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St. Croix Printing Equipment, Inc. v. Sexton et al.: US District Court : TORT - no tortious interference with contract; no defamation

1 In that Order, the Court granted summary judgment to Plaintiff on Defendant
Shinohara USAs Counterclaims, which alleged violations of the Lanham Act, 15 U.S.C.
1114 et seq., unfair competition in violation of Minnesota common law, and deceptive
trade practices in violation of the Minnesota Deceptive Trade Practices Act (DTPA), Minn.
Stat. 325D.43 et seq.
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
St. Croix Printing Equipment, Inc., Civil No. 06-4273 (PAM/JSM)
Plaintiff,
v. MEMORANDUM AND ORDER
Debbie Sexton, St. Croix Printing
Equipment Imports, Ltd.,
Shinohara USA, Inc., and
Shinsuke Kubota,
Defendants.
This matter is before the Court on Defendants Motions for Summary Judgment. For
the reasons that follow, the Court grants the Motions.
BACKGROUND
The facts of the matter are fully set forth in this Courts Order of May 29, 2008.1 In
brief, Plaintiff St. Croix Printing Equipment, Inc. (St. Croix Minnesota), located in
Stillwater, Minnesota, sells used printing presses. St. Croix Minnesota is owned by John
Diana (Diana). More than 20 years ago, Diana and Defendant Debbie Sexton together
owned a company also called St. Croix Printing Equipment, Inc. In 1989, Sexton opened her
own business, called St. Croix Printing Equipment Imports, Ltd. (St. Croix Iowa), located
2
in Iowa.
St. Croix Iowa is an authorized dealer for printing presses manufactured by the
Japanese parent company of Defendant Shinohara USA, Inc. (Shinohara). St. Croix
Minnesota sells used Shinohara printing presses, among other brands, but is not an authorized
Shinohara dealer.
St. Croix Minnesotas claims arise out of Defendants alleged conduct with respect
to two of St. Croix Minnesotas customers: John Schuster (Schuster) and Tandem Printing
(Tandem). St. Croix Minnesota contends that Defendants told Schuster false and
misleading things about the used press he had contracted to buy from St. Croix Minnesota,
causing Schuster to breach his contract with St. Croix Minnesota and instead to purchase a
new Shinohara press from St. Croix Iowa. St. Croix Minnesota further alleges that Sexton
and St. Croix Iowa charged Tandem an exorbitant fee for post-installation work that was
required on the press Tandem purchased from St. Croix Minnesota, causing Tandem to
withhold the amount of the fee from its final payment to St. Croix Minnesota.
A. Schuster
In early 2006, an authorized Shinohara dealer named Ken Williams contacted Diana
about a used Shinohara press that was available for sale. Diana then contacted Schuster, who
ultimately decided to buy the press. Several days later, Sexton visited Schuster and learned
that he was buying a press from St. Croix Minnesota. Schuster gave Sexton the serial
number of the press he had agreed to purchase.
According to Defendants, Sexton contacted Shinohara USA about the press and
3
learned that it had been damaged while being delivered to another customer. Defendants
contend that the press was unsalable and unusable. In fact, Defendants sued the delivery
company alleging that the press was essentially destroyed. In that lawsuit, Ken Williams
testified that the press could not be repaired and should not be sold. Defendants contend that
St. Croix Minnesota was attempting to pass off this unusable press to Schuster, who was not
told that the press was damaged in any way.
St. Croix Minnesota contends that Defendants seriously overstate the extent of the
damage to the press. In fact, after Schuster decided not to buy the supposedly unusable press,
the press was sold to another printing company that has been using it without incident. St.
Croix Minnesota argues that Defendants interference with the Schuster sale amounts to
tortious interference and violations of the Deceptive Trade Practices Act, because Defendants
knew that the press was in working condition but told Schuster that it was not. Further, St.
Croix Minnesota alleges that Defendants implied to Schuster that Diana was lying to him
about the condition of the press, thus defaming St. Croix Minnesota.
B. Tandem
In 2001, Tandem purchased a used Shinohara press from St. Croix Minnesota. St.
Croix Minnesota had imported this press from Japan and thus the operating language for the
press was Japanese. St. Croix Minnesota attempted to reprogram the press to English but
was unable to do so. Tandem then sought the help of Sexton and St. Croix Iowa. Sexton and
her technicians ultimately fixed the issue and charged Tandem more than ,000 for St.
Croix Iowas services. Tandem withheld this amount from its final payment to St. Croix
4
Minnesota.
Defendants contend that the reprogramming was complicated and required many
hours of work. St. Croix Minnesota argues that Sexton charged Tandem ,000 for ,500
worth of parts because she knew that Tandem would withhold the amount from its final
payment to St. Croix Minnesota, thereby depriving St. Croix Minnesota of its profit in the
transaction.
