Plymouth Grain Terminals LLC et al v. Lansing Grain Company LLC et al, No. 2:2010cv05019 - Document 428 (E.D. Wash. 2013)
Court Description: ORDER DENYING IN PART THE PARTIES' MOTIONS FOR SUMMARY JUDGMENT - granting in part and denying in part 298 Motion for Summary Judgment; and granting in part and denying in part 340 Motion to Amend/Correct. Signed by Judge Thomas O. Rice. (CC, Case Administrator)
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Plymouth Grain Terminals LLC et al v. Lansing Grain Company LLC et al Doc. 428 1 2 3 4 5 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WASHINGTON 6 7 8 9 10 PLYMOUTH GRAIN TERMINALS, LLC, a Delaware limited liability company, CENTRAL WASHINGTON CORN PROCESSORS, INC. a Washington corporation, and PAULSON COMMODITIES, LTD., an Oregon corporation, 13 14 15 16 ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT Plaintiff, 11 12 NO: 10-CV-5019-TOR v. LANSING GRAIN COMPANY, LLC, a Michigan limited liability company, LANSING GRAIN COMPANY, an assumed name, LGC GRAIN COMPANY, LLC, a Michigan limited liability company, and LANSING TRADE GROUP, LLC, a Delaware limited liability company, 17 Defendant. 18 19 20 ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 1 Dockets.Justia.com 1 ________________________________ 2 LANSING TRADE GROUP, LLC, a Delaware limited liability company, 3 Counterclaim Plaintiff, 4 v. 5 6 7 8 9 PLYMOUTH GRAIN TERMINALS, LLC, a Delaware limited liability company, CENTRAL WASHINGTON CORN PROCESSORS, INC., a Washington corporation, and PAULSON COMMODITIES, LTD., an Oregon corporation, Counterclaim Defendants. 10 11 12 BEFORE THE COURT are Defendant’s Motion for Summary Judgment 13 (ECF No. 298) and Plaintiff’s Amended Motion for Summary Judgment (ECF No. 14 340). This matter was heard with oral argument on December 5, 2013. Joan 15 Schulkers and John S. Ziobro appeared on behalf of the Plaintiffs. Kirk T. May 16 and J. Chad Mitchell appeared on behalf of Defendants. The Court has reviewed 17 the briefing and the record and files herein, and is fully informed. 18 // 19 // 20 // ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 2 1 2 BACKGROUND This case concerns a corn marketing agreement and the resulting 3 relationship formed between Plaintiffs Plymouth Grain Terminal, LLC, Paulson 4 Commodities, Ltd., and Central Washington Corn Processors, Inc., and Defendant 5 Lansing Grain Company, LLC. Plaintiffs sued Defendant, alleging breach of 6 contract, breach of fiduciary duty, breach of covenant of good faith and fair 7 dealing, unjust enrichment, interference with prospective advantage, 8 misappropriation of a trade secret, and demanded an accounting. Lansing 9 counterclaimed for breach of contract, breach of covenant of good faith and fair 10 dealing, interference with prospective advantage, tortious interference with 11 contract, and breach of partnership/joint venture (pleading in the alternative). 12 Before the Court are the parties’ motions for summary judgment. 13 14 FACTS Plaintiff Plymouth Grain Terminals, LLC (“PGT”) is a Delaware limited 15 liability company with an Oregon principal place of business. ECF No. 304 at 2. It 16 is owned by Dennis Kyllo (“Kyllo”), Steve Paulson (“Paulson”), and Plaintiff 17 Central Washington Corn Processors, Inc. (“CWCP”). CWCP owns 98 percent of 18 PGT. Id. Plaintiff CWCP is a Washington corporation with a principal place of 19 business in Washington. Id. It is in the business of processing corn and feed 20 ingredients (grinding and milling) for end users such as cattle farms and dairies. ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 3 1 Id. CWCP is owned equally by Paulson, Kyllo, and Tom Walters. Id. Plaintiff 2 Paulson Commodities, Ltd. (“PC”) 1 is an Oregon corporation with a principal 3 place of business in Oregon which brokers grain between buyers and sellers. Id. at 4 3; ECF No. 299 at 3. It is owned solely by Paulson, a broker with the Chicago 5 Board of Trade. ECF No. 304 at 2. AgriNorthwest is an elevator facility in 6 Plymouth, Washington, owned by the Mormon church. Id. CWCP built and 7 operated a corn grinder at AgriNorthwest’s Plymouth facility. ECF No. 299 at 2. 8 In March 2003, CWCP and AgriNorthwest entered into a lease agreement 9 under which CWCP leased from AgriNorthwest land at the facility in Plymouth, 10 Washington, to grind corn. ECF No. 299 at 6 (Defendant’s Statement of Facts). 11 The lease, as amended in 2005, extended through the end of 2010. Id. In July 2009, 12 AgriNorthwest informed CWCP that it was not going to extend the lease beyond 13 2010. Id. The parties could not agree on lease terms for an extension. Id. at 7. The 14 parties disagree about why this was so. Plaintiffs contended that it was because 15 AgriNorthwest was aware of Plaintiffs’ problems with Lansing; Defendant 16 contends that it was for unrelated business reasons. 17 18 1 19 20 Not to be confused with Commodities Plus (“CP”), a company owned by Kyllo, but not a party to this lawsuit. ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 4 1 In or around May or June 2003, Defendant Lansing Grain Company, LLC 2 (“Lansing”), and Plymouth Grain Terminals (“PGT”) entered into the Corn 3 Marketing Agreement (“CMA”). 2 The CMA was amended in October 2003. The 4 amended CMA provides in part: 5 Lansing Grain Company LLC (Lansing) and TI 48-130-6798 (SG) agree to enter into a relationship to market corn from facility at Plymouth, Washington. It is intended that the activity resulting from this agreement will result in a relationship that will generate net operating profits to be split with 60% going to Lansing and 40% going to SG after the first $75,000 is designated to Lansing. 6 7 8 Whereas, SG intends to provide destination marketing, truck logistics coordination, receivable collections services to dairies and feedlots in the area around Plymouth. 9 10 Whereas, Lansing intends provide BN shuttle transfer, corn merchandising expertise and management, accounting and credit services, and operating capital. 11 12 ECF No. 150-1. There is no written agreement between Lansing and CWCP 13 regarding the grinding services that CWCP provided. ECF No. 299 at 2. 14 Generally, the parties dispute what happened during the course of the 15 relationship. Plaintiffs’ complaint alleges that CWCP agreed as part of the 16 2 17 The parties dispute whether PC and CWPA are also parties to the CMA, but at 18 minimum there appears to be no dispute that PGT is a party. ECF No. 12-1; ECF 19 No. 12-2 (the CMA is between Lansing and “TI 48-130-6798 (SG)”); ECF No. 1 at 20 2 (PGT is also known as TI 48-130-6798, its tax identification number). ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 5 1 agreement between PGT and Lansing to finance and build a corn grinder at the 2 AgriNorthwest facility and actually paid approximately $1.2 million to build the 3 grinder. ECF No. 1 at 4. Plaintiffs’ complaint also alleges that PC was brokering 4 the corn between buyers and Lansing. ECF No. 1 at 4. 5 During the course of the parties’ relationship under the CMA, 6 representatives of Lansing had access to PC’s customer lists and customer 7 information. See ECF No. 299 at 4 (Defendant’s Statement of Facts); ECF No. 347 8 at 7-8 (Plaintiffs’ Responsive Statement of Facts). Plaintiffs contend that Lansing 9 contacted PC’s customers and sold to them directly, effectively cutting out 10 Plaintiffs from any profit. ECF No. 1 at 5. However, Defendant disputes this. ECF 11 No. 150 at 6. 12 At minimum, PGT, PC, and CWCP believed that Lansing breached the 13 CMA by, inter alia, failing to provide profit and loss statements and other 14 documentation, and depriving Plaintiffs of profits allegedly due under the terms of 15 the CMA. ECF No. 299 at 4. As a result, PGT, PC, and CWCP sued Lansing, 16 alleging breach of contract, breach of fiduciary duty, breach of covenant of good 17 faith and fair dealing, unjust enrichment, interference with prospective advantage, 18 misappropriation of a trade secret, and demanded an accounting. ECF No. 1. 19 Lansing counterclaimed (1) against PGT for breach of contract; (2) against PC for 20 breach of contract; (3) against PGT and PC for breach of covenant of good faith ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 6 1 and fair dealing; (4) against PGT for interference with prospective advantage; (5) 2 against CWCP for tortious interference with contract; (6) against PGT, PC, and 3 CWCP for breach of partnership/joint venture (pleading in the alternative); and (7) 4 against PGT, PC, and CWCP for set off. ECF No. 150 at 20-25. 