United States District Court, D. New Mexico
BAR J SAND & GRAVEL, INC., a New Mexico corporation, Plaintiff,
FISHER SAND & GRAVEL CO., a North Dakota corporation, doing business in New Mexico through its division SOUTHWEST ASPHALT & PAVING, Defendant.
MEMORANDUM OPINION AND ORDER
MATTER is before the Court on Plaintiff Bar J Sand
& Gravel, Inc's (“Bar J”) Motion to
Dismiss and for Partial Summary Judgment on Defendant Fisher
Sand & Gravel Co.'s (“Fisher”) Claims.
Doc. 105. In this motion, Bar J seeks dismissal or the grant
of summary judgment in its favor on Fisher's
counterclaims that “some other contract beside the ESA
governed the parties' relationship after June 28, 2012 or
that the ESA was modified.” Id. at 1. For the
reasons set forth below, the Court grants the motion.
Fisher's Amended Counterclaims
22, 2015, Fisher filed amended counterclaims for intentional
or negligent misrepresentation (Count I), violation of the
New Mexico Unfair Practices Act (Count II), breach of
contract (Counts III, IV, VII), breach of the duty of good
faith and fair dealing (Count V), declaratory judgment (Count
VI) and fraudulent inducement (Count VIII). See Doc.
46 at 13-41. In the motion at issue before the Court, Bar J
seeks dismissal or summary judgment on Fisher's breach of
contract counterclaims. These claims (Counts III, IV, VII)
are as follows:
III: Fisher alleges that it entered into an express or
implied agreement with Bar J that was effective on June 29,
2012 - the day after the ESA expired. Doc. 46 at ¶ 155.
This new agreement, Fisher alleges, obligated it to purchase
only 150, 000 tons of material each year from Bar J.
Id. Fisher further states that, despite purchasing
more than 150, 000 tons in calendar years 2012-2014, Bar J
sent invoices to Fisher each of these years seeking payment
based on a minimum tonnage requirement above 150, 000 tons
even though Fisher had not agreed to a minimum tonnage
requirement in excess of 150, 000 tons. Doc. 46 ¶¶
156-159. Fisher claims that Bar J acted in bad faith when it
invoiced Fisher for minimum tonnages to which Fisher had not
agreed. Id. ¶ 160. Fisher also alleges that Bar
J failed to take reasonable steps to carry out the intent and
provisions of the express or implied agreement between the
parties by “causing, contributing to, or ratifying Bar
J Trucking's failure to make royalty payments to the
Pueblo.” Id. ¶¶ 163-166. Fisher
seeks monetary damages, including punitive damages, costs and
attorneys' fees. Id. ¶¶ 161-162,
IV: In this alternate breach of contract claim, Fisher
alleges that it had an agreement with Bar J to
“negotiate in good faith new mandatory minimum tonnage
requirements applicable to Fisher's operation of the
Mine.” Id. ¶ 170. Fisher contends that
Bar J failed to negotiate in good faith by first
“agreeing that the minimum tonnage requirement had been
reduced to 150, 000 tons but later claiming that it had made
no such agreement.” Id. ¶ 171. Fisher
further alleges that in attempting to collect mandatory
minimum payments in 2012-2014 that were not due, Bar J
breached an “implied contract regarding the operation
of the Mine (the terms of which were that Fisher would be
permitted to operate the Mine provided that it paid a royalty
to Bar J for all Materials purchased) that was created when
the parties agreed to negotiate the terms of a more permanent
agreement.” Id. ¶ 174. Fisher seeks
damages for Bar J's alleged breach of the agreement to
negotiate in good faith regarding minimum tonnage
requirements, for Bar J's “bad faith”, and
for Bar J's alleged “breach of the implied contract
based on course of conduct that was created when the ESA
expired and the parties failed to enter into a new
agreement.” Id. ¶¶ 175-177.
VII: In this additional alternate breach of contract
claim, Fisher alleges that if the Court accepts Bar J's
contention that the ESA was renewed, the ESA “was
renewed with the modified term that only 150, 000 tons of
Material needed to be purchased by Fisher each year.”
Id. ¶¶ 201-202. Fisher further alleges
that if the ESA was renewed -- whether it was with or without
a modification -- Bar J breached the ESA's “Mutual
Cooperation Lease” by misrepresenting to Fisher in
April 2013 that the Pueblo had renewed the lease, by failing
to correct this misrepresentation in August 2014, by failing
to advise Fisher of Bar J Trucking's non-payment on the
lease, and by causing, contributing to, or ratifying Bar J
Trucking's failure to make royalty payments. Id.
alleges that in late 2011 and early 2012, it began
experiencing reduced sales volumes in part due to a downturn
in the market. See Tommy Fisher Depo., January 21,
2016, 49:21-52:25 (Doc. 138-1). Fisher alleges that its
president, Tommy Fisher, met with Ted Martinez, vice
president of Bar J, in early 2012 to discuss these issues.
