Opinion ID: 2973837
Heading Depth: 5
Heading Rank: 2

Heading: Celotex and “Pointing Out”

Text: As stated, supra, on a motion for summary judgment, “the burden on the moving party may be discharged by ‘showing’--that is, pointing out to the district court--that there is an absence of evidence to support the nonmoving party’s case.” Celotex Corp., 477 U.S. at 325. Specifically, [A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,” which it believes demonstrate the absence of a genuine issue of material fact. Id. at 323. Thus, a moving party must point out specifically why the nonmoving party fails to present a genuine issue of material fact as to the nonmoving party’s case. Defendant in the instant case pointed out the fact that Plaintiff failed to allege or prove a violation of Sections 15.1 and 15.2 of the operating agreement, as Hailey Oil Services did not have a contract with Chevron, and such a contract was a condition precedent to payment under those Sections. In its memorandum in support of its motion for judgment on the pleadings (converted for this Court’s purposes to a motion for summary judgment), Defendant argued, “[Plaintiff] cannot show that A.J. Hall defaulted under the Operating Agreement, because it is undisputed that the No. 05-5893 Max Arnold & Sons v. W.L. Hailey & Co. Page 11 condition precedent to the vesting of A.J. Hall’s payment obligations under the Operating Agreement, the existence of a contract with Chevron, was not fulfilled.” (J.A. at 121.) We agree with the district court that there was no evidence of a contract with Chevron, so that A.J. Hall did not default on its obligations under Sections 15.1 and 15.2. Therefore, summary judgment in favor of Defendant as to this issue would be proper. Defendant, however, failed to point out in its motion for judgment on the pleadings (converted for this Court’s purposes to a motion for summary judgment) any deficiency in Plaintiff’s claim that A.J. Hall failed to make payments in conformance with Section 6.1 of the operating agreement, so that Defendant was liable for those payments.8 In paragraph 16 of the complaint, Plaintiff alleged: The payment of distributions of cash flow to [Plaintiff], as referenced above in Paragraph 14A [which references Section 6.1 of the operating agreement], has been partially satisfied but remains substantially unsatisfied. Specifically, [Plaintiff] was to receive a quarterly distribution of cash flow in the amount of $33,750.00 for the first four (4) calendar quarters of operation. [Plaintiff] did receive an initial cash flow distribution in the amount of $35,425.70 . . . . A.J. Hall failed or refused to make the remaining three payments due. (J.A. at 11-12.) Defendant did not respond to this allegation in its motion for judgment on the pleadings or its memorandum in support of its motion. While Defendant made the general argument that “[Plaintiff’s] Complaint does not contain the critical allegation that the principal obligor, A.J. Hall, defaulted in its payment obligations under the Operating Agreement,” Defendant then explained this general statement: “[Plaintiff] cannot show that A.J. Hall defaulted under the Operating Agreement, because it is undisputed that the condition precedent to the vesting of A.J. Hall’s payment obligations under the Operating Agreement, the existence of a contract with Chevron, was not fulfilled.” (J.A. at 120-21.) The sole focus of Defendant’s argument on its motion for judgment on the pleadings was on Sections 15.1 and 15.2 of the operating agreement, not Section 6.1. Defendant therefore failed to meet his burden on summary judgment to “point out” this specific deficiency of Plaintiff’s case. Defendant may argue that it presented to the district court evidence that supported the fact that Hailey Oil Services did not generate positive cash flow after the first quarter, so that there was no breach under Section 6.1; for example, in his affidavit, McDonald implies that Hailey Oil Services did not have positive cash flow for the second, third, and fourth quarters. Assuming arguendo that this evidence applies to Defendant’s motion for judgment on the pleadings, which is questionable as Defendant submitted the affidavit in response to Plaintiff’s motion for summary judgment, Defendant’s argument would fail. The mere fact that evidence in the record supported an argument that Defendant failed to make does not correct Defendant’s failure to make said argument. Otherwise, the district court, on a motion for summary judgment, would have the responsibility of culling through the record and extrapolating arguments that Defendant could potentially make; this, however, is not the appropriate allocation of burdens on a motion for summary judgment. Defendant has the burden to point out to the district court why it should receive summary judgment, and it failed to do so with respect to Plaintiff’s claim under Section 6.1. Moreover, the fact that Defendant denied the allegations under paragraph 16 of the complaint in its answer is also insufficient to meet its burden on summary judgment. When Defendant denied the allegation, there was then a potential factual dispute as to whether Section 6.1 had been 8 The district court denied Defendant’s motion for judgment on the pleadings (here construed as a motion for summary judgment) on the basis that Section 6.1 entitled Plaintiff to absolute payments for each quarter. As explained, supra, this basis was incorrect, but the district court nevertheless was correct in its denial of Defendant’s motion. No. 05-5893 Max Arnold & Sons v. W.L. Hailey & Co. Page 12 breached. Defendant still had the burden on summary judgment to point out that Plaintiff did not have any evidence to support Plaintiff’s allegations under that paragraph so as to demonstrate no genuine issue of material fact as to this claim. We recognize that this is a somewhat unusual case in that we are reversing the grant of Plaintiff’s motion for summary judgment because Plaintiff failed to put forth any evidence that Section 6.1 was breached, yet we are also denying Defendant’s motion for summary judgment because it failed to point out the lack of evidence as to Plaintiff’s claim under Section 6.1. The point, however, is that Supreme Court case law mandates this result. Under Celotex, if a plaintiff put forth a complaint and then provided no evidence for its claim, the defendant should not make a motion for summary judgment, without pointing out the deficiencies of the plaintiff’s case, and then expect the court to rule in the defendant’s favor. Celotex places a minimal burden on the moving party; the moving party need not support its motion for summary judgment with evidence; instead, it only must point out the deficiencies of the nonmoving party’s case. 477 U.S. at 324-25. Defendant in the instant case did not even meet this minimal burden, so that this Court must uphold the district court’s denial of summary judgment as to this claim.