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

Background

Since 2015, Commercial Bag Company supplied woven polypropylene bags to Land O’Lakes. The parties’ original Packaging Materials Supply Agreement required Land O’Lakes to make reasonable efforts to purchase approximately 15% to 20% of its annual bag volume from Commercial, but it did not require exclusive purchasing.

The original agreement allowed termination for cause after an uncured default. Amendment 1, signed in 2017, extended the relationship and added a provision allowing Land O’Lakes to terminate without cause on 90 days’ prior written notice. Amendment 2, signed in 2018, extended the agreement’s term and updated pricing. It stated that all remaining terms and conditions of the original agreement remained in effect. Amendment 3 later referred to the original agreement and both earlier amendments.

Commercial argued that Amendment 2 eliminated the without-cause termination provision and required Land O’Lakes to purchase 85 million bags each year through March 2024. Land O’Lakes gave Commercial 90 days’ notice in August 2020 that it was terminating the agreement. Commercial asserted claims for breach of contract, breach of the covenant of good faith and fair dealing, mutual and unilateral mistake, and promissory estoppel.

Summary-judgment standard

The court applied the summary-judgment standard under Rule 56 of the Federal Rules of Civil Procedure. Summary judgment is appropriate when no genuine dispute about a fact that could affect the result exists and the moving party is entitled to judgment under the law.

Contract claims

The parties agreed that Minnesota law and the Uniform Commercial Code governed the agreements. The court held that the agreements were unambiguous and therefore interpreted them based on their written terms rather than outside evidence such as emails or the parties’ internal discussions.

The court concluded that Amendment 1 clearly allowed Land O’Lakes to terminate the agreement without cause on 90 days’ written notice. Amendment 2 did not change that provision; instead, it stated that the agreement’s remaining terms continued in effect. Amendment 3’s reference to Amendment 1 further supported that conclusion. The court also noted that the agreement required any change to its terms to be written and signed by both parties, and no later written change eliminated the without-cause termination right.

The court rejected Commercial’s argument that the reference to an estimated annual volume of 85 million bags required Land O’Lakes to buy that quantity. The written agreements did not require Land O’Lakes to purchase a specific number of bags, and the agreement allowed Land O’Lakes to terminate at any time.

The court also found that the plating-cost provision required Land O’Lakes to reimburse Commercial for plating and printing costs, not to pay costs that Commercial had not incurred. The undisputed evidence showed that Commercial had not paid those costs, so it had no claim based on Land O’Lakes’ failure to reimburse them.

The court further held that the Uniform Commercial Code did not permit an independent claim for breach of the duty of good faith and fair dealing. Even assuming such a claim could be brought independently, the court found no evidence of bad faith. Land O’Lakes’ stated reasons for ending the relationship—including moving production to the United States, reducing supply disruptions, and avoiding tariffs—were not bad-faith reasons under the circumstances.

Equitable claims

The court rejected Commercial’s promissory-estoppel claim because Minnesota law does not allow that claim when a written contract governs the parties’ relationship. The court had determined that the agreement and amendments were enforceable and defined the parties’ duties.

The court also rejected Commercial’s requests to reform, or change, the written agreement based on mutual or unilateral mistake. Reformation requires strong evidence that the written agreement failed to reflect the parties’ actual agreement because of a mutual mistake or because one party made a mistake accompanied by fraud or inequitable conduct by the other.

The court found no mutual mistake because the evidence showed that Land O’Lakes intended to preserve the without-cause termination provision. It also found no basis for reformation based on unilateral mistake because the contracts were not ambiguous and the evidence did not establish fraud or misrepresentation by Land O’Lakes.

Disposition

The court granted Land O’Lakes’ motion for summary judgment, denied Commercial’s motion for partial summary judgment, and dismissed the case with prejudice.