Qwinstar Corporation v. Anthony

882 F.3d 748 (8th Cir. 2018)

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Nature of the Case

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Facts

P and Pro Logistics (D) are or were engaged in the business of selling and repairing old IBM check-processing systems. Negotiations between P and D ensued for P to purchase D. D completed an inventory of all of the parts he owned at the time, and this 56-page document showed a total parts value of over $4.7 million. P visited D on three separate occasions over the next several months, but no one ever made an independent inventory of the parts or compared the parts present in the warehouse to those represented in D's inventory document. The parties memorialized these deal in two separate contracts: (1) the Asset Purchase Agreement (APA), for the transfer of D's parts inventory to P; and (2) the Employment Agreement (EA), which concerned D's assumed role with P after the sale. After performing for almost one year, D notified P that its parts inventory was getting low on some items. P sent two employees to investigate the shortage. Both made comments about the sparse quantity of parts that existed at the Pro Logistics facility. But no one documented the remaining parts or compared the parts present to those in the January inventory. One month later, P sent D an email stating that $1 million in parts had been sold since the business arrangement had been finalized, and demanding that D account for the remaining $3.4 million. D later recovered about $600,000 in additional parts from D and then terminated D for alleged cause and filed suit to recover the claimed shortfall in the parts inventory. P sued for breach of the APA and D counterclaimed that P breached the EA by failing to pay him for the full five-year contract term. The court ruled for D on both issues. P appealed.