EDMUND A. SARGUS, JR., District Judge.
Plaintiff, Mulch Manufacturing Inc. ("MMI"), brings this diversity action against Defendants, Advanced Polymer Solutions, LLC ("APS"), and John M. Ryan ("Ryan") (collectively "Defendants"), for various claims including breach of contract and fraud. This matter is before the Court for consideration of APS's Motion for Summary Judgment (ECF No. 46) and MMI's Motion for Partial Summary Judgment (ECF No. 47). For the following reasons, APS's Motion for Summary Judgment is
MMI is an Ohio corporation, with its headquarters located in Reynoldsburg, Ohio. (J. Spencer Decl. ¶ 2, ECF No. 17-1.) MMI manufactures, sells, and distributes mulch and mulch-related products. (J. Spencer Dep. 7, ECF No. 35-2.) In addition, to its Ohio location, MMI has a plant located in Callahan, Florida. (J. Spencer Decl. 112, ECF No. 17-1.) Josh Spencer ("J. Spencer") is the CEO of MMI, and his son, Ralph Spencer ("R. Spencer") is the company's President. (J. Spencer Dep. 6; R. Spencer Dep. 4, ECF No. 35-3.) J. Spencer's office and MMI's accounting office are located in Ohio. (J. Spencer Decl. ¶ 2, ECF No. 17-1.) Jonathon Stott ("Stott") was a production and sales employee of MMI during the relevant periods of this lawsuit. (Stout Dep. 6, ECF No. 35-7.) Wayne Jones ("Jones") is a General Manager for MMI. (Jones Dep. 6, ECF No. 35-5.)
APS is a limited liability company located in Port Washington, Long Island, New York. (Ryan Aff. ¶ 5, ECF No. 13-1.) APS "custom tailor[s]" chemical formulations and also manufactures products. (Ryan Dep. 10, ECF No. 35-1.) APS uses a patented process, which it refers to as "grafting," to chemically bond properties to a customers' product, resulting in "[a] better adhesion." (Id. at 11-12.) Defendant Ryan, who is a resident of New York, is the President of APS. (Id. at 8-9.) Paul Thottathil, Ph.D. ("Dr. Thottathil"), is APS's Vice President of Research and Development. (Thottahil Dep. 7, ECF No. 35-4.)
In 2005, MMI began manufacturing a product called "Softscape," a mulch product made from shredded fiber. (J. Spencer Dep. 7-8, 17, 34.) MMI initially sold Softscape without a flame retardant, until the company received several complaints from customers that Softscape was catching on fire. (Id. at 17-19.) Accordingly, MMI began looking for a solution, such as a fire retardant that could be added to the mulch. (Id. at 20.)
Shortly after it received complaints regarding Softscape, MMI reached out to
In June 2006, Ryan emailed Stott indicating that the results of a project feasibility assessment were "very encouraging" and estimating a price of 25 to 30 cents per pound. (Dep. Ex. 6.
On July 18, 2006, MMI and APS ultimately entered into an agreement (hereinafter the "R & D Agreement" or "Agreement") regarding the development of a formulation.
The R & D Agreement contained three general phases. (See Agreement II, IV.) The first phase — set to last four weeks — stated that "APS chemists will vary different combinations of activator', monomers and catalysts according to [MMI's] submitted specifications. At the end of this phase, APS will send [MMI] preliminary samples for testing and evaluation." (Id. at IV (emphasis in original).) MMI owed APS $30,000 for the first phase. (Id. at II.) At the end of this phase MMI had the right to terminate the R&D Agreement with no further fees. (Id.)
With regard to second phase, the R&D Agreement provided:
(Id. at IV(emphasis in original).) MMI agreed to pay APS $50,000 at the start of the second phase. (Id. at II.) The R&D Agreement also expressed APS's desire to manufacture the formulation for MMI on an ongoing basis either during or after the second phase. (Agreement IV.) R. Spencer
Finally, the R & D Agreement allowed MMI the option of a third phase, in which APS would fine tune a formulation, to the extent necessary, and transfer a patent application to MMI. (Id.) The Agreement provided that any resulting patents would belong to MMI. (Id. at III.) The Agreement further stated that MMI would owe APS an additional $40,000, upon transfer of a patent application, if MMI elected to patent the ultimate formulation. (Id. at 11.)
On July 19, 2006, MMI paid APS $30,000 for the first phase of research and development. (Ryan Dep. 37-38; Dep. Ex. 1.) APS worked from mulch samples that MMI sent. (Thottathil Dep. 8.) Dr. Thottathil stated that during the first phase he made different formulations and treated the mulch with the formulations. (Id. at 8-10.) J. Spencer testified that during this general period MMI would periodically receive samples from APS of either fire retardant or mulch treated with fire retardant. (J. Spencer Dep. 40-41.) J. Spencer stated that at the end of the first phase MMI was satisfied that APS was making progress. (J. Spencer Dep. 39-40.) On August 15, 2006, MMI paid APS $50,000 for the second phase of the R & D Agreement. (Dep. Ex. 1.)
