Robert D. Geringer v. D. Ray Strong
Filing
117
ORDER AND MEMORANDUM DECISION granting 76 Motion for Summary Judgment. Signed by Judge Tena Campbell on 11/7/17 (alt)
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
ROBERT D. GERINGER,
Plaintiff,
ORDER
AND
vs.
MEMORANDUM DECISION
D. RAY STRONG, in his capacity as
Liquidating Trustee of the Liquidating Trust
for the Consolidated Legacy Debtors, the
Liquidating Trust for Castle Arch
Opportunity Partners I, LLC, and the
Liquidating Trust for Castle Arch
Opportunity Partners II, LLC,
Case No. 2:16-CV-391-TC
Defendant.
Plaintiff Robert Geringer alleges that Defendant D. Ray Strong (Trustee) breached a
contract to sell Mr. Geringer land in Smyrna, Tennessee. He also brings a claim for breach of the
implied covenant of good faith and fair dealing. The Trustee’s motion for summary judgment on
those claims is now before the court.
The court agrees with the Trustee that Mr. Geringer’s claims rely on a notice provision
that is not legally binding. Specifically, that notice provision was set forth in a preliminary
agreement that, when merged into an integrated contract, was extinguished and is not
enforceable. For this and other reasons set forth below, the court GRANTS the Trustee’s motion.
FACTS
In October 2011, a state-appointed receiver filed Chapter 11 bankruptcy petitions for
Castle Arch Real Estate Investment Company (CAREIC) and its related entities in the District of
Utah. In May 2012, the bankruptcy court appointed Mr. Strong as the Chapter 11 Trustee for
CAREIC.
After CAREIC filed for bankruptcy, Mr. Geringer (a former manager of CAREIC) filed
an unsecured claim against the estate. In addition, Mr. Geringer filed an objection in the
bankruptcy case regarding a settlement agreement between the Trustee and William Warwick. In
the meantime, the Trustee filed claims against Mr. Geringer and others for alleged wrongdoing in
their capacities as former managers of CAREIC.
Between January and May 2015, the Trustee and Mr. Geringer engaged in mediation to
resolve their differences. The parties contemplated a settlement agreement under which Mr.
Geringer would (a) buy one or more pieces of real estate from the Trustee at an above-market
price and (b) withdraw the Warwick Objection, all in exchange for the Trustee’s release of
claims against Mr. Geringer.
During mediation, Mr. Geringer expressed interest in purchasing a 484-acre parcel of real
property located in Smyrna, Tennessee (the Smyrna Property), from the Trustee as part of the
settlement. But the Trustee already had a sale and purchase agreement with DSSIII Holding
Company, LLC, for the Smyrna Property. (See October 29, 2014 Real Estate Purchase & Sale
Agreement (DSSIII Agreement), Trustee App. Doc. 27 at Apx. 285–318, ECF No. 79-27.) In
fact, the Bankruptcy Court had already approved the Trustee’s sale of the Smyrna Property to
DSSIII, including the March 2015 Amendment to the DSSIII Agreement, which extended
2
DSSIII’s due diligence period and set forth four milestones that DSSIII was required to pursue
“in good faith with commercially reasonable diligence.” (First Am. to DSSIII Agreement,
Trustee App. Doc. 29 at Apx. 351–53, ECF No. 79-29.)
Although the Smyrna Property was under contract, the sale was not yet final because
DSSIII was conducting due diligence on the property. During that time, Mr. Geringer offered
more money for the property along with more favorable terms. When DSSIII subsequently
demanded a one-third reduction in the agreed-upon price, the Trustee seriously considered Mr.
Geringer’s offer because he felt he had a duty to maximize the estate. Still, in order to sell the
property to Mr. Geringer, the Trustee would have to accomplish two things.
He would have to legitimately free himself of his obligations to DSSIII. To do that, he
would have to show that DSSIII was in breach of the contract, for example by failing to pursue
the four milestones “in good faith and with commercially reasonable diligence.” (Id.) He would
also need bankruptcy court approval for the new settlement and sale agreement with Mr.
Geringer. Under Bankruptcy Rule 9019, a settlement agreement with a Trustee is not
enforceable until approved by the Bankruptcy Court. Travelers Ins. Co. v. Am. Agcredit Corp.
