United States Court of Appeals
`For the Eighth Circuit
`___________________________
`
`No. 16-3679
`No. 16-3872
`___________________________
`
`HIP, Inc., fka Unitherm Food Systems, Inc.
`
`lllllllllllllllllllll Plaintiff - Appellant/Cross-Appellee
`
`v.
`
`Hormel Foods Corporation, et al.
`
`lllllllllllllllllllll Defendants - Appellees/Cross-Appellants
`____________
`
`Appeals from United States District Court
`for the District of Minnesota - Minneapolis
`____________
`
` Submitted: October 18, 2017
` Filed: April 18, 2018
`____________
`
`Before LOKEN, MURPHY, and COLLOTON, Circuit Judges.
`____________
`
`LOKEN, Circuit Judge.
`
`Hormel Foods Corporation is a Delaware corporation with its principal place
`of business in Minnesota that manufactures and markets meat products. In early
`2007, Hormel sought an improved method of producing precooked bacon, which it
`was then producing in continuous commercial microwave ovens and selling into retail
`
`Appellate Case: 16-3679 Page: 1 Date Filed: 04/18/2018 Entry ID: 4651406
`
`

`

`and foodservice markets. On July 20, Hormel entered into a Mutual Confidential
`Disclosure Agreement (the “MCDA”) with HIP, Inc. (formerly Unitherm Food
`Systems, Inc.) (“Unitherm”), an Oklahoma Corporation that develops cooking
`processes and sells equipment including commercial ovens. On September 25, they
`entered into a Joint Development Agreement (the “JDA”) incorporating the MCDA.
`On April 1, 2010, Hormel terminated the JDA. In September 2014, Unitherm
`commenced this diversity action alleging, as relevant here, that Hormel wrongfully
`terminated the JDA and breached the MCDA. Hormel counterclaimed, alleging that
`Unitherm breached the JDA and seeking a declaratory judgment that Hormel owns
`the patented “Unitherm Process” for precooking bacon in a spiral oven. The district
`court granted summary judgment, dismissing Unitherm’s breach of contract claims
`1
`and Hormel’s breach of contract and declaratory judgment counterclaims. They cross
`appeal these rulings. We affirm.
`
`I. Background.
`
`By 2005, Hormel had identified superheated steam as a way to improve
`precooked bacon quality and began work to develop a superheated steam process for
`cooking bacon. In 2007, Hormel considered partnering with one of two commercial
`oven manufacturers that offered spiral ovens for cooking meat products with steam,
`Unitherm and JBT Corporation (formerly FMC FoodTech). Unitherm’s owner, David
`Howard, had developed the “Unitherm Process” suitable for producing precooked
`bacon in a spiral oven. In a July 10 “generic” discussion of ovens and products,
`Howard urged Hormel to consider using superheated steam in a spiral oven to
`produce precooked bacon. The next day, Hormel met with JBT to test cook chicken
`in JBT’s spiral oven. They test cooked a small amount of bacon.
`
` The Honorable Joan N. Ericksen, United States District Judge for the District
`1
`of Minnesota.
`
`-2-
`
`Appellate Case: 16-3679 Page: 2 Date Filed: 04/18/2018 Entry ID: 4651406
`
`