On August 9, 2006, APS sent MMI mulch samples treated with four different formulations — formulation numbers 28, 31, 33, and 34 — for MMI's evaluation. (Thottathil Dep. 16; Dep. Ex. 9.) Of the formulations it received on August 9, 2006, MMI initially preferred formulation 28. (See Thottathil Dep. 17.) On September 1, 2006, APS shipped MMI sixteen drums of formulation 28 for trial. (Dep. Ex. 10.) MMI paid $11,900 for this shipment. (Dep. Ex. 2, ECF No. 36-2.) J. Spencer stated that MMI was dissatisfied with formulation 28 because, according to MMI, the formulation wouldn't mix with water. (J. Spencer 48-49; see also Jones Dep. 13-14.) According to J. Spencer, MMI also felt that APS was ignoring parameters that MMI had set, including cost. (J. Spencer Dep. 48-49; Dep. Ex. 11.)
Dr. Thottathil averred that, in response to MMI's criticism of formulation 28, APS began making other formulations. (Thottathil Dep. 18.) Dr. Thottathil's testimony suggests that APS eventually sent MMI a price quote for formulation number 48 ("formulation 48"). (See id. at 18-25.) Dr. Thottathil testified that formulation 48 was a multi-ingredient formulation. (Id. at 21.) Dr. Thottathil further described that one of the ingredients for formulation 48 was "FR-48," an additive material that Spartan Flame Retardants, Inc. ("Spartan") manufactured. (Id. at 19-21.) During his deposition testimony, Dr. Thottahil also referred to the Spartan material as "additive 48." (See, e.g., id. at 48.) According to Dr. Thottahil, the numbering of formulation 48 and FR-48 was coincidental. (Id. at 59-60.) Dr. Thottathil testified that FR-48 is an ammonium polyphosphate and that there are other companies, besides Spartan, that make ammonium polyphosphate. (Id. at 51-52, 66.)
J. Spencer stated that, in late October 2006, MMI was ready to use formulation 48 in production. (J. Spencer Dep. 91.) He asserted, however, that MMI still believed the price was too expensive, (Id. at 92.) J. Spencer further averred that APS and Ryan represented that "APS had developed this formulation in-house." (J. Spencer Decl. ¶ 6, ECF No. 17-1.) J. Spenser maintained that MMI's understanding
During the above period of development, MMI and APS exchanged a number of communications that ultimately led to several purchase orders spanning from October 2006 to May 2010. Dr. Thottathil testified that after APS sent MMI a price quote for formulation 48, MMI informed APS that the formulation was too expensive. (Thottathil Dep. 18-19.) Dr. Thottathil stated that Ryan then instructed him to send MMI the best individual chemical from the formulation. (Id. at 19.) According to Dr. Thottathil, he sent MMI the Spartan FR-48 material for its evaluation. (Id.) Within a September 12, 2006 letter to J. Spencer,
(Dep. Ex. 12.)
J. Spencer and Ryan exchanged a series of emails in September and October 2006. The emails subject lines all stated that they were regarding "Formulation 48." (Dep. Exs. 14-16.) Within the initial September 26, 2006 email, Ryan stated that he was approaching his "suppliers" to try and lower costs and indicated that he had been able to bring the cost of the product down to 60 cents per pound. (Dep. Ex. 16 at 7.) J. Spencer responded indicating that this price was unacceptable. (Id. at 6.) Moreover, J. Spencer stated that MMI would need a tote of the fire retardant to test,
J. Spencer's testimony reflects that MMI was eventually able to test the product APS sent and concluded that it worked. (J. Spencer Dep. 81.) J. Spencer also testified that, at the time of testing,
In late October 2006, Ryan sent an email, once again with a subject line of "Formulation #48," reflecting that MMI had agreed to purchase 45, 000 pounds of product. (Dep. Ex. 17.) A subsequent purchase order described the purchase as being for a "[f]ire [r]etardant product for colored mulch as previously discussed and agreed upon." (Dep. Ex. 18.) MMI continued to submit purchase orders for the fire retardant until May 2010. (See Dep. Ex. 2.) The record reflects, and Defendants concede, that from October 2006 through May 2010, the product MMI was receiving from APS was the Spartan manufactured additive, FR-48, not formulation 48. (See Ryan Dep. 46-47, 110; Thottathil Dep. 29-30, 46; Dep. Ex. 3.)
According to J. Spencer, based on the representations of APS, MMI was under the impression that the fire retardant it was purchasing was the formulation that APS developed and was producing. (J. Spencer Dep. 79, 142-44; see also R. Spencer Dep. 25-26.) Ryan, on the other hand, asserted that MMI knew that they were being shipped a "bare bones formulation that was the FR-48." (Ryan Dep. 169.) Specifically, Ryan stated that MMI knew that APS could not manufacture products in the quantity that APS was shipping.
