Off-Spec Solutions, LLC v. H.J. Heinz Company, L.P.
Filing
69
MEMORANDUM DECISION AND ORDER. IT IS HEREBY ORDERED that Plaintiff's Motion for Partial Summary Judgment (Dkt. 27 ) is GRANTED IN PART AND DENIED IN PART. To wit: the Court GRANTS Plaintiff's motion to the extent it seeks a holding that th e parties' written agreement requiring Heinz to deliver and Off-Spec to purchase "all solid potato by-product such as cull potatoes, fries, etc., Press Cake, dry peel" is unambiguous. The Court otherwise DENIES Plaintiff's motion. Signed by Judge Ronald E. Bush. (km)
UNITED STATES DISTRICT COURT
DISTRICT OF IDAHO
OFF-SPEC SOLUTIONS, LLC, an Idaho limited
liability company,
Plaintiff,
Case No.: 1:16-cv-00123-REB
MEMORANDUM DECISION AND
ORDER RE: PLAINTIFF’S MOTION
FOR PARTIAL SUMMARY
JUDGMENT (Dkt. 27)
vs.
H.J. HEINZ COMPANY, L.P., a Delaware limited
partnership,
Defendant,
Pending is Plaintiff’s Motion for Partial Summary Judgment (Dkt. 27), in which Plaintiff
Off-Spec Solutions, LLC (“Off-Spec”) seeks the entry of an order making three specific holdings
related to its claims. Having reviewed the briefing and supporting filings, participated in oral
argument on March 13, 2018, and otherwise being fully advised, the Court enters the following
Decision and Order:
I. BACKGROUND
Off-Spec is in the business of managing and distributing food waste commodities. Am.
Compl. ¶ 4 (Dkt. 21). Its core business involves transporting food waste away from production
facilities and delivering it to animal producers that can use it as animal feed. Id. Defendant H.J.
Heinz Company, L.P. (self-referred to as “Kraft-Heinz,” but referred to herein as “Heinz”),
operates a potato processing plant in Ontario, Oregon. Id. ¶ 5. In September 2014, Heinz held an
auction to sell the right to purchase and haul away “press cake,” one of several kinds of potato
processing by-products, from its Ontario, Oregon potato processing plant. Plf.’s Statement of
Fact ISO Mot. for Partial Summ. J. ¶¶ 6–8 (Dkt. 27-1). Off-Spec bid in and won the auction. Id.
MEMORANDUM DECISION AND ORDER RE: PLAINTIFF’S MOTION FOR
PARTIAL SUMMARY JUDGMENT – 1
After the auction, the parties worked on and entered into a final, written, agreement. In
that process were sown the seeds of this dispute. Off-Spec alleges that on October 2, 2014, its
principals Chris Salvador and Daniel Salvador met with Bob Pedracini, Heinz’s plant manager,
and Ashli Perdue, Heinz’s plant operational risk manager, to discuss the contract terms. Am.
Compl. ¶ 6 (Dkt. 21). During this meeting, Off-Spec alleges, Mr. Pedracini and Ms. Perdue told
Messrs. Salvador that Heinz wanted Off-Spec to haul away all potato by-products and not just
press cake. Id. ¶ 9. Because certain of the other by-products are more valuable than press cake,
Off-Spec was eager to agree to this expansion of the rights they had won at the auction. Id. Thus,
Off-Spec alleges, it was not surprised when the draft agreement Heinz presented to Off-Spec on
October 18, 2014 purported to apply to all potato by-products and not just press cake. Id. ¶ 10.
The parties ultimately executed a written agreement on or about November 22, 2014. Id. Ex. A
(the “Agreement”). The agreement references “all solid potato by-product such as cull potatoes,
fries, etc., Press Cake, dry peel, (hereinafter collectively referred to as ‘Plant by-products’) which
results from Heinz’s operation of” its Ontario plant. Agreement ¶ 2 (Dkt. 21).