5 6 7 DISCUSSION A. Legal Standard Summary judgment may be granted to a moving party who demonstrates 8 “that there is no genuine dispute as to any material fact and that the movant is 9 entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The moving party 10 bears the initial burden of demonstrating the absence of any genuine issues of 11 material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The burden then 12 shifts to the non-moving party to identify specific genuine issues of material fact 13 which must be decided by a jury. See Anderson v. Liberty Lobby, Inc., 477 U.S. 14 242, 256 (1986). “The mere existence of a scintilla of evidence in support of the 15 plaintiff’s position will be insufficient; there must be evidence on which the jury 16 could reasonably find for the plaintiff.” Id. at 252. 17 For purposes of summary judgment, a fact is “material” if it might affect the 18 outcome of the suit under the governing law. Id. at 248. A dispute concerning any 19 such fact is “genuine” only where the evidence is such that a reasonable jury could 20 find in favor of the non-moving party. Id. In ruling upon a summary judgment ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 7 1 motion, a court must construe the facts, as well as all rational inferences therefrom, 2 in the light most favorable to the non-moving party. Scott v. Harris, 550 U.S. 372, 3 378 (2007). Only evidence which would be admissible at trial may be considered. 4 Orr v. Bank of America, NT & SA, 285 F.3d 764 (9th Cir. 2002). 5 6 B. Plaintiffs Bound by the CMA A disputed material fact underlying several issues is who are the parties to 7 the CMA. Defendants assert in their statement of facts—and Plaintiffs do not 8 dispute—that PGT and Lansing entered into the CMA. ECF No. 299 at 1. 9 However, Lansing declares in its statement of facts that neither PC nor CWCP are 10 parties to the CMA. ECF No. 299 at 2. Plaintiffs dispute this, arguing that PC 11 believed it was obligated under the CMA to broker trades for Lansing, and that 12 CWCP as a corn grinder was obligated under the CMA to secure corn to the 13 specifications noted in Lansing’s corn contracts (citing Paulson’s deposition). ECF 14 No. 347 at 3-4. Somewhat confusingly, Lansing counterclaims against PC for 15 breach of the CMA in its second amended answer, noting that under the CMA, PC 16 was obligated to broker trades for Lansing. ECF No. 150 at 21. Furthermore, PC is 17 mentioned in the October 2003 Amended CMA, though it is in reference to how 18 SG’s profits will be distributed. ECF No. 150-1 at 9 (“At the end of every 19 marketing period Lansing will distribute to SG 40% of all net operating profits 20 over $75,000 minus 40% of all bad debt write off and 100% of brokerage paid to ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 8 1 Paulson Commodities.” (emphasis in original)). Additionally, there is a curious, 2 repeated reference to “SG” in the contract. Lansing admitted that it entered into 3 the Corn Marketing Agreement with “TI 48-130-6798 (SG)” which consisted of 4 Steve Paulson, Tom Walters, and Dennis Kyllo and was referred to as “SG” or 5 “Steve’s Group.” Defendant’s Second Amended Answer, ECF No. 150 at 4. 6 Accordingly, the Court finds that there is a genuine dispute of material fact as 7 to whether PC and CWCP are also parties to the contract. 8 9 C. Breach of Contract Plaintiffs’ move for summary judgment on their breach of the CMA claims. 10 Lansing moves for summary judgment on one aspect of damages. The Court 11 considers each motion in turn. 12 13 1. Plaintiffs’ Motion on Breach of Contract Plaintiffs argue that they are entitled to summary judgment on their breach 14 of contract claim because Lansing (1) failed to provide the required accountings 15 and documentation; (2) failed to provide necessary information to PC to broker 16 trades; (3) refused to provide reasonable credit limits to end user corn purchasers in 17 attempts to alienate them; and (4) refused to provide credit to and sell single 18 truckload amounts to new and existing customers in furtherance of the CMA. ECF 19 No. 340 at 6. Lansing contends in its responsive briefing that the parties’ 20 ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 9 1 fundamental dispute about how profit and loss are calculated bars resolution of this 2 claim at summary judgment. ECF No. 373 at 3. 3 Here, the parties dispute many of the material facts underlying the breach of 4 contract claim; taken in the light most favorable to the nonmoving party, the 5 disputed facts defeat Plaintiffs’ motion for summary judgment. The Court 6 examines each of Plaintiff’s contentions in turn. 7 Plaintiffs claim that Defendant failed to provide the required accountings 8 and documentation, and that Defendant did not provide necessary information to 9 PC to broker trades. ECF No. 340 at 6. Defendant contends that there are disputed 10 material facts as to whether PGT did or did not receive sufficient information 11 under the CMA, ECF No. 373 at 6, noting that Lapke provided a breakdown of 12 profits, ECF No. 375 at 7 (citing Lapke Deposition at 201), and that PGT and 13 Paulson had significant information about transactions processed under the CMA, 14 ECF NO. 373 at 5 (citing Paulson Deposition at 150). 15 Plaintiffs also contend that Lansing breached its duties under the CMA by 16 failing to use PC to broker trades. Lansing contends that PC was not a party to the 17 CMA and that Paulson admitted in his deposition that the CMA did not require 18 Lansing to use PC as its broker. ECF No. 373 at 9 (citing Paulson Deposition at 19 56). Thus, a question of fact remains whether Lansing was required to use PC to 20 ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 10 1 broker its trades. See also discussion in Section B regarding questions of fact as to 2 which parties were bound under the CMA. 3 Plaintiffs also contend that Lansing breached its duties under the CMA by 4 changing and refusing to provide reasonable and rational credit limits to end user 5 corn purchasers in attempts to alienate them. ECF No. 373 at 6. Lansing disputes 6 that there is anything in the CMA prohibiting it from changing credit limits, and 7 notes that the CMA makes clear that all contracts are subject to Lansing’s company 8 credit policy. ECF No. 373 at 9. Plaintiffs also argue that Lansing breached the 9 CMA by failing to process single truckload amounts to new and existing 10 customers. ECF No. 340 at 6. Lansing counters that the CMA did not require 11 Lansing to provide single truckloads to such customers. ECF No. 373 at 10. 12 Generally, the parties dispute most of their obligations under the CMA. As 13 Lansing argues, ECF No. 373 at 1, the contention that the contract has been 14 breached ultimately turns on the issue of calculation of profit and loss under the 15 CMA. The parties have each contended that the other has breached the CMA on 16 different theories of how the profits and losses should be calculated. If Lansing is 17 correct, then PGT owes Lansing for losses. If PGT is correct, Lansing owes PGT. 18 The parties fundamentally disagree about how profits and losses should have been 19 reported. Accordingly, and for the disputes of material fact above stated, the Court 20 ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 11 1 denies Plaintiffs’ motion for summary judgment on the breach of contract 2 claim. 3 4 2. Defendant’s Motion with Respect to Damages Lansing argues that it is entitled to summary judgment only on Plaintiffs’ 5 claim for alleged freight rebate damages for breach of the CMA because the CMA 6 did not concern freight rebates. ECF No. 298 at 20. Lansing contends that 7 Plaintiffs acknowledged that the CMA does not refer to freight rebates, and thus 8 these are inappropriate for lost damages computations. Id. Plaintiffs contend that 9 “[r]ebates and incentives would have been discounts off the price associated with 10 purchase contracts and would absolutely factor into the sales price and profit 11 margin.” ECF No. 347 at 5; ECF No. 353 at 3. Lansing counters that “freight 12 discounts” are defined in the CMA as “additional freight that may be paid to ship 13 corn outlined in the purchase and sales contracts,” and as such were not rebates. 14 ECF No. 364 at 6 (emphasis in original). At bottom, Lansing’s argument is that 15 since freight rebates were not mentioned or defined in the CMA, they can be 16 ignored for purpose of computing profit and loss attributable to the CMA. Id. 17 The Court acknowledges the contractual definition of “freight discounts” 18 does not apply to these rebates at issue. But the contract does not purport to define 19 each element of “profit and loss”. Indeed, nowhere does the contract purport to 20 provide a definition for the cost of goods sold, a vital aspect of calculating profit ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 12 1 and loss. Absent that, the most basic and rudimentary accounting principles would 2 attribute the freight rebates to the cost center that generated them, that is, as a 3 reduction to the cost of goods sold under the CMA. Accordingly, Defendant’s 4 motion for summary judgment on freight rebate damages is denied. 