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

United States District Court, D. New Mexico

June 26, 2018

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 or in the alternative for Summary Judgment on Counts I, II, V, VI and VIII of Fisher's Amended Counterclaims. Doc. 197. Fisher has acknowledged that in light of the Court's prior rulings, Counts V, VI, and VIII of its Amended Counterclaim are moot. Doc. 224 at n.1. As a result, the Court dismisses those counts. Count I of Fisher's Amended Counterclaim alleges that Bar J intentionally or negligently misrepresented that a lease between two separate entities that had to be in place for Fisher to continue to do business with Bar J had been extended. Doc. 49 at 35. Because the Court rejects Bar J's arguments regarding duty and because genuine disputes of material facts related to Fisher's claims exist, the Court denies Bar J's motion with regard to Count I of Fisher's Amended Counterclaim. In Count II of its Amended Counterclaim, Fisher asserts that Bar J's alleged misrepresentations regarding the lease extension support a violation of New Mexico's Unfair Practices Act (NMUPA). Doc. 49 at 37. Because the Court finds that a NMUPA violation can occur in the absence of a contract and that the alleged false or misleading representation(s) were made “in connection with” the sale of goods to Fisher, the Court also denies Bar J's motion with regard to Count II of Fisher's Amended Counterclaim. Accordingly, Bar J's motion is granted in part and denied in part.

         I. APPLICABLE LEGAL STANDARDS

         Rule 12(b)(6)[1]

         Rule 12(b)(6) allows for the dismissal of a complaint where the plaintiff has failed to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). “The court's function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the plaintiff's complaint alone is legally sufficient to state a claim for which relief may be granted.” Tal v. Hogan, 453 F.3d 1244, 1252 (10th Cir. 2006) (internal citation omitted). In considering dismissal under Rule 12(b)(6), the Court will “assume the truth of the plaintiff's well-pleaded factual allegations and view them in the light most favorable to the plaintiff.” Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007). Generally, a district court can consider outside materials only by converting a 12(b)(6) motion to dismiss to a motion for summary judgment. Utah Gospel Mission v. Salt Lake City Corp., 425 F.3d 1249, 1253 (10th Cir. 2005). But conversion is unnecessary when the documents are referenced in the complaint and their authenticity is unchallenged. Id. at 1253-54.

         A complaint will survive a Rule 12(b)(6) motion if it contains “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). “In determining the plausibility of a claim, we look to the elements of the particular cause of action, keeping in mind that the Rule 12(b)(6) standard [does not] require a plaintiff to set forth a prima facie case for each element. The nature and specificity of the allegations required to state a plausible claim will vary based on context. But mere labels and conclusions and a formulaic recitation of the elements of a cause of action will not suffice; a plaintiff must offer specific factual allegations to support each claim.” Safe Streets All. v. Hickenlooper, 859 F.3d 865, 878 (10th Cir. 2017) (internal quotation marks and citations omitted). “Thus, a claim is facially plausible if the plaintiff has pled factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

         Rule 56

         A court “shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). There is no genuine dispute as to any material fact unless the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is genuine “if there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way, ” and it is material “if under the substantive law it is essential to the proper disposition of the claim.” Becker v. Bateman, 709 F.3d 1019, 1022 (10th Cir. 2013) (internal quotation marks omitted). In reviewing a motion for summary judgment, the Court views the evidence and all reasonable inferences therefrom in the light most favorable to the non-moving party. S.E.C. v. Thompson, 732 F.3d 1151, 1156-57 (10th Cir. 2013) (quotation omitted). Initially, the party seeking summary judgment has the burden of showing that there is no genuine dispute as to any material fact. See Shapolia v. Los Alamos Nat'l Lab., 992 F.2d 1033, 1036 (10th Cir. 1993). Once the moving party meets its burden, the non-moving party must show that genuine issues remain for trial. Id.