After the agreement was executed, Heinz delivered press cake to Off-Spec but no other
by-products. Am. Compl. ¶ 17 (Dkt. 21). As a result, Off-Spec brings this lawsuit and alleges
that it is entitled to declaratory relief as well as damages for breach of contract, breach of
warranty, and unjust enrichment. Id. ¶¶ 25–45. Heinz counterclaimed, seeking reformation of the
Agreement in addition to damages for breach of contract and trespass. Def.’s Ans. and Aff.
Defenses to Plf.’s First Am. Compl. and Def.’s Countercls. ¶¶ 58–77 (Dkt. 44).
Heinz disputes many of Off-Spec’s allegations. Most significantly, Heinz says that no
one told Messrs. Salvador in October 2014 that Heinz wanted to sell to Off-Spec all by-products
rather than only press cake. Pedracini Decl. ¶¶ 3–7 (Dkt. 59-9); Perdue Decl. ¶ 29 (Dkt. 32). As
MEMORANDUM DECISION AND ORDER RE: PLAINTIFF’S MOTION FOR
PARTIAL SUMMARY JUDGMENT – 2
set out in Ms. Perdue’s declaration, Heinz asserts it already had a contract to provide its cull
potatoes and “fries” (potatoes lost during the production process) to another third party, so it
would not have even contemplated providing those by-products to Off-Spec. Id. ¶¶ 12, 17. Heinz
says that Off-Spec was aware of this. Id. ¶¶ 12, 15. Heinz maintains that it intended to sell OffSpec only press cake.
According to Ms. Perdue, the first draft of the agreement she sent to Off-Spec mentioned
only press cake. Id. ¶ 37. The redlined version of the draft agreement Daniel Salvador returned to
Ms. Perdue retained, unedited, the paragraph indicating that Heinz would provide Off-Spec only
press cake. Id. ¶¶ 38–39. However, when Ms. Perdue forwarded the redlined draft to an attorney
in Heinz’s out-of-state in-house legal staff, a revised draft was returned which included several
changes. Id. ¶¶ 42–43. Among these were a redefinition of the agreement’s scope to state it
applied to all by-products rather than just press cake. Id. Ms. Perdue declared she noticed and
removed certain other incorrect changes, but she did not notice the agreement scope had been
redefined to include all plant by-products rather than only press cake. Id.
The central issue in Off-Spec’s motion is whether the Agreement unambiguously requires
Heinz to deliver to Off-Spec all plant by-products. Off-Spec maintains that the Agreement is
unambiguous on its face and that even if there were a mistake in the drafting the Agreement is
nonetheless enforceable against Heinz. Heinz counters that the Agreement is ambiguous and that
extrinsic evidence shows there was no meeting of the minds as to by-products other than press
cake. Heinz argues the reference to plant by-products rather than just press cake was a drafting
error. Def.’s Opp. to Plf.’s MPSJ 2 (Dkt. 30).
Off-Spec moves for partial summary judgment, seeking an order holding that (1) the
Agreement’s language specifying it applied to “all solid potato by-product such as cull potatoes,
MEMORANDUM DECISION AND ORDER RE: PLAINTIFF’S MOTION FOR
PARTIAL SUMMARY JUDGMENT – 3
fries, etc., Press Cake, dry peel” is unambiguous; (2) this language plainly required Heinz to sell
to Off-Spec all solid potato by-product produced at Heinz’s Ore-Ida plant, including cull
potatoes, fries, press cake, and dry peel – and not just press cake; and (3) Heinz breached the
written agreement by delivering only press-cake to Off-Spec. Mot. for Partial Summ. J. re:
Breach of Contract 1–2 (Dkt. 27). Off-Spec’s motion was filed concurrently with a statement of
fact in support (Dkt. 27-1), a memorandum in support (Dkt. 27-2), and a declaration of Daniel
Salvador (Dkt. 27-3).
