Plymouth Foam v. City of Becker ( 1997 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 96-4203
___________
Plymouth Foam Products, Inc., *
*
Appellant, *
* Appeal from the United States
v. * District Court for the
* District of Minnesota
City of Becker, Minnesota, *
*
Appellee. *
___________
Submitted: June 13, 1997
Filed: August 12, 1997
___________
Before MURPHY, LAY, and NORRIS,1 Circuit Judges.
___________
MURPHY, Circuit Judge.
Plymouth Foam Products, Inc. approached the city of Becker about
providing economic incentives to move one of its plants there. The parties
disagree over whether an enforceable agreement was ever reached and whether
the representations of a city employee were fraudulent. The district
2
court granted summary judgment for the city
1
The Honorable William A. Norris, United States Circuit Judge for the Ninth
Circuit, sitting by designation.
2
The Honorable David S. Doty, United States District Judge for the District of
Minnesota.
on both the contract and fraud claims and concluded that the city was not
estopped from arguing there was no contract. We affirm.
Plymouth Foam manufactures insulation products and is owned and
managed by Bradley Roberts and his two brothers. In 1990 it began to
explore the possibility of relocating the plant it then operated in Maple
Grove, Minnesota. Bradley Roberts was primarily responsible for the
relocation efforts.
One potential new site for the plant was the city of Becker,
Minnesota which has an Economic Development Authority (EDA) which initially
considers any proposal from a company. The EDA is an advisory body to the
city council and was established by the council with a formal resolution.
If the EDA accepts a proposal, it passes it on to the city council which
is empowered to make the final decision. In Minnesota a municipality may
enter into a contract with another party only if it is authorized by the
respective city council. Minn. Stat. § 412.201 (West 1987).
David Graning is the community development director for the city of
Becker, and part of his job is to act as a contact for businesses
interested in operating there. He is an employee of the city and does not
sit on either the EDA or the city council. Graning is the only person in
the city administration that Roberts dealt with directly in discussing
Plymouth Foam's relocation to Becker.
On June 30, 1992, Roberts submitted an application for economic
assistance to the city. The application stated that Plymouth Foam needed
help in obtaining approximately $60,000 in financing to cover the gap
between its available resources and the expenses associated with the move.
Graning contacted the Minnesota Department of Trade and Economic
Development (MDTED) to inquire about state programs which might provide the
funds and was informed that money was not available for companies like
Plymouth Foam which were relocating from one Minnesota city to another.
-2-
The EDA then considered and approved an incentive package for
Plymouth Foam and passed it along to the city council. In July 1993 the
council passed a resolution providing Plymouth Foam with land, utilities
installation, and a contribution of up to $15,000 for site preparation.
The resolution did not contain a guarantee for the $60,000 financing sought
by the company.
In September of 1993, Roberts informed Graning that Plymouth Foam had
received a more attractive relocation offer from the city of Graettinger,
Iowa. In response, Graning again contacted the MDTED and discovered that
since Plymouth Foam was now considering an offer from outside Minnesota,
Becker could qualify for funding from the state in order to provide the
company with additional financing.
In March 1994 Graning met with a representative of MDTED named
Terrell Towers who stated that there was approximately $150,000 available
in MDTED's economic recovery fund and that the Plymouth Foam proposal would
meet the requirements for those funds. Graning says he informed Roberts
of the substance of this conversation and told him that Towers made it
sound like all they needed to do was fill out the application and the funds
would be available. Roberts characterizes the conversation slightly
differently; he claims Graning told him the state had agreed to provide the
funds and they were available upon request. While Roberts realized that
the city had to submit a written application to the state for these funds,
his conversations with Graning led him to believe that there was a verbal
agreement between the state and the city to earmark $150,000 for Plymouth
Foam and that these funds were available whenever needed.3
3
In his deposition of May 1, 1996, Roberts stated he knew the $150,000 he
discussed with Graning would come from the state, not the city. In a supplemental
affidavit filed after the city's motion for summary judgment, Roberts said it was his
understanding that Becker would provide $150,000 whether it received the state money
or not. He did not claim that this understanding was based on any specific
representation made by Graning or anyone else associated with the city. To the extent
that his subsequent affidavit conflicts with his earlier deposition, his affidavit testimony
should be disregarded. See RSBI Aerospace, Inc. v. Affiliated FM Ins. Co., 49 F.3d
399, 402 (8th Cir. 1995).