5 6 D. Partnership Accounting Claim The Court next considers the parties’ cross-motions for summary judgment 7 on Plaintiffs’ claim for a partnership accounting. Lansing argues for summary 8 judgment on grounds that (2) there was no partnership with Lansing, and 9 alternatively (2) that because PGT has elected to pursue a legal claim for breach of 10 CMA in a jury trial, it cannot simultaneously pursue a bench trial for an 11 accounting. ECF No. 298 at 17. The Court considers each issue in turn. 12 1. Whether PGT and Lansing Formed a Partnership or Joint Venture 13 Plaintiffs contend that PGT and Lansing entered into a joint venture to 14 operate collectively under the CMA. ECF No. 340 at 16. They allege that, like a 15 partnership, PGT and Lansing intended to operate as co-venturers under the CMA 16 for the purpose of making a profit. Id. Defendant contends that the relationship 17 formed by the CMA was not a partnership but a merchandising agreement. ECF 18 No. 298 at 18. 19 “The essential elements of a joint venture are (1) a contract, express or 20 implied; (2) a common purpose; (3) a community of interest; (4) an equal right to a ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 13 1 voice, accompanied by an equal right to control.” Paulson v. Pierce Cnty., 99 2 Wash. 2d 645, 654-55 (1983). An ownership or proprietary interest in the subject 3 matter of the enterprise by all parties is not essential to creation of a joint venture. 4 Id. In joint ventures, funds, property or labor are joined in common purpose, each 5 contributor has some right to direct conduct of others, losses and profits are shared, 6 and repayment of money advanced is not required absolutely, but is contingent 7 upon making a profit. Liebergesell v. Evans, 23 Wash.App. 357, 361 (1979), 8 review granted, reversed on other grounds, 93 Wash.2d 881 (1980). 9 Under the Revised Uniform Partnership Act (“RUPA”), codified at RCW 10 § 25.05, “the association of two or more persons to carry on as co-owners a 11 business for profit forms a partnership, whether or not the persons intend to form a 12 partnership.” RCW 25.05.055. 13 Here, at minimum, PGT and Lansing have (1) an express contract in the 14 form of the CMA. It defines their (2) “common purpose” in “market[ing] corn 15 from facility in Plymouth.” See ECF No. 150-1. This creates their (3) “community 16 of interest” in the relationship that “generate[d] net operating profits to be split.” 17 See id. Though the parties’ agreement is silent as to (4) control, both have 18 significant responsibilities under the contract. Under the CMA, PGT agreed to 19 “provide destination marketing, truck logistics coordination, receivable collections 20 services to dairies and feedlots in the area around Plymouth,” while Lansing agreed ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 14 1 to “provide BN shuttle transfer, corn merchandising expertise and management, 2 accounting and credit services, and operating capital.” ECF No. 12-2. Furthermore, 3 the CMA provides for profit sharing: “activity resulting from this agreement will 4 result in a relationship that will generate net operating profits to be split with 60% 5 going to Lansing and 40% going to SG after the first $75,000 is designated to 6 Lansing.” ECF No. 150-1. In other words, PGT contributed its “labor” in the form 7 of marketing and coordination while Lansing contributed “property” in the form of 8 operating capital in order to generate “net operating profits.” Thus, the parties’ 9 stated intentions fall squarely into the definition of a joint venture. The Court finds 10 as a matter of law that a joint venture existed between PGT and Lansing. They may 11 also have formed a partnership: Under RUPA, whether or not the parties’ intended 12 to form a partnership is irrelevant; thus, Lansing’s contention that the parties said 13 they formed a merchandising agreement rather than a partnership does not preclude 14 them from unintentionally forming a partnership. 3 15 However, there is a genuine issue of material fact as to whether PC and 16 CWCP are parties to the CMA. Because the written CMA forms the basis for 17 3 18 The Court refers to the relationship as a joint venture while recognizing that the 19 duties and remedies for either a partnership or joint venture are fundamentally the 20 same. ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 15 1 PGT’s and Lansing’s joint venture, its lack of clarity about whether PC and CWCP 2 are also parties means there is an unresolved issue of fact. It is clear that Paulson’s 3 interest in Paulson Commodities became apparent to Lansing because the CMA 4 was amended in October 2003 to provide that “Lansing will distribute to SG 40% 5 of all net operating profits over $75,000 minus 40% of all bad debt write off 6 and 100% of brokerage paid to Paulson Commodities.” ECF 150-1 (emphasis in 7 original). Accordingly, the question of whether PC and CWCP were also parties to 8 the Lansing/PGT joint venture is unresolved for purposes of summary judgment. 9 10 2. Whether Plaintiffs Have a Cause of Action for an Accounting The Court next determines whether Plaintiffs have a cause of action for an 11 accounting of the joint venture. In Count IV of their complaint, Plaintiff PGT 12 demands from Lansing: 13 14 15 an accounting, and reconciliation, as well as all monthly, and yearly profit and loss statements, and any other account statements directly or indirectly related to the partnership, and any underlying documentation, including but not limited to profits, losses, expenses, and operating capital, management, and other accounting items relating to the parties’ partnership for the last six years.” 16 ECF No. 1 at 9. PGT moves for summary judgment on the issue of accounting, 17 arguing that a cause of action for accounting accrues at dissolution and that 18 partners have a statutory right to a settlement of accounts upon cessation of 19 business activities, but Lansing “continuously refuses to provide an accurate 20 reporting of profit relating to all activity under the CMA.” ECF No. 340 at 16. ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 16 1 The Court first notes that an accounting is generally available to joint 2 ventures and partnerships. A joint venture “is in the nature of a partnership, and the 3 rights, duties and liabilities of joint adventurers are generally subject to the rules 4 applicable to partnerships.” Rains v. Walby, 13 Wash.App. 712, 720 (1975). In a 5 joint venture, 6 [t]here is a right to an accounting between joint adventurers to determine their respective interests and liabilities. Following the reasoning that a joint adventurer has similar rights to those of a partner, we look to the law of partnerships to determine a partner's rights to an accounting. 7 8 Id. at 721. 9 In Washington, the operation of partnerships and rights and obligations of a 10 partnership’s individual members are expressly governed by statute. See generally 11 Title 25 RCW. The Revised Uniform Partnership Act (“RUPA”) expressly 12 supersedes the common law governing partnerships. RCW 25.05.015(1); Simpson 13 v. Thorslund, 151 Wash.App. 276, 282 (2009). RUPA provides in part, “[a] 14 partner may maintain an action against the partnership or another partner for legal 15 or equitable relief, with or without an accounting as to partnership business, to… 16 [e]nforce the partner's rights under the partnership agreement….” 17 RCW 25.05.170.4 Additionally, “[e]ach partner is entitled to a settlement of all 18 19 20 4 Prior to the adoption of RUPA, a partner was generally barred from bringing suit against a former co-partner regarding partnership liabilities without first bringing ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 17 1 partnership accounts upon winding up the partnership business….” 2 RCW 25.05.330.5 Here, Plaintiffs’ demand an accounting along with other claims for relief to 3 4 enforce rights under the partnership. ECF No. 1. Thus, Plaintiff is “enforce[ing] its 5 rights under the partnership agreement” (the CMA) by “maintain[ing] and 6 action…against another partner for legal or equitable relief, with…an accounting 7 an action to account for and settle the partnership's affairs. Simpson, 151 8 Wash.App. at 282. Since the adoption of RUPA in 1998, however, Washington law 9 no longer requires such an accounting. Id. 10 5 Plaintiffs contend in their motion for summary judgment that a cause of action for 11 accounting accrues at dissolution, citing Malnar v. Carlson, 128 Wash.2d 521 12 (1996), which bases this assertion on the now superseded RCW 25.04.430. Under 13 the common law, to state a cause of action for an accounting, a plaintiff must 14 establish: “(1) a fiduciary relation existed between the parties, or that the account is 15 so complicated that it cannot be conveniently taken in an action at law; and (2) the 16 plaintiff has demanded an accounting from the defendant and the defendant has 17 refused to render it.” State v. Taylor, 58 Wash.2d 252, 262 (1961) (citing Seattle 18 National Bank v. School Dist. No. 40, 20 Wash. 368 (1898)). 