Driskill Agricultural Services Incorporated v. Dimare Fresh Incorporated

Filing 91

ORDER ADOPTING REPORT AND RECOMMENDATION 87 . It is further ordered that Defendants Motion for Summary Judgment (Doc. 67 ) is denied and that Plaintiff's Motion for Partial Summary Judgment (Doc. 69 ) is denied. Signed by Judge Rosemary Marquez on 2/3/15. (See attached PDF for complete information.) (KAH)

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1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Driskill Agricultural Services Incorporated, Plaintiff, 10 11 ORDER v. 12 No. CV-12-00426-TUC-RM Dimare Fresh Incorporated, 13 Defendant. 14 Plaintiff Driskill Agricultural Services (“Driskill”), as assignee of Mexican 15 tomato-grower Agricola Beltran (“Beltran”) and Beltran’s agent Top Yields, initiated this 16 lawsuit by filing a Complaint against Defendant DiMare Fresh (“DiMare”) for breach of 17 contract and breach of the duty of good faith and fair dealing. 18 counterclaims for breach of express warranty, breach of the warranty of merchantability, 19 and breach of the warranty of fitness. On November 22, 2013, DiMare moved for 20 summary judgment and Driskill moved for partial summary judgment. Pending before 21 the Court is a Report and Recommendation (“R&R”) issued by Magistrate Judge Leslie 22 A. Bowman that recommends denying both parties’ summary judgment motions. DiMare asserted 23 The dispute between the parties arises out of a produce sales agreement in which 24 Beltran agreed to supply DiMare with “good and marketable” tomatoes for a set price per 25 box during the 2012 growing season. DiMare argues that there is no genuine dispute of 26 material fact that Beltran failed to supply “good and marketable” tomatoes as required by 27 the sales agreement. Driskill argues that there is no genuine dispute of material fact that 28 all tomatoes presented to DiMare for delivery under the sales agreement were in “good 1 and marketable” condition and that DiMare breached the agreement by refusing to take 2 delivery of the tomatoes presented. 3 demonstrates that DiMare clearly and unequivocally repudiated the sales agreement. Driskill also argues that undisputed evidence 4 The Magistrate Judge found that there is a genuine dispute as to whether the term 5 “good and marketable” in the sales agreement incorporated a color requirement, and 6 recommended denying both parties’ summary judgment motions on this ground. The 7 Magistrate Judge further found that there is a genuine issue of material fact as to whether 8 DiMare’s behavior constituted an anticipatory repudiation of the sales agreement. 9 Both parties filed objections to the Magistrate Judge’s R&R. In its objections, 10 DiMare argues that there is no factual dispute that a color requirement was a term of the 11 sales agreement because there is no dispute that “good and marketable” tomatoes must 12 meet USDA marketing standards, and USDA marketing standards require no less than 13 90% of mature green tomatoes in each load to be “green and breakers” in color. Driskill 14 alleges that both parties to the sales agreement understood the “good and marketable” 15 requirement to mean tomatoes grading 85% or better on United States Department of 16 Agriculture (“USDA”) inspection certificates, and that a color requirement was never 17 agreed to by the parties. Driskill argues that the Magistrate Judge erred by relying upon 18 inadmissible evidence in finding a genuine dispute as to whether the “good and 19 marketable” requirement incorporated a color standard. Driskill further argues that the 20 Magistrate Judge erred in finding that DiMare offered admissible evidence sufficient to 21 controvert Driskill’s evidence of anticipatory repudiation. 22 I. The “Good and Marketable” Requirement 23 DiMare argues that USDA marketing standards require no less than 90% of 24 mature green tomatoes in each load to be “green and breakers” in color, citing USDA 25 Inspection Instructions and USDA Standards for Grades of Fresh Tomatoes. The USDA 26 Inspection Instructions note that “[c]olor, ripeness and firmness are important factors in 27 determining the marketability of tomatoes,” and that “practically all tomatoes are green” 28 at shipping point. (Doc. 68-1, ex. 4 at 26-27). The USDA Standards provide color -2- 1 classifications that “may be used, when specified in connection with the grade statement, 2 in describing the color as an indication of the stage of ripeness of any lot of mature 3 tomatoes of a red fleshed variety.” 7 C.F.R. § 51.1860. If a color classification is 4 specified in connection with the grade statement, at least 90% of the tomatoes in the lot 5 must be of the color specified, but there is no requirement that at least 90% of the 6 tomatoes be “green and breakers” for the tomatoes to be considered “good and 7 marketable.” See 7 C.F.R. § 51.1861(f). 