Alcan Forest Products LP v. A-1 Timber Consultants, Inc.
Filing
194
ORDER: re Four Pending Motions (see order for full details). Signed by Judge Sharon L. Gleason on 11/13/2013. (AEM, CHAMBERS STAFF)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
ALCAN FOREST PRODUCTS, LP, an
Alaska Limited Partnership,
Plaintiff,
v.
A-1 TIMBER CONSULTANTS, INC., a
Washington Corporation,
Defendant.
Case No. 5:11-cv-00001-SLG
ORDER RE FOUR PENDING MOTIONS
This litigation concerns a contract dispute between Plaintiff Alcan Forest
Products, LP (“Alcan”) and Defendant A-1 Timber Consultants, Inc. (“A-1”). Before the
Court are numerous motions, including three motions for summary judgment and a
motion to amend the answer. This Order is intended to address these four pending
motions. Each has been fully briefed, and on June 21, 2013, the Court heard oral
argument on the motions: 1
1. At Docket 58, A-1 moves for summary judgment on all claims made by
Alcan. 2
2. At Docket 72, Alcan moves for summary judgment on A-1’s affirmative
defense of impossibility of performance. 3
3. At Docket 74, A-1 moves for leave to amend its answer and to include various
affirmative defenses and counterclaims. 4
1
Docket 147 (Minute Entry).
2
See Docket 58 (A-1 MSJ); Docket 71 (Alcan Opp. MSJ); Docket 88 (A-1 Reply MSJ).
3
See Docket 72 (Alcan MSJ Impossibility); Docket 97 (A-1 Opp. Impossibility); Docket 115
(Alcan Reply Impossibility).
4. At Docket 77, A-1 moves for summary judgment on estoppel grounds. 5
The remaining motions will be addressed by separate order.
FACTUAL AND PROCEDURAL BACKGROUND
This case arises out of an April 2010 contract between Alcan and A-1, in which
A-1 committed to bring a feller buncher to Southeast Alaska to assist Alcan in
harvesting second growth timber at Coon Cove and Long Island. 6
Alcan is in the
business of buying and selling timber in Southeast Alaska, but Alcan itself does not
actually harvest timber. 7 Evergreen Timber, LP (“Evergreen”), which is not a party to
this litigation, is a logging company managed and owned by the same entities as
Alcan. 8
Evergreen’s business is harvesting timber. 9
As of 2009, A-1 was in the
business of “cutting timber, harvesting timber, and buying and selling timber.”10
I.
Alcan Purchases Right to Harvest Timber on Long Island and at Coon Cove.
In 2005, Alcan contracted with Cape Fox Corporation for the “exclusive right to
cut, remove and appropriate” certain timber in various locations near Ketchikan, Alaska,
4
See Docket 74 (A-1 Mot. Amend); Docket 93 (Alcan Opp. Amend); Docket 107 (A-1 Reply
Amend).
5
See Docket 77 (A-1 MSJ Estoppel); Docket 114 (Alcan Opp. Estoppel); Docket 134 (A-1
Reply Estoppel).
6
See Docket 1-2 (Complaint). A feller buncher is a machine that grasps a standing tree at its
base, cuts the tree at ground level, and lays the tree in a pile or “bunch.” This system may
reduce the number of human timber fallers on a job. See Docket 59-9 ¶¶ 3-4 (3/5/13 Loushin
Decl.).
7
Docket 38-5 at 16:14-17:2 (8/15/12 Brown Dep.).
8
Docket 66-1 ¶ 12 (3/25/13 Nichols Decl.).
9
Docket 38-5 at 17:15-20 (8/15/12 Brown Dep.).
10
Docket 49-1 at 14:19-15:14 (8/15/12 Loushin Dep.).
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including Coon Cove. 11 The timber at Coon Cove was “salvaged timber”—timber left
over after prior logging operations—and predominantly second growth. 12 Harvesting
the timber at Coon Cove would require that Alcan construct a logging road into the sale
area. 13 Through several contract extensions, Alcan had the right to remove timber from
Coon Cove through December 31, 2010. 14
In 2007, Alcan contracted with K-Ply, Inc., a subsidiary of Klukwan, Inc., for the
purchase and sale of timber on Long Island. 15 The timber on Long Island was also
mostly second growth. 16
Alcan had determined that the most economical way to
harvest most of the second growth timber on Long Island was by using a feller
buncher. 17 Timber not cut by the feller buncher could be hand cut. 18 Alcan’s right to
remove timber from Long Island expired on December 31, 2011. 19
11
Docket 59-1 (5/27/05 Timber Cutting Right Contract, between Cape Fox Corp. and Alcan).
12
Id.; Docket 66-1 ¶¶ 32-33 (3/25/13 Nichols Decl.).
13
Docket 66-1 ¶ 34 (3/25/13 Nichols Decl.).
14
Id. ¶ 35; Docket 59-1 at 7 (12/31/09 Am. No. 2 to Timber Cutting Right Contract).
15
See Docket 59-2 (Am. No. 1 to Long Island 2007 Timber Sale Agreement between Alcan and
K Ply, Inc.).
16
See Docket 66-1 ¶¶ 28-29 (3/25/13 Nichols Decl.).
17
Id.
18
Id. ¶ 28.
19
See Docket 59-2 (Am. No. 1 to Long Island 2007 Timber Sale Agreement between Alcan and
K Ply, Inc.).
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II. Alcan Arranges to Harvest, Contracting with Evergreen and Contacting A-1.
In March 2010, Alcan contracted with Evergreen to harvest timber on Long
Island. 20
Evergreen’s responsibilities included “furnish[ing] all labor, equipment,
supplies and competent supervision.” 21 This seems to include housing and feeding
loggers, building roads, moving fallen timber, and bundling timber for transportation. 22
The contract provided that Evergreen would be paid based on the volume of board feet
of timber harvested (commonly referred to as MBF). 23 If Evergreen did not produce
logs, it was not paid. 24 The parties dispute why Alcan planned to harvest Long Island in
the 2010 timeframe. A-1 asserts that Alcan was not in a hurry to harvest Long Island
and that Alcan profited from delaying the harvest “due to a longer period for growth.” 25
A-1 directs the Court to Nichols’s deposition testimony explaining the delay where he
testified “that the market situation was such that we were waiting for a better market.” 26
Alcan asserts that it chose 2010 because of the unavailability of a contractor prior to
20
Docket 59-3 (3/17/10 Logging and Road Construction Contract; Long Island Timber Sale,
between Alcan and Evergreen).
21
Id.; Docket 38-7 at 44:4-14 (8/14/12 Nichols Dep.).
22
Docket 58 at 4 (A-1 MSJ); Docket 38-7 at 44:4-14 (8/14/12 Nichols Dep.).
23
Docket 59-3 at Ex. A (3/17/10 Logging and Road Construction Contract; Long Island Timber
Sale, between Alcan and Evergreen).
24
Docket 66-1 ¶ 72 (3/25/13 Nichols Decl.).
25
Docket 58 at 13 (A-1 MSJ); see also Docket 38-5 at 29 (Brown Dep.) (noting that prior to
2010, “[A-1] w[as]n’t in any hurry to harvest [Long Island].”); Docket 59-10 ¶ 5 (3/5/13 Jendro
Decl.).
26
Docket 38-7 at 37:11-22 (8/14/12 Nichols Dep.).
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that time—that is, before that, Evergreen was committed on other contracts. 27 Alcan
also asserts that its decision whether to harvest Coon Cove was dependent upon
finding a contractor that could complete the harvesting on Long Island and at Coon
Cove prior to expiration of both contracts. 28 Alcan would not harvest Coon Cove unless
it could find a contractor that could do both, thus making it economical for Alcan to build
the necessary access road. 29
As noted above, because much of the timber on Long Island and at Coon Cove
was second growth, Alcan sought to use a feller buncher. Neither Alcan nor Evergreen
had a feller buncher in Southeast Alaska, so Alcan representatives Brian Brown and
Eric Nichols reached out to A-1 president, Tom Loushin, to discuss a potential contract
for use of A-1’s feller buncher. Brown, Nichols, and Loushin met in Ketchikan, Alaska,
in March 2010 to discuss the project. 30 Alcan asserts that during that meeting, Brown
and Nichols informed Loushin of their time restrictions on harvesting Coon Cove and
Long Island because of the 2005 and 2007 contracts. 31
In his declaration, Nichols states that he inquired as to Loushin’s other projects in
Alaska because Alcan would not have contracted with A-1 if it had known that A-1
intended to engage in other contracts at the same time. 32 Alcan’s concern was that A-1
27
Docket 71 at 4 (Alcan Opp. MSJ); Docket 66-1 ¶¶ 25-26 (3/25/13 Nichols Decl.).
28
Docket 66-1 ¶ 40 (3/25/13 Nichols Decl.).
