AGROLINZ, INC. and AGROLINZ MELAMIN , G. M.B.H. v. Micro Flo Company

8 Agrolinz, Inc., et al. v. Micro Flo Co. No. 98-6015
trial court err in concluding that the parties did not intend to
preclude Micro Flo from pursuing its outstanding reserved
claims against Agrolinz in arbitration. Accordingly, the trial
court’s disposition is affirmed for the reasons set forth
herein.
*The Honorable James S. Gwin, United States District Judge for the
Northern District of Ohio sitting by designation.
1
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2000 FED App. 0030P (6th Cir.)
File Name: 00a0030p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
AGROLINZ, INC. and
AGROLINZ M ELAMIN ,
G. M.B.H.,
Plaintiffs-Appellants,
v.
M ICRO FLO C OMPANY ,
Defendant-Appellee.
;>

1
No. 98-6015
Appeal from the United States District Court
for the Western District of Tennessee at Memphis.
No. 97-02566—Bernice B. Donald, District Judge.
Argued: September 22, 1999
Decided and Filed: January 20, 2000
Before: KRUPANSKY and NORRIS, Circuit Judges;
GWIN, District Judge.*

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2 Agrolinz, Inc., et al. v. Micro Flo Co. No. 98-6015
_________________
COUNSEL
ARGUED: Robert A. McLean, FARRIS, MATHEWS,
BRANAN & HELLEN, Memphis, Tennessee, for Appellants.
Leo M. Bearman, Jr., BAKER, DONELSON, BEARMAN &
CALDWELL, Memphis, Tennessee, for Appellee.
ON BRIEF: Robert A. McLean, FARRIS, MATHEWS,
BRANAN & HELLEN, Memphis, Tennessee, for Appellants.
Leo M. Bearman, Jr., Jennifer R. Keown, BAKER,
DONELSON, BEARMAN & CALDWELL, Memphis,
Tennessee, for Appellee.
_________________
OPINION
_________________
KRUPANSKY, Circuit Judge. Plaintiff-Appellants
Agrolinz, Inc. and Agrolinz Melamin, G.m.b.H., hereafter
collectively referred to as “Agrolinz,” challenge the denial of
their motion for summary judgment and the grant thereof to
Defendant-Appellee, the Micro Flo Company, requiring
Agrolinz to defend itself in arbitration against breach of
contract and other claims made by Micro Flo.
On September 8, 1992, Agrolinz, Inc. and Agrolinz
Melamin, G.m.b.H. (Agrolinz) and Micro Flo Co. (Micro Flo)
entered into a Manufacturing and Distribution Agreement
(Agreement) under the terms of which Agrolinz granted
Micro Flo exclusive rights to manufacture and distribute its
proprietary agricultural fungicide “Cuproxat” throughout the
United States in consideration for Micro Flo’s commitment to
annually purchase assigned minimum quantities of copper
sulfate, the basic active ingredient of Cuproxat, from
Agrolinz.
The Agreement also incorporated an arbitration provision
that referenced the Commercial Rules of the American
No. 98-6015 Agrolinz, Inc., et al. v. Micro Flo Co. 7
conclusion that in the event that there has been no
adjudication on the merits of a contested issue, the “extent to
which a judgment or decree entered by consent is conclusive
in a subsequent action should be governed by the intention of
the parties … rather than a mechanical application of the
general rules governing the scope of estoppel by judgment
[claim preclusion].” Long v. Kirby-Smith, 292 S.W.2d 216,
220 (Tenn. Ct. App. 1956); see also Apstein v. Tower
Investments of Miami, Inc., 544 So. 2d 1120, 122 (Fla. Dist.
Ct. App. 1989), the Florida court concluded that the intent of
the settling parties as to what was included in the settlement
controls the effect of a consent dismissal with prejudice.
In both Florida and Tennessee the party asserting claim
preclusion has the burden of proving the elements of that
legal principle. The instant case requires Agrolinz to prove
that the issues embraced by Micro Flo’s Tennessee arbitration
action had been determined on the merits by a previous
judicial disposition and/or that it had been the intention of the
adverse parties to include those issues in the dismissal with
prejudice articulated in the Florida consent decree.
Agrolinz has not carried its burden of proving either
requirement necessary to support its “issue preclusion”
argument. To the contrary, the evidence developed in the
record weighs heavily in favor of Micro Flo. It is apparent
that Micro Flo, from the very outset of negotiations with
plaintiffs to settle the Florida Cases, intended to seek
arbitration of its claims against Agrolinz for the cost of
copper sulfate and other raw materials remaining in its
inventories, together with the cost of its stocked Cuproxat, in
addition to shipping, storage and interest costs. Agrolinz, its
insurance carriers and all participating legal counsel were
aware of Micro Flo’s intention to pursue arbitration for the
recovery of its described damages. In the context of the
instant case this appellate review is in accord with the district
court and finds that it did not err in concluding that Micro
Flo’s claims which are the subject of the Tennessee
arbitration had not been adjudicated on their merits by the
Florida court that journalized the consent decree, nor did the

