Kenco Logistics v. Adagio Teas ( 2022 )

2022 UT App 115THE UTAH COURT OF APPEALS
IDRIVE LOGISTICS LLC,
Appellee,
v.
ADAGIO TEAS INC.,
Appellant.
Opinion
No. 20210088-CA
Filed October 6, 2022
Fourth District Court, Provo Department
The Honorable Christine S. Johnson
No. 190400543
Troy L. Booher, Dick J. Baldwin, Taylor Webb, and
Matthew G. Bagley, Attorneys for Appellant
David R. Parkinson and Ronald F. Price, Attorneys
for Appellee
JUDGE DAVID N. MORTENSEN authored this Opinion, in which
JUDGE GREGORY K. ORME and JUSTICE JILL M. POHLMAN
concurred.1
MORTENSEN, Judge:
¶1 Adagio Teas Inc. (Adagio) contracted with iDrive Logistics
LLC (Kenco2) to assist it in obtaining reduced prices for shipping
costs. After a dispute over calculating Kenco’s fee for services
1. Justice Jill M. Pohlman began her work on this case as a member
of the Utah Court of Appeals. She became a member of the Utah
Supreme Court thereafter and completed her work on the case
sitting by special assignment as authorized by law. See generally
Utah R. Jud. Admin. 3-108(4).
2. iDrive Logistics does business as “Kenco Parcel Solutions.”
iDrive Logistics v. Adagio Teas
arose, the parties eventually settled the dispute regarding
outstanding invoices. Adagio applied this same agreed-upon rate
to four invoices moving forward. Litigation ensued when a
dispute arose again. On a motion for summary judgment, the
district court determined that the parties had modified their
original agreement and that Adagio had breached that modified
agreement. Adagio now appeals, and we affirm.
BACKGROUND3
¶2 To save money on shipping, Adagio entered into a contract
(Contract) with Kenco in which Kenco would obtain shipping
discounts for Adagio and Adagio would pay Kenco a portion of
the resulting savings. However, after some time had passed,
Adagio alleged that Kenco had been overbilling. The dispute
boiled down to Adagio believing it would pay Kenco a portion of
a 4% savings while Kenco believed Adagio would pay a portion
of a 22% savings. The greater the savings, the greater Kenco’s fee
would be.4 After Adagio informed Kenco of its belief that Kenco
had been overbilling, the parties engaged in lengthy negotiations
regarding the terms of the Contract and the appropriate billing
rate.
3. “In reviewing a district court’s grant of summary judgment, we
view the facts and all reasonable inferences drawn therefrom in
the light most favorable to the nonmoving party and recite the
facts accordingly.” NetDictation LLC v. Rice, 2019 UT App 198, n.1,
455 P.3d 625 (cleaned up).
4. According to Adagio, the manner of determining the proper
rate was far more complex, but because the specifics of the
complex calculations do not affect the outcome of this case, we
follow the parties’ example and provide basic percentages for
simplicity’s sake.
20210088-CA 2 2022 UT App 115iDrive Logistics v. Adagio Teas
¶3 Ultimately, Kenco offered to meet Adagio in the middle
and proposed to charge based on a 10.5% rate. Kenco stated, “We
are willing to make this change moving forward as we value you as
a customer” and indicated that it would even be willing to
recalculate the most recent invoice using that new baseline.
(Emphasis added.) Kenco continued, “We appreciate your
concern and feel we have found a way to address [it] moving
forward.” (Emphasis added.) But Adagio was not satisfied and
requested that any discount be applied retroactively. Kenco
summarized these developments in an email:
Originally when we discussed[,] I had offered as a
goodwill gesture to adjust calculations from
October moving forward. Last call I had offered to
extend that to open invoices, you had asked to go to
the beginning. You were not realizing at the time
that meant back into 2016. You then asked for it to
include 2017 shipments, not just open invoices.
Rather than adjusting invoices[,] you agreed on last
call that a Credit Memo would be acceptable. I have
made a Credit Memo and I have included all
shipments in 2017.
