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Bannister v. Bemis Company, Inc.: US District Court : CIVIL PROCEEDURE | CONTRACTS - contract choice-of-law OK for summary judgment on merits; but not fees

Roger William Bannister,
Civ. No. 07-1662 (RHK/AJB)
Bemis Company, Inc.,
Brian E. Cote, Cote Law Office, Minneapolis, Minnesota, for Plaintiff.
Matthew E. Damon, David A. James, Halleland Lewis Nilan & Johnson P.A.,
Minneapolis, Minnesota, for Defendant.
This matter is before the Court on Plaintiff Roger Bannisters Motion for
Attorneys Fees (Doc. No. 48). For the reasons set forth below, Bannisters Motion will
be denied.
This case arises out of a noncompete agreement between Bannister and Bemis
Company, Inc. (Bemis). That agreement included a choice-of-law provision, which
provides that [t]he validity, construction, interpretation, and enforceability of this
Agreement . . . shall be governed by [Arkansas law]. (Cote Aff. Ex. A at 4.) Bannister
alleged that Bemis violated the agreement when it refused to pay his monthly base salary
after his termination. The Court agreed with Bannister and granted his motion for
summary judgment on this claim.
Bannister now seeks attorneys fees under Arkansas law, which allows a court to
award a reasonable attorneys fee to the prevailing party in an action for breach of
contract. Arkansas Code 16-22-308. Bemis opposes Bannisters Motion, arguing that
the noncompete agreement does not specify that attorneys fees are recoverable and that
the matter is governed by Minnesota law, which does not allow for the recovery of
attorneys fees in a breach-of-contract case.1 (Def.s Oppn Mem. at 3-6.)
As a federal court sitting in diversity, this Court must apply state substantive law
and federal procedural law. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). In a
diversity case, state law generally governs the question whether there is a right to
attorneys fees. Ferrell v. West Bend Mut. Ins. Co., 393 F.3d 786, 796 (8th Cir. 2005)
(citing Alyeska Pipeline Serv. Co. v. Wilderness Socy, 421 U.S. 240, 259 n.31 (1975)).
Indeed, as long as state law does not run counter to a valid federal statute or rule of
court, and usually it will not, state law denying the right to attorneys fees or giving a
right thereto, which reflects a substantial policy of the state should be followed.
Alyeska, 421 U.S. at 259 n.31. Here, there is no applicable federal statute and therefore
the right to attorneys fees is a substantive issue for Erie purposes, and accordingly, state
rather than federal law applies. See Ferrell, 393 F.3d at 796.
1 The Court afforded Bannister the opportunity to file a reply memorandum, but he declined to
do so. Consequently, he did not address the choice-of-law issue raised by Bemis.
At first glance, it appears that the Courts analysis should end here and conclude
that Arkansas law applies because that is what the parties agreed to in their choice-of-law
provision. It is true that Minnesota courts are committed to the rule that parties may
agree that the law of another state shall govern their agreement and will interpret and
apply the law of another state where such an agreement is made. Milliken & Co. v.
Eagle Packaging Co., 295 N.W.2d 377, 380 n.1 (Minn. 1980) (internal quotation
omitted). But this general contractual choice-of-law provision does not replace
Minnesotas procedural law. See U.S. Leasing v. Biba Info. Processing Servs., Inc., 436
N.W.2d 823, 825-26 (Minn. Ct. App. 1989) (holding Minnesotas procedural law
governed statute-of-limitations conflict despite choice-of-law provision designating
Massachusetts law to govern the parties dispute). In other words, the law of the forum
state governs matters of procedure and remedies. Davis v. Furlong, 328 N.W.2d 150, 153
(Minn. 1983). If the parties wish for the application of another states law concerning
such procedural and remedial matters, they must expressly state it in their agreement.
Schwans Sales Enters., Inc. v. SIG Pack, Inc., 476 F.3d 594, 596 (8th Cir. 2007) (citing
U.S. Leasing, 436 N.W.2d at 826). In this case, the noncompete agreement does not have
a choice-of-law provision that expressly governs procedural matters. Accordingly, the
Court must engage in a choice-of-law analysis to determine whether to apply Minnesota
or Arkansas law.
Although the Court concludes that the right to attorneys fees is substantive for
Erie purposes and therefore it must apply some states law to the issue it does not
follow that it is substantive for purposes of the choice-of-law inquiry. See Schwans, 476
F.3d at 596 (citing Sun Oil Co. v. Wortman, 486 U.S. 717, 726 (1988)). The United
States Supreme Court has made clear that there is not an equivalence between what is
substantive under the Erie doctrine and what is substantive for purposes of conflict of
laws. Sun Oil Co., 486 U.S. at 726. Consequently, the Court will apply Minnesotas
choice-of-law principles to determine which states law applies with respect to an award
of attorneys fees. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)
(explaining that a federal district court is to apply the conflict-of-law principles of the
state where the district court sits).