29
Id. ¶¶ 39-40, 42.
30
Id. ¶ 38.
31
Docket 71 at 7 (Alcan Opp. MSJ); Docket 66-1 ¶¶ 47, 50-51, 54 (3/25/13 Nichols Decl.).
32
Docket 66-1 ¶ 57 (3/25/13 Nichols Decl.).
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might spread its resources too thin. 33 Ultimately, Loushin contracted with Leisnoi, Inc.
to harvest on Kodiak Island during the same time period as the Long Island and Coon
Cove project. 34 But at Loushin’s deposition, he testified that Brown and Nichols never
told him that they would not hire A-1 if it was to accept other projects. 35
Loushin’s general practice is to visit a job site before contracting to send a feller
buncher. 36 At the meeting in March 2010, Loushin was shown pictures of Long Island
and Coon Cove. 37 However, the parties dispute whether Brown and Nichols offered or
were willing to take Loushin to see the sites. Loushin asserts that Alcan could not or
would not take him to view the sites. 38 Nichols, on the other hand, states that Loushin
declined an offer to visit and view conditions. 39 There is no dispute that Loushin did not
see the sites at Long Island and Coon Cove prior to signing the contract on behalf of
A-1.
III. Alcan and A-1 Contract, and the Harvesting Begins.
On or about April 15, 2010, the parties entered into their contract, pursuant to
which A-1 would bring a single feller buncher to harvest second growth timber at Long
33
Id .¶¶ 57-58.
34
Docket 66-5 at 62:14-65:20 (8/15/12 Loushin Dep.).
35
Id. at 63:6-64:9.
36
Docket 73-3 at 29:6-18 (8/15/12 Loushin Dep.).
37
Docket 49-1 at 28:17-23, 33:13-16 (8/15/12 Loushin Dep.); Docket 66-1 ¶ 53 (3/25/13
Nichols Decl.).
38
Docket 98-1 ¶ 4 (5/1/13 Loushin Decl.); Docket 49-1 at 29 (8/15/12 Loushin Dep.).
39
See Docket 66-1 ¶¶ 48-49 (3/25/13 Nichols Decl.); Docket 66-2 at 49 (8/14/12 Nichols Dep.).
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Island and Coon Cove. 40 The contract indicated that its “term” would be for “one 1
logging season, commencing on or about April 15, 2010 and terminating on October 31,
2010 or upon completion.” 41
The contract provided that Alcan would pay “$220 per cutting hour” for a single
“Tigercat 370” feller buncher (the “Tigercat”). 42 The parties entered into a pay-percutting-hour agreement, rather than a pay-per-volume-cut agreement, which is more
typical in the industry. In Loushin’s declaration, he states that the parties used the payper-cutting-hour agreement for a variety of reasons, including to “reduce[] risks to both
parties because of mutual uncertainties about the ground conditions, camp conditions,
and whether a feller buncher in Southeast Alaska could fall timber at a rate consistent
with normal operating conditions.” 43 He also states that A-1 contracted for this payment
method because it was difficult to distinguish between mechanically and hand-cut trees,
and because of “Alcan’s refusal to take” him to visit the sites. 44 Alcan asserts that
Loushin negotiated an “exceedingly high hourly rate” to cover A-1’s risk of any
uncertainty from not seeing the sites. 45
The contract included a “time is of the essence” clause. It also included a clause
requiring A-1 to comply with the Worker’s Compensation Act and provide Alcan with a
40
Docket 38-10 (Contract).
41
Id. ¶ 2.
42
Id. at Ex. B (Contract Price Schedule).
43
Docket 98-1 ¶ 4 (5/1/13 Loushin Decl.).
44
Id.; see also Docket 73-3 at 31:21- 32:14 (8/15/12 Loushin Dep.).
45
Docket 72 at 4 (Alcan MSJ Impossibility).
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certificate of compliance. 46 At paragraph 21, the contract provided Alcan the right to
terminate:
21. ALCAN’S RIGHT TO TERMINATE - REMEDIES: In case Contractor
shall fail to perform any part of this contract by him to be performed
promptly and in the manner herein specified, Alcan may, at its option,
terminate this contract and all rights of the Contractor hereunder by giving
written notice of such termination to Contractor personally or by mail
addressed to the Contractor at the address appearing herein. In such
event Alcan shall be entitled to take immediate possession of the above
described lands and the timber thereon and all logs cut therefrom and to
remove Contractor, his agents, servants and employees from said lands. 47
The contract also included a clause in which each party agreed to maintain an on-site
representative to assist in “day-to-day management issues”:
27. ON SITE REPRESENTATION: The parties agree that each of them
will have a representative on site authorized to represent them on day-today management issues. Each party agrees to keep the on[-]site
representative of the other informed of all material developments and all
items requiring notice. 48
In the contract, Alcan identified Eric Nichols and A-1 identified Dan Ward, a feller
buncher operator, as on-site representatives. 49
A-1’s Tigercat arrived at Long Island on April 29, 2010. At his deposition, Ward
testified that he had concerns about the operation of the Tigercat “from an hour after
being there” because “[t]here was way too much debris on the ground [and] the ground
was too soft,” which caused the Tigercat to sink. 50 During the initial days of operation,
46
Docket 38-10 ¶¶ 8, 18 (Contract).
47
Id. ¶ 21.
48
Id. ¶ 27.
49
Id.
50
Docket 38-11 at 11:20-24 (9/22/12 Ward Dep.).
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Alcan provided no telephone communication at the Long Island camp, so Ward was not
able to immediately communicate these problems to Loushin. 51 But Ward shared his
concerns with Mike Doig, Evergreen’s supervisor of operations at Long Island. 52
Due to mechanical breakdowns, A-1’s feller buncher operated only 25 or 32 out
of 69 days between April 29, when the machine arrived at Long Island, and July 6, when
Alcan terminated the contract. 53 For example, the Tigercat did not operate from April
30, 2010, when the turbo charger failed, until after it was repaired on or about May 5,
2010. 54 During that breakdown, Ward made a trip to Ketchikan for replacement parts,
at which time he was able to share his concerns with Loushin. 55 The machine broke
down again on May 10, 2010, when the tool tilt cylinder failed, and was inoperable until
May 28, 2010. 56 Then, on June 15 or June 22, 2010, a cutting blade failed. 57 The
Tigercat was not repaired again until after Alcan terminated the contract. 58 During this
time, Evergreen employees at Long Island conducted mostly “non-logging related jobs
51
Id. at 12:11-19 (“[U]ntil the first breakdown I couldn’t call Tom if I had wanted to . . . . There
was no communication with nobody.”).
52
Id.
53
There is some dispute concerning whether the Tigercat was operating between June 16 and
22. The motion for summary judgment states that the Tigercat’s cutting blade failed on June 15,
2010. But A-1’s Notice Regarding Changed Facts Based on Newly-Produced Evidence, at
Docket 143, states that the blade failed on June 22, 2010. There is a pending motion to strike
the notice, but this date is not determinative to any issue in this Order.
54
Docket 66-7 (Interrogatory Answers).
55
Docket 38-11 at 12:20-23, 13:11-14:6 (9/22/12 Ward Dep.).
56
Docket 66-7 (7/26/12 Interrogatory Answers).
57
As noted in footnote 53, there is some dispute concerning this date.
58
Docket 66-7 (7/26/12 Interrogatory Answers). The “termination” is discussed in more detail
below.
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to keep busy, but were able to log as trees were handcut.” 59 According to Nichols,
Evergreen employees were kept on the payroll to discourage them from leaving the
remote camp at Long Island to find paying jobs elsewhere. 60 Ward testified in his
deposition, however, that there was nevertheless high employee turnover due to the
“conditions” at the Long Island camp. 61
Despite the on-site representative clause in the contract, the evidence
demonstrates that neither party’s designated on-site representative was present at Long
Island every day. Nichols was present at Long Island to “set[] the camp up”62 and to
watch the Tigercat operate during the first few days. 63
He also made subsequent
visits. 64 But he was on Long Island only approximately 13 days during the course of the
contract. 65
A-1’s representative, Ward, who was also the Tigercat operator, was
present every day that the Tigercat was operable, but he was also absent many days. 66
59
Docket 66-1 ¶ 76 (3/25/13 Nichols Decl.).
60
Id. ¶¶ 77-79.
61
Docket 38-11 at 19:5-19 (9/22/12 Ward Dep.) (“[A]ny time a plane would come in[,] people
would run for the float plane to get out of there because there was no communication and
because of the conditions.”).
62
Docket 38-7 at 53:23-54:1 (8/14/12 Nichols Dep.).
63
Id. at 56:6-8 (8/14/12 Nichols Dep.); Docket 66-1 ¶ 68 (3/25/13 Nichols Decl.).
