NOT RECOMMENDED FOR PUBLICATION File Name: 24a0194n.06
No. 23-1726 FILED UNITED STATES COURT OF APPEALS May 01, 2024 FOR THE SIXTH CIRCUIT KELLY L. STEPHENS, Clerk ) CANADIAN SILICA INDUSTRIES, INC., ) Plaintiff-Appellee, ) ) GRAYMONT (MI) LLC, ) ON APPEAL FROM THE UNITED Intervening Plaintiff-Appellant, ) STATES DISTRICT COURT FOR ) THE WESTERN DISTRICT OF v. ) MICHIGAN ) SAND PRODUCTS CORPORATION, a ) Michigan Corporation, ) OPINION ) Defendant-Appellee. )
Before: BOGGS, KETHLEDGE, and MURPHY, Circuit Judges.
KETHLEDGE, Circuit Judge. Graymont (MI) LLC argues that a lease agreement between
Sand Products Corporation and Canadian Silica Industries, Inc. was de facto a sale agreement—
as to which Graymont had a right of first refusal. The district court disagreed and granted summary
judgment to Sand Products. We affirm.
I.
In describing the facts for purposes of summary judgment, we view the record in the light
most favorable to Graymont. See Sloat v. Hewlett-Packard Enter. Co., 18 F.4th 204, 207 (6th Cir.
2021). In 2014, Sand Products owned approximately 1,500 acres of land in Michigan’s Upper
Peninsula, on the shores of Lake Michigan, where it operated a sand mine. The property was
divided into four parcels: Parcel 1 was the northernmost parcel and was an inactive sand reserve; No. 23-1726, Canadian Silica Indus., Inc. v. Sand Prods. Corp.
Parcel 2 was the mine; Parcel 3 provided entry to a tunnel under U.S. Highway 2, which runs
parallel to the shoreline; and Parcel 4—the shoreline parcel—included a processing plant, a
conveyor system, a shipping terminal, and a dock. Parcels 3 and 4 together were called the “SPC
Facility”; all four parcels together were called the “SPC Property.”
In 2014, Sand Products signed a 30-year “Access Agreement” with Graymont, a limestone
company. That agreement granted Graymont a non-exclusive right to use the SPC Facility to ship
limestone only. The agreement also gave Graymont a right of first refusal: if Sand Products
obtained “a bona fide offer to purchase” either “some or all of” the SPC Facility or “all or
substantially all of” the SPC Property, Graymont would have up to 60 days to choose “to purchase
the offered property upon the same price, terms and conditions.”
Two years later, Sand Products offered to sell the industrial dock to Graymont for about
$13 million. Graymont declined. The next year, Sand Products began negotiations to sell its
sand-mining business to Canadian Silica. In 2017, the two companies signed a non-binding letter
of intent for Canadian Silica to purchase the sand-mining business. Sand Products sent that letter
to Graymont and offered it the same deal, but Graymont took no action.
Sand Products was careful not to trigger Graymont’s right of first refusal when structuring
the deal with Canadian Silica. The parties finalized the deal a few months later in 2017. As
relevant here, Canadian Silica purchased Parcel 2, received a zero-cost option to purchase part of
Parcel 1, and leased Parcels 3 and 4 for about $250,000 a year. That lease had an initial term of
50 years, with options for Canadian Silica to extend the lease for up to two additional terms of
25 years. The lease was non-exclusive and allowed Canadian Silica to use the property only to
“mine, process, and ship sand.” In addition, among other limitations, Canadian Silica’s rights
under the lease agreement were “subject and subordinate to the rights of Graymont[,]” and
-2- No. 23-1726, Canadian Silica Indus., Inc. v. Sand Prods. Corp.
Canadian Silica could make no changes to the property that would “adversely affect Graymont’s
rights.”
In January 2018, Sand Products, Canadian Silica, and Graymont met in Toronto to discuss
their shared use of the property. In 2019, Graymont approached Sand Products about buying the
dock; as a part of those negotiations, Sand Products gave Graymont a redacted copy of its lease
agreement with Canadian Silica. But again Graymont chose not to buy.