(Emphasis added.) (Cleaned up.) Kenco continued,
I have accommodated what seemed to be the last
area we were apart when we spoke, i.e. all 2017
shipments rather than open invoices. I would like to
discuss when timing for getting caught up on the
amounts still outstanding.
Adagio’s response was short and to the point:
Thank you for adjusting the pricing of all 2017
shipments. Will gladly speak tomorrow. . . .
Appreciate your help[.]
20210088-CA 3 2022 UT App 115iDrive Logistics v. Adagio Teas
¶4 Once Kenco offered to provide a credit toward past paid
and unpaid invoices through 2017 (in essence reimbursing
Adagio as if it had paid for those invoices based on a 10.5% rate),
Adagio accepted the credit, and the dispute regarding invoices up
to that point was resolved. Kenco then sent—and Adagio paid—
four post-credit invoices based on the same 10.5% rate used to
calculate the credit. But eventually, Adagio refused to pay any
more invoices under this rate—largely because using the 10.5%
rate actually increased Adagio’s shipping costs—and litigation
followed.
¶5 Adagio’s acceptance of the credit and payment of invoices
based on the 10.5% rate provided the crux of that litigation. The
parties disagreed about (1) whether those actions demonstrated
that the parties modified the Contract and (2) whether that
modification applied to invoice calculations moving forward.
Kenco asserted that Adagio’s actions effectuated such a
modification, but Adagio asserted that there was no modification
and that it paid the four post-credit invoices only on a “trial basis,
as a good-faith gesture to help [defuse] tensions between the
parties.” When the parties filed cross-motions for summary
judgment, the district court reviewed the undisputed facts and
explained, “In the present case, there is an objective manifestation
of an intention to be bound by a verbal modification. That
manifestation is documented in the email exchanges between the
parties, as well as in Adagio’s course of conduct thereafter.” The
court continued, “The expressed words and deeds of both parties
thus demonstrate an intent to be bound, and an intent to waive
any formal writing.” The district court granted summary
judgment in Kenco’s favor, and Adagio now appeals.
ISSUE AND STANDARD OF REVIEW
¶6 On appeal, Adagio contends that the court erred in
granting Kenco’s summary judgment motion in the face of
“disputed issues of material fact as to the temporal scope of the
20210088-CA 4 2022 UT App 115iDrive Logistics v. Adagio Teas
parties’ agreement.” We review a grant of “summary judgment
for correctness, giving no deference to the [district] court’s
decision.” Bahr v. Imus, 2011 UT 19, ¶ 15, 250 P.3d 56.
ANALYSIS
I. Summary Judgment
¶7 “Summary judgment is only appropriate if the moving
party shows that there is no genuine dispute as to any material
fact and the moving party is entitled to judgment as a matter of
law.” Arlington Mgmt. Assocs., Inc. v. Urology Clinic of Utah Valley,
LLC, 2021 UT App 72, ¶ 10, 496 P.3d 719 (cleaned up). In
determining if the district court properly granted summary
judgment, the questions before us are twofold: (1) whether,
“view[ing] the facts and all reasonable inferences drawn
therefrom in the light most favorable to the nonmoving party,”
there exists “no genuine dispute as to any material fact” about the
parties modifying the Contract to calculate invoices using an
adjusted rate moving forward after crediting the past invoices and
(2) whether a modified contract existed under which Kenco can
recover. See iDrive Logistics LLC v. IntegraCore LLC, 2018 UT App
40, ¶ 30, 424 P.3d 970 (cleaned up).
¶8 Adagio contends that the district court erred in granting
summary judgment “by making inferences and viewing the facts
in the light most favorable to Kenco, the moving party, as to
whether the parties had a meeting of the minds about the
temporal scope of their agreement.” Specifically, Adagio asserts
the court’s conclusion that “the parties’ course of conduct
manifested their intention to be bound . . . was error” because
“[t]he parties’ contract specified that any modifications must be
reduced to writing” and because inferences of contract
modification based on any course of conduct ignore contrary
evidence that Adagio intended that those additional invoices be
20210088-CA 5 2022 UT App 115iDrive Logistics v. Adagio Teas
paid “only as a gesture of good will to ease tensions and on a
limited trial basis.” (Cleaned up.)