C. Plaintiffs Claims
In its Amended Complaint, St. Croix Minnesota raises the following claims: tortious
interference with the Schuster contract (Count I), tortious interference with the Tandem
contract (Count II), defamation arising out of the Schuster transaction (Count III), violations
of the Minnesota DTPA arising out of the Schuster transaction (Count IV), tortious
interference with the prospective advantage of the Schuster sale (Count V), and vicarious
liability, seeking to hold the corporate Defendants liable for the actions of the individual
Defendants (Counts VI and VII).
Defendants seek summary judgment on these claims, contending that there are no
genuine issues of fact on the elements of St. Croix Minnesotas causes of action and that
Defendants are entitled to judgment as a matter of law.
5
DISCUSSION
A. Standard of Review
Summary judgment is proper if there are no disputed issues of material fact and the
moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The Court
must view the evidence and the inferences that may be reasonably drawn from the evidence
in the light most favorable to the nonmoving party. Enter. Bank v. Magna Bank of Mo., 92
F.3d 743, 747 (8th Cir. 1996). However, summary judgment procedure is properly regarded
not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as
a whole, which are designed to secure the just, speedy, and inexpensive determination of
every action. Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986).
The moving party bears the burden of showing that there is no genuine issue of
material fact and that it is entitled to judgment as a matter of law. Id. at 323; Enter. Bank,
92 F.3d at 747. A party opposing a properly supported motion for summary judgment may
not rest on mere allegations or denials, but must set forth specific facts in the record showing
that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256
(1986).
B. Tortious Interference
Under Minnesota law, a plaintiff seeking to establish a claim for tortious interference
with contract must show: (1) the existence of a contract; (2) knowledge of the contract; (3)
intentional procurement of the contracts breach; (4) absence of justification; and
(5) damages caused by the breach. Bebo v. Delander, 632 N.W.2d 732, 738 (Minn. Ct.
2 There is some question as to whether Minnesota recognizes the tort of interference
with prospective advantage. Benefit Resource, Inc. v. Apprize Tech. Solutions, Inc., Civ.
No. 07-4199, 2008 WL 2080977, at *10 n.6 (D. Minn. May 15, 2008) (Ericksen, J.) (citing
Harbor Broad., 636 N.W.2d at 569 n.4)
6
App. 2001) (quoting Furlev Sales & Assocs., Inc. v. North Am. Auto. Warehouse, 325
N.W.2d 20, 25 (Minn.1982)). Similarly, a claim for tortious interference with prospective
business advantage requires a plaintiff to prove:
1. the existence of a reasonable expectation of economic advantage or
benefit belonging to Plaintiff;
2. that Defendants had knowledge of that expectation of economic
advantage;
3. that Defendants wrongfully and without justification interfered with
Plaintiffs reasonable expectation of economic advantage or benefit;
4. that in the absence of the wrongful act of Defendants, it is reasonably
probable that Plaintiff would have realized his economic advantage or
benefit; and
5. that Plaintiff sustained damages as a result of this activity.
Harbor Broad., Inc. v. Boundary Waters Broadrs, Inc., 636 N.W.2d 560, 569 (Minn. Ct.
App. 2001) (quoting Lamminen v. City of Cloquet, 987 F. Supp. 723, 731 (D. Minn. 1997)
(Davis, J.)).2 An important element of both torts is causationthat but for Defendants
alleged interference, St. Croix Minnesota would have secured the business or obtained the
business advantage. Rainforest Caf, Inc. v. Amazon, Inc., 86 F. Supp. 2d 886, 909 (D.
Minn. 2001) (Davis, J.) (citing N. Cent. Co. v. Phelps Aero, Inc., 139 N.W.2d 258, 263
(Minn. 1965)).
3 Although Defendants do not raise the issue, it is questionable whether St. Croix
Minnesota can claim both tortious interference and defamation arising out of the same
allegedly false statements. See Dunham v. Opperman, No. A06-750, 2007 WL 1191599, at
*6-*7 (Minn. Ct. App. Apr. 24, 2007), rev. denied July 17, 2007 (finding that where same
statements form the basis of claim for tortious interference and defamation, defamation claim
encompasses tortious interference claim and tortious interference claim was properly
dismissed). Here, St. Croix Minnesota cites the same allegedly false statements to support
both its tortious interference and defamation claims. (Am. Compl. 12, 33.)
