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US Magnesium, LCC v. PVS Chloralkali, Inc.

United States District Court, D. Utah

September 30, 2019



          Jill N. Parrish United States District Court Judge.

         Before the court is a Motion for Summary Judgment filed by Defendant and Counterclaim Plaintiff PVS Chloralkali, Inc. (“PVS”). [Docket 47]. PVS’s motion for partial summary judgment is DENIED.


         On June 13, 2013, PVS and U.S. Magnesium (“USMAG”) entered into a five-year agreement (the “Commercial Agreement”), under which USMAG would supply hydrochloric acid to PVS. On July 28, 2015, the parties executed a new agreement for the sale of hydrochloric acid (the “Sales Agreement”). The Sales Agreement, which was backdated to June 1, 2015, expressly terminated the Commercial Agreement. It further required PVS to purchase a minimum of 600 tons of hydrochloric acid per week from USMAG. Also on July 28, 2015, PVS and USMAG executed three railcar sublease agreements (the “Sublease Agreements”). Under the Sublease Agreements, PVS subleased to USMAG sixty hydrochloric acid railcars for a period running from June 1, 2015, to May 31, 2018. Each of the Sublease Agreements conveyed to USMAG a sublease in hydrochloric railcars that PVS had leased from one of three hydrochloric acid railcar lessors.

         On September 30, 2016, USMAG filed a complaint against PVS, alleging that PVS had breached the Sales Agreement and its implied duty of good faith and fair dealing. USMAG also sought a declaration that it was excused from further performance under the Sales Agreement and the Sublease Agreements.

         PVS answered USMAG’s complaint, asserted a counterclaim for breach of the Sublease Agreements, and sought a declaration that the Sublease Agreements are valid and enforceable, regardless of the enforceability of the Sales Agreement. In its answer, USMAG conceded that it had stopped paying rent under the Sublease Agreements but argued that payment under the Sublease Agreements was excused as a result of PVS’s alleged breach of the Sales Agreement.

         PVS filed a motion for partial summary judgment on all claims in its counterclaim. PVS argues that it is entitled to relief as a matter of law because USMAG stopped paying the monthly rent due to PVS and continued to retain and make use of the railcars in breach of the Sublease Agreements. In response, USMAG asserts that the Sales Agreement and the Sublease Agreements comprise a single agreement and that PVS materially breached the Sales Agreement, thus excusing USMAG’s obligation to perform under the Sublease Agreements. In its reply, PVS argues that the Sales Agreement and the Sublease Agreements are separate contracts and that its alleged failure to perform under the Sales Agreement does not excuse USMAG’s obligations under the Sublease Agreements.


         Summary judgment is appropriate when “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). The movant bears the initial burden of demonstrating the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the movant has met this burden, the burden shifts to the nonmoving party to “set forth specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (citation omitted).


         PVS moves for summary judgment on its counterclaim, alleging that USMAG breached three independent Sublease Agreements as a matter of law. USMAG asserts in its defense that the Sublease Agreements and Sales Agreement were sub-parts of one overarching agreement between the parties and argues that its obligations under the Sublease Agreements were excused when PVS allegedly breached the Sales Agreement. To prevail on its motion for summary judgment, PVS must therefore establish that the Sublease Agreements and the Sales Agreement were separate, independent contracts as a matter of law.

         In support of its assertion that the parties executed one contract, USMAG argues that Utah courts have interpreted multiple agreements as a single contract in some circumstances. Sacramento Baseball Club, Inc. v. Great N. Baseball Co., 748 P.2d 1058, 1060 (Utah 1987) (“An agreement may be a single contract even though it consists of several writings that the parties have never physically attached to each other.”). Whether these contracts should similarly be read as one depends on the intentions of the parties and is therefore an issue of contract interpretation. See id.

         Under Utah law, “[t]he cardinal rule in construing any contract must be to give effect to the intentions of the parties.” Atlas Corp. v. Clovis Nat. Bank, 737 P.2d 225, 229 (Utah 1987). In giving effect to the intentions of parties to a contract, Utah courts look first to the language of the agreement. Winegar v. Froerer Corp., 813 P.2d 104, 108 (Utah 1991). If the language is unambiguous as to the parties’ intentions, then Utah courts do not look beyond that language. Id. Interpretation of the contract in such cases is a question of law. Kimball v. Campbell, 699 P.2d 714, 716 (Utah 1985). If, on the other hand, the court concludes that the language of the contract is ambiguous, then the court may look to extrinsic evidence in order to determine the parties’ intentions. Atlas Corp., 737 P.2d at 229 (citing Big Butte Ranch, Inc. v. Holm, 570 P.2d 690 (Utah 1977)). The interpretation of an ambiguous contract using extrinsic evidence is a question of fact. Kimball, 699 P.2d at 716. So long as there is a genuine dispute as to the extrinsic evidence, summary judgment is precluded. Grow v. Marwick Dev., Inc., 621 P.2d 1249, 1252 (Utah 1980).

         I. The Language of the Sales Agreement and ...

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