D Stadtler Trust 2015 Trust et al v. Gorrie et al

Filing 280

ORDER - 1) The Stadtler Parties' motion for summary judgment on the Gorrie Parties' counterclaims and partial summary judgment on their own claims (Doc. 255 ) is granted in part and denied in part. 2) Houchin's motion for summary judg ment on the Gorrie Parties' third-party claims (Doc. 256 ) is granted in part and denied in part. 3) The Gorrie Parties' motion for partial summary judgment on the Stadtler Parties' claims and Houchin's third-party counterclaims (Doc. 257 ) is granted in part and denied in part. See order for complete details. Signed by Judge Dominic W. Lanza on 8/27/24. (NKS)

1

WO

2
3
4
5
6

IN THE UNITED STATES DISTRICT COURT

7

FOR THE DISTRICT OF ARIZONA

8
9

D Stadtler Trust 2015 Trust, et al.,
Plaintiffs,

10

Plaintiff

No. CV-22-00314-PHX-DWL
ORDER

11
12
13

v.
Pamela Gorrie, et al.
Defendants.

14
15

In this action, Daniel Stadtler (“Stadtler”), in his individual capacity and in his

16

capacity as trustee for the D. Stadtler Trust 2015 (“the Trust”) (together, “the Stadtler

17

Parties”), has sued Pamela Gorrie (“Gorrie”), Innovative Global Distributions, LLC

18

(“IGD”), Natural Footprints Organic Farm LP (“NFOF”), and NFF Management LLC

19

(“NFF”) (collectively, “the Gorrie Parties”). (Doc. 131.) The Gorrie Parties have, in turn,

20

asserted counterclaims against the Stadtler Parties. (Doc. 77.) Additionally, IGD and

21

Gorrie (together, “the IGD Parties”) have asserted third-party claims against William

22

Houchin (“Houchin”), who has asserted third-party counterclaims against the IGD Parties.

23
24
25
26
27
28

(Doc. 134.) At the root of this sprawling dispute is a failed hemp operation in Salome,
Arizona.
Now pending before the Court are summary judgment motions filed by all three sets
of litigants. (Docs. 255-257.) For the reasons that follow, each motion is granted in part
and denied in part.
…

1
2

BACKGROUND
I.

Undisputed Background Facts

3

The Trust owned a 540-acre parcel of agricultural land situated at 68562 56th Street,

4

Salome, Arizona (the “Farm”). (Doc. 17-1 at 2; Doc. 110-1 ¶ 4.) Stadtler hired non-party

5

William Dawson (“Dawson”) to broker a potential sale of the Farm. (Doc. 110-1 ¶ 5; Doc.

6

17-1 at 2.)

7
8

In November 2019, Dawson, on behalf of Stadtler, began discussing a potential sale
of the Farm with Gorrie. (Doc. 110-1 ¶¶ 5-8.)

9

On January 17, 2020, the Trust and IGD executed a real estate purchase contract

10

(the “Farm Purchase Agreement”) under which IGD would buy the Farm from the Trust

11

for $1.4 million. (Doc. 17-1.) Under the Farm Purchase Agreement, the Trust provided

12

seller-carryback financing for a large portion of the purchase price—IGD agreed to pay

13

$20,000 upon signing the agreement, $280,000 at closing, and $1.1 million over the

14

following 18 months according to a payment schedule. (Id. at 2.)

15

On February 11, 2020, IGD and the Trust executed an Addendum to the Farm

16

Purchase Agreement (the “Purchase Addendum”). (Doc. 17-3.) The Purchase Addendum

17

required IGD to pay $60,000 at closing and an additional $240,000 within 30 days of

18

closing. (Id.)

19

On February 27, 2020, the sale closed. (Doc. 110-1 ¶ 9; Doc. 257-2 at 8). Around

20

the same time, the Trust and IGD executed a promissory note for $1.34 million (the

21

“Promissory Note”) that was secured by a deed of trust (the “Deed of Trust”) with IGD as

22

payor and the Trust as beneficiary. (Doc. 17-2.)

23

Although the parties dispute why, they agree that the hemp operation the Gorrie

24

Parties intended to operate on the Farm struggled to obtain funding and that IGD did not

25

make the $240,000 payment within 30 days of closing. (Doc. 77 at 7 ¶¶ 23-26; Doc. 257-

26

2 at 19-21.)

27

On April 10, 2020, the Trust and NFOF executed a revenue-sharing agreement (the

28

“April 2020 RSA”). (Doc. 17-4.) At that time, NFOF was leasing the Farm from IGD.

-2-

1

(Id. at 2.) Under the April 2020 RSA, NFOF would pay the Trust “1% of the net revenue

2

from the harvest, process, and sale of hemp products from the operation of the Farm” for

3

up to five years, but with a maximum allocation of $1 million per year. (Id.)

4

On January 10, 2021, IGD and Stadtler signed another revenue-sharing agreement

5

(the “Three Acre RSA”). (Doc. 17-5 at 1-4.) Under the Three Acre RSA, IGD agreed to

6

finance the hemp operations on a three-acre parcel of the Farm and provide a UCC-1 lien

7

on the hemp crop from that parcel in exchange for Stadtler providing a $75,000 line of

8

credit, which IGD would repay with revenue generated by the three-acre operation. (Id.)

9

The parties agreed that “[t]he remaining monies from the sale of the hemp product … shall

10

be split equally between the parties.” (Id. at 3.) However, IGD did not subsequently

11

register the UCC-1 lien. (Doc. 255-2 at 5.)

12

On January 14, 2021, Stadtler, Gorrie, and Dawson executed a related document

13

entitled “Personal Loan and Agreement.” (Doc. 17-5 at 5-7.) Under the Personal Loan

14

and Agreement, Gorrie and Dawson agreed to personally guarantee Stadtler’s $75,000 line

15

of credit to IGD. (Id.)

16
17

From January 10, 2021 to April 30, 2021, Stadtler provided at least $62,575 in
funding to IGD. (Doc. 255-3 at 33.)

18

On May 11, 2021, IGD and Stadtler executed a document entitled “Addendum to

19

the Original Personal Loan and Agreement, Revenue Sharing Agreement between Pamela

20

J. Gorrie dba [IGD] (the Borrower) and Dan Stadtler (the Lender) executed January 14,

21

2021 between the parties” (hereinafter, the “Three Acre Addendum”). (Doc. 17-7.) The

22

Three Acre Addendum stated that Stadtler had already provided more than $100,000 in

23

funding and that hemp cultivation on the three-acre parcel had been unsuccessful. (Id. at

24

2.) The Three Acre Addendum stated that Stadtler “will agree to additional funding of the

25

crop” not to exceed $60,000 and that Gorrie, Stadtler, and Dawson would “provid[e]

26

[Stadtler] with an accounting of why additional funding is needed.” (Id. at 4.)

27

On May 26, 2021, IGD and Houchin (Stadtler’s nephew) executed a joint-venture

28

agreement (the “JVA”) under which Houchin would fund hemp cultivation on a 20-acre

-3-

1

portion of the Farm. (Doc. 77-5; Doc. 257-6 at 29-32.) Two days later, IGD and Houchin

2

executed an Addendum to the JVA (the “JVA Addendum”) modifying Houchin’s

3

stipulated capital contributions. (Doc. 77-6.) Houchin ultimately made $72,300 in capital

4

contributions to IGD. (Doc. 77 at 26 ¶ 23; Doc. 270-4 at 8.)
For reasons that are disputed, the Gorrie Parties’ relationships with the Stadtler

5
6

Parties and Houchin ultimately fell apart, leading to this litigation.

7

II.

8
9

Procedural History
On February 11, 2022, the Stadtler Parties filed a complaint in La Paz County

Superior Court, naming the Gorrie Parties as defendants. (Doc. 1-2 at 10-27.)

10

On February 27, 2022, Gorrie removed the action to this Court. (Doc. 1.)1

11

On May 2, 2022, the Stadtler Parties filed a First Amended Complaint (“FAC”).

12

(Doc. 25.)

13

On May 27, 2022, the Gorrie Parties answered the FAC. (Doc. 38.) In the same

14

pleading, the Gorrie Parties asserted counterclaims against the Stadtler Parties and the IGD

15

Parties asserted third-party claims against Houchin. (Doc. 38.) That same day, the Gorrie

16

Parties also moved for a temporary restraining order (“TRO”) and preliminary injunction

17

(“PI”) blocking the Trust from pursuing a trustee’s sale of the Farm, which was scheduled

18

for June 9, 2022. (Doc. 39.) The trustee’s sale was later postponed. (Doc. 60.)

19
20

On July 7, 2022, after an evidentiary hearing (Doc. 70), the Court orally denied the
Gorrie Parties’ TRO and PI request. (Doc. 82 at 198-206.)

21

On July 14, 2022, the Gorrie Parties filed their operative pleading, the First

22

Amended Answer, Counterclaim and Third-Party Complaint. (Doc. 77.) In it, the Gorrie

23

Parties assert the following 10 counterclaims against the Stadtler Parties: (1) breach of the

24

April 2020 RSA, Deed of Trust, Promissory Note, and Purchase Addendum; (2)

25

declaratory judgment that the April 2020 RSA modified the terms of the Promissory Note,

26

Deed of Trust, and Purchase Addendum; (3) breach of the Three Acre RSA; (4) fraudulent

27
28

The Stadtler Parties challenged the validity of Gorrie’s removal effort (Doc. 11), but
the Court eventually denied the Stadtler Parties’ motion to remand (Doc. 21).
1

-4-

1

inducement; (5) tortious interference with contract; (6) breach of the implied covenant of

2

good faith and fair dealing; (7) injunctive relief; (8) negligence per se; (9) estoppel; and

3

(10) breach of fiduciary duty. (Id. at 17-24.) In the same pleading, the IGD Parties assert

4

the following five third-party claims against Houchin: (1) breach of the JVA; (2) breach of

5

the implied covenant of good faith and fair dealing; (3) declaratory judgment; (4) tortious

6

interference with business expectancy; and (5) breach of fiduciary duty. (Id. at 27-30).

7

On December 5, 2022, the Stadtler Parties filed their operative pleading, the Second

8

Amended Complaint (“SAC”). (Doc. 131.)2 It asserts the following six claims against the

9

Gorrie Parties: (1) breach of the Three Acre RSA and Personal Loan, as amended by the

10

Three Acre Addendum; (2) breach of Gorrie’s personal guarantee of the Personal Loan;

11

(3) unjust enrichment; (4) fraudulent inducement; (5) negligent misrepresentation; and (6)

12

conversion/replevin. (Id. at 27-35.)

13

On December 9, 2022, Houchin filed his operative pleading, the First Amended

14

Answer to Third-Party Complaint and Third-Party Counterclaim. (Doc. 134.) It asserts

15

the following six third-party counterclaims against the IGD Parties: (1) breach of the JVA;

16

(2) breach of the implied covenant of good faith and fair dealing; (3) unjust enrichment;

17

(4) fraudulent inducement; (5) negligent misrepresentation; and (6) breach of fiduciary

18

duty. (Id. at 19-24.)

19
20

On January 6, 2023, the Gorrie Parties filed a second motion for a TRO and PI,
again seeking to block the Trust from pursuing a trustee’s sale of the Farm. (Doc. 149.)

