Leonetti's Frozen Foods, Inc. v. Rew Mktg., Inc. ( 2018 )

United States Court of Appeals
For the Eighth Circuit
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No. 17-1445
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Leonetti's Frozen Foods, Inc.
Plaintiff - Appellant
v.
Rew Marketing, Inc.
Defendant
Crew, Inc., doing business as Rew Marketing, Inc.
Defendant - Appellee
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Appeal from United States District Court
for the Western District of Arkansas - Fayetteville
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Submitted: February 14, 2018
Filed: April 11, 2018
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Before LOKEN, BENTON, and ERICKSON, Circuit Judges.
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ERICKSON, Circuit Judge.
In 2014, Leonetti’s Frozen Foods, Inc. hired Crew, Inc. to market and sell
stromboli products to Sam’s Club. One of these products was intended for sale in
Sam’s Club’s in-store cafes. The in-store café product needed to be reformulated so
that it could be heated in Sam’s Club’s impinger pizza ovens. Leonetti’s worked for
months to ensure that the café stromboli met Sam’s Club’s stringent requirements,
which demanded that the stromboli pass two crucial tests. Leonetti’s eventually
succeeded in passing the two tests. Shortly after receiving news that the stromboli
passed the tests and reviewing photographs of the testing, Crew President Jeff
Campigli inadvertently sent a reply-all email that expressed his pleasure that the
testing had gone so well. In the email, Campigli suggested that some of the
photographs were so good they could be used to market the product to Costco, Sam’s
Club’s primary competitor. The following month, Sam’s Club terminated discussions
with Leonetti’s.
Leonetti’s filed an action against Crew, asserting that the email caused Sam’s
Club to decline to purchase Leonetti’s stromboli products. The district court, having
jurisdiction under 28 U.S.C. § 1332(a)(1), granted summary judgment against
Leonetti’s on all counts but one. On appeal, jurisdiction is proper in this court under
28 U.S.C. § 1291. For the reasons stated below, we reverse.
I.
Leonetti’s is in the business of developing and manufacturing a variety of
frozen food products. In August 2014, Leonetti’s and Sam’s Club began discussing
the possible purchase of two stromboli products: “Leonetti’s Frozen Stromboli” and
“Café Stromboli.” Leonetti’s hired Crew as a broker for the testing and approval
process. Crew was already Leonetti’s broker for Costco.
Leonetti’s needed to reformulate its pepperoni and provolone cheese Café
Stromboli to meet Sam’s Club’s requirements—which were being driven by the
impinger ovens that Sam’s Club uses to heat its pizza products. In essence Sam’s
Club required the stromboli product to pass both a temperature test and a hold test
before it would be willing to purchase the stromboli for resale. The testing process
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began in late September 2014. It is undisputed that during October and November
2014 Leonetti’s struggled to achieve the requisite internal temperature (at least 135
degrees) without burning the stromboli or having cold pockets inside the stromboli.
Leonetti’s successfully reformulated the stromboli by changing the dough and
surface area. By early December 2014, Sam’s Club Senior Vice President Shawn
Baldwin told Leonetti’s co-owner Robert Ippaso that Leonetti’s had made substantial
progress, writing, “John [Hawthorne, the café buyer for Sam’s Club,] told me that you
are getting close on the Stromboli heating evenly [t]o a point we can test and sell some
soon.” The stromboli met Sam’s Club’s internal-temperature benchmark in tests
conducted during the week of December 7, 2014, and on December 16, 2014.
That same day, Hawthorne requested that Leonetti’s develop a ham and
pepperoni stromboli to sell in addition to the pepperoni and provolone stromboli.
Crew Chief Executive Officer Cindy Romines-Towler told Leonetti’s that after the
holidays, the ham and pepperoni product would undergo temperature tests, the
pepperoni and provolone product would undergo a hold test, and if the latter passed
the hold test, the parties would “move forward.” On January 13, 2015, the ham and
pepperoni stromboli failed a temperature test, and Hawthorne concluded that the
original pepperoni and provolone stromboli was better.
On January 14, 2015, the pepperoni and provolone stromboli passed
temperature and hold tests. That day, Romines-Towler emailed Hawthorne to report
the favorable results:
John and Jeremy good day! I completed the in-club testing this morning
at the Bentonville Sam’s Club. Test went extremely well. I used 8
Stromboli’s in the test. The additional samples were used to determine
where to start the pans as the temperature and times were not set at 485*
- 6 minutes. The ovens were set at 500* - 6:30, club associate said they
started the pizzas at the entrance of the oven and recommended we do
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the same. I found that the top oven cooked hotter than the 2nd and 3rd
oven. While the top oven did not burn the Stromboli they were a little
darker than we like to have.