In response, Heinz filed a memorandum in opposition (Dkt. 30), a statement of disputed
facts in opposition (Dkt. 31), and a declaration of Ashli Perdue (Dkt. 32). Heinz also moved to
continue or deny the motion for partial summary judgment under Fed. R. Civ. P. 56(d) (Dkt. 33).
Off-Spec’s response to the motion to continue included a second declaration of Daniel Salvador
(Dkt. 36-1). Off-Spec also filed a reply memorandum supporting its partial summary judgment
motion (Dkt. 37).
Heinz also moved to strike the second declaration of Daniel Salvador, alternatively
seeking leave to file a surreply memorandum in opposition to the motion for partial summary
judgment. (Dkt. 38). Heinz then filed a reply supporting its motion to continue (Dkt. 39). OffSpec responded to the motion to strike (Dkt. 43) and Heinz replied (Dkt. 46).
The Court granted the motion to continue, to allow the parties to conduct targeted
discovery prior to deciding the partial summary judgment motion (Dkt. 52). The Court’s order
set a schedule for supplemental briefing after some discovery had occurred. The Court also
declined to strike the second declaration of Daniel Salvador but granted Heinz leave to file a
surreply. (Dkt. 63.)
MEMORANDUM DECISION AND ORDER RE: PLAINTIFF’S MOTION FOR
PARTIAL SUMMARY JUDGMENT – 4
Off-Spec filed “Objections to Declaration of Ashli Perdue” in which it argued that the
Court may not consider those statements of Ms. Perdue’s that are “speculative, conclusory,
misleading, and not based on personal knowledge.” (Dkt. 57.) Heinz then filed a supplemental
brief opposing Off-Spec’s motion for partial summary judgment, accompanied by several
declarations (Dkts. 59, 59-1 through 59-9). Finally, Off-Spec filed a supplemental brief
supporting its partial summary judgment motion, accompanied by a declaration of counsel and a
declaration of John Hepton (Dkts. 62, 62-1, 62-2).
A hearing on Off-Spec’s partial summary judgment motion was held March 13, 2018.
II. LEGAL STANDARD
1. Summary Judgment Standard
Summary judgment is appropriate where a party can show that, as to any claim or
defense, “there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). One of the principal purposes of summary
judgment “is to isolate and dispose of factually unsupported claims . . . .” Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). It is “not a disfavored procedural shortcut,” but is instead the
“principal tool[ ] by which factually insufficient claims or defenses [can] be isolated and
prevented from going to trial with the attendant unwarranted consumption of public and private
resources.” Id. at 327. “[T]he mere existence of some alleged factual dispute between the parties
will not defeat an otherwise properly supported motion for summary judgment.” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986). There must be a genuine dispute as to any
material fact — a fact “that may affect the outcome of the case.” Id. at 248.
The evidence must be viewed in the light most favorable to the non-moving party, and
the court must not make credibility findings. Id. at 255. Direct testimony of the non-movant must
MEMORANDUM DECISION AND ORDER RE: PLAINTIFF’S MOTION FOR
PARTIAL SUMMARY JUDGMENT – 5
be believed, however implausible. See Leslie v. Grupo ICA, 198 F.3d 1152, 1159 (9th Cir. 1999).
However, the Court is not required to adopt unreasonable inferences from circumstantial
evidence. See McLaughlin v. Liu, 849 F.2d 1205, 1208 (9th Cir. 1988).
The moving party bears the initial burden of demonstrating the absence of a genuine
dispute as to material fact. See Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 2001). To
carry this burden, the moving party need not introduce any affirmative evidence (such as
affidavits or deposition excerpts) but may simply point out the absence of evidence to support
the non-moving party’s case. See Fairbank v. Wunderman Cato Johnson, 212 F.3d 528, 532 (9th
Cir. 2000). This shifts the burden to the non-moving party to produce evidence sufficient to
support a jury verdict in his favor. See Devereaux, 263 F.3d at 1076. The non-moving party must
go beyond the pleadings and show “by [his] own affidavits, or by the depositions, answers to
interrogatories, or admissions on file” that a genuine dispute of material fact exists. Celotex, 477
U.S. at 324. Where reasonable minds could differ on the material facts at issue, summary
judgment should not be granted. Anderson, 477 U.S. at 251.