21
22

On January 11, 2023, after a hearing (Doc. 157), the Court denied this request.
(Doc. 184 at 39-47.)
On January 12, 2023, the trustee’s sale of the Farm occurred. (Doc. 179-1; Doc.

23
24

257-1.)

25

On March 14, 2023, after a slew of motions practice, the Court issued a lengthy

26

order that, among other things, dismissed the Gorrie Parties’ fifth, seventh, and eighth

27

2

28

On October 14, 2022, the Stadtler Parties filed a motion for leave to file the SAC.
(Doc. 103.) On November 29, 2022, after extensive briefing (Docs. 109, 114, 115, 123,
126), the Court granted the Stadtler Parties’ amendment request. (Doc. 129.)
-5-

1

counterclaims against the Stadtler Parties. (Doc. 203 at 45-46.)

2

On October 13, 2023, the Stadtler Parties’ moved for summary judgment on the

3

Gorrie Parties’ remaining counterclaims and partial summary judgment on their own

4

claims (Doc. 255); Houchin moved for summary judgment on the IGD Parties’ third-party

5

claims (Doc. 256); and the Gorrie Parties moved for partial summary judgment on the

6

Stadtler Parties’ claims and Houchin’s third-party counterclaims (Doc. 257). These

7

motions are now fully briefed. (Docs. 269-71, 277-79.)3

8
9

DISCUSSION
I.

Legal Standard

10

“The court shall grant summary judgment if [a] movant shows that there is no

11

genuine dispute as to any material fact and the movant is entitled to judgment as a matter

12

of law.” Fed. R. Civ. P. 56(a). “A fact is ‘material’ only if it might affect the outcome of

13

the case, and a dispute is ‘genuine’ only if a reasonable trier of fact could resolve the issue

14

in the non-movant’s favor.” Fresno Motors, LLC v. Mercedes Benz USA, LLC, 771 F.3d

15

1119, 1125 (9th Cir. 2014). The court “must view the evidence in the light most favorable

16

to the nonmoving party and draw all reasonable inference in the nonmoving party’s favor.”

17

Rookaird v. BNSF Ry. Co., 908 F.3d 451, 459 (9th Cir. 2018). “Summary judgment is

18

improper where divergent ultimate inferences may reasonably be drawn from the

19

undisputed facts.” Fresno Motors, 771 F.3d at 1125 (internal quotation marks omitted).

20

A party moving for summary judgment “bears the initial responsibility of informing

21

the district court of the basis for its motion, and identifying those portions of ‘the pleadings,

22

depositions, answers to interrogatories, and admissions on file, together with the affidavits,

23

if any,’ which it believes demonstrate the absence of a genuine issue of material fact.”

24

Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting Fed. R. Civ. P. 56(c)). See

25

also Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir. 2000).

26
27
28

There is no issue for trial unless enough evidence favors the non-moving party.
3

Only Houchin requested for oral argument. (Docs. 256, 270, 278.) That request is
denied because the issues are fully briefed and argument would not aid the decisional
process. See LRCiv 7.2(f).
-6-

1

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). “If the evidence is merely

2

colorable or is not significantly probative, summary judgment may be granted.” Id. at 249-

3

50 (citations omitted). At the same time, the evidence of the non-movant is “to be believed,

4

and all justifiable inferences are to be drawn in [its] favor.” Id. at 255. “[I]n ruling on a

5

motion for summary judgment, the judge must view the evidence presented through the

6

prism of the substantive evidentiary burden.” Id. at 254. Thus, “the trial judge’s summary

7

judgment inquiry as to whether a genuine issue exists will be whether the evidence

8

presented is such that a jury applying that evidentiary standard could reasonably find for

9

either the plaintiff or the defendant.” Id. at 255.

10

“[W]hen parties submit cross-motions for summary judgment, [e]ach motion must

11

be considered on its own merits,” but the Court must consider all evidence submitted in

12

support of both cross-motions when separately reviewing the merits of each motion. Fair

13

Hous. Council of Riverside Cnty., Inc. v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir.

14

2001) (internal quotation marks omitted). For “the party with the burden of persuasion at

15

trial” to succeed in obtaining summary judgment, it “must establish beyond controversy

16

every essential element” of each claim on which summary judgment is sought. S. Cal. Gas

17

Co. v. City of Santa Ana, 336 F.3d 885, 888 (9th Cir. 2003) (internal quotation marks

18

omitted). The party without the burden of persuasion at trial is entitled to summary

19

judgment where it establishes that the party with the burden of persuasion will be unable

20

to prove at least one element of its claim in light of the undisputed facts. Celotex Corp.,

21

477 U.S. at 322-23. This distinction reflects that the burden is ultimately on the proponent

22

of each claim to prove it. Id. (“Rule 56(c) mandates the entry of summary judgment, after

23

adequate time for discovery and upon motion, against a party who fails to make a showing

24

sufficient to establish the existence of an element essential to that party’s case, and on

25

which that party will bear the burden of proof at trial. In such a situation, there can be ‘no

26

genuine issue as to any material fact,’ since a complete failure of proof concerning an

27

essential element of the nonmoving party’s case necessarily renders all other facts

28

immaterial.”).

-7-

1

Where the Court “does not grant all the relief requested by the motion, it may enter

2

an order stating any material fact—including an item of damages or other relief—that is

3

not genuinely in dispute and treating the fact as established in the case.” Fed. R. Civ. P.

4

56(g). However, where “it is readily apparent that the court cannot grant all the relief

5

requested by the motion, it may properly decide that the cost of determining whether some

6

potential fact disputes may be eliminated by summary disposition is greater than the cost

7

of resolving those disputes by other means, including trial. Even if the court believes that

8

a fact is not genuinely in dispute it may refrain from ordering that the fact be treated as

9

established.” Fed. R. Civ. P. 56(g) (2010 amendments advisory comments).

10
11
12

II.

The Stadtler Parties’ Motion
A.

The Gorrie Parties’ Counterclaims
1.

The Parties’ Arguments

13

Although the Stadtler Parties indicate at the outset of their motion that they are

14

seeking summary judgment on “each of the counterclaims filed by” the Gorrie Parties

15

(Doc. 255 at 2), the Stadtler Parties state in their first section heading that they are only

16

seeking summary judgment on Counterclaims One, Four, Six, and Ten. (Id. at 16.) The

17

Stadtler Parties argue that damages are an essential element of each of those counterclaims

18

and “the Gorrie Parties have failed to produce evidence sufficient to establish their alleged

19

lost profits damages with reasonable certainty” and “have no expert or witness to

20

competently testify as to damages and have offered only varying and highly speculative

21

estimates of their damages.” (Id. at 16-19.) More specifically, the Stadtler Parties contend

22

that (1) “the Gorrie Parties have failed to submit sufficient evidence to establish a

23

reasonable certainty that they could plant, germinate, grow, and harvest any crops”; and

24

(2) “the Gorrie Parties have failed to submit sufficient evidence to establish with reasonable

25

certainty the net profits that they allegedly lost.” (Id. at 19-22.) The Stadtler Parties also

26

argue that because Counterclaim Two is simply a request for declaratory relief concerning

27

Counterclaim One, and Counterclaim One has now been shown to “fail[] as a matter of

28

law,” it follows that Counterclaim Two “is moot.” (Id. at 26.) Finally, as an alternative

-8-

1

basis for seeking summary judgment on Counterclaims One and Two, the Stadtler Parties

2

argue that (1) “the April 2020 RSA was not sufficiently clear and certain to effectuate a

3

valid modification for purposes of the Statute of Frauds”; and (2) “[a] loan agreement may

4

not be modified by a subsequent signed writing that does not expressly reference the

5

modification to the original agreement.” (Id. at 22-26.)

6

The Gorrie Parties begin by objecting to two categories of evidence cited in the

7

Stadtler Parties’ motion. First, the Gorrie Parties object to the expert report of Scott Evans

8

(the “Evans Report”) because it is unsworn. (Doc. 271 at 2-3.) The Gorrie Parties also

9

contend the Evans Report is inadmissible “because it fails to attach copies of the documents

10

to which it refers.” (Id.) Second, the Gorrie Parties object, on hearsay grounds, to the

11

Stadtler Parties’ references to certain comments made by Bankruptcy Judge Collins during

12

IGD’s bankruptcy proceeding. (Id. at 3.) Next, the Gorrie Parties provide a lengthy

13

narrative of the facts of the case, which is supported by citations to an unsigned declaration

14

from Gorrie. (Id. at 3-9, citing Doc. 271-1 [unsigned Gorrie declaration].) Next, the Gorrie

15

Parties contend “there is ample evidence to demonstrate the damages occasioned by both

16

Stadtler and Houchin’s breaches in this matter.” (Id. at 9-13.) Next, the Gorrie Parties

17

dispute several of the Stadtler Parties’ interpretations of the April 2020 RSA and Three

18

Acre RSA (id. at 13-14) and several related factual assertions (id. at 14-16). Finally, the

19

Gorrie Parties contend that “the statute of frauds is inapplicable because there is a writing

20

and a course of dealing.” (Id. at 16-18.)

21

In reply, the Stadtler Parties begin by objecting to Gorrie’s unsigned declaration,

22

which they contend provides almost all of the evidentiary foundation for the Gorrie Parties’

23

arguments. (Doc. 277 at 2-3.) The Stadtler Parties further contend that “the Gorrie Parties’

24

other supporting evidence is inadmissible where not properly authenticated.” (Id. at 4-5.)

25

The Stadtler Parties then reiterate that “summary judgment . . . on counts 1, 4, 6, and 10 of

26

the Gorrie Parties’ amended counterclaim . . . is warranted . . . where the Gorrie Parties

27

have failed to produce evidence sufficient to establish their alleged lost profits damages

28

with reasonable certainty.” (Id. at 5-8.) Alternatively, the Stadtler Parties reiterate that

-9-

1

“summary judgment is mandated on Counts One and Two . . . based on the statute of

2

frauds.” (Id. at 8-9.) The Stadtler Parties also attach a signed declaration from Evans. (Id.

3

at 12, citing Doc. 277-1 [signed Evans declaration].) As for Judge Collins’s comments,

4

the Stadtler Parties contend they were “not presented for the truth of the matter discussed

5

therein.” (Id.)

6

2.

Evidentiary Objections

7

The Gorrie Parties’ evidentiary objections are unavailing. Although the Evans

8

Report was not signed under penalty of perjury or initially accompanied by a declaration

9

from Evans, the Stadtler Parties provided a declaration from Evans as an attachment to

10

their reply. See, e.g., Am. Fed’n of Musicians of United States & Canada v. Paramount

11

Pictures Corp., 903 F.3d 968, 976-77 (9th Cir. 2018) (“For purposes of Federal Rule of

12

Civil Procedure 56(c)(4), there is no meaningful distinction between an expert report

13

accompanied by a sworn declaration and an expert report that is itself sworn.”) (footnote

14

omitted); AMC, LLC v. Nw. Farm Food Coop., 481 F.Supp.3d 1153, 1160 n.1 (D. Or. 2020)

15

(“In response to NW Farm’s objection, AMC authenticated Dr. Hildebrandt’s reports by

16

submitting Dr. Hildebrandt’s declaration in which he states under penalty of perjury that

17

the Exhibits to which NW Farm objected are true and correct copies of his reports and that

18

he is prepared to testify to his opinions at trial.”) (cleaned up); Martin v. City of San Jose,

19

2020 WL 5910078, *4 n.9 (N.D. Cal. 2020) (“Defendants have generally objected to the

20

Smith expert report as well as other reports from Plaintiffs’ experts because they were

21

unsworn, i.e., not attached to declarations from the experts. . . . Mr. Martin has now cured

22

any problems with the submission of expert declarations as part of his reply brief.”);

23

Humphreys & Partners Architects, L.P. v. Lessard Design, Inc., 790 F.3d 532, 539 (4th

24

Cir. 2015) (“[S]ubsequent verification or reaffirmation of an unsworn expert’s report,

25

either by affidavit or deposition, allows the court to consider the unsworn expert’s report

26

on a motion for summary judgment.”) (citation omitted). Evans’s declaration meets the

27

requirements of Rule 56(c)(4) because it is signed under penalty of perjury and “satisfies

28

the functional concerns behind Rule 56(c)(4)—that [Evans] is competent to testify to the

- 10 -

1

conclusions and opinions in the report.” Am. Fed’n of Musicians, 903 F.3d at 977.

