OK Sand and Gravel, Inc. v. Martin Marietta Corp.

• Decision Date: 28 February 1992
• Docket Number: No. IP 90-1051-C.,IP 90-1051-C.
• Citation: 786 F. Supp. 1442
• Parties: O.K. SAND AND GRAVEL, INC., an Indiana corporation, Plaintiff, v. MARTIN MARIETTA CORPORATION, a Maryland corporation, Defendant.
• Court: U.S. District Court — Southern District of Indiana

786 F. Supp. 1442

O.K. SAND AND GRAVEL, INC., an Indiana corporation, Plaintiff, v. MARTIN MARIETTA CORPORATION, a Maryland corporation, Defendant.

No. IP 90-1051-C.

United States District Court, S.D. Indiana, Indianapolis Division.

February 28, 1992.

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R. James George, Jr., John M. Harmon, F. Michael Lawrence, Graves, Dougherty, Hearon & Moody, Austin, Tex., for plaintiff.

G. Thomas Blankenship, Blankenship & Robbins, Donald E. Knebel, Lynn C. Tyler, Barnes & Thornburg, Indianapolis, Ind., for defendant.

BARKER, District Judge.

This matter is before the court to address Martin Marietta's motion to dismiss. Upon review of the record, this court GRANTS, in part, and DENIES, in part, that motion.

I. Background

O.K. Sand and Gravel produces (not surprisingly) sand and gravel. The Martin Marietta Corporation sells (and produces) sand and gravel, as well as crushed stone and other aggregate-type material. In April 1984, the two companies signed a document titled "Letter of Intent Sales Agreement." The intent agreement provided in part:

Martin will solicit orders for sand and gravel with a range of sizes, specifications and quantities agreed upon by O.K., and at prices mutually agreeable to both parties.

In November 1984, O.K. Sand and Martin Marietta executed the Sales Agency Agreement, in which O.K. Sand formally appointed Martin Marietta as its "exclusive sales agent." The Sales Agency Agreement provided in part:

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties agree as follows:

1. Appointment as Exclusive Agent. O.K. appoints Martin as its exclusive sales agent to sell all aggregates, materials, products or goods excavated, produced or held by O.K. at the Facility.

2. Duties of Martin. Martin shall solicit all orders for the Products at the set "List Prices" and prepare all arrangements for the delivery of the Products including truck procurement, scheduling and expediting.

3. Duties of O.K. O.K. shall keep a minimum inventory of Products at the Facility throughout the term of this Agreement, or any extensions thereof, ... and, furthermore, shall excavate and produce Products at such frequency and in such volume to supply the reasonable requirements of its customers.

The Sales Agency Agreement automatically renewed year to year, absent a timely (90 day advance) written notice of cancellation.

In 1984, when Martin Marietta began selling O.K. Sand's products, Martin Marietta sent O.K. Sand (at the end of every month) a monthly remittance check and a general report of how much total sand and gravel it had sold that month. Martin Marietta did not, however, disclose to O.K. Sand how much it was charging for O.K. Sand products. In 1985, O.K. Sand began asking Martin Marietta how much it was charging for O.K. Sand products, but Martin Marietta responded by either evading the question or telling O.K. Sand "it was none of their business what prices Martin Marietta obtained for O.K.'s products." O.K. Sand's First Amended Complaint, ¶ 20.

In 1986, Martin Marietta initiated the practice of changing the set "List Prices" for O.K. Sand products without O.K. Sand's approval, notifying O.K. Sand of the price changes after the fact "usually annually, by telephone and/or by written communications ... although some of the Products were changed by Martin Marietta ... more often than annually." Id. at ¶ 15. However, in 1987, apparently in response to O.K. Sand's continued requests for price information, Martin Marietta began providing O.K. Sand monthly "Analysis by Product" documents in 1987. These documents listed the average prices Martin Marietta had charged for O.K. Sand's products in the previous month, but the documents did not disclose what specific prices Martin Marietta had charged individual customers. In January 1989, O.K. Sand notified Martin Marietta that it wanted to cancel the agency agreement.

Approximately four months later, O.K. Sand filed a complaint (as amended) against Martin Marietta claiming breach of contract, fraud, conversion, and breach of fiduciary duty.¹ In sum, O.K. Sand alleged that Martin Marietta violated the agency agreement by not disclosing what prices it was charging, by selling O.K. Sand product at prices below the mutually agreed-upon "List Prices," and by secretly purchasing O.K. Sand's products for itself (after which it mixed-in its own product and resold the sand-mix at a higher price.) In response, Martin Marietta filed a counterclaim alleging that it was O.K. Sand who breached the Sales Agency Agreement and that O.K. Sand had violated the Sherman and Clayton Acts. See 15 U.S.C. §§ 1, 2, and 14.

II. Discussion

Waiver, Estoppel, Ratification and Acquiescence

Martin Marietta moves to dismiss all claims on the basis that since O.K. Sand knew that Martin Marietta had breached one fiduciary duty (by failing to disclose pricing information), yet allowed the contract to renew year after year, O.K. Sand acquiesced, ratified, waived, and is equitably estopped from asserting any breach of fiduciary duty claim.