         II. ANALYSIS

         a. Intentional or Negligent Misrepresentation Counterclaim (Count I)

         “In New Mexico, misrepresentation can be by either commission or omission.” Encinias v. Whitener Law Firm, P.A., 2013-NMSC-045, ¶ 20, 310 P.3d 611. Fisher alleges both types in this case. Specifically, Fisher claims that Bar J misrepresented to Fisher that the lease with the Pueblo had been extended for an additional ten years.[2] Fisher also alleges that Bar J had a duty to disclose problems with the lease, and that Bar J's failure to do so constituted a misrepresentation by omission.[3] Fisher claims it relied on Bar J's misrepresentation that the lease had been renewed and therefore continued to produce and stockpile inventory because it expected that it would be able to continue its mining operations beyond January 2015, when the lease was initially set to expire. Doc. 49 at ¶ 121. Fisher further asserts that, because Bar J did not notify Fisher until August 29, 2014, that the lease would not been renewed, it was forced to abandon 300, 000 tons of stockpiled material when the lease ended on January 17, 2015. Id. ¶¶ 120, 130.

         This is Bar J's second motion seeking dismissal or the grant of summary judgment in its favor as to Fisher's intentional or negligent misrepresentation counterclaim. See Doc. 104 (Bar J's Motion for Partial Summary Judgment on Count I of Fisher's Amended Counterclaim - Intentional or Negligent Misrepresentation). The Court initially sets forth the following facts taken from its previous order (Doc. 183), that, unless otherwise noted, are undisputed. To the extent the facts are disputed, the Court views the facts and all reasonable inferences therefrom in the light most favorable to Fisher, the non-moving party. See S.E.C. v. Thompson, 732 F.3d 1151, 1156-57 (10th Cir. 2013) (quotation omitted).

         1. Background Facts

         Fisher's intentional or negligent misrepresentation counterclaim arises in part from the April 22, 2013 meeting between Bar J and Fisher personnel. The individuals present at the April 22, 2013 in-person meeting on behalf of Bar J were Ted Martinez and Frank Duran. Doc. 104-1. Tommy Fisher, Mike Moehn and Dave Olson attended on behalf of Fisher. Id. According to Fisher, the purpose of the meeting was to discuss “whether the royalty rate could be reduced and how best to reduce the parties' agreement into writing.” Id. During the meeting, Fisher inquired as to the term of the proposed amendment it was going to draft because “if the Lease was to expire in January 2015, it may not be necessary to reduce anything to writing but that if the Lease was going to be extended, then the agreement that Fisher was to draft should reflect that additional term.” Id. Fisher states that at that point, “Frank Duran emphatically stated that the Lease had been extended another ten years.” Id. Fisher claims that Ted Martinez did not disagree with or correct Duran's statement, and that he did not make any statements contrary to Duran's representation that the lease had been renewed. Id.

         Mike Moehn, who was present at the meeting, testified in his deposition that Frank Duran told Fisher personnel at the meeting that the Pueblo had extended the lease for an additional ten years. See Moehn Depo., Oct. 12, 2015, 110:19-112:3 (Doc. 104-3) (“I just remember him saying we have it for ten more years”; “he was emphatic that they had the lease for ten more years”; “I took it as they had the lease secured for ten more years, and that's how he portrayed it”). Moehn did not, however, recall the exact words used by Duran. Id.

         Frank Duran's recollection of the April 2013 meeting differs from that of Moehn. In his affidavit, Duran states that although he does not recall what was specifically said at the meeting, he “would not have said definitely, or otherwise, that Bar J Trucking had ‘secured' an additional ten-year lease with the Pueblo.” Doc. 104-5 at ¶ 5. Duran denies that he would have made this representation because (1) he had no relationship with Bar J Trucking and (2) Bar J Trucking did not share its dealings with the Pueblo with him. Id. Duran further states that he would not have made a representation regarding lease renewal at the meeting because the lease “renewal or non-renewal decision did not have to be made by the Pueblo for more than a year and one-half.” Id. Additionally, Duran states that he is not an employee or agent of Bar J or Bar J Trucking and has never had the authority to bind either of these entities. Id. ¶¶ 1-3. Duran indicates in his affidavit that he has always represented to Fisher that he works for MCT Industries. Id.