2

The Gorrie Parties also contend that Evans failed to provide an appendix identifying

3

the documents he reviewed (Doc. 271 at 2), but Evans did provide such an appendix. (Doc.

4

255-3 at 29-32.) Nor is there any merit to the Gorrie Parties’ contention that Evans should

5

have provided copies of every document he reviewed. (Doc. 271 at 2.) Appendix B

6

identifies the documents Evans reviewed, and it appears those documents were either

7

publicly filed, otherwise publicly available, or produced in discovery. (Doc. 255-3 at 29-

8

32.) Although the Gorrie Parties complain that the failure to attach documents leaves the

9

Court “to assume [the Evans Report] accurately quotes or characterized the documents,”

10

the Gorrie Parties have not identified a single document they contend was misquoted or

11

mischaracterized or not made available to then. Cf. Brewster v. City of Los Angeles, 672

12

F.Supp.3d 872, 1007 (C.D. Cal. 2023) (“Defendants’ first argument, that Mr. Cook’s

13

analysis is flawed and inadmissible because the underlying VIIC data is not attached to the

14

Dwight Cook Declaration, is disingenuous. First of all, it is undisputed that the VIIC data

15

and Plaintiffs’ reliance upon it was provided to Defendants’ Counsel in July 2019, when

16

Plaintiffs first moved for class certification, and Plaintiffs re-sent it to Defendants on

17

January 24, 2023. As Defendants surely are aware, there is a good reason that Plaintiffs

18

could not have directly attached the data files to the Dwight Cook Declaration, which was

19

submitted in PDF format: the VIIC data is contained in enormous Microsoft Excel

20

spreadsheets. . . . Defendants have reviewed the data themselves, and because they make

21

no argument to the contrary, the Court infers that they found no problem with how either

22

of Plaintiffs’ experts used the dataset.”) (citation omitted).

23

Next, as for the statements by Judge Collins during IGD’s bankruptcy proceeding,

24

the Court agrees with the Stadtler Parties that such statements need not be “stricken”

25

because they are not being offered for the truth of the matter asserted (instead, they are

26

only offered to provide context and background) and do not, at any rate, provide the

27

foundation for any of the rulings in this order.

28

This leaves the Stadtler Parties’ objection to Gorrie’s unsigned declaration. That

- 11 -

1

objection has merit. An unsigned declaration carries no evidentiary weight at summary

2

judgment. See, e.g., Fed. R. Civ. P. 56(c)(1)(A); 28 U.S.C. § 1746; United States v. Ritchie,

3

342 F.3d 903, 909 (9th Cir. 2003) (“[I]n ruling on a motion for summary judgment, a court

4

may substitute an unsworn declaration for a sworn affidavit if the declaration complies

5

with 28 U.S.C. § 1746. But such documents must be . . . subscribed by the declarant.”)

6

(cleaned up); Young v. Allstate Co., 662 F. Supp. 3d 1066, 1072 (C.D. Cal. 2023)

7

(“Young’s declarations are fatally defective—neither was signed under penalty of perjury.

8

. . . Only sworn affidavits—or unsworn declarations that are, inter alia, subscribed under

9

penalty of perjury, pursuant [to] 28 U.S.C. § 1746—satisfy the requirement of Rule

10

56(c)(4).”). Also, unlike the Stadtler Parties in relation to Evans, the Gorrie Parties made

11

no effort to rectify their submission of an unsigned declaration after the deficiency was

12

called to their attention. Young, 662 F. Supp. 3d at 1073 (“If Young’s failure to properly

13

subscribe the declarations under penalty of perjury was but a mere oversight, the Court

14

would have expected the Youngs’ counsel to have sought immediate ex parte relief to

15

obtain leave of Court to file amended and properly subscribed declarations. Allstate pointed

16

out the subscription deficiency in its Reply papers filed on Monday, March 13, 2023. The

17

Court has yet to receive anything from the Youngs.”). Thus, the Court will not consider

18

Gorrie’s unsigned declaration.4

19

3.

20

Analysis
a.

Damages

21

As an initial matter, although the Stadtler Parties’ motion papers contain a few

22

passages that can be read as suggesting they are seeking summary judgment on all of the

23

Gorrie Parties’ remaining counterclaims (except Counterclaim Two) due to a lack of

24

damages, the relevant section heading states that the Stadtler Parties are only seeking

25

summary judgment on Counterclaims One, Four, Six, and Ten due to a lack of damages.

26

(Doc. 255 at 16; Doc. 277 at 5.) The Court will limit its analysis accordingly.

27

4

28

The Stadtler Parties also object to Exhibit A (Doc. 271-1 at 10-14) to the declaration.
The Court need not resolve that objection because consideration of that exhibit does not
affect the disposition of the motions being resolved here.
- 12 -

1

The four counterclaims at issue are for breach of contract (Counterclaim One), fraud

2

in the inducement (Counterclaim Four), breach of the implied covenant of good faith and

3

fair dealing (Counterclaim Six), and breach of fiduciary duty (Counterclaim Ten). As the

4

Stadtler Parties correctly note, damages are an essential element of each of those claims.

5

Chartone, Inc. v. Bernini, 83 P.3d 1103, 1111 (Ariz. Ct. App. 2004) (breach of contract);

6

Meritage Homes Corp. v. Hancock, 522 F. Supp. 2d 1203, 1218 (D. Ariz. 2007) (fraudulent

7

inducement); United Dairymen of Ariz. v. Schugg, 128 P.3d 756, 761-62 (Ariz. Ct. App.

8

2006) (breach of the implied covenant of good faith and fair dealing); Stazenski v.

9

Coughlin, 2015 WL 3917039, *4 (Ariz. Ct. App. 2015) (breach of fiduciary duty). The

10

Gorrie Parties do not argue otherwise. Thus, to survive summary judgment with respect to

11

those counterclaims, the Gorrie Parties must come forward with sufficient evidence to

12

establish a triable issue of fact as to damages.

13

Under Arizona law, because “[t]he burden [i]s on the plaintiffs to show the amount

14

of their damages with reasonable certainty,” the “plaintiff’s evidence” must “provide some

15

basis for . . . an approximately accurate estimate.” Gilmore v. Cohen, 386 P.2d 81, 82

16

(Ariz. 1963). “The requirement of reasonable certainty in establishing the amount of

17

damages applies with added force where a loss of future profits is alleged . . . because such

18

loss is capable of proof more closely approximating mathematical precision.” Id. at 82-83

19

(cleaned up). In such cases, the plaintiff must come forward with evidence that would

20

allow the jury to reasonably estimate both (1) how much product the plaintiff would have

21

succeeded in selling; and (2) how much profit the plaintiff would have made from those

22

sales. Rancho Pescado, Inc. v. Nw. Mut. Life Ins. Co., 680 P.2d 1235, 1245-47 (Ariz. Ct.

23

App. 1984) (“Rancho Pescado had the burden of proving with reasonable certainty the fact

24

that it could raise catfish in the canal and that it could thereafter market them at a profit as

25

well as proving with reasonable certainty how much profit it would have realized. . . . [W]e

26

view the evidence as a whole as amounting to nothing more than conjecture and

27

speculation. The picture which emerges is one of an intelligent and enterprising individual

28

who had an ambitious idea to take advantage of existing waterways to raise and sell catfish.

- 13 -

1

However, the evidence is insufficient to prove that he would have succeeded in this highly

2

risky industry. . . . We are of the opinion that the jury did not have sufficient evidence to

3

make a rational judgment as to the fact that Rancho Pescado would have been successful

4

and if so as to the amount of lost future profits.”). As for the latter requirement, profit

5

means revenue minus expenses—a mere estimate of expected revenue is alone insufficient.

6

See, e.g., Rancho Pescado, 680 P.2d at 1245 (“[R]easonable certainty may be provided

7

when the plaintiff devises some reasonable method of computing his net loss.”) (emphasis

8

added); Gilliland v. Rodriquez, 268 P.2d 334, 337 (Ariz. 1954) (“The correct measure of

9

damage to be applied herein is the difference between the value of the probable yield when

10

ready for market and the expense of producing, harvesting the marketing.”); United Verde

11

Copper Co. v. Ralston, 46 F.2d 1, 2 (9th Cir. 1931) (“The measure of damages for loss of

12

a growing crop where there appears to be a reasonable certainty that it would have matured

13

. . . is to allow for the value of the probable yield under proper cultivation when matured

14

and ready for market, less the estimated expense of producing, harvesting, and

15

marketing.”); McAlister v. Loeb & Loeb, LLP, 2024 WL 372214, *6 (Ariz. Ct. App. 2024)

16

(affirming trial court’s exclusion of lost-profits expert in part because the expert

17

“inexplicably ignored expenses” and “assumed profitability based on (speculative) revenue

18

alone”); Tourelle Dev., Inc. v. Proffitt, 2010 WL 1050316, *3 (Ariz. Ct. App. 2010) (“We

19

agree with the superior court that Appellants failed to meet their burden of providing facts

20

to support a ‘reasonable basis’ for calculating their alleged lost profits damages. Even

21

assuming Appellants offered satisfactory evidence of the Project’s then-current value, that

22

evidence failed to take into account expenses that reasonably would be expected to be

23

incurred before the Project would sell out.”) (citation omitted).

24

The Court has little trouble concluding that the Gorrie Parties have failed to meet

25

their burden as to these requirements. In their response brief, under the heading “There is

26

ample evidence to demonstrate the damages occasioned by both Stadtler and Houchin’s

27

breaches in this matter,” the Gorrie Parties begin by attempting to explain their theory as

28

to why Houchin’s challenged conduct interfered with their ability to obtain a “minimum

- 14 -

1

revenue stream” of “between $14,976,000 to $19,989,000,” which would have been

2

generated by the sale of hemp and biomass products. (Doc. 271 at 9-11.) However, the

3

only cited proof of the Gorrie Parties’ ability to successfully grow and harvest the products

4

necessary to achieve such sales is paragraph 52 of the unsigned Gorrie declaration. (Id. at

5

11 [“Gorrie is able to testify with respect to growing hemp because she was able to grow

6

205 pounds from 100 plants germinated and grown from 108 seeds. Gorrie Dec. ¶ 52”].)5

7

This showing is insufficient to create a triable issue of fact as to the damages

8

associated with the Gorrie Parties’ counterclaims against the Stadtler Parties for three

9

independent reasons. First, there is insufficient evidence that the Gorrie Parties could have

10

successfully grown and harvested the hemp and biomass products necessary to achieve the

11

projected sales, as the Gorrie Parties failed in their earlier attempts to grow and harvest

12

such products and the only cited evidence of their ability to succeed in the future is the

13

unsigned Gorrie declaration (who is not, at any rate, designated as an expert on that topic

14

and has no background in agriculture, see Doc. 255-5 at 4). See, e.g., Rancho Pescado,

15

680 P.2d at 1245-47. Compare Gilliland, 268 P.2d at 388 (holding that witnesses were

16

properly allowed “to testify concerning producing, and marketing of crops” in an action

17

seeking lost profits from a farming operation because “[t]he record shows the witnesses

18

who testified to these matters were qualified and testified from their own knowledge”).

