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Langer v. Rice

Intermediate Court of Appeals of Hawaii

October 28, 2013

DONALD J. LANGER and DAVID LANGER, Plaintiffs-Appellants,
v.
RONALD RICE, Defendant-Appellee, and DOE DEFENDANTS 1-20, Defendants

NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS AND PACIFIC REPORTER

APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CIVIL NO. 07-1-1340)

Richard Turbin Rai Saint Chu Janice D. Heidt (Turbin Chu, Attorneys) and David A. Vukelja for Plaintiffs-Appellants.

David W. Proudfoot (Belles Graham Proudfoot, Wilson & Chun, LLP) and JAMES R. MCGIBBON for Defendant-Appellee.

Nakamura, Chief Judge, Foley and Leonard, JJ.

MEMORANDUM OPINION

Plaintiffs-Appellants Donald J. Langer and David Langer (Langer)[1] appeal from the Circuit Court of the First Circuit's (Circuit Court) Final Judgment entered on January 13, 2009.[2]The Circuit Court granted summary judgment in favor of Defendant-Appellee Ronald Rice (Rice) on Langer's claims of breach of contract (Counts I and II) and fraud in the inducement (Count III). On appeal, Langer asserts that the Circuit Court erred in granting summary judgment in favor of Rice on these counts. We conclude that the Circuit Court erred in granting summary judgment on the basis of res judicata and/or judicial estoppel, but that Langer's fraudulent inducement claim is barred by the applicable statute of limitations.

I. BACKGROUND

In the late 1960s, Rice manufactured and sold a suntan product called "Tropic Tan." Langer purchased Tropic Tan from Rice for resale at motels and pool decks in Daytona Beach, Florida. Although Tropic Tan was manufactured in Florida, its label represented that it was manufactured in Hawai'i. Rice believed the made-in-Hawaii label was an effective sales tool. He then changed the name of his product to "Hawaiian Tropic."

Rice approached Langer with business proposals regarding relocating Hawaiian Tropic to Hawai'i. In 1972, Langer and Rice formed a partnership in Hawai'i for the manufacture, distribution, and sale of Hawaiian Tropic. Shortly thereafter, however, both parties incorporated separate business entities in Hawai'i and Florida. Langer incorporated as "Don Suntan, Inc." and Rice as "Tanning Research Laboratories, Inc." Through these entities, Langer functioned as the exclusive distributor of Hawaiian Tropic in Hawai'i and various other regions through contracts with Rice's corporation.

Between 1972 and 1976, Langer and Rice entered into various discussions and/or agreements regarding Langer's interest in the Hawaiian Tropic business under Rice's corporation. These discussions and/or agreements were the basis for two prior lawsuits in Volusia County, Florida. Based on the prior lawsuits, Rice filed a motion for summary judgment in the instant case asserting, inter alia, that Langer's present claims were barred by res judicata. On January 13, 2009, the Circuit Court entered final judgment in favor of Rice and dismissed all claims on the basis of res judicata, judicial estoppel, and the statute of limitations.

A. Present and Prior Cases

1. Present Case - the Sale Proceeds Agreement

In the present case, Langer alleges that he became concerned that his investment in the Hawaiian Tropic brand would be lost if Rice sold the business. Rice agreed that if Langer continued to distribute the Hawaiian Tropic product, he would receive ten percent of the sale proceeds if the business ever sold. Sometime before May of 1973, Rice purportedly confirmed this agreement in a signed, handwritten letter (Proceeds Agreement) which provided: "Let it be known that .... In case of sale of Hawaiian Tropic, Don Langer will receive 10% of the gross proceeds of the sale if he is still living in Hawaii, working for Hawaiian Tropic, and meeting all of the above requirements of this Agreement." As consideration, Langer assisted in the development of Hawaiian Tropic, relocated to Hawai'i, managed the Hawaiian Tropic manufacturing facility, distributed and sold the product in Hawai'i, and relinquished his interest in the Hawaiian Tropic trademark.

Langer contends that from 1972 to 1976, the parties continued to negotiate regarding Langer's potential receipt of an interest in Rice's corporation. However, he maintains that the Proceeds Agreement remained a separate, enforceable contract.

In 2007, Rice sold Hawaiian Tropic to Playtex Products, Inc. for approximately $108 million. On July 20, 2007, Langer filed the complaint herein, alleging that Rice breached the Proceeds Agreement by failing to deliver ten percent of the sales proceeds (Counts I and II). He also asserted that Rice fraudulently induced Langer to relocate to Hawai'i, manage the Hawaiian Tropic manufacturing facility, distribute and sell the product in Hawai'i, and relinquish his interest in the Hawaiian Tropic trademark in exchange for the Proceeds Agreement (Count III) .

