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Bright Harvest Sweet Potato Co., Inc. v. Hj Heinz Company, Lp

United States District Court, D. Idaho

March 9, 2015

BRIGHT HARVEST SWEET POTATO COMPANY, INC., Plaintiff,
v.
H.J. HEINZ COMPANY, L.P., Defendant.

MEMORANDUM DECISION AND ORDER

B. LYNN WINMILL, Chief District Judge.

INTRODUCTION

The Court has before it two motions in limine filed by Plaintiff Bright Harvest Sweet Potato Company, Inc. (Dkts. 87, 88) and two motions in limine filed by Defendant H.J. Heinz Company (Dkts. 69, 70). The Court will address each motion below. The Court recognizes other motions are pending, but will defer ruling until further briefing has been received and reviewed.

ANALYSIS

1. Plaintiff's Third Motion in Limine Re: Advice of Counsel.

Bright Harvest moves to exclude evidence that Heinz relied upon the advice of counsel when it stopped ordering sweet potato fries from Bright Harvest. (Dkt. 87). In support of its motion, Bright Harvest alleges Heinz refused to provide attorney-client communications between its employees and counsel who negotiated the Co-Pack Agreement ("CPA"). Given such refusal, Bright Harvest requests the Court preclude Heinz from using these communications to explain what Heinz intended or understood the CPA language to mean. Additionally, Bright Harvest moves to preclude Heinz from using attorney-client communications to show that Heinz's breach of the CPA did not constitute willful misconduct or gross negligence. Specifically, Heinz wants to introduce (1) testimony from Jonathan Bailey, (2) Exhibit 2019 and (3) Exhibit 2122.

Heinz seeks to show its intent when it entered into the CPA by introducing Exhibit 2019. That exhibit is a string of e-mails between Heinz's employees and legal counsel written prior to the signing of the CPA. Heinz asserts that it disclosed this exhibit to Bright Harvest when Tim Hensley forwarded the string of e-mails to Rex King. However, during Daniel Shaw's deposition, Heinz's counsel indicated that the e-mails were privileged communications and that Hensley did not waive that privilege when he improperly disclosed the e-mails. See Dep. of Daniel Shaw 46:25-49:7, Ex. D, Nicholson Decl., Dkt. 108.

Heinz now seeks to introduce the e-mails it previously claimed were privileged and elicit testimony of the related conversations with counsel. Heinz may not use the attorney-client privilege as both a sword and a shield. See In re Fresh and Process Potatoes Antitrust Litig., 2014 WL 1413676, at*5 (D. Idaho 2014). A party may not selectively reveal only those portions of the privileged communications most beneficial to its case. See id. Accordingly, the Court will grant this portion of Bright Harvest's motion and preclude Heinz from using attorney-client privileged communications to explain what it intended or understood the CPA language to mean.

Heinz also seeks to elicit testimony from Jonathan Bailey, who was involved in the decision to stop purchasing product from Bright Harvest in September 2012. Additionally, Heinz might introduce Exhibit 2122 to illustrate its legal counsel's position on Heinz's ability to stop purchasing product under the CPA. Exhibit 2122 is a string of e-mails between Heinz's employees discussing legal counsel's opinion of whether certain actions would breach the CPA.

During Hensley's deposition, Heinz instructed Hensley not to answer questions regarding legal advice he received about Heinz's ability to stop purchasing under the CPA. See Hensley Dep. at 218:1-219:11, Ex. D, Nicholson Decl., Dkt. 108. Likewise, during Kris Ketola's deposition, Heinz objected to conversations with in-house attorney Leslie Britton about Heinz's exit strategy. Ketola Dep. at 97:1-98:17, Ex. D, Nicholson Decl., Dkt. 108. Also, during his deposition, Bailey testified that he e-mailed Britton about whether Heinz could self-produce sweet potato fries. See Def.'s Opp'n at 3, Dkt. 98. During discovery, Heinz claimed privilege and did not produce these e-mails in discovery. See Nicholson Decl., Exh. E, Dkt. 108-1. Despite the fact that Heinz claimed privilege in these communications, it now seeks to introduce Exhibit 2122-a thread of e-mails between Bailey, Hensley, and Ketola discussing the privileged communications previously objected to by Heinz.