19 20 ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 18 1 as to partnership business,” as permitted by RUPA. See RCW 25.05.170. 2 Furthermore, the parties agree that the CMA has been terminated, although it is 3 unclear to the Court when that termination occurred. As Lansing notes in its 4 Second Amended Answer, “Lansing admits that Lansing and PGT continued their 5 relationship under the Corn Marketing Agreement until the summer of 2009, at 6 which time the Plaintiffs breached the Corn Marketing Agreement by unilaterally 7 terminating it, or attempting to unilaterally terminate it, without cause or written 8 notice.” ECF No. 150 at 6. 3. Whether PGT can pursue a bench trial for accounting 9 10 The Court next considers whether a jury trial or a bench trial is appropriate 11 for cases involving both a claim for a partnership accounting, which is a claim in 12 equity, 6 and a breach of contract claim, a claim in law. Lansing contends that 13 because PGT is pursuing a legal claim for breach of the CMA before a jury it 14 cannot simultaneously pursue a bench trial for accounting. ECF No. 298 at 18. It 15 further alleges that Plaintiffs’ evidentiary presentation in a jury trial “will 16 essentially be each party presenting the accounting it claims is required by the 17 6 18 equitable remedy. Petrella v. Metro-Goldwyn-Mayer, Inc., 695 F.3d 946, 956 (9th 19 Cir. 2012) cert. granted, 134 S. Ct. 50 (2013) (citing Dairy Queen, Inc. v. Wood, 20 369 U.S. 469, 478 (1962)). Seeking an accounting, where the accounting is not provided for by contract, is an ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 19 1 CMA,” and therefore there would be no need for the equitable relief of an 2 accounting. Id. at 19. 3 First, the Court notes that it finds no support for the proposition that PGT 4 cannot simultaneously pursue a bench trial for an accounting while it pursues a 5 legal claim for breach of the CMA.7 Rather, in cases involving questions of both 6 equity and law, courts must determine whether legal or equitable claims 7 predominate. Auburn Mech., Inc. v. Lydig Const., Inc., 89 Wash.App. 893, 898 8 (1998). Article I, section 21 of the Washington constitution “has been held to 9 guarantee a right to a jury trial where the civil action is purely legal in nature, but 10 not where the action is purely equitable in nature.” Id. at 897. But doubts should be 11 “resolved in favor of a jury trial.” Id. In determining the primary nature of an 12 action, the following factors are considered: 13 (1) who seeks the equitable relief; (2) is the person seeking the equitable relief also demanding trial of the issues to the jury; (3) are the main issues primarily legal or equitable in their nature; (4) do the equitable issues present complexities in the trial which will affect the orderly determination of such issues by a jury; (5) are the equitable and legal issues easily separable; (6) in the exercise of such discretion, great weight should be given to the constitutional right of trial by jury and if the nature of the action is doubtful, a jury trial should be allowed; (7) the trial court should go 14 15 16 17 7 18 Defendant cites Roediger v. Reid, 133 Wash. 608, 609 (1925), which holds that 19 the trial court properly denied a jury trial where the question was whether a 20 partnership was established, an equitable claim. ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 20 1 2 beyond the pleadings to ascertain the real issues in dispute before making the determination as to whether or not a jury trial should be granted on all or part of such issues. 3 Id. at 898 (quoting Scavenius v. Manchester Port Dist., 2 Wash.App. 126, 129–30, 4 467 P.2d 372 (1970) (approved and adopted in Brown [v. Safeway Store, Inc.], 94 5 Wash.2d at 368, 617 P.2d 704 [1980])). 6 In cases involving both equitable and legal claims, courts have left open the 7 possibility of ordering that the legal claims be tried with a jury, and the equitable 8 claims be tried separately, without a jury. See Auburn Mechanical, 89 Wash.App. 9 at 898 (quoting Scavenius, 2 Wash.App. at 129-30 (“the trial court should go 10 beyond the pleadings to ascertain the real issues in dispute before making the 11 determination as to whether or not a jury trial should be granted on all or part of 12 the issues”) (emphasis added)); see also 14 Wash. Prac., Civil Procedure § 10:13 13 (2d ed.) (“The guidelines…also seem to contemplate the possibility of separate 14 trials.”). See also Green v. McAllister, 103 Wash.App. 452 (2000) (reviewing 15 Superior Court case in which jury heard a breach of contract claim and the court 16 entered findings and a judgment on the accounting action at the same time); Box v. 17 Crowther, 3 Wash.App. 67, 68 (1970) (reviewing Superior Court case in which 18 breach of contract claim was tried with a jury, though “court quite properly 19 declined to permit the jury to decide the accounting aspects of the case and 20 submitted to the jury only the questions of damages to the plaintiffs”). ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 21 1 4. Accounting 2 RUPA provides 3 In settling accounts among the partners, profits and losses that result from the liquidation of the partnership assets must be credited and charged to the partners' accounts. The partnership shall make a distribution to a partner in an amount equal to any excess of the credits over the charges in the partner's account. A partner shall contribute to the partnership an amount equal to any excess of the charges over the credits in the partner's account, except, in the case of a limited liability partnership the partner shall make such contribution only to the extent of his or her share of any unpaid partnership obligations for which the partner has personal liability under RCW 25.05.125. 4 5 6 7 8 RCW 25.05.330. 9 “In an action for an accounting, ‘the court (or more commonly, an auditor, 10 master, or referee subject to court review) conducts a comprehensive investigation 11 of the transactions of the partnership and the partners, adjudicates their relative 12 rights, and enters a money judgment for or against each partner according to the 13 balance struck.’” Guntle v. Barnett, 73 Wash.App. 825, 830 (1994) (quoting 2 14 Alan R. Bromberg and Larry E. Ribstein, Partnership, § 6.08(a) (1994)); see also 15 Holman v. Cape, 45 Wash.2d 205, 206 (1954) (quoting Yarwood v. Billings, 31 16 Wash. 542 (1903)) (in action for accounting, trial court has power “not only to 17 state the account between the parties but to enter a judgment in favor of one and 18 against another, as the state of the account may require.”). “When an action for an 19 accounting is being used to wind up the partnership's affairs, the court is obligated 20 to provide ‘for a full accounting of the partnership assets and obligations and ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 22 1 distribution of any remaining assets or liabilities to the partners in accordance with 2 their interests in the partnership.’” Guntle, 73 Wash.App. at 830 (citing Box v. 3 Crowther, 3 Wash.App. 67, 77–78 (1970)). Whether to appoint an accountant is a 4 matter addressed to the sound discretion of the court. See Guntle, 73 Wash.App. at 5 830-31 (“Other jurisdictions have held that whether to appoint an accountant is a 6 matter addressed to the sound discretion of the trial court....Washington cases seem 7 in accord, or at least consistent.”). 8 9 The partner controlling the records has the burden of proof of the account’s accuracy. Cederlund v. Cederlund, 7 Wash.App. 320, 321 (1972) (quoting In re 10 Tembreull’s Estate, 37 Wash.2d 93 (1950)) (“When a managing partner who keeps 11 the books is [sued] for settlement, he must sustain the burden of proof of the 12 correctness of the account. . . .’”; “’[I]f they are so kept as to be unintelligible… 13 every presumption will be made against those to whose negligence or misconduct 14 the non-production of proper accounts is due.’”). 15 Here, the claims remaining are both in equity (the partnership accounting 16 claim) and in law (the breach of contract claim). Because the breach of contract 17 claim is significant, the parties are entitled to a jury trial on those issues. However, 18 the accounting—to which the Court has found Plaintiffs are entitled above— 19 involves complex and specialized financial issues pertaining to the grain industry. 20 Such a complex accounting would be difficult for a jury to properly decide and is ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 23 1 reserved for the equity court. Accordingly, the Court will bifurcate the claims in 2 equity from the claims at law, providing a bench trial for the accounting followed 3 by a jury trial for the remaining issues at law. Doing so allows the parties to have 4 the jury trial to which they are entitled, as well as an accounting. 