(In re Blehm Land & Cattle Co.), 859 F.2d 137, 141 (10th Cir. 1988). Similarly, under 11 U.S.C.
§ 363(b)(1), a trustee may sell property of the estate outside of the ordinary course of business
only with bankruptcy court approval, “after notice and a hearing.” In other words, without
Bankruptcy Court approval of the proposed sale to Mr. Geringer, the Agreement would not be
enforceable. See G-K Dev. Co., Inc. v. Broadmoor Place Invs., L.P. (In re Broadmoor Place
Invs., L.P., 994 F.2d 744, 745 (10th Cir. 1993); In re Landscape Properties, Inc., 100 B.R. 445,
447 (Bankr. E.D. Ark. 1988) (although competing offers are “denominated ‘real estate contract’
3
there simply is no contract without bankruptcy court approval”) (cited in G-K Dev. Co., 994 F.2d
at 745 n.1).
Recognizing the obstacles to the proposed sale, the parties nevertheless hurriedly entered
into a preliminary agreement—the Memorandum of Understanding, referred to in the Trustee’s
briefs as the “Term Sheet”—to memorialize material points of the agreement reached in
mediation and identify the necessary contingencies: “This MOU is subject to the approval of the
bankruptcy court, and the Trustee’s ability to terminate the current purchase contract” with
DSSIII. (May 20, 2015 Mem. of Understanding (“Term Sheet”), Trustee App. Doc. 3 at Apx.
20–22, ECF No. 79-3.)
The Trustee’s alleged breach of the Term Sheet’s notice provision is the sole basis for
Mr. Geringer’s claims. That provision set forth one of the steps the Trustee would have to take
to terminate the DSSIII Agreement: “The Trustee will within 5 days provide notice of
termination of the contract to sell the Smyna [sic] to DSSIII and will provide notice of this sale
and of the motion to approve this sale to DSSIII Holding Co., LLC.”1 (Term Sheet ¶ 7.)
But, significantly, approximately one month after signing the Term Sheet, the parties
executed the June 30, 2015 Land Purchase Agreement (Agreement).2 (Trustee App. Doc. 32 at
1
The notice provision is vague because it does not list any date or event within which the
Trustee was required to provide notice to DSSIII. Mr. Geringer contends that notice was to be
given within five days after execution of the Term Sheet. (See First Am. Compl. ¶ 18.) The
Trustee offers evidence that the language required notice of termination within five days of the
execution of the Agreement, not the Term Sheet. (See Trustee’s Reply at 11–12, ECF No. 83.)
But the court need not address this issue because the court holds that the Term Sheet is not a
binding document.
2
The Trustee refers to this document throughout his briefs as the “Settlement and Sale
Agreement.”
4
Apx. 423–36, ECF No. 79-32.) That Agreement contains an integration clause:
This Agreement constitutes the sole and entire agreement of the parties and is
binding upon and shall inure to the benefit of Seller and Purchaser, their
respective heirs, successors, and legal representatives and permitted assigns. . . .
All prior discussions, negotiations and agreements are merged herein and have no
further force or effect.
(Id. § 19(c).)
The Agreement also expressly stated that the bankruptcy court’s approval and termination
of the DSSIII Agreement were necessary conditions of the Agreement. In the section labeled
“Contingencies,” the Agreement sets forth the following caveat:
The Parties agree that this Agreement is conditioned on and is subject to (i) the
Liquidating Trustee’s ability to terminate the DSSIII Purchase Agreement solely
as determined by the Bankruptcy Court and (ii) the Bankruptcy Court’s entry of an
Order approving this Agreement as to Purchaser or as to a person making a higher
and better offer than the Purchaser that is accepted by the Liquidating Trustee. If
the Bankruptcy Court does not approve this sale to either the Purchaser or to a
person making a higher and better offer for any reason, this Agreement shall be
null, void and of no force or effect and the Parties shall be in the same position
that they were in as though this Agreement had never been executed.
(Id. § 6(a) (emphasis added).)