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6 Agrolinz, Inc., et al. v. Micro Flo Co. No. 98-6015
3Pursuant to Heyliger v. State Univ. & Community College Sys. of
Tenn., 126 F.3d 849, 852 (6th Cir. 1997), the term “claim preclusion” will
replace “res judicata” as traditionally defined under Tennessee precedent.
Micro Flo had breached its contract with Agrolinz by failing
to purchase the contractually-agreed minimum quantities of
copper sulfate and by failing to promote Cuproxat in the
United States for the duration of its five-year exclusive
contract.
The parties filed cross-motions for summary judgment. On
June 22, 1998, the district court granted summary judgment
in favor of Micro Flo.
On appeal, Agrolinz has urged that under Florida law an
agreed dismissal “with prejudice” is a judgment “on the
merits” so as to bar future litigation under the doctrine of
claim preclusion.3 Agrolinz has argued that the Full Faith and
Credit Clause of the United States Constitution mandates the
federal district court in Tennessee to afford the Florida court’s
consent decree the same effect it would have in Florida and
bar Micro Flo’s arbitration action presently pending in
Tennessee.
In addressing the issue, Florida legal precedent discloses
that in a settlement of a pending legal controversy by consent
decree, the words “with prejudice” incorporated into the
stipulation of dismissal are without legal significance and will
not bar a subsequent suit arising from the seminal case unless
there has been a judicial adjudication on the merits of the
issues joined in the seminal suit. In North Shore Realty Corp.
v. Gallagher, 99 So. 2d 255, 257 (Fla. Dist. Ct. App. 1957),
the court concluded that an order of dismissal “with
prejudice” should be treated as a dismissal without prejudice,
and the words “with prejudice” disregarded as surplusage
when it is apparent that there had been no adjudication of the
substantive issues joined by the pleadings. See
also Hassentuefel v. Howard Johnson, Inc., 52 So. 2d. 810,
812 (Fla. 1951). Tennessee precedent is in accord.
Moreover, Tennessee and Florida subscribe to the legal
No. 98-6015 Agrolinz, Inc., et al. v. Micro Flo Co. 3
Arbitration Association. Specifically, Section 20 of the
Agreement, entitled “Arbitration,” provided in pertinent part:
Any controversy or claim between the parties hereto
arising, directly or indirectly, out of or relating to the
present Agreement or transactions pursuant thereto, or
the breach thereof, including tort or other non-contractual
type claims, shall be finally settled by arbitration in
accordance with the Commercial Arbitration Rules of the
American Arbitration Association (“AAA”) then in
effect, and any judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction
thereof … Arbitration proceedings shall be held at
Memphis, Tennessee, U.S.A..
Rule 47 of the Commercial Arbitration Rules of the AAA
47 states that, “no judicial proceeding by a party relating to
the subject matter of the arbitration shall be deemed a waiver
of the party’s right to arbitrate.”
The companies commenced implementation of the
Agreement, with Micro Flo marketing Cuproxat to farms
throughout the United States.
In the fall of 1993, two Florida farms that used Cuproxat
notified Micro Flo that their current tomato and pepper crops
had been damaged by an herbicide identified as “2,4-D”
which was not normally found in Cuproxat. The Florida
farms charged that the Cuproxat used on their crops had been
contaminated with 2,4-D. Micro Flo concluded that the
source of the 2,4-D was copper sulfate it had received from
Agrolinz pursuant to their contract.
During the fall of 1994, David C. Brown Farms, Red Star
Farms, Inc., Di Mare Homestead, Inc., Di Mare Ruskin, Inc.,
and other Florida farms, all of whom had purchased and used
Cuproxat manufactured by Micro Flo and sold by Farmers

