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Bar J Sand & Gravel, Inc. v. Fisher Sand & Gravel Co.

United States District Court, D. New Mexico

September 29, 2017

BAR J SAND & GRAVEL, INC., a New Mexico corporation, Plaintiff,
v.
FISHER SAND & GRAVEL CO., a North Dakota corporation, doing business in New Mexico through its division SOUTHWEST ASPHALT & PAVING, Defendant.

          MEMORANDUM OPINION AND ORDER

         THIS 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.

         I. Background

         a. Fisher's Amended Counterclaims

         On July 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:

         Count 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, 167-168.

         Count 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.

         Count 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. ¶¶ 203-208.

         b. Factual Background[1]

         Fisher 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.

         Although 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).

         The 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.” Id.

         On 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 ...

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