Raffel Systems LLC v. Man Wah Holdings LTD Inc
Unreported, E.D. Wis. June 2, 2022 (2022)
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Rule of Law:
A motion for reconsideration of a non-final order serves the limited purpose of correcting manifest errors of law or fact or presenting newly discovered evidence, and is generally disfavored. An agency relationship, even between a parent and subsidiary, can be established by implied or apparent authority if the principal's actions justify a belief in agency, the principal knows of these acts, and the third party reasonably relies on the relationship.
Facts:
- Man Wah Holdings Ltd., Inc., Man Wah (USA) Inc., and XYZ Companies 1-10 (collectively 'Man Wah') alleged that Raffel Systems, LLC ('Raffel') breached two Supplier Contracts from 2016 and 2017, which included a dispute resolution provision and an exclusivity clause.
- Xiamen Raffel, a wholly owned subsidiary of Raffel Systems, LLC, was the entity that signed the 2016 and 2017 Supplier Agreements with Man Wah, not Raffel Systems, LLC directly.
- Man Wah attempted to have Raffel Systems, LLC directly sign the agreements, but Raffel declined.
- Paul Stangl, then-president of Raffel Systems, LLC, engaged in email negotiations with Man Wah through Ben Song of Xiamen Raffel, instructing Song on specific contract terms, such as the removal of Article 2.1, and authorizing Song to sign the agreement once changes were made.
- Stangl testified that Xiamen Raffel's purpose was to allow Raffel to legally conduct business in China, as Raffel Systems, LLC, a non-Chinese entity, could not sell goods domestically there.
- Man Wah representatives involved in the contract negotiations, Linhua Huang and Binghuang Chen, testified that they believed they were dealing with the same company and understood that Xiamen Raffel needed approval from Raffel Systems, LLC's 'bosses in the USA' for decisions.
Procedural Posture:
- Raffel Systems, LLC initiated a lawsuit against Man Wah Holdings Ltd, Inc., Man Wah (USA) Inc., and XYZ Companies 1-10 in the United States District Court for the Eastern District of Wisconsin.
- Man Wah filed counterclaims against Raffel Systems, LLC for breach of contract, breach of the covenant not to sue, and breach of the covenant of good faith and fair dealing, specifically alleging Raffel breached the 2016 and 2017 Supplier Contracts.
- Raffel Systems, LLC moved for summary judgment on Man Wah's breach of contract counterclaims, arguing it was not bound by the contracts, the 2017 contract was invalid, and it had not breached them.
- The District Court issued a summary judgment decision on November 5, 2021, finding that Raffel Systems, LLC was bound by the 2016 and 2017 Supplier Agreements under an agency theory and that the 2017 Supplier Agreement was valid. The court granted summary judgment to Raffel on the breach of Article 10.4 counterclaim but denied summary judgment on the breach of Article 2.4 (exclusivity clause) counterclaim, determining that questions of fact remained for a jury.
- Raffel Systems, LLC filed an expedited non-dispositive motion for reconsideration of the November 5, 2021 summary judgment decision, specifically challenging the findings that it was bound by the agreements and that the 2017 agreement was valid.
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Issue:
Did the District Court commit a manifest error of law or fact when it previously found that Raffel Systems, LLC was bound by the 2016 and 2017 Supplier Agreements under an agency theory, and that the 2017 Supplier Agreement was valid, such that reconsideration is warranted?
Opinions:
Majority - Nancy Joseph
No, the District Court did not commit a manifest error of law or fact when it previously found that Raffel was bound by the supplier agreements under an agency theory or that the 2017 agreement was valid, and thus reconsideration is not warranted. The court emphasized that motions for reconsideration serve a very limited purpose, primarily to correct manifest errors of law or fact or to present newly discovered evidence, and are not for re-litigating previously briefed arguments. Raffel, in its prior motion for summary judgment, chose to raise and argue the issue of agency, asserting that no genuine issues of material fact existed and that it was entitled to judgment as a matter of law. By doing so, Raffel put the issue before the court for a legal determination based on the undisputed facts presented. The court, citing Goldstein v. Fid. & Guar. Ins. Underwriters, Inc., found that Raffel could not now claim lack of notice or attempt to introduce 'additional evidence' after its initial assertion that the facts were undisputed, deeming such an attempt 'lawyerly game-playing.' The evidence previously presented by Raffel itself, including emails where Paul Stangl (Raffel Systems, LLC's president) instructed Ben Song (Xiamen Raffel) on contract negotiations and authorized him to sign, and Stangl's testimony regarding Xiamen Raffel's purpose in legally conducting Raffel's business in China, clearly supported the finding of an agency relationship under Wisconsin law. Man Wah's witnesses also testified to their belief that Xiamen Raffel was acting on behalf of Raffel Systems, LLC and required approval from 'bosses in the USA,' satisfying the reliance element of agency. The court concluded that there were no contradictory facts for a jury to resolve regarding agency, only Raffel's undisputed facts supporting its opponent's position. Furthermore, Raffel failed to provide any specific arguments demonstrating a manifest error of fact or law regarding the validity of the 2017 Supplier Agreement.
Analysis:
This case clarifies the strict standard for motions for reconsideration of non-final orders under Rule 54(b), emphasizing they are not opportunities to re-litigate or introduce new evidence that could have been presented earlier, particularly when a party has initially asserted a lack of factual dispute. It reinforces the principle that a party moving for summary judgment opens itself to a legal ruling based on the facts it presents, even if that ruling is unfavorable. The decision also illustrates how a parent company's direct involvement and strategic control over a subsidiary's contractual negotiations, coupled with third-party perceptions, can establish an agency relationship, especially when the subsidiary serves a specific, legally necessary function for the parent in a foreign market.