Notably, the Agreement’s recitals recognized that the Trustee had already given notice to
DSSIII: “On June 30, 2015, the Liquidating Trustee served a Notice of Termination of Real
Estate Purchase and Sale Agreement on DSSIII in accordance with its duty as a fiduciary to
accept any higher and better offers for the purchase of the Property.” (Recitals in Agreement at
1, Apx. 423.) In that Notice of Termination, the Trustee stated that he was terminating the
contract with DSSIII because, among other things, “on or about May 12, 2015 and thereafter,
DSSIII indicated that it would require material changes and concessions to the Purchase
Agreement including yet further extensions of its Due Diligence Period,” that “[i]n addition,
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DSSIII has not met many of the milestones under the Amendment,” and that “[i]n the meantime,
the Seller has received an offer that Seller believes materially higher and better, both in amount
and other terms.” (Letter from Peggy Hunt, Dorsey & Whitney LLP, to Tyson J. Reilly, DSSIII
Holding Co., LLC (June 30, 2015), Trustee App. Doc. 22 at Apx. 145–46, ECF No. 79-22.)
On July 6, 2015, as part of his obligations under the Agreement, the Trustee submitted a
motion to the Bankruptcy Court seeking approval of the settlement and sale of the Smyrna
property to Mr. Geringer (i.e., approval of the Agreement). DSSIII adamantly opposed the
motion and did not acquiesce in any of the Trustee’s notices of termination. DSSIII objected to
the sale and requested an emergency status conference. DSSIII told the Bankruptcy Court that
the Trustee was “attempting to sell valuable real property, which is under contract to DSSIII, to
another party,” and that DSSIII “remains ready, willing and able to close immediately . . . but is
being prevented from doing so by the trustee.” (DSSIII Emergency Request for Status
Conference, Trustee App. Doc. 35 at Apx. 558, ECF No. 79-35.)
On July 14, 2015, the Bankruptcy Court held a hearing based on DSSIII’s emergency
request. After hearing from the parties, the Bankruptcy Court continued all further hearings on
the Trustee’s motion to sell the Smyrna Property, without date, which effectively denied the
Trustee’s sale motion (the closing date for the sale to DSSIII was apparently scheduled for July
30, 2015, less than two weeks after the court’s decision). (See Tr. of July 28, 2015 Bankr. Ct.
Hr’g at Apx. 742, Trustee App. Doc. 40, ECF No. 79-40.) The Bankruptcy Court explained its
reasons, including the following: “I think parties such as [DSSIII] have a right to rely on orders
of this Court approving contracts between fiduciaries that appear before this Court, and I am not
going to allow the trustee on the state of the record to sell the property to somebody else when
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the buyer indicates that it is ready, willing, and able to perform according to the contract that it
signed and that I approved.” (Tr. of July 14, 2015 Hr’g in Bankr. Ct. at Apx. 180–82, Trustee
App. Doc. 25, ECF No. 79-25 (emphasis added).) The Trustee filed an emergency motion for
reconsideration of the court’s indefinite continuance of hearings on his motion for approval of
the Agreement with Mr. Geringer. (See July 23, 2015 Emergency Mot. for Reconsideration,
Trustee App. Doc. No. 39, ECF No. 79-39.) The Bankruptcy Court denied it two days before the
scheduled closing with DSSIII. (See Tr. of July 28, 2015 Hr’g at Apx. 742, 752–53.) With lack
of Bankruptcy Court approval,3 the Agreement was, as the integration clause clearly states, “null,
void and of no force or effect” and the parties were “in the same position that they were in as
though this Agreement had never been executed.” (Agreement § 6(a).)
The Trustee did not sell the Smyrna property to Mr. Geringer. Mr. Geringer followed up
with this suit, alleging breach of contract and breach of the implied covenant of good faith and
fair dealing.
Mr. Geringer bases his claim for breach of contract on the Term Sheet, not the
Agreement. According to Mr. Geringer’s logic, when the Agreement failed (in particular, for
lack of Bankruptcy Court approval), the parties’ relationship reverted back to the Term Sheet,
3
Mr. Geringer contends that “[t]he result of the July 14, 2015 hearing was simply that the
hearing on Mr. Strong’s sale motion was continued without date.” (Geringer’s Opp’n at 47, ECF
No. 80.) According to Mr. Geringer, “the reason [the] bankruptcy court never approved the
Agreement was that Mr. Strong never asked the bankruptcy court to approve it. Mr. Strong
simply failed to prosecute his own motion.” (Id. at 48.) The record belies Mr. Geringer’s
assertion. The Trustee’s motion to the Bankruptcy Court expressly asked for “approval of sale of
property” in Smyrna, Tennessee, to Mr. Geringer. (See July 6, 2015 Mot. of Trustee, Trustee
App. Doc. 32, ECF No. 79-32.) And his motion to reconsider shows that the Trustee did
prosecute his motion to the best of his ability under the circumstances.