64
Docket 66-1 ¶¶ 68-70 (3/25/13 Nichols Decl.).
65
Docket 94-2 ¶ 3 (4/29/13 Nichols Decl.). There is some dispute concerning precisely how
many days Nichols was present, but there is no doubt that he was absent many days.
66
Docket 94-1 (7/26/12 A-1 Response to Plaintiff’s First Discovery Requests); Docket 85-3 at
34:8-35:1 (9/22/12 Ward Dep.). It appears Ward was only absent when there was a problem
with the machine because of his efforts to repair the machine.
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After A-1 began operating on Long Island, Alcan learned that A-1 had contracted
with Leisnoi, Inc. for timber operations on Kodiak Island. 67 A-1 asserts that after this,
Alcan withdrew logistical support for the Long Island operation. 68 Ward testified that
Alcan representatives were not helpful when A-1 requested assistance. 69 But there
does not appear to be any clause in the contract requiring Alcan to provide assistance
to A-1.
IV. After Several Tigercat Breakdowns, Alcan’s “Terminates” the Contract, but
Proceeds with Harvesting on Long Island and at Coon Cove.
On July 6, 2010, about 20 days after the mid-June cutting blade failure, Brown
wrote a letter on behalf of Alcan to A-1, terminating the contract. 70 The letter stated:
Pursuant to Paragraph 21 of the Contract dated April 15, 2010 between
Alcan Forest Products and A-1 Timber, you are hereby notified that you
have committed a material breach of said contract. The breaches which
you have committed include the following:
1) Failure to provide Alcan proof of Worker[s’] Compensation coverage for
A-1’s employees in the state of Alaska after repeated requests.
(Paragraph 18)
2) Failure to carry on work in a diligent and continuous manner until all
activities are complete. (Paragraph 8) 71
67
Docket 38-6 at 82:18-83:8 (8/15/12 Brown Dep.).
68
Docket 58 at 7 (A-1 MSJ); Docket 38-11 at 90:12-92:13 (9/22/12 Ward Dep.).
69
Docket 38-11 at 90:12-92:13 (9/22/12 Ward Dep.). At Ward’s deposition, in response to a
question concerning whether Alcan would assist in transporting people, equipment, or parts
between Ketchikan and Long Island, Ward stated that “Alcan wouldn’t help with anything.” For
example, Ward requested assistance from Brown, who had a boat, in transporting a disk for the
Tigercat, and although Brown provided “a couple of names . . .[,] he wanted no part of helping
[Ward].”
70
71
Docket 66-11 (7/6/10 Termination Letter Alcan to A-1).
Id.
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Loushin’s wife, Sharon Loushin, responded to the letter by email, stating:
I just got back in the office to this letter. We have not given you the
Workers[’] compensation because Dan Ward is a Corporate Manager on
Salary and is Exempt from the workers[’] comp. As you know the machine
has been down several times and we have had to have parts shipped up
there. Therefore the work has not been done in a timely manner. This is
unfortunate, however if you want us to Cease and Desist from the job, we
will be there and get our equipment off the island. 72
Tom Loushin also responded:
We understand your [sic] we will send you proof of Alaska workers[’]
com[p] as soon as the ladies return to the office[.] as for the parts for the
machine they are being flown from Ketchikan to long island today[.] if you
want us to remove are [sic] machine and stop work let me no [sic][.] I will
make the arrangements ASAP tom[.] 73
A few days later, on July 9, 2010, Brown wrote a letter to Sharon Loushin, stating that
Alcan “understand[s] that [A-1] acknowledges that it is in default on the contract,” but
“[i]f this is not accurate; please notify Alcan immediately. Meanwhile, we will consider
the contract terminated.” 74 The same day, Sharon Loushin responded, explaining that
there were “many problems with the Machinery breaking down,” but that A-1 “do[es] not
feel we were in default.” 75
On June 30, 2010, Alcan and Evergreen amended their contract to include that
Evergreen would “pursue purchase of a Feller Buncher” to harvest at Long Island and
Coon Cove. 76 The contract amendment stated that Alcan would pay “a sum equal to
72
Docket 66-12 (7/7/10 Email Sharon Loushin to Nancy Brown).
73
Docket 66-14 (7/7/10 Email Tom Loushin to Nancy Brown).
74
Docket 59-7 (7/9/10 Letter Brian Brown to Sharon Loushin).
75
Docket 59-8 (7/9/10 Letter Sharon Loushin to Brian Brown).
76
Docket 59-3 (6/30/10 Am. 1 to Long Island Logging Contract); Docket 66-1 ¶¶ 154-56
(3/25/13 Nichols Decl.).
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the 2 year depreciation amount,” as well as $220 per feller buncher operating hour. On
July 1, 2010, Evergreen purchased a used Madill feller buncher (the “Madill”) for
$200,000. 77 According to George Barnes, who operated the Madill for Alcan, the Madill
operated “efficiently” at Long Island and Coon Cove in 2010 and 2011, and “without
experiencing the degree of mechanical breakdowns experienced by” the Tigercat. 78 But
at his deposition, Ronald Perry, another Evergreen employee who also operated the
Madill, described several mechanical problems with the machine. 79 He also stated that
logging on Long Island was “extreme” and “an everyday battle,” and that the machine
would get “stuck” in the soft ground. 80
In October 2010, Alcan purchased an extension on its contract to harvest at Long
Island from December 31, 2011 through December 31, 2012. 81 Alcan asserts that “[t]he
extension was necessitated by the delay in production of logs caused by A-1’s breach in
cutting timber.”82 Alcan attempted, but was unable, to negotiate a contract extension for
harvesting Coon Cove; instead, in March 2011, Alcan entered into a stumpage only
77
Docket 59-6 (7/1/10 Hermann Brothers Invoice for Madill); Docket 66-1 ¶¶ 152-53 (3/25/13
Nichols Decl.).
78
Docket 66-10 ¶¶ 6, 14 (3/25/13 Barnes Decl.); see also Docket 55 at 6 (2/15/13 Alcan
Witness List).
79
Docket 59-5 at 19:18-21:1 (10/1/12 Perry Dep.); see also Docket 61 at 11 (3/7/13 A-1
Witness List).
80
Docket 59-5 at 21:6-22:10, 23:3-23:20 (10/1/12 Perry Dep.).
81
Docket 58 at 3 (A-1 MSJ); Docket 59-2 (Am. No. 1 to Long Island 2007 Timber Sale
Agreement); Docket 66-1 ¶ 81 (3/25/13 Nichols Decl.).
82
Docket 66-1 ¶¶ 11, 22 (3/25/13 Nichols Decl.)
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contract with Cape Fox for harvesting at Coon Cove. 83 Alcan asserts that A-1’s alleged
breach caused a delay in cutting the Coon Cove timber, which ultimately resulted in
Alcan’s requiring the stumpage contract. 84
Alcan filed suit against A-1 on or about March 18, 2011, in the Superior Court for
the State of Alaska in Ketchikan. 85
In the complaint, Alcan asserts various claims
related to breach of contract and violation of the Unfair Trade Practices and Consumer
Protection Act. 86 A-1 removed the case to this federal court on the basis of diversity of
citizenship on April 8, 2011. 87
As noted above, there are now numerous motions pending before the Court, but
this Order addresses only the motion to amend and the three motions for summary
judgment.
JURISDICTION
The Court has jurisdiction over this action pursuant to 28 U.S.C. § 1332. In this
diversity action, the Court applies state law to substantive legal issues and federal law
to procedural issues. 88
83
Id. ¶¶ 107-12.
84
Id. ¶¶ 105-113.
85
Docket 1-2 (Complaint).
86
Id.
87
Docket 1 (Notice of Removal).
88
Nitco Holding Corp. v. Boujikian, 491 F.3d 1086, 1089 (9th Cir. 2007) (“Because this case
arose under the district court’s diversity jurisdiction, 28 U.S.C. § 1332, we apply state
substantive law, but we apply federal procedural law.”).
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DISCUSSION
I. A-1’s Motion at Docket 74 to Amend the Answer will be Granted in Part and
Denied in Part.
At Docket 74, A-1 moves for leave to amend its answer to assert the affirmative
defenses of statute of frauds, misrepresentation, and impossibility/impracticability of
performance, and to assert counterclaims for fraudulent misrepresentation, material
misrepresentation, breach of contract, and violations of Alaska’s Unfair Trade Practices
and Consumer Protection Act. A-1 asserts that the Court should permit amendment
under Federal Rule of Civil Procedure 15 because there was no undue delay, as critical
evidence only surfaced after recent disclosures, and because Alcan has been aware of
A-1’s allegations of misrepresentation “for a period of months.”89 A-1 further asserts
that permitting amendment either causes no prejudice, or that “Alcan brought any
prejudice on itself” through its late disclosures. 90
In its motion, A-1 describes the conflicting positions of the parties as to whether
Loushin wanted to inspect Long Island prior to entering into the contract, and then it
focuses on alleged misrepresentations by Alcan concerning its on-site representative.
