Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_03-cv-02487/USCOURTS-azd-2_03-cv-02487-0/pdf.json

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

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

 The Court will deny the request for oral argument because the parties have submitted

memoranda thoroughly discussing the law and evidence and the Court concludes that oral

argument will not aid its decisional process. See Mahon v. Credit Bur. of Placer County,

Inc., 171 F.3d 1197, 1200 (9th Cir. 1999).

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

William J. Howard, 

Plaintiff, 

vs.

General Electric Capital Business Asset

Funding Corporation,

Defendant. 

)

)

)

)

)

)

)

)

)

)

)

)

)

No. CV-03-2487-PHX-DGC

ORDER

Pending before the Court are Plaintiff’s motion for partial summary judgment and

Defendant’s cross-motion for summary judgment on Plaintiff’s breach of contract claim.

Docs. ##127, 136. Also pending is Defendant’s motion for summary judgment on Plaintiff’s

breach of the duty of good faith and fair dealing claim. Doc. #129. For the reasons set forth

below, the Court will deny the motions.1

Background

Plaintiff attempted to purchase thirteen Denny’s restaurants from Phoenix Restaurant

Group (“PRG”). On May 4, 2001, Defendant sent Plaintiff a loan proposal offering to lend

Case 2:03-cv-02487-DGC Document 164 Filed 03/31/06 Page 1 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

 Plaintiff initially sought a loan from Defendant on behalf of a corporation Plaintiff

controlled, Salient, Inc. Plaintiff later substituted Olio, Inc., for Salient. By the time this

lawsuit was filed, Olio had assigned its assets to Plaintiff.

- 2 -

Plaintiff $9.5 million for the purchase of the restaurants. Plaintiff accepted the proposal

three days later. On July 2, 2001, Defendant sent Plaintiff a commitment letter that

incorporated the terms of the loan proposal. Plaintiff accepted the commitment letter the

next day. On October 5, 2001, Defendant sent Plaintiff a termination letter stating that

Defendant was terminating its loan commitment “because of a material adverse change in the

circumstances of the transaction.”2

 

Plaintiff commenced this action by filing a complaint against Defendant in state court.

Plaintiff alleged that Defendant wrongfully terminated the commitment letter based on a false

rumor that PRG might file for bankruptcy. After Plaintiff filed an amended complaint,

Defendant removed the action to this Court. Doc. #1.

Plaintiff filed a second amended complaint that purported to state four claims for

relief: breach of contract, breach of the duty of good faith and fair dealing, tortious

interference with business expectancy, and indemnification. Doc. #19. On April 12, 2004,

the Court granted Defendant’s motion to dismiss the tortious interference with business

expectancy and indemnification claims. Doc. #30. Plaintiff filed a third amended complaint

on April 27, 2004, re-alleging the breach of contract and breach of the duty of good faith and

fair dealing claims. Doc. #37. Defendant filed an answer the same day. Doc. #38.

Discussion

I. Summary Judgment Standard.

Summary judgment is appropriate if the evidence, viewed in the light most favorable

to the nonmoving party, “show[s] that there is no genuine issue as to any material fact and

that the moving party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c); see

Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Substantive law determines which

facts are material and “[o]nly disputes over facts that might affect the outcome of the suit . . .

will properly preclude the entry of summary judgment.” Anderson v. Liberty Lobby, Inc.,

Case 2:03-cv-02487-DGC Document 164 Filed 03/31/06 Page 2 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

 The § 6 principles include (a) the needs of the interstate and international systems,

(b) the relevant policies of the forum, (c) the relevant policies of other interested states,

(d) the protection of justified expectations, (e) the basic policies underlying the particular

field of law, (f) certainty, predictability and uniformity of result, and (g) ease in the

determination and application of the law to be applied. Restatement § 6(2)(a)-(g). 

- 3 -

477 U.S. 242, 248 (1986). To preclude summary judgment the dispute must be genuine, that

is, the evidence must be “such that a reasonable jury could return a verdict for the nonmoving

party.” Id.

