Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_10-cv-00616/USCOURTS-azd-2_10-cv-00616-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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 The parties requested oral argument in connection with this Motion for Partial

Summary Judgment. (Docs. 44, 51). The parties have had the opportunity to submit briefing.

Accordingly, the Court finds the pending motion suitable for decision without oral argument

and the parties’ request is denied. See LRCiv 7.2(f).

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Superior Marble, L.L.C.

Plaintiff, 

vs.

Omya, Inc.

Defendant. 

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No. CV 10-00616-PHX-SMM

ORDER

Before the Court is Defendant Omya, Inc.’s (“Omya”) Motion For Partial Summary

Judgment on Plaintiff Superior Marble, L.L.C.’s (“Superior”) claim for punitive damages.

(Doc. 44). Superior responded (Doc. 51) and Omya replied (Doc. 55). After consideration

of the issues, the Court finds the following.1

BACKGROUND

Until 2010, Superior produced and sold sand, feed supplements, gravel, and specialty

products made from marble found in only a few locations in North America, including the

Queen Creek Quarry (the “Quarry”) owned and operated by Omya. (Doc. 1 at 2; Doc. 47 at

1-2). On November 12, 1999, Superior and Omya entered into a long-term “Arizona Supply

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Agreement” (the “Agreement”), which provided that Omya would supply Superior with

marble from the Quarry for at least twenty years. (Doc. 1 at 2; Doc. 47 at 2; Doc. 47-4 at 5).

The Quarry is located on U.S. Forest Service land in Pinal County, Arizona. (Doc. 1

at 3; Doc. 47 at 2). Pursuant to federal regulations, Omya needed approval from the U.S.

Forest Service (the “Forest Service”) to operate and mine the Quarry. (Doc. 46 at 6; Doc. 47-

5 at 2). In 1997, Omya purchased the Quarry and asserts that it initially operated the Quarry

under existing temporary permits. (Doc. 47-5 at 2). By 1999, Omya had discussed with the

Forest Service a plan to expand the Quarry’s operations. (Doc. 47-5 at 2). On November 1,

2002, the Forest Service issued a Decision Notice and Finding of No Significant Impact (the

“Decision”) pertaining to Omya’s planned Quarry expansion. (Doc. 47 at 9). The Decision

allowed Omya to continue mining and processing marble and to expand operations to an

additional 123 acres of Forest Service land. (Doc. 47-7 at 2). 

The Decision also required Omya to comply with certain conditions, including that

Omya pave an access road to the Quarry. (Doc. 47-7 at 2). In November 2003, Omya

submitted and the Forest Service approved a revised Plan of Operation (the “Plan”). (Doc.

14 at 2; Doc. 47-1 at 6). In 2008, work commenced on the access road with an estimated cost

of $885,000. (Doc. 47 at 10). Omya avers that by about October 2008, it became apparent

that implementing the Plan would cost about $2.5 million. (Doc. 47 at 11; Doc. 47-5 at 5).

On February 6, 2009, citing the unexpected cost of implementing the Plan, Omya gave notice

to Superior that it was halting operations at the Quarry. (Doc. 47 at 7). Omya continued to

supply materials to Superior until about September 22, 2009, when Omya gave notice to

Superior that no further deliveries would be made. (Doc. 47 at 7). 

On March 19, 2010, Superior filed its Complaint alleging Breach of Contract and

Breach of Duty of Good Faith and Fair Dealing and seeking punitive damages for the bad

faith claim. (Doc. 1). Omya’s Answer raised the affirmative defense that Paragraph 3(b) of

the Agreement (“Paragraph 3(b)”) precludes Omya from liability for suspension of

operations because Omya was obligated to incur significant liability and expense in order to

obtain and maintain a permit to operate the Quarry. (Doc. 14 at 6, 8). The Court granted

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Superior’s Motion for Partial Summary Judgment finding that Paragraph 3(b) does not

excuse Omya’s alleged failure to perform its duties under the Agreement. (Doc. 37). On May

27, 2011, Omya filed this Motion for Partial Summary Judgment to dispose of Superior’s

claim for punitive damages. (Doc. 44).

