Justice Beth Baker delivered the Opinion of the Court.
APPEAL FROM: District Court of the Ninth Judicial District, In and For the County of Toole, Cause No. DV-12-039 Honorable David Cybulski, Presiding Judge COUNSEL OF RECORD: For Appellants: Gregory J. Hatley, Tyler C. Smith, Davis, Hatley, Haffeman & Tighe, P.C., Great Falls, Montana For Appellees: Thane P. Johnson, Johnson, Berg & Saxby, PLLP, Kalispell, Montana Clement L. Glynn, Jonathan A. Eldredge, Glynn & Finley, LLP, Walnut Creek, California Filed: /s/_________
Clerk Justice Beth Baker delivered the Opinion of the Court. ¶1 The Ninth Judicial District Court, Toole County, granted summary judgment in favor of ROC Gathering, LLP, Ranck Oil Company, Inc., and Commercial Energy of Montana, Inc., (collectively, "ROC" or "Defendants") after determining that those parties had not breached their contract with Ferdig Oil Co., Inc. and Somont Oil Company, Inc. (collectively, "Ferdig Oil"). The District Court entered a separate order awarding ROC attorney fees and costs in the action. Ferdig Oil appeals both orders. We consider the following issues on appeal:
1.
Whether the District Court properly held on summary judgment that ROC did not breach or repudiate the parties' 2006 Settlement Agreement;
2.
Whether the District Court abused its discretion in fixing the amount of attorney fees and costs to which ROC was entitled as the prevailing party.
We affirm the summary judgment order and reverse for modification of the fees and costs.
PROCEDURAL AND FACTUAL BACKGROUND
¶2 The parties to this case are engaged in the business of gathering, processing, and marketing oil and natural gas in northern Toole County, Montana. Barbara Ranck Perry and Ron Perry have ownership interests in each of the three Appellees: ROC Gathering, Ranck Oil, and Commercial Energy. Charles Jansky owns Appellants: Ferdig Oil and Somont Oil. All five companies were signatories to a Settlement Agreement in 2006 ("2006 Agreement") to resolve multiple commercial disputes arising from their various business relationships. At issue in this case is the provision of the 2006 Agreement that allowed Ferdig Oil to tap into a delivery line owned and operated by ROC Gathering. ¶8 After discussions between the parties' lawyers, ROC Gathering's counsel sent an e-mail to Ferdig Oil's counsel on July 24, 2014. In the e-mail, ROC Gathering requested verification that the leak in Ferdig Oil's line had been fixed. ROC Gathering's counsel wrote, "We are not at all comfortable that the sole source of the leak has been discovered or that the system is safe to start operations." It requested details of the repairs, including information about who had repaired the pipeline and how it was done. ROC Gathering stated it wanted to inspect the pipeline and have appropriate pressure testing done or to review any data if Ferdig Oil already had completed testing the pipeline. The e-mail explained that
apart from the issues in the pending litigation, we are too concerned about the risk of a continuing leak and potential explosion to agree to let Ferdig simply open the tap and start producing, but we are willing to work with you to determine that your system is safe to re-start.
¶9 The second paragraph of the e-mail turned to the ongoing litigation between the parties, reiterating ROC Gathering's position that the 2006 Agreement between the parties was terminated or terminable and that Ferdig Oil's operations were a proper basis for termination. ROC Gathering's counsel sought a non-waiver, non-admissibility agreement to prevent Ferdig Oil from using continued production against ROC Gathering in the litigation. After proposing the non-waiver, non-admissibility agreement, counsel explained that ROC Gathering was "not saying no" to Ferdig Oil's requests to open the tap. As an alternative to the non-waiver, non-admissibility agreement, counsel proposed that the parties attempt to negotiate a global resolution of all of the parties' outstanding
issues rather than work through the issues piecemeal. In concluding the e-mail, ROC Gathering's counsel asked for Ferdig Oil's thoughts on the ideas it proposed. ¶10 Ferdig Oil did not respond to the July 24 e-mail, but filed an application for a preliminary injunction to order ROC Gathering to reopen the tap. The District Court denied the application. After the denial, Ferdig Oil developed its own direct line to Northwestern Energy's transmission system and filed an amended complaint asserting claims for monetary damages for breach of contract; anticipatory breach; breach of implied duty of good faith and fair dealing; constructive fraud and negligent misrepresentation; intentional interference with contract rights; and unjust enrichment. Ferdig Oil sought over $6 million in damages. ¶11 ROC filed for summary judgment, arguing that they had not interfered with or breached the 2006 Agreement. Alternatively, they argued that Ferdig Oil and Somont Oil had failed to mitigate their damages when they developed their own delivery line to Northwestern Energy's transmission system without responding to the July 24 e-mail. Ranck Oil and Commercial Energy sought summary judgment on the additional ground that they were improperly joined, asserting that the rights and obligations at issue were solely between ROC Gathering and Ferdig Oil. The District Court agreed with ROC and granted summary judgment to all Defendants.
