Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_04-cv-06090/USCOURTS-caed-1_04-cv-06090-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition for Removal- Breach of Contract

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

AMBER CHEMICAL, INC., a

California corporation,

 Plaintiff,

 v. 

REILLY INDUSTRIES, INC., an

Indiana corporation, 

 Defendant.

1:06-CV-06090 OWW SMS 

MEMORANDUM DECISION AND

ORDER RE: DEFENDANT’S MOTION

FOR SUMMARY JUDGMENT.

I. INTRODUCTION

Plaintiff Amber Chemical (“Amber”) filed suit in the

Superior Court for the County of Kern against Defendant Reilly

Industries (“Reilly”), for damages arising out of an alleged

breach of a requirements contract for the delivery of chemical

products. (See Doc. 1.) Reilly removed the case to federal

court on the basis of diversity jurisdiction. (Id.) Before the

Court for decision is Defendant Reilly’s motion for summary

judgment. (Doc. 19, filed Aug. 19, 2005.) Amber filed

opposition (Doc. 20, filed Sept. 8, 2005), and Reilly replied

(Doc. 22, filed Oct. 31, 2005). 

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II. BACKGROUND

Amber is a wholesale commodity chemical company that

specializes in selling chemical inputs to oil field service

companies, but has recently expanded to also distribute chemicals

to agricultural businesses. (Deft’s Statement of Undisputed

Facts (“DSUF”), Doc. 19-2 #3.) 

Historically, the relationship proceeded in the following

manner. In the fall of each year, Reilly would provide Amber

with firm prices for potassium chloride for the following year. 

(Plaintiff’s Statement of Disputed/Undisputed Fact (“PSF”), Doc.

20 #27.) Amber then agreed to purchase a minimum annual quantity

of potassium chloride from Reilly at that agreed upon price,

unless Reilly was unable to meet Amber’s needs. (DSUF #1.) 

Logistically, Amber would not order and pay for their annual

volume of potassium chloride all at once. Rather, Amber placed

periodic orders, depending on its needs during any given time

period. Amber submitted purchase orders for the purchase of each

shipment of potassium chloride. (DSUF #5.) Once Reilly received

a purchase order from Amber, Reilly then processed that order and

shipped the product. (DSUF #7.) 

It is undisputed that Reilly shipped the product to Amber

along with a standard invoice, which set forth standard terms and

conditions (“Standard Terms”), including the condition that the

invoice and the terms and conditions constitute the parties’

entire agreement and that the terms could only be amended,

modified or revised through a written document executed by the

parties. (DSUF ## 7-9.) However, Amber employees, Bob Brister

and Sandra Kay Newman, testified that they had no knowledge of

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these standard terms and conditions. (Amber’s Response to DSUF

## 7-9; Brister Decl. at ¶¶ 17, 19; Brister Depo. at 142-144;

Newman Depo. at 13-14.)

Amber believed that it was obligated to purchase all of its

requirements for potassium chloride from Reilly, unless Reilly

was unable to supply. On occasion, Reilly would be unable to

meet Amber’s needs for short periods of time as a result of

logistical problems or other reasons. On one occasion, Reilly

was unable to meet Amber’s needs for several months. On these

occasions, Amber contracted with Mississippi Potash to provide

replacement potassium chloride. Amber, however, believed that it

should always give Reilly, in substance, a right of first refusal

whenever it contemplated contracting with Mississippi Potash. On

occasion, when informed of Amber’s intent to obtain replacement

material from Mississippi Potash, Reilly attempted to deliver

potassium chloride to Amber by alternative means. (Brister Depo.

49, 81-82.)

Reilly contends that its relationship with Amber ended in

March 2004, when Reilly sold its potassium chloride business to

another vendor. (DSUF #2.) Amber maintains that during the fall

of 2003, through a series of e-mails between Reilly employee

Brett Wilhelm and Amber employee Bob Brister, an agreement was

reached whereby Reilly would sell Amber potassium chloride

throughout 2004 at a fixed price of $122.50 per ton, so long as

the volume of potassium chloride purchased by Amber from Reilly

met or exceeded the volume it purchased from Reilly in 2003. The

relevant exchange of e-mails, the authenticity of which is not

disputed, begins with an e-mail from Brett Wilhelm at Reilly to

Bob Brister at Amber:

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From: Wilhelm, Brett

Sent: Friday, September 12, 2003 5:16 PM

To: ‘bbaci5201@aol.com’

Subject: 2004 pricing

Bob,

As I mentioned to Kay on the phone, I’d be willing to

work out a contract with you for the upcoming year we

hold the material pricing, but push through the

increase in retail rate (4%). This would account for

approximately $1.00 - $1.50 a ton increase. If the

volume remains the same, or increases, this would be

something I’d be willing to do to maintain our

partnership. Let me know if this works for you for the

upcoming year and if it is something that will work for

Amber. The key for us is to maintain and build upon

our relationship. We ordered five more Hopper cars

today to help alleviate some of the bumps that have

occurred on the supply side in the past. I’m in the

office all next week, so give me a call and we can

discuss this proposal. Have a great weekend!