LEGAL STANDARDS

A court must grant summary judgment if the pleadings and supporting documents,

viewed in the light most favorable to the nonmoving party, “show 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); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Jesinger v.

Nev. Fed. Credit Union, 24 F.3d 1127, 1130 (9th Cir. 1994). Substantive law determines

which facts are material. See Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986); see also

Jesinger, 24 F.3d at 1130. “Only disputes over facts that might affect the outcome of the suit

under the governing law will properly preclude the entry of summary judgment.” Anderson,

477 U.S. at 248. The dispute must also be genuine, that is, the evidence must be “such that

a reasonable jury could return a verdict for the nonmoving party.” Id.; see Jesinger, 24 F.3d

at 1130.

A principal purpose of summary judgment is “to isolate and dispose of factually

unsupported claims.” Celotex, 477 U.S. at 323-24. Summary judgment is appropriate against

a party who “fails to make a showing sufficient to establish the existence of an element

essential to that party’s case, and on which that party will bear the burden of proof at trial.”

Id. at 322; see also Citadel Holding Corp. v. Roven, 26 F.3d 960, 964 (9th Cir. 1994). The

moving party need not disprove matters on which the opponent has the burden of proof at

trial. See Celotex, 477 U.S. at 323-24. The party opposing summary judgment need not

produce evidence “in a form that would be admissible at trial in order to avoid summary

judgment.” Id. at 324. However, the nonmovant must set out specific facts showing a genuine

dispute for trial. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574,

585-88 (1986); Brinson v. Linda Rose Joint Venture, 53 F.3d 1044, 1049 (9th Cir. 1995).

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DISCUSSION

In its Motion for Partial Summary Judgment, Omya asserts that because Superior’s

claim for breach of the implied covenant of good faith and fair dealing sounds in contract

rather than in tort, punitive damages are not recoverable as a matter of law. (Doc 44 at 6).

Superior contends that it can bring a claim for tortious breach of the implied covenant of

good faith and fair dealing because a “special relationship” can be found to exist “where

restricting recovery to contract damages only would provide more of an incentive for breach

of contract than for its performance.” (Doc. 51 at 3 (citing Rawlings v. Apodaca, 726 P.2d

565, 577 (Ariz. 1986))). Omya responded that Rawlings does not stand for the proposition

that a “special relationship” exists simply because “a party to the contract might believe that

it was better off breaching a contract than performing.” (Doc. 55 at 8). 

Unless there is an accompanying tort, punitive damages will not be awarded in

contract actions. Miscione v. Bishop, 636 P.2d 149, 152-53 (Ariz. Ct. App. 1981). Generally,

a plaintiff’s remedy for breach of the implied covenant of good faith and fair dealing is

limited to the contract itself absent a “special relationship” between the parties “arising from

elements of public interest, adhesion, and fiduciary responsibility.” Burkons v. Ticor Title

Ins. Co. of Cal., 813 P.2d 710, 720 (Ariz. 1991). Such a “special relationship” usually

involves situations where the contract “is one in which the plaintiff seeks something more

than commercial advantage or profit from the defendant.” Rawlings, 726 P.2d at 575. 

The Court finds that Superior has failed to demonstrate the necessary special

relationship to support a claim for the breach of the implied covenant of good faith and fair

dealing in tort that would warrant punitive damages. There is no evidence that Superior has

a special relationship with Omya in which it “sought protection or security rather than profit

or advantage” from Omya. Id. Rather, Omya and Superior are merely two business entities

who had entered into an arms-length commercial agreement. Contrary to Superior’s

argument, a special relationship does not exist simply because restricting its recovery to

contract damages could conceivably encourage breach. Thus, as a matter of law, punitive

damages cannot be awarded in this case.

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CONCLUSION

IT IS HEREBY ORDERED GRANTING Omya’s Motion For Partial Summary

Judgment (Doc. 44).

IT IS FURTHER ORDERED that Superior is not entitled to punitive damages on

its claim for Breach of Duty of Good Faith and Fair Dealing.

DATED this 8th day of August, 2011.

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