Pacific Dining LLC v. Quality Distributors

• Court: Superior Court of Guam
• Decided: January 11, 2013
• Docket: CV0559-12
• Status: Unknown

Opinion

IN THE SUPERIOR COURT OF GUAM 2

3 PACIFIC DINING, LLC dba ) 4 LONESTARSTEAKHOUSE ) 5 Plaintiff, ) ) DECISION AND ORDER 6 vs. ) (Motion for Summary Judgment) ) 7 QUALITY DISTRIBUTORS, ) 8 Defendants. ) ) 9 QUALITY DISTRIBUTORS, ) ) 10 ) II Counterclaim Plaintiff, ) ) I2 vs. ) ) 13 PACIFIC DINING, LLC dba ) I4 LONE STAR STEAKHOUSE, ) Counterclaim Defendant. I5

I6

I7 This matter was heard on the 14th day of November, 2012, before the HONORABLE I8 SENIOR PRO TEMPORE JUDGE ELIZABETH BARRETT on Defendant's (hereinafter I9 "Quality") Motion for Summary Judgment. Quality appeared and was represented by Attorney 20 Daniel J. Berman. Plaintiff (hereinafter "Lone Star") and was represented by Attorney Joyce 2I

22 C.H. Tang. Having considered the oral arguments and briefs, the Court GRANTS summary

23 judgment on the claim of Lone Star's Violation of Guam Deceptive Trade Practices Consumer 24 Protection Act claim, and DENIES Quality's Motion for Summary Judgment on the claims of 25 Breach of Contract, Breach of the Covenant of Good Faith and Fair Dealing, and 26 Misrepresentation. 27

Page I of I2 I. FACTUAL & PROCEDUAL BACKGROUND 2 This matter is an action to recover a balance due under a commercial contract between 3 the parties regarding ocean freight costs for goods shipped from the United States mainland to 4

Guam. From 1995 to 2010, Lone Star entered into Credit and Distribution agreements with 5

6 Quality, at which time Plaintiff/Counterclaim-Defendant Brian Artero (hereinafter "Artero")

7 executed a personal guaranty. These agreements were renewed annually and provided an 8 exclusivity clause in which obligated Lone Star and Artero to purchase its goods exclusively 9 from Quality. Until 2007, the agreements remained unaltered with the agreements providing 10

II Lone Star would be charged "FREIGHT RATE (BASED ON CURRENT SHIPPING RATES,

12 SUBJECT TO CHANGES." 2007 Distribution Agreement ~ 5. In 2008, Quality altered this 13 provision in their distribution Agreement to provide: 14 CONSOLIDATION, HANDLING AND FREIGHT RATE (BASED ON 15 CURRENT SHIPPING RATES, SUBJECT TO CHANGE ANYTIME): 16 FROZEN GOODS $0.27 PER POUND, GROSS WEIGHT 17 CHILLED GOODS $0.31 PER POUND, DRY GOODS $0.20 PER POUND, GROSS WEIGHT 18 SELLING PRICE: 19

20 A. FOB FROZEN ITEMS:

21 SELLING PRICE= FOB OAKLAND+ QD MARK-UP+ FREIGHT 22 (WHERE QD MARK-UP IS BASED FOB OAKLAND PRICE)

23 FOR EXAMPLE: 1 CASE CHICKEN BREASTS, 12lbs@ $1.50/lb. FOB OAKLAND 24 SELLING PRICE= [(1.50 x 12lbs.) X 1.13] + (12lbs. x 0.27) 25 =23.58 PER CASE

26 Without review, Artero signed the agreement on behalf of Lone Star, as it had always 27 done so. In May 2010, Artero decided to utilize another company for distribution services and 28

Page 2 of 12 expressed to Mr. George Lai, the President of Quality, that the contracts for Lone Star and 2 Chili's Guam would be moved to Luen Fung, a competitor of Quality. 3 In June 2010, Artero corresponded with the General Manager of Quality, Mr. Landon 4

5 Nadler (hereinafter "Nadler"), regarding close-out matters at which time Nadler informed

6 Artero of a change in the 2008 Distribution Agreement. Artero and Nadler met in June 2010,

7 where Nadler pointed out the specific provision at issue and Lone Star was being 8 "overcharged," as the agreement included additional costs deviating from their prior course of 9 dealing. Lone Star had the impression the agreement of the parties provided the cost of freight 10

11 as a "pass-through" cost based on the actual cost to ship the goods to Guam.

