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Silicon International Ore, LLC v. Monsanto Co.

Supreme Court of Idaho

November 27, 2013

SILICON INTERNATIONAL ORE, LLC, an Idaho limited liability company, Plaintiff-Appellant,
v.
MONSANTO COMPANY, a Delaware corporation, and WASHINGTON GROUP INTERNATIONAL, INC., an Ohio corporation, Defendants-Respondents.

2013 Opinion No. 126

Appeal from the District Court of the Sixth Judicial District of the State of Idaho, Caribou County. Hon. Mitchell W. Brown, District Judge.

The order judgment of the district court is affirmed. Attorney's fees on appeal and costs on appeal are awarded to Respondents.

Moffatt, Thomas, Barrett, Rock & Fields, Chtd, Pocatello, and Bennett, Tueller, Johnson & Deere, Salt Lake City, Utah, attorneys for Appellant Silicon International. Barry A. Johnson argued.

Racine, Olsen, Nye, Budge & Bailey, Chtd., Pocatello, attorneys for Respondent Monsanto Company. Randall C. Budge argued.

Hawley, Troxell, Ennis & Hawley, LLP, Boise, attorneys for Respondent Washington Group. Jason D. Scott argued.

W. JONES, Justice.

I. Nature of the Case

Plaintiff, Silicon International Ore, LLC ("SIO"), appeals the district court's entry of summary judgment in favor of defendants, Monsanto Company ("Monsanto") and Washington Group International, Inc. ("WGI"), in a lawsuit brought by SIO against Monsanto and WGI for alleged breach of contract, intentional interference with SIO's operations under said contract and breach of the implied covenant of good faith and fair dealing.

II. Factual and Procedural Background

Monsanto, through a wholly owned subsidiary, owns a quartzite mine near Soda Springs, Idaho. Monsanto and WGI contracted with each other for WGI to operate the quartzite mine. This agreement was memorialized in the Quarzite Agreement ("First Quarzite Agreement"), which expired at the end of 2002. A by-product of WGI's operations at the quarry was silica sand, which was too small for Monsanto to use in its manufacturing.

In early 2000, SIO contacted Monsanto about acquiring the silica sand. Both Monsanto and WGI met with SIO to discuss SIO's proposed business plan. SIO presented Monsanto with a proposed contract[1], but the proposed contract was never executed. However, on November 29, 2000, Monsanto and WGI executed an Addendum to the First Quarzite Agreement ("First Addendum"). The First Addendum authorized WGI to construct and operate a processing facility for silica sand at the quartzite mine and to pay Monsanto royalties of $13.00 per ton of processed silica sand that was sold by WGI to a third party. On December 1, 2000, SIO and WGI executed the Master Agreement, under which WGI agreed to provide "a portion of the silica sand within its control" to SIO; SIO agreed to pay for the construction of the processing facility for the silica sand; SIO agreed to pay WGI to dry, screen, and bag the silica sand; SIO agreed to pay WGI an additional $13.00 per ton for the processed silica sand; and WGI agreed to load the bagged silica sand onto SIO trucks. The Master Agreement was effective for five years, and it provided that title to the silica sand would pass to SIO upon delivery of the silica sand by WGI. Shortly thereafter, on December 19, 2000, Robert Sullivan, an officer of SIO who signed the Master Agreement, wrote a letter to Monsanto saying "we are pleased that the intent seems to be a long-term relationship."

Shortly before the First Quarzite Agreement was set to expire in September of 2001, Monsanto and WGI executed a second Quarzite Agreement ("Second Quarzite Agreement"). Because the Second Quarzite Agreement by its terms terminated the First Quarzite Agreement, on March 1, 2002, Monsanto and WGI executed a new addendum to the Second Quarzite Agreement ("Second Addendum"). The Second Addendum was almost identical to the First Addendum but provided that WGI would pay Monsanto between $3.00 and $13.00 per ton of silica sand based on several considerations and that the "[t]itle to the silica sand sold by SIO shall pass directly from [Monsanto] to SIO upon processing . . . subject to payment." The Second Addendum also provided that Monsanto would make available enough silica sand to allow SIO to sell up to 25, 000 tons of processed sand a year.

The Master Agreement between WGI and SIO expired on December 1, 2005. WGI continued providing silica sand to SIO for two additional years.[2] On December 28, 2007, WGI notified SIO that it would no longer be providing SIO with silica sand after the end of the year. After discussions with SIO, SIO was permitted to continue processing and bagging sand through April 29, 2008. SIO dismantled its operations in the quarry and removed its building and equipment.

On December 31, 2009, SIO sued Monsanto and WGI for damages for violating and interfering with an alleged verbal agreement to continue processing silica sand. SIO alleged that it and Monsanto entered into a verbal agreement separate and apart from the Master Agreement for the sale of silica sand. SIO alleged that the terms of the verbal agreement were as follows: (1) Monsanto agreed to furnish SIO with certain agreed-upon quantities of silica sand if processed in a safe and environmentally friendly manner; (2) SIO could sell the processed sand to third parties, but Monsanto reserved the right to limit the markets in which SIO could sell the sand; (3) SIO could extract sand from the quarry; and (4) the agreement would remain in full force so long as mutually beneficial to both SIO and Monsanto. SIO further alleged that it and Monsanto understood the agreement to be mutually beneficial so long as (1) SIO conformed to Monsanto's environmental, safety, and control regulations; (2) SIO paid Monsanto an agreed-upon royalty; and (3) SIO permitted Monsanto to control the markets in which SIO could sell the sand. So long as these requirements were met, SIO alleged the verbal agreement provided that Monsanto would continue to provide sand from the quarry.

