Linde, LLC v. Valley Protein, LLC

LINDE, LLC, Plaintiff, v. VALLEY PROTEIN, LLC, Defendant.

VALLEY PROTEIN, LLC, Counter-claimant, v. LINDE, LLC, Counter-defendant.

No. 1:16-cv-00527-DAD-EPG

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA

July 11, 2019

ORDER GRANTING IN PART PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT

(Doc. No. 52)

This matter is before the court on plaintiff and counter-defendant Linde, LLC's ("Linde") motion for summary judgment, or in the alternative for partial summary judgment, filed on August 7, 2018. (Doc. No. 52.) Defendant and counter-claimant Valley Protein, LLC ("Valley Protein") filed an opposition on September 4, 2018. (Doc. No. 53.) Linde filed its reply on September 11, 2018. (Doc. No. 58.) On September 18, 2018, the court held a hearing on the motion at which attorney Adam Scott Hamburg appeared for Linde, and attorney Russell K. Ryan appeared for Valley Protein. Having considered the parties' briefing and heard from counsel, the court will grant Linde's motion for summary judgment in part.

BACKGROUND

The facts of this case are as follows, and are undisputed except where noted. On January 27, 2011, Linde and Valley Protein entered into a Product Supply Agreement (the "2011 Agreement"), in which Valley Protein agreed to purchase from Linde its requirements for CO₂ for its meat processing plant located at 1828 E. Hedges Avenue, Fresno, CA 93703 (the "Plant"). (Doc. No. 52-5 ("UMF") at ¶ 1.) The 2011 Agreement also contained an Application Equipment, Ancillary Equipment, and Services Term Sheet, wherein Valley Protein agreed to lease a Cryoline (Cryowave) Tunnel 48-30 (the "2011 Freezer") from Linde (the "2011 Rental Agreement"). (Id. at ¶ 2.) In addition, the 2011 Agreement contained an Application Equipment, Ancillary Equipment, and Services Rider (the "2011 Equipment Rider"), which provided that Valley Protein was obligated to keep the 2011 Freezer clean at all times, and to "maintain the [2011 Freezer] in a good and fully functional condition, in accordance with any written instructions provided by Linde." (Id.) Further, the 2011 Equipment Rider stated that Valley Protein "is solely responsible for determining the suitability, compatibility, and use of the [2011 Freezer]." (Id.)

By early 2012, Valley Protein realized that it was not meeting its target conversion rates using the 2011 Freezer.¹ (Id. at ¶ 6.) In addition, by October 1, 2012, Valley Protein's production increased due to additional business it acquired, and there is some evidence that it was unable to fully meet this increased demand due to the 2011 Freezer malfunctioning. (Id. at ¶ 7; Doc. No. 54 ("DMF") at ¶ 7.) Although it is undisputed that Valley Protein did not lose customers as a result of these malfunctions, Valley Protein contends that "it did lose business." (DMF at ¶ 7.) In September 2014, Valley Protein was awarded a new contract with Safeway,because of which it sought ways to improve and expand its freezing operations. (UMF at ¶ 8.) To that end, Valley Protein's president Robert Coyle contacted Michael Iannelli, a sales manager employed by Linde, to inquire whether Linde possessed any newer technology or equipment that would permit Valley Protein to increase its production rate and reduce its CO₂ consumption. (Doc. No. 52-1 ("Iannelli Decl.") at ¶ 9; Doc. No. 52-2 at 17-18.) On September 4, 2014, Linde engineer Amanda Guzman contacted Coyle with a questionnaire to enable Linde to identify the appropriate equipment that would suit Valley Protein's needs. (UMF at ¶ 9; Iannelli Decl. at ¶ 11; Doc. No. 52-2 at 20-21.) On September 29, 2014, Coyle returned this questionnaire to Ms. Guzman. (Iannelli Decl. at ¶ 12; Doc. No. 52-2 at 23-31.) According to the questionnaire, Coyle represented to Linde that the "desired production rate" was 3,500 pounds of poultry per hour. (Iannelli Decl. at ¶ 12; Doc. No. 52-2 at 25-31).

There is some lack of clarity about what occurred next. Iannelli stated his understanding that Valley Protein originally requested the ability to process 3,500 pounds of poultry per hour, as indicated in the questionnaire, but "ultimately ended up" increasing that requirement to 5,000 pounds of poultry per hour. (Doc. No. 57-2 at 12.) In addition, Coyle stated that in October 2014, he received assurances from Ms. Guzman, one of Linde's engineers, that Linde's new equipment would process 5,000 pounds of poultry per hour. (Doc. No. 56 ("Coyle Decl.") at ¶ 9.) However, there does not appear to be any evidence that Valley Protein conveyed to Linde that the capability to process 5,000 pounds of poultry per hour was a requirement in October 2014: Coyle stated that information was not conveyed to Linde until at least November 5. (Doc. No. 52-4 at 19.) In addition, Iannelli stated that he was unaware of this 5,000-pound requirement as of September or October, implying that he was made aware of it only later. (Doc. No. 57-2 at 12.)

