Strategy and Execution Inc v. Lxr Biotech LLC

STATE OF MICHIGAN
COURT OF APPEALS
STRATEGY AND EXECUTION INC, UNPUBLISHED
June 28, 2018
Plaintiff/Counterdefendant-
Appellee,
v No. 337105
Oakland Circuit Court
LXR BIOTECH LLC, LC No. 2015-146756-CK
Defendant/Counterplaintiff-
Appellant.
Before: MURPHY, P.J., and JANSEN and RONAYNE KRAUSE, JJ.
PER CURIAM.
Defendant/counter-plaintiff LXR Biotech LLC (LXR) appeals by right the judgment
entered in favor of Plaintiff/counter-defendant Strategy & Execution Inc (SEI), after a jury trial,
as well as the trial court’s earlier grant of partial directed verdict in SEI’s favor. We affirm.
LXR is a manufacturer of energy shots, and SEI is an entity that does sales and
marketing. LXR retained SEI to handle its sales and marketing, but for various reasons the
relationship broke down. Broadly, SEI contends that LXR breached the parties’ contract by
failing to pay commissions and a monthly retainer, and further asserts that it was hamstrung in its
efforts to perform under the contract by LXR’s nonpayment as well as refusal to disclose
necessary information or otherwise cooperate. LXR admitted that it failed to make all of its
payments, and contends that SEI not only failed to produce promised results, but also breached
the contract by failing to meet agreed-upon performance criteria and affirmatively hurt LXR’s
sales. Additionally, LXR claims SEI attempted to tamper with LXR’s management, improperly
harassed LXR for information to which it had no right, and interfered in LXR’s relationship with
a major investor. LXR further stated that its failure to make all of SEI’s payments was because
SEI essentially caused LXR to be incapable of doing so. The trial court granted a directed
verdict in favor of SEI as to LXR’s breach of contract claim.
This Court reviews de novo a grant or denial of a motion for directed verdict. Aroma
Wines & Equip, Inc v Columbia Distrib Servs, Inc, 303 Mich. App. 441, 446; 844 NW2d 727
(2013). The evidence, and any reasonable inferences therefrom or conflicts in, must be viewed
in the light most favorable to the non-moving party, and the motion granted only if there is no
factual dispute or reasonable jurors could not differ. Id. This Court reviews de novo as a
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question of law the proper interpretation of a contract, including a trial court’s determination
whether contract language is ambiguous. Klapp v United Ins Group Agency, Inc, 468 Mich. 459,
463; 663 NW2d 447 (2003). This Court reviews de novo a claim of instructional error to
determine whether the complaining party was unfairly prejudiced by the omission of any
material issues, defenses, or theories supported by the evidence. Cox v Board of Hosp Managers
for City of Flint, 467 Mich. 1, 8; 651 NW2d 356 (2002).
LXR first argues that the trial court erred in granting a directed verdict in favor of SEI on
its breach of contract claim. Specifically, it is undisputed that the parties’ written contract
specified, in relevant part, that “Performance criteria will be added after both parties have had a
chance to get familiar with the market and product potential and agree to negotiate in good
faith.” There is also no dispute that the principals of the parties never both signed a single
written document embodying any such criteria. The principal of LXR, Andrew Krause,1 did
write down some performance criteria on a now-lost piece of paper after, he claims, arriving at a
verbal agreement with the principal of SEI, Thomas Morse. The existence of the piece of paper
itself was corroborated; however, the only other person who claimed to know of it, an attorney
who worked for LXR and kept the paper in his office until the paper disappeared, gave
conflicting testimony at trial and at his deposition regarding whether performance criteria were
ever actually agreed upon by anyone other than Krause alone.
A single party’s subjective belief that an agreement was reached is insufficient to
establish the requisite “meeting of the minds.” Kamalnath v Mercy Mem Hosp Corp, 194 Mich
App 543, 548-549; 487 NW2d 499 (1992). Nonetheless, a suspiciously improbable case is
usually not justification for depriving the jury of its role as the evaluator of witnesses’ credibility.
Caldwell v Fox, 394 Mich. 401, 407; 231 NW2d 46 (1975). However, there may be exceedingly
unusual cases where a witness’s testimony is not in fact sufficient to create a genuine question of
fact, generally where a witness has a non-trivial interest in the outcome and the testimony is in
some way additionally improbable because it is self-contradictory, contravenes physical laws or
incontrovertible other evidence, or is based on doubtful memory and departs from an
overwhelming accumulation of other evidence. See Krisher v Duff, 331 Mich. 699, 709-710; 50
NW2d 332 (1951); Wingett v Moore, 308 Mich. 158, 161; 13 NW2d 244 (1944); Grace Harbor
Lumber Co v Friedman, 277 Mich. 202, 211; 269 N.W. 144 (1936).
