Simmons Foods, Inc. v. Hill's Pet Nutrition, Inc.

270 F.3d 723 (8th Cir. 2001)

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Nature of the Case

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Facts

Poultry by-product meal is the main ingredient in D's pet foods. D started buying poultry meal from P in 1986. P had modified its processing for 'regular ash' poultry meal in accordance with D's specifications and became one of D's regular suppliers. D and P entered their first long-term written contract, a two-year agreement. It was an 'output' contract whereby D agreed to purchase all poultry meal produced by P at its facility in Southwest City, Missouri. After the first contract expired in 1992, the parties entered into a series of one-year contracts through 1997. Some were 'output' contracts like the first; at least one was a 'requirements' contract whereby P agreed to supply the needs of D's Los Angeles plant. In 1995, Simmons began expanding its operation to produce 'low ash' poultry meal. P expanded its operation because D needed 'low ash' meal and wanted P to produce it. P contemplated asking D for a long-term contract to recoup money spent on improvements but decided against it. P continued to negotiate one-year agreements following the expansion project. In the fall of 1997, D became obsessed with reducing the cost of doing business by $75 million over a three-year period. D asked its principal suppliers, including P, to reduce supply costs to meet that goal. D responded with two purchase orders for the 1998 contract year. The terms of these purchase orders did not refer to 'output' or 'requirements.' Instead, one purchase order referred to the specific quantity of low ash meal set forth in the November 1997 fax (36. 6 million pounds) and the other referred to the specific quantity of regular ash meal set forth therein (14 million pounds). Both parties fully performed the 1998 contract. In the fall of 1998, D wanted more than a 3% reduction from the prices and P would have to agree to a substantial price reduction, or risk termination of its relationship with D. P wrote to D to confirm a six-month agreement from January 1 through June 30, 1999. Instead of fixed prices, the parties agreed that pricing would be based on the Chicago Board of Trade index prices. This contract resulted in prices substantially less than the 3% reduction per year that P set forth in the November 1997 fax. They were unable to reach an agreement for the sale and purchase of poultry meal beyond June 30, 1999. P sued D alleging breach of contract for the years 1999 and 2000. P alleged that the November 1997 fax set forth a three-year deal, and claimed damages for 1999 and 2000 in an amount equal to the difference between sales to other customers, and the prices set forth in the November 1997 fax. P also alleged a promissory estoppel claim, seeking to recover the cost of improvements made in 1995 and 1996 to produce 'low ash' poultry meal. D moved for summary judgment on both claims, which the district court granted. With respect to the breach of contract claim, the district court held that the November 1997 fax failed to satisfy the Uniform Commercial Code's (UCC) statute of frauds because the fax did not refer to quantities for the years 1999 and 2000. The district court held that evidence of D's alleged oral promise of a long-term relationship was barred by the UCC's parol evidence rule because P subsequently entered into one-year written contracts with D. P appealed.