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Sun Aviation, Inc. v. L-3 Communications Avionics Systems, Inc.

Supreme Court of Missouri, En Banc

October 31, 2017

SUN AVIATION, INC., Respondent,
v.
L-3 COMMUNICATIONS AVIONICS SYSTEMS, INC., Appellant.

         APPEAL FROM THE CIRCUIT COURT OF JACKSON COUNTY The Honorable James F. Kanatzar, Circuit Judge.

          Zel M. Fischer, Chief Justice.

         L-3 Communications Avionics Systems, Inc. ("L-3") appeals the circuit court's judgment in favor of Sun Aviation, Inc. ("Sun") for violations of various provisions of the Merchandising Practices Act, sections 407.010 et seq.[1] The circuit court's judgment is reversed in part, and the case is remanded for a new trial on damages. In all other respects, the judgment is affirmed.

         Factual and Procedural History

         L-3 is a manufacturer of aircraft instruments. It transacted with Sun to act as a distributor of L-3's products: gyros[2] and power supplies.[3] When L-3's parent company underwent a consolidation process, the parent decided to terminate L-3's distributorship with Sun, and directed L-3 to do so. Sun filed an action against L-3 raising the following claims: Count I, violation of § 407.405 (the "Franchise Act") by failing to provide timely, written notice of termination; Count II, violation of § 407.753 (the "Industrial Maintenance and Construction Power Equipment Act" or "IMCPE Act") by terminating the parties' business relationship without good cause; Count III, violation of § 407.860 (the "Inventory Repurchase Act") by refusing to repurchase inventory; and Count IV, fraudulent concealment of its parent's consolidation plans, which eventually led to the termination of the parties' business relationship.

         The circuit court granted Sun's motion for partial summary judgment as to liability but not damages on Counts I, II, and III. The circuit court ordered the case to proceed to trial on damages on those counts as well as liability and damages on Count IV. Following a bench trial, the circuit court entered judgment in favor of Sun on Count IV. The circuit court awarded Sun damages on all counts. L-3 appealed, and after opinion by the court of appeals, this Court sustained transfer pursuant to article V, section 10 of the Missouri Constitution.

         I.

         L-3 argues the circuit court erred in granting partial summary judgment in favor of Sun on Counts II and III because L-3's products are not "industrial, maintenance and construction power equipment used for industrial, maintenance and construction applications" pursuant to the IMCPE Act, section 407.753, and the Inventory Repurchase Act, section 407.860. "Whether to grant summary judgment is an issue of law that this Court determines de novo." Swadley v. Shelter Mut. Ins. Co., 513 S.W.3d 355, 357 (Mo. banc 2017). "Statutory interpretation is an issue of law that this Court reviews de novo." Newsome v. Kansas City, Mo. Sch. Dist., 520 S.W.3d 769, 780 (Mo. banc 2017).

         The IMCPE Act, section 407.753.1, provides:

Any manufacturer, wholesaler or distributor of industrial, maintenance and construction power equipment used for industrial, maintenance and construction applications and repair parts therefor, who enters into a written or parol contract with any person, firm, or corporation engaged in the business of selling and repairing industrial, maintenance and construction power equipment used for industrial, maintenance and construction applications and repair parts therefor, whereby such retailer agrees to maintain a stock of parts or complete or whole machines or attachments, shall not terminate, cancel, or fail to renew any such contract without good cause.

(Emphasis added). The Inventory Repurchase Act, section 407.860.1, provides that a "wholesaler, manufacturer or distributor shall repurchase that inventory previously purchased from him and held by the retailer at the date of termination of the contract." A "retailer" is defined as "any person, firm or corporation engaged in the business of selling, repairing and retailing . . . [i]ndustrial, maintenance and construction power equipment[.]" Section 407.850(5)(b) (emphasis added).

         The issue is whether the General Assembly intended for gyros and power supplies to be covered under the phrase "industrial, maintenance and construction power equipment." "This Court's primary rule of statutory interpretation is to give effect to legislative intent as reflected in the plain language of the statute at issue." Parktown Imps. v. Audi of Am., 278 S.W.3d 670, 672 (Mo. banc 2009). However, when the General Assembly has not defined the phrase "industrial, maintenance and construction power equipment, " "undefined words are given their plain and ordinary meaning as found in the dictionary to ascertain the intent of lawmakers." Howard v. City of Kansas City, 332 S.W.3d 772, 780 (Mo. banc 2011). In addition to seeking guidance from the dictionary, "when a statute in question fails to provide a statutory definition, . . . case law interpreting the term in the context of the statute" should be considered. State ex rel. Proctor v. Messina, 320 S.W.3d 145, 155 (Mo. banc 2010).

