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Rock Port Market, Inc. v. Affiliated Foods Midwest Cooperative, Inc.

Court of Appeals of Missouri, Western District, Fourth Division

July 25, 2017

ROCK PORT MARKET, INC., Respondent,
v.
AFFILIATED FOODS MIDWEST COOPERATIVE, INC., Appellant.

         Appeal from the Circuit Court of Nodaway County, Missouri The Honorable Roger M. Prokes, Judge.

          Before: Mark D. Pfeiffer, Chief Judge, and James Edward Welsh and Edward R. Ardini, Jr., Judges.

          Mark D. Pfeiffer, Chief Judge.

         Affiliated Foods Midwest Cooperative, Inc. ("Affiliated Foods") appeals from the judgment of the Circuit Court of Nodaway County, Missouri ("trial court"), entered following a jury verdict for compensatory and punitive damages in favor of Rock Port Market, Inc. ("Rock Port") on its claim of breach of the duty of good faith and fair dealing. We affirm in part and reverse in part.

         Factual and Procedural Background[1]

         Rock Port was a grocery store in Rock Port, Missouri, owned by the Leisman family since 1949. In 1999 it submitted an application to become a member of Affiliated Foods, a Nebraska cooperative. Affiliated Foods obtained groceries at a discounted rate from food distributors and sellers because of its purchasing power and sold those groceries to member retail grocery stores. To become a member, Rock Port was required to make a membership deposit of $2, 500 with its application, and thereafter make a membership investment of two percent of its weekly purchases from Affiliated Foods for the first year and one percent thereafter. As part of the membership agreement, Rock Port was required to accumulate a non-interest-bearing debenture bond in the amount of $50, 000, from which Rock Port would derive an annual patronage rebate of the one percent weekly fee. If Rock Port ceased to be a member of Affiliated Foods, the bond would be returned to Rock Port without interest.

         In 2008, Affiliated Foods had approximately 900 member stores. In September of that year, Affiliated Foods representative Richard York met with Hubert Turnbull of Nodaway County Bank, the banker for Roger Pennel, LouAnn Pennel, WC Farmer, Dr. Aron Burke, and Roger Livengood ("investor group"), to discuss a grocery business they were interested in starting in Rock Port, Missouri. Turnbull asked York for a pro forma or an estimated business plan. York had discussions in October with the investor group. On November 4, 2008, LouAnn Pennel notified York that the investor group had decided to move forward with the project. In November, York provided Turnbull a ten-page pro forma, which included financial projections based on weekly and annual sales, margins, expenses, insurance, store labor, laundry, and uniforms. Because York was aware that the investor group was going to apply for Tax Increment Financing ("TIF"), he included a $15, 000 TIF projection. On December 22, 2008, York forwarded to an Affiliated Foods engineer photographs of a plat for the new store project to determine what size building would fit on that location. York also obtained building quotes for the new store project. In addition, the Affiliated Foods graphic design team provided proposed logo designs for the investor group. All of these services were provided to the investor group free of charge and at a time when the group was not a member of Affiliated Foods, an Affiliated Foods member - Rock Port - already operated a grocery store in this small community, and York believed that the investor group's prospective grocery store operation would likely force Rock Port out of business.

         In January 2009, York visited with Rock Port and told the store owners that Affiliated Foods had been contacted by people who were interested in building a new grocery store in the town. In March 2009, Rock Port's attorney asked York to provide a letter to the owners regarding the sustainability of two stores in Rock Port, Missouri. York complied, stating in his letter:

In my opinion, and my opinion only, it would be most beneficial to have only one grocery retail outlet in the community to continually meet purchase requirements not only from Affiliated Foods Midwest, but other direct store delivery vendors. . . . It would be a challenge for two retail outlets to survive in this community. Not impossible but not probable.