It is inescapable that Krause is a highly interested witness with every motive to
prevaricate, although that does not make him a particularly unusual witness in this matter.
However, by his own testimony he was in the habit of routinely lying to Morse, which he
seemingly believed was simply good business practice. His testimony also featured a
noteworthy disinclination to provide direct answers to questions. LXR relies on emails to show
that there had been an agreement as to performance criteria, but all the emails appear to show is
that the parties discussed proposals for performance criteria. Voluminous email communications
were admitted, and LXR apparently deemed performance criteria of great importance.
Therefore, we find it beyond merely implausible that the purported oral agreement Krause
1
No relation to any judge on this panel.
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described would not have been expressly memorialized or referenced in some written and
retained document attributable to principals from both parties. All other things being equal,
“absence of evidence is not evidence of absence.” In re Rail Freight Fuel Surcharge Antitrust
Litigation, 725 F 3d 244, 254 (CA DC, 2013). However, all other things are not equal where it is
inconceivable that, if any such agreement existed, written evidence of the agreement would not
be found.
The trial court ruled that the jury could not reasonably find that a specific agreement on
performance requirements was ever agreed upon, because “both parties kind of dropped the
ball.” We agree with the trial court that this is one of the exceedingly rare cases in which a
witness’s testimony is insufficient to create a jury question. We also note that even though our
review of a trial court’s decision on a motion for directed verdict is de novo, the trial court’s
superior vantage point of the evidence and the case encompasses more than just the demeanor
and credibility of the witnesses, and so if the question is a close one, we give deference to the
trial court to some degree. See Om-El Export Co v Newcor, Inc, 154 Mich. App. 471, 480; 398
NW2d 440 (1986). We therefore affirm the trial court’s grant of directed verdict in favor of SEI.
That being the case, LXR argues in the alternative that if no performance criteria were
agreed upon, the entire contract is void, and thus SEI’s claim for breach of that contract must
also be invalidated. SEI points out, accurately, that LXR did not raise this issue in the trial court;
however, the gravamen of LXR’s argument is that the trial court’s determination has automatic
and inescapable legal consequences. This is at least arguably an exception to a finding or
decision made by the trial court, MCR 2.517(7), and is in any event “a question of law and the
facts necessary for its resolution have been presented.” Steward v Panek, 251 Mich. App. 546,
554; 652 NW2d 232 (2002). We find the issue appropriate for our review. However, we
disagree with LXR’s substantive argument.
Primarily, LXR fails to recognize that the parties did in fact arrive at a meeting of the
minds on July 24, 2014, to, inter alia, add performance criteria at a later date, specified in ¶ 9 of
their contract. Leaving matters open to future negotiation can be evidence that the parties did not
intend to enter into a contract at that time, but does not prove it. Opdyke Investment Co v Norris
Grain Co, 413 Mich. 354, 359-360; 320 NW2d 836 (1982). It is true that if any individual term
in a contract is invalid, that will invalidate the entire contract if the terms “are interdependent and
common to one another and to the consideration.” See City of Lansing v Lansing Twp, 356 Mich.
641, 658; 97 NW2d 804 (1959). However, LXR does not make the argument that the parties
somehow never agreed to ¶ 9, or that ¶ 9 fails to specify all of its own material terms. See
Heritage Broadcasting Co v Wilson Communications, Inc, 170 Mich. App. 812, 819; 428 NW2d
784 (1988). Rather, LXR makes the peculiar argument that either a contract to make a contract
is intrinsically invalid, which is flatly incorrect, or that if the parties never carried out the
requirements of ¶ 9, the entire contract is therefore void.
First, it is clear from the testimony of both Krause and Morse that each of them believed
¶ 9 to have been agreed to and binding. They simply accused the other of dragging their feet in
actually carrying out its requirements. Neither expressed confusion about what it called for.
Leaving aside the fact that it is usually for the jury to decide whether a meeting of the minds
occurred, the evidence was simply uncontested that there was a meeting of the minds. If the
parties understood ¶ 9 to completely specify all of its own material terms for when and how the
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performance criteria should be determined, but they failed to carry out the terms of ¶ 9, then at
most one or the other of them would have a claim for breaching a contract to make a contract.