2. Other Applicable Legal Standards
This motion presents an issue of whether a contract is clear, or whether it is ambiguous.
Under Oregon law,1 “[u]nambiguous contracts must be enforced according to their terms.” Pac.
First Bank v. New Morgan Park Corp., 876 P.2d 761, 764 (Or. 1994). “Extrinsic evidence
regarding the circumstances underlying the formation of a contract may be considered to
determine whether a contractual provision is ambiguous.” State ex rel. Dept. of Educ. v. Vantage
1
The Agreement specifies that New York law governs, but the parties agree that Oregon
law should apply because the Agreement has no relationship to New York or New York law and
because Oregon is the place of performance of the Agreement. The Court will apply Oregon law.
MEMORANDUM DECISION AND ORDER RE: PLAINTIFF’S MOTION FOR
PARTIAL SUMMARY JUDGMENT – 6
Techs. Knowledge Assessment, LLC, 261 P.3d 17, 22 (Or. App. 2011); see also ORS 41.740,2
42.220.3 “A provision is ambiguous when it is reasonably susceptible to more than one
meaning.” Vantage Techs., 261 P.3d at 22. “If a contract is ambiguous, the trier of fact will
ascertain the intent of the parties and construe the contract consistent with the intent of the
parties.” Pac. First Bank, 876 P.2d at 764. “To interpret a contractual provision,” courts first
“examine[] the text of the disputed provision, in the context of the document as a whole. If the
provision is clear, the analysis ends.” Yogman v. Parrott, 937 P.2d 1019, 1021 (Or. 1997). If “the
contractual provision at issue is ambiguous” the court proceeds “to examine extrinsic evidence of
the contracting parties’ intent.” Id. at 1022 (citing ORS 41.740 for the proposition that “extrinsic
evidence is admissible to ‘explain an ambiguity’ in a contract”).
Stated simply, extrinsic evidence relating to the formation of an agreement can be used to
show an ambiguity. And where there is an ambiguity, regardless of how it is shown, extrinsic
evidence may be used to explain the ambiguity by reference to the parties’ intentions.
Also, “it is the duty of a court to construe a contract as a whole employing any reasonable
method of interpretation so that no part of it is ignored and effect can be given to every word and
phrase.” New Zealand Ins. Co. v. Griffith Rubber Mills, 526 P.2d 567, 569 (Or. 1974).
III. DISCUSSION
Off-Spec seeks partial summary judgment on three, sequentially-related, issues. First,
Off-Spec requests a ruling that the Agreement’s definition of the products covered by the
2
ORS 41.740 prohibits extrinsic evidence of the terms of a written agreement except in
certain circumstances. One such circumstance relates to “evidence of the circumstances under
which the agreement was made;” another is “to explain an ambiguity, intrinsic or extrinsic.”
3
ORS 42.220 provides that “[i]n construing an instrument, the circumstances under
which it was made, including the situation of the subject and of the parties, may be shown so that
the judge is placed in the position of those whose language the judge is interpreting.”
MEMORANDUM DECISION AND ORDER RE: PLAINTIFF’S MOTION FOR
PARTIAL SUMMARY JUDGMENT – 7
Agreement is unambiguous. Second, Off-Spec requests a ruling that this unambiguous language
required Heinz to sell to Off-Spec all potato by-products and not just press cake. Third, Off-Spec
requests a ruling that Heinz breached the Agreement by delivering only press cake.
As an initial matter, the Court will consider the circumstances under which the
Agreement was made in deciding whether any of its terms are ambiguous. ORS 42.220; Vantage
Techs., 261 P.3d at 22. Those circumstances show factual disputes regarding the negotiations
leading to the Agreement’s formation and regarding what each party believed was the
Agreement’s scope.