19

Second, the Gorrie Parties have only attempted to identify their lost revenue, and lost profit

20

cannot be calculated unless the claimant also establishes the costs that would have been

21

5

22
23
24
25
26
27
28

In the section of the response brief addressing damages, the Gorrie Parties also
include what appear to be certain quotations from Gorrie’s deposition. Putting aside that
those quotations only appear to be offered to explain the Gorrie Parties’ methodology for
their damage calculations, as opposed to supporting the Gorrie Parties’ claimed ability to
successfully grow and harvest the products at issue, the Gorrie Parties have not placed the
deposition transcript in the record and do not cite to anywhere else in the record where the
transcript may be found. Fed. R. Civ. P. 56(c)(3) (“The court need consider only the cited
materials, but it may consider other materials in the record.”); id., advisory committee
comment to 2010 amendments (“Subdivision (c)(1)(A) describes the familiar record
materials commonly relied upon and requires that the movant cite the particular parts of
the materials that support its fact positions. Materials that are not yet in the record—
including materials referred to in an affidavit or declaration—must be placed in the
record.”); Fleischer Studios, Inc. v. AVELA, Inc., 2009 WL 7464165, *2 (C.D. Cal. 2009)
(“[T]he court need not search through a voluminous record to locate and identify facts
assisting the non-moving party to avoid summary judgment.”).
- 15 -

1

incurred in the course of obtaining the alleged lost revenue. See, e.g., Gilliland, 268 P.2d

2

at 337; United Verde Copper, 46 F.2d at 2; McAlister, 2024 WL 372214 at *6; Tourelle

3

Dev., 2010 WL 1050316 at *3. Third, putting aside these fundamental flaws, the point of

4

the discussion in this portion of the Gorrie Parties’ brief is to identify the damages caused

5

by Houchin, not the distinct challenged conduct of the Stadtler Parties.

6

These flaws are not remedied in the next section of the response brief, where the

7

Gorrie Parties contend that their theory of damages as to the Stadtler Parties is “much like

8

the Houchin damage claim” and “involves simple math calculations.” (Doc. 271 at 11-12.)

9

Here, the Gorrie Parties contend that “Stadtler’s breach of the Jan 21 REV share and May

10

21 Addendum”—that is, Stadtler’s failure to provide the additional $60,000 in funding

11

contemplated in those agreements—“resulted in an inability to plant, germinate, grow and

12

harvest 15,000 seed which had a potential yield of 2 lbs. per plant, or 13,620,000 grams of

13

smokable hemp with a retail value of $81,720,000 due to value of $6 per gram retail sales

14

value.” (Id. at 12.) The Gorrie Parties then add: “Gorrie is also able to show the expenses

15

associated with growing the crops because that was the amount of the capital that would

16

need to be repaid to both Stadtler and Houchin at the time of the sale of the crops as

17

provided in each of the agreements with those parties.” (Id.) Although this discussion,

18

unlike the discussion regarding Houchin, is at least pitched toward the correct adversaries,

19

it is insufficient to create a triable issue of fact on damages for the first two reasons

20

identified in the paragraph above. First, there is insufficient evidence that the Gorrie

21

Parties could have, with an additional $60,000 in funding from Stadtler, successfully grown

22

and harvested the products necessary to achieve over $81.7 million in retail sales revenue.

23

See, e.g., Rancho Pescado, 680 P.2d at 1245-47. Second, once again, the Gorrie Parties

24

have only identified lost revenue, which is not the same thing as lost profit. See, e.g.,

25

Gilliland, 268 P.2d at 337; United Verde Copper, 46 F.2d at 2; McAlister, 2024 WL 372214

26

at *6; Tourelle Dev., 2010 WL 1050316 at *3. Nor is there any merit to the Gorrie Parties’

27

conclusory assertion that the only “expenses associated with growing the crops” would

28

have been repaying certain money to Houchin and/or Stadtler. This overlooks the obvious

- 16 -

1

other costs associated with a multi-million dollar farming operation, such as (but not

2

limited to) fertilizer, labor, water, and marketing. Cf. Gilliland, 268 P.2d at 337-38 (noting,

3

in case seeking lost profits “for loss of an onion and carrot crop because of inability to

4

pump irrigation water,” that the lost revenue had to be offset by the “cost of production,

5

harvesting and marketing”).

6

b.

Counterclaim Two

7

For the reasons stated above, the Stadtler Parties are entitled to summary judgment

8

on Counterclaims One, Four, Six, and Ten. Additionally, Counterclaims Five, Seven, and

9

Eight were dismissed in an earlier order.

10

(Doc. 203.)

Thus, the only remaining

counterclaims are Counterclaims Two, Three, and Nine.

11

Of those counterclaims, the Stadtler Parties only raise a proper request for summary

12

judgment as to Counterclaim Two, which is the Gorrie Parties’ claim for declaratory relief

13

that the April 2020 RSA “modified the payment obligations” arising from the Promissory

14

Note and the Purchase Addendum and “discharge[d] the preexisting duties under the

15

Promissory Note.” (Doc. 77 ¶¶ 78-82.) As noted, the Stadtler Parties advance two

16

alternative bases for seeking summary judgment on Counterclaim Two: (1) the April 2020

17

RSA did not, for various reasons, modify IGD’s obligations under the Farm Purchase

18

Agreement, the Purchase Addendum, the Promissory Note, and Deed of Trust; and (2)

19

Counterclaim Two is contingent on the success of Counterclaim One. Because the Court

20

agrees with the former argument, it is unnecessary to reach the latter.

21

Under Arizona law, a material term of a written agreement that was subject to the

22

statute of frauds may not, in general, be orally amended. Executive Towers v. Leonard,

23

439 P.2d 303, 305 (Ariz. Ct. App. 1968) (“Where an original agreement comes within

24

provisions of the statute of frauds requiring certain agreements to be in writing, the statute

25

of frauds renders invalid and ineffectual a subsequent oral agreement changing the terms

26

of the written contract.”). Instead, “the modification of a material term of an agreement,

27

which was required by the statute of frauds to be in writing, must also be in writing.” Best

28

v. Edwards, 176 P.3d 695, 698 (Ariz. Ct. App. 2008). The written modification must, itself,

- 17 -

1

“comply with the statute of frauds.” Id. at 700. See also id. at 699 (citing, with approval,

2

a Minnesota case’s holding that a “modification to a contract must, itself, satisfy the statute

3

of frauds if it would be subject to the statute of frauds were it a separate contract”) (citation

4

omitted). The Gorrie Parties appear to agree with these principles but argue that the April

5

2020 RSA is the sort of writing that is sufficient to amend an earlier written agreement that

6

was subject to the statute of frauds. (Doc. 271 at 16-18.) Alternatively, the Gorrie Parties

7

argue that a limited exception to the statute of frauds, known as the estoppel or part

8

performance exception, applies. (Id.)

9

The Gorrie Parties’ first argument is unavailing.6 To comply with the statute of

10

frauds, a writing must, among other things, “state[] with reasonable certainty the essential

11

terms of the unperformed promises in the contract.” Restatement (Second) of Contracts

12

§ 131(c). See also Register v. Coleman, 633 P.2d 418, 421 (Ariz. 1981) (“The statute

13

requires there be a memorandum in writing . . . [that] must contain the terms and conditions

14

of all the promises constituting the contract and by whom and to whom the promises are

15

made.”). If the writing does not identify, with reasonable certainty, the essential terms and

16

conditions of the agreement, it is invalid. See, e.g., Nowell v. Andrew Wright Enterprises,

17

691 P.2d 1107, 1109-12 (Ariz. Ct. App. 1984) (concluding that writing did not comply

18

with statute of frauds due to lack of specificity and applying § 131 of the Restatement);

19

Restatement (Second) of Contracts § 131, cmt. g (noting that “[t]he ‘essential’ terms of

20

unperformed promises must be stated” and that “omission or misstatement of an essential

21

term means that the memorandum is insufficient”).

22

identifying the essential terms and conditions of the agreement “cannot be remedied by

23

resort to parol evidence, nor is parol evidence available to supply a missing term by labeling

Additionally, a deficiency in

24
25
26
27
28

6

In the March 2023 order, the Court did not reach the merits of this issue because
“the parties’ briefing related to the statute of frauds [was] particularly bare-bones” and
“neither side addresse[d] whether the substance of the April 2020 RSA was sufficiently
clear and certain to effectuate a valid modification for purposes of the statute of frauds.”
(Doc. 203 at 52.) The Court thus concluded that “[w]hether the April 2020 RSA was a
sufficient writing to achieve such a modification is . . . a different question for a different
day.” (Id. at 53.) Through the parties’ summary judgment briefing, that day has now
arrived.
- 18 -

1

an agreement ‘ambiguous.’” Gray v. Kohlhase, 502 P.2d 169, 171-72 (Ariz. Ct. App.

2

1972). See also Realty Executives Int’l Servs. LLC v. Devonshire W. Canada Ltd., 2020

3

WL 5057655, *4 (D. Ariz. 2020) (“The statute requires a writing that . . . sets forth the

4

terms and conditions of all of the promises constituting the contract. REI does not dispute

5

that the 2008 Agreement omits much of this information, but instead contends that the

6

missing terms can be supplied by ‘context and performance’—in other words, by parol

7

evidence. On this point, REI is just wrong.”) (citations omitted); Custis v. Valley Nat. Bank

8

of Phoenix, 375 P.2d 558, 561 (Ariz. 1962) (“Where a written memorandum is deficient

9

for the reason that essential terms are omitted, parol evidence is not admissible to supply

10

these missing terms.”).

11

The language of the April 2020 RSA does not indicate that the parties intended it to

12

modify the Promissory Note, Deed of Trust, or Purchase Addendum. Under the April 2020

13

RSA, NFOF and the Trust agreed to share revenue from the Farm. Nothing in the

14

agreement references the Promissory Note, Deed of Trust, or Purchase Addendum or

15

suggests any intent to modify them. (Doc. 17-4.) The April 2020 RSA does say that it

16

“sets forth the entire understanding of the parties hereto relating to the subject matter hereof

17

and supersedes all prior agreements, term sheets and understandings between the parties

18

relating to the subject matter hereof.” (Id. at 4.) But the subject matter of the April 2020

19

RSA is NFOF’s agreement to give 1% of the Farm’s revenue to the Trust. That differs

20

from the subject matter of the Promissory Note, Deed of Trust, and Purchase Addendum,

21

with dealt with IGD’s obligation to make certain loan repayments to the Trust. The bottom

22

line is that without the introduction of parol evidence—which, as discussed, is not allowed

23

in this context—it is impossible to conclude that the April 2020 RSA was intended to

24

modify IGD’s repayment obligations under the Promissory Note, Deed of Trust, or

25

Purchase Addendum.