12 Lone Star stopped payment on the agreement on April30, 2012. On May 15,2012, Lone 13 Star filed suit with the following relevant causes of action: (1) breach of contract; (2) violation 14 of the Deceptive Trade Practices Act; (3) breach of the covenant of good faith and fair dealing; 15 and (4) misrepresentation. Lone Star also requested a demand for jury trial. 16

17 Quality filed its Answer and Counterclaim on June 14, 2012 for breach of contract and

18 damages. On July 16, 2012, Quality moved for summary judgment on all of Lone Star's causes 19 of actions. Lone Star filed its reply to Quality's counterclaims on August 7, 2012. 20 At the August 29, 2012 scheduling conference, Quality asserted that the Issue of 21

22 summary judgment had been fully briefed on a companion case, Quality Distributors v. Chili's

23 Guam, CV 498-11 (hereinafter "Chili's Guam matter"), and that they would have no objection 24 to Lone Star using the entire discovery from the Chili's Guam matter. Lone Star objected that 25 they were separate cases. The Court ordered that oral arguments on summary judgment would 26 take place on November 14, 2012. On September 28, 2012, Lone Star subsequently filed its 27

28 First Amended Complaint, providing the same causes of action, and filed its Opposition to

Page 3 of12 Quality Distributors Motion for Summary Judgment on November 5, 2012. Quality replied on 2 November 13, 2012. 3 II. DISCUSSION 4 Summary judgment is appropriate if the pleadings and discovery documents in a case, 5

6 along with affidavits, show "that there is no genuine issue as to any material fact and that the

7 moving party is entitled to judgment as a matter of law. 1" In order to defeat a motion for 8 summary judgment, a non-moving party must come forth with sufficient evidence that a 9 genuine issue of fact remains in dispute? It is accepted that "any doubts should be resolved in lO

11 favor of the non-moving party, and the movant's evidence must be considered in the light most

12 favorable to the non-moving party. 3" The moving party is not required to negate each element 13 of the non-moving party's case. Rather, the moving party satisfies and discharges its burden by 14 establishing the absence of evidence to support the non-moving party's case. 4 15 If a lack of evidence is established by the moving party, the non-moving party must 16

17 present specific facts showing there is a genuine issue for trial. The non-moving party may not

18 rely on conclusory allegations contained in the pleadings, but must present some significant 19 probative evidence tending to support the assertions. 5 20

1 24 GRCP 56(c); Attorney General v. Perez, 2008 Guam 161 12. See also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). "[T]he plain language of Rule 56(c) mandates the entry of summary judgment, after adequate 25 time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. 1" 26 However, there can be no "genuine issue of material fact" if there is a complete failure of proof concerning an essential element of a party's case, since such failure renders all other facts immaterial. 1 Moreover, "[t]actual 27 disputes that are irrelevant or unnecessary will not be counted." 2 ld at 16 1 13. 3 28 Id at 16 1 12. 4 Kim v. Hong, 1997 Guam II 16 (citing Celotex Corp. v. Catrett, 477 U.S. 317,325 (1986)). 5 Edwards v. Pacific Fin. Corp., 2000 Guam 27 17. Page 4 of 12 A genuine issue exists when there is "sufficient evidence" establishing a factual dispute 2 requiring resolution by a fact-finder. 6 The factual dispute must concern a "material fact. 7" 3 Whether a fact is material is determined by the governing substantive law; if the fact may affect 4 the outcome, it is material. 8 5

6 1. Breach of Contract 7 a. Lone Star's claim is not barred by the statute of limitations. 8 The Guam's Uniform Commercial Code (hereinafter "The Guam UCC") governs 9 contracts for the sale of goods. Title 13 G.C.A. §2725(1), provides the statute of limitations for 10

II bringing a breach of contract action. Specifically, it states, "an action for beach of any contract

12 for sale must be commenced within four years after the cause of action has accrued .. 9" The 13 aggrieved party's lack of knowledge of the breach is not a defense. 10 All actions must 14 commence within four years of the alleged breach. 15 Plaintiff is requesting damages "in having paid invoices based on inflated freight I6

17 charges in the amount of $254,115.00 (does not include 8 month period in 2002) and other