Off-Spec’s declarant Daniel Salvador states that Heinz plant manager Bob Pedracini told
him at an in-person meeting that “Heinz wanted Off-Spec to haul away all potato by-products
generated at the Ore-Ida facility, including cull potatoes, press cake, dry peel, and fries.”
Salvador Decl. ¶ 10 (Dkt. 27-3). Salvador goes on to say that the “agreement Heinz emailed on
October 17, 2014, reflected our discussions with Bob and Ashli to change the deal, so that OffSpec would purchase all solid potato by-products produced at the Ore-Ida plant, and not just the
press cake.” Id. ¶ 13.
The statements of Heinz’s declarants Mr. Pedracini and Ms. Perdue directly contradict
these statements by Mr. Salvador. Ms. Perdue says that “during the Pre-Contract meeting, no one
from Kraft Heinz or Off-Spec mentioned or suggested that Off-Spec would purchase any byproduct other than press cake. . . . Neither Bob nor I ever met with either Chris Salvador or
Daniel Salvador during Kraft Heinz’s contract negotiations with Off-Spec.”4 First Perdue Decl.
4
Ms. Perdue’s declaration also details the process by which, in her perception, the
Agreement came to include a mistake in the paragraph defining its scope. First Perdue Decl. ¶¶
36–48 (Dkt. 32). Although Off-Spec filed an objection to Ms. Perdue’s declaration (Dkt. 57),
asserting that some of her statements are inadmissible, the Court does not rely on any of the
MEMORANDUM DECISION AND ORDER RE: PLAINTIFF’S MOTION FOR
PARTIAL SUMMARY JUDGMENT – 8
¶¶ 29, 31 (Dkt. 32). Mr. Pedracini says that he “do[es] not recall ever meeting with anyone from
Off-Spec prior to signing the contract.” Pedracini Decl. ¶ 4 (Dkt. 59-9). He also says that before
he signed the Agreement he “had not been involved in any negotiations or contract discussions
with Off-Spec” and that he “never promised, offered, or agreed that Kraft Heinz would sell any
potato by-products other than press cake.” Id. ¶¶ 3, 5. Finally, he says that he “never indicated to
Off-Spec that Off-Spec was ever entitled to purchase potato by-products other than press cake,
nor have I been present for a conversation where anyone made such a representation. I am not
aware of any person making such representations to Off-Spec on Kraft Heinz’s behalf.” Id. ¶ 6.
Thus, there is a stark disagreement as to the circumstances surrounding the formation of the
Agreement.
Off-Spec, however, does not seek summary judgment related to the Agreement’s
formation. Hence, the disagreement over the lead-up to the Agreement does not necessarily sink
Off-Spec’s request for summary judgment. The details of the disputed facts do, however, provide
context for the Court’s analysis of whether the Agreement, or any term in it, is ambiguous.
Equipped with this background, the Court now undertakes to answer that question.
Paragraph two of the Agreement, labeled “PRODUCT,” states that
Heinz shall deliver and Off-Spec Solutions shall remove and purchase all
solid potato by-product such as cull potatoes, fries, etc., Press Cake, dry peel ,
(hereinafter collectively referred to as “Plant by-products”) which results from
Heinz’s operation of its plant located at 175 N. E. 6th Avenue, Ontario, Oregon
(hereinafter referred to as the “Plant”). Delivery by Heinz shall be at the plant. The
terms and conditions of this contract shall be retroactive to the commencement date
identified.
Agreement ¶ 2 (Dkt. 21 Ex. A).
challenged statements in deciding the instant motion. The Court does not opine at this time as to
the admissibility of any particular statements in Ms. Perdue’s declaration or as to Off-Spec’s
challenges thereto.