26

The Gorrie Parties’ fallback argument invokes the “part performance” or “estoppel”

27

exception to the statute of frauds, which precludes “a party . . . from asserting the Statute

28

of Frauds as a defense when he has induced or permitted another to change his position to

- 19 -

1

his detriment in reliance on an oral agreement which would be within the Statute.” William

2

Henry Brophy Coll. v. Tovar, 619 P.2d 19, 22 (Ariz. Ct. App. 1980). See generally Owens

3

v. M.E. Schepp Ltd. P’ship, 182 P.3d 664, 668 (Ariz. 2008) (“The ‘part performance’

4

exception to the statute of frauds is grounded in the equitable principle of estoppel. The

5

label ‘part performance’ is in some ways a misnomer: the relevant acts need not be required

6

by the oral agreement, but rather must be undertaken in reliance on the agreement. In

7

addition to providing an equitable basis for ordering specific performance, acts of part

8

performance serve an important evidentiary function—they excuse the writing required by

9

the statute because they provide convincing proof that the contract exists. So that this

10

exception does not swallow the rule, the acts of part performance take an alleged contract

11

outside the statute only if they cannot be explained in the absence of the contract.”)

12

(citations omitted). The Gorrie Parties’ reliance on this doctrine is unavailing because the

13

only evidence they cite in an attempt to satisfy its requirements is the unsigned Gorrie

14

declaration. (Doc. 271 at 16-17.) As discussed in earlier parts of this order, that declaration

15

has no evidentiary value at summary judgment.

16
17
18
19

Accordingly, the Stadtler Parties are entitled to summary judgment on Counterclaim
Two.
B.

The Stadtler Parties’ Affirmative Claims
1.

The Parties’ Arguments

20

The Stadtler Parties also seek summary judgment on their first two claims against

21

the Gorrie Parties. (Doc. 255 at 10 [“Relevant here are the following counts: Count One:

22

Breach of Contract (Three Acre RSA and Personal Loan, as amended by the Addendum to

23

Three Acre RSA); and Count Two: Breach of Contract (Personal Guarantee).”]; id. at 26

24

[section heading: “Summary judgment is warranted in favor of the Stadtler Parties on

25

Counts One and Two of the SAC”].) The Stadtler Parties contend that, under the Three

26

Acre RSA, “if the crop did not produce enough income to repay Mr. Stadtler $75,000.00,

27

he had the right to enforce the Personal Loan and Agreement against Ms. Gorrie” and that

28

“IGD and Ms. Gorrie admit they breached several provisions of the contracts related to the

- 20 -

1

Three Acre RSA.” (Id. at 27.) The Stadtler Parties further contend that “[u]nder the

2

Personal Loan and Agreement, if the hemp project was not successful and could not repay

3

Mr. Stadtler, Mr. Stadtler was entitled to recover the money from Ms. Gorrie,” but

4

“[d]espite demand, Ms. Gorrie did not repay Mr. Stadtler.” (Id.) Therefore, the Stadtler

5

Parties seek summary “judgment against Ms. Gorrie and in favor of Mr. Stadtler for

6

$75,000.00.” (Id. at 27-28.)

7

The Gorrie Parties’ responsive argument, in its entirety, is as follows: “As provided

8

in the express language of the Personal Loan and Agreement, Gorrie is not responsible

9

under the personal guarantee to repay the note ‘until 5 days from the final sale of all hemp

10

product produced on these three (3) acres.’ However, as provided in the bankruptcy

11

schedules, the hemp product from the three (3) acres has not been sold and is still being

12

held by IGD. As a result, the pre-condition for the personal guarantee has not been met

13

and any demand for payment is not ripe.” (Doc. 271 at 18.)

14
15
16

In reply, the Stadtler Parties assert that “summary judgment is warranted . . . on
counts one through three.” (Doc. 277 at 9-10.)
2.

Analysis

17

At the outset, the Stadtler Parties did not seek summary judgment on Count Three

18

until their reply brief. Accordingly, the Court declines to consider that request. Zamani v.

19

Carnes, 491 F.3d 990, 997 (9th Cir. 2007) (“The district court need not consider arguments

20

raised for the first time in a reply brief.”); Maese-Thomason v. Embry-Riddle Aeronautical

21

Univ., 2023 WL 5822513, *13 (D. Ariz. 2023) (“[T]his rule applies with particular force

22

in the summary-judgment context.”).

23

Regarding Counts One and Two, the Stadtler Parties are correct that where “the

24

contractual language is clear,” Arizona courts will “afford it its plain and ordinary meaning

25

and apply it as written.” Liberty Ins. Underwriters, Inc. v. Weitz Co., LLC, 158 P.3d 209,

26

212 (Ariz. Ct. App. 2007). However, “[t]he intent of the parties to an ambiguous contract

27

is a question of fact which cannot properly be resolved on motion for summary judgment.”

28

Hamada v. Valley Nat. Bank, 555 P.2d 1121, 1124 (Ariz. Ct. App. 1976). “Where contract

- 21 -

1

language is susceptible to more than one interpretation, the matter should be submitted to

2

the jury.” State v. Mabery Ranch, Co., L.L.C., 165 P.3d 211, 219 (Ariz. Ct. App. 2007).

3

The Stadtler Parties’ primary argument is that “[u]nder the Personal Loan and

4

Agreement, if the hemp project was not successful and could not repay Mr. Stadtler, Mr.

5

Stadtler was entitled to recover the money from Ms. Gorrie.” (Doc. 255 at 27.) In fact,

6

the Personal Loan and Agreement states that “in the event that this hemp crop fails to repay

7

the Note . . . Stadtler may within 5 days from the final sale of all hemp product produced

8

on these three (3) acres demand Pamela J. Gorrie and William Dawson to pay . . . Stadtler

9

the remaining outstanding balance within 5 days from such notice.” (Doc. 17-5 at 6.) The

10

Stadtler Parties have not established, on this record, that there been a “final sale of all hemp

11

product produced” or that no more hemp product will be produced in the future.

12

Alternatively, even if the “final sale” has occurred, the record is undeveloped as to when it

13

occurred and whether Stadtler gave the required notice within five days of that date.

14

The Stadtler Parties also contend that “IGD and Ms. Gorrie admit they breached

15

several provisions of the contracts related to the Three Acre RSA: they did not provide a

16

UCC 1 lien, they did not restrict use of the funds to expenses for the Three Acre hemp

17

operation, they did not provide any revenue from the sale of the hemp to the Stadtler

18

Parties, and they did not repay Mr. Stadtler as promised upon demand.” (Doc. 255 at 27.)

19

But even assuming that some of these breaches are established on this record—for

20

example, the Gorrie Parties admit that IGD did not provide the required a UCC-1 lien (Doc.

21

255-2 at 5)—the rule is that when, as here, restitution is sought as damages for breach by

22

non-performance, “restitution is available only if the breach gives rise to a claim for

23

damages for total breach and not merely to a claim for damages for partial breach.”

24

Restatement (Second) of Contracts § 373, cmt. a. See also id., illustration 2 (“A contracts

25

to build a house for B for $100,000, progress payments to be made monthly. After having

26

been paid $40,000 for two months, A commits a breach that is not material by inadvertently

27

using the wrong brand of sewer pipe. B has a claim for damages for partial breach but

28

cannot recover the $40,000 that he has paid A.”). The record is wholly undeveloped as to

- 22 -

1

whether the UCC-1 lien breach, or the other asserted breaches, constituted partial breaches

2

and a reasonable factfinder could, when drawing all inferences in favor of the Gorrie

3

Parties, conclude that they were. Cf. Farnsworth v. Evans, 2011 WL 2176160, *6 (Ariz.

4

Ct. App. 2011) (“[V]iewing the facts in the light most favorable to Evans, there are genuine

5

issues of material fact . . . whether there was a material breach by Keen, precluding

6

summary judgment.”).7

7

Finally, the Stadtler Parties point to a provision in the Three Acre Addendum stating

8

that “[t]here has been no fault by IGD LLC, to continue in a good and fair husbandry

9

manner to grow the desired crop, abnormally high weather temperatures were a major

10

factor in the failure of the seedlings. IGD LLC, chose to slow down in its final planting

11

schedule in the greenhouse in order to correct a few problems with the greenhouse which

12

led to some failure of the hemp plants to grow successfully. This has been corrected and

13

new planting have resumed in the greenhouse.” (Doc. 17-7 at 2.) But this language does

14

not clearly and unambiguously alter the provisions in the Personal Loan Agreement

15

governing when Gorrie’s payment obligations would be triggered.

16

III.

The Gorrie Parties’ Motions
The Stadtler Parties’ Claims

17

A.

18

The Gorrie Parties move for summary judgment “on Counts One, Two, Three, Four,

19
20
21
22
23
24
25
26
27
28

Additionally, as for one of the Stadtler Parties’ breach theories—that Gorrie used
$25,242 of Stadtler’s funding between January 2021 and April 2021 for personal
expenditures—the Stadtler Parties attempt to establish the factual predicate for this theory
by citing a table that Evans apparently created after reviewing the Gorrie Parties’ financial
documents. It states that $25,242 is the “total funds used by Gorrie” during those months.
(Doc. 255-3 at 34.) But no explanation is provided for how Evans concluded that all of
these expenditures were for Gorrie’s personal use. The Court thus does not consider this
fact to be adequately established for purposes of the Stadtler Parties’ request for summary
judgment on their affirmative claims. Cf. Greene v. Bd. of Regents of Univ. Sys. of Georgia,
2023 WL 5837501, *20 (S.D. Ga. 2023) (“The moving party must carry its burden by
presenting credible evidence affirmatively showing that, on all the essential elements of its
case on which it bears the burden of proof at trial, no reasonable jury could find for the
nonmoving party. In other words, the moving party’s evidence must be so credible that, if
not controverted at trial, the party would be entitled to a directed verdict. . . . Plaintiff has
the only expert evidence as to whether Hall complied with the standard of care. However,
even uncontradicted expert opinion testimony is not conclusive, and the jury has every
right not to accept it. Consequently, Hershberger’s opinions are not so credible that they
would entitle Plaintiff to a directed verdict.”) (cleaned up).
7

- 23 -

1

Five [of the SAC] and a narrowing of Count Six.” (Doc. 257 at 3.) The Gorrie Parties’

2

various arguments in support of that request are addressed individually below.

3

1.

Full Credit Bid Rule And Anti-Deficiency Statute

4

The Gorrie Parties seek summary judgment on Counts Three, Four, and Five on the

5

ground that the January 2023 trustee’s sale of the Farm extinguished those claims under

6

Arizona’s Full Credit Bid Rule, which is set out in A.R.S. § 33-814(D). (Doc. 257 at 3-5.)

