Hilo Products, Inc. v. Target Corporation

Background

Hilo Products supplied produce to Target stores in Kona and Hilo, Hawaii, between 2011 and 2018. Hilo alleged that Target frequently underpaid or failed to pay invoices, creating nearly $1.37 million in backlogged invoices. The parties often worked together to resolve older invoices, and Target continued paying some invoices more than one year old, including invoices from June 2017 that it paid in February 2020.

Target stopped ordering produce from Hilo in 2018, but the parties continued discussing and resolving unpaid invoices through 2020 and into 2021. In June 2021, a Target employee said he wanted to meet and “get this backpay cleared up.” On August 2, 2021, Target’s counsel told Hilo that the invoices were too old under the parties’ contract and that Target would not pay them. Hilo filed suit in December 2021.

Motion to Dismiss Standard

Target moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint alleges enough facts to support a legally plausible claim. At this stage, the court generally accepts the complaint’s factual allegations as true and draws reasonable inferences for the plaintiff.

Breach of Contract: Count I

The contract required Hilo to bring a claim within one year after the claim accrued. The court concluded that the invoices’ “net 30” payment term meant Target breached the contract when it failed to pay an invoice within 30 days, so the one-year period ordinarily would have expired before Hilo sued.

The court rejected Hilo’s argument that Target’s payments and communications had formally acknowledged the entire debt and restarted the limitations period. The February 2020 payment concerned only particular invoices, the August 2020 email was not properly part of the pleadings and was not an unconditional acknowledgment, and the June 2021 text message was too vague to identify the invoices or clearly promise payment of all outstanding amounts.

The court nevertheless held that Hilo plausibly alleged equitable estoppel. Equitable estoppel is a rule that can prevent a party from asserting a defense when its conduct induced the other party to reasonably delay action and caused harm. Hilo alleged that Target repeatedly paid invoices more than one year old and continued working to resolve the backlogged invoices, causing Hilo to believe that payment would occur without litigation. The court found that whether Hilo reasonably relied on that conduct was generally a fact question and could not be resolved against Hilo at the motion-to-dismiss stage.

The court also held that Hilo plausibly alleged waiver. Waiver means intentionally giving up a known right. A factfinder could conclude that Target’s years-long practice of resolving and paying invoices more than one year old waived Target’s right to enforce the contractual deadline. The contract’s nonwaiver clause did not require dismissal as a matter of law because party conduct can support a waiver claim despite such a clause.

The court therefore denied Target’s motion to dismiss Count I, Hilo’s claim for breach of implied or express contract.

Equitable Claims: Counts III and IV

The court granted Target’s motion to dismiss Hilo’s account-stated claim in Count III and unjust-enrichment claim in Count IV. Under the court’s analysis, equitable claims generally are unavailable when a valid written contract governs the disputed rights and payments. Hilo challenged enforcement of the contract’s time limit, but it did not claim that the contract itself was invalid or that it did not govern the parties’ relationship. The court also ruled that Hilo’s ability to plead alternative claims did not eliminate the requirement to allege a plausible basis for each claim.

Agricultural Good-Faith Claim: Count II

The court granted Target’s motion to dismiss Count II, which alleged breach of Minnesota’s statutory agricultural duty of good faith and fair dealing. The statute applies to contracts between a contractor and a producer. The court concluded that Hilo was a wholesaler and intermediary, not a statutory “producer,” so the parties’ agreement was not an agricultural contract covered by the statute. The court dismissed this claim because Hilo could not state a claim under the statute.

Disposition

The court granted in part and denied in part Target’s motion to dismiss. It granted the motion as to Counts II, III, and IV, and denied it as to Count I. The court dismissed Counts II, III, and IV with prejudice because Hilo could not cure their defects through amended pleadings. Count I remained pending.