In 2020, Canadian Silica began processing and shipping limestone—not just sand—at the
SPC Facility. Sand Products objected and Canadian Silica sued Sand Products, alleging it
had breached the lease agreement. Graymont then intervened in the suit, relying upon Canadian
Silica’s allegations to claim that the lease agreement for the SPC Facility was actually a sale—
which would trigger Graymont’s right of first refusal. The district court held otherwise, and
granted summary judgment to Sand Products. The court also held a bench trial on Canadian
Silica’s claims, finding that, under the lease agreement, Canadian Silica could not use the property
for anything other than sand mining. Graymont then brought this appeal of the court’s
summary-judgment order.
II.
We review the district court’s grant of summary judgment de novo. Miles v. S. Cent. Hum.
Res. Agency, 946 F.3d 883, 887 (6th Cir. 2020). The parties agree that Michigan law applies here.
Under Michigan law, courts interpret contracts according to their “plain and ordinary
meaning.” In re Smith Tr., 745 N.W.2d 754, 758 (Mich. 2008). But Michigan courts interpret
rights of first refusal “narrowly.” LaRose Mkt., Inc. v. Sylvan Ctr., Inc., 530 N.W.2d 505, 507
(Mich. Ct. App. 1995).
-3- No. 23-1726, Canadian Silica Indus., Inc. v. Sand Prods. Corp.
Graymont’s argument in this appeal is that Canadian Silica’s lease agreement for the SPC
Facility was, de facto, a sale of Parcel 3 and 4—which would entitle Graymont to a right of first
refusal to purchase those parcels. Here is how the Access Agreement defined that right:
If SPC obtains a bona fide offer to purchase some or all of the SPC Facility, or all or substantially all of the SPC Property, that is acceptable to it, SPC will deliver to Graymont a written notice (i) stating its intention to transfer the SPC Facility or SPC Property, and (ii) including a copy of the bona fide offer for purchase. Graymont will have the right of first refusal (the “Right of First Refusal”) for a period of sixty (60) days after receiving the notice to elect to purchase the offered property upon the same price, terms and conditions of the sale as are contained in SPC’s notice. We set to one side the underlying premise of Graymont’s argument—that a lease agreement
could amount de facto to a purchase agreement—because in any event Graymont’s argument fails
on its own terms. Canadian Silica did not “purchase” the SPC Facility de facto any more than it
did de jure. For starters, ownership in fee simple brings the right to exclude others, Eastbrook
Homes, Inc. v. Treasury Dep’t, 820 N.W.2d 242, 249 (Mich. Ct. App. 2012); and here, under the
lease agreement, Canadian Silica could not exclude Graymont from using the SPC Facility for its
limestone business. To the contrary, the lease agreement expressly subordinated Canadian Silica’s
rights to Graymont’s rights under the Access Agreement. Moreover—as the district court found
after trial (and Graymont here does not dispute)—Canadian Silica could use the SPC Facility only
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NOT RECOMMENDED FOR PUBLICATION File Name: 24a0194n.06
No. 23-1726 FILED UNITED STATES COURT OF APPEALS May 01, 2024 FOR THE SIXTH CIRCUIT KELLY L. STEPHENS, Clerk ) CANADIAN SILICA INDUSTRIES, INC., ) Plaintiff-Appellee, ) ) GRAYMONT (MI) LLC, ) ON APPEAL FROM THE UNITED Intervening Plaintiff-Appellant, ) STATES DISTRICT COURT FOR ) THE WESTERN DISTRICT OF v. ) MICHIGAN ) SAND PRODUCTS CORPORATION, a ) Michigan Corporation, ) OPINION ) Defendant-Appellee. )
Before: BOGGS, KETHLEDGE, and MURPHY, Circuit Judges.
KETHLEDGE, Circuit Judge. Graymont (MI) LLC argues that a lease agreement between
Sand Products Corporation and Canadian Silica Industries, Inc. was de facto a sale agreement—
as to which Graymont had a right of first refusal. The district court disagreed and granted summary
judgment to Sand Products. We affirm.