7
1. Schuster
Because a claim for tortious interference may lie only when the alleged interference
is wrongful, St. Croix Minnesotas claims depend only on whatever false information Sexton
allegedly supplied to Schuster. St. Croix Minnesota bases its tortious interference claim on
the following allegedly false statements:
the printing press was a 2001 model year, not a 2003 model year; the printing
press was a model 74, not a model 75; the subject printing press was dropped
and the frame broken at both ends and defective; the press was owned by
Shinohara; and the press being offered was a prototype.
(Am. Compl. 12.)3
The evidence in the record shows that Schuster did not decide to cancel his contract
with St. Croix Minnesota because of any alleged misrepresentations regarding the model
year, model number, or ownership of the press. Nor did he cancel the transaction because
Sexton told him that the press was a prototype. Indeed, the misstatements about the model
number and year, ownership, and whether the press was a prototype were corrected within
a short time after Sexton made them and had no effect on Schusters decision to cancel the
transaction. (Veith Decl. Ex. G (Schuster Dep.) at 27 (Within days we realized that most
8
of what we were told [by St. Croix Minnesota] about the press was accurate, other than the
omission about the damage.).)
The record also reflects that although Sexton told Schuster that the press was cracked
and damaged, she did not tell him that the press was defective and would not work. (Bruozas
Decl. Ex. GG (Schuster Dep.) at 41 (I was not told by anyone that the press would not
work.).) St. Croix Minnesota cannot claim that Schuster rescinded the contract because of
misinformation about whether the press would work.
Thus, the only statement that could form the basis for St. Croix Minnesotas tortious
interference claim is Sextons statement that the press was damaged. It is undisputed that the
press St. Croix Minnesota attempted to sell to Schuster was cracked. There is much dispute
about how the damage affected the press and about the extent of the damage. However,
whether the press was indeed cracked on both ends or on only one end is immaterial. The
press was cracked, and Diana did not disclose this information to Schuster. (Id.) The record
is unequivocal that Dianas failure to disclose the damage, and not Sextons alleged
misstatement about the extent of the damage, was fatal to the Schuster transaction,. (Id. (At
that point, I wasnt going to buy anything from [St. Croix Minnesota] because I was
misled . . . .).)
St. Croix Minnesota has failed to show causation with respect to its claims for tortious
interference arising out of the Schuster transaction. In other words, St. Croix Minnesota has
not established that, but for Sextons misstatement that the press was damaged on both ends,
Schuster would have proceeded with the sale. Defendants Motion is granted as to Counts
4 St. Croix Minnesota has also failed to establish that the amount Sexton charged
Tandem for the language conversion was unreasonable. The only testimony in the record is
that the language conversion was complicated and that Sexton and her technicians spent a
tremendous amount of time on the conversion. (Veith Decl. Ex. E (Sexton Dep.) at 97.)
St. Croix Minnesota has not come forward with anything to rebut Sextons statements, such
as expert testimony that the Tandem conversion should have cost much less than what Sexton
charged.
9
I and V.
2. Tandem
As noted above, one element of tortious interference with contract is that the alleged
interference result in the breach of the contract. St. Croix Minnesota has failed to establish
that genuine issues of fact exist as to whether Tandem breached its contract with St. Croix
Minnesota, and thus its claim for tortious interference fails.4
The purchase agreement between Tandem and St. Croix Minnesota provides that
Tandem was entitled to a refund if the press did not perform to Tandems standards. (Diana
Decl. Ex. 6 at 1.) There is no dispute that St. Croix Minnesota was not able to install the
press so that it performed satisfactorily, because St. Croix Minnesota was unable to change
the presss language from Japanese to English. Thus, Tandem was entitled to, and did,
withhold some of the agreed-on purchase price.
Moreover, at the hearing on these Motions St. Croix Minnesota contended that the
original purchase agreement was superseded by a settlement agreement. (Id. Ex. 9.) This
settlement agreement specifically allowed Tandem to withhold money from the purchase
price to pay St. Croix Iowas fees for the language conversion. (Id. at 1 (The remaining
10
balanced owed to [St. Croix Minnesota] . . . shall be retained by [Tandem] and used to pay
[St. Croix Iowa] for the language conversion.).) If, as St. Croix Minnesota stated, this
settlement agreement is the operative contract, there can be no contention that Tandem
breached any contract. St. Croix Minnesota has no claim for tortious interference arising out
of the Tandem transaction, and Defendants Motion as to Count II is granted.
C. Defamation
St. Croix Minnesota contends that the following statements Sexton made to Schuster
were false and defamatory:
the printing press was a 2001 model year, not a 2003 model year; the printing
press was a model 74, not a model 75; the subject printing press was dropped
and the frame broken at both ends and defective; the press was owned by
Shinohara; and the press being offered was a prototype.