`

`On July 20, at Hormel’s invitation, Howard gave a one-hour presentation of
`Unitherm’s new process for cooking bacon in a spiral oven using superheated steam
`at Hormel’s main offices in Austin, Minnesota. Before the meeting, the parties signed
`the MCDA, which Hormel prepared. On September 25, the parties entered into the
`JDA, with the stated purpose of developing “the Project.” The meaning of that term
`is a key part of the issues on appeal. During the effective period of the JDA, Hormel
`and Unitherm conducted tests for cooking bacon in a mini test spiral oven owned by
`Unitherm, which Hormel leased in July 2008 to continue work on the Project.
`
`On December 5, 2007, JBT issued a press release regarding the use of its spiral
`oven for producing precooked bacon. Concerned JBT might attempt to patent the
`concept, Unitherm filed a process patent application for the Unitherm Process in
`January 2008. Hormel terminated the JDA on April 1, 2010. Before termination,
`Hormel had experimented with microwave preheating of bacon before precooking in
`a superheated spiral oven. After termination, Hormel purchased the spiral test oven
`it had leased from Unitherm. In August 2011, Hormel filed an application for a
`“Hybrid Process” patent for cooking bacon by preheating it in a microwave oven and
`then running it through a spiral oven filled with superheated steam. The application
`identified the spiral test oven purchased from Unitherm as the oven used to develop
`that process. In January 2012, Hormel and JBT entered into a contract for “the
`development (design and build) of an oven by JBT for Hormel Foods’ patent-pending
`technology of cooking bacon.” For this purpose, JBT modified its GCO-II spiral
`oven by “reverse engineering” the Unitherm test oven. Hormel purchased the
`resulting commercial oven from JBT in 2013 and began marketing a new precooked
`bacon product called “Bacon1” in 2014, using the Hybrid Process.
`
`Unitherm commenced this suit in September 2014, alleging breach of contract,
`misappropriation of trade secrets, and unjust enrichment and seeking an accounting
`and a declaratory judgment that it owns the Hybrid Process disclosed in Hormel’s
`pending patent application. Unitherm claimed that Hormel wrongfully terminated the
`
`-3-
`
`Appellate Case: 16-3679 Page: 3 Date Filed: 04/18/2018 Entry ID: 4651406
`
`

`

`JDA without notice, failed to share information, misappropriated the Unitherm
`Process for its own commercial purposes, and breached the MCDA by disclosing
`details of the Unitherm Process and test oven to JBT and reverse engineering the test
`oven. Hormel’s counterclaim alleged that Unitherm breached the JDA by failing to
`assign the Unitherm Process to Hormel after Hormel purchased the test oven, and
`sought a declaratory judgment that Hormel owns the now-patented Unitherm Process.
`
`The district court initially dismissed Unitherm’s misappropriation of trade
`secrets and accounting claims because the alleged trade secrets were made public in
`Unitherm’s patent application. After discovery, both parties moved for summary
`judgment on their respective breach of contract and declaratory judgment claims and
`on Unitherm’s unjust enrichment, claim. The district court granted summary
`judgment, dismissing Unitherm’s breach of contract and unjust enrichment claims and
`Hormel’s breach of contract and declaratory judgment claims. Both parties appeal.
`2
`
`II. Unitherm’s Breach of Contract Claims.
`
`Unitherm argues the District Court erred in granting summary judgment
`dismissing its claims that Hormel breached the JDA and the MCDA. We review the
`grant of summary judgment de novo, including the district court’s interpretation of
`state law. Wayne v. Genesis Med. Ctr., 140 F.3d 1145, 1147 (8th Cir 1998).
`
`The parties subsequently moved to dismiss without prejudice remaining claims
`2
`regarding ownership of the Hybrid Process. In response to our inquiry at oral
`argument, they explained these claims were not dismissed to evade the final order
`doctrine, but because Hormel’s Hybrid Process patent application remains pending.
`They assured the court the dismissed claims will not be revived after this appeal. We
`are satisfied the cross appeals seek review of a final order within our jurisdiction
`under 28 U.S.C. § 1291.
`
`-4-
`
`Appellate Case: 16-3679 Page: 4 Date Filed: 04/18/2018 Entry ID: 4651406
`
`

`

`Minnesota law governs these claims. “In order to state a claim for breach of
`contract, the plaintiff must show (1) formation of a contract, (2) performance by
`plaintiff of any conditions precedent to his right to demand performance by the
`defendant, and (3) breach of the contract by defendant.” Park Nicollet Clinic v.
`Hamann, 808 N.W.2d 828, 833 (Minn. 2011). The Supreme Court of Minnesota has
`repeatedly held that “when a contractual provision is clear and unambiguous, courts
`should not re-write, modify, or limit its effect by a strained construction.” Valspar
`Refinish, Inc. v. Gaylord’s, Inc., 764 N.W.2d 359, 364-65 (Minn. 2009), citing cases.
`“Unambiguous contract language must be construed according to its plain and
`ordinary meaning.” Mapes v. MTR Gaming Grp., Inc., 299 F.3d 706, 707 (8th Cir.
`2002). We determine the plain and ordinary meaning of contract language by
`“reading it in the context of the instrument as a whole and viewing each part of the
`contract in light of the others.” Olympus Ins. Co. v. AON Benfield, Inc., 711 F.3d
`894, 898 (8th Cir. 2013) (applying Minnesota law). We consider extrinsic evidence
`only when the language of the contract is ambiguous. See id.; Dykes v. Sukup Mfg.
`Co., 781 N.W.2d 578, 582 (Minn. 2010); Mapes, 299 F.3d at 707.
`
`A. Breach of the JDA. Unitherm alleges that Hormel wrongfully terminated
`the JDA on April 1, 2010. Our consideration of this issue must focus on a number
`of provisions in this three-page agreement. First, the introductory recital:
`
`HORMEL and UNITHERM would like to work together to develop an
`oven that uses very high (approaching 100%) steam levels for cooking.
`This oven process would initially be focused on producing bacon.
`Hormel has developed a prototype high steam level oven that produces
`such bacon and would like to work with Unitherm to develop
`commercial ovens using high steam levels which would be exclusive to
`Hormel (“The Project”).
`
`-5-
`
`Appellate Case: 16-3679 Page: 5 Date Filed: 04/18/2018 Entry ID: 4651406
`
`