MEMORANDUM DECISION AND ORDER RE: PLAINTIFF’S MOTION FOR
PARTIAL SUMMARY JUDGMENT – 9
The Court is persuaded, as indicated at the motion hearing, that there is no genuine
dispute as to the Agreement’s definition of “plant by-products.” There is no ambiguity in the
definition; it plainly applies to “all solid potato by-product” including the listed examples. It may
be, as Heinz argues, that this definition is not what it intended to draft and it is the result of a
mistake in its internal legal chain.5 But the plain language appearing in the four corners of the
Agreement admits no ambiguity. The Court will therefore grant the first request in Off-Spec’s
motion for partial summary judgment.
However, genuine disputes of material fact preclude summary judgment as to Off-Spec’s
other requests. Off-Spec’s second request is for a ruling that “this language” – referring to
paragraph two of the Agreement – “plainly required Heinz to sell to Off-Spec all solid potato byproduct . . . and not just press cake.” Mot. for Partial Summ. J. 1 (Dkt. 27). Paragraph two does
indeed evidence an obligation undertaken by Heinz to sell all plant by-products, including but
not limited to press cake. But when this paragraph is considered in the context of the entire
Agreement and the circumstances surrounding its formation, there is an ambiguity that cannot be
resolved at summary judgment.
Paragraph three of the Agreement is entitled “PAYMENT” and provides in part that
“Off-Spec Solutions shall pay Heinz, monthly payments (FOB the Plant) in accordance with
Addendum A, attached hereto and made a part hereof, for all Plant by-products removed from
the Plant.” Agreement ¶ 3 (Dkt. 21). Addendum A, in its entirety, provides as follows:
ADDENDUM A
Price will be based on $4 bushel Corn CME. = $9.95
EXAMPLE: This is using the factor of 2.487. Simple example shown here (2.487
x $1) = $2.487 Press Cake price.
5
The posture of the instant motion does not require the Court to decide whether the
Agreement includes a mistake, or, if so, what the consequences of that mistake might be.
MEMORANDUM DECISION AND ORDER RE: PLAINTIFF’S MOTION FOR
PARTIAL SUMMARY JUDGMENT – 10
Corn bu $1.00 = Press Cake $2.487
Corn bu $2.00 = Press Cake $4.97
Corn bu $3.00 = Press Cake $7.462
Corn bu $4.00 = Press Cake $9.95
Corn bu $5.00 = Press Cake $12.435
Corn bu $6.00 = Press Cake $14.922
Corn bu $7.00 = Press Cake $17.409
Corn bu $8.00 = Press Cake $19.896
The pricing assumes that the dry-weight percentage of the Plant by-products
average around 20% Dry Matter.
The grid price will be figured as follows: The Friday closes will be averaged for a
three month period on the near term CBOT corn contracts and that price will be
used to price the preceding quarter. Example: The Friday average closes in the front
month for January, February, and March will determine the price for April potatoes.
Adjustments will not be made on a more frequent than quarterly basis.
Agreement Addendum A (Dkt. 21).6
Thus, some “price” under the Agreement is pegged to the price of corn bushels on the
CME, but it is not clear what product or products are to be so-priced, or – more confusingly –
what amount, or volume, or other identifiable “quantity” is to be tied to that price.7 Notably, the
pricing matrix in the Addendum is the same as appeared in the original draft of the Agreement
when it referred only to press cake, and even though the record is clear that both sides to this
dispute agreed that the by-products other than press cake were more valuable than press cake
(discussed infra).
The other express references in the Addendum are to press cake. Off-Spec argues that the
Addendum sets the price for all plant by-products as 2.487 times the quarterly average of the
6
The formatting, but not the contents, of the Addendum has been edited slightly for
brevity and clarity.
7
At the hearing on this motion, counsel represented that CME refers to the Chicago
Mercantile Exchange. The Agreement does not define the term.
MEMORANDUM DECISION AND ORDER RE: PLAINTIFF’S MOTION FOR
PARTIAL SUMMARY JUDGMENT – 11
price of a bushel of corn. In contrast, Heinz argues that the Addendum sets the price only for
press cake and that the Agreement sets no price for other by-products.8
Hence, it is ambiguous both as to whether the Addendum’s single reference to “plant byproducts,” in context, purports to set a price for all plant by-products, and as to how that price is
to be calculated.