         On June 4, 2009, York attended a TIF Commission meeting at the request of the investor group. When the size of the Rock Port, Missouri, grocery market and the viability of two stores were discussed, York expressed his opinion that it was possible, not probable, for two grocery stores to survive in that community, but it would be better to consolidate. That same day, York emailed Affiliated Foods' officers regarding his attendance at the TIF Commission meeting. He stated that he assumed the owners of Rock Port would say that he undermined them at the meeting: "I assume he [Michael Leisman] will threaten to leave [Affiliated Foods], but under the circumstances [Affiliated Foods] will be better served supplying new store with weekly purchases of 28- to 30, 000 a week versus a failing store struggling to purchase 10, 000 a week." On the date York made the statement, Affiliated Foods had not even received a membership application or $2, 500 deposit from the investor group, later to be known as FC Food Country.

         In June or July 2009, the TIF for FC Food Country was passed. Thereafter, the investor group obtained a $315, 000 loan from Nodaway Valley Bank to finance the new grocery business. FC Food Country started doing business out of the meat market owned by the Pennels before the new grocery store was built.

         Affiliated Foods had a business relationship with Loyalty Lane, a company that provided reward cards for grocery stores. In July 2009, York emailed a Loyalty Lane representative, informing him that FC Food Country wanted to be a Loyalty Lane customer but not if Rock Port was going to be a Loyalty Lane customer. York stated: "Matt Leisman from the old store always talks a good story but never does anything[, ] and they will probably go away within the year. I would suggest we sign up a new store as their yearly sales will be about 2.5 million versus the old store, which would be about $600, 000 a year." Loyalty Lane responded: "Rich, per your request, we have told Roger and WC that we will give them a 5 mile exclusivity." FC Food Country received the five-mile exclusivity from Loyalty Lane.

         The Leisman family closed Rock Port in December 2009 because "the playing field was not going to be equal." FC Food Country became a member of Affiliated Foods on June 29, 2010.

         In 2012, Rock Port brought suit against Affiliated Foods for (1) breach of its duty of good faith and fair dealing, (2) fraudulent misrepresentation, and (3) breach of contract against Richard York, a claim that was dismissed by the trial court via summary judgment. In 2014, the matter was tried before a jury, which rendered verdicts in favor of Affiliated Foods on both remaining counts. Thereafter, the trial court granted Rock Port's motion for new trial, but only as to its claim of breach of duty of good faith and fair dealing. The case went to trial for the second time in 2015. At the close of Rock Port's evidence in the second trial, Affiliated Foods moved for a directed verdict "to request dismissal of the case as a matter of law for failure to establish the elements of proof necessary to permit submission to the jury, " which was denied by the trial court. At the close of all the evidence, Affiliated Foods "renew[ed]" its motion made at the close of Rock Port's evidence, which was denied by the trial court.

         At the instruction conference of the 2015 trial, counsel for Affiliated Foods objected to Rock Port's tendered verdict directing instruction and punitive damages instruction. The trial court overruled the objections and submitted both instructions to the jury.

         After a three-day trial, the jury returned a verdict on Rock Port's claim for breach of the duty of good faith and fair dealing in favor of Rock Port and assessed actual damages against Affiliated Foods in the amount of $370, 000. The jury assessed punitive damages against Affiliated Foods in the amount of $500, 000. The trial court entered its judgment on December 6, 2015, for Rock Port on the jury's verdict and awarded it $870, 000 ($370, 000 as actual damages, and $500, 000 as punitive damages).

         Affiliated Foods moved for judgment notwithstanding the verdict, new trial, and/or remittitur, which was denied by the trial court, and Affiliated Foods timely appealed.

         Standard of Review

         "Whether a jury was instructed properly is a question of law that this [c]ourt reviews de novo." City of Harrisonville v. McCall Serv. Stations, 495 S.W.3d 738, 746 (Mo. banc 2016) (internal quotation omitted). Our review is conducted in the light most favorable to the record, and we will find submission of an instruction proper if any theory supports the instruction. Id. "The party challenging the instruction must show that the offending instruction misdirected, misled, or confused the jury, resulting in prejudice to the party challenging the instruction." Id. (internal quotation omitted). We will reverse instructional errors "only if the error resulted in prejudice that materially affects the merits of the action." Id. (internal quotation omitted).

         Analysis

         Point I

         In Affiliated Foods' first point, it asserts that the trial court erred in submitting Rock Port's claim for punitive damages to the jury because Rock Port had ...


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