5 The Court will hold the bench trial for an accounting first. The accounting 6 may clarify issues at the heart of some of the breach of contract issues. Such an 7 accounting, performed prior to a jury trial, has the potential to greatly reduce the 8 complexity of the issues remaining for the jury. At this time, the Court declines to 9 appoint an auditor or master. 10 E. Breach of Fiduciary Duty 11 Lansing moves for summary judgment on the issue breach of fiduciary duty, 12 arguing that neither PGT, PC, nor CWCP were partners in the alleged partnership, 13 and therefore Lansing could owe them no fiduciary duty. ECF No. 298 at 3. 14 Plaintiffs move for summary judgment on the breach of fiduciary duty claim. ECF 15 No. 340 at 9. Plaintiffs appear to assert in the complaint that the fiduciary duty 16 arose out of a partnership. See ECF No. 1 at 7 (“Lansing has a fiduciary duty to the 17 partnership”). However, Plaintiffs’ motion for summary judgment rather argues 18 that the parties “both admit that trust is an integral part of commodity trading 19 because million dollar transactions are made by phone,” and that it is 20 “understandable that Plaintiffs relied on that trust when transacting the activity ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 24 1 under the CMA on behalf of Lansing.” ECF No. 340 at 10. To this argument, 2 Lansing responds that Plaintiffs cannot meet their burden to show that Lansing had 3 a fiduciary duty to any Plaintiffs. ECF No. 373 at 10. 4 In a fiduciary relationship one party “‘occupies such a relation to the other 5 party as to justify the latter in expecting that his interests will be cared for....’ ” 6 Liebergesell v. Evans, 93 Wash.2d 881, 889–90 (1980) (quoting Restatement of 7 Contracts § 472(1)(c) (1932)). Breach of a fiduciary duty imposes liability in tort. 8 Micro Enhancement Int'l, Inc. v. Coopers & Lybrand, LLP, 110 Wash.App. 412, 9 433 (2002). The plaintiff must prove (1) existence of a duty owed, (2) breach of 10 that duty, (3) resulting injury, and (4) that the claimed breach proximately caused 11 the injury. Id. at 433-34 (citing Miller v. U.S. Bank of Wash., 72 Wash.App. 416, 12 426 (1994)). A fiduciary relationship arises as a matter of law in certain contexts 13 such as trustee and beneficiary, principal and agent, and partner and partner. Id. 14 Plaintiffs tangentially re-assert the partnership argument with Lansing in 15 their responsive memorandum, arguing that the parties’ efforts under the CMA 16 were often referred to as a joint venture, joint position, or partnership. ECF No. 17 350 at 15 (citing Exhibits 66-69, 71, 144-145). Because the Court has determined 18 that Lansing and PGT formed a joint venture through the CMA, a fiduciary duty 19 between those two entities arises as a matter of law. See Lybrand, 110 Wash.App. 20 at 433. Accordingly, the Court grants partial summary judgment to Plaintiffs on the ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 25 1 issue of whether a fiduciary relationship and thus fiduciary duties exist between 2 Lansing and PGT. The question of whether Lansing breached a fiduciary duty is 3 inextricably intertwined with whether Lansing breached the contract, and thus 4 genuine issues of material fact remain on the issue of breach and damages. 5 Accordingly, these issues are preserved for the jury trial and cannot be 6 decided on summary judgment with respect to PGT. 7 However, there remains a dispute about whether PC or CWCP were parties 8 to the CMA, and, consequently about whether they were parties to the joint venture 9 with Lansing. If they were joint venturers, then fiduciary duties are owed. 10 Plaintiffs also argue that fiduciary duties arise in other contexts than 11 relationships producing fiduciary duties as a matter of law. Thus, the Court 12 considers whether a quasi-fiduciary relationship in fact arose between Lansing and 13 PC and CWCP. As a general rule, participants in a business transaction deal at 14 arm's length and do not enter into a fiduciary relationship. Liebergesell, 93 15 Wash.2d at 889. But special circumstances may establish a quasi-fiduciary 16 relationship in fact where one would not normally arise in law. Annechino v. 17 Worthy, 162 Wash.App. 138, 143 (2011), aff'd, 175 Wash.2d 630 (2012). “’The 18 facts and circumstances must indicate that the one reposing the trust has foundation 19 for his belief that the one giving advice or presenting arguments is acting not in his 20 own behalf, but in the interests of the other party.’” Goodyear Tire & Rubber Co. ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 26 1 v. Whiteman Tire, Inc., 86 Wash.App. 732, 742 (1997) (quoting Burwell v. South 2 Carolina Nat'l Bank, 340 S.E.2d 786, 790 (1986)). In other words, the plaintiff 3 must show some dependency on his or her part and some undertaking by the 4 defendant to advise, counsel and protect the weaker party. Id. See also 5 Liebergesell, 93 Wash.2d at 884-85 (sufficient evidence of fiduciary relationship to 6 overcome summary judgment where businessman induced a widowed school 7 teacher to lend him money at 20 percent interest rate, even though he knew that 8 rate was illegal). In Goodyear, the court found that counterclaim plaintiff had not 9 created an issue of fact sufficient to avoid summary judgment where, though tire 10 dealer was vulnerable, tire manufacturer was clearly interested in promoting itself 11 as demonstrated by its reservation of right to compete. Id. at 743 (“the existence of 12 conflicting profit incentives between a manufacturer and dealer is at odds with a 13 fiduciary relationship”). 14 Plaintiffs’ claim that their trust relationship with Lansing (which gives rise 15 to a fiduciary duty) stems from the relationship formed under the CMA. But PC’s 16 and CWCP’s relationship to the joint venture remains a disputed factual question. 17 Plaintiffs allege that PC was to broker trades and that CWCP was to secure the 18 corn to the specifications provided by the sale contracts forwarded by Lansing, and 19 that the total effort was often referred to as “joint venture” or “partnership.” ECF 20 No. 350 at 15. ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 27 1 However, outside a partnership/joint venture, Plaintiffs have not indicated 2 how their business relationship—in which PC brokered trades and CWCP procured 3 and ground corn—is one giving rise to an expectation that Lansing would care for 4 PC or CWCP’s welfare, or act primarily for the benefit of CWCP, or was one 5 where PC/CWCP was dependent or weak. Indeed, both PC and CWCP admit they 6 were fully paid for their services.8 ECF Nos. 302 at ¶ 106; 304 at ¶ 364; 375-1 at 7 68-69 (Walter’s trucking was also paid in full for its services). Plaintiffs have 8 failed to establish a genuine issue of material fact to defeat summary judgment. No 9 other special relationship existed between the parties which would impose 10 fiduciary duties. Thus, absent a finding that PC and CWCP were parties to the 11 partnership/joint venture, Defendant is entitled to summary judgment that there 12 was no other basis for imposition of fiduciary duties owed to PC and CWCP. 13 14 Accordingly, Defendant’s motion for summary judgment is partially granted that no fiduciary duties are owed to PC and CWCP outside the CMA. 15 F. Breach of Duty of Good Faith and Fair Dealing 16 17 Plaintiffs move for summary judgment on their claim that Lansing breached the duty of good faith and fair dealing. ECF No. 340 at 12. Lansing counters that 18 8 19 Paulson now complains that PC was shorted $8,000 in broker fees for a single 20 transaction. ECF No. 302 at ¶ 106. But that does not create a fiduciary relation. ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 28 1 the duty only arises with respect to specific contract obligations and that if no 2 contractual duty exists, there is nothing that must be performed in good faith. ECF 3 No. 373 at 14. Lansing also moves for summary judgment on this claim, arguing 4 that PC and CWCP are not parties to the CMA and thus there is no relationship 5 with Lansing on which the covenant of good faith and fair dealing could be based. 6 ECF No. 298 at 4. 7 In Washington, every contract carries with it an implied covenant of good 8 faith and fair dealing that obligates the parties to cooperate with one another so that 9 each may obtain the full benefit of performance. Frank Coluccio Constr. Co., Inc. 10 v. King County, 136 Wash.App. 751, 764 (2007) (citing Badgett v. Sec. State Bank, 11 116 Wash.2d 563, 569 (1991)). The covenant of good faith applies when the 12 contract gives one party discretionary authority to determine a contract term; it 13 does not apply to contradict contract terms. Goodyear Tire & Rubber Co. v. 14 Whiteman Tire, Inc., 86 Wash.App. 732, 738 (1997). That a party can breach the 15 duty of good faith and fair dealing by acting dishonestly or unlawfully does not 16 mean that dishonesty or an unlawful purpose is a necessary predicate to proving 17 bad faith. Scribner v. Worldcom, Inc., 249 F.3d 902, 910 (9th Cir. 2001) (applying 18 Washington law). 