Sperry Marketing v. Newco, Inc. ( 1998 )

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
MAY 21 1998
TENTH CIRCUIT
PATRICK FISHER
Clerk
SPERRY MARKETING, INC.,
Plaintiff-Appellant,
v. No. 97-3101
(D.C. No. 96-2155-GTV)
NEWCO, INC.; SWING N SLIDE (D. Kan.)
CORPORATION,
Defendants-Appellees.
ORDER AND JUDGMENT *
Before ANDERSON and KELLY, Circuit Judges, and BRETT, District Judge. †
Plaintiff-Appellant Sperry Marketing appeals the entry of summary
judgment dismissing its diversity action for breach of contract against defendants-
appellees Newco and Swing N Slide (Swing N Slide). Swing N Slide succeeded
Newco by merger in 1992. Sperry claimed Swing N Slide violated its
Independent Sales Representative Agreement (Agreement) under which Sperry
sold Swing N Slide’s products. The district court held Sperry was equitably
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. This court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
†
The Honorable Thomas R. Brett, Senior United States District Judge for
the Northern District of Oklahoma, sitting by designation.
estopped to assert breach of the contract, noting Sperry failed to address equitable
estoppel in its response to the summary judgment motion. On appeal Sperry
argues the district court erred in granting summary judgment on the basis of
equitable estoppel. Our jurisdiction arises under 28 U.S.C. § 1291, and we
affirm.
The following facts are either uncontested or are presented in the light most
favorable to Sperry. In October 1990, Sperry and Swing N Slide entered into a
written contract, the Agreement, under which Sperry became a sales
representative for Swing N Slide’s products in return for a five percent sales
commission. Sperry’s sales territory consisted of Arkansas, Iowa, Kansas,
Louisiana, Minnesota, Missouri, Nebraska, North Dakota, South Dakota, and
Texas. The Agreement was for an indefinite term, and was terminable at will by
either party with one month’s notice.
In April 1992, Swing N Slide informed Sperry in writing that it was
reducing Sperry’s commission for sales on its Builders Square account from five
percent to three percent. Sales commissions on all other accounts remained at
five percent. Sperry’s president, Thomas Sperry, submitted an affidavit in which
he attests he “personally objected to each of the unilateral changes in the
contract.” Aplt. App. at 150. In his deposition, Mr. Sperry testified that he could
recall no specific discussion with Swing N Slide about this change, but he was
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generally upset and was sure he called and said so. See id. at 49. He testified
this was not a specific recollection, but said, “I think it’s something I think I
probably did.” Id. Following this reduction, Sperry accepted checks based on the
reduced commission for more than three years, until the relationship was
terminated.
In May 1992, Swing N Slide notified Sperry in writing that it was removing
Arkansas, Louisiana, Minnesota, North Dakota, South Dakota, and Texas from
Sperry’s sales territory. Sperry again expressed its displeasure to Swing N Slide.
Mr. Sperry’s account of his discussion with a Swing N Slide officer was, “We
asked, you know, why and we’d always done a good job and it seems like this is
what we got for a reward for a job well done.” Id. Mr. Sperry had dinner with a
Swing N Slide officer in which he tried to persuade Swing N Slide to give back
the commission and territory. Mr. Sperry testified that he did not recall saying
anything to the effect that Sperry was violating the Agreement by taking away
territory. See id. at 50. “The arguments,” Mr. Sperry stated, “were—had more to
do with the job we were doing . . . .” Id.Mr. Sperry continued some sales efforts in Texas after the territory
reduction, and maintained two full-time salespeople in Texas selling other
products Sperry represented. Mr. Sperry stated in his affidavit that it would have
required little additional expense to continue marketing Swing N Slide products in
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Texas. Nevertheless Sperry sent four letters to various accounts in Texas stating,
“Regretfully, on June 30, 1992 we will no longer represent Newco Swing-N-Slide
with your company.” Id. at 73-76. In April 1993, Swing N Slide sent Sperry a
note confirming its territory and other information. A cover letter requested that
the note be faxed back to Swing N Slide with all corrections marked on it, or, if
everything was correct, that it be faxed back with the notation “OK.” On Mr.
Sperry’s return fax he had written, “OK Fax back” above his signature. Sperry
continued to accept commission checks from Swing N Slide based on the
decreased sales area. Swing N Slide, meanwhile, engaged other sales
representatives to cover the area it took from Sperry, paying $538,104.77 in
commissions to the new representatives over the remainder of the time the
Agreement was in effect.
Finally, in March 1995, Swing N Slide informed Sperry by letter that
effective April 15, 1995, Sperry’s sales commission on all sales would be cut to
three percent. Three Sperry officers travelled to Janesville, Wisconsin to make a
presentation to Swing N Slide. In the materials they presented was a statement in
bold type referring to the prior territory and commission reductions: “Newco
portrayed, and we eventually accepted, that these changes were for the betterment
of the company.” Id. at 94. Mr. Sperry’s affidavit states that the word “accepted”
meant “believed,” not “agreed to.” Id. at 149. Swing N Slide partially relented,
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allowing certain commissions to remain at five percent. Sperry continued to
accept commission checks reflecting the reduction after April 15, 1995. Between
1992 and 1995 Sperry accepted $1.2 million in commissions from Swing N Slide.
There is no evidence of any written objection to Swing N Slide’s reductions of
commissions or territory.
In September, 1996 Swing N Slide sent notice to Sperry that it was
terminating the Agreement. Sperry does not challenge the termination.