Against Monsanto, SIO asserted breach of the alleged verbal agreement, breach of the implied covenant of good faith and fair dealing, equitable estoppel, and quasi-estoppel. Monsanto denied SIO's claims and asserted the statute of frauds, I.C. §28-2-201(1), as an affirmative defense. Against WGI, SIO claimed that WGI breached the covenant of good faith and fair dealing implied into the Master Agreement, and SIO alleged that WGI tortiously interfered with the alleged verbal agreement between SIO and Monsanto.

On January 25, 2011, Monsanto and WGI filed motions for summary judgment. Monsanto argued that the verbal agreement was too indefinite and uncertain to constitute a contract, that the verbal agreement was void under the statute of frauds, and that SIO could not prove damages. WGI argued that the verbal agreement was too indefinite and uncertain to constitute a contract, that SIO could not prove damages, and that the verbal agreement is contrary to the express terms of the Master Agreement.

In its opposition to the motions for summary judgment, SIO offered an email correspondence between its employee, Robert Sullivan, and Mitchell Hart, a former employee of Monsanto, from March 13, 2008, ("Hart email"). In that email, Hart, who was SIO's contact at Monsanto at the time the alleged verbal agreement was formed but no longer works at Monsanto, affirmed that the following was a fair statement of the discussions between SIO and Monsanto: "we both concur that an agreement exists between Monsanto and [SIO] in that Monsanto represented to us that we would be allowed to continue to operate as long as it was mutually beneficial for us to do so." Monsanto challenged the statement as inadmissible hearsay and sought to strike the email. SIO argued that the statement was not hearsay but was admissible under the residual exception to the hearsay rule provided by I.R.E. 803(24).

On September 21, 2011, the district court entered its Memorandum Decision and Order, which granted Monsanto's motion to strike the Hart email as inadmissible hearsay. The district court also granted Monsanto summary judgment on the basis that the alleged verbal agreement was unenforceable under the statute of frauds and was vague, indefinite, or uncertain with respect to its essential terms. The district court granted WGI summary judgment on SIO's claims against it on the basis that there was no evidence that WGI knew of the separate oral agreement between SIO and Monsanto, and the district court found that SIO failed to support its claims for damages on the intentional interference with contract claim. Final Judgment was entered on October 7, 2011. SIO appealed on November 18, 2011.

III. Issues on Appeal

1. Whether the district court abused its discretion by excluding the Hart email from summary judgment consideration.
2. Whether the district court erred when it granted summary judgment in favor of Monsanto on SIO's claims for breach of contract, breach of the implied covenant of good faith and fair dealing, equitable estoppel, and quasi-estoppel.
3. Whether the district court erred when it granted summary judgment in favor of WGI on SIO's claims for tortious interference with a contractual relationship and breach of the implied covenant of good faith and fair dealing.
4. Whether Monsanto and WGI are entitled to attorney fees on appeal.

IV. Standard of Review

An appeal from summary judgment is reviewed under the same standard a district court uses when granting a motion for summary judgment. A & J Const. Co., Inc. v. Wood, 141 Idaho 682, 684, 116 P.3d 12, 14 (2005). Under Rule 56(c) of the Idaho Rules of Civil Procedure, summary judgment is proper if "the pleadings, depositions, and admissions 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 a judgment as a matter of law." If the evidence reveals no disputed issues of material fact, then summary judgment should be granted. Smith v. Meridian Joint Sch. Dist. No. 2, 128 Idaho 714, 718–19, 918 P.2d 583, 587–88 (1996). In making this determination, "all disputed facts are liberally construed in favor of the non-moving party." McCoy v. Lyons, 120 Idaho 765, 769, 820 P.2d 360, 364 (1991). Summary judgment proceedings are decided on the basis of admissible evidence. Heinze v. Bauer, 145 Idaho 232, 236, 178 P.3d 597, 601 (2008). "The moving party is entitled to judgment when the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to that party's case . . . ." Badell v. Beeks, 115 Idaho 101, 102, 765 P.2d 126, 127 (1988).

Appellate courts examine issues of evidentiary exclusion under the abuse of discretion standard. Slack v. Kelleher, 140 Idaho 916, 924, 104 P.2d 958, 966 (2004). "A trial court does not abuse its discretion if it (1) recognizes the issue as one of discretion, (2) acts within the boundaries of its discretion and applies the applicable legal standards, and (3) reaches the decision through an exercise of reason." Johannsen v. Utterbeck, 146 Idaho 423, 429, 196 P.3d 341, 347 (2008). "Error may not be predicated upon a ruling which admits or excludes evidence unless a substantial right of the party is affected." I.R.E. 103(a).

V. Analysis

A. The district court did not abuse its discretion when it granted the motion to strike the Hart email as inadmissible hearsay.

SIO argues that the district court erred when it excluded the March 14, 2008, email from Hart on the basis that it was inadmissible hearsay. SIO contends that the Hart email is admissible pursuant to the residual exception to the hearsay rule, I.R.E. 803(24). SIO contends that the evidence should be admissible pursuant to this exception because there is no dispute that the emails are true and correct emails. The emails, according to ...


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