         Following the April 2013 meeting, Fisher did not independently investigate Duran's alleged representation that the lease had been extended. Doc. 104-1. In May 2013, Moehn sent an email to Duran regarding a “Proposed Ammendment [sic] to Supply Agreement”. Doc. 104-2. Attached to the email was a copy of the proposed amendment, which included in relevant part a proposed term of five years with an option to renew for an additional five years. Id. It is undisputed that Bar J did not sign this proposed amendment. See Doc. 104 at 3, Doc. 105 at 9. Fisher nonetheless continued its mining operations through 2013 and into calendar year 2014.

         On August 29, 2014, a Fisher employee learned from a newspaper article that the lease had not been renewed. Doc. 137-3 at 5; See also Moehn Depo. 295:5-7 (Doc. 104-3). Fisher then contacted Bar J, and Bar J confirmed that the Pueblo would not be renewing the lease. Doc. 137-3. At that point, Fisher stopped production of additional materials, but it had approximately 340, 000 tons of stockpiled material.[4] Doc. 137-3 at 8; Doc. 104-4. Fisher did not remove its stockpiled material when the lease ended on January 17, 2015. Moehn testified that the reason Fisher did not remove the material is because the time frame was too prohibitive to secure and prepare a new site to store the stockpiled material and to transport the materials. Moehn Depo. 295:1-5 (Doc. 137-1). Fisher asserts that had Bar J informed Fisher of the issues surrounding the lease, including its cancellation, Fisher would have “converted its operations to an on-demand production model and would have sold most or all of the inventory that was in place as of April 22, 2013.” Doc. 137 at 6.

         During the course of discovery in this case, Fisher obtained documents from Bar J indicating that a month prior to the April 2013 meeting, Bar J, Bar J Trucking, Louis Jacques, and Ted Martinez “were notified by letter from Acting Superintendent of the Bureau of Indian Affairs and by letter from Insurance Company of the West that Bar J Trucking owed the Pueblo approximately $263, 074.40 for unpaid royalties for royalty adjustments made under Bar J [Trucking's] lease with the Pueblo.” Doc. 137-3 at 7. On or about April 25, 2013, Fisher asserts Bar J Trucking was informed that the BIA had decided to cancel the lease.[5] Id. Bar J Trucking appealed the decision and, on September 23, 2014, the BIA's Southwest Regional Director affirmed the decision. Id. The affirmance was appealed but later dismissed as moot on January 30, 2015. Id. at 7-8.

         2. Additional Facts

         The parties set forth the following additional facts in connection with the motion at issue. Doc. 197 at 5-6; Doc. 224 at 3-11; Doc. 234 at 4-7.

         From June 28, 2012 until January 2015, Fisher sold 459, 776 tons of material. See Schwarzkopf Report, Doc. 197-1, at 8. During this time period, Fisher produced 170, 687 tons of material. Id. Fisher states that it paid Bar J $1.3 million in royalties for each ton of material it sold between June 28, 2012 and January 2015. Id. The parties dispute whether Fisher would have had to abandon 289, 089 tons of stockpiled material had it ceased operations on June 28, 2012. See Doc. 197 at 5; Doc. 224 at 5.

         Fisher claims it continued its operations after June 28, 2012, with Bar J's “permission and consent.” Doc. 224 at 4. During the entire time Fisher operated the pit, it paid Bar J $5, 000 each month for a Bar J employee to operate a weigh station. See Doc. 224 at 6 (citing Ted Martinez Depo. 39:1-40:1, Doc. 224-1; Michael Moehn Depo. 256:3-23, Doc. 224-2). Tommy Fisher testified in his deposition that he never heard that Bar J had any problems with the royalty amounts Fisher paid from June 28, 2012 onwards. See Tommy Fisher Depo. 267:11-13 (Doc. 224-3).

         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 and, on February 8, 2013, he sent such a letter. 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.

         Mr. Fisher testified that Bar J did not send any further invoices for the 2012 minimums during the calendar year 2013, despite invoicing Fisher for other amounts that year. Fisher Depo. 277:2-19. In early 2014, Fisher once again received an invoice from Bar J for alleged underpayments. Doc. 38-5. This invoice did not include the 2012 minimums. Id. The invoice reflected a minimum tonnage requirement of 400, 000 tons for 2013 and, in addition to the 161, 211 tons Fisher actually purchased, billed Fisher approximately $637, 566 in connection with difference between the asserted 400, 000 minimum and the approximately 161, 211 tons purchased. Id. Tommy Fisher testified that he contacted Ted Martinez regarding the 2013 invoice, and that Mr. Martinez once again stated the invoice was sent in mistake. Fisher Depo. 283:2-15 (Doc. 138-1). The monthly invoices sent to Fisher during 2014 did not include the 2013 minimums. Fisher Depo. 277:2-19.