STANDARDS OF REVIEW
¶12 We review a district court's grant of summary judgment de novo. Boulder Hydro Ltd. P'ship v. Nw. Corp., 2018 MT 248, ¶ 8, 393 Mont. 85, 428 P.3d 250. A moving party is entitled to summary judgment under M. R. Civ. P. 56(c)(3) when the party demonstrates the absence of any genuine issues of material fact and entitlement to judgment as a matter of law. Boulder Hydro, ¶ 8. The interpretation of a contract is a question of law we review for correctness. Boulder Hydro, ¶ 8. The determination of whether a party materially breached a contract is a question of fact. Eschenbacher v. Anderson, 2001 MT 206, ¶ 22, 306 Mont. 321, 34 P.3d 87. We review a district court's findings of fact for clear error. Eschenbacher, ¶ 22. ¶13 Where legal authority exists to award attorney fees, we review a trial court's award of attorney fees and costs for an abuse of discretion. See Houden v. Todd, 2014 MT 113, ¶¶ 20-21, 375 Mont. 1, 324 P.3d 1157.
DISCUSSION
¶14 1. Whether the District Court properly held on summary judgment that ROC did not breach or repudiate the parties' 2006 Settlement Agreement. ¶15 Ferdig Oil challenges the District Court's order granting summary judgment in favor of ROC. Ferdig Oil maintains that ROC Gathering's July 24 e-mail conditioned Ferdig Oil's continued use of the pipeline interconnection on acceptance of and compliance with new terms that were not contained in the original 2006 Agreement. Ferdig Oil argues that this constitutes breach, repudiation, or anticipatory breach. Ferdig argues that the safety assurances ROC Gathering sought were related to repair work that did not occur on ROC Gathering's property and that it was not reasonable for ROC Gathering to demand assurances about repair work on Ferdig Oil's own property. Ferdig Oil cites this Court's determination in Eschenbacher that a defendant's demands for additional information to allay safety concerns constituted a breach of contract because that agreeing to open the taps and resume production prejudices the defendants' rights in the lawsuit. We claim that the contract is properly terminated and/or terminable." In fact, ROC filed a motion for partial summary judgment to resolve that issue in May 2015, which the District Court granted. Ferdig Oil does not appeal this order. In its proper context, it is clear that the second paragraph of the July 24 e-mail sought to protect ROC's litigation positions and requested settlement negotiations in relation to the ongoing litigation. Such a request does not constitute breach of the contract that is the subject of the dispute. ¶21 Ferdig Oil also challenges the District Court's determination that Ferdig Oil did not attempt to mitigate its damages and that Ranck Oil and Commercial Energy were misjoined in the proceedings. We need not address these arguments, however, because we affirm the District Court's decision to grant summary judgment on the ground that ROC did not breach the 2006 Agreement. ¶22 2. Whether the District Court abused its discretion in fixing the amount of attorney fees and costs to which ROC was entitled as the prevailing party. ¶23 The 2006 Agreement included a provision entitling the prevailing party to recover attorney fees and costs. The 2006 Agreement states:
In the event any party to this Agreement is compelled to incur any expenses, including reasonable attorney's fees, in instituting or prosecuting any action, suit or proceeding to enforce any of the terms, covenants or conditions contained herein, or to collect damages, the prevailing party in any such action, suit or proceeding shall be entitled to recovery of such attorney's fees and all court costs incurred therein.
Ferdig Oil challenges the amount—over $465,000—that the District Court awarded to ROC under this provision. Ferdig Oil challenges the award of fees for redundant and
of court."
Thayer v.
Hicks, 243 Mont. 138, 158,
793 P.2d 784, 796-97 (1990). The District Court incorrectly focused on the broad language in the first part of the provision in determining that the parties had agreed to the recovery of costs outside of the statute. The operative part of the provision allowing for the recovery of court costs in the 2006 Agreement is much narrower: the prevailing party "shall be entitled to recovery of such attorney's fees and
all court costs incurred." (Emphasis added). This language does not take the allowable costs out of
§ 25-10-201, MCA. We remand for the District Court to determine costs allowable under
§ 25-10-201, MCA, and decisions from this Court interpreting that provision. ¶36 Finally, Ferdig Oil relies on
Laudert v.
Richland County Sheriff's Department, 2001 MT 287, ¶ 19,
307 Mont. 403,
38 P.3d 790, to argue that fees associated with distinctly different defenses based on different facts should be allocated and apportioned separately.
Laudert does not require this.
Laudert explained that when a plaintiff in a civil rights case fails to prevail on claims that are unrelated to the claims on which he succeeded, the court must exclude attorney fees related to the unsuccessful claims in the fee calculation.
Laudert, ¶ 19. That is not the case here. ROC was successful on all of the claims challenged on appeal. We affirm the District Court's allocation of the fee award.
CONCLUSION
¶37 The District Court's order granting summary judgment is affirmed. We reverse and remand the District Court's award of attorney fees and costs for recalculation to excise the fees incurred to establish the amount of ROC's fee claim and to award only those costs allowed by statute.