In order to ship FR-48 to MMI, APS entered into a non-disclosure agreement with Spartan on October 26, 2006. (Dep. Ex. 21.) With regard to bills of lading and the shipment of products, the agreement between Spartan and APS stated:
[APS] shall from time to time place orders with Spartan for the Product which Spartan shall ship to [APS's] customers at the locations to be designated by [APS], all of which such orders shall be shipped pursuant to bills of lading issued by [APS] directly to its customers. At no time shall any vehicle involved in the transport of such Product to a customer of [APS] or any container in which the Product is held, transported or delivered, bear any marking or identification of any kind or be accompanied by any documentation or labels which in any way indicates or reflects that the Product
(Id. at 1.) John Kuetemeyer, Spartan's President, averred that his understanding of the purpose for these requirements was that APS did not want MMI to know where the shipments were coming from. (Kuetemeyer Dep. 32-32, ECF No. 35-6.) Ryan stated that he considered requiring a blind bill of lading to be standard procedure. (Ryan Dep. 170.) Additionally, in early 2007, after the initial shipment of FR-48, Jones testified that APS sent MMI a Material Safety Data Sheet ("MSDS") concerning the product.
The parties continued to exchange communications during the period when MMI was placing purchase orders with APS. In December 2006, within an email to J. Spencer regarding purchase orders, Ryan stated that APS would "be shutting down production for [the] Christmas week. Please advise if another order is needed beforehand...." (Dep. Ex. 27.) On January 25, 2007, Ryan again emailed J. Spencer stating "[w]e have not received an order from you since last Oct[ober]. When we discussed this manufacture, you mentioned quite a volume." (Dep. Ex. 28.) In April 2007, during a series of emails to J. Spencer regarding the ordering of fireproofing, Ryan stated that "[u]pon confirmation of transfer, the formulation will be manufactured and shipped to [MMI's] facilities." (Dep. Ex. 30.)
J. Spencer states that, in January 2008, MMI began purchasing a binder — in addition to the fire retardant — to prevent the fire retardant from washing off the mulch in rain. (J. Spencer Dep. 131-33.) Dr. Thottathil stated that this product was Haloflex 202 and that APS ordered the binder from Monson Industries ("Monson"). (Thottathil Dep. 11.) The initial purchase order for the binder, dated January 8, 2008, described the product as "Formulation #48 Binder." (Dep. Ex. 2 at 9.)
In September 2009, R. Spencer emailed Ryan. (R. Spencer Dep. 27; Dep. Ex. 36.) At this time, R. Spenser informed Ryan that — due to concerns about the cost of the flame retardant — MMI hired a chemist, Rick Starcher ("Starcher"), to evaluate the potential of lowering costs. (Dep. Ex. 36.) Within the email, R. Spencer further provided:
(Id.) Ryan responded to this email stating that if MMI could submit a blanket purchase order for the retardant and binder, he would be able to work with APS's raw material supplier to lower prices. (Dep. Ex. 37.)
With regard to the formula, Ryan emailed Starcher and referred him to Stott, stating that it was his understanding that APS had already sent the formula to MMI "a long time ago." (Ryan Dep. 176-77; Dep. Ex. 38.) On October 1, 2009, based upon Starcher's continued request,
According to R. Spencer, MMI first discovered that APS was selling MMI a Spartan product when MMI accidently received a document in May 2010 referencing Spartan. (See R. Spencer Dep. 64-65; R. Spencer Dep. Ex. 67, ECF No. 43-1.) R. Spencer stated that this course of events led MMI to discover that APS had been selling FR-48, and not formulation 48. (R. Spencer Dep. 66-67.) R. Spencer asserted that when he contacted Ryan concerning the matter, Ryan represented that APS was supplying Spartan with raw materials and Spartan was mixing the materials. (Id. at 67-68.) R. Spencer stated that he thought, at the time, that attempting to deal directly with Spartan "would be a worthless venture" because the Spartan representative became "quiet with [him]" when he contacted the company. (Id. at 70.) J. Spencer averred that MMI stopped using the product that APS sold them in 2010 and began manufacturing its own flame retardant, different from the formulation APS provided. (J. Spencer Dep. 152.)
During his deposition, J. Spencer testified that over the course of the companies' relationship, MMI paid APS $722,000.00 for product purchases. (J. Spencer Dep. 148, Dep. Ex. 64.) Within a later declaration, J. Spencer averred that — by his calculations — APS made a profit of approximately $185,000 by marking up the cost of the Spartan product and selling it to MMI.
MMI brought this action in April 2011.