Waiver² is an intentional relinquishment of a known right. Ogle v. Wright, 172 Ind.App. 309, 360 N.E.2d 240 (1977); Lafayette Beverage Distributors, Inc. v. Anheuser-Busch, Inc., 545 F.Supp. 1137, 1149 (N.D.Ind.1982). Mere silence, acquiescence, or inactivity does not constitute waiver unless the waiving party had a duty to speak or act. Lafayette Beverage Distributors, Inc. v. Anheuser-Busch, Inc., 545 F.Supp. at 1149.

Estoppel, as compared to waiver, focuses not on intent, but on the effect of one's conduct. Saverslak v. Davis-Cleaver Produce Co., 606 F.2d 208, 213 (7th Cir.1979), cert. denied, 444 U.S. 1078, 100 S.Ct. 1029, 62 L.Ed.2d 762 (1980). Estoppel arises when one's conduct (not manifested intent) misleads another to believe that a right will not be enforced and causes the other party to act to his detriment. Id. Indiana follows the general rule that "silence and acquiescence,³ when good faith requires a person to speak or act, will satisfy the first element of equitable estoppel." Warner v. Riddell Nat. Bank, 482 N.E.2d 772, 775 (Ind.Ct.App.1985).⁴ "For silence to give rise to equitable estoppel, there must not only be an opportunity to speak, but an imperative duty to do so." Erie-Haven, Inc. v. First Church of Christ, 155 Ind.App. 283, 292 N.E.2d 837, 842 (1973).

Martin Marietta's claims of waiver and estoppel both rest on the premise that once O.K. Sand discovered that Martin Marietta was refusing to provide pricing information, O.K. Sand had an affirmative duty to speak or act to mitigate its losses. However, Martin Marietta has glossed-over the fact that once O.K. Sand recognized that Martin Marietta was not disclosing pricing information, O.K. Sand insisted that Martin Marietta comply with the agency agreement and provide that information. (Recall that when confronted with this request, Martin Marietta replied that this information "was none of O.K. Sand's business.") The facts as alleged in the complaint do not demonstrate that O.K. Sand waived its right to be informed of pricing information, nor would O.K. Sand's repeated requests for pricing information reasonably lead Martin Marietta to conclude that O.K. Sand would be estopped from pursuing its rights under the agency agreement.

Even if O.K. Sand had not acted or spoken in the face of Martin Marietta's initial breach, O.K. Sand had no duty to mitigate damages based on Martin Marietta's failure to provide pricing information. O.K. Sand knew that Martin Marietta was not providing pricing information as early as 1984, but that fact alone would not necessarily lead O.K. Sand to the conclusion that Martin Marietta was breaching other fiduciary duties.⁵ O.K. Sand had no actual or constructive knowledge that Martin Marietta was committing fraud or quoting and charging unauthorized prices, nor is it apparent from the complaint that O.K. Sand was negligent in acquiring such knowledge. See Hammond v. Welsh, 224 Ind. 349, 67 N.E.2d 390, 393 (1946) ("To have estoppel by acquiescence the person to be estopped must have had knowledge of the facts."); Lafayette v. Keen, 113 Ind. App. 552, 48 N.E.2d 63, 70 (1943). O.K. Sand tried (repeatedly) to get pricing information from Martin Marietta, and Martin Marietta cannot rely on its refusal to provide that information to establish estoppel or waiver. Rushville Nat. Bank v. State Life Ins. Co., 210 Ind. 492, 1 N.E.2d 445, 449 (1936).

Statute of Limitations

Martin Marietta claims that the nature of the harm alleged in Counts I-V is breach of fiduciary duty, and that those breaches occurred more than two years prior to the filing of this action. Martin Marietta thus moves to dismiss Counts I-V claiming that breach of fiduciary duty claims—like breach of trust, breach of bailment, and legal malpractice claims—are subject to Indiana's two-year statute of limitations for "injuries to personal property." See IND.CODE § 34-1-2-2(1); see also Whitehouse v. Quinn, 477 N.E.2d 270 (Ind.1985), Mack v. American Fletcher Nat. Bank & Trust Co., 510 N.E.2d 725 (Ind.Ct.App. 1987); French v. Hickman Moving & Storage, 400 N.E.2d 1384 (Ind.Ct.App.1980).

O.K. Sand responds by asserting, "O.K. seeks damages for breach of contract under each of Counts I-IV. Thus, for limitations purposes, these actions are governed by the ten-year Indiana statute of limitations applicable to written contracts."⁶ O.K. Sand further asserts that Count V alleges fraud and is subject to Indiana's six-year statute of limitations for fraud actions.

In Indiana, the applicable statute of limitations "should be ascertained by reference to the nature of the harm alleged rather than by reference to theories of recovery. In other words, the applicable statute of limitations is ascertained by identifying the nature or substance of the cause of action and not by the form of the pleadings." Whitehouse v. Quinn, 477 N.E.2d 270, 273...