Commercial Bag Company v. Land O’Lakes, Inc.

United States Court of Appeals
For the Eighth Circuit
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No. 22-3036
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Commercial Bag Company,
lllllllllllllllllllllPlaintiff - Appellant,
v.
Land O’Lakes, Inc.,
lllllllllllllllllllllDefendant - Appellee.
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Appeal from United States District Court
for the District of Minnesota
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Submitted: May 9, 2023
Filed: August 25, 2023
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Before COLLOTON, WOLLMAN, and BENTON, Circuit Judges.
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COLLOTON, Circuit Judge.
Commercial Bag Company sued Land O’Lakes for breach of contract after
Land O’Lakes terminated a supply agreement between the parties. The district court*
*The Honorable David S. Doty, United States District Judge for the District of
Minnesota.

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granted summary judgment for Land O’Lakes. Commercial Bag appeals, and we
affirm.
I.
Land O’Lakes is a Minnesota agricultural cooperative. A subsidiary of Land
O’Lakes manufactures and sells animal-feed products. This subsidiary packages most
of its feed products in polypropylene bags. Polypropylene bags are designed to resist
tears and punctures, and they can be embossed with high-quality graphics.
Commercial Bag Company sells polypropylene bags and other packaging products.
In January 2015, Land O’Lakes and Commercial Bag entered into a “Packaging
Materials Supply Agreement.” Under the Agreement, Land O’Lakes agreed to “make
best reasonable efforts” to buy fifteen to twenty percent of its annual polypropylene
bag volume from Commercial Bag. The Agreement’s initial term was two
years—from January 2015 to December 2016—with a one-year renewal option.
Either party could terminate the Agreement “for cause in the event of any default by
the other if such default is not cured within ninety (90) days.” In late 2016, the
parties orally renewed the Agreement for another year.
In August 2017, the parties extended the Agreement for an additional year.
The extension was accomplished by an amendment to the Agreement entitled,
“Amendment #1 to Packaging Materials Supply Agreement.” Amendment #1
extended the agreement and changed the termination provision of the Agreement
from “for cause” to “without cause.” The amended provision stated that “[Land
O’Lakes] may terminate this Agreement without cause upon 90 calendar days’ prior
written notice to [Commercial Bag].”
In October 2017, Land O’Lakes issued a request for proposal from multiple bag
manufacturers seeking a long-term partnership for the supply of polypropylene bags.
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As part of the request for proposal, Land O’Lakes supplied the bidding manufacturers
with a sample agreement setting forth the terms and conditions that Land O’Lakes
anticipated would be included in any future agreement. The sample agreement
contained a “for cause” termination provision similar to the provision included in the
original Agreement.
Commercial Bag submitted a bid, and Land O’Lakes accepted. Instead of
negotiating a new contract, however, the parties again amended the Agreement.
Amendment #2 extended the Agreement’s term for five years and three months, to
expire on March 31st, 2024, “unless otherwise terminated in accordance with the
Agreement.” Amendment #2 also replaced the Agreement’s exhibits with new
Exhibits A through G.
New Exhibit A to Amendment #2 listed pricing for the polypropylene bags.
In the heading above the price list, the parties included a parenthetical: “(as of
January 1st, 2018, Estimated Annual Volume of 85M).” Exhibit A also provided that
Commercial Bag would credit Land O’Lakes with $375,000 in “plating costs.”
Plating costs are the costs of developing plates for printing graphics on the bags.
During the course of the Agreement, Commercial Bag acquired most of its
polypropylene bags from factories in Vietnam. After the parties executed
Amendment #2, however, the United States International Trade Commission began
to investigate complaints that polypropylene bag factories in Vietnam were engaged
in the illegal “dumping” of their products in the United States. In response, Land
O’Lakes and Commercial Bag entered into a third amendment to the Agreement.
Amendment #3 served to “further amend” the Agreement. Under Amendment
#3, Land O’Lakes agreed to pay any new tariffs on bags from Vietnam, and
Commercial Bag committed to finding a new manufacturer if necessary “[t]o provide
a cost competitive bag.”
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The Trade Commission ultimately imposed tariffs on polypropylene bags from
Vietnam. Shortly thereafter, Commercial Bag located a new manufacturer in
Thailand. Due to concerns with the new manufacturer, however, Land O’Lakes
decided to purchase a portion of its polypropylene bags from a domestic manufacturer
instead. Land O’Lakes informed Commercial Bag of this decision, and said that it
would “result in a discontinuation of the business relationship between Land O’Lakes
and Commercial” for polypropylene bags. In August 2020, Land O’Lakes gave
Commercial Bag 90 days’ notice that it was terminating the Agreement.