Sincerely, 

Brett Wilhelm, 

Reilly Industries, Inc.

On September 15, 2003, Bob Brister at Amber sent the

following e-mail to Brett Wilhelm at Reilly:

From: ACIBB5201@aol.com

Sent: Monday, September 15, 2003 2:44 PM

To: BWilheim@reilyind.com

Subject: Re: FW: 2004 pricing

Brett

looks good to me please work the contract up

bob

amber

Brett Wilhelm at Reilly responded to the above message as

follows: 

Subject: Re: FW: 2004 pricing

Sent: 9/15/033 1:02:36 PM Pacific Standard Time

From: BWilhelm@reilyind.com

To: ACIBB5201@aol.com

Bob,

What type of volume are you committing to? Will it 

[at ] least be the same as 2003?

Brett

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(Decl. of Bobby Brister, Doc. 20, Ex. A (formatting modified).) 

At some point, either during or following this exchange of

e-mails, Wilhelm called Brister to confirm the quantity of

potassium chloride Amber intended to purchase from Reilly in

2004. (PSF #36.) Brister orally confirmed that Amber would

purchase at least as much or more potassium chloride from Reilly

as it had in 2003. (PSF #37.) However, the alleged agreement

was never reduced to writing. In fact, at no point during the

course of Amber and Reilly’s business relationship did the two

companies ever execute a formal written contract reflecting any

long term contractual arrangement. (PSF #26.)

It is undisputed that, throughout the early part of 2004, up

until March 15, 2004, the date on which Reilly cut off shipments

to Amber, Amber bought all of its requirements for potassium

chloride from Reilly, and that these purchases were in excess of

the quantities it bought in 2003.

Reilly concedes that Amber intended to rely on the firm

price quoted by Reilly to enter into contracts with Amber’s

customers. (PSF #29.) Reilly also concedes that if Amber was

unable to meet its commitments, both as to supply and price, this

would pose a “very big problem” for Amber. (PSF #30.) When the

e-mail exchange between Wilhelm and Amber took place in the Fall

of 2003, Wilhelm knew Reilly was negotiating a sale of its

potassium chloride business. (PSF #31.)

Amber relied upon Reilly’s alleged promise by entering into

contracts with its own customers based on the quoted price. (PSF

#32.) Amber suffered damages as a result of Reilly’s failure to

supply potassium chloride at the allegedly agreed-upon price. 

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(PSF #33.) 

III. STANDARD OF REVIEW

Summary judgment is warranted only “if the pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact.” Fed. R. Civ.P. 56(c);

Cal. v. Campbell, 138 F.3d 772, 780 (9th Cir.1998). Therefore,

to defeat a motion for summary judgment, the non-moving party

must show (1) that a genuine factual issue exists and (2) that

this factual issue is material. Id. A genuine issue of fact

exists when the non-moving party produces evidence on which a

reasonable trier of fact could find in its favor viewing the

record as a whole in light of the evidentiary burden the law

places on that party. See Triton Energy Corp. v. Square D Co.,

68 F.3d 1216, 1221 (9th Cir.1995); see also Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 252-56 (1986). Facts are “material”

if they “might affect the outcome of the suit under the governing

law.” Campbell, 138 F.3d at 782 (quoting Anderson, 477 U.S. at

248).

The non-moving party cannot simply rest on its allegations

without any significant probative evidence tending to support the

complaint. Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th

Cir.2001). The plain language of Rule 56(c) mandates the entry

of summary judgment, after adequate time for discovery and upon

motion, against a party who fails to make a showing sufficient to

establish the existence of an element essential to the party's

case, and on which that party will bear the burden of proof at

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trial. In such a situation, there can be “no genuine issue as to

any material fact,” since a complete failure of proof concerning

an essential element of the nonmoving party's case necessarily

renders all other facts immaterial. Celotex Corp. v. Catrell,

477 U.S. 317, 322-23 (1986). The more implausible the claim or

defense asserted by the non-moving party, the more persuasive its

evidence must be to avoid summary judgment. See United States ex

rel. Anderson v. N. Telecom, Inc., 52 F.3d 810, 815 (9th

Cir.1996). Nevertheless, the evidence must be viewed in a light

most favorable to the nonmoving party. Anderson, 477 U.S. at

255. A court's role on summary judgment is not to weigh evidence

or resolve issues; rather, it is to determine whether there is a

genuine issue for trial. See Abdul-Jabbar v. G.M. Corp., 85 F.3d

407, 410 (9th Cir.1996).

