Superior Marble, LLC v. OMYA, Inc.

Filing 57

ORDER granting 44 Motion for Partial Summary Judgment. Further Ordered that Superior is not entitled to punitive damages on its claim for Breach of Duty of Good Faith and Fair Dealing. Signed by Judge Stephen M McNamee on 8/8/2011.(TCA)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Superior Marble, L.L.C. 10 11 Plaintiff, vs. 12 Omya, Inc. 13 Defendant. 14 ) ) ) ) ) ) ) ) ) ) ) ) No. CV 10-00616-PHX-SMM ORDER 15 16 Before the Court is Defendant Omya, Inc.’s (“Omya”) Motion For Partial Summary 17 Judgment on Plaintiff Superior Marble, L.L.C.’s (“Superior”) claim for punitive damages. 18 (Doc. 44). Superior responded (Doc. 51) and Omya replied (Doc. 55). After consideration 19 of the issues, the Court finds the following.1 BACKGROUND 20 21 Until 2010, Superior produced and sold sand, feed supplements, gravel, and specialty 22 products made from marble found in only a few locations in North America, including the 23 Queen Creek Quarry (the “Quarry”) owned and operated by Omya. (Doc. 1 at 2; Doc. 47 at 24 1-2). On November 12, 1999, Superior and Omya entered into a long-term “Arizona Supply 25 26 27 28 1 The parties requested oral argument in connection with this Motion for Partial Summary Judgment. (Docs. 44, 51). The parties have had the opportunity to submit briefing. Accordingly, the Court finds the pending motion suitable for decision without oral argument and the parties’ request is denied. See LRCiv 7.2(f). 1 Agreement” (the “Agreement”), which provided that Omya would supply Superior with 2 marble from the Quarry for at least twenty years. (Doc. 1 at 2; Doc. 47 at 2; Doc. 47-4 at 5). 3 The Quarry is located on U.S. Forest Service land in Pinal County, Arizona. (Doc. 1 4 at 3; Doc. 47 at 2). Pursuant to federal regulations, Omya needed approval from the U.S. 5 Forest Service (the “Forest Service”) to operate and mine the Quarry. (Doc. 46 at 6; Doc. 47- 6 5 at 2). In 1997, Omya purchased the Quarry and asserts that it initially operated the Quarry 7 under existing temporary permits. (Doc. 47-5 at 2). By 1999, Omya had discussed with the 8 Forest Service a plan to expand the Quarry’s operations. (Doc. 47-5 at 2). On November 1, 9 2002, the Forest Service issued a Decision Notice and Finding of No Significant Impact (the 10 “Decision”) pertaining to Omya’s planned Quarry expansion. (Doc. 47 at 9). The Decision 11 allowed Omya to continue mining and processing marble and to expand operations to an 12 additional 123 acres of Forest Service land. (Doc. 47-7 at 2). 13 The Decision also required Omya to comply with certain conditions, including that 14 Omya pave an access road to the Quarry. (Doc. 47-7 at 2). In November 2003, Omya 15 submitted and the Forest Service approved a revised Plan of Operation (the “Plan”). (Doc. 16 14 at 2; Doc. 47-1 at 6). In 2008, work commenced on the access road with an estimated cost 17 of $885,000. (Doc. 47 at 10). Omya avers that by about October 2008, it became apparent 18 that implementing the Plan would cost about $2.5 million. (Doc. 47 at 11; Doc. 47-5 at 5). 19 On February 6, 2009, citing the unexpected cost of implementing the Plan, Omya gave notice 20 to Superior that it was halting operations at the Quarry. (Doc. 47 at 7). Omya continued to 21 supply materials to Superior until about September 22, 2009, when Omya gave notice to 22 Superior that no further deliveries would be made. (Doc. 47 at 7). 23 On March 19, 2010, Superior filed its Complaint alleging Breach of Contract and 24 Breach of Duty of Good Faith and Fair Dealing and seeking punitive damages for the bad 25 faith claim. (Doc. 1). Omya’s Answer raised the affirmative defense that Paragraph 3(b) of 26 the Agreement (“Paragraph 3(b)”) precludes Omya from liability for suspension of 27 operations because Omya was obligated to incur significant liability and expense in order to 28 obtain and maintain a permit to operate the Quarry. (Doc. 14 at 6, 8). The Court granted -2- 1 Superior’s Motion for Partial Summary Judgment finding that Paragraph 3(b) does not 2 excuse Omya’s alleged failure to perform its duties under the Agreement. (Doc. 37). On May 3 27, 2011, Omya filed this Motion for Partial Summary Judgment to dispose of Superior’s 4 claim for punitive damages. (Doc. 44). 