A. Genuine Issue of Material Fact
1. Delaware Law on Contract Modification
¶9 Under Delaware law,5 contract formation depends on
“whether a reasonable negotiator in the position of one asserting
the existence of a contract would have concluded, in that setting,
that the agreement reached constituted agreement on all of the
terms that the parties themselves regarded as essential.” Leeds v.
First Allied Conn. Corp., 521 A.2d 1095, 1097 (Del. Ch. 1986); see also
Sheets v. Quality Assured, Inc., No. N14C-03-010 VLM, 2014 WL
4941983, at *2 (Del. Super. Ct. Sept. 30, 2014) (stating that “[u]nder
Delaware law, contract formation is a question of fact” and “[a]
contract is formed when it is reasonable to conclude, based on the
objective manifestations of assent and the surrounding
circumstances,” including the “course of dealing,” “that the
parties intended to be bound to their agreement on all essential
terms”). “Any amendment to a contract, whether written or oral,
relies on the presence of mutual assent . . . .” Continental Ins. Co. v.
Rutledge & Co., 750 A.2d 1219, 1232 (Del. Ch. 2000).
¶10 Delaware courts have explained the meaning of mutual
assent: “Manifestation of mutual assent is an external or objective
standard for interpreting conduct. A party manifests an intention
to be bound if he believes or has reason to believe that the
promisee will infer that intention from his words or conduct.”
5. The parties agree that the “contract required the application of
Delaware law” and that Delaware law governs the dispute. We
thus apply Delaware law throughout this decision. See 1600
Barberry Lane 8 LLC v. Cottonwood Residential O.P. LP, 2021 UT 15,
¶ 31, 493 P.3d 580 (“[B]ecause the parties contracted to have
[another state’s] law govern the [contract], we must apply [that
state’s] law to determine whether the district court erred . . . .”).
20210088-CA 6 2022 UT App 115iDrive Logistics v. Adagio Teas
Schaeffer v. Lockwood, No. 2018-0926-MTZ, 2021 WL 5579050, at *16
(Del. Ch. Nov. 30, 2021) (cleaned up).6 Further, “mutual assent
means the external expression of intention as distinguished from
undisclosed intention.” Id. (cleaned up). Thus, a “court
determines whether there has been mutual assent based upon the
parties’ expressed words and deeds as manifested at the time
rather than by their after-the-fact professed subjective intent.” Id.(cleaned up).
¶11 A “prohibition against amendment except by written
change may be waived or modified in the same way in which any
other provision of a written agreement may be waived or
modified, including a change in the provisions of the written
agreement by [the] course of conduct of the parties.” Pepsi-Cola
Bottling Co. of Asbury Park v. Pepsico, Inc., 297 A.2d 28, 33 (Del.
1972). “[P]arties have a right to renounce or amend the agreement
in any way they see fit and by any mode of expression they see fit.
They may, by their conduct, substitute a new oral contract
without a formal abrogation of the written agreement.” Id.; see also
id. (finding contracting parties’ course of conduct could modify an
agreement, even where original contract prohibited “any change
except by written bilateral agreement”). And in that course of
6. Although Schaeffer v. Lockwood, No. 2018-0926-MTZ, 2021 WL
5579050 (Del. Ch. Nov. 30, 2021), was discussing contract
formation, as opposed to contract modification, see id. at *15, we
see that distinction as irrelevant because the elements of contract
formation are identical to those for modification, see Thomas v.
Marta, 1990 WL 35292, at *2 (Del. Super. Ct. Mar. 27, 1990) (“[T]o
be effective as a modification, the new agreement must possess all
of the elements necessary to form a contract. A modification
requires the assent of both or all parties to the contract.”); see also
17A Am. Jur. 2d Contracts § 496 (2022) (“A valid modification of a
contract must satisfy all the criteria essential for a valid original
contract, including offer, acceptance, and consideration.” (cleaned
up)).