IV. ANALYSIS

A. Formation of a Contract

1. Formation of a Written Contract/ Statute of Frauds

Requirement.

Section 2201 of the California Commercial Code (“the Code”)

provides in relevant part as follows:

Except as otherwise provided in this section a contract

for the sale of goods for the price of five hundred

dollars ($500) or more is not enforceable by way of

action or defense unless there is some writing

sufficient to indicate that a contract for sale has

been made between the parties and signed by the party

against whom enforcement is sought or by his or her

authorized agent or broker. A writing is not

insufficient because it omits or incorrectly states a

term agreed upon but the contract is not enforceable

under this paragraph beyond the quantity of goods shown

in the writing.

Cal. Comm. Code § 2201(1) (“Formal requirements; statute of

frauds”).

The statute of frauds covers contracts for the sale of goods

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over $500. Goods means “all things (including specially

manufactured goods) which are movable at the time of

identification to the contract for sale other than the money in

which the price is to be paid, investment securities...and things

in action.” Cal. Com. Code § 2105(1). Potassium chloride is a

“thing” and is therefore a “good” for purposes of the statute of

frauds. It is undisputed that alleged contract, if formed, was

for more than $500 worth of potassium chloride. Therefore, the

alleged requirements contract must conform to the statute of

frauds in order to be enforceable. 

Plaintiff alleges that the series of e-mails between 

authorized agents of Amber and Reilly establish an enforceable

contract. A contract within the statute of frauds is enforceable

“if it is evidenced by any writing, signed by or on behalf of the

party to be charged, which [1] reasonably identifies the subject

matter of the contract, [2] is sufficient to indicate that a

contract with respect thereto has been made between the parties

or offered by the signer to the other party, and [3] states with

reasonable certainty the essential terms of the unperformed

promises in the contract.” Rest. 2d. Contracts, § 131. 

Here, the statute of frauds is not satisfied because the emails do not sufficiently “indicate that a contract with respect

thereto has been made between the parties or offered by the

signer to the other party.” Generally, “[a]n offer is the

manifestation of willingness to enter into a bargain, so made as

to justify another person in understanding that his assent to

that bargain is invited and will conclude it.” 1 Witkin Cal.

Summ., Ch. I, Contracts § 125 (10th ed. 2005). Similarly,

section 26 of the Second Restatement of Contracts states: 

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A manifestation of willingness to enter into a bargain

is not an offer if the person to whom it is addressed

knows or has reason to know that the person making it

does not intend to conclude a bargain until he has made

a further manifestation of assent.

 

(quoted in 1 Witkin, Contracts § 130.) 

The e-mail of September 12, 2003, from Brett Wilhelm, the

manager of Reilly’s brine division, to Bob Brister, Amber’s

president, reads in relevant part:

...I’d be willing to work out a contract with you for

the upcoming year we hold the material pricing, but

push through the increase in retail rate (4%). This

would account for approximately $1.00 - $1.50 a ton

increase. If the volume remains the same, or

increases, this would be something I’d be willing to do

to maintain our partnership. Let me know if this works

for you for the upcoming year and if it is something

that will work for Amber. The key for us is to

maintain and build upon our relationship. We ordered

five more Hopper cars today to help alleviate some of

the bumps that have occurred on the supply side in the

past. I’m in the office all next week, so give me a

call and we can discuss this proposal. Have a great

weekend!

(emphasis added.)

This e-mail did not constitute an offer because it merely

invited the parties to “work[] out a contract,” that would be

reduced to writing, and evidenced only a willingness to “discuss

this proposal.” Wilhelm did not “intend to conclude a bargain

until he [had] made a further manifestation of assent.” As such,

this e-mail it is no more than an invitation to negotiate.

On September 15, 2003, Brister replied on behalf of Amber:

“[L]ooks good to me[.] [P]lease work the contract up[.]” Since

Wilhelm’s prior e-mail did not constitute an offer, it did not

create the power in Brister to accept. Nor does Brister’s reply

purport to actually be an acceptance. Rather, Brister indicates

that Reilly should “work the contract up.” This language

evidences an understanding that no contract yet existed and that

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Amber intended that any contract be reduced to writing. No

written contract was ever prepared.