Under Minnesota choice-of-law principles, the first inquiry is whether an actual
conflict of law exists. Nodak Mut. Ins. Co. v. Am. Family Mut. Ins., 604 N.W.2d 91, 93-
94 (Minn. 2000). A conflict exists if application of either states law would determine
the outcome of the case. Id. at 94. The Court concludes that an actual conflict exists
between Minnesota law and Arkansas law. Under Arkansas law, a prevailing party
may recover attorneys fees in a breach of contract action. Arkansas Code 16-22-308.
Under Minnesota law, however, there is no statute that allows for the recovery of
attorneys fees in a case of this nature. Thus, application of either states law would be
outcome determinative.
The next inquiry is whether the application of either states law would be
constitutional, that is, whether the state has sufficient contacts to the underlying litigation
that application of its law would be neither arbitrary nor fundamentally unfair. Jepson
v. Gen. Cas. Co., 513 N.W.2d 467, 469-70 (Minn. 1994). Here, Bannister worked at
Bemiss facility in Arkansas and the parties entered into the noncompete agreement there.
These contacts are sufficient for the Court to apply Arkansas law. Likewise, Minnesota
has sufficient contacts because Bemis has a facility in Minnesota and its headquarters
was previously located in Minnesota. Therefore, the Court concludes that Minnesota and
Arkansas each have sufficient contacts with this dispute such that the law of either state
could be constitutionally applied.
Finally, the Court considers whether the conflict is substantive or procedural under
the law of the forum state. Nesladek v. Ford Motor Co., 46 F.3d 734, 736 (8th Cir. 1995)
(citing Gate City Fed. Sav. & Loan Assn v. OConnor, 410 N.W.2d 448, 450 (Minn. Ct.
App. 1987)). If procedural, the court applies the law of the forum state and the analysis
ends. Nesladek, 46. F.3d at 736. If substantive, the court considers the following five
factors to determine which law to apply: (1) predictability of result, (2) maintenance of
interstate order, (3) simplification of the judicial task, (4) advancement of the forums
governmental interests, and (5) the better rule of law. Nodak, 604 N.W.2d at 94.
The Minnesota Supreme Court has not specifically addressed whether an award of
attorneys fees is substantive or procedural for choice-of-law purposes. But, this Court is
not without guidance the Minnesota Supreme Court has defined substantive law as
that part of the law which creates, defines, and regulates rights, as opposed to
procedural or remedial law, which prescribes method[s] of enforcing the rights or
obtaining redress for their invasion. Meagher v. Kavli, 88 N.W.2d 871, 879-80 (1958).
In this Courts view, an award of attorneys fee relates to a remedy and therefore is
procedural because it is unrelated to the merits of the case. See Zaretsky v. Molecular
Biosys., Inc., 464 N.W.2d 546, 548 (Minn. Ct. App. 1990) (finding Minnesotas
prejudgment-interest statute procedural because it promoted early settlement between the
litigants and was unrelated to the merits of the case). Moreover, Arkansass
characterization of its own statute, while not dispositive because we are applying
Minnesota law, is to be considered under the choice-of-law analysis used by the
Minnesota courts. Nesladek, 46 F.3d at 736 (citing Myers v. Govt Employees Ins. Co.,
225 N.W.2d 238, 241 (Minn. 1974)). Notably, the Supreme Court of Arkansas considers
the allowance of attorneys fees to be a procedural matter. USAA Life Ins. Co. v. Boyce,
745 S.W.2d 136, 138 (Ark. 1988). Indeed, the Supreme Court of Arkansas has applied
Arkansas law relating to attorneys fees and penalties where Arkansas is the forum, even
where the law of another State governs substantive issues, including the interpretation of
an insurance contract. Ferrell, 393 F.3d at 796-97 (citing Amer. Physicians Ins. Co. v.
Hruska, 428 S.W.2d 622, 627-28 (Ark. 1968)). Therefore, the Court concludes that an
award of attorneys fees is a procedural matter for conflict-of-law purposes. As a result,
Minnesota law applies. See Nesladek, 46 F.3d at 736.
Under Minnesota law, attorney fees are not recoverable in litigation unless there
is a specific contract permitting [it] or a statute authorizing such recovery. Dunn v.
Natl Beverage Corp., 745 N.W.2d 549, 554 (Minn. 2008). Here, there is no contractual
authority that permits the recovery of attorneys fees. Further, no Minnesota statute
specifically authorizes an award of attorneys fees in a breach-of-contract case.
Accordingly, Bannisters motion for an award of attorneys fees must be denied.
Based on the foregoing, and all the files, records, and proceedings herein, IT IS
ORDERED that Bannisters Motion for Attorneys Fees (Doc. No. 48) is DENIED.
Date: May 6, 2008
s/Richard H. Kyle
United States District Judge


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