II. Analysis.

A. Does Arizona or Washington Law Apply to Plaintiff’s Contract Claims?

Defendant states that because Arizona’s application of the implied duty of good faith

and fair dealing differs from Washington law, a true conflict of law exists with respect to

Plaintiff’s contract claims. Doc. #129 at 6 n.3. The Court agrees. Compare Wells Fargo

Bank v. Arizona Laborers, Teamsters, & Cement Masons Local No. 395 Pension Trust, 38

P.3d 12, 29 ¶ 64 (Ariz. 2002) (“The duty of good faith extends beyond the written words of

the contract. . . . [A] party may . . . breach its duty of good faith without actually breaching

an express covenant in the contract.”) with Badgett v. Sec. State Bank, 807 P.2d 356, 360

(Wash. 1991) (“The duty to cooperate exists only in relation to performance of a specific

contract term. . . . [T]here cannot be a breach of the duty of good faith when a party simply

stands on its rights to require performance of a contract according to its terms.”). Because

this is a diversity case, the Court must apply the choice-of-law rules of Arizona, the forum

state. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941). 

Arizona has adopted Section 188 of the Restatement (Second) of Conflicts of Laws

(“Restatement”) as the basis for deciding choice of law issues involving contracts. See Landi

v. Arkules, 835 P.2d 458, 463 (Ariz. Ct. App. 1992). Section 188 provides that “[t]he rights

and duties of the parties with respect to an issue in contract are determined by the local law

of the state which . . . has the most significant relationship to the transaction and the parties

under the principles stated in § 6.” Restatement § 188(a)(1).3

 “[T]he contacts to be taken

Case 2:03-cv-02487-DGC Document 164 Filed 03/31/06 Page 3 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 4 -

into account in applying the principles of § 6 . . . include: (a) the place of contracting, (b) the

place of negotiation of the contract, (c) the place of performance, (d) the location of the

subject matter of the contract, and (e) the domicile, residence, . . . place of incorporation and

place of business of the parties.” Restatement § 188(a)(2).

1. The Place of Contracting.

The place of contracting is the place where the last act necessary to make the contract

binding occurred under the law of the forum state. Restatement § 188, cmt. e. Arizona has

adopted the “mailbox rule” for contract acceptance. See Cohen v. First Nat’l Bank of

Nogales, 198 P. 122, 124 (Ariz. 1921). Under that rule, an offer is accepted and a contract

is binding when the acceptance is sent. See id; Spellman Lumber Co. v. Hall Lumber Co.,

241 P.2d 196, 198 (Ariz. 1952) (“[T]he contract as to the second car of lumber was formed

. . . when the defendants formally accepted the offer of the plaintiffs by mailing them a

written confirmation.”); Molybdenum Corp. of Am. v. Superior Ct., 498 P.2d 166, 168

(Ariz. Ct. App. 1972) (“[T]he defendant’s employment offer was accepted by the plaintiff

. . . by his act of depositing the written acceptance in the mail in Arizona.”). In this case, it

is undisputed that Plaintiff signed both the loan proposal and commitment letter in Arizona

and sent them to Defendant from Arizona. Docs. ##129 at 8, 140 at 12. This factor favors

the application of Arizona law.

2. The Place of Negotiation. 

The place where the parties negotiate the contract has little significance if “there is no

one single place of negotiation and agreement[.].” Restatement § 188, cmt. e. The loan

proposal was negotiated in Arizona and Michigan. Doc. #162 ¶ 24. The commitment letter

was negotiated primarily in Washington. Docs. ##130 ¶ 8, 162 ¶ 25. This factor does not

weigh in favor of either Arizona or Washington law.

3. The Place of Performance.

Neither the loan proposal nor the commitment letter requires a specific place of

performance. Doc. #128 Exs. A, K. Defendant contends that the only performance

contemplated by the parties after Defendant funded the loan was Plaintiff’s repayment of the

Case 2:03-cv-02487-DGC Document 164 Filed 03/31/06 Page 4 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 5 -

loan to Defendant in Washington. Doc. #129 at 9-10 (citing Taylor v. Sec. Nat’l Bank, 514

P.2d 257 (Ariz. Ct. App. 1973) (holding that California law applied because the defendant

was contractually obligated to repay a loan in California)). Because Defendant did not

fund the loan, however, Plaintiff had no obligation to repay it. See Taylor, 514 P.2d at 261

(After receipt of the plane by the defendant Taylor, the only continuing aspect of this entire

transaction was the required performance by him of his obligation to make monthly payments

to the assignee in California.”) (emphasis added). The initial performance contemplated by

the parties was Defendant’s funding of the loan to an Arizona corporation. See Docs. ##37

¶ 1, 128 Exs. A, K. This factor favors Arizona law.