Attached is a recap of the testing.
Please let me know if you have any questions and what our next steps
will be.
Minutes later, Campigli, who was blind copied on Romines-Towler’s email, hit reply
all and sent the following email (the “Costco email”): “Nice job Cindy. Robert
[Ippaso] and I could even use slides 2-5 in our Costco Presentation next week :).”
Hawthorne responded, “I believe we received this note in error. Please be
advised, I have not forwarded it and it will be deleted. Thank you.” Contrary to his
representations, Hawthorne did not delete the email, instead forwarding it to his boss,
Dennis Horn, saying: “So this is interesting . . . . . . . and obviously not something
meant for us.”
Ippaso replied to Hawthorne, thanking him for his understanding and admitting
that Leonetti’s was invited the previous year to present a different product to Costco.
Hawthorne did not respond but instead forwarded the email to Horn commenting, “I
believe this is the owner.” The same day, Campigli sent an email apology to
Hawthorne, who again did not reply but instead forwarded the email to Horn.
Hawthorne testified that he regarded the Costco email as a “grievous error” and
that it would be “unethical” for Leonetti’s to use slides documenting test results for
a possible Sam’s Club product in a presentation to Costco. Hawthorne acknowledged
that Leonetti’s sharing of the product that it developed exclusively for Sam’s Club
would be “a very serious issue.” Hawthorne also testified that he considered the
Costco email “a joke” and that he did not take it seriously.
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Over the next three weeks, Romines-Towler tried unsuccessfully to contact
Hawthorne both by phone and email. At his deposition, Hawthorne offered no reason
for his failure to respond. Hawthorne did not make contact with Crew or Leonetti’s
until February 3, 2015. In the meantime, despite Hawthorne’s original claims to the
contrary, Leonetti’s did not fail any further tests.
When Hawthorne finally got back to Romines-Towler, he did so in order to
terminate Sam’s Club’s relationship with Leonetti’s, sending an email stating:
Cindy,
We have tried and tried several revisions of this product. And to be
honest, the very first version was the best. We did, as you know, have
several temperature problems from day one. Cindy, you and your team
are well aware of the efforts put forth. We battled cold pockets several
times and a change in cheese (which lowered quality) and then finally
get the temperature consistent. We tested on January 14 here in our
kitchens and the bottoms burned. It would be an unacceptable product
to put in front of the Members. Most importantly, we have not yet had
a version of the Stromboli that I have found acceptable to take to a taste
panel.
I would like to put this product on the shelf. We sincerely appreciate all
your efforts and hard work to try and make this work.
Thank you, Cindy. Please let me know if you have any questions.
Consistent with this email, Hawthorne testified in his deposition that Sam’s Club
terminated the project development for performance issues and that the decision was
uninfluenced by the Costco email. No document in Sam’s Club’s files indicates that
the Costco email was considered in the decision.
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Leonetti’s commenced this action against Crew for negligence, breach of
contract, breach of fiduciary duty, and trade libel. The district court granted summary
judgment for Crew on each count except the breach of contract count, which was later
dismissed with prejudice pursuant to a stipulation entered into by the parties. In
granting summary judgment, the district court expressed, “There is powerful evidence
in the record that Mr. Campigli’s email did not cause Sam’s Club not to purchase
frozen food from Leonetti’s.” The district court further explained:
Ultimately, the only evidence in the record to support the contention that
Mr. Campigli’s email caused Sam’s Club not to purchase the products,
is the bare fact that the decision not to purchase was made only a few
weeks after Mr. Campigli’s email was sent. There is no documentary or
testimonial evidence anywhere in the record that any person in the
decision-making process based the decision in any way on Mr.
Campigli’s email, and there is evidence that they did not. To permit the
issue of causation to reach a jury on this record would be to invite pure
speculation from the finder of fact.
Leonetti’s appeals the adverse grant of summary judgment.
II.