`

`Next, a number of operating provisions:
`
`1. Sharing of Information. HORMEL and UNITHERM shall share
`information and ideas to assist in the development of the Project.
`
`2. By HORMEL. During work on the Project, HORMEL shall make
`available equipment, source product and technical personnel for the
`Project, including defining Project requirements.
`
`3. By UNITHERM. During work on the Project, Unitherm will . . .
`commit adequate resources to develop the Project to produce a
`commercially-viable end product with all due haste.
`
`5.c. Exclusivity. Following completion of a commercially viable
`application of the Project, the parties will negotiate an agreement by
`which UNITHERM will be the exclusive supplier to HORMEL of
`equipment related to the Project for an initial period of five (5) years.
`
`And finally, the termination provision Hormel invoked in terminating the JDA:
`
`6.b. Termination. . . . Either party may terminate this Agreement if,
`after reasonably adequate development work and testing has been done,
`a commercially viable Project has not resulted, upon providing at least
`thirty (30) days prior written notice.
`
`The district court granted summary judgment dismissing this claim because no
`“commercially viable Project” had resulted after reasonably adequate development
`work and testing. The court emphasized that the last sentence of the above-quoted
`recital defined the “Project” as “concern[ing] the development of a commercial oven,
`not a cooking process.” Because “the term falls within the period of the last
`sentence,” the court reasoned, “it refers only to that sentence[, which] discusses
`developing commercial ovens, not oven processes.” This analysis is consistent with
`the contract interpretation principle that a “defined term is defined by tucking it at the
`
`-6-
`
`Appellate Case: 16-3679 Page: 6 Date Filed: 04/18/2018 Entry ID: 4651406
`
`

`

`end of the definition, in parentheses.” Olympus Ins. Co., 711 F.3d at 899. Summary
`judgment is appropriate, the district court concluded, because “[t]here is no evidence
`the parties developed ovens, let alone commercially viable ones.”
`
`Focusing on the express reference to “oven process” in the second sentence of
`the recital, Unitherm argues, as it did in the district court, that the contract term
`“Project” included the development of cooking processes. Unitherm’s theory is that,
`because there was adequate evidence that it brought a commercially viable Unitherm
`Process to Hormel at the start of the JDA, and the parties applied and refined that
`process to produce good tasting bacon in the leased mini spiral oven prior to
`termination, Hormel wrongfully terminated the JDA.
`
`We conclude that Unitherm’s dissecting of the JDA recital mistakenly elevates
`semantics to an art form. The first sentence of the recital plainly declares the purpose
`of the JDA -- “to develop an oven that uses very high (approaching 100%) steam
`levels for cooking.” The third sentence explains that Hormel has “a prototype high
`steam level oven that produces such bacon” but wants “to work with Unitherm to
`develop commercial ovens using high steam levels which would be exclusive to
`Hormel.” Unitherm relies on the second sentence of the recital stating that the “oven
`process would initially be focused on producing bacon.” However, the district
`court’s interpretation of the term “Project” is consistent with the plain meaning of the
`entire recital read in the context of the operative provisions of the JDA. The recital
`clearly defined the Project as developing an oven using a particular process.
`Paragraph 3 reinforced this interpretation, obligating Unitherm to help “develop the
`Project to produce a commercially-viable end product.” (Emphasis added.)
`Paragraph 5.c. then spelled out Unitherm’s reward: upon “completion of a
`commercially viable application of the Project,” Hormel committed to negotiate an
`agreement giving Unitherm, an oven manufacturer, the exclusive right to supply
`“equipment related to the Project” for five years. The plain meaning of these
`provisions is that the term “commercially viable Project” in paragraph 6.b. means, in
`
`-7-
`
`Appellate Case: 16-3679 Page: 7 Date Filed: 04/18/2018 Entry ID: 4651406
`
`

