Evans et al v. Orion Ethanol, Inc.

Filing 33

MEMORANDUM AND ORDER granting 29 Motion for Summary Judgment. A hearing on damages will be held on July 18, 2011 at 1:30 P.M. Signed by District Judge Monti L. Belot on 6/23/2011. Mailed to pro se party Orion Ethanol, Inc., Attn.: Tim Barker, CEO, 307 S. Main Street, Pratt, KS 67124 by regular mail (rm)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

GARY C. EVANS, et al.,
)
)
)
)
)
)
)
)
)
)

Plaintiffs,
v.
ORION ETHANOL, INC.,
Defendant.

Civil ACTION
No.

09-CV-1245-MLB

MEMORANDUM AND ORDER
Before the court are the following:
1.

Plaintiffs’ Motion for Summary Judgment;

2.

Plaintiffs’ Brief in Support of Summary Judgment, and
affidavits.

Plaintiffs

1

filed

this

breach

of

contract

action

against

defendant to recover $1,100,000 owed on two convertible senior notes
plaintiffs hold that the defendant (Orion) has not paid, along with
interest

and

attorney’s

fees.

Plaintiffs

now

move

for

summary

judgment.
I.

GOVERNING LAW
A federal court sitting in diversity applies federal procedural

law and the substantive law that would be applied by the forum state.
Burnham v. Humphrey Hospitality REIT Trust, Inc., 403 F.3d 709, 712
(10th Cir. 2005).
choice-of-law
1

Consistent therewith, where a contract contains a

clause,

the

court

will

apply

the

forum

state’s

Defendant Orion Ethanol did not provide this court with a
response to the Motion for Summary Judgment.

choice-of-law rules. Midamerica Constr. Mgmt., Inc. v. MasTec N. Am.,
Inc., 436 F.3d 1257, 1260 (10th Cir. 2006). Under Kansas law, parties
to a contract may select the law that will govern interpretation of
their agreement, and Kansas courts will generally honor that choice.
Pepsi-Cola Bottling Co. of Pittsburg, Inc. v. PepsiCo, Inc., 431 F.3d
1241, 1255 (10th Cir. 2005) (citing Brenner v. Oppenheimer & Co., 273
Kan. 525, 44 P.3d 364, 374 (2002)). As such, Kansas procedural law and
New York substantive law will be applied to this motion.
II.

SUMMARY JUDGMENT STANDARD
The rules applicable to the resolution of this case, now at the

summary judgment stage, are well-known and are only briefly outlined
here.

Federal Rule of Civil Procedure 56(c) directs the entry of

summary judgment in favor of a party who "show[s] that there is no
genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law."

Fed. R. Civ. P. 56(c).

An issue is “genuine” if sufficient evidence exists so that a rational
trier of fact could resolve the issue either way and an issue is
“material” if under the substantive law it is essential to the proper
disposition of the claim.

Adamson v. Multi Community Diversified

Svcs., Inc., 514 F.3d 1136, 1145 (10th Cir. 2008).

When confronted

with a fully briefed motion for summary judgment, the court must
ultimately determine "whether there is the need for a trial–whether,
in other words, there are any genuine factual issues that properly can
be resolved only by a finder of fact because they may reasonably be
resolved in favor of either party."
477 U.S. 242, 250 (1986).
judgment.

Anderson v. Liberty Lobby, Inc.,

If so, the court cannot grant summary

Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
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D.Kan.

Rule

6.1(d)(2)

provides

in

pertinent

part

that

“[r]esponses to motions to dismiss or for summary judgment must be
filed and served within 21 days....” D. Kan. Rule 7.4 provides: “If
a responsive brief or memorandum is not filed within the Rule 6.1(d)
time requirements, the court will consider and decide the motion as
an uncontested motion.” McKeighan v. Corrections Corp. of America,
2011 WL 977587 (D.Kan.,2011). “Pursuant to local rules, a party may,
by failing to offer a timely response, waive the right to respond or
to controvert the facts asserted in a motion for summary judgment.”
Reed v. Bennet, 312 F.3d 1190, 1195 (10th Cir. 2002). Thus, a district
court can grant summary judgment if the uncontroverted facts in the
motion meet the requirements of Fed. R. Civ. P. 56(c)-if they
demonstrate that no material issues of fact remain and that the moving
party is entitled to judgment as a matter of law. Id.

Orion has

failed to respond to this motion for summary judgment, and therefore
this court will deem all facts supported by plaintiffs’ affidavits
uncontroverted.
III. UNCONTROVERTED FACTS
On or about November 3, 2006 plaintiffs entered into subscription
agreements

with

Orion.

