Counter Wraps International v. Diageo North America, Inc.

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS JUL 2 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
COUNTER WRAPS INTERNATIONAL, No. 19-15712
INC., doing business as DC Media and
Marketing, D.C. No.
2:16-cv-02924-JCM-CWH
Plaintiff-Appellant,
v. MEMORANDUM*
DIAGEO NORTH AMERICA, INC.;
DIAGEO AMERICAS, INC.,
Defendants-Appellees.
Appeal from the United States District Court
for the District of Nevada
James C. Mahan, District Judge, Presiding
Submitted May 13, 2020**
Portland, Oregon
Before: BYBEE and VANDYKE, Circuit Judges, and CHHABRIA,*** District
Judge.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
***
The Honorable Vince Chhabria, United States District Judge for the
Northern District of California, sitting by designation.
Counter Wraps International, Inc. (“CWI”) appeals the district court’s grant
of summary judgment dismissing its breach of contract and fraud claims. The
district court concluded that both claims were barred by the relevant statute of
limitations. We have jurisdiction under 28 U.S.C. § 1291. We affirm in part and
reverse in part.
CWI agreed to make counter wraps for Diageo’s1 sparkling alcoholic drink,
Nuvo. CWI alleges that the parties executed a written contract under which Diageo
would pay CWI $7.5 million for 5,000 wraps (the “Nuvo Agreement”). Diageo
ultimately requested fewer wraps and paid CWI $3.38 million for the reduced
number of wraps. CWI contends that Diageo first fraudulently induced CWI to enter
into a contract, and then breached the contract. Diageo argues that (1) it was never
a party to the so-called Nuvo Agreement, (2) the variable-quantity terms attached to
Diageo’s later-signed Purchase Order (“PO”) controlled its agreement with CWI,
and (3) even if the parties started with a fixed-quantity contract, the parties
subsequently modified the contract by agreement, so Diageo never breached the
agreement as modified.
We review de novo a district court’s grant of summary judgment and “view
the evidence in the light most favorable to the nonmoving party.” United States v.
Phattey, 943 F.3d 1277, 1280 (9th Cir. 2019) (internal quotation marks omitted;
1
We collectively refer to the Defendants as “Diageo.”
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alterations adopted). We must also determine “whether the district court correctly
applied the relevant substantive law”—here, Nevada law. Id. (quoting Devereaux v.
Abbey, 263 F.3d 1070, 1074 (9th Cir. 2001) (en banc)).
The dispositive issue for the breach of contract claim is whether the parties’
agreement was written or oral. If oral, as the district court concluded, Nevada law
imposes a four-year statute of limitations that bars CWI’s breach of contract claims.
Nev. Rev. Stat. § 11.190(2)(c). On the other hand, if the parties’ agreement was
written, Nevada law imposes a six-year statute of limitations, and CWI’s contract
claim is not time-barred. Nev. Rev. Stat. § 11.190(1)(b). The district court
determined that the agreement between the parties was oral in nature and thus time-
barred under Nevada’s four-year statute of limitations for oral contracts. But that
was error.
Under Nevada law, “a strict construction should not be applied by the court in
determining what does and what does not constitute a ‘contract in writing’” under
Section 11.190(1)(b). El Ranco, Inc. v. N.Y. Meat & Provision Co., 493 P.2d 1318,
1321 (Nev. 1972), disagreed with on other grounds by State v. Am. Bankers Ins. Co.,
782 P.2d 1316 (Nev. 1989). “[A]ll that is required is that there be a writing which
fairly imports the obligation to pay.” Id. at 1321–22 (concluding that sales receipts
and the parties’ course of dealing were sufficient to meet Nevada’s “contract in
writing” requirement). Here, while the parties dispute which emails and documents
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controlled their agreement, the evidence produced at summary judgment makes clear
that the parties’ agreement was based on written emails and documents containing
prices, amounts, and terms. Regardless of whether the Nuvo Agreement controls (as
CWI argues) or the PO terms control (as Diageo argues) or the parties’ contract was
modified by subsequent correspondence (as Diageo also argues), the evidence shows
that one or more writings existed that governed various terms of the parties’
agreement, and CWI’s breach of contract claim is therefore not time-barred under
Nevada Revised Statute § 11.190(1)(b). The question of which writing(s) control is
a disputed issue of material fact that should be decided by the fact-finder, not
pretermitted at the summary judgment stage.