Off-Spec emphasizes the fact that the Addendum includes the word “example” twice as a
preface to the list of different dollar values based on the price of corn. Such a term, Off-Spec
asserts, illustrates that the Addendum is consistent with the argument that the same pricing factor
of 2.487 applies to all plant by-products and not just press cake. The Court agrees that this is a
possible interpretation of the Addendum and that it would be consistent with the Agreement as a
whole. But this is not the only reasonable interpretation. And, Off-Spec’s interpretation would
render the term “Press Cake” – which appears nine times in the Addendum – superfluous.
Adopting Off-Spec’s interpretation also would be inconsistent with the requirement in Oregon
law that it is the Court’s duty “to construe a contract as a whole employing any reasonable
method of interpretation so that no part of it is ignored and effect can be given to every word and
phrase.” New Zealand Ins. Co., 526 P.2d at 569.
Moreover, Off-Spec itself alleges that “the re-sell value of some of the other by-products
can be higher than the re-sell value of press cake.” Am. Compl. ¶ 9 (Dkt. 21). It claims Heinz
breached the Agreement by “failing or refusing to provide Off-Spec all Plant by-product and in
only providing it the much less valuable press cake.” Id. ¶ 31 (emphasis added). The parties were
8
The parties do not discuss whether or how ORS 72.3050, relating to an “open price
term” in UCC contracts, might apply to the Agreement. Presumably this is because Off-Spec
argues the Agreement sets the price as to all plant by-products and Heinz argues the Agreement
does not apply to any plant by-products besides press cake, so there is no price term to set.
MEMORANDUM DECISION AND ORDER RE: PLAINTIFF’S MOTION FOR
PARTIAL SUMMARY JUDGMENT – 12
free, of course, to strike any bargain they wished. But the interpretation Off-Spec urges is made
less likely by its own admissions that other by-products are worth more than press cake.
However, the Court is similarly unconvinced by Heinz’s argument that the Addendum
unambiguously fails to set the price for all plant by-products. The first sentence of the
Addendum does not expressly reference press cake, plant by-products, or any other goods to be
sold under the Agreement, and it provides enough information to calculate the 2.487 factor used
in the examples that follow it. The Addendum also does mention, as referenced above, “Plant byproducts” after the examples.
The Court further notes that neither the Agreement nor Addendum A describes the unit of
weight or volume for the goods. The Court presumes, without deciding, that the parties’ course
of performance may establish the unit for press cake. ORS 71.3030(1), (4). But because Heinz
never delivered other by-products to Off-Spec under the Agreement, it is not clear that course of
performance can establish the units for by-products other than press cake.9 This results in an
additional ambiguity. That is, with respect to by-products besides press cake, the Agreement is
ambiguous both as to the price and as to the unit of weight or volume. Stated differently, even if
Off-Spec’s interpretation were unambiguous that the price of all by-products and not just press
cake is 2.487 times the price of a bushel of corn, neither the Agreement nor the parties’ course of
performance establishes whether that pricing factor is per pound, or bushel, or ton, or some other
9
The Court acknowledges, and the parties would be well aware, that there would be a
course of dealing between Heinz and other entities regarding prices assigned to removal of byproducts other than press cake.
MEMORANDUM DECISION AND ORDER RE: PLAINTIFF’S MOTION FOR
PARTIAL SUMMARY JUDGMENT – 13
commodity unit of the by-product. Nor is there evidence in the record that the same units apply
for each kind of by-product.10
It is apparent, then, that the Agreement’s pricing structure is ambiguous with respect to
plant by-products besides press cake because it is “reasonably susceptible to more than one
meaning.” Vantage Techs., 261 P.3d at 22. Because the Agreement is ambiguous, extrinsic
evidence of the parties’ intent may be considered to resolve the ambiguity. Pac. First Bank, 876
P.2d at 764. As discussed supra, Off-Spec’s declarations provide evidence that Heinz intended to
sell Off-Spec additional by-products (although it is debatable whether the evidence supports any
particular price or unit term). On the other hand, Heinz’s declarations provide evidence that
Heinz did not intend to sell Off-Spec by-products besides press cake at any price.
