Unpublished Disposition, 865 F.2d 264 (9th Cir. 1988)

No. 87-4185.

United States Court of Appeals, Ninth Circuit.

Before NELSON and BEEZER, Circuit Judges, and ALFREDO C. MARQUEZ,^*  District Judge.

MEMORANDUM^** 

The First National Bank of Saint Paul ("Bank") filed suit against Intermountain Bancorporation ("IMBC") and James G. Edmiston alleging nonpayment of two demand promissory notes. The notes stated that Minnesota law would govern the notes and the rights and obligations of the parties to the notes. IMBC and Edmiston counterclaimed, alleging, inter alia, that the Bank had breached a covenant of good faith and fair dealing. The district court concluded that the counterclaim should be analyzed under Minnesota law. The court held that Minnesota law does not recognize a tort claim for breach of the covenant of good faith and fair dealing and, therefore, granted summary judgment in favor of the Bank. On appeal, IMBC and Edmiston contend that the court below erred by not applying Montana law, the law of the forum state. IMBC and Edmiston further allege that Montana law recognizes a tort action for breach of the covenant of good faith and fair dealing. In the alternative, IMBC and Edmiston contend that Minnesota law recognizes a contractual action for breach of the covenant of good faith and fair dealing. The record does not support a reversal of summary judgment on this ground. We affirm.

Because this is a diversity case brought before a federal court in the state of Montana, we must apply the conflict of law rules that the Montana courts would apply. Klaxon Co. v. Stentor Elec. Mfg. Co., Inc., 313 U.S. 487, 496 (1941); Fleury v. Harper & Row, Publishers, Inc., 698 F.2d 1022, 1025 (9th Cir.), cert. denied, 464 U.S. 846 (1983). By virtue of statute, Montana allows parties to a planned transaction to agree that a particular forum's law will govern the parties' rights and duties. Mont. Code Ann. Sec. 30-1-105 (1987). Here, both notes provided that Minnesota law would govern the notes and the rights and obligations of the parties to the notes.

The appellants contend that Montana law, not Minnesota law, should be applied to their claim for breach of the covenant of good faith and fair dealing because it sounds in tort. This argument is without merit. We have held that even if a claim sounds in tort, as long as the claim has its roots in the contractual relationship between the parties we should abide by the contract provision dictating that a particular forum's law will apply. Alghanim v. Boeing Co., 477 F.2d 143, 150 (9th Cir. 1973). Here, the claim for breach of the implied covenant of good faith and fair dealing is clearly rooted in the contractual relationship between the Bank and IMBC and Edmiston. Thus, the district court correctly decided that Minnesota law governs the appellants' claim for breach of the covenant of good faith and fair dealing.

There is no tort liability in Minnesota for breach of an implied duty of good faith in a contract. Wild v. Rarig, 302 Minn. 419, 234 N.W.2d 775, 789-90 (1975) (per curiam). There is, however, an applicable express contractual duty of good faith. Minn.Stat.Ann. Sec. 336.1-203 (1966). Uniform Commercial Code Sec. 1-203 requires good faith in all contracts governed by the U.C.C. These promissory notes are governed by U.C.C. Article 3. The record, however, does not sufficiently support appellants' claim so as to defeat the Bank's motion for summary judgment.

The appellants' allegations of the Bank's improper conduct were limited to their legal memorandum and the affidavit of James Edmiston. These statements were mere conclusory allegations unsupported by specific facts sufficient to defeat the motion for summary judgment. Angel v. Seattle-First National Bank, 653 F.2d 1293, 1299 (9th Cir. 1981). A party's mere assertion of a material fact in its legal memorandum does not create a genuine issue that will defeat a motion for summary judgment. S.A. Empresa de Viacao Aerea Rio Grandense v. Walter Kidde & Co., Inc., 690 F.2d 1235, 1238 (9th Cir. 1982). Therefore, summary judgment was properly granted to the Bank.

AFFIRMED.