`

`the words of the recital, a commercially viable oven for making bacon “using high
`steam levels which would be exclusive to HORMEL.”
`
`In addition to urging an implausible definition of the term Project, Unitherm
`totally failed to introduce evidence addressing the critical term “commercially viable”
`in paragraph 6.b. “Commercially viable,” a term used in a variety of contexts, has a
`plain meaning -- “the ability of a business, product, or service to compete effectively
`and to make a profit.” CAMBRIDGE BUSINESS ENGLISH DICTIONARY. “‘Commercial
`3
`viability’ means the ability to sell a device at a profit and to afford the development
`and continuation of an ongoing business.” Cyrix Corp. v. Intel. Corp., 846 F. Supp.
`522, 541 (E.D. Tex. 1994). Or, as the Second Circuit said more recently,
`“‘commercially viable’ -- read ‘profitable.’” Beardslee v. Inflection Energy, L.L.C.,
`761 F.3d 221, 229 (2d Cir. 2014). It is also a term that can be objectively proved.
`For example, in one securities fraud case, the court noted that a “commercial viability
`determination is the result of a cost/revenue analysis that may be assessed using
`quantitative data.” In re Novagold Res. Inc. Sec. Litig., 629 F. Supp. 2d 272, 302
`n.21 (S.D.N.Y. 2009).
`
`Here, Unitherm presented no evidence countering Hormel’s decision that “after
`reasonably adequate development work and testing has been done, a commercially
`viable Project has not resulted.” The JDA explicitly gave Hormel the task of
`“defining Project requirements,” so Unitherm needed strong evidence discrediting
`Hormel’s decision that the requirements of Paragraph 6.b. had not been met. Yet,
`there was no evidence work on the Project developed an oven capable of producing
`commercial quantities of bacon using the process Unitherm brought to the Project.
`Indeed, in his lengthy deposition, Howard admitted that no bacon produced by a
`spiral oven using the Unitherm superheated steam process has ever been sold in the
`
`https://dictionary.cambridge.org/us/dictionary/english/commercial-viability
`3
`(last visited Apr. 2, 2018).
`
`-8-
`
`Appellate Case: 16-3679 Page: 8 Date Filed: 04/18/2018 Entry ID: 4651406
`
`

`

`United States. Evidence that those participating in a test panel opined that the mini
`spiral test oven produced bacon samples tasting as good as microwave precooked
`bacon already on the market was not evidence that a high quality new product could
`be profitably produced in large quantities in a commercial oven. Nor was there
`evidence that Costco, for example -- Hormel’s major customer for microwave
`precooked bacon -- could be persuaded to make a major product change to precooked
`bacon produced in a spiral oven using superheated steam. For these reasons, we
`conclude that Unitherm failed to present evidence permitting a reasonable jury to find
`that Hormel wrongfully terminated the JDA.
`
`B. Breach of the MCDA. Unitherm argues that Hormel breached the MCDA,
`after it terminated the JDA but while the five-year MCDA was still in effect, by (1)
`disclosing to JBT confidential information relating to the Unitherm Process, and (2)
`permitting JBT to reverse engineer the mini spiral test oven to develop the
`commercial oven Hormel now uses to produce Bacon 1 using Hormel’s Hybrid
`Process. The district court concluded Hormel did not breach the MCDA because
`confidential information within the meaning of the MCDA was not disclosed to JBT.
`First, the district court reasoned, the information Hormel disclosed to JBT was
`disclosed in the Unitherm Process patent application and therefore fell within the
`“public knowledge” provision in the MCDA. Second, permitting JBT to reverse
`4
`engineer the mini spiral test oven did not breach the Use of Confidential Information
`provision because the mini oven was not confidential information: before the alleged
`breaches, Unitherm marketed the same oven and displayed it at a trade show; in
`addition, Hormel had purchased the test oven from Unitherm after terminating the
`JDA.
`
`For the same reason, the district court dismissed Unitherm’s theft-of-trade-
`4
`secrets claim earlier in the litigation, a ruling Unitherm has not appealed.
`-9-
`
`Appellate Case: 16-3679 Page: 9 Date Filed: 04/18/2018 Entry ID: 4651406
`
`