(Am. Comp. 33.) These statements are alleged to be defamatory not on their face, but in
what they imply about St. Croix Minnesota, namely, that St. Croix Minnesota misled
Schuster.
To state a claim for defamation under Minnesota law St. Croix Minnesota must prove
that the alleged statements were made, communicated to a third person, false, and harmed
St. Croix Minnesotas reputation. See Thompson v. Olsten Kimberly Qualitycare, Inc., 33
F. Supp.2d 806, 815 (D. Minn. 1999) (Tunheim, J.) (citing Ferrell v. Cross, 557 N.W.2d 560,
565 (Minn. 1997)).
In addition, Minnesota considers corporations to be public figures and therefore
requires a showing that the statements were made with actual malice. Northwest Airlines,
11
Inc. v. Aestrea Aviation Servs., Inc., 111 F.3d 1386, 1393 (8th Cir. 1997) (citing Jadwin v.
Minneapolis Star & Tribune Co., 367 N.W.2d 476, 487 (Minn. 1985)). Actual malice
means that the alleged defamer acted with knowledge that [the statement] was false or with
reckless disregard of whether it was false or not. Chafoulias v. Peterson, 668 N.W.2d 643,
654 (Minn. 2003) (quoting New York Times v. Sullivan, 376 U.S. 254, 279-80 (1964)).
Actual malice does not mean that the defendant acted with ill will or spite. Id. (citing
Harte-Hanks Commcns, Inc. v. Connaughton, 491 U.S. 657, 665-67, 666 n.7 (1989)).
Reckless disregard requires proof that the defendant made the statement while subjectively
believing that the statement was probably false. Id. at 655. The United States Supreme
Court has explained that a statement is made with actual malice if it is fabricated by the
defendant, is a product of his imagination, . . . is based wholly on an anonymous unverified
telephone call[, or if] the publishers allegations are so inherently improbable that only a
reckless man would have put them in circulation. St. Amant v. Thomson, 390 U.S. 727, 732
(1968).
Here, the evidence shows that Sexton corrected within a very short time the
misinformation she gave Schuster about the presss model number, model year, ownership,
and whether it was a prototype. There is no evidence in the record that Sexton acted with
actual malice in making these statements, and indeed the fact that she returned to Schusters
office the next day to correct the misinformation belies any claim that she or any of the
Defendants acted with actual malice as to those statements.
With respect to the remaining statements, that the press was broken at both ends and
12
was defective, there is no evidence in the record that Sexton or any of the Defendants made
these statements. As noted above, Schuster testified that I was not told by anyone that the
press would not work. (Bruozas Decl. Ex. GG (Schuster Dep.) at 41.) Schusters belief as
to the working condition of the press came not from Sexton or other Defendants, but from
the fact that St. Croix Minnesota did not disclose that the press was damaged. (Id. (stating
that after Diana told Schuster that he was buying the press as is, Schuster decided I wasnt
going to buy anything from [St. Croix Minnesota] because I was misled and I am not going
to invest 0,000 on something that might or might not work.).) St. Croix Minnesota
cannot hold Defendants responsible for a lost sale caused by St. Croix Minnesotas failure
to be honest with a customer. The defamation claims fail.
D. Deceptive Trade Practices
The Minnesota DTPA defines a deceptive trade practice as, among other things,
disparag[ing] the goods, services, or business of another by false or misleading
representation of fact. Minn. Stat. 325D.44, subd. 1(8). St. Croix Minnesota contends
that Defendants violated Minnesotas DTPA by disparaging the goods, services, or business
of St. Croix Minnesota. (Am. Compl. 38.) The statements they cite as the basis for this
claim are the same statements cited with respect to the tortious interference and defamation
claims. (Id. 39.) Because the Court has found that the statements were either corrected
very shortly after they were made or were not made, St. Croix Minnesota cannot recover for
business disparagement under the DTPA. See MSK EyEs Ltd. v. Wells Fargo Bank, Civ.
No. 05-999, 2007 WL 1965549, at *8 (D. Minn. Jul. 3, 2007) (Doty, J.) (dismissing DTPA
13
business disparagement claim when defamation claim based on same statements also
dismissed).
E. Vicarious Liability
St. Croix Minnesota seeks to hold the corporate Defendants liable for the actions of
the individual Defendants. However, because St. Croix Minnesota has no viable claims
against any Defendants, its claims for vicarious liability also fail.
CONCLUSION
St. Croix Minnesota has failed to show that any genuine issues of material fact exist
on its claims. Accordingly, IT IS HEREBY ORDERED that Defendants Motions for
Summary Judgment (Docket Nos. 103, 116) are GRANTED.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: August 7, 2008
s/Paul A. Magnuson
Paul A. Magnuson
United States District Court Judge
 

 
 
 

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