Heritage Broadcasting Co, 170 Mich. App. at 819. LXR does not argue that ¶ 9 was
incomprehensible or incomplete, but rather only that if the parties never complied with it, the
entire contract falls apart. This is incorrect: it simply means LXR could, at least in theory, have
argued that SEI breached the contract by failing to agree to performance criteria.
We note that ¶ 9 is clear about what the parties are to do, but is somewhat vague as to
timing. However, it does specify conditions precedent to the future agreement, so it is not
outright devoid of any timing requirements. In any event, LXR argues that it is invalid for
calling for a future agreement, per se. The fact that a term in the parties’ agreement requires
them to arrive at another agreement in the future does not invalidate the contract itself and is not
itself an unenforceable term. It appears that ¶ 9 specifies what the parties are to do and when
they are to do it, which should constitute all essential and material terms in the absence of some
articulated reason why it does not. There was no dispute that the parties believed they had
entered into a valid and binding contract. If the parties failed to make the agreement as dictated,
then either or both of them might have a claim for a breach of ¶ 9, but that does not render the
contract void in its entirety. We disagree with LXR’s argument that SEI’s breach of contract
claim fails on the basis that the entire contract was void.
LXR next argues that the trial court erred in refusing to give a requested instruction to the
jury pertaining to “procuring cause.” Generally, LXR argues that in the absence of a specific
contractual right to do so, sales representatives are only entitled to commissions after the
termination of a contract if the sales representatives are the “procuring cause” of any sales upon
which such commissions could be based. See Reed v Kurdziel, 352 Mich. 287, 294-295; 89
NW2d 479 (1958). LXR points out that the parties’ contract does not include any extraordinary
right to post-termination commissions. We agree. However, the gravamen of SEI’s argument is
that the contract was not properly terminated according to its terms, so it renewed automatically,
and SEI only sought commissions during that renewed contract term, not commissions from after
the contract terminated by SEI’s reasoning.
We certainly take note that the parties’ contract is not a model of elegance. LXR
correctly points out that the automatic-renewal term of the contract (as well as the 90-day notice
to cancel term) is buried in the middle of a contract term that otherwise only addresses SEI’s
$20,000 a month retainer. LXR is also correct in stating that as a general proposition, the last-
antecedent rule would restrict the renewal provision to apply only to the retainer. See Sun Valley
Foods Co v Ward, 460 Mich. 230, 237; 596 NW2d 119 (1999) (discussing interpretation of
statutes). However, LXR ignores the far more general principle that such “rules” of construction
are merely guidelines subject to any clear intention to the contrary discernable from the contract
as a whole. Detroit Trust Co v Manilow, 272 Mich. 211, 218; 261 N.W. 303 (1935). Given the
obviously haphazard assembly of the parties’ contract, and SEI’s inescapably obvious argument
that it would be absurd for the parties to have intended a situation under which SEI’s retainer fee
entitlement would renew but its obligations would not, especially given the fact that LXR never
even made this argument below, we reject a hypertechnical perversion of the parties’ clear intent.
That being the case, the date upon which the parties’ contract terminated was explicitly
put to the jury. SEI made the express argument to the jury that if the contract was not terminated
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properly according to its terms, it renewed automatically, and that LXR had failed to terminate
the contract properly. LXR, in contrast, argued to the jury that the evidence showed that the
contract had already been terminated long before Krause instructed SEI to cease and desist from
further activities. We think it would have been better had the trial court explicitly told the jury
that they were to make a determination of when the contract terminated, if at all. However, it is
clear from the closing arguments, which were cogent and expeditious, that the jury would have
been aware that this determination was an essential part of what the jury needed to decide. By
necessary implication, the jury found that the parties’ contract renewed and was still in effect
through July of 2016. Because SEI sought no commissions beyond that date, no “procuring
cause” instruction was necessary. Similarly, there is no need to consider whether the contract
provided for post-termination commissions. The trial court did not err in declining to give a
“procuring cause” instruction.
Finally, LXR argues that the trial court should have granted it a new trial on its claim for
tortious interference. Generally, LXR argues that it and SEI were in a fiduciary relationship.
LXR alleges that Morse told a major investor that Krause was working against its interests and
suggested that Krause was not merely incompetent but deceitful, Morse sought to take over
LXR, Morse divulged confidential information to outside entities, Morse planned to force LXR
into involuntary bankruptcy, and Morse attempted to undermine LXR’s new sales director. As a
consequence, the investor decided not to make a new three to five million dollar investment in
early 2015. We disagree.