`

`(1) The Unitherm Process. Unitherm claims that Hormel’s work with JBT to
`replicate the Unitherm Process after Hormel terminated the JDA in 2010 breached the
`MCDA’s confidential information provisions. But the Unitherm Process was
`published in Unitherm’s process patent application filed on January 11, 2008. The
`MCDA specifically exempts from the definition of Confidential Information any
`information that the recipient “can demonstrate . . . is or becomes public knowledge
`through no breach of this Agreement.” Unitherm argues the district court erred in
`relying on this provision because Unitherm was forced to file its patent application
`as a result of Hormel’s earlier (time-barred) breach of the MCDA when Hormel
`disclosed the confidential idea of using a spiral oven to produce precooked bacon to
`JBT before Unitherm and Hormel entered into the MCDA. This far-fetched
`contention is contrary to the express terms of the contract.
`
`The summary judgment record established that, prior to the signing of the
`MCDA, Unitherm’s Howard revealed to Hormel only the general idea of using a
`“spiral oven using superheated steam to cook bacon.” Spiral ovens were already on
`5
`the market, and as early as 2004 Hormel began researching and working with other
`companies to develop a process by which precooked bacon could be produced with
`superheated steam. Hormel did not disclose Confidential Information, as that term
`was later defined in the MCDA, if it investigated whether a rival oven manufacturer
`was pursuing this concept before inviting Howard to make a full presentation of what
`Unitherm would propose. The Unitherm Process did not became public information
`because Hormel breached a contract not yet signed or even negotiated. Thus, Hormel
`did not breach the MCDA by disclosing to JBT, after Hormel terminated the JDA,
`public information Hormel acquired while the JDA was in effect.
`
`At the motion to dismiss stage, Unitherm admitted it only disclosed to Hormel
`5
`a “general concept . . . but no details of the Unitherm Process” before the MCDA was
`signed, and that “[t]he breach of contract occurred at the very earliest on April 1,
`2010, when Hormel unilaterally terminated the JDA with the hidden agenda to keep
`the fruits of Unitherm’s Process for itself.”
`-10-
`
`Appellate Case: 16-3679 Page: 10 Date Filed: 04/18/2018 Entry ID: 4651406
`
`

`

`(2) The Test Oven. Unitherm argues Hormel breached the MCDA by allowing
`JBT to examine and reverse engineer the mini spiral test oven Hormel purchased from
`Unitherm after terminating the JDA. The MCDA provides that “Confidential
`Information” “should be accompanied by a statement that the information is
`Confidential Information.” Because Unitherm presented no evidence the mini oven
`was marked as Confidential Information, the district court properly looked, as the
`MCDA required, to whether “the circumstances would lead a reasonable person to
`believe that such information may be Confidential Information.” The court
`concluded that, because Hormel owned the mini spiral test oven and Unitherm had
`displayed and marketed it at a trade show, the test oven did not qualify as
`Confidential Information. We agree. Unitherm argues the district court should not
`have “ignore[d] the record evidence showing that Hormel wrongfully duped Unitherm
`into selling the test oven by leading Unitherm into thinking Hormel had abandoned
`the Project.” However, Hormel did not wrongfully terminate the JDA and was under
`no contractual duty to disclose to Unitherm whether it intended to continue exploring
`a commercially viable method to produce precooked bacon using a process that
`included superheated steam in a spiral oven.
`
`C. Unitherm’s Discovery Appeal. Unitherm argues the district court erred in
`denying its request to discover information relating to profits Hormel earned selling
`its Bacon1 product. We reverse a district court’s discovery rulings only for a “gross
`abuse of discretion resulting in fundamental unfairness in the trial of the case.”
`Tenkku v. Normandy Bank, 348 F.3d 737, 743 (8th Cir. 2003) (quotation omitted).
`Unitherm argues it “should be allowed to conduct discovery showing the amount of
`damages it has suffered as a result of Hormel’s breach of the MCDA.” However, as
`Hormel did not breach the MCDA, any discovery related to Unitherm’s alleged
`damages is of no moment. Refusing to permit this time-consuming discovery into a
`highly confidential subject was not an abuse of discretion, much less fundamentally
`unfair.
`
`-11-
`
`Appellate Case: 16-3679 Page: 11 Date Filed: 04/18/2018 Entry ID: 4651406
`
`