4. The Location of the Subject Matter of the Contract.

The direct subject matter of the contract was the funding of a loan to an Arizona

corporation and the repayment of the loan to a Washington corporation. See Doc. #128

Exs. A, K. The indirect subject matter was the purchase of restaurants located in Florida and

Missouri. This factor does not weigh in favor of either Arizona or Washington law.

5. The Location of the Parties.

At the time of contract formation and termination, Defendant was incorporated in

Delaware and located in Washington, Salient and Olio were incorporated and located in

Arizona, and Plaintiff and his wife, who personally guaranteed the loan, were residents of

Arizona. Docs. ##129 at 10, 140 at 14. This factors weighs in favor of Arizona law.

6. The Relevant § 6 Principles.

Arizona takes a more expansive view of the duty of good faith and fair dealing than

does Washington. Compare Wells Fargo, 38 P.3d at 29 with Badgett, 807 P.2d at 360.

Arizona places greater importance on the primary benefit of the agreement and the parties’

justified expectations. See Wells Fargo Bank, 38 P.3d at 31 ¶ 69. Based on the commitment

letter, Plaintiff justifiably expected that Defendant would fund the loan, which in turn would

enable Plaintiff to purchase the restaurants from PRG. The Court concludes that Arizona’s

policies of protecting the primary benefit of the agreement and the parties’ justified

expectations should be the controlling state interest. See Restatement § 6(1)(b)-(e).

Case 2:03-cv-02487-DGC Document 164 Filed 03/31/06 Page 5 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4 See also Doc. #43 (4/7/04 Hr’g Tr. 37-38 (concluding that Arizona had the most

significant relationship to Plaintiff’s tort claims under Restatement §§ 145 and 6)).

5

 Defendant requests that the Court not consider Plaintiff’s new “claim” of an oral

agreement because Plaintiff never pled or disclosed evidence of the “claim.” Doc. #159 at

2-3. The Court will deny the request. Plaintiff raised the issue of an oral agreement in

response to Defendant’s revocation argument. The issue of an oral agreement is simply part

of Plaintiff’s properly pled breach of contract claim. See Fed. R. Civ. P. 8(a). Moreover, the

documents Plaintiff relies on in support of an oral agreement were created by Defendant,

negating any unfair surprise or prejudice. 

- 6 -

7. Conclusion.

Factors 1, 3, and 5 of § 188 weigh in favor of applying Arizona law, while factors

2 and 4 are neutral. The relevant § 6 principles also weigh in favor of Arizona’s policies of

protecting the primary benefit of the agreement and the parties’ justified expectations. The

Court thus concludes that Arizona law should apply to the contract claims. See Restatement

§§ 188, 6; Landi, 835 P.2d at 463 (affirming the trial court’s decision to apply Arizona law

under Restatement §§ 188 and 6 because “Arizona [was] the state with the most significant

contacts”); Aries v. Palmer Johnson, Inc., 735 P.2d 1373, 1381 (Ariz. Ct. App. 1987)

(holding that Arizona law applied because the contract was entered into in Arizona and one

party was domiciled in Arizona).4

B. Plaintiff’s Breach of Contract Claim.

1. Revocation.

The commitment letter, as amended, set a September 26, 2001 funding cut-off date.

Doc. #130 Ex. 5. Around that time, the parties discussed extending the cut-off date. On

October 3, 2001, Defendant sent Plaintiff an amendment to the commitment letter that

addressed the issue of extending the cut-off date to October 31, 2001. Id. Ex. 6. 

Defendant contends in its cross-motion for summary judgment that the October 3

amendment was an offer to extend the funding cut-off date and that Defendant revoked its

offer two days later when it sent Plaintiff the termination letter. Doc. #136 at 11-13.

Plaintiff argues that there is a genuine dispute as to whether the parties had an enforceable

oral agreement to extend the cut-off date prior to termination. The Court agrees.5

Case 2:03-cv-02487-DGC Document 164 Filed 03/31/06 Page 6 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

 Marinace does not recall his conversations with Plaintiff or how the October 31,

2001 cut-off date was selected. Id. Ex. D. 