Specifically, A-1 states that evidence demonstrating misrepresentations only recently
came to light.
For example, although the April 2010 contract identified Nichols as
Alcan’s on-site representative and Alcan’s December 2011 preliminary disclosures
stated that Michael Doig was Alcan’s on-site representative (despite Alcan’s contract
89
Docket 74 at 2-3 (A-1 Mot. Amend). At oral argument, A-1 argued that Alcan had been
playing “hide the ball” with discovery, exhibiting a consistent pattern of nondisclosure.
90
Id. at 2; Docket 107 at 5 (A-1 Reply Amend).
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with Doig, which stated that he was not an agent), 91 at Nichols’s August 2012
deposition, he testified that “Brian (Brown) ran th[e] operation” at Long Island. 92 But in
Nichols’s March 2013 declaration, he again acknowledges that he was Alcan’s on-site
representative. 93
A-1’s
motion
does
not
address
the
additional
alleged
misrepresentations laid out in the proposed amended answer, for example that Alcan
failed to disclose its relationship with Evergreen and failed to disclose its 2010 harvest
plans for Long Island and Coon Cove. 94 Likewise, although described in the proposed
amended answer, A-1’s motion does not address its statute of frauds or
impossibility/impracticability defenses, or claims concerning breach of contract.
Alcan opposes the motion, arguing that it is untimely and that permitting
amendment would cause prejudice and unreasonable delay, requiring the Court to
reopen discovery. 95
Alcan also asserts that A-1’s misrepresentation claim is not
viable. 96 Like A-1’s opening brief, Alcan’s opposition focuses primarily on the on-site
representative misrepresentation issue. A-1’s reply faults Alcan for not addressing the
other “fifteen separate misrepresentations” in A-1’s proposed amended answer, and
91
Docket 74 at 3-4 (A-1 Mot. Amend); Docket 75-1 (12/19/11 Alcan Preliminary Disclosures)
(identifying Doig as an “Alcan Representative”); Docket 75-2 (3/21/10 Service Agreement
between Alcan and Doig) (stating Doig is not an agent).
92
Docket 38-7 at 54:10-13 (8/14/12 Nichols Dep.)
93
Docket 66-1 ¶¶ 62, 68 (3/25/13 Nichols Decl.).
94
Docket 74-1 at 12-13 ¶¶ 32(a), (k) (A-1 Proposed Amended Answer).
95
Docket 93 (Alcan Opp. Amend). Alcan did agree that A-1 could raise the impossibility
defense without seeking leave of the court. Id. at 1, n.1.
96
Id.
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states that “[t]hese allegations speak for themselves and are incorporated in A-1’s
motion . . . .” 97
Pursuant to Federal Rule of Civil Procedure 15(a)(2), “[t]he court should freely
give leave” to amend “when justice so requires.” In deciding “a motion for leave to
amend, a district court must consider whether the proposed amendment results from
undue delay, is made in bad faith, will cause prejudice to the opposing party, or is a
dilatory tactic.” 98 Generally, prejudice results where allowing amendment would impose
“additional litigation costs . . . that could have easily been avoided.” 99 However, “when
a party seeks to amend a pleading after the pretrial scheduling order’s deadline for
amending the pleadings has expired, the moving party must satisfy the ‘good cause’
standard of Federal Rule of Civil Procedure 16(b)(4).” 100 In those circumstances, the
court “may take into account any prejudice to the party opposing modification of the
scheduling order,” but should focus its inquiry on “the moving party’s reasons for
seeking modification . . . . If that party was not diligent, the inquiry should end.”101
Here, the Scheduling and Planning Order, issued on July 19, 2011, states:
“Motions to . . . amend the pleadings subsequent to the date of this order must be
97
Docket 107 at 4 (A-1 Reply Amend).
98
Chodos v. W. Publ. Co., 292 F.3d 992, 1003 (9th Cir. 2002) (affirming denial of leave to
amend complaint); see also AmerisourceBergen Corp. v. Dialysist W., Inc., 465 F.3d 946, 957
(9th Cir. 2006).
99
AmerisourceBergen, 465 F.3d at 957 (affirming denial of leave to amend a reply, where
motion to amend was filed fifteen months after defendant learned of claim but still within pretrial
scheduling order’s deadlines for amendment).
100
In re W. States Wholesale Nat. Gas Antitrust Litig, 715 F.3d 716, 736 (9th Cir. 2013).
101
Id. at 736 (quoting Johnson v. Mammoth Rec., Inc., 975 F.2d 604, 609 (9th Cir. 1992)).
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served and filed not later than January 2, 2012. Thereafter, . . . pleadings [may be]
amended only upon leave of court and for good cause shown.” 102 A-1’s motion to
amend was not filed until April 11, 2013, fifteen months after the Scheduling Order’s
deadline. Thus, under Federal Rule of Civil Procedure 16 and the Scheduling and
Planning Order, A-1 must show “good cause” before amendment will be permitted. 103
A-1 has failed to demonstrate the requisite “good cause.”
A-1’s request is
unreasonably tardy. Through diligent discovery, A-1 could have earlier explored its
concerns about Loushin’s inability to visit the sites and Alcan’s on-site representative.
Since the time that Ward operated the Tigercat on Long Island, A-1 could have been
aware that the contract identified Nichols as Alcan’s on-site representative but that he
was often absent from Long Island. Indeed, A-1 asserts the affirmative defense of
estoppel in its original answer. 104
With respect to alleged misrepresentations concerning Alcan’s relationship with
Evergreen and Alcan’s harvest plans, A-1 presents no argument that it made timely
discovery requests to uncover this information. A-1 has known of Alcan’s ownership
interest in Evergreen since, at the latest, August 2012. 105 A-1 has known of Alcan’s
claim of Evergreen pass-through damages since, at the latest, Alcan’s June 2012
102
Docket 14 (7/19/11 Scheduling Order).
103
See W. States Wholesale Nat. Gas Antitrust Litig., 715 F.3d at 736.
104
The Court addresses infra A-1’s motion for summary judgment on estoppel, which further
details the on-site representative issue.
105
See Docket 37 at 2 (A-1 Mot. Compel Trans-Pac) (discussing ownership interests); Docket
38-7 at 8:19-14 (8/14/12 Nichols Dep.).
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disclosures, which state that Alcan seeks damages for costs incurred by Evergreen. 106
The discovery deadline in this case was initially June 2012, but it was extended through
November 2012 and then March 2013. 107 Through these extensions, A-1 had adequate
time to follow up on the June and August disclosures. And although Alcan produced
some Evergreen documents during discovery, 108 A-1 is not thereby permitted to
disregard corporate formalities and rely upon Alcan to informally produce all Evergreen
documents. Thus, at the June 21, 2013 hearing, in considering A-1’s motion to compel
Alcan to produce Evergreen employment records, the Court concluded that Alcan did
not improperly withhold those documents or fail to make mandatory disclosures with
respect to them pursuant to Federal Rule of Civil Procedure 26. 109 The lack of timely
and comprehensive discovery requests is not “good cause” to permit amendment after
the deadline.
Finally, while A-1 asserts that the allegations of the remaining
misrepresentations “asserted in the proposed amended complaint speak for themselves
106
See Docket 38-13 (6/5/12 Preliminary Disclosures); see also Docket 90-3 (7/25/12 Alcan
Responses to First Discovery Requests) (identifying Evergreen as a “person[] who w[as] hired
to work or worked on the Coon Cove or the Long Island timber harvest projects for Alcan” during
the relevant time period).
107
Docket 14 (7/19/11 Scheduling Order); Docket 25 (5/21/12 Pretrial Order); Docket 36
(11/5/12 Order Granting Joint Motion to Continue Trial).
108
See Docket 37 at 7 (A-1 Mot. Compel Trans-Pac), in which A-1 acknowledges that Alcan
produced some documents. The Court granted in part and denied in part that motion to compel,
which is not relevant to the currently pending motions. See Docket 51 (Order on Mot. Compel
Trans-Pac).
109
See Docket 76 (A-1 Mot. Compel Records); Docket 147 (Minute Entry). The Court denied
that motion as moot because, by that date, Alcan had disclosed the requested records.
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and are incorporated in A-1’s motion,” 110 this conclusory argument does not meet the
good cause standard.
In addition, amendment at this time would be prejudicial. When the motion was
filed, this litigation had been pending for almost two years. Allowing amendment would
likely require that the Court reopen discovery and alter the trial date, resulting in
unreasonable additional expense and further delays.
However, with respect to the affirmative defense of impossibility/impracticability,
the parties have conducted the relevant discovery and Alcan has moved for summary
judgment on the defense. Alcan will not be prejudiced by A-1 asserting that defense at
trial.
