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Driveline Retail Merchandising, Inc. v. Pepsico, Inc.

United States District Court, E.D. Texas, Sherman Division

May 21, 2018

DRIVELINE RETAIL MERCHANDISING, INC.
v.
PEPSICO, INC.

          MEMORANDUM OPINION AND ORDER

          AMOS L. MAZZANT UNITED STATES DISTRICT JUDGE

         Pending before the Court are Defendant PepsiCo, Inc.'s (“PepsiCo”) Motion for Judgment on the Pleadings (Dkt. #17), Plaintiff/Counterclaim-Defendant Driveline Retail Merchandising, Inc.'s (“Driveline”) Motion for Judgment on the Pleadings on Defendant/Counterclaim-Plaintiff's Counterclaims (Dkt. #23), Plaintiff/Counterclaim Defendant's Motion for Partial Summary Judgment (Dkt. #39), and Defendant PepsiCo's Motion for Summary Judgment (Dkt. #40). Having reviewed the relevant pleadings and motions, the Court finds that the parties' motions for judgment on the pleadings should be denied as moot, PepsiCo's summary judgment should be granted in part, and Driveline's partial summary judgment should be granted in part.

         BACKGROUND

         Driveline is a corporation that is in the business of providing merchandising services, technology services, and consulting services to manufacturers and retailers. PepsiCo and its affiliates are in the business of manufacturing food products and distributing these products to various retail outlets throughout the country. Driveline contracted with PepsiCo to provide sales and retail merchandising assistance and services to PepsiCo. Relevant to the current dispute, the parties culminated their agreement into two contracts.

         First, on January 1, 2015, the parties entered into the Master Agreement for Sales and Merchandising Services (“the 2015 Agreement”), which was in effect from January 1, 2015 through December 31, 2016 (Dkt. #40, Exhibit 2 at p. 1). Under the terms of the 2015 Agreement, Driveline would perform sales and retail merchandising services for PepsiCo, according to the requirements set forth in the contract, and would send PepsiCo an invoice for such services (Dkt. #40, Exhibit 2 at p. 1). The invoices were subject to acceptance by PepsiCo and, if accepted, the “[p]ayment terms will be net sixty (60) days from the latter of the date the invoice is received by [PepsiCo].” (Dkt. #40, Exhibit 2 at p. 1). However, if PepsiCo reasonably disputed any of the services reported on the invoice, PepsiCo had the right to refuse payment until the dispute was resolved (Dkt. #40, Exhibit 2 at p. 1). Moreover, the 2015 Agreement provided for a rebate if PepsiCo paid a certain amount in invoices. Item 14 of Exhibit A to the 2015 Agreement dictated as follows:

14. Rebate (based on total annual spend): Yes Total Spend is not rounded
$1 - $1.499MM 0%
$1.5MM - $3.99MM 1% Back to $1
$4 - $7.99MM 3% Back to $1-Amount are non- cumulative; only one rebate (at the highest level based
>$7.99MM 5% upon total spend, will accrue)

(Dkt. #40, Exhibit 2 at p. 11).

         During 2015 and 2016, while the 2015 Agreement was in effect, Driveline sent PepsiCo invoices and PepsiCo made payments on the invoices. In 2015, PepsiCo paid Driveline $5, 303, 050.48. In 2016, PepsiCo paid Driveline $4, 023, 478.03.[1] Driveline did not make any credits or payments in rebates to PepsiCo.

         The parties entered into its second Master Agreement for Sales and Merchandising Services on February 1, 2017 (“the 2017 Agreement”). The terms of the 2017 Agreement were much the same as the 2015 Agreement; however, the parties made a few adjustments to the terms. Relevant to the case, the parties changed the terms of the rebate to exclude from rebate consideration “fulfillment & print charges and undisputed payments made more than 7 business days after the payment terms” (Dkt. #40, Exhibit 3 at p. 10). On March 24, 2017, Driveline submitted an invoice to PepsiCo in the amount of $390, 881.68 for services provided under the 2017 Agreement (“the 2017 Invoice”). PepsiCo paid $105, 691.82 of the 2017 Invoice to Driveline and represented that it was withholding the remaining $285, 189.86 as the amount Driveline owed PepsiCo in rebates under the terms of the 2015 Agreement.

         Based on this alleged partial payment, on June 15, 2017, Driveline filed suit for breach of the 2017 Agreement and, in the alternative, unjust enrichment or quantum meruit (Dkt. #1). PepsiCo answered suit and raised the affirmative defenses of setoff and promissory estoppel (Dkt. #7 at pp. 7-8). PepsiCo additionally asserted counterclaims against Driveline for breach of the 2015 Agreement and declaratory judgment (Dkt. #7 at pp. 8-12). Driveline filed an answer to the counterclaims and asserted the affirmative defenses of material breach of the 2015 Agreement, failure to comply with conditions precedent, waiver, and offset (Dkt. #14 at pp. 8-9).

         On October 16, 2017, PepsiCo filed its motion for judgment on the pleadings (Dkt. #17) and on November 9, 2017, Driveline filed its motion for judgment on the pleadings (Dkt. #23).[2]Then, on January 19, 2018, Driveline filed it motion for partial summary judgment (Dkt. #39). On February 9, 2018, PepsiCo filed its response (Dkt. #43) and Driveline filed its reply on February 20, 2018 (Dkt. #46). Additionally, on January 19, 2018, PepsiCo filed a motion for summary judgment (Dkt. #40). On February 12, 2018, Driveline filed a response (Dkt. #44) and PepsiCo filed a reply on February 16, 2018 (Dkt. #45).