7

 Defendant argues in its cross-motion that Plaintiff’s damages should be limited to

his reliance damages. Doc. #136 at 14-16. Defendant, however, did not seek or obtain leave

to raise this issue. See id. at 3 n.1. The Court granted Defendant leave to file a belated

second motion for summary judgment on the revocation issue because that issue may have

been dispositive of the case. See Docs. ##139, 148. The Court will not consider Defendant’s

damages argument.

- 7 -

Construed in Plaintiff’s favor, the evidence shows the following: During telephone

conversations with Plaintiff in late September 2001, Defendant’s Regional Credit Manager,

Peter Marinace, agreed to extend the funding cut-off date to October 31, 2001. Doc. #156

¶ 9, Ex. G. On September 27, 2001, Marinace sent an e-mail to Defendant’s Contract

Administrator, Tami Schlicter, instructing her to “issue [the] funding extension letter through

10-31-01.” Id. ¶ 10, Ex. H. On October 3, 2001, Marinace sent a follow-up e-mail

instructing Schlicter to fax the extension letter to Plaintiff and explaining that “per [his]

earlier e-mail, [Plaintiff] has now through 10-31-01.” Id. ¶ 11, Ex. I (emphasis added).

Two days later, Defendant sent Plaintiff a letter terminating the commitment letter. Doc.

#128 Ex. O.

A jury reasonably could conclude from this evidence that the parties had an

enforceable oral agreement extending the funding cut-off date to October 31, 2001. Plaintiff

has testified that Marinace agreed to the extension in late September 2001, and Marinace’s

e-mails appear to confirm the agreement. Doc. #156 Exs. G-I.6

 Defendant’s October 5 letter

stated that Defendant was “terminating” the loan commitment, not revoking an offer to

extend the funding cut-off date. Doc. #128 Ex. O. Whether the parties intended to extend

the cut-off date to October 31, 2001 is a factual question for the jury. See Braxton-Secret

v. Robins Co., 769 F.2d 528, 531 (9th Cir. 1985) (stating that “[q]uestions involving a

person’s state of mind . . . are generally factual issues inappropriate for resolution by

summary judgment”). The Court will deny Defendant’s cross-motion for summary

judgment.7

Case 2:03-cv-02487-DGC Document 164 Filed 03/31/06 Page 7 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 8 -

2. Breach.

Plaintiff contends in its motion for partial summary judgment that Defendant

wrongfully terminated the commitment letter based on a false rumor that PRG might file for

bankruptcy. Doc. #1 at 1. Specifically, Plaintiff contends that Defendant’s reason for

terminating was not contemplated by either the material adverse change (“MAC”) clause in

the loan proposal or the MAC clause in the commitment letter. Id. (citing United Cal. Bank

v. Prudential Ins. Co. of Am., 681 P.2d 390 (Ariz. Ct. App. 1983)).

Defendant states that a PRG bankruptcy could have subjected the transaction between

PRG and Plaintiff to a fraudulent conveyance challenge and would have permitted PRG to

reject its primary leases on the restaurants being subleased to Plaintiff, in which case Plaintiff

could have lost possession of the leased premises. Doc. #136 at 10. Defendant argues that

the MAC clauses are exceptionally broad and that a jury reasonably could conclude from the

evidence that Defendant was entitled to terminate the commitment letter based on the threat

of a PRG bankruptcy.

a. The Loan Proposal MAC Clause. 

The MAC clause contained in the loan proposal provides:

In the event there shall be a material adverse change in [Plaintiff’s] financial

condition prior to funding, [Defendant] shall have the right and option to

terminate its obligation hereunder without thereby incurring any liability to

[Plaintiff].

Doc. #128 Ex. K. Defendant contends that the only reasonable interpretation of the phrase

“financial condition” is one that includes the “future prospects” of Plaintiff’s company.

Doc. #136 at 31-32. Defendant, however, ignores the language “prior to funding.” Neither

a fraudulent conveyance challenge nor Plaintiff’s loss of possession of the restaurants could

have occurred “prior to funding.” Those issues could have arisen only after the loan funded

and the deal closed. The Court concludes that the plain language of the loan proposal MAC

clause did not entitle Defendant to terminate its loan commitment based on the threat of a

PRG bankruptcy. See United Cal. Bank, 681 P.2d at 410 (“If the meaning of a contract can

be determined from the four corners of the document and cannot reasonably be construed in

Case 2:03-cv-02487-DGC Document 164 Filed 03/31/06 Page 8 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 9 -

more than one sense, . . . the court must give effect to the language of the agreement.”); see

also S.C. Johnson & Son, Inc., 167 F. Supp. 2d 657, 670 (D. Del. 2001) (interpreting the

phrase “financial condition” in a MAC clause as referring only to the seller’s pre-closing

financial condition and holding that a pending lawsuit against the seller did not materially

change the seller’s financial condition); Goodman Mfg. Co. v. Raytheon Co., No. 98 Civ.