19 20 Here, Plaintiffs simply have not established undisputed facts sufficient for summary judgment. As discussed at greater length above, there are genuine issues ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 29 1 of material fact as to which party breached the CMA and how. For example, 2 Plaintiffs contend that Lansing failed to disclose expenses and profits, and monthly 3 and annual P&L’s. ECF No. 340 at 14. However, Lansing disputes this. ECF No. 4 375 at 7 (citing Lapke Deposition at 201). The duty of good faith and fair dealing 5 is inextricably intertwined with the explicit duties under the contract, about which 6 there are disputed material facts. Any undisputed facts that Plaintiffs assert simply 7 are not enough to show a breach of the duty of good faith and fair dealing for the 8 purposes of summary judgment. For example, Plaintiffs argue that Lansing’s profit 9 and loss statements were never audited, which Lansing does not dispute (though 10 Lansing objects to the underlying exhibit on authentication grounds). ECF No. 340 11 at 14; ECF No. 375 at 5. But this, standing alone, is not enough. Accordingly, 12 Plaintiffs’ motion for summary judgment on the issue of breach of the duty of 13 good faith and fair dealing fails, and these issues will be tried with the breach 14 of contract claim. 15 Because there is a question of fact as to whether PC and CWCP are parties 16 to the CMA, there is likewise a question of material fact as to whether there was a 17 duty of good faith and fair dealing as to them. Accordingly, Defendant’s motion 18 for summary judgment as to PC and CWCP on the breach of the duty of good 19 faith and fair dealing also fails. 20 /// ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 30 1 2 G. Unjust Enrichment Claim Plaintiffs claim that they are entitled to summary judgment on their unjust 3 enrichment claim because, inter alia, Lansing benefitted from PC’s negotiations 4 and brokering, and was unjustly enriched by profits it made on arbitrage and 5 diversion, discounts, and other activities in which it denied PC brokerage fees. 6 ECF No. 340 at 19. Lansing moves for summary judgment as well, arguing (1) that 7 PGT’s unjust enrichment claim fails because Washington law precludes a party to 8 a contract from asserting an unjust enrichment claim for damages arising from a 9 transaction about which the parties have a contract, and (2) that PC and CWCP 10 have no unjust enrichment claim because they were not parties to the CMA and 11 thus could not have bestowed any benefit on Lansing, as required for an unjust 12 enrichment claim. ECF No. 298 at 15. 13 “Unjust enrichment is the method of recovery for the value of the benefit 14 retained absent any contractual relationship because notions of fairness and justice 15 require it.” Young v. Young, 164 Wash.2d 477, 484, 191 P.3d 1258 (2008). 16 17 18 Three elements must be established in order to sustain a claim based on unjust enrichment: a benefit conferred upon the defendant by the plaintiff; an appreciation or knowledge by the defendant of the benefit; and the acceptance or retention by the defendant of the benefit under such circumstances as to make it inequitable for the defendant to retain the benefit without the payment of its value. 19 20 Id. (internal citations omitted ). A claim for unjust enrichment is based on the ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 31 1 doctrine of implied contract. MacDonald v. Hayner, 43 Wash.App. 81, 85, 715 2 P.2d 519 (1986).Under Washington law, “[a] party to a valid express contract is 3 bound by the provisions of that contract, and may not disregard the same and bring 4 an action on an implied contract relating to the same matter, in contravention of the 5 express contract.” U.S. for Use and Benefit of Walton Technology, Inc. v. Weststar 6 Engineering, Inc., 290 F.3d 1199, 1204 (9th Cir. 2002) (dismissing unjust 7 enrichment claim where Plaintiff had affirmed the validity of the contract). 8 9 Here, as Lansing argues, Plaintiffs have claimed breach of contract—a claim premised on its acknowledgment of the existence of a contract with Lansing. ECF 10 No. 1 at 7. PGT is undisputedly a party to the CMA, and Plaintiffs’ unjust 11 enrichment claims arise from the same facts that give rise to their breach of 12 contract claims. Accordingly, Plaintiffs’ unjust enrichment claim fails as to PGT. 13 PGT must pursue damages under its breach of contract claim. 14 In their reply, Plaintiffs appear to acknowledge Lansing’s exclusion of PGT 15 from the unjust enrichment claim, but argue that “if any party is found to be 16 outside the CMA, it should certainly be entitled to compensation because of unjust 17 enrichment which would otherwise accrue to Defendants.” ECF No. 350 at 11. A 18 dispute remains about whether PC and CWCP are parties to the CMA: if they are 19 parties, they must also pursue their damages under a breach of contract claim; if 20 ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 32 1 they are not parties they have come forward with insufficient evidence to support 2 an implied contract/unjust enrichment cause of action. 3 CWCP has identified no unjust enrichment claims. As indicated above, 4 CWCP was fully paid for its services. ECF No. 304 at ¶ 364. PC has identified 5 only one transaction that it claims it brokered for Lansing in which it claims 6 Lansing reduced its fee by $8,000. Paulson Declaration, ECF No. 302 at ¶ 106. 7 The refusal of Lansing to pay $8,000 brokering fee on a single transaction does not 8 constitute an unjust enrichment cause of action. Otherwise, PC has failed to come 9 forward with sufficient admissible evidence to establish an unjust enrichment 10 cause of action. PC complains that Lansing made money on arbitrage, diversion 11 and discounts, but does not otherwise support these allegations with any specific 12 evidence that would establish the elements of an unjust enrichment claim. PC, as a 13 broker, could expect its broker fees, but it certainly is not entitled to the reward that 14 a speculator in the grain market achieves. Indeed, PC’s money was not at risk. 15 Thus, Lansing’s motion for summary judgment on Plaintiffs’ unjust 16 enrichment claims is granted. 17 H. Tortious Interference 18 Lansing moves for summary judgment on Plaintiffs’ claim of tortious 19 interference with a business expectancy. ECF No. 298 at 2. It contends that (1) 20 there is no evidence that Lansing interfered with AGNW’s lease with CWCP at the ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 33 1 Plymouth Facility, (2) there is no evidence that Lansing wrongfully interfered with 2 any relationship PC had with the two local customers PC has identified as having 3 bought corn from Lansing, and (3) that Lansing cannot be liable for interference 4 with its own contract. ECF No. 298 at 5, 8. Plaintiffs counter that, though Lansing 5 has provided support for its contentions, other, contradictory evidence exists. ECF 6 No. 350 at 4. 7 To prove tortious interference, the plaintiff must produce evidence sufficient 8 to support all the following findings: (1) the existence of a valid contractual 9 relationship or business expectancy; (2) the defendant's knowledge of and 10 intentional interference with that relationship or expectancy; (3) a breach or 11 termination of that relationship or expectancy induced or caused by the 12 interference; (4) an improper purpose or the use of improper means by the 13 defendant that caused the interference; and (5) resultant damage. Leingang v. 14 Pierce County Med. Bureau, Inc ., 131 Wash.2d 133, 157 (1997). The party 15 moving for summary judgment has the burden to show the absence of evidence 16 that would raise an issue of material fact regarding any of the five elements of the 17 tortious interference claim. Atherton Condo. Apartment–Owners Ass'n Bd. of Dir. 18 v. Blume Dev. Co., 115 Wash.2d 506, 516 (1990). 19 20 A valid “business expectancy” includes any prospective contractual or business relationship that would be of pecuniary value. Manna Funding, LLC v. ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 34 1 Kittitas Cnty., 173 Wash.App. 879, 897, 295 P.3d 1197, 1207, as amended on 2 denial of reconsideration (Apr. 9, 2013), review denied, 178 Wash.2d 1007, 308 3 P.3d 642 (2013). “All that is needed is a relationship between parties 4 contemplating a contract, with at least a reasonable expectation of fruition,” and 5 this “relationship must be known, or reasonably apparent, to the interferor (sic).” 