8 The only record evidence clearly specifying a 90% “green and breakers” 9 requirement is the report and testimony of DiMare’s expert, Thomas A. Leming. In his 10 report, Mr. Leming states: “In my opinion, DiMare could expect to receive,” under the 11 sales agreement, “tomatoes with less than 15% total defects, including no more than 1% 12 decay and showing no less than 90% Green & Breakers, as reflected on USDA inspection 13 certificates.” (Doc. 68-1, ex. 5 at 1). Mr. Leming testified that the 15% total defects and 14 90% “green and breakers” requirements were “the two criteria that, in my mind, would 15 establish that tomatoes coming across the border would meet the definition of ‘good and 16 marketable.’” (Doc. 72-1, ex. 3 at 28:15-20 (emphasis added)). Mr. Leming indicated 17 that he “used the figure of 90 percent or more Green & Breakers” as one of the criteria 18 because “the contract was for mature green tomatoes.” (Id. at 28:21-24). 19 Driskill argues that Mr. Leming’s opinion is not admissible to determine the 20 parties’ intended meaning of the term “good and marketable,” and that the Magistrate 21 Judge accordingly erred in relying upon it. 22 ambiguous, courts applying Arizona law may admit parol evidence to clarify and explain 23 the document. See Johnson v. Earnhardt’s Gilbert Dodge, Inc., 132 P.3d 825, 828 (Ariz. 24 2006). Evidence of “a professional custom within a particular geographic area may be 25 used to establish the terms of a contract.” Nat’l Hous. Indus., Inc. v. E.L. Jones Dev. Co., 26 576 P.2d 1374, 1378 (Ariz. App. 1978). The Magistrate Judge assumed that Mr. Leming 27 based his opinion regarding the meaning of the term “good and marketable” on the use of 28 that term in the relevant market, but the Court has not found support in the record for that -3- Where, as here, a contractual term is 1 assumption. Mr. Leming’s report does not demonstrate that Mr. Leming has experience 2 in the particular geographical area at issue, and it does not state that Mr. Leming based 3 his opinion regarding the meaning of the term “good and marketable” on professional 4 custom within that area. Both Mr. Leming’s report and testimony indicate that the 90% 5 “green and breakers” requirement arises from Mr. Leming’s own interpretation of the 6 terms of the produce sales agreement. Expert witnesses are generally not permitted to 7 provide legal opinions concerning the meaning and effect of contractual terms. See 8 Energy Oils, Inc. v. Mont. Power Co., 626 F.2d 731, 737 (9th Cir. 1980) (district court 9 erred by “admitting testimony of expert witnesses concerning their opinions as to the 10 legal effect of the agreements and also by permitting a witness to express the subjective 11 intent of the parties in entering into the agreements”); Marx & Co. v. Diners’ Club Inc., 12 550 F.2d 505, 509 (2d Cir. 1977) (district court erred by allowing expert to provide “legal 13 opinions as to the meaning of the contract terms at issue”); Messina v. Midway Chevrolet 14 Co., 209 P.3d 147, 152-53 (Ariz. App. 2008) (trial court did not abuse discretion in 15 refusing to consider expert testimony concerning the meaning of a contractual term); 16 Tavilla v. Blue Cross & Blue Shield of Ariz., Inc., 2014 WL 4473638, at *4 (Ariz. App. 17 Sept. 11, 2014) (trial court did not abuse discretion in refusing to consider expert opinion 18 because opinion would not have assisted court in interpreting contract at issue); see also 19 Taylor v. State Farm Mut. Auto. Ins. Co., 854 P.2d 1134, 1139 (Ariz. 1993) (courts 20 should not consider parol evidence “that has no probative value in determining the 21 parties’ intent”). 22 “When interpreting a contract . . . it is fundamental that a court attempt to 23 ‘ascertain and give effect to the intention of the parties at the time the contract was made 24 if at all possible.’” Taylor, 854 P.2d at 1139 (quoting Polk v. Koerner, 533 P.2d 660, 662 25 (Ariz. 1975)). If “parties use language that is mutually intended to have a special 26 meaning, and that meaning is proved by credible evidence, a court is obligated to enforce 27 the agreement according to the parties’ intent.” 28 signatories to the produce sales agreement establishes that the parties intended the term -4- Id. Here, the testimony of both 1 “good and marketable” to mean tomatoes that met the standards to grade 85% or better 2 on USDA inspection. Angel Antonio Beltran Soberanes, who signed the agreement on 3 behalf of Beltran, testified: 4 5 6 7 8 9 Q. What was the requirement under that contract in terms of the quality or condition of the tomatoes? A. 85 percent or better. Q. That was your understanding when you entered into the contract? A. That is correct. Q. And were there any other requirements regarding quality or condition in the contract? A. No. (Doc. 75-1, ex. 4 at 68:7-15). Similarly, Sam Licato, who signed the agreement on behalf of DiMare, testified: 10 11 12 13 14 15 16 17 18 19 Q. Under the