         3. Analysis

         Bar J argues that it had no duty to inform Fisher of the impending expiration of the lease between Bar J Trucking and the Pueblo and, therefore, Fisher's misrepresentation counterclaim fails. Bar J primarily argues that the Court determined no contractual relationship existed between the parties and that, in the absence of a contractual relationship in 2013 and 2014, Bar J had no duty to disclose any problems with the lease to Fisher. Essentially, Bar J argues that once the ESA expired, Fisher became a trespasser with no right to be on the property, much less with any right to be informed of whether a lease regarding the property had been extended. Analysis of Bar J's arguments begins with determining whether Fisher's misrepresentation counterclaim requires the existence of a duty. If a duty is required, the next question is whether that duty must be based on a contractual relationship. Once the Court defines these legal standards, it will apply them to the facts of this case.

         (i) Legal Framework

         Fisher acknowledges that negligent misrepresentation and intentional misrepresentation claims through omission require the existence of a duty. See June 11, 2018 Hearing Tr. at 140 (Doc. 256) (“[i]f you are making an intentional fraud claim based on a failure to disclose, you have to show a duty. You have to show that the person had an obligation to tell you something.”); Doc. 224 at 13 (discussing duty analysis for negligent misrepresentation claims). Thus, the only dispute concerns whether intentional misrepresentation through an affirmative statement requires the existence of a duty. The New Mexico Court of Appeals in R.A. Peck, Inc. v. Liberty Fed. Sav. Bank wrote, “[a]bsent fraud, negligent misrepresentation requires a duty on the part of the person furnishing information; the person receiving the information must have a right to rely on it.” 1988-NMCA-111, ¶ 10; 766 P.2d 928. The caveat “absent fraud” indicates that, unlike other circumstances, when the person who furnishes information is committing fraud, no duty is required. Other cases, however, indicate that intentional misrepresentation also requires a duty. See Delgado v. Costello, 1978-NMCA-058, ¶ 9, 580 P.2d 500 (indicating that constructive fraud, fraud, and negligent misrepresentation claims “depend on a duty on the part of defendants” and discussing the duty to disclose in the context of these claims); Bull v. BGK Holdings, LLC, 859 F.Supp.2d 1238, 1243 (D.N.M. 2012) (“Common law claims of negligent and intentional misrepresentation can be examples of claims which arise from an independent and recognized duty of care.”). Rather than resolving this legal issue, the Court assumes that intentional misrepresentation by affirmative statement also requires the existence of a duty.

         Next, the Court considers whether the duty required must arise from a contractual relationship. Bar J argues that, in the absence of a contract between the parties in 2013 and 2014, the Court must necessarily find as a matter of law that Bar J had no duty to disclose problems with the lease to Fisher during this time period. See Doc. 197 at 9 (“Fisher's claim of misrepresentation assumes that Fisher and Bar J S&G had a contractual relationship from which a duty could arise. . . Without a contractual relationship giving Fisher that right [to continue selling existing stockpiled inventory in 2013-2014], no duty was or could have been owed by Bar J S&G to Fisher.”). The Court disagrees with this argument and concludes that a duty to disclose can arise even in the absence of a contractual relationship between the parties. Bar J does not point to any New Mexico cases that have hinged the duty to disclose solely based on whether there is a binding contract between the parties. The cases the Court has come across indicate that while a contractual relationship can give rise to a duty to disclose, such a duty may arise in other ways. In Krupiak v. Payton, 1977-NMSC-024, ¶ 3, 561 P.2d 1345, the New Mexico Supreme Court provided the following general guidance as to when a duty to disclose may arise in fraudulent misrepresentation claims:

A duty to disclose may arise if there is knowledge that the other party to a contemplated transaction is acting under a mistaken belief. A duty to disclose may also arise if one has superior knowledge that is not within the reach of the other party or could not ...

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