700 Fed.Appx. 852 (10th Cir. 2017), 16-1186, Rice’s Lucky Clover Honey, LLC v. Hawley

• Citation: 700 Fed.Appx. 852
• Opinion Judge: Robert E. Bacharach, Circuit Judge
• Party Name: RICE’S LUCKY CLOVER HONEY, LLC., a Colorado limited liability company, Plaintiff/Counterclaim Defendant-Appellant, v. Jamie HAWLEY, an individual Defendant/Counterclaimant-Appellee.
• Attorney: Michael Bohan, Troy R. Rackham, Fennemore Craig, Denver, CO, Ian R. Rainey, Lewis Brisbois Bisgaard & Smith, Denver, CO, for Plaintiff Counterclaim Defendant-Appellant Alex Michael Beltz, Katherine Anne Knowles, Messner & Reeves, Denver, CO, Bryan Hillary Burg, Siebman, Burg, Phillips & Smith, Pl...
• Judge Panel: Before BACHARACH, PHILLIPS, and McHUGH, Circuit Judges.
• Case Date: August 15, 2017
• Court: United States Courts of Appeals, U.S. Court of Appeals — Tenth Circuit

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700 Fed.Appx. 852 (10th Cir. 2017)

RICE’S LUCKY CLOVER HONEY, LLC., a Colorado limited liability company, Plaintiff/Counterclaim Defendant-Appellant,

v.

Jamie HAWLEY, an individual Defendant/Counterclaimant-Appellee.

No. 16-1186

United States Court of Appeals, Tenth Circuit

August 15, 2017

Editorial Note:

UNPUBLISHED OPINION (See Fed. Rule of Appellate Procedure 32.1. See also U.S.Ct. of App. 10th Cir. Rule 32.1.)

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(D.C. No. 1:14-CV-00402-RPM) (D. Colorado)

Michael Bohan, Troy R. Rackham, Fennemore Craig, Denver, CO, Ian R. Rainey, Lewis Brisbois Bisgaard & Smith, Denver, CO, for Plaintiff Counterclaim Defendant-Appellant

Alex Michael Beltz, Katherine Anne Knowles, Messner & Reeves, Denver, CO, Bryan Hillary Burg, Siebman, Burg, Phillips & Smith, Plano, TX, for Defendant Counterclaimant-Appellee

Before BACHARACH, PHILLIPS, and McHUGH, Circuit Judges.

ORDER AND JUDGMENT^[*]

Robert E. Bacharach, Circuit Judge

This appeal grew out of a confusing contract between a honey business (Rice’s Lucky Clover Honey, LLC) and its president (Mr. Jamie Hawley). Both parties sued one another for breach of contract, with Rice Honey also suing for breach of fiduciary duty.¹

The district court awarded judgment as a matter of law to Mr. Hawley on Rice Honey’s claims for breach of contract and breach of fiduciary duty. These rulings were correct.

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The district court also awarded judgment as a matter of law to Mr. Hawley on his counterclaim for breach of contract. In our view, the district court should have let the jury decide this claim. Accordingly, we reverse the judgment for Mr. Hawley on his counterclaim for breach of contract. In connection with this counterclaim, the district court also held as a matter of law that a liquidated-damages clause was enforceable. Under state law, the enforceability of this clause should have been left for the jury to decide.

I. Background

The parties negotiated over the contract terms and exchanged multiple drafts. Rice Honey wanted to hire Mr. Hawley for one year and see how the relationship worked before deciding whether to continue. Mr. Hawley wanted a term longer than one year.

Rice Honey proposed a contract with a one-year term that could be renewed for up to three years. Mr. Hawley changed the language without alerting Rice Honey to the change. Rice Honey signed, thinking that it was signing its latest version. Rice Honey was wrong; the written contract contained indicia reflecting the wishes of both parties: [Mr.] Hawley’s term of employment under this Agreement (such term of employment, as it may be extended or terminated, is herein referred to as the " Employment Term" ) shall be for a term commencing on the Effective Date and, unless terminated earlier as provided in Section 5 hereof, ending on the third anniversary of the Effective Date (the " Original Employment Term" ) one (1) year period ; unless, at least sixty (60) days prior to the end of the original employment term Rice [Honey] or [Mr.] Hawley has notified the other in writing that the Employment Term shall terminate at the end of that current term. If not so terminated, then the Employment Term shall be automatically extended, subject to earlier termination as provided in Section 5 hereof, for an additional two (2) year period (the " Additional Terms" ).

Appellant’s App’x, vol. V, at 846 (emphasis added). In one place, the contract stated that the employment term would end on " the third anniversary of the [e]ffective [d]ate." Id. In the same sentence, however, the contract stated that the employment term would be a " one (1) year period." Id.

Rice Honey soon became disenchanted with Mr. Hawley and notified him that the employment would not be renewed after one year. Mr. Hawley viewed this notification as a premature termination, theorizing that the base term was three years rather than one year. This disagreement led to the litigation.