7

In a related vein, the Gorrie Parties argue as to Count Two that “Stadtler’s failure to bring

8

a deficiency action within 90 days of the trustee’s sale bar[s] his claims against Gorrie

9

pursuant to the Personal Guarantee.” (Id. at 5.) The Stadtler Parties, in turn, disavow any

10

claim for relief “under the Promissory Note and Deed of Trust” in Counts Three, Four, and

11

Five but contend that summary judgment is improper because those counts also “pray for

12

relief under other agreements.” (Doc. 269 at 4.)8 As for Count Two, the Stadtler Parties

13

clarify that it is not a claim regarding Gorrie’s “personal guarantee of the Farm Purchase

14

Agreement,” but rather a claim that “Gorrie breached the Personal Loan and Agreement

15

that secures the Three Acre RSA.” (Id. at 9.) The Gorrie Parties do not respond to these

16

arguments in their reply. (Doc. 279.)

17

The Gorrie Parties are not entitled to summary judgment based on these arguments.

18

A.R.S. § 33-814(D) provides: “If no action is maintained for a deficiency judgment within

19

the time period prescribed in subsections A and B of this section [usually 90 days after the

20

trustee’s sale], the proceeds of the sale, regardless of amount, shall be deemed to be in full

21

satisfaction of the obligation and no right to recover a deficiency in any action shall exist.”

22

Courts have interpreted this language as meaning that “borrowers, partners, guarantors, and

23

other persons ‘directly, indirectly or contingently liable on the contract’ are protected by

24

subsection D’s 90-day limit for bringing a deficiency action.” M & I Bank, FSB v.

25

Coughlin, 805 F. Supp. 2d 858, 861 (D. Ariz. 2011). See also Equity Income Partners, LP

26
27
28

Although the Stadtler Parties only mention “Counts Four and Five of the SAC” in
the portion of their brief responding to the Gorrie Parties’ arguments regarding A.R.S.
§ 33-814(D) (Doc. 269 at 6), the table appearing several pages earlier in their brief indicates
they also seek to defend Count Three against those arguments (id. at 4).
8

- 24 -

1

v. Chicago Title Ins. Co., 387 P.3d 1263, 1268 (Ariz. 2017) (“Arizona’s foreclosure scheme

2

protects the borrower and any other person directly, indirectly, or contingently liable under

3

the loan, such as partners and guarantors, from deficiency judgments.”). However, courts

4

have left for another day “whether a borrower/trustor who actively defrauds the

5

lender/beneficiary . . . is protected by § 33-814’s 90-day limitations period from an action

6

grounded in fraud in addition to a claim for deficiency on the secured contract. This is not

7

an obvious consequence of the Deed of Trust Act.” M & I Bank, 805 F. Supp. 2d at 873.

8

Additionally, even if “if a defrauding borrower is protected from fraud suits, it hardly

9

means that other participants in the fraud should share in that immunity, or that violators

10

of their own separate contracts with the lender should have special privilege to do so.” Id.

11

at 873-74.

12

Although A.R.S. § 33-814(D) precludes the Stadtler Parties from pursuing an action

13

for a “deficiency judgment” related to Promissory Note and Deed of Trust against the

14

borrower (here, IGD) and any person indirectly or contingently liable under those

15

agreements, that principle does not compel the entry of summary judgment on Counts

16

Three, Four, and Five because those claims in their now-narrowed form only seek relief

17

based on other agreements, including the Three Acre RSA. Likewise, Count Two, which

18

alleges that Gorrie breached the Personal Loan and Agreement, is not implicated because

19

that contract required Gorrie to guarantee IGD’s obligations under the Three Acre RSA,

20

not IGD’s obligations under the Promissory Note and Deed of Trust. (Doc. 17-5 at 7.)

21

Accordingly, the Gorrie Parties’ request for an across-the-board grant of summary

22

judgment as to Counts Two, Three, Four, and Five is denied.

23
24

2.

Counts Four And Five: Fraudulent Inducement And Negligent
Misrepresentation

25

The Gorrie Parties argue that “Stadtler cannot meet his burden to demonstrate fraud

26

in the inducement for either the purchase of the Farm or under the [Three Acre RSA] as

27

modified by the [Three Acre Addendum].” (Doc. 257 at 6-8.) For similar reasons, the

28

Gorrie Parties argue that “Stadtler cannot sustain a negligent misrepresentation claim for

- 25 -

1

either the Farm Purchase Agreement or the [Three Acre RSA] or the [Three Acre

2

Addendum].” (Id. at 8-9.) The Stadtler Parties respond that they “have submitted evidence

3

that—at a minimum—creates an issue of fact as to whether the Gorrie Parties fraudulently

4

induced the Stadtler Parties into entering into the Three Acre RSA, Personal Loan and

5

Agreement, and the Three Acre Addendum, and into loaning the Gorrie Parties farm

6

equipment.” (Doc. 269 at 8.) The Stadtler Parties do not provide much evidence in their

7

response brief, but their argument seems to be that (1) in 2021 (well after the sale of the

8

Farm) Gorrie made misrepresentations about the need for a $75,000 loan to help

9

accomplish a successful hemp harvest that would help her secure further investment from

10

others; (2) Stadtler made a substantial loan in reliance on these representations as part of

11

the Three Acre RSA; and (3) Gorrie then used a substantial portion of that loan for her own

12

personal expenditures rather than to achieve a successful harvest. (Doc. 110-2 ¶¶ 12-13;

13

Doc. 255-3 at 21, 34.) In reply, the Gorrie Parties argue that “Stadtler’s Response utterly

14

fails to demonstrate the high burden necessary to prove both the fraud in the inducement

15

or negligent misrepresentation.” (Doc. 279 at 2.)

16

The Gorrie Parties are not entitled to summary judgment on Count Four. As an

17

initial matter, although the Gorrie Parties argue there is insufficient evidence of fraudulent

18

inducement in relation to the purchase of the Farm, the Stadtler Parties have now agreed to

19

narrow Count Four to subsequent agreements (i.e., the Three Acre RSA, Three Acre

20

Addendum, and Personal Loan and Agreement). (Doc. 269 at 4.) The Stadtler Parties have

21

come forward with sufficient evidence to survive summary judgment as to their fraudulent

22

inducement claim related to those agreements.

23

A “fraudulent inducement claim . . . requires proof of the following elements: (1) a

24

representation; (2) its falsity; (3) its materiality; (4) the speaker’s knowledge of its falsity

25

or ignorance of its truth; (5) the speaker’s intent that it be acted upon by the recipient in the

26

manner reasonably contemplated; (6) the hearer’s ignorance of its falsity, (7) the hearer’s

27

reliance on its truth; (8) the hearer’s right to rely on it; and (9) the hearer’s consequent and

28

proximate injury.” Lemad Corp. v. Miravista Holdings, LLC, 2014 WL 4649593, *5 (Ariz.

- 26 -

1

Ct. App. 2014) (cleaned up). See also Meritage Homes, 522 F. Supp. 2d at 1218 (same).

2

Here, the representations by Gorrie to Dawson (which Dawson conveyed to Stadtler)

3

satisfy the first element despite the fact they went through an intermediary. Although

4

Arizona courts have not definitely resolved whether “the principle of indirect

5

representation” applies in Arizona, Leizerman v. Wick, 2009 WL 325434, *3 (Ariz. Ct.

6

App. 2009), in the Court’s view “[i]t should be obvious that one cannot avoid fraud liability

7

by sending a misrepresentation through an intermediary.” M & I Bank, FSB v. Coughlin,

8

2011 WL 5445416, *5 (D. Ariz. 2011). See also Restatement (Second) of Torts § 533

9

(“The maker of a fraudulent misrepresentation is subject to liability . . . if the

10

misrepresentation . . . is made to a third person and the maker intends or has reason to

11

expect that its terms will be repeated or its substance communicated to the [injured party],

12

and that it will influence his conduct in the transaction or type of transaction involved.”).

13

Turning to the next elements, “[t]he general rule” is “that the jury must resolve

14

questions of materiality and reliance in a fraud claim.” Lerner v. DMB Realty, LLC, 322

15

P.3d 909, 914 (Ariz. Ct. App. 2014). Here, a reasonable juror could conclude that Gorrie

16

represented that the requested investment would be used to achieve a successful harvest

17

and that Stadtler made the investment in reliance on this expectation. (Doc. 17-5 at 3 [“This

18

agreement is for a $75,000 investment which will plant 3 acres of hemp crop.”]; Doc. 110-

19

2 ¶¶ 12-13 [“Ms. Gorrie said that if IGD could show a successful grow of hemp crop, she

20

would be able to attract other investors to help pay for the Property and a larger hemp

21

operation. . . . I related this idea to Mr. Stadtler who agreed to lend her up to $75,000.00

22

to get three acres of the Property planted.”].)

23

The Stadtler Parties have also presented a report showing that their accounting

24

expert concluded, after reviewing bank statements from the Gorrie Parties, that Gorrie used

25

at least $25,242 of Stadtler’s funding for her own personal expenditures. (Doc. 255-3 at

26

34.) Although, as explained in footnote seven, this evidence is not sufficiently developed

27

to support a grant of summary judgment in favor of the Stadtler Parties on their affirmative

28

claims, it still supplies enough evidence of falsity for the Stadtler Parties to avoid summary

- 27 -

1

judgment on those claims. A reasonable juror could also infer that Gorrie intended to use

2

some of the money for personal expenditures at the time she made the representation—

3

according to the Stadtler Parties’ proof, she began spending the money for personal use the

4

very same month the Three Acre RSA was signed. (Doc. 17-5 at 4; Doc. 255-3 at 34.)

5

Finally, a reasonable juror could also conclude that Stadtler had the right to rely on Gorrie’s

6

representations and that in making the challenged representations to Dawson, Gorrie

7

intended to induce the conduct that followed. See, e.g., Dawson v. Withycombe, 163 P.3d

8

1034 (Ariz. Ct. App. 2007) (“A person may rightfully rely upon a misrepresentation of fact

9

even when he may have discovered the falsity of the statement by a simple investigation.”).

10

These conclusions are not undermined by the Gorrie Parties’ undeveloped assertion

11

that “Stadtler cannot sustain a fraudulent inducement claim under either [the Three Acre

12

RSA] or the [Three Acre Addendum] because his Agent was intimately involved in all

13

aspects of the deal and was considered by Stadtler to be competent.” (Doc. 257 at 10.)

14

Although the Gorrie Parties do not cite any authority to support this argument, their theory

15

appears to be that because Count Four relies on Gorrie’s alleged misrepresentation

16

regarding “her experience and her competence to run a hemp operation and that the

17

proceeds of the hemp operation would be huge,” but in Stadtler’s eyes Dawson was

18

competent, it follows that any fraudulent inducement claim fails. (Id. at 10-11.) This

19

argument is unavailing because, at a minimum, Count Four is also premised on a different

20

misrepresentation by Gorrie (i.e., how she would use the funds) that is unrelated to her

21

relative competence in relation to Dawson. Cf. Image Tech. Serv., Inc. v. Eastman Kodak

22

Co., 1993 WL 313162, *2 (N.D. Cal. 1993) (“Kodak cites no authority supporting the

23

proposition that plaintiffs must present every theory of the case in opposition to a motion

24

for summary judgment.”).