20210088-CA 7 2022 UT App 115iDrive Logistics v. Adagio Teas
conduct, “there must be a clear intention to alter the express
terms,” Simon Prop. Group, LP v. Brighton Collectibles, LLC, No.
N21C-01-258 MMJ CCLD, 2021 WL 6058522, at *3 (Del. Super. Ct.
Dec. 21, 2021)—that is, the expression of the intention must be one
of “specificity and directness,” Continental Ins., 750 A.2d at 1230(cleaned up).
2. Kenco’s and Adagio’s Communications and Course of
Conduct
¶12 As an initial matter, Adagio argues that any modification
of the Contract had to be reduced to writing pursuant to one of
the Contract’s provisions: “This Agreement may not be waived,
repealed, altered, or amended in whole or in part except by an
instrument in writing executed by authorized representatives of
each of the parties.” But Adagio concedes that “this provision
could be waived by course of conduct”—a point confirmed by
Delaware law—all the while asserting that the parties’ “course of
conduct here was not sufficient to create a new governing
contract.”
¶13 As will be explained, the parties’ communications and
actions demonstrated the necessary intent to be bound, leaving no
room for a genuine dispute of material fact. Specifically, the
parties’ emails and their subsequent course of conduct
demonstrate indisputable mutual assent to modify the Contract.
¶14 Although Adagio initially rejected Kenco’s offer to charge
based on a 10.5% rate “moving forward,” the email discussion
demonstrates that it did so because it wanted that same rate to be
applied retroactively. (Emphasis added.) Kenco stated that it had
originally “offered as a goodwill gesture to adjust calculations
from October moving forward” but that in later discussions, it had
“offered to extend that [rate] to open invoices.” (Emphasis added.)
In response, Adagio said it wanted that rate to apply back “to [the]
beginning,” but it ultimately settled on the offer “includ[ing] 2017
shipments, not just open invoices.” Thus, the new rate would
20210088-CA 8 2022 UT App 115iDrive Logistics v. Adagio Teas
apply “moving forward,” but the remaining negotiations—
specifically those that followed Adagio’s initial rejection of
Kenco’s offer—related only to how far back the new rate would
extend. Adagio sought to have it apply to the beginning of the
relationship, and the parties ultimately settled on applying the
rate to all 2017 charges. Instead of recalculating the past invoices,
Kenco provided a “Credit Memo” reflecting the amount provided
under that agreement and finalized the email, stating, “I have
accommodated what seemed to be the last area we were apart”—
specifically, how far back the new rate would be applied, “i.e. all
2017 shipments rather than open invoices.” Adagio responded
not with a challenge to the description of events nor with any
rejection of this summary, but with a simple acknowledgment:
“Thank you for adjusting the pricing of all 2017 shipments. . . .
Appreciate your help.”
¶15 The parties’ course of conduct confirms the same. Not only
did Adagio accept the credit memo that came as part of that
package deal, but it also continued to operate using that 10.5%
rate by paying on four post-credit invoices based on the
renegotiated rate (the same one used to calculate the credit). The
undisputed fact that an offer was made and that the parties
proceeded in lockstep with the terms of that offer constitutes
evidence of the parties’ assent to the modified contract terms. See
11 Williston on Contracts § 32:14 (4th ed. 2022) (“Even when the
terms of a contract are clear and unambiguous, the subsequent
conduct of the parties may evidence a modification of their
contract. Accordingly, while their conduct may not be used to
support an interpretation contrary to the plain meaning of the
contract, it may nonetheless be used to prove the existence of a
modification of the original contract terms.”).