2. First Ten Percent Case - Stock Agreement

On September 29, 1982, Langer filed a complaint against Rice in Volusia County, Florida (Case No. 82-4371-CA-01). Langer's primary claim centered on an agreement between the parties that allegedly arose in May of 1976. Langer alleged that after negotiations, Rice agreed to grant him ten percent of the stock in Tanning Research Laboratories, Inc. (Stock Agreement). As consideration, Langer assigned the Hawaiian Tropic trademark and his interest in the partnership to Rice's corporation. Rice failed to tender the stock as agreed. Langer then sought damages for breach of contract, unjust enrichment, and fraudulent inducement of the trademark and partnership assignments.

Rice filed a motion for summary judgment arguing that Langer's claims were time-barred under the applicable statute of limitations. In his memorandum in opposition, Langer characterized the Proceeds Agreement as part of an evolution of inchoate proposals that culminated in the Stock Agreement. Langer described the following documents as evidence of the evolving agreement: (1) the Proceeds Agreement, as evidenced by the same handwritten letter proffered in the instant case; (2) a draft "Irrevocable Trust" granting Langer ten percent of the stock in Rice's corporation, contingent on sale of the corporation; and (3) further drafts and proposals regarding Langer's acquisition of a ten percent interest in Rice's corporation. Langer testified that the Stock Agreement "most definitely" superseded all earlier proposals, including the Proceeds Agreement.

The court entered summary judgment in favor of Rice on all claims, based on the statute of limitations. Langer appealed the judgment to Florida's Fifth District Court of Appeal. In his appellate briefings, Langer described the Proceeds Agreement as "the beginning of continuous negotiations to reach an agreement establishing the time and manner in which Langer would receive his 10% interest in the Hawaiian Tropic business." The Florida Court of Appeal affirmed the judgment without opinion.

3. Second Ten Percent Case - Incentive Agreement

While Langer's appeal from summary judgment in the first case was pending, his corporation (Don Suntan) had another case pending against Rice's corporation in Volusia County (No. 83-955-CA-01). Langer filed an amended complaint in this case adding himself as an individual co-plaintiff. He also added three new counts to the complaint seeking declaratory relief and damages for breach of contract. Langer alleged that he and Rice had entered into an incentive agreement for a ten percent interest in Rice's corporation — essentially the same agreement described in the first case. As consideration, Langer alleged his prior and continuing efforts to promote the Hawaiian Tropic product.

In the amended complaint, Langer addressed the Proceeds Agreement and proffered the handwritten letter evidencing the agreement. He described the Proceeds Agreement as part of a single agreement that was modified over time and later culminated in an incentive agreement.[3] Langer alleged that as an incentive for him to promote the Hawaiian Tropic product, the parties originally agreed that he would receive ten percent of the proceeds in the event of a sale. However, the parties later modified the Proceeds Agreement by mutual consent. Instead of ten percent of the sale proceeds, the parties agreed that Langer would receive ten percent of the stock in Rice's corporation. This modification was evidenced by several draft agreements, although Langer never produced an executed agreement.

Rice's corporation filed a motion for summary judgment on the amended claims regarding the Stock Agreement on the basis of res judicata. The Florida court granted the motion and dismissed the new claims. Langer did not appeal. However, in a motion for rehearing, he conceded that res judicata "might apply as a bar to Count III [for declaratory relief and damages arising from the Stock Agreement]."

II. POINTS OF ERROR

On appeal, Langer asserts that the Circuit Court erred in granting summary judgment. Specifically, he maintains that the court erred by applying res judicata to bar his claims and by failing to resolve all presumptions and inferences concerning the prior cases in his favor.

III. APPLICABLE STANDARDS OF REVIEW

An appellate court reviews "the circuit court's grant or denial of summary judgment de novo." Querubin v. Thronas, 107 Hawai'i 48, 56, 109 P.3d 689, 697 (2005).

The Hawai'i Supreme Court has often articulated the standard as the following:

[S]ummary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. A fact is material if proof of that fact would have the effect of establishing or refuting one of the essential elements of a cause of action or defense asserted by the parties. The evidence must be viewed in the light most favorable to the non-moving party. In other words, we must view all of the evidence and the inferences drawn therefrom in the light most favorable to the party opposing the motion.

Id. (quoting Durette v. Aloha Plastic Recycling, Inc., 105 Hawai'i 490, 501, 100 P.3d 60, 71 (2004)).

Hawai'i Rules of Civil Procedure Rule 56(e) provides in relevant part:

Rule 56. Summary Judgment.
(e) Form of Affidavits; Further Testimony; Defense Required. When a motion for summary judgment is made . . . an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse ...

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