This matter is before the Court on the parties' cross Motions for Summary Judgment. APS and Ryan seek judgment as to all of Plaintiff's claims, while MMI requests
Summary judgment is appropriate "if the movant shows that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The Court may therefore grant a motion for summary judgment if the nonmoving party who has the burden of proof at trial fails to make a showing sufficient to establish the existence of an element that is essential to that party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
The "party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact." Id. at 323, 106 S.Ct. 2548 (internal quotations omitted). The burden then shifts to the nonmoving party who "must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (quoting Fed.R.Civ.P. 56). "The evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor." Id. at 255, 106 S.Ct. 2505 (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970)). A genuine issue of material fact exists if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Liberty Lobby, Inc., 477 U.S. at 248, 106 S.Ct. 2505; see also Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (the requirement that a dispute be "genuine" means that there must be more than "some metaphysical doubt as to the material facts"). Consequently, the central issue is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Liberty Lobby, Inc., 477 U.S. at 251-52, 106 S.Ct. 2505.
The Court first considers the parties choice of law contentions as well as potential application of the economic loss rule. The Court will then address the claims independently, examining whether any party is entitled to judgment. Finally, the Court will consider the parties' separate contentions regarding individual liability against Ryan.
Initially, the Court must address choice of law. There is some dispute as to whether Ohio law or New York law should apply to this action. MMI contends that the Court should apply Ohio law. Although Defendants maintain that New York law is proper, they also contend that "a conflict
A federal court sitting in diversity applies the choice-of-law rules of the forum state. Pedicini v. Life Ins. Co. of Alabama, 682 F.3d 522, 526 (6th Cir.2012). "Ohio's choice-of-law rules are the rules in the Second Restatement of Conflict of Laws." EnQuip Technologies Group v. Tycon Technoglass, 986 N.E.2d 469, 483 (Ohio Ct.App.2012). Initially, the Court must decide whether "the cause of action sounds in contract or in tort[,]" as different choice-of-law rules apply in each area. Nicula v. Nicula, No. 84049, 2009 WL 1244170, at *6 (Ohio Ct.App. May 7, 2009). Although claims under the ODTPA do not fit neatly into either category, as the title of the Act suggests, such claims are based on deceptive and misleading practices, akin to negligent misrepresentation or fraud. Consequently, the Court will apply tort choice-of-law principles. See Laserworks, a Div. of King-Haller Enter., Inc. v. Pitney Bowes, Inc., 105 Fed.Appx. 657, 661 (6th Cir.2004) (treating case that included claims under the ODTPA as involving alleged tortious conduct for the purposes of an Ohio choice of law analysis).
Within the context of tort actions, to determine the state with the most significant relationship to the cause of action, Ohio courts consider "(1) the place of the injury; (2) the place where the conduct causing the injury occurred; (3) the domicile, residence, nationality, place of incorporation, and place of business of the parties; [and] (4) the place where the relationship between the parties, if any, is located...." Nicula, 2009 WL 1244170, at *6. For claims of fraud, the Court must also consider:
In re Nat'l Century Fin. Enter., Inc., Inv. Litig., 905 F.Supp.2d 814, 833 (S.D.Ohio 2012) (quoting Restatement (Second) Conflict of Laws § 148(2)).
MMI's claims in this action, including its claim under the ODTPA, relate to conduct in a number of states. Although MMI conducts some of its operations in Florida, both its headquarters and its CEO — J. Spencer — are located in Ohio. (Spencer Decl. ¶ 2, ECF No. 17-1.) J. Spencer asserted that during negotiations leading to the relevant purchase orders he exchanged information with APS, through telephone calls and emails, and ultimately issued the initial October 24, 2006 purchase order, from Ohio. (Id. at ¶ 7.) Spencer also averred that, with regard to the purchase order, MMI made all of its payments from Ohio. (Id. at ¶ 9.) On the other hand, both APS and Ryan are located in New York. (Ryan Dec. ¶¶ 2, 5.) Moreover, according to Ryan, negotiations for the initial R&D Agreement occurred between
The Court finds that Ohio law applies for the purpose of MMI's claims under the ODTPA. The actions giving rise to the ODTPA claim share a closer relationship to Ohio than New York, MMI's claim is based on the various alleged representations that APS and Ryan made regarding the product MMI was purchasing. While MMI alleges that Defendants misrepresented the product in a variety of ways, a large portion of the alleged misrepresentations took place in email exchanges between J. Spencer and Ryan leading up to the initial purchase order. The record reflects that Ryan made these representations in New York and J. Spencer received these representations in Ohio. Tipping the scales in Ohio's favor, however, are the factors of reliance and injury. Specifically, the current record reflects that MMI — through J. Spencer — ultimately decided to make purchase orders, and paid for those purchase, from Ohio. Consequently, the Court finds that Ohio has a stronger relationship to MMI's alleged reliance and injury. Cf. Restatement (Second) Conflict of Laws § 148, cmt. c ("When plaintiffs initial act of reliance is his entry into a contract by which he binds himself to relinquish assets, the place of loss may be considered to be either the place where the plaintiff entered into the contract or the place where he relinquished the assets pursuant to the terms of the contract....").