5 LEGAL STANDARDS 6 A court must grant summary judgment if the pleadings and supporting documents, 7 viewed in the light most favorable to the nonmoving party, “show that there is no genuine 8 dispute as to any material fact and the movant is entitled to judgment as a matter of law.” 9 Fed. R. Civ. P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Jesinger v. 10 Nev. Fed. Credit Union, 24 F.3d 1127, 1130 (9th Cir. 1994). Substantive law determines 11 which facts are material. See Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986); see also 12 Jesinger, 24 F.3d at 1130. “Only disputes over facts that might affect the outcome of the suit 13 under the governing law will properly preclude the entry of summary judgment.” Anderson, 14 477 U.S. at 248. The dispute must also be genuine, that is, the evidence must be “such that 15 a reasonable jury could return a verdict for the nonmoving party.” Id.; see Jesinger, 24 F.3d 16 at 1130. 17 A principal purpose of summary judgment is “to isolate and dispose of factually 18 unsupported claims.” Celotex, 477 U.S. at 323-24. Summary judgment is appropriate against 19 a party who “fails to make a showing sufficient to establish the existence of an element 20 essential to that party’s case, and on which that party will bear the burden of proof at trial.” 21 Id. at 322; see also Citadel Holding Corp. v. Roven, 26 F.3d 960, 964 (9th Cir. 1994). The 22 moving party need not disprove matters on which the opponent has the burden of proof at 23 trial. See Celotex, 477 U.S. at 323-24. The party opposing summary judgment need not 24 produce evidence “in a form that would be admissible at trial in order to avoid summary 25 judgment.” Id. at 324. However, the nonmovant must set out specific facts showing a genuine 26 dispute for trial. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 27 585-88 (1986); Brinson v. Linda Rose Joint Venture, 53 F.3d 1044, 1049 (9th Cir. 1995). 28 -3- 1 DISCUSSION 2 In its Motion for Partial Summary Judgment, Omya asserts that because Superior’s 3 claim for breach of the implied covenant of good faith and fair dealing sounds in contract 4 rather than in tort, punitive damages are not recoverable as a matter of law. (Doc 44 at 6). 5 Superior contends that it can bring a claim for tortious breach of the implied covenant of 6 good faith and fair dealing because a “special relationship” can be found to exist “where 7 restricting recovery to contract damages only would provide more of an incentive for breach 8 of contract than for its performance.” (Doc. 51 at 3 (citing Rawlings v. Apodaca, 726 P.2d 9 565, 577 (Ariz. 1986))). Omya responded that Rawlings does not stand for the proposition 10 that a “special relationship” exists simply because “a party to the contract might believe that 11 it was better off breaching a contract than performing.” (Doc. 55 at 8). 12 Unless there is an accompanying tort, punitive damages will not be awarded in 13 contract actions. Miscione v. Bishop, 636 P.2d 149, 152-53 (Ariz. Ct. App. 1981). Generally, 14 a plaintiff’s remedy for breach of the implied covenant of good faith and fair dealing is 15 limited to the contract itself absent a “special relationship” between the parties “arising from 16 elements of public interest, adhesion, and fiduciary responsibility.” Burkons v. Ticor Title 17 Ins. Co. of Cal., 813 P.2d 710, 720 (Ariz. 1991). Such a “special relationship” usually 18 involves situations where the contract “is one in which the plaintiff seeks something more 19 than commercial advantage or profit from the defendant.” Rawlings, 726 P.2d at 575. 20 The Court finds that Superior has failed to demonstrate the necessary special 21 relationship to support a claim for the breach of the implied covenant of good faith and fair 22 dealing in tort that would warrant punitive damages. There is no evidence that Superior has 23 a special relationship with Omya in which it “sought protection or security rather than profit 24 or advantage” from Omya. Id. Rather, Omya and Superior are merely two business entities 25 who had entered into an arms-length commercial agreement. Contrary to Superior’s 26 argument, a special relationship does not exist simply because restricting its recovery to 27 contract damages could conceivably encourage breach. Thus, as a matter of law, punitive 28 damages cannot be awarded in this case. -4- 1 2 3 4 5 6 CONCLUSION IT IS HEREBY ORDERED GRANTING Omya’s Motion For Partial Summary Judgment (Doc. 44). IT IS FURTHER ORDERED that Superior is not entitled to punitive damages on its claim for Breach of Duty of Good Faith and Fair Dealing. DATED this 8th day of August, 2011. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -5-

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