Effective November 1, 2014, Linde and Valley Protein entered into a new agreement, referred to as the "2014 Agreement."² (UMF at ¶ 11.) The 2014 Agreement included the Product Supply Agreement, which contained the following provisions relevant to this action:

9. Warranty, Sole Remedies, and Limitation of Damages.

. . .

(e) Statute of Limitations. A Party must commence an action for a breach of contract within one year after the action has accrued.

. . .

15. General Provisions.

. . .

(b) Entire Agreement. Each Term Sheet, in conjunction with the terms specified in this document and the related Riders: (1) constitutes a separate contract between the Parties; (2) constitutes all of the terms of the contract between the Parties regarding its subject matter; and (3) supersedes and terminates all previous agreements between the Parties regarding this agreement's subject matter. Any term contained in a delivery document used by Linde, or a purchase order, confirmation, or acknowledgement used by Valley Protein, that conflicts with, is different from, or is additional to, the terms of this agreement is not part of the contract between the parties.

(UMF at ¶ 11; Doc. No. 52-2 at 35, 37-38.) In addition, the 2014 Agreement included an Application Equipment, Ancillary Equipment and Services Term Sheet and accompanying Rider (the "2014 Rental Agreement"), wherein Valley Protein agreed to lease a Spiral Freezer 20-175S from Linde (UMF at ¶ 13; Doc. No. 52-2 at 45-55.) The 2014 Agreement also contained a Bulk Term Sheet and Rider, pursuant to which Valley Protein agreed to purchase its CO₂ gas requirements exclusively from Linde. (UMF at ¶ 12; Doc. No. 52-2 at 40-44.) The Bulk Term Sheet also authorized Linde to charge Valley Protein a fuel surcharge for the delivery of the CO₂ gas. (UMF at ¶ 12; Doc. No. 52-2 at 43.)

According to the Coyle Declaration, a few weeks after the 2014 Agreement was executed, Iannelli contacted Coyle and advised him the equipment that served as the core of the 2014 Agreement had been "mis-engineered," and was only capable of processing less than 2,000 pounds of poultry per hour. (Coyle Decl. at ¶ 12.) Iannelli acknowledged that the new equipment was insufficient to meet Valley Protein's needs and asked for a "do-over," agreeing to release Valley Protein from the 2014 Agreement. (Id.; Doc. No. 57-2 at 30-31.) According to Coyle, having equipment sufficient to meet its poultry production requirements "was an absolutely

/////essential requirement and the primary and perhaps sole reason Valley Protein entered in the 2014 Agreement." (Coyle Decl. at ¶ 12.) Linde does not appear to contest this version of events.

On December 1, 2014, Coyle sent an email to Iannelli, which stated in relevant part that Valley Protein would "like to rescind the contract we signed previously requesting an extension of the contract date and the new equipment, the [2014 Freezer.]" (UMF at ¶ 14; Iannelli Decl. at ¶ 16; Doc. No. 52-2 at 57.) Iannelli responded by email the same day, agreeing to let Valley Protein rescind the 2014 Rental Agreement, but declining to accept Valley Protein's request to rescind the 2014 Agreement as a whole. (UMF at ¶ 15; Iannelli Decl. at ¶ 17.) On December 12, 2014, Valley Protein entered into an Equipment Lease Agreement with Linde's competitor, Air Liquide, for a Spiral Freezer Model MB1-30-0550-09. (UMF at ¶ 17.) Concurrently, Valley Protein also executed a Product Supply Agreement with Air Liquide to obtain CO₂ from Air Liquide, despite Iannelli's email to Coyle notifying him that "Linde does not accept [Valley Protein's] request to rescind the contract renewal of the CO₂ agreement." (Id.; Doc. No. 52-2 at 57.) On January 25, 2015, Coyle sent a Termination Notice to Iannelli, wherein Coyle notified Linde that Valley Protein would not be renewing the 2011 Product Supply Agreement. (UMF at ¶ 18; Iannelli Decl. at ¶ 18; Doc. No. 52-2 at 59-60.) In response to Coyle's email, Iannelli again advised Coyle that Linde and Valley Protein had a valid supply agreement for CO₂ that was renewed in November 2014, and that according to the terms of that agreement, Valley Protein was obligated to obtain its CO₂ from Linde for the term of five years after that date. (UMF at ¶ 19; Iannelli Decl. at ¶¶ 19-20; Doc. No. 52-2 at 59-60.) On February 1, 2016, Valley Protein notified Linde that it would no longer be purchasing its CO₂ from Linde. (UMF at ¶ 20; Iannelli Decl. at ¶ 22; Doc. No. 52-2 at 64.)

In addition to moving for summary judgment as to its own claims, Linde also moves for summary judgment in its favor as to Valley Protein's counter-claims for breach of contract, breach of the covenant of good faith and fair dealing, intentional misrepresentation, negligent misrepresentation, and unfair competition. These allegations center primarily on alleged malfunctioning of the 2011 Freezer. (See Doc. No. 29 at ¶¶ 11-15.) In addition to those allegations, Valley Protein alleges that between mid-2014 and the beginning of 2016, Lindeobtained the CO₂ delivered to the Plant from its competitor's plant in...