/S/ BETH BAKER We Concur: /S/ MIKE McGRATH
/S/ INGRID GUSTAFSON
/S/ LESLIE HALLIGAN
District Judge Leslie Halligan sitting for
Justice Laurie McKinnon Justice Jim Rice, dissenting. ¶38 My reading of the record leads to a different conclusion than the Court's. I disagree with the District Court's grant of summary judgment, and would remand for further proceedings based upon Ferdig Oil's summary judgment showing that ROC had breached the parties' contract. ¶39 ROC attempts to frame this dispute as one solely about its concerns over operational safety. It argues, "[a]t no time did ROC refuse Ferdig's connection; ROC simply sought confirmation that the line was sound and safe to operate." ROC's appellate brief opens with a section entitled, "Requesting Assurance That the Line Was Safe to Re-Open Was Not a Breach," followed by its alternative argument that, "even if ROC's request for safety assurances had been a breach," Ferdig Oil failed to mitigate its damages. However, despite the posturing by ROC to make this case about safety concerns, and its assertions that "at no time" did it refuse the connection to which Ferdig Oil was contractually entitled, and that it "simply sought" confirmation that it was safe to proceed, the record reveals a different story, in my view. ROC was engaged in much more, from which it attempts to divert attention. ¶40 The key evidence is the e-mail of July 24, 2014, from ROC's counsel. Consistent with its litigation strategy, ROC heavily emphasizes the first paragraph of that e-mail, which discussed safety concerns, by quoting that paragraph verbatim in its briefing. Then, it conveniently omits the second paragraph of that e-mail from its verbatim quotation. The Court acknowledges the need to read the second paragraph "in its entirety," Opinion, ¶ 18, but provides only a summary. However, I view this evidence as critical. That paragraph stated:
Assuming that we can get past those [safety testing] details,
we still have the concern that agreeing to open the taps and resume production prejudices the defendants' rights in the lawsuit.
We claim that the contract is properly terminated and/or terminable.
We contend that problems with Ferdig's operations are a proper basis for termination.
If we agree to resuming operations (especially before the safety issues raised above are fully resolved), we are creating evidence that you would be able to use against us.
Any deal to continue production would have to address that via a non-waiver, non-admissibility agreement, and I do not know that that would be workable. We are not saying no to the request at this point, and we have some time to continue talking about it while we work through the issues in the first paragraph. However, I propose that it would be better to approach this via an effort to reach a global resolution of all claims. We would prefer to work out all issues than to have a piecemeal deal that allows production to continue but that does not resolve the basic claims in the case, and that also creates the risk of undermining some of our points in the lawsuit. If you are interested in a global resolution, then we would ask you to make a proposal that includes payment for the right to resume a contract that we contend is properly terminated or terminable, and a time limit after which the parties may end their dealings. If you are not interested in that, then I would appreciate your thoughts about a non-waiver, non-admissibility agreement
if we were to agree to production during the pendency of this litigation. (emphasis added).
Western Star Trucks, 2007 MT 48,
336 Mont. 145,
153 P.3d 627, and the Restatement (Second) of Contracts (Am. Law Inst. 1981). However, ROC's e-mail foreclosed that very option by demanding that Ferdig Oil agree that its reinstated access would be "non-admissible" in future litigation. If Ferdig Oil could not disclose its continued access, then it would be impossible for Ferdig Oil to comply with the new terms and "sue for the costs" of complying, as mitigation required. Because ROC's demands boxed Ferdig Oil in, I disagree with the District Court's conclusion that the Ferdig Oil parties "had a duty to mitigate their claimed damages, and they failed to do so." ¶45 I believe there exists here a material issue of fact going to the issue of breach of contract. At a minimum, there are factual issues about what the e-mail meant and what ROC intended by its wording, such that these questions should be addressed in further proceedings. I do not believe ROC has established that it is entitled to judgment on the breach of contract claim as a matter of law.
The Court excuses any breach of the contract by ROC simply because the parties were then engaged in litigation. No support is offered for the proposition that ongoing litigation excuses a party's obligations under a contract prior to a court's ruling. Even as ROC legally sought to end the contract, it simultaneously attempted to extract further concessions by threat of immediately terminating access—after initially demanding that Ferdig Oil complete safety conditions, which Ferdig Oil satisfied, only then to place further conditions and cost on access. The Court's assertion that the valve being closed for seven months somehow excuses ROC's refusal to reopen it is not determinative. Ferdig Oil had a contractual right to use the valve before and after the repair, and ROC's conduct was a potential breach. If ROC had only wanted to terminate the contract, it was unnecessary to require Ferdig Oil to complete safety conditions required for access. --------
/S/ JIM RICE Justice Dirk Sandefur and Justice James Jeremiah Shea join in the dissenting Opinion of Justice Jim Rice.
/S/ DIRK M. SANDEFUR
/S/ JAMES JEREMIAH SHEA