I.
In describing the facts for purposes of summary judgment, we view the record in the light
most favorable to Graymont. See Sloat v. Hewlett-Packard Enter. Co., 18 F.4th 204, 207 (6th Cir.
2021). In 2014, Sand Products owned approximately 1,500 acres of land in Michigan’s Upper
Peninsula, on the shores of Lake Michigan, where it operated a sand mine. The property was
divided into four parcels: Parcel 1 was the northernmost parcel and was an inactive sand reserve; No. 23-1726, Canadian Silica Indus., Inc. v. Sand Prods. Corp.
Parcel 2 was the mine; Parcel 3 provided entry to a tunnel under U.S. Highway 2, which runs
parallel to the shoreline; and Parcel 4—the shoreline parcel—included a processing plant, a
conveyor system, a shipping terminal, and a dock. Parcels 3 and 4 together were called the “SPC
Facility”; all four parcels together were called the “SPC Property.”
In 2014, Sand Products signed a 30-year “Access Agreement” with Graymont, a limestone
company. That agreement granted Graymont a non-exclusive right to use the SPC Facility to ship
limestone only. The agreement also gave Graymont a right of first refusal: if Sand Products
obtained “a bona fide offer to purchase” either “some or all of” the SPC Facility or “all or
substantially all of” the SPC Property, Graymont would have up to 60 days to choose “to purchase
the offered property upon the same price, terms and conditions.”
Two years later, Sand Products offered to sell the industrial dock to Graymont for about
$13 million. Graymont declined. The next year, Sand Products began negotiations to sell its
sand-mining business to Canadian Silica. In 2017, the two companies signed a non-binding letter
of intent for Canadian Silica to purchase the sand-mining business. Sand Products sent that letter
to Graymont and offered it the same deal, but Graymont took no action.
Sand Products was careful not to trigger Graymont’s right of first refusal when structuring
the deal with Canadian Silica. The parties finalized the deal a few months later in 2017. As
relevant here, Canadian Silica purchased Parcel 2, received a zero-cost option to purchase part of
Parcel 1, and leased Parcels 3 and 4 for about $250,000 a year. That lease had an initial term of
50 years, with options for Canadian Silica to extend the lease for up to two additional terms of
25 years. The lease was non-exclusive and allowed Canadian Silica to use the property only to
“mine, process, and ship sand.” In addition, among other limitations, Canadian Silica’s rights
under the lease agreement were “subject and subordinate to the rights of Graymont[,]” and
-2- No. 23-1726, Canadian Silica Indus., Inc. v. Sand Prods. Corp.
Canadian Silica could make no changes to the property that would “adversely affect Graymont’s
rights.”
In January 2018, Sand Products, Canadian Silica, and Graymont met in Toronto to discuss
their shared use of the property. In 2019, Graymont approached Sand Products about buying the
dock; as a part of those negotiations, Sand Products gave Graymont a redacted copy of its lease
agreement with Canadian Silica. But again Graymont chose not to buy.
In 2020, Canadian Silica began processing and shipping limestone—not just sand—at the
SPC Facility. Sand Products objected and Canadian Silica sued Sand Products, alleging it
had breached the lease agreement. Graymont then intervened in the suit, relying upon Canadian
Silica’s allegations to claim that the lease agreement for the SPC Facility was actually a sale—
which would trigger Graymont’s right of first refusal. The district court held otherwise, and
granted summary judgment to Sand Products. The court also held a bench trial on Canadian
Silica’s claims, finding that, under the lease agreement, Canadian Silica could not use the property
for anything other than sand mining. Graymont then brought this appeal of the court’s
summary-judgment order.
II.
We review the district court’s grant of summary judgment de novo. Miles v. S. Cent. Hum.
Res. Agency, 946 F.3d 883, 887 (6th Cir. 2020). The parties agree that Michigan law applies here.