¶16 Thus, the parties’ respective actions demonstrated a
modification of the Contract, regardless of any requirement for
that modification to be written. “[P]arties have a right to renounce
or amend the agreement in any way they see fit and by any mode
20210088-CA 9 2022 UT App 115iDrive Logistics v. Adagio Teas
of expression they see fit. They may, by their conduct, substitute
a new oral contract without a formal abrogation of the written
agreement”—and that is exactly what happened here. See Pepsi-
Cola Bottling Co. of Asbury Park v. Pepsico, Inc., 297 A.2d 28, 33 (Del.
1972). Moreover, the evidence demonstrating Adagio’s and
Kenco’s assent is not ambiguous. The parties here agreed to a
specific modification in their new agreement, and, at least for a
time, the parties complied with those obligations.
¶17 In short, both the emails and the subsequent course of
conduct (i.e., compliance with the agreement set forth in those
emails) directly and specifically demonstrate the parties’ intention
to modify their agreement and the mutual assent to do so. See
Continental Ins. Co. v. Rutledge & Co., 750 A.2d 1219, 1230 (Del. Ch.
2000).
¶18 Adagio, however, resists this conclusion by contending
that it paid the four new invoices applying the 10.5% rate only “as
a gesture of good will . . . to see if the proposed new rate would
result in an overall reduction of shipping costs.” The evidence
presented to support this assertion comes from Adagio’s post hoc
affidavits, in which it stated, among other things, that (1) it “did
not feel that Kenco was being compensated correctly” but that it
“made four payments” “to ease the tension that developed in [the]
relationship”; (2) it “did not consider the issue finally resolved”
because it did not consider the rate to be a final rate; (3) it “was
willing to try paying the . . . rate on a limited or trial basis to see if
it could get Adagio closer to where it needed to be in terms of its
historical shipping costs, but [it] did not consider it a final rate or
a final settlement of the matter”; (4) “[b]y applying the . . . rate on
a limited or trial basis, [it] never intended to permanently pay
Kenco more than what it was actually due under the Contract”;
and (5) “it soon became clear that Kenco was still overbilling.”
¶19 But “mutual assent means the external expression of
intention as distinguished from undisclosed intention.” Schaeffer
20210088-CA 10 2022 UT App 115iDrive Logistics v. Adagio Teas
v. Lockwood, No. 2018-0926-MTZ, 2021 WL 5579050, at *16 (Del.
Ch. Nov. 30, 2021) (cleaned up). Notably, under Delaware law,
“[a]n overt manifestation of assent, not a subjective intent,
controls the formation of a contract,” and therefore, “[t]he
unexpressed subjective intention of a party is . . . not relevant.”
Acierno v. Worthy Bros. Pipeline Corp., 693 A.2d 1066, 1070 (Del.
1997); see also Leeds v. First Allied Conn. Corp., 521 A.2d 1095, 1101
(Del. Ch. 1986) (“It is basic that overt manifestation of assent—not
subjective intent—controls the formation of a contract; that the
only intent of the parties to a contract which is essential is an
intent to say the words or do the acts which constitute their
manifestation of assent. Accordingly, our inquiry is the objective
one: whether a reasonable [person] would, based upon the
objective manifestation of assent and all of the surrounding
circumstances, conclude that the parties intended to be bound by
contract.” (cleaned up)).
¶20 Thus, a “court determines whether there has been mutual
assent based upon the parties’ expressed words and deeds as
manifested at the time rather than by their after-the-fact professed
subjective intent.” Schaeffer, 2021 WL 5579050, at *16 (cleaned up).
“It is not material what induces the will. Otherwise stated, motive
in the manifestation of assent is immaterial. There may be primary
and secondary reasons or motives for a performance constituting
manifestation of assent to an offer inviting acceptance by
performance; and the chief reason or the prevailing motive need
not necessarily be the offer itself.” Industrial Am., Inc. v. Fulton
Indus., Inc., 285 A.2d 412, 415 (Del. 1971) (cleaned up).
