Eighth Circuit Contracts Cases 2011 (Part 8)

U.S. 8th Circuit Contract Cases

Wells Fargo Bank, N.A. v. WMR e-PIN, LLC

The scope of an arbitration agreement can be expanded by positions taken by the parties in arbitration proceedings.

Wells Fargo brought claims against WMR e-PIN and other respondents, alleging breach of contract and misappropriation of trade secrets. The claims arose out of a software licensing agreement and other contracts which contained binding arbitration provisions.

The arbitration provision in the software licensing agreement precluded the arbitration panel from issuing an injunction. The provision stated, “Any award in arbitration under this section shall be limited to monetary damages and shall include no injunction or direction to any party other than the direction to pay a monetary amount.” Nevertheless, the panel found for Wells Fargo and permanently enjoined the respondents from misappropriating Wells Fargo’s trade secrets.

The United States District Court for the District of Minnesota confirmed the award and the Eighth Circuit affirmed.

The respondents argued before both the district court and the appellate court that, among other things, the arbitration panel had erred in granting injunctive relief to Wells Fargo because the arbitration agreement limited the panel’s authority to an award of monetary damages.

The district court and Eighth Circuit both held that the respondents had waived their right to challenge the grant of injunctive relief by the arbitration panel because they had requested injunctive relief themselves. The district court stated, “If a party willingly and without reservation allows an issue to be submitted to arbitration, he cannot await the outcome and then later argue that the arbitrator lacked authority to decide the matter.” Affirming the district court’s ruling, the Eighth Circuit stated, “Having requested that the Panel enter injunctive relief on their behalf, appellants cannot complain when the Panel decides instead to enter injunctive relief against them.”

Porter v. City of Lake Lotawana

Former City clerk Jane Porter brought suit after being terminated by the City of Lake Lotawana, Missouri, alleging, among other things, breach of contract. The United States District Court for the Western District of Missouri dismissed all counts including a contract-based wrongful termination claim, which was dismissed because Missouri law requires contracts with municipalities to be in writing and Porter failed to show that she had a written contract. The Eighth Circuit affirmed.

Watkins Inc. v. Chilkoot Dist., Inc.

The question before the Eighth Circuit in Watkins Inc. v. Chilkoot Dist., Inc. was whether a dealer agreement that was ostensibly entered into in 2006 replaced an earlier contract between the parties. The case illustrates the contracting risks that businesses face in the ordinary course of their business. Contracts are negotiated, performed, interpreted, revisited, amended, and replaced in the rough and tumble of business. I’s aren’t always dotted and t’s crossed with deliberation and care. Sometimes this results in unfavorable contract provisions.

Watkins, a manufacturer, sent many of its Canadian dealers, which it called “sales associates,” a new contract with a cover letter which stated:

Periodically, we review records to ensure we have accessible and up-to-date contract documents. We have found that a number of documents have been archived during the last ten years, which makes it a challenge to have accessible contracts. We are requesting your support to provide us with updated and accurate data by filling out the enclosed International Associate Agreement. We ask that you complete a new Agreement Form and return it to Watkins Incorporated by May 15, 2006. Should you have your original contract with up-to-date data, feel free to send us a copy of that document.

According to Watkins, it sent the letter to its sales associates because a flood had destroyed its records database. The new contract that was sent with the letter was significantly different than its existing contracts with its sales associates, however. The sales associate involved in the litigation signed the new agreement and enclosed its existing contract when it returned the new contract to Watkins. The associate contended, however, that it intended merely to provide updated data, not to enter into a replacement contract.

The relationships among the various parties are a bit complicated due to the long duration of the business relationships, as well as the sale of business interests along the way, but the legal analysis is pretty straightforward. In short, the Eighth Circuit held that questions of fact precluded summary judgment because it was unclear whether the sales associate intended to agree to a new contract, and the case was remanded to the trial court.

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