The issue on appeal is whether the district court erred by granting summary
judgment in favor of Crew after improperly weighing the evidence and determining
Hawthorne’s testimony was credible. We review de novo the district court’s grant of
summary judgment. Banks v. Slay, 875 F.3d 876, 880 (8th Cir. 2017) (citing Odom
v. Kaizer, 864 F.3d 920, 921 (8th Cir. 2017)). Summary judgment is appropriate “if
the pleadings, the discovery and disclosure materials on file, and any affidavits show
that there is no genuine issue as to any material fact and that the movant is entitled to
judgment as a matter of law.” Arena Holdings Charitable, LLC v. Harman Prof’l,
Inc., 785 F.3d 292, 293 (8th Cir. 2015) (quoting Torgerson v. City of Rochester, 643
F.3d 1031, 1042 (8th Cir. 2011) (en banc)). In ruling on a summary judgment motion,
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a court must view the facts in the light most favorable to the non-moving party. Wood
v. SatCom Mktg., LLC, 705 F.3d 823, 828 (8th Cir. 2013) (quoting Torgerson, 643
F.3d at 1042). In reaching its decision, a court “should not weigh the evidence, make
credibility determinations, or attempt to determine the truth of the matter.” Quick v.
Donaldson Co., 90 F.3d 1372, 1376–77 (8th Cir. 1996) (citing Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 249 (1986)).
In its grant of summary judgment, the district court failed to consider evidence
rebutting the explanation in Hawthorne’s email and evidence beyond mere timing that
the Costco email was the reason for the termination. By doing so, the district court
improperly weighed the evidence and improperly determined that Hawthorne’s
testimony was credible. See Tolan v. Cotton, 134 S. Ct. 1861, 1866 (2014) (quoting
Anderson, 477 U.S. at 249) (“By failing to credit evidence that contradicted some of
its key factual conclusions, the court improperly ‘weigh[ed] the evidence’ and
resolved disputed issues in favor of the moving party.”).
In particular the court failed to consider Leonetti’s evidence offered to rebut
Hawthorne’s email explaining that Sam’s Club was terminating the project for product
quality concerns. In his email, Hawthorne stated that Leonetti’s had trouble coming
up with an acceptable product, particularly with regard to temperature, which is
admittedly undisputed by the parties so far as it goes. The rest of the story is that
Leonetti’s was finally able to pass both the temperature and hold tests—Sam’s Club’s
requirement before the parties would “move forward.” When pressed to explain why
Sam’s Club terminated the relationship after the passed tests, Hawthorne testified that
Leonetti’s product must have failed a test after January 14, 2015. He later conceded
in his deposition that no evidence substantiated this claim. Romines-Towler testified
that the product did not fail any tests after that date. Hawthorne explained in the
termination email that the bottoms of the stromboli burned during the January 14th
test, but Romines-Towler wrote to him on January 14 that the “[t]est went extremely
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well.” Leonetti’s also filed photos from the test that do not appear to show burnt
stromboli.
Contrary to the district court’s order, Leonetti’s also presented evidence beyond
mere timing that the project termination was caused by the Costco email. Leonetti’s
was told that the parties would “move forward” if the stromboli passed both
temperature and hold tests. The stromboli passed the required tests on January 14,
2015, the day the Costco email was sent. Prior to the Costco email, Leonetti’s and
Crew had frequent communication with Sam’s Club; after the email, Hawthorne went
silent, ignoring Crew’s emails and calls for three weeks. Hawthorne testified that the
Costco email was a “grievous error” and that sharing a product developed exclusively
for Sam’s Club would be “unethical” and “a very serious issue.” Although Leonetti’s
presented no direct evidence that the Costco email caused the project termination,
there is sufficient circumstantial evidence to show causation. See New Maumelle
Harbor v. Rochelle, 991 S.W.2d 552, 554 (Ark. 1999) (quoting Wallace v. Broyles,
961 S.W.2d 712, 715 (Ark. 1998)) (“Proximate cause may be shown from
circumstantial evidence, and ‘such evidence is sufficient to show proximate cause if
the facts proved are of such a nature and are so connected and related to each other
that the conclusion therefrom may be fairly inferred.’”).
“Considered together, these facts lead to the inescapable conclusion that the
court below credited the evidence of the party seeking summary judgment and failed
properly to acknowledge key evidence offered by the party opposing that motion.”
Tolan, 134 S. Ct. at 1867–68. Because a genuine issue of material fact exists as to the
causation of the project termination, the district court erred by granting summary
judgment.
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III.
For the foregoing reasons, we reverse the judgment of the district court and
remand for proceedings consistent with this opinion.
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