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which the Trustee breached by failing to give the five-day notice to DSSIII.
Mr. Geringer also ties his claim for breach of the implied covenant of good faith and fair
dealing to the Term Sheet, not the Agreement. Mr. Geringer alleges that the Trustee “acted with
an improper motive and/or not in good faith when he failed to send notice of termination of the
contract to sell the Smyrna Property to DSSIII when required under the [Term Sheet.]” (First
Am. Compl. ¶ 30 (emphasis added).) He further alleges that the Trustee “encouraged DSSIII to
continue its efforts to complete due diligence on the Smyrna acquisition, and ultimately elected
to sell the Smyrna Property to DSSIII.” (Id.) Assuming the truth of those allegations, Mr.
Geringer concludes that the Trustee’s “failure to terminate the DSSIII Contract when he had the
absolute right to do so[4] . . . . gave DSSIII the ability, which it exercised [in Bankruptcy Court],
to force Mr. Strong to close the DSSIII Contract and sell the Smyrna Property to DSSIII.”
(Geringer’s Opp’n at 48, ECF No. 80.)
ANALYSIS
The Trustee’s two main arguments5 focus on the merger doctrine and failure of proof of
causation. First, the Trustee contends that the Term Sheet was superseded by the Agreement,
which has an integration clause and does not contain the five-day notice provision. Second,
4
The Trustee strongly objected to Mr. Geringer’s characterization of the Trustee’s rights
under the DSSIII Agreement. Concerning Mr. Geringer’s comment that the Trustee had “an
absolute and immediate right to terminate the DSSIII Contract,” the Trustee said such a comment
was “patently and demonstrably false.” (Trustee’s Reply at 11.) Although the record supports
the Trustee’s characterization, the court need not resolve the scope of the Trustee’s rights under
the DSSIII Agreement at that time.
5
The Trustee offers alternative reasons to dismiss Mr. Geringer’s claims. Because the
Trustee’s two key points are sufficient bases for granting summary judgment, the court will not
address the parties’ remaining arguments.
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according to the Trustee, Mr. Geringer has provided no evidence tying the Trustee’s alleged
breach to Mr. Geringer’s claimed damages.
For the reasons set forth below, the court agrees with the Trustee.
Standard of Review
Federal Rule of Civil Procedure 56 permits summary judgment “if the pleadings,
depositions, answers to interrogatories, and admission on file, together with the affidavits, if any,
show that there is no genuine issue as to any material fact and that the moving party is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(c); see also Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 250-51 (1986). The court must draw all reasonable inferences in favor of the
nonmoving party when examining the record. Id. at 250.
The Trustee, as movant, bears the burden of demonstrating that there is no reasonable
basis upon which a jury could find for Mr. Geringer. In response, Mr. Geringer must establish a
genuine issue for trial. If he fails to meet that burden, the court must grant of summary
judgment.
[T]he plain language of Rule 56(c) mandates the entry of summary judgment, after
adequate time for discovery and upon motion, against a party who fails to make a
showing sufficient to establish the existence of an element essential to that party’s
case, and on which that party will bear the burden of proof at trial. In such a
situation, there can be “no genuine issue as to any material fact,” since a complete
failure of proof concerning an essential element of the nonmoving party's case
necessarily renders all other facts immaterial. The moving party is “entitled to a
judgment as a matter of law” because the nonmoving party has failed to make a
sufficient showing on an essential element of her case with respect to which she
has the burden of proof.
Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986) (emphasis added). “[A] mere scintilla of
evidence supporting the nonmoving party theory does not create a genuine issue of material fact.”
9
Anderson v. Coors Brewing Co., 181 F.3d 1171, 1175 (10th Cir. 1999) (emphasis added).