Heinz again attempts to use attorney-client privilege as both a shield and a sword. It objected to questions during depositions about exit strategy with legal counsel and now seeks to introduce such evidence at trial. Also, it asserted privilege as to e-mails with Britton but seeks to introduce the content of those e-mails through other means. Heinz cannot selectively choose to produce only certain privileged communications. Moreover, Heinz cannot deprive Bright Harvest of the opportunity to cross-examine deponents about evidence that Heinz intends to present at trial. See, e.g., In re Fresh and Process Potatoes Antitrust Litig., 2014 WL 1413676, at*5. Accordingly, the Court will grant Bright Harvest's motion and preclude Heinz from using attorney-client communications to show its state of mind when it exited the contract.

2. Defendant's First Motion in Limine Re: Damages.

a. Other Damages

Heinz asks the Court to preclude Bright Harvest from seeking damages relating to: 1) loss of goodwill with raw potato suppliers, (2) loss of goodwill with Arkansas Capital and Simmons First Bank, (3) loss of industry reputation, and (4) loss of critical skill work force. (Dkt. 69). Bright Harvest does not seek to recover these items at trial. Accordingly, the Court grants this request. The Court will not, however, exclude evidence simply because it may incidentally relate to one of these categories. Any disputes regarding such evidence will be resolved at sidebar during trial.

b. Evidence Relating to Lost Profits

Heinz seeks to preclude Bright Harvest from presenting evidence of "lost profits." (Dkt. 69). Heinz asserts that Section 16(e) of the CPA bars Bright Harvest from recovering lost profits. That section states:

Neither [Bright Harvest] nor Heinz shall be responsible or liable for the lost profits of the other party in case of a breach of this Agreement, unless the party breaching this Agreement has caused such lost profits due to its willful misconduct or gross negligence.

Am. Compl., Ex. A, Dkt. 11-1, at 11.

Bright Harvest contends that this language only applies when a party seeks lost profits in connection with a claim for indemnification. Heinz, in contrast, contends that the language applies to the entire agreement. It is for the Court to decide whether the terms of a contract are ambiguous as a matter of law. Carpenters Pension Trust Fund v. Underground Constr. Co., 31 F.3d 776, 778 (9th Cir. 1994). However, a disagreement about a contract's meaning does not necessarily render the contract ambiguous. Int'l Union of Bricklayers & Allied Craftsman Local No. 20 v. Martin Jaska, Inc., 752 F.2d 1401, 1406 (9th Cir. 1985). To be ambiguous, the terms of the contract must be susceptible to two different and reasonable interpretations-each being consistent with the language of the contract as a whole. Kennewick Irrigation Dist. v. United States, 880 F.2d 1018, 1032 (9th Cir. 1989) (citation omitted). "If a contract's terms are clear and unambiguous, the contract's meaning and legal effect are questions of law to be determined from the plain meaning of its own words." Bream v. Benscoter, 79 P.3d 723 (2003).

Although Section 16(e) is located within the indemnity section of the CPA, the only reasonable interpretation of this provision is that it applies to the entire CPA. The term "Agreement, " as used throughout the CPA, refers to the CPA as a whole. Section 16(e) explicitly states that neither party is responsible for lost profits "in case of a breach of this Agreement." Am. Compl., Ex. A, Dkt. 11-1, at 11. It is unreasonable to limit application of this language to only instances when a party seeks lost profits in connection with indemnification. Thus, Section 16(e) applies to both indemnification and non-indemnification provisions. Accordingly, to recover lost profits, the plain language of the Agreement requires that Bright Harvest show Heinz breached the Agreement and caused lost profits due to Heinz's willful misconduct or gross negligence.

c. Evidence Relating to Reasonable Overhead

Additionally, the parties disagree as to whether the term "profits" includes reasonable overhead. The Court's role in interpreting a contract is to effectuate the mutual intent of the contracting parties. Straub v. Smith, 175 P.3d 754, 758 (Idaho 2007). A court should first look to the four corners of the contract to ascertain the intent of the contracting parties. See id. If the contract's language is clear and ...


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