-3-
After further discussions, Graning asked Roberts to write a letter
which he could present to the EDA for consideration and approval. In a
letter dated March 23, 1994, Roberts outlined the incentives Plymouth Foam
required to relocate its plant in Becker. The letter is directed to
Graning and the "Economic Development Committee" and states that Plymouth
Foam intended to move to Becker "if the items below are met as we have
discussed." One item is a $150,000 forgivable loan or grant to help offset
moving costs and train new employees. While the source of this funding is
not specifically identified, elsewhere in the letter Roberts offers to
supply any material necessary to "file for the state money."
Graning then took the letter of March 23 to the EDA and presented it
as a proposal for consideration. The minutes of the meeting indicate that
a motion was adopted "to accept the Plymouth Foam proposal," and that the
adopted motion was sent to the city council for consideration. The city
council never considered or approved the proposal, however.
After the EDA meeting, city officials submitted an application for
the MDTED funds on behalf of Plymouth Foam. Graning was informed by MDTED
in the summer of 1994 that the economic recovery fund had been exhausted
for that year, but that additional funding might be available in January
1995. Graning relayed this information to Roberts. Becker resubmitted an
application to MDTED on August 11, 1994. In a letter dated September 28,
1994, MDTED informed Becker that the economic recovery fund had been fully
allocated for the 1995 fiscal year and that no funds would be available to
it. Plymouth Foam then obtained a $150,000 bank loan instead of the
forgivable loan or grant it says it believed would be available.
Plymouth Foam filed a complaint asserting breach of contract and
fraud against
-4-
the city, and the district court granted the city's motion for summary
judgment. A decision to grant summary judgment is reviewed de novo.
Michalski v. Bank of Am. Ariz., 66 F.3d 993, 995 (8th Cir. 1995). The
court views all the evidence in favor of the non-moving party and gives
that party all reasonable inferences that may be drawn from the evidence.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). The non-moving
party, however, must set forth specific facts sufficient to raise a genuine
issue of material fact, Celotex Corp. v. Catrett, 477 U.S. 317, 324
(1986), and there is no issue for trial unless reasonable minds could
differ as to the import of the evidence. Anderson, 477 U.S. at 250-51.
If the non-moving party has completely failed to support an essential
element of a claim, summary judgment is appropriate because all other
factual disputes become immaterial. Celotex, 477 U.S. at 322-23.
Plymouth Foam's breach of contract claim must fail because there is
no contract to enforce. Under Minnesota law a municipality may enter into
a contract only if authorized by its city council. Minn. Stat. Ann. §
412.201 (West 1994). The record contains no evidence that the city council
itself accepted the company's proposal or that it authorized Graning or the
EDA to accept the company's offer. On appeal, Plymouth Foam no longer
argues a contract was ever actually formed.
Plymouth Foam does argue, however, that the city should be estopped
from claiming there was no contract because Graning had made earlier
representations that an agreement existed and that MDTED had agreed to
provide $150,000. Equitable estoppel is intended to prevent a party "from
taking unconscionable advantage of [its] own wrong by asserting [its]