2774 (LAP), 1999 WL 681382, at *14 (S.D.N.Y. Aug. 31, 1999) (“As for plaintiff’s theory

that ‘future prospects’ must be included in the definition of ‘financial condition,’ . . . the

parties failed to include such a meaning in the Agreement, and I decline the invitation to

insert it by judicial construction.”).

b. The Commitment Letter MAC Clause.

The MAC clause contained in the commitment letter provides:

Should the structure of the transaction between [Plaintiff] and [PRG]

materially change in a manner that [Defendant] deems unacceptable,

[Defendant] reserves the right to withdraw this commitment.

Doc. #128 Ex. A. Plaintiff contends that he is entitled to partial summary judgment because

there is no language in this MAC clause suggesting that the parties intended the clause to

apply to a future change in the structure of the transaction, i.e. a post-closing PRG

bankruptcy. Doc. #127 at 15. Defendant argues that a jury reasonably could conclude that

the MAC clause encompassed the parties’ expectation that Plaintiff would be able to operate

the restaurants without any serious threat to his ownership or continued possession of the

restaurants, and that a potential PRG bankruptcy posed such a threat. Doc. #136 at 22.

The Court agrees with Defendant. The parties left the phrase “structure of the

transaction” undefined in the commitment letter. See Doc. #128 Ex. A. The MAC clause

does not limit the relevant material changes to existing changes. Marinace has testified that

his intent in including the MAC clause in the commitment letter was to provide Defendant

with “the broadest possible protection from any changes in the structure of the transaction”

and to permit Defendant “to terminate its loan commitment if there were any changes in the

circumstances of [Plaintiff’s] acquisition that would materially affect [Plaintiff’s] ability to

Case 2:03-cv-02487-DGC Document 164 Filed 03/31/06 Page 9 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

8

 Plaintiff contends that Marinace’s affidavit must be stricken because it contradicts

his deposition testimony and is offered merely to create a triable issue. Doc. #156 at 12. The

Court disagrees. Marinace testified at his deposition that he could not recall why he included

the MAC clause in the commitment letter. This testimony does not foreclose a properly

refreshed recollection and therefore does not “flatly contradict” Marinace’s affidavit

testimony. See Kennedy v. Allied Mut. Ins. Co., 952 F.2d 262, 266-67 (9th Cir. 1991); see

also Anderson, 477 U.S. at 255 (stating that “[c]redibility determinations [and] the weighing

of evidence are jury functions, not those of a judge”).

9

 Plaintiff’s reliance on United California Bank is misplaced because in that case there

was no MAC clause in the commitment letter. 681 P.2d at 441.

10 Given this ruling, the Court need not address Defendant’s arguments that there are

triable issues as to whether Defendant is entitled to rescind its loan commitment and whether

Plaintiff could have met the conditions precedent to Defendant’s obligation to fund. See

Doc. #136 at 16-20.

- 10 -

repay [the] loan.” Doc. #137 Ex. 28 ¶ 12 (Marinace Aff.).8

 Defendant’s expert witness has

testified that the purpose of a MAC clause in the lending industry is to protect the lender

from new risks or a substantial increase in existing risks that did not exist at the time the loan

commitment was made. Id. Ex. 23 at 11.

Construing the evidence in Defendant’s favor, the Court finds a genuine factual issue

concerning the intended meaning of the commitment letter MAC clause. That issue must be

resolved by a jury, not the Court. See United Cal. Bank, 681 P.2d at 412 (stating that “any

ambiguity in [contract] documents is subject to a factual determination concerning the intent

of the parties and is to be resolved conclusively by the trier of fact”); In re Estate of Pouser,

975 P.2d 704, 709 (Ariz. Ct. App. ) (“If the will is reasonably susceptible to two

interpretations, that goal is better served by determining the testator’s intent as a question of

fact.”) (citing United Cal. Bank, 681 P.2d at 412); see also Braxton-Secret, 769 F.2d at 531

