The Santa Barbara Smokehouse, Inc. v. Aquachile, Inc.

THE SANTA BARBARA SMOKEHOUSE, INC., a California corporation; and DHBRANDS LIMITED, a Cyprus limited liability company, Plaintiffs, v. AQUACHILE, INC., a Florida corporation; AGROSUPER S.A., a Chile corporation; and EMPRESAS AQUACHILE S.A., a Chile corporation, Defendants.

AQUACHILE, INC., a Florida corporation, Counter-Plaintiff, v. THE SANTA BARBARA SMOKEHOUSE, INC., a California corporation, Counter-Defendant.

No. CV 19-10733-RSWL-JEM x

United States District Court, C.D. California

March 4, 2022

[REDACTED] ORDER RE: DEFENDANTS' MOTION FOR SUMMARY JUDGMENT [129]; DEFENDANTS' OBJECTIONS AND MOTION TO STRIKE [165]; DEFENDANTS' MOTIONS IN LIMINE [196, 197 198]; AND DEFENDANTS' MOTION TO EXCLUDE [206]

HONORABLE RONALD S.W. LEW SENIOR U.S. DISTRICT JUDGE

Plaintiffs The Santa Barbara Smokehouse (“Smokehouse”) and DHBrands Limited (“DHBrands”) bring this Action asserting the following claims for relief against Defendants AquaChile, Inc. (“AquaChile”); Agrosuper S.A. (“Agrosuper”); and Empresas AquaChile S.A. (“Empresas”): (1) breach of contract; (2) promissory estoppel; (3) fraudulent concealment; (4) aiding and abetting fraudulent concealment; (5) intentional interference with prospective economic advantage; (6) negligent interference with prospective economic advantage; (7) inducing breach of contract; (8) intentional interference with contractual relations; (9) intentional interference with prospective economic advantage; and (10) negligent interference with prospective economic advantage. AquaChile has asserted counterclaims against Smokehouse for breach of contract and promissory estoppel.

Currently before the Court are Defendants' Motion for Summary Judgment [129]; Motion to Strike [165]; Motions in Limine [196, 197, 198]; and Motion to Exclude [206]. Defendants seek summary judgment on all of Plaintiffs' claims, as well as on AquaChile's counterclaims for breach of contract. Having reviewed all papers submitted pertaining to this Motion, the Court NOW FINDS AND RULES AS FOLLOWS: the Court GRANTS Defendants' Motion for Summary Judgment in its entirety. The Court DENIES Defendants' Motion to Strike and OVERRULES Defendants' objections. Given the Court's ruling on the Motion for Summary Judgment, the Court DENIES Defendants' Motions in Limine and Motion to Exclude as moot.

I. BACKGROUND

A. Factual Background

Smokehouse is a California corporation. Defs.' Stmt. of Uncontroverted Facts (“Defs.' SUF”) ¶ 1, ECF No. 129-2.^[1] DHBrands owns the brands under which Smokehouse sells its salmon products, and Smokehouse pays DHBrands a percentage of Smokehouse's revenues in exchange for use of the brands. Id. ¶ 4. AquaChile is a supplier of salmon fillets and is a wholly owned subsidiary of Empresas. Id. ¶¶ 6, 8. Both AquaChile and Empresas are owned by Agrosuper. Id. ¶ 7.

In 2015, Smokehouse and AquaChile entered into a one-year supply agreement whereby AquaChile would supply Smokehouse with various salmon fillets, and Smokehouse would pay a price per pound that was negotiated monthly. Id. ¶ 9. This agreement expired in April 2016, but AquaChile continued to supply fillets to Smokehouse on a per-order basis. Id. ¶ 10. When Smokehouse later sought assurance that AquaChile would continue supplying it with salmon fillets at Smokehouse's election, AquaChile proposed a five-month supply agreement. Id. ¶¶ 11, 12. Smokehouse CEO Tim Brown (“Brown”) rejected this offer and instead proposed a two-year agreement. Id. ¶ 13. Vincent De La Cruz (“De La Cruz”), an AquaChile representative, in turn rejected Smokehouse's offer, stating he would get fired for accepting a two-year supply agreement on AquaChile's behalf. Id. ¶ 14; Decl. of Michael Weiss in Supp. of MSJ (“Weiss Decl.”) Ex. 11, ECF No. 130-11.

The parties agree that from 2016 through September 2019, AquaChile continued to provide weekly sales to Smokehouse. Id. ¶ 22. The parties also agree that Smokehouse was free to purchase salmon from other suppliers at any time. Id. ¶ 25. However, Plaintiffs assert that AquaChile's continued supply was pursuant to a three-year supply agreement that the parties entered into on July 20, 2017 (the “2017 Agreement”), which obligated AquaChile to supply Smokehouse with salmon fillets through July 2020.^[2] Id. Defendants dispute the existence of this contract, asserting that AquaChile did not agree to supply Smokehouse with salmon fillets for three years. Defs.' SUF ¶ 20.