The final e-mail in this series is Wilhelm’s response to

Brister’s reply: “What type of volume are you committing to? 

Will it be the same as 2003?” This specifically indicates that

Brister had not offered a specified quantity in his e-mail, and

Wilhelm needed to establish this term with certainty before

making the offer of the quoted price. No evidence of a written

reply by Brister was submitted. 

The writings in evidence do not indicate that a contract was

formed, as there was no offer and acceptance. Therefore, unless

the statute of frauds is excused or an exception applies, the

alleged agreement is unenforceable.

2. Exception to the Statute of Frauds for Certain

Oral Agreements.

Although the e-mails do not themselves establish that a

written contract for sale was formed, California’s Commercial

Code provides several ways in which an oral agreement may satisfy

the statute of frauds. Cal. Comm. Code. § 2201(2)-(3). 

Potentially relevant in this case is Section 2201(3)(b), which

provides: “A contract which does not satisfy the requirements of

[the statute of frauds] but which is valid in other respects is

enforceable...[i]f the party against whom enforcement is sought

admits in his or her pleading, testimony, or otherwise in court

that a contract for sale was made, but the contract is not

enforceable under this provision beyond the quantity of goods

admitted...” (emphasis added).

Although Mr. Wilhelm of Reilly admitted to providing a firm

price to Amber in the fall of 2003 for 2004 (Wilhelm Depo. 107-

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108), Wilhelm nowhere admits that a contract or a requirement

contract was made between the parties. This, is insufficient to

satisfy Section 2201. 

B. Promissory Estoppel.

Amber asserts that Reilly should be estopped from

disclaiming the existence of a contract because Reilly made an

oral promise to Amber upon which Amber relied to its detriment. 

California Commercial Code section 1103(b) states “[u]nless

displaced by the particular provisions of this code, the

principles of law and equity, including...estoppel...supplement

its provisions.” Estoppel serves as “one further exception to

imposition of the statute of frauds.” Allied Grape Growers v.

Bronco Wine Co., 203 Cal. App. 3d 432, 444 (1988). The

California Supreme Court has held:

The doctrine of estoppel to assert the statute of

frauds has been consistently applied by the courts of

this state to prevent fraud that would result from

refusal to enforce oral contracts in certain

circumstances. Such fraud may inhere in the

unconscionable injury that would result from denying

enforcement of the contract after one party has been

induced by the other seriously to change his position

in reliance on the contract....” 

Monarco v. Lo Greco, 35 Cal. 2d 621, 623 (1950).

The doctrine of estoppel is proven where one party

suffers an unconscionable injury if the statute of

frauds is asserted to prevent enforcement of oral

contracts. Unconscionable injury results from denying

enforcement of a contract after one party is induced by

another party to seriously change position relying upon

the oral agreement. It also occurs in cases of unjust

enrichment.

Allied, 203 Cal. App. 3d at 434. Application of the doctrine is

ordinarily a question of fact. Byrne v. Laura, 52 Cal. App. 4th

1054, 1068 (1997)(citing Phillippe v. Shapell Industries, 43 Cal.

3d 1247, 1272 (1987)(Kaufman, J dissenting)).

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1. Promise.

The threshold question is whether any oral agreement was

reached between the parties prior to Amber’s detrimental

reliance. To be binding for purposes of promissory estoppel, the

promise must be “clear and unambiguous.” Lange v. TIG Ins. Co.,

68 Cal. App. 4th 1179, 1185-86 (1998)(reviewing numerous cases

and treatises that so hold). 

Plaintiff alleges that an oral requirements contract was

formed here. Requirements contracts “have been enforced by the

courts with little difficulty, where the surrounding

circumstances indicate the approximate scope of the promise.” 

Seaman's Direct Buying Service, Inc. v. Standard Oil Co., 36 Cal.

3d 752, 763 (1984)(overruled on other grounds by Freeman & Mills,

Inc. v. Belcher Oil Co., 11 Cal. 4th 85 (1995)). A specific

quantity term is not required if quantity may be measured by the

requirements of the buyer or if the contract is for exclusive

dealings. California Commercial Code section 2306 provides: 

 (1) A term which measures the quantity by the output

of the seller or the requirements of the buyer means

such actual output or requirements as may occur in good

faith, except that no quantity unreasonably

disproportionate to any stated estimate or in the

absence of a stated estimate to any normal or otherwise

comparable prior output or requirements may be tendered

or demanded.