strict legal rights." Brown v. Minnesota Dept. of Pub. Welfare, 368 N.W.2d
906, 910 (Minn. 1985) (citation omitted). A claim of estoppel requires
proof that a party made representations or inducements upon which the other
party reasonably relied to its detriment. Id. Estoppel is an equitable
remedy within the discretion of the trial court that is applied sparingly
against the government. Id., 368 N.W.2d at 910. There is a heavy burden
to establish estoppel against a governmental entity; it requires proof that
the entity acted wrongfully and that a serious injustice
-5-
would result if it were not estopped. Id.; Ridgewood Dev. Co. v. State,
294 N.W.2d 288, 293 (Minn. 1980).
Plymouth Foam is unable to show the city itself made any
representations. Its estoppel argument relies on the verbal comments of
David Graning who is an employee of the city and does not sit on either the
EDA or the city council. "Whether an administrative officer is authorized
to make a representation is an important consideration in determining
whether the government should be estopped from contesting the accuracy of
that representation." Mesaba Aviation v. County of Itasca, 258 N.W.2d 877,
879 (Minn. 1977). "No representation, statement, promises, or acts of
ratification by officers of a municipal corporation or a county can operate
to estop it to assert the invalidity of a contract where such officers were
without power to enter into such a contract in behalf of the corporation."
56 Am. Jur. 2d, Municipal Corporations § 528 (1971 & 1997 Supp.); see also
Jasaka Co. v. City of St. Paul, 309 N.W.2d 40, 44 (Minn. 1981)
(municipality is rarely estopped by the unauthorized acts or omissions of
its officers or agents); City of Fergus Falls v. Whitlock, 77 N.W.2d 194,
198 (Minn. 1956) (government not estopped by unauthorized act of officer);
Alexander Co. v. City of Owatonna, 24 N.W.2d 244, 249-50 (Minn. 1946)
(same). Plymouth Foam does not dispute that Graning could not bind the
city to a contract or that he was held out as having such authority. Since
Graning was not authorized to enter into a contract with Plymouth Foam on
behalf of the city, his representations that such an agreement had been
reached do not estop the city from arguing there was no contract.
Even if Graning's representations could be attributed to the city,
Plymouth Foam's reliance on those representations was not justified. "All
persons contracting with a municipal corporation are conclusively presumed
to know the extent of the authority possessed by the officers with whom
they are dealing," Jewell Belting Co. v. Village of Bertha, 97 N.W. 424,
425 (Minn. 1903), because the law and public records give other parties
constructive notice of the powers and functions of such
-6-
officers. See 13A Dunnell Minnesota Digest 2d, Municipal Corporations, §
7.05(b) (3d ed. 1981). Graning was not authorized to contract on behalf
of the city or to speak definitively about what the city council had or had
not approved. Roberts is a sophisticated businessman and part owner of a
multi-million dollar company, and the law, public records, and his
experience with the earlier incentive package approved by the city council
put him on notice about what was required to reach an agreement with the
city. Reliance on the oral statements of a city employee regarding the
terms or status of an agreement of this type and magnitude was not
justified.
Plymouth Foam also argues that Graning's representations mean that
the city committed fraud. To establish a claim for fraud under Minnesota
law, a plaintiff must show: (1) a false representation of a material fact
susceptible to knowledge; (2) the defendant knew it to be false or asserted
it as his own knowledge without knowing whether it was true or false; (3)
the defendant intended the plaintiff to act on the representation; (4) the
plaintiff was justified in relying on the representation; and (5) the
plaintiff suffered damages. See Davis v. Re-Trac Mfg. Corp., 149 N.W.2d
37, 38-39 (Minn. 1967).
As with the estoppel claim, Plymouth has not shown its reliance on
Graning's alleged representations was reasonable. Graning had no authority
to bind the city, and Roberts is conclusively presumed to be aware of this
fact. See Jewell Belting, 97 N.W. at 425. Since he knew Graning could not
bind the city and because his earlier dealings with the city and the
Minnesota statutory code put him on notice of what was required to reach
an agreement, it was not reasonable for Roberts to rely on Graning's oral
statements. Summary judgment for the city on the fraud claim was
appropriate.
For these reasons the judgment is affirmed.
-7-
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
-8-