This Court has explained:
The elements of tortious interference with a business relationship are the
existence of a valid business relationship or expectancy, knowledge of the
relationship or expectancy on the part of the defendant, an intentional interference
by the defendant inducing or causing a breach or termination of the relationship or
expectancy, and resultant damage to the plaintiff. [BPS Clinical Laboratories v
Blue Cross and Blue Shield of Michigan, 217 Mich. App. 687, 698-699; 552 NW2d
919 (1996).]
Actions “motivated by legitimate business reasons” do not constitute an improper motive, BPS
Clinical Labs, 217 Mich. App. at 699. LXR correctly points out that a desire to profit is not an
end that justifies any means. Jim-Bob, Inc v Mehling, 178 Mich. App. 71, 96-97; 443 NW2d 451
(1989). It would therefore be more accurate to say that the existence of legitimate business
reasons will not necessarily immunize a party from a claim of tortious interference, but the
plaintiff is nevertheless obligated to show that the defendant had at least one motive that was
improper. Dalley v Dykema Gossett, 287 Mich. App. 296, 323-324; 788 NW2d 679 (2010); see
also Woody v Tamer, 158 Mich. App. 764, 773-775; 405 NW2d 213 (1987) (discussing tortious
interference with a contract). Also of note, any such business relationship must be real or
reasonably likely, not merely wishful thinking. Cedroni Ass’n, Inc v Tomblindon, Harburn
Assoc, Architects & Planners Inc, 492 Mich. 40, 45; 821 NW2d 1 (2012).
It must be emphasized again that there was a jury verdict on this issue. A trial court’s
decision on a motion for a new trial, premised on the argument that the verdict was against the
great weight of the evidence, is reviewed for an abuse of discretion. Bosak v Hutchinson, 422
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Mich 712, 737; 375 NW2d 333 (1985). Exactly what that means is somewhat nebulous.
Arrington v Detroit Osteopathic Hosp Corp, 196 Mich. App. 544, 550-561; 493 NW2d 492
(1992). However, it is amply clear that the trial court may not invade the role of the jury, and
this Court is limited in the extent to which it may second-guess the trial court’s conclusion. Id.
In effect, we are required to give a significant degree of deference to the trial court, which in turn
is required to give a significant degree of deference to the jury. The question before us is not
whether a jury could reasonably find in LXR’s favor. Rather, the question is essentially whether
it was unreasonable for the jury not to find in their favor.
As an initial matter, the testimony made it clear that the major investor’s initial large
investment into LXR was a matter of nepotism and a return of a favor, and at best the investor
had a vague expectation of competence based on knowledge of some of Krause’s blood-relatives.
This somewhat reduces the importance of any descriptions Morse may have given of Krause as a
less than excellent businessperson. Furthermore, the investor’s representative who testified at
trial was evasive about what its intentions had been at the relevant time, but expressly denied that
the description Morse gave about the situation at LXR, whatever it was, had been the reason why
the investor decided not to make an investment at that time. Furthermore, much of the alleged
wrongful conduct by SEI appears to be more a matter of either a personal vendetta by Morse
against Krause or personal paranoia by Krause about Morse; or possibly both. In any event, even
if Krause expected to receive more money, much of the alleged wrongful conduct by Morse
apparently occurred after the investor decided not to offer LXR further funding, and before the
investor decided that it would offer further funding after all. Otherwise, there was simply
conflicting testimony about who knew what, why Morse sought out the investor, whether there
were ever any serious plans to place LXR into involuntary bankruptcy, who was behind any such
plans, and generally anything else of conceivable relevance.
We do not doubt that the jury could have found in LXR’s favor. However, it is clear that
there was also ample evidence from which the jury could reasonably find that any business
expectancy was wishful thinking on the part of LXR, that Morse had no meaningful effect on the
investor’s decision whether to fund LXR at any particular time, or that Morse had no improper
motives in whatever conduct he undertook. We do not find that it was “outside th[e] principled
range of outcomes,” People v Babcock, 469 Mich. 247, 269; 666 NW2d 231 (2003), for the trial
court to determine that the jury’s verdict was against the great weight of the evidence.
Affirmed.
/s/ William B. Murphy
/s/ Kathleen Jansen
/s/ Amy Ronayne Krause
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