For the foregoing reasons, A-1’s motion to amend the complaint at Docket 74 will
be granted with respect to the impossibility/impracticability defense, but will be
otherwise denied.
II. Motions for Summary Judgment.
A. Standard of Review.
Federal Rule of Civil Procedure 56(a) directs a court to “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.” The burden of showing the absence
of a genuine dispute of material fact lies with the moving party. 111 If the moving party
meets this burden, the non-moving party must present specific evidence demonstrating
110
Docket 107 at 4 (A-1 Reply Amend).
111
Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).
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the existence of a genuine issue of fact. 112 The non-moving party may not rely on mere
allegations or denials. 113
It must demonstrate that enough evidence supports the
alleged factual dispute to require a finder of fact to make a determination at trial
between the parties’ differing versions of the truth. 114
When considering a motion for summary judgment, a court must accept as true
all evidence presented by the non-moving party and draw “all justifiable inferences” in
the non-moving party’s favor. 115 To reach the level of a genuine dispute, the evidence
must be such “that a reasonable jury could return a verdict for the non-moving party.” 116
The non-moving party “must do more than simply show that there is some metaphysical
doubt as to the material facts.”117 If the evidence provided by the non-moving party is
“merely colorable” or “not significantly probative,” summary judgment is appropriate. 118
B. A-1’s Motion at Docket 58 for Summary Judgment Will Be Denied.
Alcan has identified six categories of damages sought in this litigation: (1) delay
damages in the amount of $129,166.60; (2) the cost of the extension of the Long Island
contract in the amount of $50,000.00; (3) depreciation of the Madill in the amount of
$80,000.00; (4) transportation of the Madill in the amount of $17,059.95; (5) the sum
112
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986).
113
Id. at 248-49.
114
Id. (citing First Nat’l Bank of Arizona v. Cities Serv. Co., 391 U.S. 253 (1968)).
115
Id. at 255 (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970)).
116
Id. at 248.
117
Scott v. Harris, 550 U.S. 372, 380 (2007) (citing Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 586-587 (1986)).
118
Anderson, 477 U.S. at 249.
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paid for the new contract for Coon Cove in the amount of $333,007.00; and (6) the cost
of additional hand cutters to harvest Coon Cove in the amount of $125,450.00. 119 Alcan
does not seek lost profits related to the sale of the timber.
A-1 moves for summary judgment on all claims, arguing that Alcan’s alleged
damages are not recoverable because Alcan ultimately profited from any alleged delay;
that Alcan cannot recover damages for “fixed costs” of maintaining the camp at Long
Island; that Alcan cannot recover any damages incurred after Alcan’s termination of the
contract; and that Alcan failed to mitigate damages, for example with respect to its
purchase of contract extensions and use of Evergreen’s Madill. 120
For the reasons discussed herein, numerous material questions of fact preclude
the entry of summary judgment.
1. Material Questions of Fact Remain as to Whether Alcan’s Damages Should
be Reduced by its Profits.
A-1 argues that Alcan cannot recover any damages because Alcan profited from
any delay caused by A-1’s alleged breach of contract. 121 A-1 asserts that Alcan made
more money by selling the timber in 2011 instead of 2010 because of the increase in
sale prices in Asia for Alaska logs, and also because the delay allowed the timber
additional time to grow. 122 The opinion of A-1’s expert, David Jendro, provides the
119
Docket 71 at 14 (Alcan Opp. MSJ).
120
Docket 58 (A-1 MSJ).
121
Docket 58 at 15 (A-1 MSJ).
122
Id. at 13.
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factual basis and calculations for A-1’s position. 123 In response, Alcan contends that A1’s alleged breach caused a delay, which resulted in Alcan selling the timber into a
depressed log market. 124 Alcan further asserts that any profits from the eventual sale
are not relevant because the purpose of Alcan’s contract with A-1 was only that A-1
should cut timber; the contract did not contemplate Alcan’s sale of timber. Alcan also
asserts that because it regularly sells logs into the market, Alcan’s lost profits as a result
of A-1’s breach cannot be determined with reasonable certainty. 125
Contract damages are intended to compensate an injured party so that it is put in
the same position that it would have been in had the breaching party performed the
contract. 126 An injured party “has a right to damages based on [its] expectation interest
. . . plus . . . any other loss, including incidental or consequential loss, caused by the
breach.”127 Where the jury finds in favor of a plaintiff, the jury may award damages if it
finds that the plaintiff demonstrated the loss “with reasonable certainty” and that the loss
was foreseeable. 128
An injured party must make reasonable efforts to mitigate
123
Id. at 13, 23; Docket 59-10 ¶¶ 3-5 (3/5/13 Jendro Decl.).
124
Docket 71 at 29 (Alcan Opp. MSJ); Docket 66-1 ¶¶ 130-134 (3/25/13 Nichols Decl.).
125
Docket 71 at 30 (Alcan Opp. MSJ). In addition, Alcan asserts that Jendro’s report is not
admissible as an expert report and that his calculations and conclusions are based on faulty
assumptions. The admissibility of Jendro’s report, including the alleged inaccuracy of facts that
he relied upon, is the subject of a separate motion, filed at Docket 82.
126
Murray E. Gildersleeve Logging Co. v. N. Timber Corp., 670 P.2d 372, 377 (Alaska 1983);
see also Alaska Civil Pattern Jury Instruction (“ACPJI”) 24.09A.
127
Am. Computer Inst. v. State, 995 P.2d 647, 655 (Alaska 2000) (quoting Restatement
(Second) of Contracts § 347).
128
See ACPJI 24.09A.
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damages, and it may be compensated for expenses reasonably incurred in that
effort. 129
Under Alaska law, in some circumstances an injured party’s ability to recover
may be limited by profits made after the alleged breach of contract. In this diversity
action, Alaska’s substantive law is controlling. In Murray E. Gildersleeve Logging Co. v.
Northern Timber Corp., the Alaska Supreme Court held that “[w]hile the wronged party
in a breach of contract suit is entitled to the benefit of his bargain, he is not entitled to
any more than his actual loss.” 130
In that case, Northern Timber Corp. (“NTC”)
contracted for Murray E. Gildersleeve Logging Co. (“MEG”) to harvest a specified
amount of timber at Shakan Bay. After commencing operations, MEG later abandoned
the Shakan Bay operation (and thus the NTC contract). NTC then logged Shakan Bay
itself and sold the timber to a third party. NTC sued MEG for related damages. At trial,
a jury found in favor of NTC and awarded damages.
On appeal, MEG argued that the jury instructions contained errors with respect to
mitigation and calculating damages. 131 With respect to mitigation, the instructions had
provided that the jury must determine whether NTC’s decision to log and sell certain
timber to a domestic market was done in an effort to minimize NTC’s damages or as a
separate operation. The supreme court held this instruction was proper. But the trial
court had then instructed the jury that it could not consider NTC’s profits from exporting
certain timber in measuring NTC’s damages. Instead, the jury was instructed that it was
129
See ACPJI 24.10; ACPJI 20.18A & B.
130
Gildersleeve , 670 P.2d at 378.
131
Id.
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required to compute damages based on the additional costs incurred by NTC to harvest
the timber itself. The Alaska Supreme Court held that this instruction was error, as it
“usurped the jury’s fact-finding authority” by assuming that production of the domestic
timber was part of NTC’s mitigation efforts.
If the domestic logging was part of
mitigation, then NTC’s overall profits were lower and the profits would not reduce
damages. However, if it was not mitigation, then the court’s instructions inappropriately
prohibited the jury from reducing damages against MEG by the profits earned by NTC
on its exported timber. Thus, the instruction improperly “forced [the jury] to assume that
domestic timber was logged in an effort to minimize losses.” 132 The court remanded,
explaining that, “[o]n remand, . . . the jury should be instructed to compute damages by
the more accurate and equitable method of profit differentials.” 133
This is because
although “NTC’s expectation interest may be measured . . . by cost differentials, . . . the
evidence shows that a measure of damages based on diminution of profits would also
give NTC the benefit of its bargain, and at less cost to MEG.”134
Alcan asserts that Gildersleeve is not applicable because that case’s “loss
avoided” rule applies only where there is a “substitute transaction,” and Alcan asserts
that it never entered into a substitute transaction to avoid the losses caused by A-1’s
default. 135 Alcan notes that Gildersleeve involved a logging contract, while the contract
132
Id. at 380.
133
Id.
134
Id. at 381.
135
See Docket 71 at 25 (Alcan Opp. MSJ) (discussing Restatement (Second) Contracts § 347,
concerning “actual loss caused by breach”).
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at issue in this case is a service contract for the provision of a feller buncher. But just
as in Gildersleeve, there is a material dispute in this case as to whether the subsequent
logging and selling of the timber was done in an effort to minimize Alcan’s losses or
damages. 136 Thus, it is an issue for the jury’s determination.