18 amounts to be proven at trial" among other forms of relief. It appears that Plaintiff is seeking 19 damages from 1995 to present. However, Plaintiff concedes that "a change to the freight 20 provision in the agreement" 11 occurred starting in 2008 and that they were put on notice in 21 June 2010. 22

25 6 Jd (citing T W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass 'n., 809 F.2d 626, 630 (9th Cir.l987)). 7 26 Id 8 Anderson v. Liberty Lobby, Inc., 477 U.S. 242,248 (1986). 9 27 See also Title 7 GCA § 11303, which speaks more generally to all contracts, providing time for commencing actions is within four (4) years of"an action upon any contract, obligation or liability founded upon an instrument in 28 writing." lo Id 11 Pltf.'s Complaint [With Request for Jury Trial] p. 3 1 10. Page 5 of 12 Plaintiff filed its Complaint on May 15, 2012. Any claims of alleged breach that 2 occurred prior to May 15, 2008 are time-barred. Given, the 2007 Distribution Agreement was 3 effective from June 1, 2007 to June 2008; Plaintiff may assert claims for any alleged breach 4 that resulted under the 2007 Agreement between May 15, 2008 to June 2008, 12 as well as any 5

6 alleged breach from the 2008 and 2009 Distribution Agreements.

7 b. There is a genuine issue as to material fact of whether a breach occurred. 8 Quality properly cites this Court to the holding of our Guam Supreme Court in Wasson 9 v. Berg, 2007 Guam 16, regarding contract interpretation. The Guam Supreme Court held: 10

II "When ... a contract dispute comes before the court on a motion for summary judgment, summary judgment is proper if the contract 12 language need only be construed and given legal effect. 13 " However, when the court must sit as a fact-finder and resort to the 13 parties' intent because of ambiguity arising from dis~uted relevant 14 evidence, the summary judgment is not appropriate. 4"

15 Guam Courts apply the traditional approach of "plain meaning" to contract 16 interpretation. If the contract in general or the clause in contention is unambiguous, plain 17 meaning is applied to the language contained in the four comers of the contract. 15 The threshold 18 requirement is to determine if ambiguity arises in the contract and if so, discretion remains with 19

20 the Court to consider parol evidence. 16 However, terms in a sale of goods contract may be

21 "explained or supplemented" by evidence of the parties course of dealing or usage of trade, or 22 by evidence of consistent additional terms unless the court finds the writing to have been 23

25 12 26 The date of the breach 13 27 Wasson v. Berg, 2007 Guam 16, 19 (citing Riley v. Pub. Sch. Syst., No 93-027, 1994 WL 111129 at *2 (N. Mar. Feb 9, 1994). 14 28 Id (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986); see also Barris Indus., Inc. 875 F.2d at 1450). 15 Wasson v. Berg, 2007 Guam 16 , 19 (2007). 16 Koch v. Spann, 193 Or. App. 608,613,92 P.3d 146, 149 (Or. Ct. App. 2004). Page 6 of 12 intended as a complete and exclusive statement of the terms of the agreement." 13 G.C.A. 2 §2202(a-b). 3 George Lai, owner of Quality Distributors (hereinafter "Lai"), and Artero were long 4 term business associates and personal friends having done business for over fourteen (14) years 5

6 under an agreement to ship goods for a company Artero managed, beginning in 1995, and then

7 acquired in 2002, called Pacific Dining, LLC dba Lone Star Steakhouse ("Lone Star"). 8 Lai presented to Lone Star agreements, which were represented as the "best deal" as to 9 freight, handling and shipping rates for franchise commodities. 17 Lone Star now argues that a "4 10

II % payment to a California Company, Cal Mar," also owned by Lai, is an additional cost, not

12 incorporated in the Lone Star agreements prior to 2008, which were never explained or 13 mentioned by Quality. Lone Star also argues that it understood it was paying only "pass through 14 rates," which meant to Lone Star that there were no additional costs imposed or incurred by 15 Lone Star once the goods reached the Port of Oakland as this was the practice under the 16

17 previous Lone Star agreements.