To defeat summary judgment on the fraud in the inducement claim, CWI must
establish the following elements by clear and convincing evidence at trial:
(1) a false representation made by [Diageo], (2) [Diageo’s] knowledge
or belief that the representation was false (or knowledge that it had an
insufficient basis for making the representation), (3) [Diageo’s]
intention to therewith induce [CWI] to consent to the contract’s
formation, (4) [CWI’s] justifiable reliance upon the misrepresentation,
and (5) damage to [CWI] resulting from such reliance.
J.A. Jones Constr. Co. v. Lehrer McGovern Bovis, Inc., 89 P.3d 1009, 1018 (Nev.
2004). “Fraud is never presumed; it must be clearly and satisfactorily proved.”
Havas v. Alger, 461 P.2d 857, 860 (Nev. 1969). To prevent summary judgment,
CWI must show that the evidence “raises a genuine issue concerning the existence
of” fraud and “come forward with specific facts showing that there is a genuine issue
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for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87
(1986) (emphasis in original; quotation marks omitted) (quoting Fed. R. Civ. P.
56(e)). “Where the record taken as a whole could not lead a rational trier of fact to
find for [CWI], there is no genuine issue for trial.” Id. at 587 (internal citation and
quotation marks omitted).
With respect to the second element, CWI provides three reasons why Diageo’s
guarantees were knowingly “false when made.” First, CWI argues that “Diageo has
an (undisclosed) internal ‘optionality’ policy affording itself the unilateral right to
walk away from its agreements with its vendors for any reason at any time.” Second,
Diageo “believes it can and will unilaterally modify or cancel vendor commitments
based on brand performance.” Third, Diageo “determined its Nuvo budget would
depend upon sales—if the brand faltered, Diageo was not committed to direct other
available funds to honor the parties’ agreement.”
Even assuming these three assertions are true, they do not demonstrate that
Diageo did not intend to uphold its end of the bargain when the agreement was
struck. See Tallman v. First Nat’l Bank of Nev., 208 P.2d 302, 307 (Nev. 1949)
(“[T]here is no inference of a fraudulent intent not to perform from the mere fact that
a promise made is subsequently not performed.”). Instead, the assertions
demonstrate that Diageo was operating under the assumption that the optionality
provision in its PO applied to the agreement with CWI. If Diageo incorrectly
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believed that its optionality provision applied, then Diageo was mistaken and only
misled itself. This mistaken belief may have resulted in later breach of the contract
because Diageo misunderstood its terms, but later nonperformance is not evidence
of fraud. See id. If, on the other hand, Diageo was correct and its optionality
provision does apply to the parties’ agreement, then CWI cannot prove that Diageo
committed fraud because Diageo could not have misled CWI about something that
was, in fact, true. Either way, the three assertions put forth by CWI do not show that
Diageo knew its guarantees under the agreement were false when made. CWI’s
fraud claim fails because CWI has not pointed to any evidence supporting the second
element of fraud in the inducement. Thus, even assuming CWI can establish the
remaining elements, its fraud claim cannot survive summary judgment.2
The district court’s dismissal of the breach of contract claim is REVERSED
and REMANDED. A trier of fact should determine which writing(s) control,
whether the parties subsequently modified their original agreement, and whether a
breach occurred.
The district court’s dismissal of the fraud claim is AFFIRMED.
2
CWI also asserts fraudulent concealment on appeal. But CWI did not allege fraudulent
concealment at the district court; in fact, the words “conceal” and “concealment” do not appear in
CWI’s First Amended Complaint. We decline CWI’s invitation to consider this argument in the
first instance and in the absence of exceptional circumstances. See Baccei v. United States, 632
F.3d 1140, 1149 (9th Cir. 2011) (“Absent exceptional circumstances, we generally will not
consider arguments raised for the first time on appeal, although we have discretion to do so.”).
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