Commercial Bag sued, alleging that Land O’Lakes breached the contract by
terminating the Agreement without cause, reducing its purchases of polypropylene
bags from Commercial Bag, and refusing to pay Commercial Bag’s invoice for plates
and artwork. Alternatively, Commercial Bag pleaded a claim for reformation due to
mutual mistake. On cross-motions for summary judgment, the district court ruled in
favor of Land O’Lakes. Commercial Bag appeals, and we review the district court’s
decision de novo. Noreen v. PharMerica Corp., 833 F.3d 988, 992 (8th Cir. 2016).
The parties agree that Minnesota law applies.
II.
A.
We first address Commercial Bag’s challenge to the district court’s
interpretation of the agreement between the parties. Commercial Bag contends that
Land O’Lakes breached the Agreement by terminating without cause. Commercial
Bag maintains that Amendment #2 unambiguously provided that Land O’Lakes could
terminate the agreement only “for cause,” as was the rule under the original
agreement before Amendment #1. Alternatively, Commercial Bag argues that
Amendment #2 is ambiguous, and that a jury must determine whether the agreement
required Land O’Lakes to establish “cause” to terminate the relationship.
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Amendment #2 provided that the Agreement could be terminated only “in
accordance with the Agreement.” Commercial Bag argues that the term “Agreement”
is ambiguous, because it could mean either the original “Agreement” or the
“Agreement as amended by Amendment #1.”
We agree with the district court that the term “Agreement” in Amendment #2
is not ambiguous. Land O’Lakes was permitted under the contract to terminate the
agreement without cause. Amendment #1 added the “without cause” termination
provision to Section 2 of the Agreement, and Amendment #2 did not remove that
provision. So the “Agreement” to which Amendment #2 referred was necessarily the
original agreement as amended by Amendment #1. The parties themselves confirmed
this understanding when they later adopted Amendment #3. The third amendment
recited that the original agreement had been amended twice before by Amendment
#1 and Amendment #2, and explained that the parties desired “to further amend the
terms of the Agreement.” In short, Amendment #1 was part of the agreement when
the parties adopted Amendment #2, so the “without cause” termination provision
continued in effect. There is no ambiguity.
Commercial Bag also argues that Exhibit E to Amendment #2 suggests that
Land O’Lakes could terminate only for cause. In Exhibit E, Land O’Lakes reserved
its right under Section 2 of the Agreement, “up to termination for cause,” if
Commercial Bag failed to comply with a quality improvement program. While Land
O’Lakes seems to have reserved more rights in Exhibit E than were necessary to
terminate the agreement, Section 28 of the Agreement provides that the terms of the
main body of the Agreement prevail over any conflicting language in the exhibits.
The unambiguous “without cause” termination provision of Amendment #1 is
therefore controlling.
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B.
Commercial Bag next argues that Land O’Lakes was required under the
Agreement to buy a specific quantity of bags per year. Section 4.3 of the Agreement
required Land O’Lakes to use its “best reasonable efforts” to purchase fifteen to
twenty percent of its annual polypropylene bag requirements from Commercial Bag.
The Agreement also stated that Commercial Bag “agrees to manufacture for and
supply to [Land O’Lakes] . . . certain quantities of [polypropylene bags] as more
specifically described on Exhibit A.”
Amendment #2 included a new Exhibit A entitled “Pricing.” The exhibit
included a price list with the following heading: “Woven Poly Bags Price List (as of
January 1st, 2018, Estimated Annual Volume of 85M).”
Commercial Bag argues that Exhibit A to Amendment #2 obligated Land
O’Lakes to purchase a minimum of eighty-five million polypropylene bags per year.
The exhibit, however, set forth only an “estimated” annual volume. The body of the
agreement continued to require that Land O’Lakes exercise “best reasonable efforts”
to purchase fifteen to twenty percent of its bag requirements from Commercial Bag.
In any event, Land O’Lakes had a contractual right to terminate the agreement
without cause, and it exercised that option. There is no ambiguity that warrants a trial
on whether the agreement required purchase of eight-five million bags.
C.