Breach of Contract
Mr. Geringer claims that the Trustee breached the Term Sheet, not the Agreement. But
the integration clause in the Agreement makes the Term Sheet legally irrelevant. With no
enforceable notice provision, there can be no breach of that notice obligation. Accordingly, the
Trustee is entitled to summary judgment on the breach of contract claim.
1.
Integration
Mr. Geringer does not have a claim for breach of the Term Sheet because that document
was merged into the Agreement through the integration clause.
This Agreement constitutes the sole and entire agreement of the parties and is
binding upon and shall inure to the benefit of Seller and Purchaser, their
respective heirs, successors, and legal representatives and permitted assigns. . . .
All prior discussions, negotiations and agreements are merged herein and have no
further force or effect.
(Agreement § 19(c) (emphasis added).) A fully integrated agreement, such as the Agreement,
supersedes a prior agreement dealing with the same subject matter (for example, the Term
Sheet), precluding a claim for breach of the prior agreement. Tangren Family Trust v. Tangren,
182 P.3d 326, 331–32 (Utah 2008) (holding that evidence of earlier or contemporaneous
agreements or discussions was not admissible to contradict terms of an integrated written
agreement and that the earlier agreement had no force or effect); Novell, Inc. v. The Canopy
Group, Inc., 92 P.3d 768, 772 (Utah Ct. App. 2004) (same); Ringwood v. Foreign Auto Works,
Inc., 671 P.2d 182, 183 n.2 (Utah 1983) (“‘[A]ny time a contract supersedes and incorporates all
or part of an earlier agreement it may be said that the earlier agreement is merged into the
later.’”) (quoting J. Calamari and J. Perillo, The Law of Contracts § 21-13 (1977)), overruled on
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other grounds by Tangren Family Trust v. Tangren, 182 P.3d 326 (Utah 2008).
Here, the Agreement and the Term Sheet indisputably dealt with the same subject—the
purchase of the Smyrna Property by Mr. Geringer in exchange for a release of claims, all
conditioned on the Trustee’s ability to terminate the DSSIII Agreement and receive Bankruptcy
Court approval. And there is no reasonable dispute that the Agreement is fully integrated.
“An agreement is integrated where the parties thereto adopt a writing or writings as the
final and complete expression of the agreement.” Novell, 92 P.3d at 772. The parties did that in
the Agreement. Section 19(c) of the Agreement unambiguously and expressly merges “[a]ll prior
discussions, negotiations and agreements” into the Agreement. (Id.) See also Tangren, 182 P.3d
at 331 n.19 (“‘[T]he merger clause is not merely a factor to consider in deciding whether the
agreement is integrated; it proves the agreement is integrated.’”) (quoting Howard v. Perry, 106
P.3d 465, 467–68 (Idaho 2005).
Section 19(c) provided that the Term Sheet, including the five-day notice provision, had
“no further force or effect” once the Agreement was executed. Apart from the express language,
two other aspects of the Agreement are proof that the five-day notice requirement was no longer
relevant. First, the Agreement did not contain a provision equivalent to the Term Sheet’s notice
requirement. Second, its recital contain the following express language: “On June 30, 2015, the
[Trustee] served a Notice of Termination of the Real Estate Purchase and Sale Agreement on
DSSIII.” (Agreement at p. 1.) In short, the five-day notice provision did not survive the merger.
Despite the integration clause, Mr. Geringer argues that when the Agreement failed (i.e.,
it became “null and void” as a result of the Bankruptcy Court’s refusal to approve the
Agreement), Section 6(a) of the Agreement returned the parties to the Term Sheet rather than to
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no agreement at all. His argument is contrary to the language of the Agreement and is “an
attempt to bootstrap around the clear legal effect of the parol evidence rule.” (Trustee’s Reply at
4, ECF No. 83.)
As noted above, once the parties entered into the Agreement, all previous negotiations,
representations, disputes, preliminary and earlier tentative agreements were, as a matter of law,
merged into one integrated whole. Consequently, earlier contradictory terms (such as the fiveday notice requirement) had no effect. Furthermore, when the Bankruptcy Court refused to
approve the sale to Mr. Geringer, Section 6 of the Agreement assured that no portion of the
parties’ agreement survived from that date onward. It was “null, void and of no further force or
effect.” (Agreement § 6(a).) As the Trustee notes, “[r]eading Section 6.a. the way Geringer does
defeats this purpose. Section 6.a. accomplishes nothing if it returns the parties to an earlier, lessrefined, unintegrated, version of the same agreement.” (Trustee’s Reply at 4 (emphasis in
original).)