(questions involving a person’s state of mind are generally factual issues).9

 The Court will

deny Plaintiff’s motion for partial summary judgment on his breach of contract claim.10

C. Plaintiff’s Breach of the Duty of Good Faith and Fair Dealing Claim.

Defendant moves for summary judgment on the ground that Plaintiff has presented

no facts showing that Defendant breached a duty of good faith and fair dealing under

Case 2:03-cv-02487-DGC Document 164 Filed 03/31/06 Page 10 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

11 Under Washington law, “there is no ‘free-floating’ duty of good faith and fair

dealing that is unattached to an existing contract.” Keystone Land & Dev. Co. v. Xerox

Corp., 94 P.3d 945, 948 (Wash. 2004). Washington law “merely requires ‘that the parties

perform in good faith the obligations imposed by their agreement.’” Badgett v. Security State

Bank, 807 P.2d 356, 360 (Wash. 1991).

- 11 -

Washington law. Doc. #129 at 14. As set forth above, however, Arizona law applies to

Plaintiff’s contract claims. Defendant acknowledges that “Arizona’s application of the

implied covenant of good faith and fair dealing differs sharply from Washington law[.]”

Id. at 6 n.3. Under Arizona law, “[t]he duty of good faith extends beyond the written words

of the contract.” Wells Fargo Bank, 38 P.3d at 29 ¶ 6. A party may “breach its duty of good

faith without actually breaching an express covenant in the contract.” Id.11

Construed in Plaintiff’s favor, the evidence shows the following: PRG had been

in severe financial distress since 1999. Doc. #128 ¶¶ 2-5. Defendant knew about PRG’s

poor financial condition. Id. ¶¶ 6-8. Despite this knowledge, Defendant committed to lend

Plaintiff $9.5 million for the purchase of thirteen restaurants from PRG. Id. ¶¶ 10-11. On

October 3, 2001 – two days before the loan transaction was scheduled to close – Defendant

decided to terminate its loan commitment based on a false rumor that PRG might file for

bankruptcy. Id. ¶¶ 14-16, 18. Defendant made this decision hastily without confirming that

the bankruptcy rumor was true or determining whether it was legally entitled to terminate

under the terms of the commitment letter. Id.; Doc. #162 ¶¶ 7-14. On October 5, 2001,

Defendant sent Plaintiff a letter terminating the loan commitment “because of a material

adverse change in the circumstances of the transaction.” Doc. #128 ¶ 17 (emphasis added).

This reason for terminating was neither contemplated by the parties nor set forth in the MAC

clauses. Id. Exs. A, K. 

Given this evidence and the applicable principles of Arizona law, the Court concludes

that a reasonable jury could return a verdict in Plaintiff’s favor on the alleged breach of the

duty of good faith and fair dealing. See Wells Fargo Bank, 38 P.3d at 30-31 (reversing the

grant of summary judgment because a jury reasonably could conclude that the

counterdefendant “wrongfully exercised a contractual power . . . for a reason inconsistent

Case 2:03-cv-02487-DGC Document 164 Filed 03/31/06 Page 11 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 12 -

with the [counterclaimant’s] justified expectations”). The Court accordingly will deny

Defendant’s motion for summary on the alleged breach of the duty of good faith and fair

dealing claim.

D. Plaintiff’s Motion to Strike Defendant’s Brief.

Plaintiff moves to strike Defendant’s cross-motion for summary judgment on the

grounds that it is untimely and not permitted by the Court’s scheduling order and exceeds the

page limitations set forth in the local rules. Doc. #155 at 10-12; see Doc. #136. The Court

will deny Plaintiff’s motion because Defendant has obtained leave of Court to file its crossmotion, see Doc. #148, and Defendant’s brief is not oversized because it constitutes a

response to Plaintiff’s motion for summary and a separate cross-motion, see LRCiv. 7.2(e).

IT IS ORDERED:

1. Plaintiff’s motion for partial summary judgment (Doc. #127) is denied.

2. Defendant’s motion for summary judgment (Doc. #129) and cross-motion for

summary judgment (Doc. #136) are denied.

3. Plaintiff’s motion to strike (Doc. #155) is denied.

The Court will set a final pretrial conference by separate order.

DATED this 31st day of March, 2006.

Case 2:03-cv-02487-DGC Document 164 Filed 03/31/06 Page 12 of 12