Commercial Bag further contends that Land O’Lakes breached the Agreement
by refusing to pay an invoice from Commercial Bag for plates and dies. The claim
is based upon an invoice from September 2020 in which Commercial Bag billed Land
O’Lakes in the amount of $1,196,250.00 for “WPP ARTWORK & CYLINDERS.”
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There is no evidence that Commercial Bag actually incurred any costs for the
specified artwork and cylinders before the supply agreement was terminated.
Exhibit A of Amendment #2 provided that Land O’Lakes “will pay
[Commercial Bag] for the first set of plates and dies for each new print copy.” A
provision on “Plating Cost Allocation” stated that Commercial Bag “agrees to waive
$375,000 in plating costs as it relates to [Land O’Lakes’s] rebranding campaign.”
The district court concluded that the provision regarding payment for plates
and dies was “unambiguously a reimbursement provision,” and we agree. The
agreement contemplated that Land O’Lakes would pay for a set of plates and dies,
and that Commercial Bag would waive a portion of the plating costs. The agreement
therefore contemplated that there would be “costs” that could be waived before any
payment obligation was triggered. Because Commercial Bag produced no evidence
that it actually incurred costs for plates and dies, the district court correctly granted
judgment for Land O’Lakes on this claim.
III.
Commercial Bag also challenges the district court’s dismissal of its equitable
claim for reformation of the agreement. Commercial Bag claims that regardless of
the written agreement, the parties did not intend for the “without cause” termination
provision from Amendment #1 to continue after the parties signed Amendment #2.
Commercial Bag argues that the parties intended to reinstate the “for cause” provision
from the original Agreement, and that the retention of the “without cause” provision
from Amendment #1 was the result of a mutual mistake.
To prevail on a reformation claim, Commercial Bag must show that: “(1) there
was a valid agreement between the parties expressing their real intentions; (2) the
written instrument failed to express the real intentions of the parties; and (3) this
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failure was due to a mutual mistake of the parties.” Nichols v. Shelard Nat’l Bank,
294 N.W.2d 730, 734 (Minn. 1980). Where, as here, a claim for reformation is based
on a mutual mistake, the evidence “must be clear, precise, and convincing.” Farmers’
Store of Wheaton v. Del. Farmers’ Mut. Fire Ins. Co., 59 N.W.2d 889, 892 (Minn.
1953). The district court concluded that the evidence was clear that Land O’Lakes
intended for the “without cause” provision to continue, and there was no genuine
issue for trial on mutual mistake.
Commercial Bag contends that the “without cause” termination provision is
inconsistent with the intent of the parties as reflected in the Land O’Lakes request for
proposal from 2017. A transmittal message with that document said that Land
O’Lakes would “look to partner long-term” with suppliers. A sample agreement
accompanying the request for proposal included a “for cause” termination provision.
Commercial Bag maintains that there is no evidence that Land O’Lakes intended to
continue the “without cause” termination provision of Amendment #1.
We agree with the district court that the record is insufficient to create a
submissible case on mutual mistake. Commercial Bag emphasizes its own intent, but
mutual mistake requires clear and convincing evidence that Land O’Lakes also did
not intend to enter into the agreement as written. A sample agreement with a “for
cause” termination provision carries little weight when the parties ultimately signed
a different agreement in Amendment #2 that continued a “without cause” termination
provision. That Land O’Lakes aspired to “partner long-term” with a supplier is not
inconsistent with its retaining a right to terminate without cause if circumstances
warranted. Indeed, the companies did business for three years under the amended
agreement, and the termination was prompted by a change in circumstances involving
use of a new manufacturer abroad.
Land O’Lakes presented evidence that the company started to include “without
cause” termination provisions in all of its supply agreements as of May 2017, well
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before the parties executed Amendment #2 in January 2018. A Land O’Lakes
manager explained that the company wanted flexibility to terminate the Agreement
in this case if Commercial Bag changed manufacturers or increased prices. Internal
documents from Land O’Lakes in 2019 show that the company understood that the
Agreement with Commercial Bag allowed for termination without cause.
Documentary evidence shows that Land O’Lakes employed “without cause”
termination provisions in agreements with other suppliers after May 2017, and in a
sample contract for another request for proposal in 2019. Even allowing for the
prerogative of a factfinder to assess conflicting evidence and the credibility of
witnesses, the record is insufficient to support a finding by the high standard of clear
and convincing evidence that the parties mutually intended something other than the
terms of the written agreement regarding termination.
The judgment of the district court is affirmed.
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