With regard to the remainder of the claims, the Court finds it unnecessary to perform a choice of law analysis. Under Ohio law, "if two jurisdictions apply the same law, or would reach the same result applying their respective laws, a choice of law determination is unnecessary because there is no conflict, and the laws of the forum state apply." Wendy's Intern., Inc. v. Illinois Union Insur. Co., No. 2:05-cv-803, 2007 WL 710242, at *5 (S.D.Ohio Mar. 6, 2007); see also Glidden Co. v. Lumbermens Mut. Cas. Co., 112 Ohio St.3d 470, 474-75, 861 N.E.2d 109 (Ohio 2006) (holding that "an actual conflict between Ohio law and the law of another jurisdiction must exist for a choice-of-law analysis to be undertaken"). Moreover, the party seeking application of foreign law "bears the burden of showing that the foreign law is different from the local law: [w]here the party seeking application of the law of a foreign jurisdiction fails to demonstrate a conflict between local law and the law of that jurisdiction, local law ... governs." Wendy's Intern., 2007 WL 710242, at *5 (internal quotations omitted); cf. also Asp v. Toshiba Am. Consumer Prods., LLC, 616 F.Supp.2d 721, 726 (S.D.Ohio 2008) ("When parties acquiesce to the application of a particular state's law, courts need not address choice of law questions.").
Here, Defendants concede that a choice of law analysis is largely unnecessary as to all but the ODTPA claims. (Defs.' Mot. Summ. J. 17 n. 9.) Under these circumstances, the Court finds any further choice of law analysis unnecessary, and will presume — at least for the purposes of summary judgment — that Ohio law applies to the remaining claims.
Defendants also maintain that the economic loss doctrine bars MMI's claims for fraud, deceptive trade practices in violation of the ODTPA, breach of fiduciary
In 2005, the Ohio Supreme Court provided the following outline of the economic loss rule:
Corporex Dev. & Constr. Mgt., Inc. v. Shook, Inc., 106 Ohio St.3d 412, 414, 835 N.E.2d 701 (Ohio 2005). In other terms, "where a plaintiff has suffered only economic harm as a result of a defendant's breach of duty, the economic-loss rule will bar the tort claim if the duty arose only by contract." Campbell v. Krupp, 195 Ohio App.3d 573, 580, 961 N.E.2d 205 (Ohio Ct.App.2011).
The issue of how far the economic loss rule extends is somewhat unsettled under Ohio law. See ITS Fin., LLC v. Advent Fin. Servs., LLC, 823 F.Supp.2d 772, 783 (S.D.Ohio 2011) (noting confusion, in light of Corporex, as to the extent the doctrine applies outside of simple negligence actions). The general approach, however, is that "the economic-loss rule does not apply — and the plaintiff who suffered only economic damages can proceed in tort — if the defendant breached a duty that did not arise solely from a contract." Campbell, 195 Ohio App.3d at 580, 961 N.E.2d 205; see also Cleveland v. JP Morgan Chase Bank, N.A., No. 98656, 2013 WL 1183332, at *7-8 (Ohio Ct.App. Mar. 21, 2013) (holding that the economic loss rule did not apply "where the duty alleged to have been breached is not related to a contractual relationship"). Moreover, various courts, applying Ohio law, have held that the economic loss rule does not apply to the claims involved here. See, e.g.,
Based upon the above authority, and considering the specific circumstances of this case, the Court finds that the economic loss rule does not apply to MMI's non-contractual claims. MMI's various tort claims, and the alleged damages from such claims, share a common factual background with MMI's breach of contract claims. Nevertheless, the claims arise from separate duties. Specifically, MMI's non-contractual claims are all based upon Defendants' duties — independent from any contractual obligation in this case — not to engage in deceptive, misleading, and/or fraudulent practices in the course of their business relationships.
Moving to MMI's substantive claims, the Court begins by examining whether any party is entitled to summary judgment on the breach of contract claims. As both sides recognize, MMI's breach of contract claims require two inquiries. First, the Court must address whether APS breached the R & D Agreement. Second, the parties dispute whether APS breached the series of purchase orders spanning from October 2006 to May 2010.
Under Ohio law, "the elements for a breach of contract are that a plaintiff must demonstrate by a preponderance of the evidence that (1) a contract existed, (2) the plaintiff fulfilled his obligations, (3) the defendant failed to fulfill his obligations, and (4) damages resulted from this failure." Anzalaco v. Graber, 970 N.E.2d 1143, 1148 (Ohio Ct.App.2012). In interpreting contractual language, the Court's purpose "is to ascertain and give effect to the intent of the parties." Foster Wheeler Enviresponse, Inc. v. Franklin Cnty. Convention Facilities Auth., 78 Ohio St.3d 353, 361, 678 N.E.2d 519 (Ohio 1997). The Court generally presumes that the intent of the parties rests within the language of the contract. Id. "Common words appearing in a written instrument will be given their ordinary meaning unless manifest absurdity results, or unless some other meaning is clearly evidenced from the face or overall contents of the instrument." Id. (internal quotations omitted).