Accordingly, “not much weight should be given to the motives of
an offeree.” Id.¶21 Here, Adagio’s professed reason for paying the additional
invoices after accepting the credit memo is nothing more than an
“after-the-fact professed subjective intent.” See Schaeffer, 2021 WL
5579050, at *16 (cleaned up). Adagio points to no record
evidence—apart from its late-in-time affidavits—that any of these
20210088-CA 11 2022 UT App 115iDrive Logistics v. Adagio Teas
intentions or understandings were expressed by Adagio to Kenco,
and we are left with Delaware law’s maxim that “the unexpressed
subjective intention of a party is,” indeed, “not relevant.” Acierno,
693 A.2d at 1070. And here, Adagio’s gratitude for Kenco’s
“extend[ing]” its offer of rate adjustment to “include” 2017
shipments are words that indicate mutual assent. Adagio’s
subsequent acceptance of the credit memo and payment of new
invoices according to the adjusted rate were actions that
manifested “an intention to be bound” such that Adagio should
have known that Kenco would understand Adagio’s conduct to
indicate such an intention. See Schaeffer, 2021 WL 5579050, at *16
(cleaned up). Accordingly, there is no dispute of material fact
underpinning the conclusion that mutual assent was present.
B. Judgment as a Matter of Law
¶22 Because we review a grant of “summary judgment for
correctness, giving no deference to the [district] court’s decision,”
Bahr v. Imus, 2011 UT 19, ¶ 15, 250 P.3d 56, we must determine if
Kenco “is entitled to judgment as a matter of law,” Arlington
Mgmt. Assocs., Inc. v. Urology Clinic of Utah Valley, LLC, 2021 UT
App 72, ¶ 10, 496 P.3d 719 (cleaned up); see also Moore v. Deli Days,
LLC, No. N18C-09-044 SKR, 2020 WL 2892229, at *1 (Del. Super.
Ct. May 29, 2020) (“[S]ummary judgment should be granted
where there are no genuine disputes of material fact and the
movant is entitled to judgment as a matter of law.”). As noted,
“under Delaware law, the formation [and modification7] of a
contract require[] a bargain in which there is a manifestation of
mutual assent to the exchange.” See Schaeffer, 2021 WL 5579050, at
*15 (cleaned up). Above, we have identified that there was indeed
mutual assent to the contract modification as evidenced by the
email communications and course of conduct. It is undisputed
that following the initial four payments under the modified
agreement, Adagio stopped making payments; thus, Kenco has
7. See supra note 6.
20210088-CA 12 2022 UT App 115iDrive Logistics v. Adagio Teas
been deprived of its benefit from the agreement. As explained, a
contract was formed and modified under Delaware law. No party
disputes that, assuming an enforceable modification came into
existence, Adagio breached the terms of that agreement.
Accordingly, Kenco was entitled to judgment as a matter of law.
II. Attorney Fees on Appeal
¶23 On appeal, Kenco also seeks attorney fees in accordance
with rule 24(a)(9) of the Utah Rules of Appellate Procedure and
the parties’ original agreement.8 Adagio conceded that Kenco is
entitled to attorney fees on appeal when it stated that Kenco’s
request should be denied only “[t]o the extent Adagio prevails on
appeal.” Because Adagio has not prevailed on appeal, Kenco
remains the prevailing party and is entitled to fees under the
Contract. Where Kenco received an award of attorney fees below,
such an award is also appropriate on appeal. See Federated Cap.
Corp. v. Abraham, 2018 UT App 117, ¶ 15, 428 P.3d 21 (“A party
entitled by contract or statute to attorney fees below and that
prevails on appeal is entitled to fees reasonably incurred on
appeal.” (cleaned up)).
CONCLUSION
¶24 Because no dispute of material fact exists and because
Kenco is entitled to judgment as a matter of law, we affirm the
district court’s order granting summary judgment and remand
the case for the limited purpose of calculating Kenco’s award of
reasonable attorney fees incurred on appeal.
8. Because the rule governing the award of attorney fees on appeal
is “one of procedure[,] . . . Utah law should apply on this point.”
See 1600 Barberry Lane 8, 2021 UT 15, ¶ 35 n.8.
20210088-CA 13 2022 UT App 115