6 Manna, at 897 (finding trial court’s grant of summary judgment on tortious 7 interference claim proper because there was no evidence that defendant interfered 8 with or delayed development activity where plaintiff had no identified contract, 9 permit or contemplated development). Intentional interference requires an 10 improper objective or the use of wrongful means that in fact cause injury to the 11 person's contractual relationship. Leingang, 131 Wash.2d at 157. But exercising in 12 good faith one's legal interests is not improper interference. Leingang, 131 13 Wash.2d at 157 (finding no improper interference in an insured’s claim that one 14 insurer tortiously interfered with his contract with another insurer where insurer 15 was asserting an arguable interpretation of existing law). The tort of interference 16 with a business expectancy requires a third party; a party to the contract cannot be 17 liable in tort for inducing its own breach. City of Seattle v. Blume, 134 Wash.2d 18 243, 266 (1997). 19 Here, even taken in the light most favorable to them, Plaintiffs have failed 20 to establish that there is a genuine issue of material fact regarding the elements of ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 35 1 their claim. First, insofar as Plaintiffs’ claims for tortious interference relate to the 2 relationship between Lansing and PGT, the Court notes that a party to the contract 3 cannot be liable in tort for inducing its own breach. Blume, 134 Wash.2d at 266. 4 Accordingly, the claim fails as to the relationship between Lansing and PGT, since 5 they had a contractual relationship with each other. 6 Next, the Court notes that there must be “a breach or termination of that 7 relationship or expectancy induced or caused by the interference.” Leingang, 131 8 Wash.2d at 157. Defendant argues that Plaintiffs fail to meet this necessary 9 element with respect to their claims that Lansing interfered with the business 10 relationship with CWCP, PC, CP or Walters because Plaintiffs have not alleged in 11 the complaint nor provided additional evidence that there was a breach or 12 termination of any symbiotic relationship between PGT and those parties. ECF No. 13 298 at 10. The Court agrees. Plaintiffs have provided no evidence of a “breach or 14 termination of expectancy” with respect to CWCP, PC, CP or Walters. This is not 15 surprising, since PGT is 98-percent-owned by CWCP; CWCP is equally owned by 16 Paulson, Kyllo, and Walters; PC is owned by Paulson; CP is owned by Kyllo; and 17 Walters, Inc., is owned by Walters. 18 With respect to Plaintiffs’ claims that Lansing acted wrongfully by making 19 direct contact and sales with PC and CP’s customers, ECF No. 350 at 6, the Court 20 notes that the parties do not appear to have had a noncompetition agreement. Thus, ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 36 1 there is no indication that Lansing’s direct contact with those customers was 2 improper, as they were exercising a legal right with respect to these customers. If 3 they were contacted during the CMA, that was allowed. If they were contacted 4 afterward, there was no contractual obligation preventing them from doing so. Paulson’s declaration additionally identifies two customers, Smeenk 9 and 5 6 Desert Oasis, that he alleges Lansing called and told they did not need to pay PGT 7 for their corn if they used Lansing for their broker instead of PGT. ECF No. 302 at 8 ¶ 105 (Paulson Declaration). Paulson contends that Smeenk and Desert Oasis owed 9 more than $70,000 to PC at the time of the lawsuit. Id. However, Defendant 10 counters that Jason Smeenk stated that he “was never told by Rebecca, or anyone 11 else, that [his] dairy would not have to pay outstanding balance due to Paulson 12 Commodities if [he] bought corn directly from Lansing.” ECF No. 299-3 at 2 13 (Declaration of Jason Smeenk). He went on to say that his “corn purchases from 14 Lansing were motivated by price as well as a good working relationship with Ms. 15 Wallick [of Lansing].” Id. Likewise, Richard Smith, owner of Desert Oasis, 16 declared that, to the best of his recollection he had “never had direct contact with 17 Lansing Grain Company” or “Plymouth Grain Terminals.” ECF No. 299-4 at ¶ 6-7. 18 He also declared that he made corn purchases for Desert Oasis through a broker at 19 NorthWest Feed, who he believed bought corn for his business from “whichever 20 9 The parties sometimes incorrectly refer to Smeenk as “Schmenk.” ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 37 1 corn dealer had the cheapest price at the time I wished to make a purchase, and that 2 would vary from week to week.” Id. at ¶ 3. Thus, Plaintiffs have identified no 3 admissible evidence that Lansing improperly interfered with its business 4 expectancies with Smeenk or Desert Oasis, and summary judgment on this claim 5 fails as to these customers. 6 Plaintiffs offer the most extensive argument with respect to its relationship 7 with AgriNorthwest. First, Plaintiffs contend that Wayne Park told Tom Walters 8 that AgriNorthwest did not renew its lease because there were issues with the 9 Lansing contract. ECF No. 350 at 4, citing Facts in Opposition, para. 17. But this 10 hearsay statement is not enough to defeat summary judgment. Plaintiffs cite 11 Paulson’s second declaration, which states that there are email exchanges10 12 involving AgriNorthwest where (1) [Rebecca] Wallick [of Lansing] asked AgriNorthwest to divulge information about PGT to Wallick, (2) Wallick asked AgriNorthwest not to release corn loads to PGT that PGT had purchased from Lansing, (3) Wallick asked AgriNorthwest to ‘monitor’ PGT and CWCP and give reports to Wallick, (4) and Wallick created discord between the parties involved. 13 14 15 ECF No. 353 at 8. However, Defendant presented evidence from AgriNorthwest 16 employee Wayne Park asserting that the non-renewal of CWCP’s lease at 17 10 18 Plaintiffs note that they were told that Rhonda Giusti of AgriNorthwest, who was 19 allegedly contacted by Lansing and asked not to release loads, had passed away 20 prior to the lawsuit’s initiation. ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 38 1 AgriNorthwest’s facility was due to the fact that AgriNorthwest was considering 2 doing the grinding itself, and they wanted more control over the facility. ECF No. 3 299-5 at 10 (Deposition of Wayne Park). Furthermore, Plaintiffs did not dispute 4 Defendant’s statement of fact that AgriNorthwest was within its contractual rights 5 when it did not renew the lease with CWCP. ECF No. 299 at 8. 6 Plaintiffs argue that “Defendants’ refusal to bring corn into AgriNW led to 7 CWCP’s grinder sitting idle generating no revenue[.] This caused CWCP to use its 8 Richland facility to receive corn. According to Paulson, this occurred before 9 CWCP’s lease at AgriNW was terminated but is believed to be a contributing 10 factor.” ECF No. 350 at 5. However, though Paulson stated in his second 11 declaration that “it was clear” to him that Park did not want to renew the lease 12 because of “discord between Lansing and PGT,” he goes on to state that “Park 13 thought he could obtain CWCP’s grinding equipment for cheap and AgriNorthwest 14 could do their own grinding.” ECF No. 353 at 8. Thus, Paulson’s own declaration 15 indicates that AgriNorthwest may have terminated the lease because of its desire to 16 obtain CWCP’s grinding equipment and do its own grinding—a motive seemingly 17 unconnected from any alleged interference by Lansing. 18 Plaintiffs claim they are entitled to call Wayne Park as a witness and 19 confront him at trial as to his reasoning, presumably to establish that Lansing was 20 the catalyst for the lease termination. ECF No. 350 at 5. But that tactic defeats the ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 39 1 purpose of the summary judgment and does not satisfy Plaintiffs’ burden at this 2 stage of the proceeding. Moreover, the Court notes that AgriNorthwest also 3 terminated its Grain Transfer Agreement with Lansing. ECF No. 304 at 22-23. 4 The significance being that neither Lansing nor PGT had a foothold at the 5 Plymouth facility any longer, and neither gained an advantage. 6 Plaintiffs note that “Defendants stopped giving PC offers or bids after 2007 7 and cut PC out of brokerage for those sales. This caused CWCP and PGT to send 8 shipments to its Richland location, creating perceived competition between 9 AgriNW and Plaintiffs.” ECF No. 350 at 5. But here, Plaintiffs have failed to show 10 that there was “knowledge of and intentional interference with that relationship or 11 expectancy” as required for the tort. Defendant may well have cut PC out of 12 brokerage—a question that goes to its relationship with PC. But there is no 13 indication that it did so to disrupt CWCP’s relationship with AgriNorthwest. 14 Accordingly, the Court finds that there is insufficient evidence to 15 support the elements for Plaintiffs’ claim of tortious interference with a 16 business expectancy. 