         The circuit court concluded the gyros and power supplies were covered under the IMCPE Act, section 407.753, and the Inventory Repurchase Act, section 407.860. It reasoned:

The word "power" means "a source or means of supplying energy." Webster's Ninth New Collegiate Dictionary (1989) at 922. The word "equipment" means "the set of articles or physical resources serving to equip a person or thing: as the implements used in an operation or activity." Webster's at 421. The Court finds the ordinary meaning of the term "power equipment" is any article or implement that is a source of energy, supplies energy, or uses energy in an operation or activity. Applying this meaning to the issue at hand, the Court finds that L-3's power supplies and gyros are "power equipment" as the term is used in Section 407.753. This is true if these products are described as batteries, generators, emergency power sources, stand-alone electric using equipment, or other descriptive names. Accordingly, repair parts for these products fall under the guise of Section 407.753. Additionally, the Court finds it is not disputed these products are used in the avionics industry.

         Using this same reasoning, the circuit court found Sun was a "retailer" as defined in § 407.850(5)(b). The circuit court, however, erred in granting partial summary judgment in favor of Sun on Counts II and III.

         The phrase "power equipment" cannot be read in isolation; the entire phrase "industrial, maintenance and construction power equipment" must be considered. "When determining the legislative intent of a statute, no portion of the statute is read in isolation, but rather the portions are read in context to harmonize all of the statute's provisions." BASF Corp. v. Dir. of Revenue, 392 S.W.3d 438, 444 (Mo. banc 2012) (per curiam). "When interpreting a statute, this Court must give meaning to every word or phrase of the legislative enactment." State ex rel. Jackson v. Dolan, 398 S.W.3d 472, 479 (Mo. banc 2013). It is not sufficient to determine only whether the gyros and power supplies are "power equipment." The phrase "power equipment" is categorized by the preceding phrase "industrial, maintenance and construction[.]" Columbia Athletic Club v. Dir. of Revenue, 961 S.W.2d 806, 809 (Mo. banc 1998), overruled on other grounds by Wilson's Total Fitness Ctr. v. Dir. of Revenue, 38 S.W.3d 424 (Mo. banc 2001).

         This Court has not had occasion to interpret the phrase "industrial, maintenance and construction power equipment." However, the United States District Court for the Eastern District of Missouri, has interpreted the phrase.[4] In McBud of Missouri, Inc. v. Siemens Energy & Automation, Inc., a distributor filed an action against a manufacturer, alleging violations of the IMCPE Act, section 407.753. 68 F.Supp.2d 1076, 1079-80 (E.D. Mo. 1999), aff'd, 210 F.3d 379 (8th Cir. 2000). The products at issue "intercept[ed] electric power as it enter[ed] an end user's facility, and distribute[d] and control[led] the power within the end user's facility." Id. at 1079. The equipment was "typically used to distribute electrical power through a series of interrelated machines and equipment in order to allow the machines and equipment to work in a coordinated fashion." Id.

         The distributor argued the words "power" and "equipment" could be read in isolation from its companion words "industrial, maintenance and construction, " which led to a broader interpretation of the phrase. Id. at 1080-81. The federal district court rejected the distributor's argument, explaining:

[I]t strains common sense to conclude that the Missouri legislature intended the term "power equipment" to include items of equipment or component parts which work in an auxiliary or supplementary manner with other machines or equipment. If [the distributor's] contention were taken to its logical extreme, a distributor of electrical outlets or electrical wiring, whose products were utilized in an industrial, maintenance or construction setting, would fall within the scope of the statute because those are devices which can conduct power to enable machines to perform work. This would be an absurd result, and the Court does not read the statute to permit the construction urged by [the distributor]. Rather, the language of the statute indicates that, at minimum, "power equipment" must refer to end use machines and equipment which operate and perform work using some power source, whether electrical, gas, steam, or other, or their own internal power source, such as an internal combustion engine.

Id. at 1081-82.[5] This Court is persuaded that the federal district court's interpretation of the phrase "industrial, maintenance and construction power equipment, " as set out in the IMCPE Act, section 407.753, and the Inventory Repurchase Act, section 407.860, is what was intended by the General Assembly.

         Consistent with the federal district court's interpretation in McBud, L-3 argues the products are "component parts" that perform in an auxiliary or supplementary manner with other aircraft components, and are not "end-use" machines. This Court agrees the aircraft itself is the end-use machine; the gyros and power supplies, which are installed in the aircraft's instrument panels, are akin to component parts and, in fact, are only two of many component parts. Indeed, the gyros cannot gauge the aircraft's position without the ...


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