"[T]he interpretation of written contract terms, including the determination of whether those terms are ambiguous, is a matter of law for initial determination by the court." Savedoff v. Access Grp., Inc., 524 F.3d 754, 763 (6th Cir.2008) (applying Ohio law). "[I]n cases where ambiguity exists, interpretation of the parties' intent is a question to be determined by the trier of fact." Schafer v. Soderberg & Schafer, 196 Ohio App.3d 458, 477, 964 N.E.2d 24 (Ohio Ct.App.2011) (internal quotations omitted); see also PNC Bank, N.A. v. May, No. 98071, 2012 WL 4243807, at *2 (Ohio Ct.App. Sept. 20, 2012) ("If ... the contract is ambiguous, ascertaining the parties' intent constitutes a question of
"Contractual language is ambiguous only where its meaning cannot be determined from the four comers of the agreement or where the language is susceptible of two or more reasonable interpretations." Covington v. Lucia, 151 Ohio App.3d 409, 414, 784 N.E.2d 186 (Ohio Ct.App.2003) (internal quotations omitted). "[W]here a contract is ambiguous, a court may consider extrinsic evidence to ascertain the parties' intent."
Relatedly, interpretation of a contract may require consideration of whether the contract is fully or partially integrated. "A contract is fully integrated when both parties to the contract adopt it as a final and complete statement of the terms of their agreement." Miller v. Lindsay-Green, Inc., No. 04AP-848, 2005 WL 3220215, at *9 (Ohio Ct.App. Dec. 1, 2005). On the other hand, "[a] contract is partially integrated when the parties to the contract adopt it as a final expression of only one portion of a larger agreement, making the contract incomplete." Id. "[I]f a contract is not fully integrated, parol evidence of additional contract terms may be admitted to complete the agreement, but only to the extent that the additional terms do not contradict the written terms of the agreement." Id. (internal quotations omitted). "The question of partial integration must be determined from the four corners of the document itself...." Allied Erecting & Dismantiling Co., Inc. v. Ohio Edison Co., No. 10-MA-25, 2011 WL 2138975, at *5 (Ohio Ct.App. May 26, 2011) (emphasis in original, internal quotations omitted).
As detailed above, the terms of the parties' July 2006 Agreement set forth two relevant phases for research and development. During the first four-week phase APS was to research and develop different chemical combinations "according to [MMI's] submitted specifications" and then provide MMI preliminary samples. (Agreement IV,) At the second phase, also stated to last four weeks, the Agreement required APS to optimize the formulation and send the ultimate formulation(s) to MMI. (Id. at IV.)
Upon the face of the Agreement, the Court finds both (1) that the Agreement is only partially integrated and (2) that some of its terms are ambiguous. With regard to integration, the Agreement is concise in setting forth the parties' terms, lacks a detailed description of the parties' obligations, and contains no integration clause. Moreover, the Agreement stated that APS's development was subject to "submitted
Based on the record evidence, the Court finds that a reasonable jury could find for MMI, with regard to both phases, on its breach of contract claim.
The Court finds Defendants contentions in support of summary judgment on the breach of contract claim unpersuasive. First, with regard to the first phase of the Agreement, Defendants stress that MMI's decision to continue to the second phase — despite an opt-out provision within the Agreement — demonstrates that APS met its initial obligation. This evidence, however, is not conclusive under the circumstances of this case. Although MMI's decision to proceed to phase two might suggest that MMI was satisfied with the initial phase, construed in MMI's favor, such evidence might only reflect that MMI — despite dissatisfaction with APS's initial performance — was not yet willing to terminate the R & D Agreement. Second, Defendants maintain that APS satisfied phase two of the Agreement by providing MMI with the recipe for formulation 48.
At the same time, however, MMI fails to establish that it is entitled to summary judgment for breach of the R&D Agreement. Although APS's feasibility report appears to have been overly optimistic, the ultimate Agreement was only for research and development of a formulation, and neither the feasibility report nor the Agreement promised ultimate success. From the current record evidence it is clear that APS ultimately created, tested, and provided MMI with multiple formulations over the course of the Agreement. Although the formulations may not have met MMI's product requirements, a reasonable jury could infer that any such failure was simply a result of the uncertain nature of research and development. Under these circumstances, an issue of fact remains as to whether APS failed to meet its obligations.
In addition to the Agreement, the parties entered into a series of purchase orders between October 2006 and May 2010.
The central issue of contention is what product did the parties intend the purchase orders to cover. If the purchase orders were for formulation 48, APS failed to satisfy the orders by sending FR-48. If the purchase orders were for FR-48, APS met its obligation. Like the terms of the R & D Agreement, the language of the purchase orders is ambiguous and only partially integrated. The purchase orders contain only vague descriptions of the fire retardant product and clearly depend on previous discussions between the parties regarding the specific product involved. (See generally Dep. Ex. 2.) Accordingly, the parties intent is a question of fact and outside evidence is admissible.
