TFG-California v. Flag City et al
Filing
32
ORDER AND MEMORANDUM DECISION denying 20 Motion for Summary Judgment. Signed by Judge Tena Campbell on 12/14/11 (alt)
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
TFG-CALIFORNIA,
Plaintiff,
ORDER AND
MEMORANDUM DECISION
vs.
FLAG CITY L.P., et al.,
Case No. 2:10-CV-470-TC
Defendants.
Plaintiff TFG-California (TFG) brought suit against Defendants Flag City L.P., William
Karr, Kenneth Kirsten, and Cecil Dillon (collectively Flag City) alleging breach of contract,
breach of the implied covenant of good faith and fair dealing, and that it is entitled to a writ of
replevin. TFG has now filed a Motion for Summary Judgment. In its response and sur-reply,
Flag City requested sanctions for responding to the initial Motion for Summary Judgment and to
TFG’s reply brief. A hearing on TFG’s Motion for Summary Judgment and Flag City’s request
for sanctions was set for December 6, 2011. After thoroughly reviewing the briefs and the
evidence that was submitted, the court found that oral argument was not necessary to decide the
issues before it. The December 6 hearing was stricken and the court took the matter under
advisement.
For the reasons set forth below, TFG’ Motion for Summary Judgment (Dkt. No. 20) is
DENIED and Flag City’s request for sanctions is DENIED.
BACKGROUND1
On December 29, 2005, Flag City entered into an agreement (Agreement)2 with TFG to
get financing to build a sign for Flag City’s commercial park. Under the Agreement, Flag City
was required to pay the cost of the equipment ($173,333) plus thirty-six monthly payments of
$5,302.60. (Lease Schedule, Ex. B to Compl. [Dkt. No. 2-2] at 23.) The Agreement also gave
Flag City three end-of-term options:
(i) purchase all, but not less than all, of the Items of Equipment for a price to be
agreed upon by both Lessor and any applicable Assignee and Lessee, (ii) extend the
Lease for twelve (12) additional months at the rate specified on the respective
Schedule, or (iii) return the Equipment to Lessor at Lessee’s expense.
(Agreement, Ex. A to Compl. [Dkt. No. 2-2] at 14.) To exercise an end-of-term option, Flag City
was required to provide written notice to TFG at least ninety days before completion of the base
term. (Id.) If no end-of-term option was selected or the parties could not agree to options (i) or
(iii), option (ii) would go into effect and the lease would be extended for twelve additional
months. (Id.)
TFG contends that at the end of the thirty-six-month base term, Flag City failed to elect
one of the end-of term options, and so option (iii) took effect and the lease was extended for
twelve additional months. During this extension period (August 2009 to August 2010), Flag City
1
In support of its Motion for Summary Judgment TFG cited only to the complaint and answer. In
response, Flag City submitted an affidavit of Willaim Karr, a general partner of Flag City. TFG
then submitted its reply and attached affidavits of David Johnson and Marci Slagle, an employee
and former employee of TFG, and a copy of the Lease Agreement. The background section is
taken from all of these documents and represents both TFG’s and Flag City’s view of the facts.
2
Flag City characterizes the agreement as a “lease purchase agreement” (Karr Aff. [Dkt. No. 221] ¶ 1) while TFG characterizes the agreement as a simple lease (see Johnson Aff. [Dkt. No. 241] ¶ 3).
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failed to make the monthly payment due on February 1, 2010 (the first month that Flag City had
not made its monthly payment), and has not made any monthly payments since that time. The
failure to make required monthly payments constitutes a default under the lease. As a result,
TFG allegedly gave notice, orally and in writing, to Flag City that it was in default. TFG claims
that it is entitled to: the missing rental payments, default interest, costs, and other expenses
totaling $85,029.66; 18% interest on this amount; and attorney’s fees and costs.
Flag City responds that at the end of base term it had paid $190,893.60, which is the full
amount of the thirty-six monthly payments. And both at the time of purchase and ninety days
before the end of the base term, Flag City exercised the purchase option, option (i) of the
Agreement, by notifying Ms. Slagle and Mr. Johnson, representatives of TFG. (Karr Aff. [Dkt.
No. 22-1] ¶ 3.) Flag City alleges that both representatives acknowledged and accepted the
notification and agreed that the purchase price would be 10% of the total equipment cost. Flag
City then paid the 10% and inadvertently overpaid an additional $16,467.88. After TFG learned
of the overpayment, it refused to acknowledge that Flag City had exercised the purchase option.
Flag City claims that TFG owes it $16,467.88 plus interest and costs and attorney’s fees.
In its reply, TFG disputes that Flag City gave the required notice of its intent to exercise
the purchase option. Both Ms. Slagle and Mr. Johnson stated in their affidavits that Mr. Karr
never gave them notice that Flag City was exercising the purchase option or any other end-ofterm option. (Slagle Aff. [Dkt. No. 24-2] ¶ 6; Johnson Aff. [Dkt. No. 24-1] ¶ 6.) TFG contends
that because Flag City did not exercise an end-of-term option, the twelve-month extension period
began. From August 2009 to January 2010, which was part of the extension period, Flag City
“paid reduced monthly rental payments of $2,100 each as a result of TFG’s accommodation to
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forebear and accept lower payments for a period of time instead of pursuing default remedies.”
(Pl.’s Reply [Dkt. No. 24] at 7.) TFG contends that Flag City owes $51,031.20 in monthly rental
payments for the extension period.