Plaintiff

Evans

purchased

a

$1,000,000

convertible senior note, and plaintiff Krueger purchased a $100,000
note. Plaintiffs placed the $1,100,000 in an escrow account with
Global Hunter Securities, who then transferred the money to Orion.
The principal amount plus interest was due on October 31, 2008.
Plaintiffs

have

not

received

any

payments

on

these

notes

since

December, 2007. Plaintiffs gave notice of the default to Orion, and
provided a written demand for performance. The interest rate on the
-3-

note was 8 percent per annum, and increased to 9 percent on April 1,
2007. The interest rate was further scheduled to increase by one
percent for every interest payment date thereafter. Evans claims he is
owed $1,389,177.80, with the debt accruing interest at a rate of
$385.56 per day from November 1, 2010.

Krueger claims he is owed

$138,917.79, with the debt accruing interest of $38.35 per day from
November 1, 2010. The note provides for reasonable attorney’s fees,
and plaintiffs claim attorney’s fees in the amount of $13,275. In sum,
Evans claims damages for $1,477,471.04 and Krueger claims damages of
$147,669.94, plus attorney’s fees.
IV.

BREACH OF CONTRACT
Plaintiffs filed suit against Orion for breach of contract with

respect to the non-payment of $1,100,000 in two convertible senior
notes, plus interest and attorney’s fees. Under New York law, a
plaintiff must prove four elements to establish breach of contract and
be entitled to damages: 1) the existence of a contract; 2) plaintiff’s
performance of the contract; 3) defendant’s breach of the contract;
and 4)resulting damages. JP Morgan Chase v. J.H. Elec. of New York,
Inc., 893 N.Y.S.2d 237 (N.Y. App. Div. 2010); Elisa Dreier Reporting
Corp. v. Global Naps Networks, Inc., 2011 N.Y. Slip Op. 03543, (N.Y.
App.

Div.

2011).

For

the

foregoing

reasons,

plaintiffs

have

established that as a matter of law, Orion breached the contract and
plaintiffs are entitled to summary judgment on the issue of liability.
Based on the uncontroverted facts, plaintiffs and Orion entered
into two contracts on November 3, 2006. Consideration was adequate,
and

the

signature

of

an

Orion

representative

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on

the

contracts

establishes acceptance of the contracts. Nothing in the uncontroverted
facts suggests that there is a genuine issue of material fact with
respect to the existence and validity of the contracts. Plaintiffs
have

established

the

existence

of

contracts

with

Orion.

Next,

plaintiffs performed their obligations under the contracts. It is
uncontroverted that plaintiffs did in fact invest $1,100,000 in Orion
and notified Orion of its default of the note on October 31, 2008 as
provided in the contracts.
Further, Orion failed to perform its obligations under the
contracts which amounted to a breach. The uncontroverted facts and the
contracts establish that Orion was to make scheduled interest payments
to plaintiffs, with the total amount due by October 31, 2008. Failure
to make scheduled payments set out in a contract establishes breach of
that contract. See Paterno & Sons, Inc., v. Town of New Windsor, 351
N.Y.S.2d 445, (N.Y. App. Div. 1974); See also Awards.Com, LLC., v.
Kinko’s, Inc., 834 N.Y.S.2d 147, 154 (N.Y. App. Div. 2007)(Holding
that failure to make payments set out in a contract is especially
material when the payments constituted the primary consideration).
Finally, Orion’s material breach of the terms of the convertible
senior notes resulted in monetary harm to plaintiffs.
V.

Damages
Plaintiffs request damages in the amount of $1,100,000 plus

$377,471.04 in accrued interest and $13,275 in attorney’s fees. To be
awarded damages, plaintiffs must calculate the damage award with
reasonable certainty. Murphy v. Lischitz, 49 N.Y.S.2d 439, 440 (N.Y.
Sup Ct. 1944). Plaintiffs do not need to prove their damages to the
-5-

dollar, but need to provide some basis of computation. Broadway
Photoplay Co. v. World Film Corp., 121 N.E. 756, 758 (N.Y. 1919).
Plaintiffs stated that they have not received any payments from Orion
since December 1, 2007, however, plaintiffs do not provide how much
Orion

paid

on

the

notes

before

December

1,

2007.

Without

this

information, damages cannot be calculated with reasonable certainty.
VI.

CONCLUSION
Plaintiffs’ Motion for Summary Judgment is granted with respect

to liability for breach of contract. Due to the uncertainty in
calculating damages, this court will hold a hearing on damages which
will be held on July 18, 2011 at 1:30 P.M.
IT IS SO ORDERED.
Dated this

23rd

day of June 2011, at Wichita, Kansas.

s/ Monti Belot
Monti L. Belot
UNITED STATES DISTRICT JUDGE

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