(2) A lawful agreement by either the seller or the

buyer for exclusive dealing in the kind of goods

concerned imposes unless otherwise agreed an obligation

by the seller to use best efforts to supply the goods

and by the buyer to use best efforts to promote their

sale.

Comment 3 to section 2306 specifically addresses the import of a

minimum quantity term: 

If an estimate of output or requirements is included in

the agreement, no quantity unreasonably

disproportionate to it may be tendered or demanded. Any

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minimum or maximum set by the agreement shows a clear

limit on the intended elasticity. In similar fashion,

the agreed estimate is to be regarded as a center

around which the parties intend the variation to occur.

Here, Bob Brister testified that the e-mails exchanged in

September 2003 and a contemporaneous phone conversation between

Mr. Brister (of Amber) and Mr. Wilhelm (of Reilly) resulted in a

two-way promise, pursuant to which Reilly promised to provide

Amber a firm price for 2004, in exchange for Amber’s commitment

not only to purchase its requirements from Reilly but to purchase

at least as much potassium chloride as it had in 2003. (Brister

Depo. at 203-205.) Although Reilly disputes the formation of any

such agreement, on summary judgment it is Amber’s version of

events that must be accepted. Amber’s evidence indicates that an

oral requirements contract was formed.

2. Reilly’s Argument that Exclusivity is a Necessary

Element of a Requirements Contract.

Reilly argues that a requirements contract can only be

formed if the buyer agrees to purchase its requirements

exclusively from the seller. It is undisputed here that, on

occasions when Reilly could not deliver Potassium Chloride to

Amber, Amber purchased potassium chloride from a different

company, Mississippi Potash. (Brister Depo at 48-50.) Mr.

Brister testified that he believed Amber was obligated to

purchase 100% of its needs from Reilly, unless Reilly was unable

to supply. If it appeared that Reilly would be unable to meet

Amber’s needs, Amber would communicate closely with Reilly to

ensure that this really was the case before purchasing from

Mississippi Potash. (Id. at 54-55.) Reilly asserts that this

arrangement precludes the existence of a requirements contract

because Amber did not purchase exclusively from Reilly. 

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First, demanding exclusivity for all requirements contracts

is contrary to the plain language of California Commercial Code

section 2306, which clearly indicates that a requirements

contract may be formed either (a) when the agreed-upon quantity

term is for “such actual...requirements as may occur in good

faith” or (b) when the agreement is for exclusive dealing in the

kind of goods concerned...” (emphasis added). 

In support of imposing an exclusivity requirement on all

requirements contracts, Reilly cites Volume 1 of Witkin’s Summary

of California Law, Contracts, Chapter 1, Section 228, which

provides:

Where the proposal is to furnish all goods of a certain

kind that the other party may need or require in a

certain business for a definite period, acceptance

results in a contract. Although the acceptor does not

in this situation agree to take any particular quantity

(for he or she may not need any), there is

consideration, because the acceptor has parted with the

right to buy the goods elsewhere. (Bartlett Springs Co.

v. Standard Box Co. (1911) 16 C.A. 671, 672, 117 P.

934; Tennant v. Wilde (1929) 98 C.A. 437, 454, 277 P.

137; Andersen v. La Rinconada Country Club (1935) 4

C.A.2d 197, 199, 40 P.2d 571; Ross v. Dunne Co. (1953)

119 C.A.2d 690, 698, 260 P.2d 104; Advance Med.

Diagnostic Laboratories v. Los Angeles (1976) 58 C.A.3d

263, 270, 129 C.R. 723, citing the text; see U.C.C.

2306; 2 Corbin (Rev. ed.), §6.5; 3 Williston 4th,

§7:12; 17A Am.Jur.2d (2004 ed.), Contracts §132; 52

Harv. L. Rev. 836; 78 Harv. L. Rev. 1212 [comprehensive

analysis of problems of drafting and construction]; 8

So. Cal. L. Rev. 243; 26 A.L.R.2d 1139 [mutuality of

contract to furnish another with his or her needs,

wants, desires, requirements, and the like]; 30

A.L.R.4th 396 [output contracts under §2-306(1) of the

Uniform Commercial Code].)

But, this summary, which is part of a subchapter dedicated to

problems of consideration, relies upon cases in which the

purchaser’s needs were so completely uncertain that consideration

was lacking. For example, in Anderson v. La Rinconada Country

Club, 4 Cal. App. 2d 197, 199-200 (1935), the purchaser agreed to

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As a general rule “[c]onsideration may be either (1) a 1

benefit conferred or agreed to be conferred upon the promisor or

some other person; or (2) a detriment suffered or agreed to be

suffered by the promisee or some other person.” 1 Witkin,

Contracts, Ch. I, § 203. 