After TFG submitted its reply, Flag City submitted a response in which it argued that
TFG’s belated evidence cannot be considered and that sanctions are appropriate. The court
reviewed Flag City’s response and issued an order giving Flag City three weeks to file a sur-reply
if it so chose. Flag City submitted a sur-reply and again requested sanctions. In total, Flag City
requests $7,755 in sanctions: $6,105 for 22.2 hours spent researching and writing the opposition,
$550 for two hours reviewing TFG’s reply brief and drafting Flag City’s response, and $1,100 for
four hours reviewing TFG’s reply brief and drafting Flag City’s sur-reply. Flag City’s
calculation of attorney’s fees is based on an hourly rate of $275 per hour, which counsel for Flag
City alleges is “very average for an attorney of [his] experience in Stockton, California.” (Defs.’
Sur-Reply [Dkt. No. 30] at 8.)
ANALYSIS
Standard of Review
The court grants summary judgment when “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). The court
“view[s] the evidence and make[s] all reasonable inferences in the light most favorable to the
nonmoving party.” N. Natural Gas Co. v. Nash Oil & Gas, Inc., 526 F.3d 626, 629 (10th Cir.
2008).
TFG cannot rely on the allegations in the unverified complaint.
“In general, a party may not rely on its own pleadings to support or oppose summary
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judgment.” 1 Stephen S. Gensler, Federal Rules of Civil Procedure, Rules and Commentary:
Rule 56, Forms of Proof at Summary Judgment (2011). But, under some circumstances the
pleadings may be used at summary judgment: “First, a party may point to the other side’s
pleadings as admissions. Second, the court may treat a verified complaint as an affidavit to the
extent it is based on personal knowledge and sets forth specific and nonconclusory allegations.”
Id.; see also Lantec, Inc. v. Novell, Inc., 306 F.3d 1003, 1019 (10th Cir. 2002) (“A district court
may treat a verified complaint ‘as an affidavit for purposes of summary judgment if it satisfies
the standards for affidavits set out in Rule 56(e).’” (quoting Conaway v. Smith, 853 F.2d 789,
792 (10th Cir. 1988))).
In its Motion for Summary Judgment, TFG relied solely on allegations in its complaint
and admissions made in Flag City’s answer. But the complaint is not a verified complaint and
TFG cannot rely on it to support summary judgment. Flag City pointed to TFG’s failure to
submit evidence in its opposition and argued that TFG’s Motion for Summary Judgment must be
denied. In response, TFG submitted additional evidence with its reply brief: the affidavits of Ms.
Slagle and Mr. Johnson and a copy of the Lease Agreement. But even considering this evidence,
TFG is not entitled to summary judgment.
There are genuine issues of material fact that preclude summary judgment.
The affidavits of Mr. Karr, Ms. Slagle, and Mr. Johnson show disputed material facts.
Mr. Karr stated in his affidavit that he “personally notified plaintiff’s representatives Marci
Kimball-Slagle and Dave Johnson that defendants intended to exercise the purchase option.”
(Karr Aff. [Dkt. No. 22-1] ¶ 3.) He further contends that “[b]oth representatives acknowledged
and accepted this notification and agreed that the purchase price would be 10% of the Total
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Equipment Cost.” (Id.) Flag City then allegedly paid the 10% purchase price and overpaid an
additional $16,467.88.
TFG disputes several of these facts. First, Ms. Slagle and Mr. Johnson deny that Mr. Karr
gave them notice of Flag City’s intent to purchase the equipment or ever discussed the end-ofterm purchase price. (Slagle Aff. [Dkt. No. 24-2] ¶ 6; Johnson Aff. [Dkt. No. 24-1] ¶¶ 14, 15.)
Second, TFG disputes that Flag City paid the 10% purchase price. Mr. Johnson stated in his
affidavit that since the end of the base term Flag City has made six reduced monthly payments
totaling $12,600. This is contrary to Mr. Karr’s statement that Flag City paid not only the 10%
purchase price but also an excess of $16,467.88. Finally, the parties disagree on the nature of the
agreement. Flag City contends that the agreement was a “lease-purchase agreement” (Karr Aff.
[Dkt. No. 22-1] ¶ 1), whereas TFG contends that the agreement was a simple lease (see Johnson
Aff. [Dkt. No. 24-1] ¶ 3).
Because there are genuine issues of material fact, TFG’s Motion for Summary Judgment
is DENIED.
Sanctions
“If satisfied that an affidavit or declaration under [Rule 56] is submitted in bad faith or
solely for delay, the court . . . may order the submitting party to pay the other party the reasonable
expenses, including attorney’s fees, it incurred as a result.” Fed. R. Civ. P. 56(h).
Flag City has requested sanctions for researching and writing the opposition, reviewing
TFG’s reply brief and drafting Flag City’s response, and again reviewing TFG’s reply brief and
drafting Flag City’s sur-reply. As an initial matter, the court notes that TFG did not submit any
affidavits in support of its Motion for Summary Judgment. Accordingly, imposing sanctions
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under Rule 56(h) for Flag City’s work in researching and writing the opposition is not warranted.
And although it was ill-advised for TFG to submit affidavits for the first time in its reply brief,
especially given that those affidavits highlighted genuine issues of material fact, the court is not
satisfied that TFG was acting in bad faith or solely to create delay. For these reasons, Flag City’s
request for sanctions is DENIED.
CONCLUSION
For the foregoing reasons, TFG’s Motion for Summary Judgment (Dkt. No. 20) and Flag
City’s request for sanctions are DENIED.
SO ORDERED this 14th day of December, 2011.
BY THE COURT:
______________________________
TENA CAMPBELL
United States District Judge
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