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Tension Envelope Corp. v. JBM Envelope Co.

United States Court of Appeals, Eighth Circuit

December 8, 2017

Tension Envelope Corporation Plaintiff- Appellant
JBM Envelope Company; Marcus G. Sheanshang; Daniel J. Puthoff Defendants - Appellees

          Submitted: September 20, 2017

         Appeal from United States District Court for the Western District of Missouri - Kansas City

          Before WOLLMAN, MELLOY, and GRUENDER, Circuit Judges.


         Tension Envelope Corporation sued a former supplier, JBM Corporation, for selling directly to its customers after promising not to do so. The district court[1] rejected one claim on the pleadings and the others on summary judgment. We affirm the district court's rulings.


         Tension and JBM manufacture and sell envelopes. In late 2000 or 2001, Tension began buying from JBM a special type of envelope-small, open-end envelopes[2]-to resell to customers. Three of Tension's customers accounted for a significant percentage of the sales.

         According to Tension, JBM offered assurances that it would not sell directly to Tension's customers. On three separate occasions, however, JBM refused to sign a non-compete agreement. After these refusals, Tension continued to order envelopes from JBM with individual purchase orders. Tension even leased its manufacturing equipment to JBM to produce the envelopes.

         Although JBM had sold some envelopes to end users since at least 2001, JBM's new management in 2011 decided to increase direct sales. By 2014, JBM decided to sell directly to Tension's customers. JBM hired a communications consultant to help with the strategy. The strategy worked, and by June 2014, JBM reached agreements with two of Tension's three large customers. JBM later tried to sell to the third large customer's customers. Tension learned of the agreements-though it earlier had suspected something was afoot-and struggled to find a new supplier.

         Tension filed its complaint in June 2014. It later filed three amended complaints and named JBM and two of JBM's corporate officers (collectively "JBM") as defendants. The district court dismissed under Federal Rule of Civil Procedure 12(b)(6) a claim for misappropriation of trade secrets. After discovery, the district court granted JBM's summary judgment motion on every remaining claim. Tension appealed.[3]


         On appeal, Tension advances seven arguments. Six relate to the district court's summary judgment grant. Tension argues that the district court erred in granting summary judgment on its claim for (1) breach of contract, (2) promissory estoppel, (3) fraudulent misrepresentation, (4) fraudulent nondisclosure, (5) tortious interference, and (6) unfair competition. Tension's final argument relates to the district court's dismissal under Rule 12(b)(6) of its misappropriation of trade secrets claim.

         We will address each claim in turn and review de novo the district court's rulings. See Turner v. Holbrook, 278 F.3d 754, 757 (8th Cir. 2002). In reviewing the motion to dismiss, we accept "well-pleaded allegations in the complaint as true" and draw "all reasonable inferences in favor" of Tension. See Schriener v. Quicken Loans, Inc., 774 F.3d 442, 444 (8th Cir. 2014). In reviewing the grant of summary judgment, we ask whether "there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law." Turner, 278 F.3d at 757 (citing Fed.R.Civ.P. 56(c)). The parties agree that the substantive law of Missouri governs the dispute. See Dannix Painting, LLC v. Sherwin-Williams Co., 732 F.3d 902, 904 n.2 (8th Cir. 2013).

         A. Breach of Contract

         Tension first argues that JBM breached a requirements contract in selling directly to its customers. Under Missouri law, a requirements contract is "one in which one party promises to supply all the specific goods or services which the other party may need during a certain period at an agreed price, and the other party promises that he will obtain his required goods or services from the first party exclusively." Essco Geometric v. Harvard Indus., 46 F.3d 718, 728 (8th Cir. 1995) (emphasis omitted) (quoting Kirkwood-Easton Tire Co. v. St. Louis Cty., 568 S.W.2d 267, 268 (Mo. 1978) (en banc)). Tension contends that the purported contract required JBM "to use its best efforts to supply the envelopes" to Tension and provide "reasonable notice" before terminating the agreement. According to Tension, JBM breached both provisions when it started selling directly to Tension's customers.

         The district court concluded that no enforceable requirements contract existed between the two companies, see Tension Envelope Corp. v. JBM Envelope Co., No. 14-567-CV-W-FJG, at 19 (W.D. Mo. Aug. 22, 2016), and we agree. Under the Missouri statute of frauds, and with exceptions not relevant here,

a contract for the sale of goods for the price of five hundred dollars or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker.

Mo. Ann. Stat. ยง 400.2-201. Tension concedes that the purported contract involves a sale of goods for more than five hundred dollars. So Tension must proffer some writing "sufficient to indicate" ...

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