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take from the supplier “all the water it should need for its

lands, depending...upon seasonal and weather conditions....” 

Even though the purchaser had not agreed to take any particular

quantity, a circumstance which otherwise might result in the

absence of consideration, the purchaser promised to buy water

from “no other source....” Id. at 199. The Andersen court held

that, even though there was a chance that the purchaser would buy

nothing during the contract period, “a promise of one party to

buy of no one else is [] sufficient consideration.” Id.; see

also, Bartlett Springs Co. v. Standard Box Co., 16 Cal App. 671,

672 (1911)(“Here there is no consideration for the promise or

offer, for the promisee has not bound himself to anything, and

has incurred no legal liability at all.”). 

Here, in exchange for Reilly’s promise of a fixed price,

Amber promised to purchase a minimum quantity of potassium

chloride. This is sufficient consideration. It is not 1

essential that a requirements contract containing a minimum

purchase quantity also be for exclusive dealings. 

3. Unconscionable Injury. 

The second requirement to establish promissory estoppel is

that the party asserting estoppel must have suffered

“unconscionable injury:

The doctrine of estoppel is proven where one party

suffers an unconscionable injury if the statute of

frauds is asserted to prevent enforcement of oral

contracts. Unconscionable injury results from denying

enforcement of a contract after one party is induced by

another party to seriously change position relying upon

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The court is under no obligation to search the record. 2

See Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir. 1996). 

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the oral agreement. It also occurs in cases of unjust

enrichment.

Allied, 203 Cal. App. 3d at 434

The undisputed evidence arguably supports a finding of

unconscionable injury. Mr. Wilhelm testified that he knew that

Amber intended to, and in fact did, rely on the firm price for

product offered by Reilly for 2004 by entering into contracts to

supply Amber’s own customers. (Wilhelm Depo. at 100-101, 134.) 

Mr. Wilhelm, of Reilly, also testified that he knew that if Amber

was unable to meet its commitments to its customer, both as to

supply and price, it would be a “very big problem” for Amber. 

(Id. at 100-101.) Finally, it is undisputed that Amber suffered

financial damages as a result of the alleged breach, because

Amber purchased potassium chloride from other sources at

unfavorable prices. (Brister Decl. at ¶¶15-16.) 

4. Reilly’s Theory that Amber Has Admitted that the

Alleged “Promise” by Reilly was Really an

“Assumption” Made by Amber. 

Reilly asserts that Amber’s promissory estoppel claim must

fail because “Amber’s witnesses have testified that the alleged

‘promise’ was not a promise made by Reilly, but rather an

assumption made by Plaintiff based upon the contract identified

above and their prior business relationship.” (See PSF #24.) In

support of this assertion, Reilly cites the Deposition of William

Brister at paragraphs 134:15-19, 161:1-3, 205-7-11. But, none of

these record citations support Reilly’s assertion. 

2

The first citation is to page 134, lines 15-19 of the

Brister Deposition which contains the following question:

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Q. So based upon the exchange of e-mail and your

understanding as to a specific price from Reilly

Industries, you made verbal commitments to Geo-Western,

MI Drilling Fluid, Enterprise Drilling, and that's it;

correct?

(Mr. Brister answered in the affirmative at line 20, which was

not cited by Reilly.) This exchange does not support Reilly’s

assertion. In fact, it appears to confirm that Amber relied upon

the firm price it received frm Reilly to enter into contracts

with its customers. 

The second excerpt cited by Reilly is page 161, lines 1-3 of

the Brister Deposition:

Q. It was your assumption that it was the same it's

always been; correct?

A. Been that way for 15 years. Yes.

This exchange, on its own, is not particularly enlightening. 

When placed in context of the preceding and subsequent

discussion, however, it is apparent that Brister was discussing

whether the 2004 agreement retained a “net-90 day” payment term

that had been part of the parties’ previous agreements for

fifteen years. Brister indicated that it was his “assumption”

that this provision was the same as it always had been. This is

far from an admission that he assumed the existence of the entire

agreement. 

Finally, Reilly cites page 205, lines 7-11 of the Brister

Deposition:

[Q.] So the e-mail and the one conversation comprised

the promise that's being discussed in Paragraph 19 of

Exhibit 31; correct?