25

Finally, because there is sufficient evidence of fraudulent inducement for Count

26

Four to survive summary judgment, the Stadtler Parties’ negligent misrepresentation claim

27

in Count Five—which, as now narrowed by the Stadtler Parties (Doc. 269 at 5), is premised

28

on the same theories and evidence—also survives summary judgment. Cf. Wigod v. Wells

- 28 -

1

Fargo Bank, N.A., 673 F.3d 547, 573 (7th Cir. 2012) (“Negligent misrepresentation

2

involves the same elements as fraudulent misrepresentation, except that (1) the defendant

3

need not have known that the statement was false, but must merely have been negligent in

4

failing to ascertain the truth of his statement; and (2) the defendant must have owed the

5

plaintiff a duty to provide accurate information.”). See also KB Home Tucson, Inc. v.

6

Charter Oak Fire Ins. Co., 340 P.3d 405, 412 n.7 (Ariz. Ct. App. 2014) (identifying

7

elements of negligent misrepresentation).

8

3.

Count Six: Conversion/Replevin

9

The Gorrie Parties seek partial summary judgment “narrowing the only potential

10

personal property subject to . . . Count Six . . . to the Tractor.” (Doc. 257 at 18.) According

11

to the Gorrie Parties, Count Six must be narrowed in this fashion because Stadtler “cannot

12

sustain a Replevin/Conversion claim with respect to” the Farm and certain equipment that

13

Stadtler “has taken control over” or “exercises complete dominion over.” (Id. at 9.) In

14

response, the Stadtler Parties concede that they have now recovered the Farm and most of

15

the equipment “that was the subject of Count [Six]” but contend that because “Gorrie

16

admits that she sold a tractor that . . . Stadtler lent her and kept the money for herself,”

17

Count Six survives. (Doc. 269 at 9-10.) In reply, the Gorrie Parties argue that “Stadtler is

18

now in possession of all items except for the disputed tractor,” which does not “belong[]

19

to Stadtler because Gorrie maintains that the tractor was purchased with funds given to the

20

venture from which Stadtler now seeks damages.” (Doc. 279 at 5.)

21

This appears to be an instance of the parties talking past each other. The Gorrie

22

Parties do not seek full summary judgment on Count Six—rather, they seek partial

23

summary judgment such that Count Six may only be based on the tractor. This approach

24

is permissible. Cf. Paul Johnson Drywall Inc. v. Sterling Grp. LP, 2024 WL 1285629, *18

25

(D. Ariz. 2024) (“Under Rule 56(a), Sterling is entitled to seek partial summary judgment,

26

including to narrow the grounds on which PJD may argue it breached the contract, even if

27

such a motion does not eliminate PJD’s contract claims.”). Meanwhile, the Stadtler Parties

28

seem to agree that Count Six should be limited in this fashion. Accordingly, the Court

- 29 -

1
2

grants partial summary judgment on Count Six, limiting its applicability to the tractor.
4.

Count One: Breach of Contract

3

Finally, the Gorrie Parties contend that “Stadtler cannot sustain a breach of contract

4

claim on . . . the [Three Acre RSA] as modified by the [Three Acre Addendum] because

5

he breached the contract first.” (Doc. 257 at 9-10.) The Stadtler Parties respond that the

6

Gorrie Parties “do not identify which provision” of these agreements “Stadtler supposedly

7

breached, nor do they explain why . . . Gorrie and the Gorrie Parties should not be required

8

to repay . . . Stadtler the $100,000.00 they admit he lent them.” (Doc. 269 at 10-11.) In

9

reply, the Gorrie Parties argue that “[t]he most substantial and material obligation that

10

Stadtler had under the [Three Acre Addendum] was to fund the $60,000 on an as needed

11

basis [and] draw basis with all parties working together in a timely manner to furnish the

12

funding and do any accounting” and “his decision to only supply funds to Dawson and

13

unwillingness to work with Gorrie on the accounting or determination of what funds were

14

needed to finish the crop, breached his obligations under the [Three Acre Addendum] and

15

excused Gorrie’s performance thereunder” because “[t]his breach was highly material.”

16

(Doc. 279 at 5.)

17

The Gorrie Parties are not entitled to summary judgment on Count One. As noted,

18

summary judgment is generally inappropriate in a breach-of-contract action where the

19

meaning of the disputed provision is ambiguous.

20

Ranch, 165 P.3d at 219. Under the Three Acre Addendum, Stadtler agreed to provide

21

additional funding up to $60,000 “as needed.” (Doc. 17-7 at 4.) The contract further

22

contemplated that Gorrie, Stadtler, and Dawson would “work together” to provide “Stadtler

23

with an accounting of why additional funding is needed.” (Id.) Although the Gorrie Parties

24

have come forward with evidence (i.e., Stadtler’s deposition testimony) that Stadtler

25

eventually stopped providing funding directly to Gorrie because he questioned whether she

26

would use the money to purchase necessary items for the Farm (Doc. 257-2 at 14-18), it is

27

undeveloped on this record whether Stadtler ever received the sort of “accounting[]” that

28

was arguably required to trigger his obligation to provide more funding. Additionally, even

- 30 -

Hamada, 555 P.2d at 1124; Mabery

1

assuming that giving money to Dawson instead of Gorrie breached the contract, a jury trial

2

would still be needed to assess materiality. Zancanaro v. Cross, 339 P.2d 746, 750 (Ariz.

3

1959) (“Ordinarily the victim of a minor or partial breach must continue his own

4

performance.”); RCS Cap. Dev., LLC v. A.B.C. Developmental Learning Centers (U.S.A.)

5

Inc., 2012 WL 2115377, *3 (Ariz. Ct. App. 2012) (“[W]hether a breach is material is a

6

question for a jury.”).

7
8

B.

Houchin’s Claims
1.

The Parties’ Arguments

9

The IGD Parties argue that “Houchin’s failure of memory . . . bars his claims with

10

respect to Count Four . . . and Count Five” because it prevents him from establishing some

11

of their elements through his testimony. (Doc. 257 at 11-17.) The IGD Parties further

12

contend that “Houchin materially breached the JVA first” and “an uncured material breach

13

of contract relieves the non-breaching party from the duty to perform.” (Id. at 17.)

14

Houchin responds that there is enough evidence of fraud and negligent

15

misrepresentation to survive summary judgment. (Doc. 270 at 5-8, 10-11.) Houchin

16

further contends that he was too exhausted to continue during the deposition, that “in light

17

of Houchin’s exhaustion, the parties agreed to end the deposition for that day, and further

18

agreed that it would be continued at a later date,” that “[t]he IGD Parties . . . never issued

19

a notice of Houchin’s continued deposition—despite Houchin requesting that they provide

20

potential dates for the same,” and that instead “the IGD Parties are attempting to use

21

Houchin’s exhaustion during his deposition and their own subsequent failure to continue

22

his deposition, as the parties agreed, to form the basis of their summary judgment

23

argument.” (Id. at 8-10.) Additionally, Houchin contends that many of the cited deposition

24

excerpts “mischaracterize or misstate [his] testimony.” (Id. at 14-20.) Finally, Houchin

25

contends that the IGD Parties’ argument that they are entitled to summary judgment

26

because he “did not respond to a July 2, 201 draw request from IGD until July 8, 2021 . . .

27

fails for multiple reasons.” (Id. at 12.)

28

In reply, the IGD Parties contend that Houchin’s “recitation of facts regarding . . .

- 31 -

1

his testimony is misleading.” (Doc. 279 at 6.) The IGD Parties further contend that

2

Houchin’s “testimony that he did not know about the nonpayment by Gorrie to Stadtler is

3

unavailing and certainly not enough to sustain his burden of demonstrating fraudulent or

4

negligen[]t misrepresentation.” (Id.) Finally, the IGD Parties argue that “Gorrie was under

5

no obligation to retake Houchin’s deposition after a review of the transcript indicated that

6

Houchin’s inability to recall was not due to tiredness, but was apparently a testimonial

7

tactic.” (Id. at 9.)

8
9

2.

Analysis
a.

Houchin’s Memory

10

In the JVA, IGD represented that it had “full power and authority to own its

11

properties and to carry on its business” and that there were “no claims, demands . . .

12

threatened against or directly or indirectly affecting IGD . . . which presently or with the

13

passage of time would be reasonably likely to have a Material Adverse Effect on IGD’s

14

performance of its obligations under this Agreement, the Limited Liability Company

15

Agreement or the Related Agreements.” (Doc. 257-6 at 7-8.) At the motion-to-dismiss

16

stage, the Court concluded that Houchin had successfully pleaded fraudulent inducement

17

and negligent misrepresentation because some of these representations could be reasonably

18

construed as false if IGD had, at the time it executed the JVA (i.e., May 26, 2021), already

19

defaulted on payments to Stadtler under the Promissory Note that was secured by the Deed

20

of Trust on the Farm. (Doc. 203 at 31, 108.) Notwithstanding the Gorrie Parties’

21

arguments about Houchin’s memory during his deposition, the evidence in the record,

22

when construed in its most favorable light, provides enough support for Houchin’s

23

fraudulent inducement claim to survive summary judgment.

24

As discussed, a “fraudulent inducement claim . . . requires proof of the following

25

elements: (1) a representation; (2) its falsity; (3) its materiality; (4) the speaker’s knowledge

26

of its falsity or ignorance of its truth; (5) the speaker’s intent that it be acted upon by the

27

recipient in the manner reasonably contemplated; (6) the hearer’s ignorance of its falsity,

28

(7) the hearer’s reliance on its truth; (8) the hearer’s right to rely on it; and (9) the hearer’s

- 32 -

1

consequent and proximate injury.” Lemad Corp., 2014 WL 4649593 at *5 (cleaned up).

2

As for the first two elements, IGD represented in the JVA that it had “full power and

3

authority to own its properties and to carry on its business.” (Doc. 257-6 at 7.) However,

4

Stadtler’s declaration states that IGD had already defaulted on the Promissory Note before

5

April 2020. (Doc. 110-1 ¶¶ 10, 17.) A reasonable juror could therefore conclude that

6

IGD’s representation in the JVA was false.

7

A reasonable juror could also conclude that this representation was material, that

8

Houchin did not know it was false, and that he relied on it. Houchin testified that he did

9

not know at the time he signed the JVA that IGD owed money to Stadtler and that he likely

10

would not have signed the JVA had he known. (Doc. 270-2 at 15, 18, 29-30, 44.)

11

Additionally, because IGD was the entity that had defaulted on its payments to Stadtler, a

12

juror could easily conclude that IGD knew the representation was false. (Doc. 110-1 ¶¶

13

10, 17.) And finally, a juror could reasonably infer from the JVA’s text that IGD intended

14

for Houchin to rely on IGD’s representations about its authority to use the property that

15

was the subject of the joint venture (i.e., the Farm) and that Houchin had a right to rely on

16

those representations, which he apparently understood to be true at the time.

17

As for negligent misrepresentation, the elements, as discussed above, are “(1) the

18

defendant provided false information in a business transaction; (2) the defendant intended

19

for the plaintiff to rely on the incorrect information or knew that it reasonably would rely;

20

(3) the defendant failed to exercise reasonable care in obtaining or communicating the

21

information; (4) the plaintiff justifiably relied on the incorrect information; and (5)

22

resulting damage.” KB Home Tucson, Inc., 340 P.3d at 412 n.7. For reasons that overlap

23

with the fraudulent-inducement analysis, there is sufficient evidence in the record for

24

Houchin to avoid summary judgment as to the first four elements. As for the fifth element,

25

a juror could reasonably conclude that Houchin suffered damages where he made $72,300

26

in capital contributions to IGD (Doc. 77 at 26 ¶ 23; Doc. 270-4 at 8) only for IGD to later

27

fail to prevent the foreclosure of the property covered by the JVA.