The Court notes that other jurisdictions may follow a rule that might disregard
profit differentials, as summarized by Corbin on Contracts: “Gains made by the injured
party on other transactions after the breach are not to be deducted from damages that
are otherwise recoverable, unless such gains could not have been made had there
been no breach.” 137 However, in this diversity case, Alcan has not directed the Court to
any authority that indicates that the Alaska Supreme Court would depart from its holding
in Gildersleeve.
Although Gildersleeve is binding, the Court nevertheless concludes that material
questions of fact remain precluding summary judgment. As noted above, the parties
appear to disagree on whether Alcan’s subsequent harvesting activities were done in an
effort to minimize Alcan’s losses resultant from A-1’s alleged breach. And the parties
disagree on when the logs were actually sold and whether Alcan’s ultimate profits were
increased or decreased as a result of the delayed harvest. 138 In short, multiple issues
of material fact preclude summary judgment on the damages claim.
136
Gildersleeve, 670 P.2d at 379.
137
11-57 Corbin on Contracts § 57.13; see also KGM Harvesting Co. v. Fresh Network, 36 Cal.
App. 4th 376, 382 (Cal. Ct. App. 1995) (declining to reduce damages for U.C.C. sale of goods
because buyer was later able to make a profit, explaining “[w]hat the buyer chooses to do with
that bargain is not relevant to the determination of damages under section 2712”).
138
Docket 58 at 13, 23 (A-1 MSJ); Docket 59-10 ¶¶ 3-5 (3/5/13 Jendro Decl.); Docket 71 at 29
(Alcan Opp. MSJ); Docket 66-1 ¶ 130 (3/25/13 Nichols Decl.).
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2. Material Questions of Fact Remain Concerning Whether Alcan May Recover
Fixed Costs for an “Idle Camp.”
Alcan seeks damages for Evergreen’s costs of operating the Long Island camp
for the period prior to July 6, 2010 when A-1’s Tigercat was nonoperational. During that
time, Evergreen employees performed “non-logging related jobs to keep busy.” 139
Evergreen seeks recovery of these “delay damages” from Alcan.
A-1 asserts that
because the Evergreen employees were working, Alcan and Evergreen benefited from
their labor, and Alcan cannot recover these fixed costs. 140
In this diversity action, this issue must be analyzed applying state law. Alaska
precedent provides some guidance on the recovery of these damages.
In Quality
Asphalt Paving, Inc. v. State, the Department of Transportation (“DOT”) contracted for
plaintiff construction company to widen a road. 141 After the DOT invoked the contract’s
“termination-for-convenience” clause, plaintiff sought damages, including “overhead
expenses
directly
allocable
to
the
project
termination,”
which
incorporated
“organizational, administrative, and other general costs that are incurred for continuing
operations.”142 The Alaska Supreme Court affirmed a hearing officer’s award of these
overhead expenses. Quality Asphalt is distinguishable from the case at hand, however,
because that contract specifically provided for the recovery of “overhead expenses” and
139
Docket 71 at 15-16 (Alcan Opp. MSJ).
140
Docket 88 at 3, 8 (A-1 Reply MSJ).
141
Quality Asphalt Paving, Inc. v. State, 71 P.3d 865 (Alaska 2003).
142
Id.
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“reasonable equipment idle time,” while A-1 and Alcan’s contract does not contain any
such provision.
State v. Northwestern Construction Co. also provides some guidance. 143 In that
case, the plaintiff contractor was hired to construct a new runway at the Anchorage
airport. The trial court held that the State was responsible for the excessive costs of the
project, and awarded the contractor damages. The Alaska Supreme Court affirmed the
majority of the trial court’s damages award, finding that an award of “10% of increased
cost for overhead” was proper where the “breach result[ed] in the contractor having to
do extra work” and the contract called for “equitable adjustment” when more work ended
up being required than had been bid. 144 The supreme court noted that “mere delay
does not necessarily increase direct costs,” but the court nonetheless permitted
damages as a percentage of increased costs because the plaintiff had demonstrated
actual increased costs. 145
The parties also discuss Precision Pine & Timber, Inc. v. United States, a
Federal Circuit Court of Appeals decision. 146 There, the court permitted recovery of
overhead damages, but concluded that the plaintiff was not entitled to the entire amount
requested because some of its request was actually the “fixed costs of operating
Precision Pine’s sawmills—namely, the cost of labor, taxes, and insurance,” which were
143
State v. Nw. Constr. Co., 741 P.2d 235 (Alaska 1987).
144
Id. at 240 (emphasis in original).
145
Id. at 240-41 (citing Bennett v. United States, 178 Ct. Cl. 61, 371 F.2d 859, 863-64 (1967);
Elias v. Wright, 276 F. 908, 910 (2d Cir. 1921); A.T. Klemens & Sons v. Reber Plumbing &
Heating Co., 139 Mont. 115, 360 P.2d 1005, 1011 (Mont. 1961)).
146
Precision Pine & Timber, Inc. v. United States, 596 F.3d 817 (Fed. Cir. 2010).
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part of the company’s permanent sawmill operating facility and that the company would
have to pay regardless of the contract. 147 But Precision Pine is easily distinguishable
from this case, because a permanent sawmill is not the same as a temporary logging
camp. 148
Here, material questions of fact remain concerning whether Alcan can recover
Evergreen’s fixed costs when the Tigercat was not operational. Fundamentally, the
parties dispute whether and to what extent the camp was actually idle when the
TIgercat was not operational. This alone precludes summary judgment on this element
of damages. The fundamental inquiry is whether and to what extent the damages
sought are consequential and foreseeable damages of the alleged breach; these are
questions for the trier of fact.
3. Material Questions of Fact Remain Concerning “Post-Termination” Damages
and Mitigation.
Alcan seeks damages for the extension of the Long Island contract and the new
Coon Cove contract, asserting that these contracts were only necessary because of A1’s breach. 149 Alcan also seeks damages for depreciation and transportation of the
Madill and for additional hand cutters to harvest at Coon Cove, asserting that these
expenses were necessary to complete the timber harvesting.
For example, Alcan
147
Id. at 834.
148
Id. at 834.
149
Docket 71 at 4, 7 (Alcan Opp. MSJ); Docket 66-1 ¶¶ 9, 11, 22, 113 (3/25/13 Nichols Decl.).
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asserts that A-1’s breach caused an “urgency to cut Coon Cove” because of the
upcoming expiration of the Cape Fox contract, which is why Alcan hired hand cutters. 150
In its motion for summary judgment, A-1 asserts that these damages are not
recoverable because they were incurred after Alcan terminated the contract. 151 A-1
also asserts that A-1’s alleged breach was not the cause of Alcan’s purchase of the
Long Island extension; rather, Alcan purchased the extension to harvest additional
timber. 152
As for Coon Cove, A-1 asserts that Alcan would not have required an
extension if Evergreen employees had finished harvesting in 2010, and it disputes
Alcan’s calculations comparing the cost of harvesting Coon Cove with a feller buncher
with the cost of the additional hand cutters. 153 With respect to the Madill, A-1 asserts
that permitting recovery for depreciation would result in “double recovery” because
Alcan also benefited from the use of the machine, 154 that Alcan has confused
depreciation and salvage value, 155 and that Alcan has failed to provide support for the
full amount it seeks to recover for the Madill’s transportation from Seattle to Long
Island. 156 The majority of A-1’s arguments amount to a contention that Alcan failed to
mitigate damages.
150
Docket 71 at 19 (Alcan Opp. MSJ).
151
Docket 58 at 20-21 (A-1 MSJ); Docket 88 at 8-9 (A-1 Reply MSJ).
152
Docket 88 at 5 (A-1 Reply MSJ).
153
Docket 58 at 13 (A-1 MSJ).
154
Docket 88 at 6 (A-1 Reply MSJ).
155
Docket 59-10 ¶ 7 (3/5/13 Jendro Decl.).
156
Docket 58 at 12 (A-1 MSJ).
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The Court first addresses the termination issue. On July 6, Alcan sent to A-1 an
email titled “Notice of Termination,” stating that, pursuant to paragraph 21, Alcan
“hereby terminates” the contract. 157 Paragraph 21 allows Alcan to terminate, “[i]n case
[A-1] shall fail to perform any part of this contract by him to be performed promptly and
in the manner . . . specified” in the contract 158—that is, if A-1 breaches the contract. A-1
asserts that Alcan cannot recover damages incurred after the termination, citing the
Uniform Commercial Code (U.C.C.) definition of termination, which provides:
“Termination” occurs when either party, under a power created by
agreement or law, puts an end to the contract otherwise than for its
breach. On “termination” all obligations that are still executory on both
sides are discharged, but a right based on a prior breach of performance
survives. 159
A-1 also cites to United Airlines v. Good Taste. 160
But Good Taste is not helpful
because in that case the Alaska Supreme Court was applying Illinois law, and the
contract at issue there permitted a party to terminate without cause simply upon 90 days
notice. Here, in contrast, Alcan could only terminate after it determined that A-1 had
failed to perform under the contract.