Here, there remains a genuine dispute regarding the parties' contractual intent, making summary judgment for either MMI or Defendants inappropriate. First, a reasonable jury could conclude that the parties intended the purchase orders to be
On the other hand, a reasonable jury could also conclude from the evidence that the purchase orders were for the Spartan FR-48 product.
Both MMI and Defendants also move for summary judgment as to MMI's claims for fraud. MMI contends that APS and Ryan made numerous misrepresentations, throughout the purchase order relationship, regarding both the specific nature and origin of the product. According to MMI, APS made such representations to keep MMI under the impression that it was purchasing formulation 48 rather than FR-48. Defendants, on the other hand, maintain that MMI's claims fail on various elements of fraud.
As the Ohio courts have held:
Andrew v. Power Marketing Direct, Inc., 978 N.E.2d 974, 989 (Ohio Ct.App.2012) (citing Burr v. Stark Cty. Bd. of Comm'rs, 23 Ohio St.3d 69, 73, 491 N.E.2d 1101 (1986)). Relatedly, under Ohio law, "[a] claim for fraudulent inducement arises when a party is induced to enter into an agreement through fraud or misrepresentation." Strategy Group for Media, Inc. v. Lowden, No. 12 CAE 030016, 2013 WL 1343614, at *7 (Ohio Ct.App. Mar. 21, 2013).
"In proving a fraud claim, a person's intent to mislead another into relying on a misrepresentation or concealment of a material fact generally must be inferred from the totality of the circumstances since a person's intent is rarely provable by direct evidence." Aztec Internatl. Foods, Inc. v. Duenas, No. CA2012-01-002, 2013 WL 501734, at *11 (Ohio Ct. App. Feb. 11, 2013). "The question of justifiable reliance is one of fact and requires an inquiry into the relationship between the parties." Mar Jul, L.L.C. v. Hurst, No. 12CA6, 2013 WL 557108, at *13 (Ohio Ct.App. Feb. 6, 2013) (internal quotations omitted). "Reliance is justifiable if the representation does not appear unreasonable on its face and if there is no apparent reason to doubt the veracity of the representation under the circumstances." Id. (internal quotations omitted). Finally, "[i]n a fraud action, a plaintiff is entitled to recover as compensatory damages such damages as will fairly compensate him for the wrong suffered, that is, the damages sustained by reasons of the fraud or deceit and which have naturally and proximately resulted therefrom." Danial v. Lancaster, No. 92462, 2009 WL 2186762, at *2 (Ohio Ct.App. July 23, 2009).
Second, a reasonable jury could find that APS and Ryan intended to mislead MMI and that MMI justifiably relied on the representations. The evidence demonstrates that APS was aware of the difference between formulation 48 and FR-48. (See, e.g., Thottathil Dep. 21.) In contrast, many of the emails J. Spencer sent to Ryan suggest that MMI thought it was purchasing a formulation. (See Dep. Ex. 16.) Furthermore, the record reflects that APS took numerous steps to conceal the fact that Spartan, and not APS, was manufacturing and shipping the product.
MMI also provides sufficient evidence to survive summary judgment on the remaining elements of fraud. It is readily apparent that the identity of the product was
Nevertheless, the record also contains conflicting evidence that would allow a trier of fact to find for Defendants. At the very least, a genuine dispute remains regarding Defendants' intent. Although a jury could find intent to mislead, a jury could also reasonably view the communications as simply containing imprecise language during informal communications. Given the similarity of the product names in this case, which appears to be coincidental, such confusion would be understandable. Additionally, crediting Defendants' evidence and testimony, APS informed MMI that the product was not formulation 48, but instead an additive from Spartan. (See Dep. Ex. 12; Ryan Dep. 128-29, 170.) In addition to cutting against any malicious or reckless intent, such evidence also supports an inference that any reliance on contrary representations was not reasonable.
Defendants and MMI each move for summary judgment as to MMI's claims pursuant to the ODTPA. MMI maintains that Defendants (1) passed off Spartan's product as their own. (2) caused a misunderstanding as to the source of the product in question, and (3) misrepresented that the product MMI was purchasing was of a particular quality. Defendants, however, maintain that the ODTPA claims fails because there was no misrepresentation and MMI cannot demonstrate damages.
The ODTPA states in relevant part:
Ohio Rev. Code § 4165.02(A).