After Rice Honey presented its trial evidence, Mr. Hawley moved for judgment as a matter of law on Rice Honey’s claims. The district court granted the motion, awarding judgment to Mr. Hawley not only on Rice Honey’s claims but also on the counterclaim. On the counterclaim, the court awarded Mr. Hawley $412,000 ($250,000 for liquidated damages and $162,000 for actual damages). In these rulings, the court held for the first time that even if the contract had only a one-year term, Rice Honey would be obligated to pay the amount specified in the contract for a termination without cause. Rice Honey appealed.

II. Standard of Review and the Applicable Substantive Law

We engage in de novo review of a district court’s grant of judgment as a matter of law, applying the same legal standards that governed in district court.

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Elm Ridge Expl. Co. v. Engle, 721 F.3d 1199, 1216 (10th Cir. 2013). Under these standards, we can uphold the district court’s ruling only if all of the evidence points one way and precludes a reasonable inference supporting Rice Honey. See id.

In this diversity case, we consider the evidence based on Colorado’s substantive law. See McKissick v. Yuen, 618 F.3d 1177, 1184 (10th Cir. 2010).² In defining Colorado’s substantive law, we are guided primarily by the opinions of the Colorado Supreme Court. Belnap v. Iasis Healthcare, 844 F.3d 1272, 1294 (10th Cir. 2017).

III. Rice Honey’s Claim for Breach of Contract

Rice Honey argues that its contract claim should have been submitted to the jury. For this argument, Rice Honey theorizes that • the jury could conclude that there was no meeting of the minds and

• the contract was ambiguous.

But these theories would not create a jury question on Rice Honey’s contract claim.

In district court, Rice Honey had based its contract claim on Mr. Hawley’s continued work for Liberty Institute, false representations to Walmart and Sam’s Club, and dishonest and disloyal conduct. But Rice Honey’s appellate arguments would not support these theories of liability. For example, in defending its contract claim, Rice Honey argues that the jury could have found that there was no meeting of the minds. But if there was no meeting of the minds, Rice Honey could not have prevailed on its contract claim. Similarly, Rice Honey argues that the alleged contract was ambiguous regarding the duration of the employment term and the effect of the " termination without cause" provision. But ambiguity of those terms would not have affected the viability of Rice Honey’s contract claim. In the absence of any other pertinent argument, we affirm the district court’s award of judgment as a matter of law to Mr. Hawley on Rice Honey’s contract claim.

IV. Rice Honey’s Claim for Breach of Fiduciary Duty

The district court also properly granted judgment as a matter of law to Mr. Hawley on Rice Honey’s claim for breach of fiduciary duty.

A. Rice Honey had to establish four elements.

On this claim, Rice Honey needed to show that (1) Mr. Hawley had acted as a fiduciary, (2) Mr. Hawley had breached a fiduciary duty, (3) Rice Honey had incurred damages, and (4) these damages had been caused by Mr. Hawley’s breach of a fiduciary duty. See Rupert v. Clayton Brokerage Co., 737 P.2d 1106, 1109-1110 (Colo. 1987) (en banc).

B. Rice Honey alleges two theories of breach of fiduciary duty.

Rice Honey alleges two theories of how Mr. Hawley breached a fiduciary duty: (1) by making material misrepresentations to Walmart and Sam’s Club, and (2) by continuing to work for Liberty after December 31, 2012.

C. The evidence did not support liability for breach of fiduciary duty based on Mr. Hawley’s alleged misrepresentations to Walmart and Sam’s Club.

The first theory involves Mr. Hawley’s alleged misrepresentations to Walmart and Sam’s Club. This theory fails as

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a matter of law based on the absence of any resulting damages.

The alleged misrepresentations appeared in a letter from Mr. Hawley to Walmart and Sam’s Club: " After an extensive review by an outside firm regarding our pricing and terms to existing customers in like classes of trade, it was brought to our attention that we are in violation of the federal law passed in 1936 to outlaw price discrimination." Appellant’s App’x, vol. V, at 898.³ Rice Honey presented evidence that this statement was false because there had not been an outside review of pricing. For the sake of argument, we may assume without deciding that Mr. Hawley acted as a fiduciary and that this misrepresentation breached a fiduciary duty to Rice Honey. Even with that assumption, this theory would fail as a matter of law because Rice Honey did not incur any damages.

Under Colorado law, Rice Honey must prove " the fact of damages or injury" with " a reasonable degree of persuasiveness." W. Cities Broad., Inc. v. Schueller, 849 P.2d 44, 48 (Colo. 1993) (en banc). This proof must go " beyond a mere possibility or speculation." Gibbons v. Ludlow, 304 P.3d 239, 246 (Colo. 2013) (en banc). Generalized opinions regarding lost sales are insufficient in the absence of an explanation. See Roberts v. Holland & Hart, 857 P.2d 492, 497 (Colo.App. 1993) (holding that an affiant’s projection of net profit was too speculative without an explanation for how the total had been calculated).

At trial, the vice-president of operations for Rice Honey testified that there had been no injury from Mr. Hawley’s misrepresentations: Q. Let’s move down a little further. Did he— here’s the next question. It says here on Item B, " Intentionally engaged in conduct which is demonstrably and materially injurious to Rice." Okay. Then it goes into various conditions and so forth like this, talking about fraud or dishonesty or theft against Rice, okay. And your testimony earlier, sir, had to do with...