28

…

- 33 -

1

b.

Breach of Contract

2

The IGD Parties’ final argument is that Houchin cannot maintain a breach-of-

3

contract claim under the JVA because Houchin breached it first by waiting five days to

4

respond to one of IGD’s draw requests. (Doc. 257 at 17.) This argument fails for a host

5

of reasons. First, the factual predicate for this argument is that IGD submitted the draw

6

request on July 2, 2021 and Houchin did not respond until July 8, 2021. (Id.)9 In support

7

of these very specific facts, the IGD Parties submit a truncated portion of Houchin’s

8

deposition testimony. (Doc. 257-5 at 41.) In the excerpt, the IGD Parties’ attorney says

9

the relevant dates for the draw request were July 2 and July 8, but Houchin does not appear

10

to indicate his agreement with those dates. (Id.)10 Further, Houchin submits evidence that

11

suggests the draw request was not formally submitted to him until July 5, 2021. (Docs.

12

270-6, 270-7.)

13

Second, the IGD Parties’ position seems to be that Houchin breached the JVA

14

because he didn’t “respond” to the draw request within three business days. (Doc. 257 at

15

18.)11 But the relevant language from the JVA provides: “Houchin shall supply the funding

16

for each phase within three . . . business days following IGD’s request for such funding,

17

provided that any such request shall be accompanied by confirmation, in a form

18

satisfactory to Houchin, that any pending phase complete.” (Doc. 257-6 at 5, emphasis

19

added.) Attached to Houchin’s response is evidence that could lead a reasonable juror to

20

conclude the “pending phase” was not “complete” at the time of the disputed draw request.

21

9

22
23
24
25
26
27
28

The IGD Parties’ brief states that Houchin did not respond to the alleged July 2,
2021 draw request until July 8, 2023. (Doc. 257 at 17.) This appears to be a typo; it seems
the IGD Parties intended to say July 8, 2021.
10
The IGD Parties contend that Houchin acknowledged on page 134 of his deposition
transcript that he received the draw request on July 2, 2021. (Doc. 257 at 17.) However,
the IGD Parties did not include this page in the deposition excerpts attached to their motion.
11
The IGD Parties also contend that Houchin’s lawyer’s failure to respond to a July
16, 2021 follow-up email until August 19, 2021 further exacerbated this breach, but they
do not appear to contend that the lawyer’s failure to respond to the follow-up email was
itself the alleged breach. (Doc. 257 at 18.) In any case, the IGD Parties have not cited any
deposition testimony verifying the July 16 and August 19 dates. Rather, they cite moments
in Houchin’s deposition where attorneys reference those dates and Houchin, to the extent
he comments at all, says he doesn’t recall. (Doc. 257-5 at 51-56.) “[Q]uestions are not
evidence.” O’Connor v. Boeing N. Am., Inc., 216 F.R.D. 640, 644 (C.D. Cal. 2003).
- 34 -

1

(Doc. 270-2 at 36.)

2

Third, even assuming the draw request was received on July 2, 2021, it is unclear

3

that a July 8, 2021 response was actually more than three business days later. In 2021, July

4

3 and 4 fell over the weekend, so it is at least ambiguous whether the parties would have

5

considered July 5, 2021 to be designated as a holiday celebrating July 4 rather than a

6

business day. See, e.g., A.R.S. § 1-301(B) (“When any of the holidays enumerated in

7

subsection A of this section [which include “July 4, ‘Independence Day’”] falls on a

8

Sunday, the following Monday shall be observed as a holiday.”).

9

Finally, even if the response was late, a jury question remains as to whether the late

10

response constituted a material breach.

11

(“[W]hether a breach is material is a question for a jury.”).

12

IV.

RCS Cap. Dev., 2012 WL 2115377 at *3

Houchin’s Motion
The Parties’ Arguments

13

A.

14

Houchin advances three discrete arguments in his summary judgment motion. (Doc.

15

256.) First, Houchin contends that the IGD Parties’ “competing damage computations

16

make it impossible for a jury to fairly estimate damages” and, additionally or alternatively,

17

that there is insufficient evidence to establish with reasonable certainty that the IGD Parties

18

“could plant, germinate, grow, and harvest any crops” and “the net profits that they

19

allegedly lost.” (Id. at 8-14, emphasis omitted.) Second, Houchin contends that the IGD

20

Parties’ “declaratory judgment claim is premature and, therefore, subject to summary

21

judgment.” (Id. at 15-16.) Third, Houchin argues that even if IGD’s claims survive

22

summary judgment, Gorrie has no right to assert contract-based claims against him because

23

she was not a party to the JVA. (Id. at 17-18.)

24

The IGD Parties respond that “there is ample evidence to demonstrate the damages

25

occasioned by . . . Houchin’s breaches in this matter.” (Doc. 271 at 9.)12 The IGD Parties

26

further argue that Houchin’s declaratory judgment argument “ignores that Gorrie has

27
28

The IGD Parties’ specific damages arguments related to Houchin are summarized
more fully in Part II.A.3.a of this order.
12

- 35 -

1

already sustained substantial damage as the result of the Houchin’s breach of agreement

2

made under the JVA Section 7.01(ii).” (Id. at 18.)

3

In reply, Houchin argues that the IGD Parties have not established “alleged lost

4

profits with reasonable certainty” because Gorrie “is not qualified to provide a layperson

5

opinion with respect to the IGD Parties’ purported ability to grow between 126,000 and

6

189,000 pounds of hemp to maturity” and because the IGD “Parties have not identified any

7

concrete evidence establishing that they were capable of selling hemp.” (Doc. 278 at 4-9,

8

emphasis omitted.) Houchin also contends that the IGD Parties failed to address many of

9

his arguments regarding alternative grounds for summary judgment. (Id. at 9-10.) Finally,

10

Houchin contends the declaratory judgment claim “is still premature” because this Court

11

has not “entered a judgment against IGD in relation to Stadtler’s claims” and IGD has not

12

“pointed to any evidence establishing that it made any payment to Stadtler.” (Id. at 11-12.)

13

B.

14

The IGD Parties’ third-party claims against Houchin for breach of contract (Claim

15

One), breach of the implied covenant of good faith and fair dealing (Claim Two), tortious

16

interference with business expectancy (Claim Four), and breach of fiduciary duty (Claim

17

Five) each require a showing of damages as an essential element. Chartone, 83 P.3d at

18

1111 (breach of contract); United Dairymen of Ariz., 128 P.3d at 761-62 (implied covenant

19

of good faith and fair dealing); Dube v. Likins, 167 P.3d 93, 98 (Ariz. Ct. App. 2007)

20

(noting that the “elements of tortious interference with a business expectancy” include

21

“resultant damage to the party whose relationship or expectancy has been disrupted.”);

22

Stazenski, 2015 WL 3917039 at *4 (breach of fiduciary duty). The IGD Parties do not

23

argue otherwise. Thus, to survive summary judgment with respect to those third-party

24

claims, the IGD Parties must come forward with sufficient evidence to establish a triable

25

issue of fact as to damages. For the reasons discussed in Part II.A.3.a above, the IGD

26

Parties have failed to do so for two independent reasons: (1) insufficient evidence to

27

establish that the IGD Parties could have successfully grown and harvested the hemp and

28

biomass products necessary to achieve the projected sales; and (2) failure to calculate and

Analysis

- 36 -

1

consider the expenses necessary to achieve the alleged lost revenue. Thus, Houchin is

2

entitled to summary judgment on Claims One, Two, Four, and Five.

3

This leaves Claim Three, which is the IGD Parties’ request for a declaration that

4

“Article 7.01 of the [JVA] obligates Houchin to indemnify and hold IGD and Gorrie

5

harmless in respect of damage, claim, or liability including to a third party arising from any

6

breach by Houchin in the [JVA],” which includes the claims brought by the Stadtler Parties

7

in this action. (Doc. 77 at 28-29 ¶¶ 43-46.) Houchin’s sole argument is that this claim is

8

premature.

9

ambiguous on a disputed issue. Hamada, 555 P.2d at 1124. It is ambiguous whether the

10

JVA’s indemnification provision is only triggered by a judgment against IGD (as Houchin

11

contends) or merely the initiation of a lawsuit (which has already occurred). Under the

12

JVA, Houchin agreed to “indemnify” IGD not only against “liability” but also against

13

“claim[s]” by third parties. (Doc. 77-5 at 13.) Further, the JVA’s indemnification process

14

begins when IGD provides “notice” and copies of “pleadings, correspondence or other

15

documents relating thereto,” as opposed to copies of a verdict, judgment or final order. (Id.

16

at 14.) Additionally, the indemnifying party generally agreed “to defend against, settle or

17

compromise such Third Party Claim at the expense of such Indemnifying Party utilizing

18

counsel reasonably acceptable to the Indemnified Party.” (Id.) Thus, Houchin is not

19

entitled to summary judgment on the prematurity issue.

But as discussed, summary judgment is improper where a contract is

20

Nor is Houchin entitled to summary judgment against Gorrie in relation to Claim

21

Three. Houchin’s argument is that because Gorrie is not a party to the JVA, she is not

22

entitled to enforce its indemnification provision. But this argument overlooks that “[a]

23

third-party beneficiary is a non-party who has the right to enforce a contract.” Maricopa-

24

Stanfield Irr. & Drainage Dist. v. Robertson, 123 P.3d 1122,1128 (Ariz. 2005). “For a

25

person to recover as a third-party beneficiary in Arizona, the contracting parties must

26

intend to directly benefit that person and must indicate that intention in the contract itself.”

27

Sherman v. First Am. Title Ins. Co., 38 P.3d 1229, 1232 (Ariz. Ct. App. 2002). Here, the

28

JVA’s indemnification provision states Houchin will “indemnify and hold harmless IGD,

- 37 -

1

its members, managers, officers, employees and agents.” (Doc. 77-5 at 13.) It is thus

2

apparent from the face of the JVA that the indemnification provision was intended not only

3

to benefit IGD, but also its “members, managers, officers, employees and agents.” There

4

is also evidence in the record that Gorrie was IGD’s manager and/or member. (See, e.g.,

5

Doc. 77-5 at 27 [IGD contract with Vermont Hemp Processing, identifying Gorrie as IGD’s

6

“manager”]; Doc. 255-3 at 8 [Evans Report, identifying Gorrie as IGD’s “sole member”].)

7

Thus, on this record, Houchin has failed to establish that Gorrie does not qualify as a third-

8

party beneficiary who could seek enforcement of the indemnification provision.

9

Accordingly,

10

IT IS ORDERED that:

11

1.

The Stadtler Parties’ motion for summary judgment on the Gorrie Parties’

12

counterclaims and partial summary judgment on their own claims (Doc. 255) is granted

13

in part and denied in part.

14
15
16

2.

Houchin’s motion for summary judgment on the Gorrie Parties’ third-party

claims (Doc. 256) is granted in part and denied in part.
3.

The Gorrie Parties’ motion for partial summary judgment on the Stadtler

17

Parties’ claims and Houchin’s third-party counterclaims (Doc. 257) is granted in part and

18

denied in part.

19

Dated this 27th day of August, 2024.

20
21
22
23
24
25
26
27
28

- 38 -