A. It would be the contract for 2004, yes.

Again, this excerpt is not meaningful on its own, particularly

given that the cited Exhibit 31 was not presented to the Court. 

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invoices containing the Standard Terms. For the purposes of this

discussion only, the district court will assume the admissibility

of those documents.

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Nevertheless, when placed in context, this exchange does not

support Reilly’s assertion. In the preceding and subsequent

pages, Brister was merely discussing the various communications

that led him to believe an agreement had been reached.

5. Conclusion Regarding Promissory Estoppel.

In sum, viewing the evidence in the light most favorable to

Plaintiffs, an oral requirements contract was formed; exclusivity

is not required; and unconscionable injury occurred. Defendant’s

motion for summary judgment is DENIED as to the claim of

promissory estoppel. 

C. The Import of the Purchase Orders and Invoices.

Reilly places great weight on the fact that, prior to each

shipment of potassium chloride, Amber sent Reilly a purchase

order. Then, along with each shipment, Reilly sent Amber an

invoice, incorporating standard terms and conditions (the

“Standard Terms”), including an integration clause, which stated

that the invoice and terms and conditions constitute the parties’

entire agreement and that the terms can only be amended, modified

or revised through a written document executed by the partes.3

Reilly asserts (a) that Amber’s purchase order was an

“offer”; (b) that Reilly’s invoice, incorporating the Standard

Terms, was an acceptance of that offer; and (c) that the Standard

Terms became a part of the contract. In support of this

assertion, Reilly cites California Commercial Code Section 2207,

which sets forth the procedure by which additional terms

contained in an acceptance or confirmation may become part of a

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 Cal. Com. Code § 2207 provides, in pertinent part: 4

(1) A definite and seasonable expression of acceptance

or a written confirmation which is sent within a

reasonable time operates as an accept ance even though

it states terms additional to or different from those

offered or agreed upon, unless acceptance is expressly

made conditional on assent to the additional or

different terms.

(2) The additional terms are to be construed as

proposals for addition to the contract. Between

merchants such terms become part of the contract

unless: (a) The offer expressly limits acceptance to

the terms of the offer; (b) They materially alter it;

or (c) Notification of objection to them has already

been given or is given within a reasonable time after

notice of them is received.

***

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contract. Amber does not directly address Section 2207 or its 4

applicability here. For the purposes of this discussion only, it

is assumed that the Standard Terms became part of a written

agreement between Amber and Reilly for each purchase. 

Assuming as much, Reilly suggests that the integration

clause precludes the alleged oral agreement from having any force

and effect. Specifically, Reilly asserts that the parol evidence

rule bars consideration of the oral agreement. Because this is a

contract for the sale of goods, the applicable parol evidence

rule is found in California Commercial Code Section 2202, which

provides:

Terms with respect to which the confirmatory memoranda

of the parties agree or which are otherwise set forth

in a writing intended by the parties as a final

expression of their agreement with respect to such

terms as are included therein may not be contradicted

by evidence of any prior agreement or of a

contemporaneous oral agreement but may be explained or

supplemented

(a) By course of dealing, course of performance, or

usage of trade (Section 1303); and

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California Commercial Code 2202, which applies to all 5

contracts for the sale of goods, slightly alters the parol

evidence rule as set forth in California Code of Civil Procedure

1856. Whereas section 1856 presumed integration, section 2202

“assumes that a written contract does not express the full

agreement of the parties unless the court expressly so finds.” 

Cal. Com. Code § 2202, Comment 1. 

An integration may be partial or complete. “[T]he 6

parties may intend a writing to finally and completely express

certain terms of their agreement rather than the agreement in its

entirety. When only part of the agreement is integrated, the

parol evidence rule applies to that part. However, extrinsic

evidence may be used to prove elements of the agreement not

reduced to writing.” Hayter, 18 Cal. App. 4th at 14 (citations

omitted).

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(b) By evidence of consistent additional terms unless

the court finds the writing to have been intended also

as a complete and exclusive statement of the terms of

the agreement.

(emphasis added). Accordingly, if the alleged oral agreement 5

contradicts the standard terms incorporated into the invoices,

the oral agreement must be disregarded. However, the oral

agreement may be supplemented by “course of dealing, course of

performance, or usage of trade.” Moreover, the oral agreement

may provide “consistent additional terms,” unless “the court

finds the writing to have been intended...as a complete and

exclusive statement of the terms of the agreement.” The

determination as to whether a contract is intended to be

“complete and exclusive” is a question for the court. Hayter

Trucking, Inc., v. Shell Western E&P, Inc., 18 Cal. App. 4th 1,

14 (1993) (discussing Cal. Code Civ. Pro. § 1856). 