The “null and void” language does not, however, make the integration invalid. The Term
Sheet lost all legal significance on June 30, 2015, the date the Agreement was executed. Later
unsatisfied contingencies, such as failure to obtain Bankruptcy Court approval, do not reverse
that merger or revive a contradictory term. See Restatement (2d) of Contracts § 213(3) (Am.
Law Inst. 1981) (“[A]n integrated agreement, even though not binding, may be effective to
render inoperative a term which would have been part of the agreement if it had not been
integrated.”); id. cmt. d; Alphonse Hotel Corp. v. Tran, No. 13 Civ. 7859(DLC), 2014 WL
3801230, at *8 (S.D.N.Y. Aug. 1, 2014) (holding that unambiguous integration clause in nonbinding contract discharged a contradicting material term of an earlier contract), aff’d, Alphonse
12
Hotel Corp. v. Tran, 828 F.3d 146, 155, 159 (2nd Cir. 2016). Accordingly, the contradictory
five-day notice provision cannot be enforced against the Trustee.
2.
Causation
Alternatively, even if the Term Sheet was an enforceable contract, Mr. Geringer does not
provide any evidence of causation. For this separate reason, the Trustee is entitled to summary
judgment.
To succeed on his claims, Mr. Geringer must prove, among other things, that the
Trustee’s alleged breach caused the Term Sheet to fail and that, as a result, Mr. Geringer suffered
damages. See Sanpete Am., LLC v. Willardsen, 269 P.3d 118, 132 (Utah 2011) (“Causation
is . . . an integral element of awarding damages in contract . . . actions[.]”). But he has not
presented any evidence of a link between the Trustee’s failure to give notice to DSSIII by May
25, 2015, failure of the Term Sheet’s contingencies, and Mr. Geringer’s claimed damages.
As Mr. Geringer points out, causation is typically a fact-intensive issue not amenable to
summary judgment. But if there is a complete lack of evidence of causation, the court may rule
on the issue as a matter of law.
Proximate cause issues can be decided as a matter of law in two circumstances:
(i) when the facts are so clear that reasonable persons could not disagree about the
underlying facts or about the application of a legal standard to the facts, and
(ii) when the proximate cause of an injury is left to speculation so that the claim
fails as a matter of law.
Harding v. Atlas Title Ins. Agency, Inc., 285 P.3d 1260, 1263 (Utah Ct. App. 2012) (internal
quotation marks and citation omitted) (emphasis added).
The ability of the Trustee to withdraw from the DSSIII Agreement (without breaching it)
and to obtain Bankruptcy Court approval of the sale to Mr. Geringer were both necessary
13
contingencies in the Agreement. It is undisputed that neither was satisfied. But there is no
evidence that the Trustee’s failure to provide notice by May 25, 2015, caused the failure of either
of these contingencies.6
The Trustee has established that DSSIII was “irretrievably committed to the Smyrna
Property before May 25, 2015,” and that DSSIII strongly resisted the Trustee’s attempt to
terminate the DSSIII Agreement. (See Trustee’s Reply at 6.) And it is clear from the transcript
of the Bankruptcy Court’s hearing on DSSIII’s objection that the timing of any notice to DSSIII
was irrelevant to that court’s decision:
I think parties such as [DSSIII] have a right to rely on orders of this Court
approving contracts between fiduciaries that appear before this Court, and I am
not going to allow the trustee on the state of the record to sell the property to
somebody else when the buyer indicates that it is ready, willing, and able to
perform according to the contract that it signed and that I approved.
(Tr. of July 14, 2015 Hr’g in Bankr. Ct. at Apx. 180–82, Trustee App. Doc. 25, ECF No. 79-25
(emphasis added).)