18 Quality admitted at the most recent hearing that Artero may not have understood that the 19 shipping rates consisted of such additional fees, yet argues that the contract is unambiguous, and 20 Lone Star bears the burden for its position because Artero failed to read the agreement. 21 The Court finds that there are genuine issues of material fact regarding the meaning and 22

23 understanding between the parties with regard to freight, handling, and shipping costs in the

24 2008 agreement, and that these terms are ambiguous in meaning between the contracting 25 parties. Whether the rates and terms were sufficiently clear must be viewed against the 26 understanding of the parties at the time they entered the agreement, and tested not only on the 27

28 17 Def. Counter-Claim Plft.'s Opp. to Quality Dist. Mtn. for Summary Judgment at pg.7.

Page 7 of 12 plain meaning of the document itself, but also the intent of the parties. While Lone Star does not 2 specifically argue ambiguity, it does argue that the contract deviates from their prior course of 3 dealing by Quality's failure to disclose the differential in costs between what the 2007 4 Agreement and the subsequent agreements thereafter. Intent of the parties is a genuine issue of 5

6 material fact, necessary to explain the ambiguity underlying the basis upon which the rates were

7 calculated and derived, particularly where one party assures the other that the rates remained 8 unchanged from their prior course of dealing. 9 2. Breach of the Covenant of Good Faith and Fair Dealing 10

II Covenant of Good Faith and Fair Dealing is a mechanism for contract interpretation to

12 ensure equity, requiring that every contract must be executed in good faith. The Guam UCC 13 defines food faith in the case of a merchant to mean "honesty in fact and the observance of 14 reasonable commercial standards. 18 The Supreme Court of Guam has applied the covenant of 15 good faith and fair dealing by asserting "[it] cannot impose substantive duties or limits on the 16

17 contracting parties beyond those incorporated in the specific terms of their agreement. 19"

18 In order to trigger this covenant, a contract must be formed. 20 In this matter, a contract 19 was formed in May 2008. The breach of the Covenant of Good Faith and Fair Dealing is 20 intrinsically tied to the same problems with breach of contract, and therefore, summary 21 judgment is not proper. 22

23 3. Misrepresentation 24 a. Lone Star's claim is not barred by the statute of limitations. 25

27 18 13 G.C.A. §2103(b). 19 28 Quijano v. Atkin-Kroll, Inc. 2008 WL 4862508 (Guam Terr.)(citing and 2008 Guam 14 Guz v. Bechtel Nat'/ Inc., 8 P.3d 1089, 1110 (Cal.2000)). 20 Id at p. 1. Page 8 of 12 For a misrepresentation claim, the claim must be brought within three (3) years and tha 2 the injury will not accrue "until the discovery by the aggrieved party of the facts constituting th 3 fraud or mistake. 21 " 4 Quality argues that a misrepresentation claim accrues when "the aggrieved part 5

6 discovers or should have discovered the misrepresentation and is barred three years after. 22 '

7 Quality argues Lone Star should have discovered their alleged breach due to the fact that Lon 8 Star should have read the 2008 Distribution Agreement prior to signing it. Quality further argue 9 the "open book" policy provision in the agreement gave Artero opportunity to have discovere 10

11 such alleged breach. 23

12 Lone Star responds by arguing Quality waived this argument by failing to assert a 9(b) 13 objection under the Guam Rules of Civil Procedure for Lone Star's failure to plead fraud with 14 sufficient particularity. Lone Star cites to a Colorado Appellate Court case, Silver v. Colorado 15 Ca. Ins. Co., where the court held "a party waives its right to object to another party's failure to 16

17 comply with the rule by neglecting to raise the objection in a responsive pleading or timely

19 The Court finds that Lone Star's waiver argument is hardly persuasive as the Colorado 20 Court used that standard in analyzing a Rule 9(b) objection, failure to plead with sufficient 21 particularity. That is not the issue currently before the Court. The issue is whether Lone Star 22

23 merely meets the statute of limitations in bringing its misrepresentation claim.