Id. at 51:22-54:8. Mr. Fisher testified that he told
Mr. Martinez during this meeting that Fisher was “going
to be way off in 2012” with regard to the minimum
tonnage requirement, that Fisher expected to purchase
“around 150, 000 [tons]” in 2012, and that Mr.
Martinez told him to “do the best you can.”
Id. at 52:19-22, 53:13, 53:24-54:1, 160:25-161:2.
Mr. Fisher testified that Mr. Martinez informed him that
reducing the minimum tonnage requirement going forward would
“not [be] an issue . . . because [Bar J] was not paying
minimums” to the Pueblo, but that Bar J was unable to
“do anything” with regard to royalty rate
payments. Id. at 154:20-25; 202:24-203:1 (Doc.
136-1). Mr. Fisher testified that he believed Mr. Martinez
had agreed to a reduction in the minimum tonnage requirements
going forward. Id.
Mr. Martinez denies telling Mr. Fisher in 2012 that it would
be okay to reduce the tonnage requirement to 150, 000 tons
annually going forward (Martinez Depo. 112:10-18), he
testified in his deposition that he did not remember having
any conversations regarding the minimums in 2012
(Id. 113:16-18), that he did not remember if Mr.
Fisher told him in 2012 that Fisher would only continue its
relationship with Bar J if the royalty or the mandatory
minimums were reduced (Id. 110:8-15), did not
remember if he told Mr. Fisher that Bar J would reduce the
mandatory minimums going forward (Id.
110:21-111:23), and did not remember if he told Mr. Fisher
that Bar J was not able to renegotiate the mandatory minimums
(Id. 112:21-24). See Ted Martinez Depo.,
January 19, 2016, (Doc. 136-4).
Court has now determined that the ESA was not renewed and
thus, expired at the end of the initial term on June 28,
2012. The parties do not dispute that Fisher continued its
operations on the premises after June 28, 2012. In early
2013, Fisher received an invoice from Bar J for unpaid
minimum tonnages during 2012. See Fisher Depo.
209:22-210:12 (Doc. 136-1); see also Doc. 38-4. This
invoice indicated that the minimum tonnage requirement was
400, 000 tons, that Fisher removed and paid for approximately
183, 764 tons, and that Fisher owed Bar J approximately $564,
375 for the 216, 235 tons that it was below the minimum. Doc.
38-4. Upon receipt of this invoice, Tommy Fisher reached out
to Mr. Martinez. See Fisher Depo. 209:22- 210:12
(Doc. 136-1). Mr. Fisher testified that Mr. Martinez told him
that the invoice was sent in error, that he would take care
of it, and that he reconfirmed the parties had agreed to a
reduced tonnage requirement of 150, 000. See Fisher
Depo. 228:8-230:24 (Doc. 136-1). Mr. Fisher testified that
Mr. Martinez told him to send a letter to him following up on
their conversation, which he proceeded to do on February 8,
2013. Id.; Doc. 6-2. In this letter, Mr. Fisher
summarized the communications he believed Bar J and Fisher
employees had the prior year regarding “adjustments to
the terms” of the original ESA and expressed his
“understanding that while [they] hadn't established
a minimum requirement going forward, as long as [Fisher] did
at least 150, 000 Tons in 2012, there wouldn't be any
additional royalty amounts sought.” Doc. 6-2. Mr.
Fisher also indicated in the letter that he hoped the bill
for additional minimums was sent in error “as it
didn't reflect our earlier conversations.”
February 20, 2013, Mr. Martinez responded to Mr. Fisher's
letter and indicated that Bar J “agree[d] we should get
together for an in person meeting to create a mutually
beneficial agreement going forward.” Doc. 6-3. This
meeting was held on April 22, 2013. Doc. 136-3 at 9. Mr.
Fisher testified that the purpose of this meeting was to
“get together . . . [to] explore all possibilities if
we can lower the royalty rates.” Fisher Depo. 245:14-24
(Doc. 138-1). Id. Mr. Fisher further testified that
neither the minimum tonnage requirement nor the 2012 invoice
came up at this meeting, and that the reason for this was
because he believed those issues had already been resolved.
Id. 248:25-249:1-13. Following the April 2013
meeting, Mr. Moehn sent an email to Frank Duran of Bar J
regarding a “Proposed Ammendment [sic] to Supply
Agreement”. Doc. 103-7. Mr. Moehn stated in the email:
I've been working with Tommy over the past two weeks to
try and come up with a proposed amendment to our supply
agreement. I tried to keep it simple. It spells out lower
minimums and also a flat royalty rate. I didn't adjust
the royalty per the provisions in our original agreement. I
simply held it at the current rates (less a penny).
I tried to follow the format of the original agreement. This
is a draft and doesn't include the necessary signature
lines. I was mostly ...