Moreover, it would be speculation to conclude that if the Trustee had given notice by
May 25, 2015, DSSIII would have acquiesced to the Trustee’s assertion that DSSIII did not fulfill
its due diligence obligations and that the Bankruptcy Court would have ruled differently. No
reasonable jury could infer causation from such speculation. Giles v. Mineral Resources Int’l,
6
The fact that Mr. Geringer suffered his alleged damages after the five-day deadline
expired does not alone establish causation. As the Trustee points out, causation cannot be
established “by timeline.” (See Trustee’s Reply at 5, n.3.) “[C]ourts do not assume a causal
connection between two events merely because one follows the other,” and “[e]vidence that
relies exclusively on the post hoc ergo propter hoc fallacy—‘after this and therefore because of
this’—is not competent.” USA Power, LLC v. PacifiCorp, 372 P.3d 629, 678 (Utah 2016)
(quoting Breton v. Clyde Snow & Sessions, 299 P.3d 13, 17 (Utah Ct. App. 2013)).
14
Inc., 338 P.3d 825, 827 (Utah Ct. App. 2014) (noting that although the court must view the facts
and all reasonable inferences in a light most favorable to the non-movant, “[r]easonable
inferences must be more than speculation and conjecture.”).
Because Mr. Geringer has no evidence of causation, the Trustee is entitled to summary
judgment on Mr. Geringer’s breach of contract claim.
Breach of the Implied Covenant of Good Faith and Fair Dealing
In Utah, “a covenant of good faith and fair dealing inheres in most, if not all, contractual
relationships.” St. Benedict’s Dev. Co. v. St. Benedict’s Hosp., 811 P.2d 194, 199 (Utah 1991).
Under that covenant, “each party impliedly promises that he will not intentionally or purposely
do anything which will destroy or injure the other party’s right to receive the fruits of the
contract.” Id.
The circumstances cited by Mr. Geringer to establish his claim for breach of the implied
covenant are the same circumstances upon which he relies to allege breach of contract. That is,
Mr. Geringer alleges that the Trustee violated the implied covenant underlying the Term Sheet by
failing to give notice to DSSIII by May 25, 2015. But his theory does not create an independent
cause of action for breach of the implied covenant for at least two reasons.
First, the rule imposing an implied covenant presupposes the existence of an enforceable
contract. As the Utah Supreme Court noted in 2014,
[W]e have consistently rejected the notion of a free-standing implied covenant of
good faith and fair dealing in the absence of a contract. Brehany v. Nordstrom,
Inc., 812 P.2d 49, 5 (Utah 1991). And the implied covenant cannot “establish
new, independent rights or duties not agreed upon by the parties.” Id. Because
we conclude that [the plaintiff] failed to establish the existence of [a] . . . contract,
15
he cannot establish a violation of the covenant of good faith and fair dealing.
Tomlinson v. NCR Corp., 345 P.3d 523, 531 (Utah 2014). Here, as the court has already held,
the Term Sheet has no legal significance. Accordingly, it is not an enforceable contract out of
which an implied covenant can arise. Id.; see also A.I. Transport v. Imperial Premium Finance,
862 F. Supp. 345 (D. Utah 1994) (“[I]f there was no breach of the original agreement . . . , there
could be no breach of an implied covenant of good faith and fair dealing.”). In other words, Mr.
Geringer focuses on an implied covenant that lived and died with the Term Sheet. Any parallel
claim for breach of the implied covenant of the Term Sheet that may have existed was
extinguished when the Term Sheet was merged into the Agreement.
Second, Mr. Geringer focuses on the Trustee’s alleged failure to comply with the express
notice provision of the Term Sheet. But “‘the purpose of the good faith doctrine in contract law
is to protect the reasonable expectations of the parties by implying terms in the agreement.’”
Terry, 47 F. Supp. 3d at 1274 (emphasis in original) (quoting A.I. Transport v. Imperial Premium
Fin., Inc., 862 F. Supp. 345, 347–48 (D. Utah 1994)). Mr. Geringer “conflates [the two types of
actions] by alleging that [the Trustee] breached the implied covenant of good faith and fair
dealing by breaching the express terms of the [contract].” Id. (emphasis added). This he cannot
do. Id. at 1275.
The Trustee is entitled to summary judgment on Mr. Geringer’s claim for breach of the
implied covenant of good faith and fair dealing.
***
16
ORDER
For the foregoing reasons, Defendant D. Ray Strong’s Motion for Summary Judgment
(ECF No. 76) is GRANTED.
DATED this 7th day of November, 2017.
BY THE COURT:
TENA CAMPBELL
U.S. District Court Judge
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