“Evidence of surrounding circumstances and prior

negotiations may be admitted for the limited purpose of assisting

the trial court in determining whether a document was intended to

be the final agreement of the parties superseding all other

transactions.” Id. “[C]ourts do not necessarily treat merger 6

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or integration clauses as conclusive of whether a writing was

intended by the parties to encompass the entire agreement.” 

Trans-Tec Asia v. M/V Harmony Container, 435 F. Supp. 2d 1015,

1029 n. 19 (C.D. Cal. 2005). 

Here, the evidence viewed in a light most favorable to

Amber, indicates that the parties did not intend for the Standard

Terms contained within the invoice to constitute the complete and

exclusive statement of the terms of the agreement. For example,

Bob Brister testified in his deposition that he had no knowledge

of the Standard Terms:

Q. And you recognize this as, basically, a Reilly

invoice?

A. Yeah. It looks familiar.

Q. Do you see on the bottom where it says, "This sale

is subject to Reilly Industries standard terms and

conditions"?

A. Yes, I do.

Q. Did you ever notice that before –

A. No.

Q. -- today. Okay. Taking a look at what's attached,

"Terms and Conditions of Sale Reilly Industries," have

you ever seen that before?

A. Not that I'm aware of.

Q. Were you aware that the invoices and the product

being shipped were subject to Pages -460 and -461?

A. No.

Q. I will represent to you that these were taken from

what you produced to us.

Do you see the numbers?

A. I understand that. But I'm not aware of them.

Q. So you are not familiar with any of the terms and

conditions that are contained in Pages -460 or -461?

A. No.

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Q. So you are not familiar with Paragraph 18 on Page

-461?

A. I am not familiar with these documents at all.

Q. So in terms of what you understood, or Amber

understood, to be the terms and conditions of its

purchases from Reilly, you had no understanding that

they incorporated these terms and conditions on Pages

-- for example, on Pages -460 and -461?

A. I had no knowledge of them.

(Brister Depo. 142-144.) Similarly, Sandra Kay Newman, the

office manager of Amber throughout the relevant time period

testified, similarly, that she had never seen the “Standard

Terms.” (Newman Depo. 13-14.) 

Moreover, Brett Wilhelm, of Reilly, testified that the

parties’ practice for many years was that, in the fall of each

year, Reilly would give Amber a firm price, which would govern

pricing for the entire following year. (Wilhelm Depo 107-108.) 

Wilhelm specifically testified that he had given Amber a firm

price for the 2004 year. (Id. at 108.) Although Reilly disputes

that providing a “firm price” is sufficient to establish the

existence of a requirements contract, this fact, along with other

evidence that suggests a requirements contract was formed, is

sufficient to call into question Reilly’s assertion that the

Standard Terms were a complete expression of the parties’

agreement(s). Therefore, for the purposes of this motion for

summary judgment, the evidence supports a finding that the

agreement was not integrated.

The question then becomes whether the terms of the oral

agreement were contradictory or supplementary to the Standard

Terms. Reilly provided no argument and no authority on this

issue. There is, in fact, no apparent conflict between the

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substance of the oral agreement and the substance of any

agreement that may have been reached by the documents exchanged

between Amber and Reilly. The oral agreement relates to the

parties long term commitments and pricing arrangement, while the

purchase orders/invoices relate to specific transactions. Amber

contends that the purchase order/invoices are reflections of the

overall requirements agreement; Reilly contends otherwise. This

is a factual dispute that cannot be resolved on summary judgment. 

VI. CONCLUSION

The alleged requirements agreement for the sale of goods is

subject to the writing requirement contained in the statute of

frauds. The e-mails exchanged between the parties in the fall of

2003 are insufficient to establish the existence of a written

contract, and no exception to the statute of frauds applies. 

However, the evidence of an alleged oral promise made by Reilly

is sufficient to raise a question of fact as to the application

of promissory estoppel. Finally, assuming, arguendo, that the

documents exchanged between the parties formed a contract

containing an integration clause, there are facts, when viewed in

a light most favorable to Amber, which suggest that the parties

did not intend for these documents to be a complete expression of

their agreement. Accordingly, the parol evidence rule does not

bar the introduction of evidence regarding the oral agreement. 

For all these reasons, Reilly’s motion for summary judgment is

DENIED.

IT IS SO ORDERED.

Dated: February 14, 2007 /s/ Oliver W. Wanger 

b2e55c UNITED STATES DISTRICT JUDGE

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