terms of this Produce Sales Agreement DiMare was obligated to buy all tomatoes that were presented that were in good and marketable condition; is that correct? A. That’s correct. Q. The tomatoes graded 85 percent [or] better on the USDA inspection, DiMare was obligated to do that? A. If they met the standards for 85 percent or better, yes. Q. So that was “yes” to my question, right? A. Yes. Q. And every load that was presented for purchase that was above 85 percent DiMare was obligated to purchase, correct? A. Yes. .... Q. And the only quality requirement set forth in this contract is that the tomatoes be in good and marketable condition, right? A. 85 percent or better, which is a number one tomato. (Doc. 75-1, ex. 3 at 36:21-37:10, 37:19-23). 20 There is no evidence that the parties discussed or negotiated a requirement that 21 tomatoes supplied under the agreement had to be at least 90% “green and breakers” to be 22 considered “good and marketable.” In fact, Mr. Licato testified that he “would never buy 23 tomatoes green” and “always buy[s] them gassed.” (Doc. 75-1, ex. 3 at 78:20-21; see 24 generally 77:10-78:21). This testimony generally corresponds to a sworn declaration by 25 Mr. Beltran stating that, in the parties’ prior dealings, DiMare’s practice was “to monitor 26 the color of the tomatoes in the warehouse, and take delivery when the load reached the 27 color specification required by DiMare’s ultimate customer.” (Doc. 75-1, ex. 13 at ¶ 7). 28 Because Mr. Leming’s opinion regarding the meaning of the term “good and -5- 1 marketable” appears to be based on his own interpretation of the parties’ contract rather 2 than on professional custom in the relevant area, and because the opinion conflicts with 3 the intended meaning of the term testified to by both signatories to the agreement, Mr. 4 Leming’s opinion fails to create a genuine dispute as to whether the sales agreement 5 incorporated a 90% “green and breakers” color requirement. It did not. 6 Nevertheless, there remains a material factual dispute regarding whether Driskill 7 offered DiMare “good and marketable” tomatoes under the sales agreement. Mr. Licato 8 testified that the tomatoes he inspected did not meet the standards for grading 85% or 9 higher on USDA inspection. (See, e.g., Doc. 75-1, ex. 3 at 50:2-9; id. at 65:14-18). 10 Though Driskill presented evidence of USDA inspection certificates reflecting scores of 11 85% or better, there remain factual issues regarding whether the certificates correspond to 12 loads presented to DiMare under the produce sales agreement and whether DiMare saw 13 the certificates. (See, e.g., Doc. 73 at ¶¶ 13-15, 18; Doc. 75-1, ex. 3 at 65:19-25). 14 Accordingly, the Court will adopt the Magistrate Judge’s recommendation to deny 15 summary judgment in favor of either side on the issue of whether Beltran offered DiMare 16 “good and marketable” tomatoes under the sales agreement. 17 II. Anticipatory Repudiation 18 The Magistrate Judge recommended denying summary judgment on the issue of 19 whether DiMare repudiated the sales agreement. Driskill alleges that there is insufficient 20 admissible evidence from which a reasonable trier of fact could find in DiMare’s favor on 21 this issue. The Court agrees with the Magistrate Judge that a material issue of fact 22 remains with respect to this issue. Driskill alleges that Beltran contacted Mr. Licato 30- 23 40 times after his last inspection of tomatoes, but Mr. Licato testified that “[n]obody ever 24 talked to [him] about buying any more tomatoes” after his last inspection. (See Doc 75-1, 25 ex. 3 at 50:24-51:1; see also id. at 42:12-17 (“I called him up and told him . . . ‘when you 26 get the right kind of tomatoes that will make grade, call me up and we will look at them 27 and if they’re good enough we’ll take them.’ And he never called me again.”). 28 .... -6- 1 III. Conclusion 2 Because there remain genuine issues of material fact regarding whether Beltran 3 offered DiMare “good and marketable” tomatoes under the sales agreement and whether 4 DiMare repudiated the agreement, the Court agrees with the Magistrate Judge that both 5 parties’ summary judgment motions should be denied. 6 Accordingly, 7 IT IS HEREBY ORDERED that the Magistrate Judge’s Report and 8 Recommendation (Doc. 87) is adopted in full except to the extent that it finds a genuine 9 dispute regarding whether the term “good and marketable” as used in the produce sales 10 11 12 13 14 15 agreement incorporated a color requirement of 90% “green and breakers.” IT IS FURTHER ORDERED that Defendant’s Motion for Summary Judgment (Doc. 67) is denied. IT IS FURTHER ORDERED that Plaintiff’s Motion for Partial Summary Judgment (Doc. 69) is denied. Dated this 3rd day of February, 2015. 16 17 18 Honorable Rosemary Márquez United States District Judge 19 20 21 22 23 24 25 26 27 28 -7-

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