We review the grant of summary judgment de novo, applying the same legal
standard used by the district court. See McIlravy v. Kerr-McGee Corp., 119 F.3d
876, 879-80 (10th Cir. 1997). Summary judgment is appropriate only if the
record, viewed in the light most favorable to the non-movant, reveals no genuine
issue of material fact and the moving party is entitled to judgment as a matter of
law. See id.; Fed. R. Civ. P. 56(c). If there is no genuine issue of material fact,
we next determine whether the substantive law was correctly applied.
See Law v. NCAA, 134 F.3d 1010, 1016 (10th Cir. 1998). The parties agreed,
and the district court correctly held, that the substantive law of Wisconsin governs
this action. See Equifax Servs., Inc. v. Hitz, 905 F.2d 1355, 1360 (10th Cir.
1990).
Although one of the grounds upon which Swing N Slide moved for
summary judgment was equitable estoppel, Sperry’s response to the summary
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judgment motion failed to address equitable estoppel. In its motion for
reconsideration, which we consider as made pursuant to Fed. R. Civ. P. 59(e),
Sperry attempted to remedy this failure, presenting to the court for the first time
facts and argument on equitable estoppel. The district court denied the motion,
relying on the rule that a party may not raise new theories or arguments on
reconsideration that were available to it at the time the original motion was
briefed. See Van Skiver v. United States, 952 F.2d 1241, 1243 (10th Cir. 1991),
cert. denied, 506 U.S. 828 (1992).
A similar rule governs Sperry’s appeal of the issue of equitable estoppel.
Absent unusual circumstances, a party may not raise in the court of appeals an
argument which it did not present to the district court until a motion for
reconsideration. See Lyons v. Jefferson Bank & Trust, 994 F.2d 716, 721-22
(10th Cir. 1993); Burnette v. Dresser Indus., 849 F.2d 1277, 1285 (10th Cir.
1988). Because Sperry did not argue equitable estoppel to the district court until
its untimely motion, and consequently the district court was not properly given the
opportunity to consider and dispose of the arguments, we will not consider them
on appeal. See Burnette, 849 F.2d at 1285.
This rule is tempered somewhat by our de novo review of a grant of
summary judgment to ensure that the district court correctly applied the
substantive law. See Law, 134 F.3d at 1016. Moreover, we may notice plain
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error in this context if the error would seriously affect the fairness, integrity or
public reputation of judicial proceedings. See Glenn v. Cessna Aircraft Co., 32
F.3d 1462, 1464 (10th Cir. 1994); see also Daigle v. Shell Oil Co., 972 F.2d 1527,
1539 (10th Cir. 1992).
Wisconsin has defined equitable estoppel as “(1) action or non-action, (2)
on the part of one against whom estoppel is asserted, (3) which induces
reasonable reliance thereon by the other, either in action or non-action, and (4)
which is to his or her detriment.” Milas v. Labor Ass’n, 571 N.W.2d 656, 660
(Wis. 1997). The party asserting estoppel as a defense has the burden of proving
it by clear, satisfying, and convincing evidence, see Gabriel v. Gabriel, 204
N.W.2d 494, 497 (Wis. 1973) and any reliance must have been reasonable, see
Consumer’s Co-op v. Olsen, 419 N.W.2d 211, 222 (Wis. 1988).
Viewing all the evidence in the light most favorable to Sperry, we agree
with the district court that Swing N Slide met its burden of demonstrating that no
genuine issue of material fact exists with respect to estoppel, and that under
Wisconsin law it is entitled to judgment as a matter of law. The record
demonstrates that Sperry’s actions and affirmative representations indicated to
Swing N Slide that it had acceded to the modifications. Although Sperry
attempted to persuade Swing N Slide to reconsider, there is no evidence of an
adequate objection on the basis of its contract. See Milas, 571 N.W.2d at 660
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(holding estoppel was established based on course of conduct and failure to
object). These actions and non-actions by Sperry, over the four-year period
between the first modification and the termination of the contract, reasonably
induced Swing N Slide to engage replacement sales representatives and pay them
$538,104.77 in commissions, to its detriment. Although Sperry at all times had
the right to decline to accept the new terms or to terminate the Agreement, it
never did so. Silence and the failure to exercise rights alone may reasonably be
relied upon to establish estoppel. See Consumer’s Co-op, 419 N.W.2d at 221
(“Defendants had the right to rely on plaintiff's failure to exercise its right.”).
Mr. Sperry’s affidavit stating that he personally objected to each
modification is a conclusion that states no specific fact from which a jury could
find an objection was made so as to preclude reasonable reliance by Swing N
Slide. Sperry cannot survive summary judgment by “replac[ing] conclusory
allegations of the complaint or answer with conclusory allegations of an
affidavit.” Lujan v. National Wildlife Fed’n, 497 U.S. 871, 888-89 (1990).
Moreover, Mr. Sperry’s affidavit conflicts with his deposition testimony, in which
he stated he had no specific recollection of making an objection to the first
modification, but thinks he probably made a telephone call to express his
displeasure. Although the court ordinarily may not discount an affidavit, a party
cannot create an issue of fact by submitting an affidavit which differs without
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explanation from the affiant’s deposition. See Franks v. Nimmo, 796 F.2d 1230,
1237 (10th Cir. 1986). We conclude as a matter of law that Sperry’s conduct was
inconsistent with the terms of the original contract to such a degree as to compel a
finding that Swing N Slide reasonably relied upon Sperry's conduct to its
detriment, so that Wisconsin’s equitable considerations prohibit Sperry from
asserting its contract rights. The district court correctly applied the substantive
law, and we find no plain error.
AFFIRMED.
Entered for the Court
Paul J. Kelly, Jr.
Circuit Judge
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