`

`III. Hormel’s Counterclaims
`
`Hormel cross-appeals dismissal of its contract and declaratory judgment
`counterclaims, arguing it is the rightful owner of the Unitherm Process and should be
`declared owner of the Unitherm Process patent. We have Article III jurisdiction over
`these state law claims. See Diagnostic Unit Inmate Council v. Films Inc., 88 F.3d
`651, 653 (8th Cir. 1996). The district court concluded that Hormel has not shown that
`it owns the Unitherm Process and its patent. We agree.
`
`Hormel argues that it owns the Unitherm Process because it falls within the
`definition of “Inventions” in the JDA: “all discoveries, improvements, know-how,
`and ideas . . . relating to the Project developed after the effective date of this
`Agreement.” Paragraph 5.a.(iv) of the JDA provided:
`
`HORMEL will own all Inventions . . . defined herein. UNITHERM will
`execute such documents as are necessary to perfect [Hormel’s]
`ownership, but no such execution will be required until Hormel executes
`a purchase agreement for a test oven. Should no such purchase
`agreement be executed, UNITHERM will retain ownership rights to
`“Inventions” conceived and reduced to practice solely by UNITHERM
`and will retain joint ownership of “Joint Inventions.”
`
`Hormel alleged that the Unitherm Process was jointly developed by the parties during
`the JDA. Therefore, Hormel owns the Unitherm Process, and Unitherm breached the
`JDA when it failed to assign ownership of the Unitherm Process and its patent to
`Hormel after it purchased the mini test oven.
`
`There is more than a little contradiction and irony in Hormel arguing on the one
`hand that it did not wrongfully terminate the JDA because the “Project” related only
`to development of an oven, and on the other hand that Hormel now owns the
`Unitherm Process because it was an Invention “related to the Project.” In any event,
`
`-12-
`
`Appellate Case: 16-3679 Page: 12 Date Filed: 04/18/2018 Entry ID: 4651406
`
`

`

`we agree with the district court the summary judgment record refutes the latter
`assertion. It is undisputed that Unitherm’s Howard brought a developed “Unitherm
`Process” to Hormel when they entered into the JDA in September 2007. Some
`months later, Unitherm applied for the Unitherm Process patent. Hormel declined
`invitations to add claims to the application and presented no evidence that any
`improvements in the Process as patented were developed as part of the Project.
`
`Given the complexities of producing commercially viable precooked bacon, we
`have no doubt the parties worked on modifications of the Unitherm Process while the
`JDA was in effect. Had these efforts resulted in “completion of a commercially
`viable application” of the Project, Paragraph ¶ 5.c. provided for negotiation of an
`agreement making Unitherm exclusive supplier of ovens and equipment for five
`years. In that case, Hormel clearly would have owned the “Inventions” producing
`this result. However, when the parties’ efforts to develop the Unitherm Process into
`a commercially viable application did not succeed, Hormel terminated the JDA and
`purchased the mini test oven after termination. In these circumstances, Paragraph
`5.a.(iv) provided that “UNITHERM will retain ownership rights to ‘Inventions’
`conceived and reduced to practice solely by UNITHERM.” The Unitherm Process,
`as patented, was conceived by Unitherm and sufficiently reduced to practice to induce
`Hormel to enter into the JDA. In these circumstances, we agree with the district court
`that no reasonable jury could find that Hormel became the rightful owner of
`Unitherm’s patented process as a result of the parties’ failed joint effort to work with
`that process “to develop,” in the words of the recital on which Hormel relies,
`“commercial ovens using high steam levels which would be exclusive to HORMEL.”
`
`The judgment of the district court is affirmed.
`______________________________
`
`-13-
`
`Appellate Case: 16-3679 Page: 13 Date Filed: 04/18/2018 Entry ID: 4651406
`
`