24 Artero discovered the misrepresentation in June 201 0 when Nadler informed Artero that 25 "there was an issue with the Lone Star and Chili's Distribution Agreements that may be of 26

27 21 7 G.C.A. §ll305(4). 22 28 Def. Quality Distributors' Mot. for Summary Judgment and Memorandum Brief. p. 7 , 2. 23 /d. at p. 8 ,1-2. 24 219 PJd 324, 328 (Colo. Ct. App. 2009). Page 9 of 12 interest" to him. 25 Fraud is never a fact that stares one directly in the face. It is uncovered most 2 often through inadvertent and unsuspecting means. Lone Star reasonably discovered the fraud 3 in June of 2010, and the claim for misrepresentation falls within the three year limitation. 4

b. There is a genuine issue as to material fact of whether misrepresentation 5 occurred. 6 In order to establish a claim of misrepresentation, four elements are required: (1) a 7

8 misrepresentation; (2) knowledge of falsity (or scienter); (3) intent to defraud to induce reliance; 6 9 (4) justifiable reliance; and ( 5) resulting in damages?

IO The basis of this cause of action is in the facts surrounding that Lone Star was induced to II enter into distribution agreements between 2008-2010 due to Quality's previous statements I2 representations that Lone Star was to be charged the actual (pass through) rates incurred by I3

I4 Quality in shipping the food products? 7 Determining if these representations caused fraud in the

I5 inducement must be subject to a reasonable inquiry into the meaning of newly added terms and I6 is an issue of fact especially in light of the declarations of Nadler informing Artero of additional I7 costs not previously included. Fraud is a most difficult fact to present in evidence, but it is I8 inevitably a matter of material fact that should not be short circuited by summary judgment. I9

20 The Court is satisfied that Artero and Lone Star have demonstrated that there are

2I genuine issue of material fact as to cause of fraud which should be presented to a finder of fact. 22 4. Violation of the Guam's Deceptive Trade Practices Consumer Protection Act is 23 Not Applicable and nearly contemptuous behavior on behalf of Lone Star. 24

26 25 27 Pltf. 's Complaint [With Request For a Jury Demand] page 12 ,60 and, p. 6 ,24. 26 Hem/ani v Flaherty, 2003 Guam 17,, 9 (citing Transpacific Export Co. v. Oka Towers Corp., 2000 Guam 3 28 ,23)("the tort of intentional misrepresentation has the same elements as fraud.") 27 First Amended Complaint [With Request for Jury Trial] p. 14 ,71.

Page IO of I2 In the Chili's Guam matter, the Court denied Artero's request to add any claims pursuant 2 to Guam's Deceptive Trade Practices Act (hereinafter "GDTPA"). 28 3 On July 12, 2012, the Court ordered Artero to strike portions of Chili's Guam First 4

Amended Complaint which referenced relief under GDTPA. 29 5

6 This is the third time Artero and his counsel have brought a GDTPA claim before this

7 Court. Artero's counsel was clearly put on notice that such a claim do not survive in light of the 8 facts in this case and "further noncompliance would not be so generously tolerated." GDTPA 9 does not apply to business consumers. Lonestar, Chili's Guam and Artero are business 10

II consumers.

12 Guam Rule of Civil Procedure (GRCP) Rule 12(f) permits a court to strike "any 13 redundant, immaterial and impertinent, or scandalous matter" from a pleading." This pattern of 14 non-compliance, straddling two matters, is nearly contemptuous. It is clear among all of the 15 parties, that the cases are related as Quality provided that they have "no objection to Lone Star 16

17 using the entire discovery from the Chili's Guam matter" at the August 29, 2012 status hearing.

18 The Court hereby GRANTS Quality's Motion for Summary Judgment on the 19 Consumer Protection Act claim as a matter of law. Any reference to GDTP A from Lonestar 20 and Artero hereafter will subject them to penalties (e.g. monetary sanctions and/or dismissal). 21 I I I 22

23 I I I

24 I I I 25 I I I 26

27 28 28 Order Granting in Part, and Denying in Part Defendant/Counterclaim Plaintiff's Motion for Leave to Amend its Answer and Counterclaim issued by the Court March 14,2012. 29 Decision and Order on Quality's Motion to Strike issued July 12,2012. Page II of 12 III. CONCLUSION 2

3 For all the reasons stated herein, the Court hereby GRANTS summary judgment on the

4 Consumer Protection claim as a matter of law, and DENIES summary judgment against all 5 other counterclaim causes of action. 6 SCHEDULING CONFERENCE is set for_FE_B_0_6_2_01_3__ at J·-?n p.m. 7

8 IT IS SO ORDERED this___IJ__ day of January 2013 9

II

HONO BLE ELIZABE BARRETT- ANDERSON 13 Senior Judge Pro Tempore, Superior Court of Guam 14

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