"When adjudicating claims arising under the Ohio Deceptive Trade Practices Act, Ohio courts apply the same analysis applicable to claims commenced under analogous federal law." Corrova v. Tatman, 164 Ohio App.3d 784, 788, 844 N.E.2d 366 (Ohio Ct.App.2005). Notably, the Lanham Act — the ODTPA's federal counterpart — recognizes a claim for the reverse passing off products. Clark v. Walt Disney Co., 642 F.Supp.2d 775, 785 (S.D.Ohio 2009). Such a claim occurs when a "producer misrepresents someone else's goods or services as his own." Dastar Corp. v. Twentieth Century Fox Film
Once again, summary judgment is not appropriate for either party. Following the same basic reasoning as applied to MMI's fraud claims above, a reasonable jury could find in favor of either MMI or Defendants on the ODTPA claims. Crediting MMI's evidence, and drawing inferences in its favor, the trier of fact could conclude APS and Ryan made a series of representations that lead MMI to reasonably believe that it was purchasing formulation 48, a unique multi-ingredient formula that APS developed and manufactured, rather than FR-48, a Spartan product and more basic compound. On the other hand, crediting Defendants' evidence and drawing inferences in their favor, a reasonable jury could determine that Defendants took sufficient actions to inform MMI of the nature of the product in question, such that there would be no confusion. Furthermore, for reasons already addressed, a dispute remains as to MMI's damages. Under these circumstances, neither side is entitled to judgment.
Defendants also move for summary judgment on MMI's claims for breach of fiduciary duty.
"To prevail on a breach of fiduciary duty claim, a party must show the existence of a fiduciary relationship, failure to comply with a duty accorded that relationship, and damages proximately caused by that failure." State ex rel. Atty. Gen. v. Vela, 987 N.E.2d 722, 730 (Ohio Ct.App. 2013). "The Ohio Supreme Court has defined a `fiduciary relationship' as one `in which special confidence and trust is reposed in the integrity and fidelity of another and there is a resulting position of superiority or influence, acquired by virtue of special trust.'" L.F.P.IP, LLC v. Hustler Cincinnati, Inc., No. I:09cv913, 2013 WL 27494, at *4 (S.D.Ohio Jan. 2, 2013) (quoting Ed Schory & Sons, Inc. v. Soc. Nat'l Bank, 75 Ohio St.3d 433, 442, 662 N.E.2d 1074 (Ohio 1996)). "[U]nder Ohio law, in the absence of special circumstances, no fiduciary relationship exists between parties negotiating an arm's-length commercial transaction." Scotts Co. LLC v. Liberty Mut. Ins. Co., 606 F.Supp.2d 722, 739 (S.D.Ohio 2009). "An ordinary business relationship cannot be turned into a fiduciary one absent factors of mutual knowledge of confidentiality or the undue
Here, Defendants are entitled to summary judgment on MMI's claims for breach of fiduciary duty. Specifically, MMI fails to demonstrate that either APS or Ryan owed MMI a fiduciary duty. This case involves arms-length transactions between two business entities. Although APS may have had more expertise regarding the subject matter of the transactions, the Court finds this fact, in and of itself, insufficient to establish a fiduciary relationship. MMI contends, in an attempt to establish a fiduciary duty, that MMI supplied proprietary information. The current evidence, however, merely demonstrates that MMI gave APS samples of its mulch product — that it had already sold on the open market — for testing. (See Thottathil Dep. 8.) Under these circumstances, MMI has failed to sufficiently demonstrate the existence of a fiduciary relationship.
MMI's final cause of action is for negligent misrepresentation.
Ohio law recognizes a cause of action for negligent misrepresentation within a business transaction. Carpenter v. Long, 196 Ohio App.3d 376, 396, 963 N.E.2d 857 (Ohio Ct.App.2011). As one Ohio court has described:
Id.
In this case, MMI presents sufficient facts to create a genuine dispute of fact regarding negligent misrepresentation. For the reasons described above, a reasonable jury could find that APS and Ryan made false representations both leading up to — and during the course of — the purchase order relationship. Even assuming the jury fails to find fraudulent intent, the jury could still conclude — based on the current record — that APS and Ryan did not exercise sufficient care in communicating to MMI regarding the nature of the product. Once again, the evidence reflects that APS was aware of the difference between formulation 48 and
Finally, the parties dispute whether MMI's individual claims against Ryan should survive summary judgment. Ryan specifically contends that (1) he was not a party to any of the contracts between APS and MMI, and (2) he is protected by APS's corporate structure.
To the extent MMI attempts to raise breach of contract claims against Ryan, the Court dismisses such claims.
Nevertheless, Ryan may be held individually liable — based on his personal conduct — for MMI's claims of fraud, negligent misrepresentation, and violations of the ODTPA. Under Ohio law, "a corporate officer can be held personally liable for tortious acts he or she has committed and, under such circumstances, a plaintiff need not pierce the corporate veil to hold individuals liable who have personally committed such acts." Roberts v. RMB Ents., Inc., 197 Ohio App.3d 435, 449, 967 N.E.2d 1263 (Ohio Ct.App.2011); cf. also Simmons v. Cook, 701 F.Supp.2d 965, 989 (S.D.Ohio 2010) ("Corporate officers may be held personally liable for Lanham Act violations."). Here, the evidence reflects that Ryan was prominently involved in the conduct giving rise to MMI's claims, as APS generally communicated to MMI through Ryan. Moreover, for the reasons outlined above, MMI presents sufficient evidence to survive summary judgment on these remaining claims.
For the foregoing reasons, APS's Motion for Summary Judgment (ECF No. 46) is GRANTED in part and