Alcan maintains that the U.C.C. does not apply because the contract at issue
was not for the sale of goods; rather, it was for service of a feller buncher. 161 And,
regardless of the U.C.C.’s applicability, the above-cited provision only applies when a
157
Docket 66-11 (7/6/10 Termination Letter Alcan to A-1).
158
Id. ¶ 21
159
Docket 58 at 20 (A-1 MSJ) (citing AS § 45.02.106).
160
Id. at 20-21 (discussing United Airlines, Inc. v. Good Taste, Inc., 982 P.2d 1259 (Alaska
1999)).
161
Docket 71 at 43-44 (Alcan Opp. MSJ).
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party puts an end to a contract “otherwise than for its breach.” 162
Alcan further
maintains that “every breach of contract gives rise to an immediate remedy.” 163 At oral
argument, Alcan further asserted that because the termination notifications were written
by non-lawyers, they were not intended to invoke the legal results of a contract
termination.
This Court agrees that the U.C.C. is not applicable to this services contract.
Furthermore, Corbin on Contracts specifically recognizes that the terms “termination,”
“cancellation,” and “discharge” are often used interchangeably, and it suggests that
courts “should never assume that contracting parties knew and distinguished accurately
between the terms.” 164 Here, paragraph 21 allowed Alcan to terminate only if A-1 failed
to perform under the contract. The terms of the contract do not speak of Alcan’s ability
to recover post-termination damages. 165 Based on the current record, the Court does
not find that the contract was intended to eliminate Alcan’s ability to recover posttermination damages if A-1 breached, when Alcan could otherwise recover full breach of
contract damages if it elected not to invoke the termination clause. 166
162
AS § 45.02.106.
163
Docket 71 at 43-44 (Alcan Opp. MSJ) (discussing 4 A. Corbin, Corbin on Contracts § 946
(1960)).
164
13-67 Corbin on Contracts § 67.2.
165
Compare Docket 59-3 ¶ 21 (3/17/10 Logging and Road Construction Contract; Long Island
Timber Sale, between Alcan and Evergreen), which provides that the right to terminate “shall
not be deemed exclusive but shall be in addition to all other remedies at law or in equity which
Alcan may have in connection with this contract and the breach thereof.”
166
Whether Alcan can recover post-termination damages at all will depend on whether it can
demonstrate that it properly invoked the termination clause, only after A-1 “fail[ed] to perform
any part of th[e] contract . . . to be performed promptly and in the manner . . . specified . . . .”
See Odom v. Lee, 999 P.2d 755 (Alaska 2000) (whether breach is material is question of fact).
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Of course, after “termination,” Alcan still had a duty to mitigate damages, and
material questions of fact in that regard preclude summary judgment on mitigation
damages.
For example, Alcan asserts that because of A-1’s breach, Evergreen
purchased the Madill to provide services to Alcan. But it is unclear why Alcan seeks
damages for two years of Madill depreciation (during which time the machine was
allegedly operating effectively) to complete a contract that A-1 intended to complete in
approximately five months. And Alcan asserts that it would not have required the new
Coon Cove contract but for A-1’s breach. 167 But at the same time, Alcan has indicated
that it “urgen[tly]” hired hand cutters at Coon Cove.
These questions of mitigation
should be resolved by a jury.
4. Alcan Presented Sufficient Proof of Damages to Survive Summary Judgment.
A-1 also argues that Alcan has failed to prove its loss with reasonable
certainty. 168 A-1 cites to the deposition of Brian Brown, who estimated damages on
behalf of Evergreen and Alcan. 169
At his deposition, Brown conceded that his
calculations were based, in part, on guesswork. 170
At the same time, Brown also
described, in detail, how he estimated Evergreen’s and Alcan’s damages. 171
167
Docket 66-1 ¶ 113 (3/25/13 Nichols Decl.).
168
Docket 58 at 19, 20 (A-1 MSJ).
169
Docket 66-13 (3/27/13 Brown Decl.).
170
Docket 38-6 at 114:4 (8/15/12 Brown Dep.).
171
See Docket 66-4 (8/15/12 Brown Dep.); Docket 66-13 (3/27/13 Brown Decl.).
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A party seeking damages “need only prove its damages to a ‘reasonable
certainty.’” 172 The amount of damages need not be proved “with exact detail, but the
evidence must provide a reasonable basis for the jury’s determination.”173 The Court
concludes that Brown’s estimates are a sufficient basis on which to base a damages
award so as to survive summary judgment. For the same reasons, A-1 is not entitled to
summary judgment on Alcan’s UTPA claim.
For all of the foregoing reasons, A-1’s motion at Docket 58 for summary
judgment will be denied.
C. Alcan’s Motion at Docket 72 for Summary Judgment on A-1’s Affirmative
Defense of Impossibility Will Be Denied.
The Court has held that A-1 may file an amended answer asserting the
affirmative defense that “performance [of the contract was] excused by the doctrine of
impossibility or impracticability of performance.” 174
At Docket 72, Alcan moves for
summary judgment on this affirmative defense. It asserts that the conditions at Long
Island were foreseeable; that Alcan representatives offered to take Loushin to see the
sites, but he declined; and that A-1 understood the potentially problematic conditions,
which is why Loushin negotiated a high-rate, pay-per-cutting-hour agreement. 175 Thus,
172
Nw. Const. Co., 741 P.2d at 237.
173
Ben Lomond, Inc. v. Schwartz, 915 P.2d 632, 636 (Alaska 1996); see also Borgen v. A&M
Motors, Inc., 273 P.3d 575, 592 (Alaska 2012) (testimony providing a “range of values on which
the jury could have based its damages verdict” was sufficient to uphold award of damages).
174
See Docket 74-1 (A-1 Proposed Amended Answer).
175
A-1 did not raise the affirmative defense of impossibility or impracticability in its original
answer. See Docket 11 (A-1 Answer). Alcan’s motion for summary judgment attempts to
distinguish impossibility and impracticability, moving for summary judgment on impossibility and
noting that A-1 has not claimed impracticability. Docket 72 at 9 n.79 (Alcan MSJ Impossibility)
(“A-1 has not claimed ‘commercial impracticability’ . . . .”). A-1 now seeks to assert both
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Alcan argues that A-1 assumed any risk of difficulties in using the feller buncher. Alcan
further asserts that A-1 could have, but failed to, include a contract clause allowing A-1
to terminate should contract performance prove unprofitable. 176 Alcan cites to several
Alaska cases discussing the defense of impossibility/impracticability. 177
Alcan also
argues that performance could not have been impracticable, given that Evergreen
ultimately utilized the Madill at Long Island. 178
A-1 opposes summary judgment, arguing that the ground conditions were not
foreseeable, and that Brown and Nichols refused to take Loushin to see the sites.179
A-1 also asserts that its performance was excused as impracticable because Alcan
failed to maintain a proper on-site representative at Long Island (i.e., Nichols was not
present and Doig lacked authority), and because poor working conditions at Long Island
defenses. See Docket 74-1 (A-1 Proposed Amended Answer). Because Alaska case law
defines impossibility to incorporate impracticability, see Gildersleeve, 670 P.2d at 375, the
distinction is irrelevant for purposes of this motion.
176
Docket 72 at 9 (Alcan MSJ Impossibility) (discussing U.S. Smelting, Ref. and Min. Co. v.
Wigger, 684 P. 2d 850, 857 (Alaska 1984), in which contract provided for termination if mining
under contract was found to be no longer profitable).
177
See id. (discussing Currington v. Johnson, 685 P.2d 73 (Alaska 1984) and State v.
Carpenter, 869 P.2d 1181, 1183-84 (Alaska 1994)). In Carpenter, a debtor farmer failed to
repay a loan and argued that performance was excused because farming his land was not
profitable under the loan contract. The Alaska Supreme Court concluded that the doctrine of
impracticability did not excuse performance. The supreme court noted that the contract
contained a clause which specifically recognized the State’s disclaimer as to the soil’s condition.
And the case was before the supreme court on review of a directed verdict after a bench trial,
not on review of an order granting summary judgment. For these reasons, this Court finds
Carpenter is distinguishable.
178
Docket 72 at 9 n.79 (Alcan MSJ Impossibility); Docket 66-10 ¶ 7 (3/25/13 Barnes Decl.).
179
Docket 98-1 ¶ 4 (5/1/13 Loushin Decl.); Docket 49-1 at 29 (8/15/12 Loushin Dep.).