17 18 I. Misappropriation of Trade Secrets Lansing moves for summary judgment on Plaintiff PC’s claim that Lansing 19 misappropriated trade secrets on grounds that (1) PC voluntarily gave the list to 20 Lansing; (2) the customer lists in question were publicly available information; (3) ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 40 1 PC took no steps to protect that information; (4) and PC identified no damages. 2 ECF No. 298 at 2-3. 3 4 5 6 7 The Uniform Trade Secrets Act (“UTSA”) prohibits misappropriation of trade secrets. RCW 19.108. Washington law defines a trade secret as information, including a formula, pattern, compilation, program, device, method, technique or process that: (a) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. 8 RCW § 19.108.010(4). A customer list is one of the types of information which 9 can be a protected trade secret if it meets the criteria of the UTSA. Ed Nowogroski 10 Ins., Inc. v. Rucker, 137 Wash.2d 427 (1999). “[W]hether a customer list is 11 protected as a trade secret depends on three factual inquiries: (1) whether the list is 12 a compilation of information; (2) whether it is valuable because unknown to 13 others; and (3) whether the owner has made reasonable attempts to keep the 14 information secret.” Ed Nowogroski, 137 Wash.2d at 442. 15 For a trade secret to exist, the underlying information must not be “readily 16 ascertainable by proper means” from some other source. Boeing Co. v. Sierracin 17 Corp., 108 Wash.2d 38, 49–50 (1987). A compilation of information may 18 constitute a trade secret even though the plaintiff cannot prove that every element 19 of the compilation is unavailable elsewhere. Id. at 50. Trade secrets frequently 20 contain elements that by themselves may be in the public domain, but which ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 41 1 together qualify as trade secrets. Id. On the other hand, when the information is in 2 the public domain, and the end product of the information is unoriginal, there is no 3 trade secret. Woo v. Fireman's Fund Ins. Co., 137 Wash.App. at 488–89 4 (combination of public data must be novel and unique); Buffets, Inc. v. Klinke, 73 5 F.3d 965 (9th Cir. 1996) (suggesting plaintiff must prove novelty to establish trade 6 secret under Washington law). 7 Trade secrets are not lost merely by such factors as confidential disclosures 8 to such persons as employees or suppliers. Boeing, 108 Wash.2d at 52. When the 9 information is given out to employees without advising them of its confidentiality, 10 or of measures to be taken to prevent it being obtained by others, security efforts 11 may not be reasonable, even if the defendant actually obtains the information by 12 improper means. Buffets, Inc. v. Klinke, 73 F.3d at 968. A misappropriation may 13 sometimes be based on a duty to maintain secrecy. RCW 19.108.010(2)(b). A 14 confidential relationship imposes an obligation not to disclose a trade secret or use 15 it for other purposes. Pacific Aerospace & Elecs., Inc. v. Taylor, 295 F.Supp.2d 16 1205, 1212 (E.D. Wash. 2003) (applying Washington law). 11 17 18 19 20 11 See also the relevant Washington Pattern Jury Instruction: “Misappropriation” of a trade secret means acquisition, disclosure, or use of a trade secret without the express or implied consent of the owner of the trade secret by a person who: (1) Used improper means to acquire the trade secret; or ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 42 1 Here, even in the light most favorable to them, Plaintiffs have failed to 2 satisfy the last prong of the test: whether the owner has made reasonable attempts 3 to keep the information secret. In a related argument, Lansing contends that it has 4 no confidentiality obligations with respect to the lists. ECF No. 298 at 13. The 5 Court agrees. Plaintiffs argue that, while PC did surrender the customer files and 6 information to Lansing as part of the CMA (so they could be approved for credit 7 terms), such a surrender is not “voluntary.” ECF No. 350 at 10; ECF No. 347 at 8. 8 But they have not established that there was any attempt to limit Lansing’s use of 9 the lists. As Lansing contends, the CMA contains no reference to any 10 confidentiality obligations arising from it. ECF No. 298 at 13. Nor does there 11 appear to be another confidentiality, nondisclosure, or noncompetition agreement 12 that could be the source of Lansing’s obligation to maintain the secrecy of the lists. 13 Nor does there appear to be any indication marked on or appended to the lists 14 indicating their secrecy, such as a “confidential” stamp. Therefore, no evidence 15 supports a claim that Plaintiffs attempted to keep the purported trade secret 16 confidential; thus, Plaintiffs’ claim of misappropriation of trade secret fails. 17 18 19 20 (2) At the time of acquisition, disclosure, or use, knew or had reason to know that his or her knowledge of the trade secret was… acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use…. 6A Wash. Prac., Wash. Pattern Jury Instr. Civ. WPI 351.03 (6th ed.). ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 43 1 Accordingly, IT IS HEREBY ORDERED: 2 1. Defendant’s Motion for Summary Judgment (ECF No. 298) is 3 GRANTED in part and DENIED in part. Defendant’s requests for 4 summary judgment on Plaintiffs’ claims of unjust enrichment, tortious 5 interference with a business expectancy and misappropriation of trade 6 secrets are GRANTED; these claims are dismissed. Defendant’s request 7 for partial summary judgment that no fiduciary duties are owed to PC and 8 CWCP outside the CMA is GRANTED. Defendant’s request for partial 9 summary judgment on the issue of whether PC and CWCP can assert a 10 claim of breach of the covenant of good faith and fair dealing is 11 DENIED; that aspect is dependent upon whether or not PC and CWCP 12 are parties to the CMA. Defendant’s request for partial summary 13 judgment on Plaintiffs’ claim for alleged freight rebate damages is 14 DENIED. Defendant’s request for partial summary judgment on 15 Plaintiffs’ claim for partnership accounting is DENIED. 16 2. Plaintiff’s Amended Motion for Summary Judgment (ECF No. 340) is 17 GRANTED in part and DENIED in part. Plaintiffs’ request for 18 summary judgment on their claims of breach of contract are DENIED. 19 The Court has determined that Lansing and PGT formed a joint venture 20 through the CMA and fiduciary duties are owed between those two ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 44 1 entities and thus, the Court GRANTS partial summary judgment to 2 Plaintiff on this issue. There remains a genuine dispute of material fact 3 as to whether PC and CWCP are also parties to the CMA (joint venture), 4 therefore, Plaintiffs motion with respect to fiduciary duties, breach, and 5 damages as to them is DENIED. Plaintiff’s motion for partial summary 6 judgment on the issue of breach of the duty of good faith and fair dealing 7 is DENIED. Plaintiffs’ request for an accounting is GRANTED. 8 3. Because triable issues of fact remain on the legal claims for breach of 9 contract, breach of fiduciary duty, breach of the duty of good faith and 10 fair dealing, as well as the equitable claim for an accounting, the Court 11 hereby bifurcates the trial on the issues as follows. 12 a. The Court will conduct a bench trial for an accounting 13 commencing at the time now scheduled for the jury trial in the 14 Final Amended Scheduling Order (ECF No. 206): January 13, 15 2014 at 9:00 a.m., in Spokane, Washington. 16 b. The remaining, unexpired deadlines and the pretrial conference set 17 in the Final Amended Scheduling Order (ECF No. 206) are 18 VACATED. 19 c. Trial briefs for the accounting shall be filed on or before January 20 7, 2014. A courtesy copy of each party’s exhibits shall be provided ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 45 1 to the Court on or before January 7, 2014. All motions in limine 2 and objections relating to the accounting will be heard during the 3 bench trial. The parties are directed to appear with witnesses and 4 exhibits required to provide a complete accounting of the 5 relationship between Lansing and PGT under the CMA. 6 d. Lansing has the burden of proof of the account’s accuracy and 7 shall present its case first. See In re Tembreull’ Estate, 37 8 Wash.2d 93 (1950)) (“When a managing partner who keeps the 9 books is [sued] for settlement, he must sustain the burden of proof 10 11 12 13 14 15 of the correctness of the account…”). e. All remaining claims will be tried in a jury trial at a date to be determined, after consultation with the parties. The District Court Executive is hereby directed to enter this Order and provide copies to counsel. DATED December 20, 2013. 16 17 THOMAS O. RICE United States District Judge 18 19 20 ORDER DENYING IN PART THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT ~ 46
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