In early 2019, AquaChile started to reduce supply of fillets to Smokehouse. Id. ¶ 28. Plaintiffs assert that Smokehouse began experiencing poor customer service from AquaChile, that AquaChile ignored several purchase orders Smokehouse had placed, and that there were delays in shipments. Id. ¶ 29. Plaintiffs believed that the supply issues were due to Agrosuper's recent acquisition of Empresas because there had previously been a lawsuit between Smokehouse and Agrosuper. Id. ¶ 27. On April 11, 2019, AquaChile's sales director told Brown that AquaChile was terminating its relationship with Smokehouse at Agrosuper's direction and would not continue shipping any salmon to Smokehouse due to its prior lawsuit with Agrosuper. Id. ¶ 30. However, Plaintiffs assert that De La Cruz called Smokehouse personnel the following morning explaining that there had been a miscommunication and that AquaChile would, in fact, continue to supply Smokehouse. Pls.' Resp. to Defs.' SUF ¶¶ 142-43.

For the next two months, there was a significant cutback in salmon offered by AquaChile to Smokehouse. Defs.' SUF ¶ 32. In response, Smokehouse informed AquaChile that its insufficient supply was impacting Smokehouse and that Smokehouse therefore refused to pay invoices owed to AquaChile for fillets Smokehouse had received from AquaChile. Id. ¶¶ 34, 35. To diffuse tensions between the two parties, Smokehouse and AquaChile entered into an agreement on June 6, 2019 (the “2019 Agreement”), whereby AquaChile agreed to deliver six containers of fillets at a reduced price due to shipping delays, and in exchange Smokehouse agreed to pay three outstanding invoices totaling $404, 078.23. Id. ¶ 36. The 2019 Agreement also stated that Smokehouse “incurred $150k damages for . . . delayed / non-shipped containers as referenced in the agreement dated July 3, 2017 [and] quality control issues as discussed on June 30, 2019.” Pls.' Resp. to Defs.' SUF ¶ 173; Decl. of David A. Thomas in Supp. of Opp'n to MSJ (“Thomas Decl.”) Ex. 35, ECF No. 153-37.

Shortly thereafter, AquaChile stopped supplying Smokehouse with frozen salmon fillets altogether, and on July 30, 2019, Smokehouse personnel discussed the need to place orders with other suppliers so there was not a gap in supply. Defs.' SUF ¶ 45. On August 5, 2019, AquaChile further advised Smokehouse that it would not be able to continue supplying Smokehouse with washed salmon fillets.^[3] Defs.' Suf ¶ 46. In September 2019, AquaChile stopped accepting any new orders and completely cut off its supply to Smokehouse. Id. ¶ 49.

XXXXX

XXXXX Id. ¶ 41. XXXXX Id. ¶¶ 42-43. XXXXX Id. ¶ 44. Smokehouse had a “record” year in 2019, XXXXX Id. ¶ 50; Pls.' Resp. to Defs.' SUF ¶ 50. XXXXX Defs.' SUF ¶ 52. At the same time that AquaChile began decreasing its supply to Smokehouse, Plaintiffs began the process of selling Smokehouse. Pls.'s Resp. to Defs.' SUF ¶ 156. XXXXX Id. ¶¶ 193, 197. XXXXX Id. ¶ 277; Decl. of Jeremy Roberts in Supp. of Pls.' Opp'n to MSJ (“Roberts Decl.”) Ex. 15, ECF No. 153-93. XXXXX Pls.' Resp. to Defs.' SUF ¶¶ 278-82; Roberts. Decl. Ex. 16, ECF No. 150-22.

B. Procedural Background

Plaintiffs commenced this Action [1] December 19, 2019, alleging that AquaChile's breach of the 2017 Agreement, along with Defendants' other misconduct, caused Plaintiffs' deal with Labeyrie to fall through and an ultimate loss in Smokehouse's value. On July 7, 2020, this Court granted in part and denied in part [61] Empresas and Agrosuper's Motion to Dismiss and granted [62] AquaChile's Motion to Dismiss with leave to amend. Plaintiffs filed a First Amended Complaint [66] on August 20, 2020. Defendants answered [73] on September 23, 2020, asserting their own counterclaims against Plaintiffs for breach of contract and promissory estoppel.

Defendants filed the instant Motion [129] on January 18, 2022. Plaintiffs filed their Opposition [153] on February 1, 2022, and Defendants replied [163] on February 8, 2022. On February 11, 2022, this Court granted [175] Plaintiffs' Ex Parte Application to file a sur-reply to address arguments raised in Defendants' Reply regarding the economic loss doctrine. Plaintiffs filed their Sur-Reply [189] on February 18, 2022.

II. DISCUSSION

A. Legal Standard

Summary judgment is appropriate when the moving party “shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A fact is “material” if it might affect the outcome of the suit, and the dispute is “genuine” if the evidence is such that a reasonable factfinder could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, 477 U.S 242, 248 (1986).

The moving party bears the initial burden of proving the absence of a genuine dispute of material fact. Celotex Corp. v Catrett, 477 U.S. 317, 323 (1986). Where the nonmoving party bears the burden of proof at trial, the moving party need only show “an absence of evidence to support the nonmoving party's case.” Id. at 325. If the moving party meets its burden, the burden then shifts to the nonmoving party to present “specific facts showing that there is a genuine issue for trial.” Anderson, 477 U.S at 250. The nonmoving party “must show more than the mere existence of a scintilla of evidence . . . or some ‘metaphysical doubt' as to the material facts at issue.” In re...