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made operations “extreme and unreasonably difficult” and caused high employee
turnover. 180
Alaska courts recognize the affirmative defense of “[i]mpossibility of performance
. . . as a valid defense to an action for breach of contract when the promisor’s
performance becomes commercially impracticable as a result of the frustration of a
mutual expectation of the contracting parties.” 181 Alaska Civil Pattern Jury Instruction
(“ACPJI”) 24.08C provides that a party must demonstrate two elements when claiming
this defense:
(1)
an event occurred which made the [party’s] performance
impracticable because of extreme and unreasonable difficulty
(expense) (injury) (loss) to [party]; and
(2)
the event which occurred was not reasonably foreseeable by the
parties when the contract was made.
Comment (b) to the Restatement (Second) Contracts § 261 explains: “In order for a
supervening event to discharge a duty under this Section, the non-occurrence of that
event must have been a ‘basic assumption’ on which both parties made the contract.”182
Here, impossibility/impracticability is A-1’s affirmative defense, so A-1 bears the burden
of proof. 183
180
Docket 97 at 9-10 (A-1 Opp. Impossibility).
181
Gildersleeve, 670 P.2d at 375 (citing N. Corp. v. Chugach Elec. Ass’n, 518 P.2d 76, 80-82
(Alaska 1974)) (affirming dismissal of impossibility defense because “[p]erformance was not
rendered impracticable, or even particularly difficult”).
182
Restatement (Second) Contracts § 261, comment b (1981).
183
Agen v. Dep’t of Rev., 945 P.2d 1215, 1220 (Alaska 1997) (“[T]he burden of proof of an
affirmative defense is on the party raising the defense.”) (citations omitted).
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The Court has reviewed the evidence submitted by each party and concludes
that material questions of fact preclude summary judgment on this defense. There
remain questions of fact concerning whether the ground conditions at Long Island were
foreseeable, and whether they made A-1’s performance impracticable. The parties also
dispute whether Alcan precluded A-1 from visiting the sites, or whether A-1 chose to
forego the inspection and assume the risk. Alcan’s argument that Loushin constructed
the terms of the contract to account for risks associated with poor ground conditions is
compelling, 184 but insufficient to eliminate questions of fact concerning whether these
particular ground conditions were foreseeable. And while Alcan Madill operator George
Barnes states that the Madill operated effectively on Long Island in 2010 and 2011,185
Madill operator Ron Perry describes Madill breakdowns and “extreme” logging
conditions. 186 Thus, questions of fact remain concerning the impracticability of A-1’s
performance.
However, the Court finds unpersuasive A-1’s argument that Alcan’s alleged
failure to maintain an on-site representative or to provide decent working conditions
support the affirmative defense of impossibility/impracticability. These claims may have
supported a timely breach of contract claim or may support A-1’s estoppel argument,
but
they
do
not
constitute
the
type
of
“event”
that
gives
rise
to
an
impossibility/impracticability defense.
184
See Docket 72 at 9 (Alcan MSJ Impossibility).
185
See Docket 66-1 ¶¶ 97-102 (3/25/13 Nichols Decl.); Docket 66-10 ¶¶ 6, 14 (3/25/13 Barnes
Decl.)
186
Docket 59-5 at 19:18-22:13 (10/1/12 Perry Dep.).
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For the foregoing reasons, Alcan’s motion at Docket 72 for summary judgment
on A-1’s impossibility/impracticability defense will be denied.
D. A-1’s Motion at Docket 77 for Summary Judgment on A-1’s Affirmative
Defense of Estoppel Will Be Denied.
At Docket 77, A-1 moves for summary judgment, arguing that Alcan is estopped
from seeking damages for A-1’s alleged breach of contract because of “Alcan’s prior
and continuing breach” by failing to maintain an on-site representative at Long Island. 187
A-1 further asserts that although Doig was present, he lacked the authority to represent
Alcan. 188
A party seeking equitable estoppel must demonstrate “the assertion of a position
by conduct or word, reasonable reliance thereon by another party, and resulting
prejudice.”189 In this action, estoppel is an affirmative defense, so A-1 bears the burden
of proof. 190
The Court has reviewed the evidence submitted by each party. There is no
question that the first element of the defense is satisfied. The parties contracted to
each maintain “a representative on site” to assist in “day-to-day management.”191 But
187
Docket 77 at 3 (A-1 MSJ on Estoppel).
188
Docket 77 at 3 (A-1 MSJ on Estoppel); see also Docket 66-8 at 13:12-20 (9/22/12 Ward
Dep.); Docket 75-2 (3/21/10 Service Agreement between Alcan and Doig Enterprises). A-1 also
argues that Alcan breached its contract by not offering to use a vessel to bring a replacement
saw disk to Long Island. But Alcan directs the Court to the contract, which does not require
Alcan to provide equipment transportation. Docket 38-10 (Contract).
189
Sidney v. Allstate Ins. Co., 187 P.3d 443, 451 (Alaska 2008) (quoting Maynard v. State Farm
Mut. Auto. Ins. Co., 902 P.2d 1328, 1330 (Alaska 1995)).
190
Agen v. Dep’t of Rev., 945 P.2d 1215, 1220.
191
Docket 38-10 ¶ 27 (Contract).
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neither party strictly complied with that contract clause. Although Nichols assisted in
“set[ting] the camp up” in Long Island, watched the Tigercat operate for several days,
and made subsequent visits to Long Island, he was also often absent. 192 Ward was
present on Long Island every day that the Tigercat was operable, but he was also
absent numerous days. 193
But material questions of fact remain with respect to the other two elements of
estoppel, that is, whether A-1 relied upon this representation in entering into the
contract and whether that reliance caused prejudice. Loushin asserts that A-1 “would
not have agreed to the contract” if Alcan did not agree to provide an on-site
representative. 194
However, the reliability of this assertion depends on Loushin’s
credibility, which the Court cannot determine on summary judgment. And although
Ward asserts that he shared his concerns about the operation of the Tigercat with
Doig, 195 it appears that Ward never complained to Nichols during the days that Nichols
was present, and there is no evidence that Ward ever complained of Nichols’s
absence. 196
Ward did, however, provide updates to Loushin when he had phone
access; 197 but there is no evidence that Loushin passed along any concerns to Alcan.
192
Docket 38-7 at 53:23-54:1, 56:6-8 (8/14/12 Nichols Dep.); Docket 94-2 ¶ 3 (4/29/13 Nichols
Decl.).
193
Docket 85-3 at 34:8-35:1 (9/22/12 Ward Dep.); Docket 94-1 (A-1 Response to Plaintiff’s First
Discovery Requests).
194
Docket 80-1 (4/18/13 Loushin Decl.).
195
Docket 38-11 at 12:11-23, 13:11-23 (9/22/12 Ward Dep.).
196
See, e.g., Docket 94-2 ¶ 7 (4/29/13 Nichols Decl.); Docket 114 at 11 (Alcan Opp. MSJ
Estoppel).
197
Docket 38-11 at 12:20-23, 13:11-14:6 (9/22/12 Ward Dep.).
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Given Ward’s apparent lack of communication with Nichols, a reasonable jury might find
that A-1 cannot demonstrate reliance on Nichols’s presence. And it is unclear how A-1
was prejudiced by Alcan’s lack of an on-site representative, 198 as Ward was able to,
eventually, communicate his concerns about operation of the Tigercat to Loushin, who
could have passed along those concerns.
Accordingly, A-1’s motion for summary judgment on estoppel grounds will be
denied. 199
CONCLUSION
For the foregoing reasons:
1.
A-1’s motion at Docket 58 for summary judgment is DENIED.
2.
Alcan’s motion at Docket 72 for summary judgment on A-1’s affirmative
defense of impossibility is DENIED.
3.
A-1’s motion at Docket 74 for leave to amend its answer and to include
various affirmative defenses and counterclaims is GRANTED in part as
to the affirmative defense of impossibility/impracticability and
otherwise DENIED.
4.
A-1’s motion at Docket 77 for summary judgment on estoppel grounds is
DENIED.
At Docket 111, the parties requested a settlement conference, and the Court granted
that request. 200 The parties requested that the settlement conference occur after the
Court issue a decision on the motions for summary judgment. The parties shall meet
198
Docket 77 at 5-6 (A-1 MSJ on Estoppel).
199
Because the Court denies summary judgment, it is not necessary to address Alcan’s
argument that it has a constitutional right to have this claim heard by a jury. See Docket 114 at
2-3 (Alcan Opp. MSJ Estoppel).
200
Docket 147 (Minute Entry).
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and confer and file a request for settlement conference with the Chambers of the
Honorable Timothy M. Burgess within 7 days of receiving this Order.
DATED at Anchorage, Alaska, this 13th day of November, 2013.
/s/ Sharon L. Gleason
UNITED STATES DISTRICT JUDGE
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