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4 Agrolinz, Inc., et al. v. Micro Flo Co. No. 98-6015
1Farmers Supply, Inc. was the dealer which sold Cuproxat supplied
by Micro Flo to the farmers that initiated the Florida Cases.
2The Red Star Farms Inc., litigation, for reasons not explained in the
record, was considered and resolved separate and apart from the
disposition of the other Florida Cases.
Supply Inc.,1 commenced legal proceedings within the
Twentieth Judicial Circuit of Florida which were designated
as a class action (the Florida Cases).2 In response, Micro Flo
filed a cross-claim and a third-party claim against Agrolinz
wherein Micro Flo sought recovery under theories of
negligence, strict liability and breach of implied warranty of
fitness, resulting damages arising from lost revenue from
sales of Cuproxat, loss of good will and litigation expenses
incident to defending the Florida Cases together with
indemnity in the full amount of damages and judgments
obtained against Micro Flo, if any, by the plaintiffs in those
cases. In its cross-claim and third-party claim against
Agrolinz, Micro Flo did not seek repayment of the purchase
price of its remaining inventories of copper sulfate purchased
from Agrolinz nor the cost of its remaining contaminated
stock of Cuproxat still on hand, freight, storage and interest
expenses -- all of which claims were incorporated into its
subsequently initiated Tennessee arbitration proceeding.
The parties have agreed that Tennessee law applies to the
resolution of the instant dispute.
Recognizing their precarious legal liability and the
magnitude of their financial exposure, Agrolinz, Micro Flo
and their respective insurance carriers pursued the generally
accepted modus operandi of convenient cooperation in
negotiating an umbrella settlement common to all of the
multiple- party plaintiffs in the Florida Cases.
Ultimately, all of the Florida Cases including the Red Star
Farms, Inc. litigation was settled on or about January 10,
1997.
No. 98-6015 Agrolinz, Inc., et al. v. Micro Flo Co. 5
The final disposition of the Florida Cases, however, was
not journalized until on or about May 17, 1997. During the
intervening period, legal counsel for Micro Flo and Agrolinz
conducted telephone discussions, some of which were
memorialized by an exchange of correspondence, wherein
Micro insisted that it intended to and would pursue arbitration
imposed by the September 8, 1999 agreement against
Agrolinz for repayment of the purchase price for raw
materials, and cost of finished product remaining in its
inventories together with related freight, storage and interest
costs, irrespective of releasing Agrolinz from the payment of
contribution and/or indemnity that Micro Flo may have been
required to pay the Plaintiffs, including litigation expenses
and attorney’s fees arising from the Florida Cases.
In an effort to avoid jeopardizing the settlement of the
Florida case, on May 17, 1997, Micro Flo and Agrolinz
journalized the following consent decree:
ORDER OF DISMISSAL WITH PREJUDICE
UPON THE FOREGOING STIPULATION, this cause
and all claims asserted herein by MICRO FLO CO.
against AGROLINZ INC. and AGROLINZ MELAMIN
be and the same are hereby dismissed with prejudice.
DONE AND ORDERED in Chambers, at Collier
County, this 17th day of May, 1997.
On May 28, 1997, Micro Flo initiated arbitration
proceedings in the state of Tennessee before the American
Arbitration Association claiming $1,000,000 in damages for
repayment of its cost of the contaminated raw materials
supplied by Agrolinz and used in the manufacture of
Cuproxat, its available stock of Cuproxat, freight, storage and
interest.
Agrolinz responded to the arbitration action by seeking the
instant declaratory and injunctive relief, together with a
counterclaim for $3,500,000 before the United States District
Court for the Western District of Tennessee alleging that

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