         LEGAL STANDARD

         The purpose of summary judgment is to isolate and dispose of factually unsupported claims or defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). Summary judgment is proper under Rule 56(a) of the Federal Rules of Civil Procedure “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A dispute about a material fact is genuine when “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248 (1986). Substantive law identifies which facts are material. Id. The trial court “must resolve all reasonable doubts in favor of the party opposing the motion for summary judgment.” Casey Enters., Inc. v. Am. Hardware Mut. Ins. Co., 655 F.2d 598, 602 (5th Cir. 1981).

         The party seeking summary judgment bears the initial burden of informing the court of its motion and identifying “depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials” that demonstrate the absence of a genuine issue of material fact. Fed.R.Civ.P. 56(c)(1)(A); Celotex, 477 U.S. at 323. If the movant bears the burden of proof on a claim or defense for which it is moving for summary judgment, it must come forward with evidence that establishes “beyond peradventure all of the essential elements of the claim or defense.” Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986). Where the nonmovant bears the burden of proof, the movant may discharge the burden by showing that there is an absence of evidence to support the nonmovant's case. Celotex, 477 U.S. at 325; Byers v. Dall. Morning News, Inc., 209 F.3d 419, 424 (5th Cir. 2000). Once the movant has carried its burden, the nonmovant must “respond to the motion for summary judgment by setting forth particular facts indicating there is a genuine issue for trial.” Byers, 209 F.3d at 424 (citing Anderson, 477 U.S. at 248-49). A nonmovant must present affirmative evidence to defeat a properly supported motion for summary judgment. Anderson, 477 U.S. at 257. Mere denials of material facts, unsworn allegations, or arguments and assertions in briefs or legal memoranda will not suffice to carry this burden. Rather, the Court requires “significant probative evidence” from the nonmovant to dismiss a request for summary judgment. In re Mun. Bond Reporting Antitrust Litig., 672 F.2d 436, 440 (5th Cir. 1982) (quoting Ferguson v. Nat'l Broad. Co., 584 F.2d 111, 114 (5th Cir. 1978)). The Court must consider all of the evidence but “refrain from making any credibility determinations or weighing the evidence.” Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007).

         ANALYSIS

         Both parties have moved for summary judgment in this case. Driveline moved for partial summary judgment on PepsiCo's liability for breach of the 2017 Agreement and on PepsiCo's counterclaims for breach of the 2015 Agreement and declaratory judgment. PepsiCo moved for summary judgment on Driveline's claim for breach of the 2017 Agreement, Driveline's claim for unjust enrichment or quantum meruit, on its own claims for breach of the 2015 Agreement, and its claim for declaratory judgment. Because the claims are interrelated, the Court addresses the motions together.

         I. Breach of the 2015 Agreement

         Before addressing whether there is a breach of the 2015 Agreement, the Court identifies what the contract requires. Neither party contests the basic requirements of the contract.[3] The 2015 Agreement requires PepsiCo to make payments for services rendered by Driveline within sixty days of receiving an invoice from Driveline. Further, if PepsiCo spends at least $1, 500, 000.00 based on total annual spend, PepsiCo is entitled to a rebate.

         PepsiCo filed a counterclaim against Driveline arguing that Driveline breached the 2015 Agreement by failing to pay or credit PepsiCo rebates that PepsiCo maintains it is owed. Driveline asserts the affirmative defense that PepsiCo materially breached the 2015 Agreement by failing to make timely payments such that Driveline did not need to perform under the 2015 Agreement.[4]PepsiCo moved for summary judgment on its counterclaim arguing that it has proven its breach of contract claim as a matter of law. Additionally, Driveline moved for summary judgment against PepsiCo's breach of contract claim arguing that PepsiCo cannot prove the elements of its claim. The Court will address each motion.

         A. PepsiCo's Motion for Summary Judgment

         PepsiCo argues that the evidence conclusively establishes all four elements of its breach of contract claim. Thus, PepsiCo asserts that it has proven its breach of contract claim as a matter of law. Driveline maintains that there are genuine issues of material fact surrounding its affirmative defense that PepsiCo materially breached the 2015 Agreement and accordingly, the Court should deny PepsiCo's motion.

         Under Texas law, a breach of contract claim requires a party to prove: (1) the existence of a valid contract; (2) performance or tendered performance by the party; (3) breach of the contract by the opposing party; and (4) damages sustained by the party as a result of the breach. Smith Int'l, Inc. v. Egle Grp., LLC, 490 F.3d 380, 387 (5th Cir. 2007) (citation omitted); Hackberry Creek Country Club, Inc. v. Hackberry Creek Home Owners Ass'n, 205 S.W.3d 46, 55 (Tex. App.- Dallas 2006, pet. denied). Neither party disputes that the 2015 Agreement is a valid contract. However, Driveline challenges the remaining elements of PepsiCo's breach of contract claim. PepsiCo avers that it has conclusively established all of the elements.

         1. Performance or Tendered Performance by PepsiCo

         Driveline argues that this element is not met because PepsiCo materially breached the 2015 Agreement by submitting late payments.[5] PepsiCo counters that it fully performed its obligations under the 2015 Agreement and that any alleged late payment is not relevant to whether or not Driveline owed rebates under the 2015 Agreement because the payment ...


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