Under Michigan law, courts interpret contracts according to their “plain and ordinary
meaning.” In re Smith Tr., 745 N.W.2d 754, 758 (Mich. 2008). But Michigan courts interpret
rights of first refusal “narrowly.” LaRose Mkt., Inc. v. Sylvan Ctr., Inc., 530 N.W.2d 505, 507
(Mich. Ct. App. 1995).
-3- No. 23-1726, Canadian Silica Indus., Inc. v. Sand Prods. Corp.
Graymont’s argument in this appeal is that Canadian Silica’s lease agreement for the SPC
Facility was, de facto, a sale of Parcel 3 and 4—which would entitle Graymont to a right of first
refusal to purchase those parcels. Here is how the Access Agreement defined that right:
If SPC obtains a bona fide offer to purchase some or all of the SPC Facility, or all or substantially all of the SPC Property, that is acceptable to it, SPC will deliver to Graymont a written notice (i) stating its intention to transfer the SPC Facility or SPC Property, and (ii) including a copy of the bona fide offer for purchase. Graymont will have the right of first refusal (the “Right of First Refusal”) for a period of sixty (60) days after receiving the notice to elect to purchase the offered property upon the same price, terms and conditions of the sale as are contained in SPC’s notice. We set to one side the underlying premise of Graymont’s argument—that a lease agreement
could amount de facto to a purchase agreement—because in any event Graymont’s argument fails
on its own terms. Canadian Silica did not “purchase” the SPC Facility de facto any more than it
did de jure. For starters, ownership in fee simple brings the right to exclude others, Eastbrook
Homes, Inc. v. Treasury Dep’t, 820 N.W.2d 242, 249 (Mich. Ct. App. 2012); and here, under the
lease agreement, Canadian Silica could not exclude Graymont from using the SPC Facility for its
limestone business. To the contrary, the lease agreement expressly subordinated Canadian Silica’s
rights to Graymont’s rights under the Access Agreement. Moreover—as the district court found
after trial (and Graymont here does not dispute)—Canadian Silica could use the SPC Facility only
for its sand business. Canadian Silica’s rights to the Facility thus differed little from Graymont’s
own rights: both could use the facility for only a single purpose for a term of years, with the
difference being that Graymont’s lease ran for 30 years whereas Canadian Silica’s ran for 50-plus.
Canadian Silica no more purchased the Facility in fee simple than Graymont did.
Moreover, if Graymont had wanted its right of first refusal to apply to long-term leases
(like its own), it easily could have drafted language to that effect. See Commc’n Enhancement,
-4- No. 23-1726, Canadian Silica Indus., Inc. v. Sand Prods. Corp.
LLC v. T6 Unison Site Mgmt., LLC, 2012 WL 1890108, at *4 (Mich. Ct. App. May 22, 2012)
(holding that, if “the parties intended that the right of refusal provision be triggered on an offer to
convey any interest in the property, the contract could have been worded accordingly”). The
district court was right to hold that Canadian Silica leased the SPC Facility rather than purchased
it.
Nor does the Michigan Court of Appeals’ decision in LaRose provide any reason to
conclude otherwise. LaRose involved a purchase, specifically the purchase of a controlling interest
in a company’s stock. LaRose Mkt., 530 N.W.2d at 507. The court’s opinion says not a word
about construing leases as sales—much less leases in which the lessee’s rights in real property are
subordinated to those of a third party. And whereas LaRose tells us to interpret rights of first
refusal narrowly, Graymont would have us construe them more broadly than any Michigan court
ever has. Id. at 508. Indeed, Graymont cites not a single Michigan case where a lease was
construed as a sale.
Finally, the remedy Graymont now seeks is patently beyond the right afforded it under the
Access Agreement. That agreement expressly limits Graymont’s right of first refusal to “the same
price, terms and conditions” of a third-party agreement. But here Graymont apparently seeks some
kind of forced sale of the SPC Facility to Graymont, rather than to step into Canadian Silica’s
shoes in the lease agreement. Reply Br. at 18-21. Graymont’s appeal is meritless for this reason
as well.
The district court’s judgment is affirmed.
-5-