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Apex Abrasives, Inc. v. WGI Heavy Minerals, Inc.

United States District Court, D. Montana, Butte Division

July 24, 2019

APEX ABRASIVES, INC., Plaintiff,
v.
WGI HEAVY MINERALS, INC., WGI HEAVY MINERALS, LLC, and DOE BUSINESS ENTITIES 1-3, inclusive, Defendants.

          OPINION AND ORDER

          DONALD W, MOLLOY, DISTRICT JUDGE UNITED SUITES DISTRICT COURT

         This case arises out of a dispute over the production and sale of commercial-grade garnet. Plaintiff Apex Abrasives, Inc. (“Apex”) alleges that following its construction of a garnet processing facility in Glen, Montana, it was forced to cease operations and liquidate its inventory because Defendants WGI Heavy Minerals, Inc. and WGI Heavy Minerals, LLC (collectively “WGI”) violated the parties' purchase agreement. Apex alleges constructive fraud/inducement (Count 1); negligent misrepresentation (Count 2); breach of contract (Count 3); and breach of the implied covenant of good faith and fair dealing (Count 4), requesting both compensatory and punitive damages. (Third Amend. Compl., Doc. 207.) WGI seeks summary judgment on Counts 1, 2, and 4, as well as on Apex's punitive damages claim. (Doc. 221.) WGI further seeks to limit certain “loss” and “lost profits” evidence at trial. (Doc. 224.) WGI's partial motion for summary judgment is granted in part and denied in part. WGI's motion in limine is denied.

         Factual Background

         The facts are largely undisputed, (see Docs. 223, 230; Sched. Order, Doc. 205 at ¶ 3), but to the extent disputes exist, the record is viewed in the light most favorable to Apex, Tolan v. Cotton, 134 S.Ct. 1861, 1866 (2014) (per curiam).

         Apex, a Montana corporation, owns a garnet processing facility near Glen, Montana. (Doc. 205 at ¶ 3(a).) WGI is an Idaho corporation, (id. at ¶ 3(b)), that is in the business of mining and marketing garnets for industrial uses, (Doc. 230 at ¶ 2). In 2005, the parties first met to explore potential business arrangements related to the production and sale of Apex garnets. (Doc. 205 at ¶ 3(c).) In October 2005, WGI produced a “Letter of Intent” in which WGI expressed an interest in an exclusive business relationship with Apex. (Ex. B, Doc. 231-2.) Apex declined, but the parties continued to communicate and WGI consistently touted its ability to market and sell garnet and, in 2006, proposed that Apex build a garnet facility. (Ex. F, Doc. 231-6 at 2.)

         Following protracted negotiations, the parties entered into a Marketing and Sales Agreement (“Agreement”) on November 18, 2009. (Doc. 230 at ¶¶ 3-8.) The Agreement was for a three-year term stating, inter alia, “Apex agrees to sell to WGI, and WGI agrees to purchase from Apex, a minimum of 5000 short Tons of Garnet in Year 1, and 10, 000 short Tons per calendar year thereafter during the Term.” (Agree. ¶ 3.1, Ex. S, Doc. 231-20).[1] WGI was given the option to purchase garnet in excess of the minimum quantities. (Id.) The specific size and quality of the garnet was identified in Attachment A to the Agreement, which provided for #80 waterjet grade. (See Id. at 8.)

         The Agreement's termination provision allowed either party to terminate without penalty upon 180-days' written notice or within 30 days of an uncorrected breach by the other party. (Id. at ¶¶ 5, 6.) The Agreement defined breach as:

a) Any failure to perform the terms and conditions of this Agreement;
b) Failure by Apex to supply minimum quantities of specified individual grades of garnet, as shown in this Agreement;
c) Failure of Apex to make regular and sufficient shipments of garnet;
d) Failure of WGI to purchase the minimum quantities of garnet called for in this Agreement; [or]
e) Failure of WGI to pay for product.

(Id. at ¶ 6.1.)

         In Year 1 of the Agreement (2010), Apex produced approximately 600 tons of #80 garnet based on purchase orders it received from WGI.[2] (Doc. 230 at ¶ 10.) On September 2, 2011, Apex sent WGI a Notice of Breach, stating that WGI had not complied with the requirements of the Agreement. (Id. at ¶ 11; Doc. 205 at ¶ 3(e).) On October 5, Apex gave WGI written notice that Apex was terminating the Agreement due to the breach. (Doc. 230 at ¶ 12.) WGI purchased no garnet from Apex in Year 3 (2012), or in any year thereafter. (Doc. 205 at ¶ 3(f).) Apex is seeking to recover from WGI approximately $8.4 to $18.1 million for loss of sales over a 15-year period of production based on known reserves at volumes and rates provided for in the Agreement. (Doc. 230 at ¶ 14.)

         Procedural Background

         This action was originally filed in state court and removed to this Court in June 2014. (Doc. 1.) Following numerous pretrial motions and conferences, (see Docs. 31, 35, 37, 96, 113, 116, 118, 120), a jury trial was held before Judge Haddon in December 2016, (see Min. Entries, Docs. 141, 142, 144, 145, 151, 152). Prior to the presentation of WGI's case, Judge Haddon granted WGI's Rule 50 motion, (see Docs. 152, 157), and judgment was entered in favor of WGI, (Doc. 156). Apex appealed. (Doc. 165.) In June 2018, the Ninth Circuit reversed and remanded in an unpublished memorandum disposition.[3] (Doc. 192.) The Ninth Circuit held that the Agreement unambiguously mandated Apex to “sell” and WGI to “purchase” 25, 000 tons of garnet over the three-year term and that any modification ...


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