Off-Spec seeks an order holding that the Agreement “required Heinz to sell to Off-Spec
all solid potato by-product produced at Heinz’s Ore-Ida plant, including cull potatoes, fries, press
cake, and dry peel – and not just press cake.” Mot. for Partial Summ. J. 1 (Dkt. 27). Despite the
lack of ambiguity in the definition of “plant by-products,” the Court must nonetheless deny the
request because there is a genuine dispute of material fact as to whether the Agreement did
impose such a duty on Heinz, in light of the ambiguities in the pricing structure.
Denying this summary judgment request, of course, is not tantamount to holding that
Heinz had no such duty or that the Agreement applies only to press cake. The Court holds merely
that the ambiguities in the pricing structure evidenced in Addendum A to the Agreement
preclude ruling as a matter of law that Heinz had such a duty.
10
The Court recognizes that the units could, perhaps, be supplied by a usage of trade.
ORS 71.3030(3), (4). But the record lacks evidence of any applicable usage of trade, so the
ambiguity cannot be resolved on the present record.
MEMORANDUM DECISION AND ORDER RE: PLAINTIFF’S MOTION FOR
PARTIAL SUMMARY JUDGMENT – 14
Off-Spec bases its third and final request for summary judgment on its assertion that
“Heinz breached the written agreement by delivering only press-cake to Off-Spec.” Mot. for
Partial Summ. J. 2 (Dkt. 27). This conclusion relies on the premise stated in its second request,
that Heinz was obligated to sell Off-Spec all plant by-products and not just press cake. Because
the Court is denying summary judgment on that request, the third request must also be denied.
The Court does not at this time consider the parties’ arguments regarding whether the
written expression of the Agreement includes a mistake, whether excusable or not. The Court
also does not consider how the parties’ course of performance under ORS 71.3030 affects the
Agreement’s interpretation or the parties’ obligations, other than as noted supra. Because the
Court concludes there are genuine disputes of material fact precluding summary judgment as to
Off-Spec’s second and third requests, there is no need to consider these arguments at this time.
IV. CONCLUSION
The definition of “plant by-products” in the Agreement is unambiguous and includes “all
solid potato by-product such as cull potatoes, fries, etc., Press Cake, [and] dry peel.”
Nonetheless, the Agreement’s pricing structure is ambiguous and extrinsic evidence calls into
question whether Heinz was obligated to sell Off-Spec plant by-products besides press cake.
Therefore, the Court will deny Off-Spec’s motion for summary judgment to the extent it seeks an
order holding that Heinz was obligated to sell all plant by-products to Off-Spec or that Heinz
breached the Agreement by delivering only press cake.
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MEMORANDUM DECISION AND ORDER RE: PLAINTIFF’S MOTION FOR
PARTIAL SUMMARY JUDGMENT – 15
V. ORDER
Based on the foregoing, IT IS HEREBY ORDERED that Plaintiff’s Motion for Partial
Summary Judgment (Dkt. 27) is GRANTED IN PART AND DENIED IN PART. To wit: the
Court GRANTS Plaintiff’s motion to the extent it seeks a holding that the language contained in
the parties’ written agreement requiring Heinz to deliver and Off-Spec to purchase “all solid
potato by-product such as cull potatoes, fries, etc., Press Cake, dry peel” is unambiguous. The
Court otherwise DENIES Plaintiff’s motion.
DATED: March 28, 2018.
_____________________________
Honorable Ronald E. Bush
Chief U. S. Magistrate Judge
MEMORANDUM DECISION AND ORDER RE: PLAINTIFF’S MOTION FOR
PARTIAL SUMMARY JUDGMENT – 16
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