Opinion ID: 2638757
Heading Depth: 3
Heading Rank: 3

Heading: Summary Judgment on the Merits

Text: Alaska Foods argues that Nichiro violated the express terms of the shareholders agreement by failing to use its best efforts to achieve the corporate and business purposes of Adak. In opposing Nichiro's motion for summary judgment, Alaska Foods submitted an affidavit by Hikita in which he asserted that Nichiro had grossly mismanaged Adak and created enormous cost overruns. Alaska Foods posits that it was Nichiro's mismanagement of Adak that led to Adak's, and hence Alaska Foods's, economic ruin. Nichiro offered nothing to rebut these assertions. Instead, it framed Alaska Foods's claim narrowly, stating that [t]he gravamen of [Alaska Foods's] claim for breach of contract is that defendants were obligated under the Shareholders Agreement to make further loans to [Adak], but failed and refused to do so in early 1975. Nichiro explained that the shareholder's agreement provided that Nichiro would loan working capital to Adak under terms set forth in a separate agreement between Nichiro and Adak. That document, the May 13, 1974 working capital loan agreement, defined the conditions and limitations on Nichiro's obligation to loan up to $2 million in working capital to Adak. It provided that Nichiro was obligated to supply working capital to Adak for a period of ninety days beyond May 13, 1974. The loan agreement further provided that Nichiro's obligation would terminate in the Event of Default. Nichiro established that it made payments beyond the ninety days required by the agreement and that Adak defaulted by failing to pay interest on its working capital loans. Accordingly, Nichiro accurately observed that it had not breached the loan agreement. The superior court did not err in granting summary judgment to Nichiro on this aspect of Alaska Foods's claim. The court erred, however, in dismissing Alaska Foods's entire breach of contract claims based solely on the evidence that Nichiro had not breached the loan agreement. Alaska Foods's claims rest not only on Nichiro's failure to loan, but also on its alleged mismanagement of the plant's construction and operation, which, according to Alaska Foods, precipitated Adak's and Alaska Foods's troubles. Alaska Foods recognizes Nichiro's contention that it was excused from its many contractual obligations because [Adak] was in default for failing to make interest payments under the loan agreement. But Alaska Foods deems this nothing more than a `chicken or egg' analysis; or which came first? Explaining that Adak had no monies to make interest payments because Nichiro's mismanagement of construction delayed production and its mismanagement of operations ensured that revenues from production would not be sufficient, Alaska Foods asserts that Nichiro's loan and impracticability defenses are rebutted by the fact that Nichiro's mismanagement triggered all of Adak's problems. For its part, Nichiro did not try to explain why Adak was in financial trouble or whether Nichiro had competently managed Adak before Alaska Foods's default and the bank's intervention. Indeed, Nichiro's fifty-four-page memorandum in support of its motion for summary judgment never asserted that it fulfilled its duty to exert best efforts in managing the venture. And in responding to Alaska Foods's opposition, Nichiro merely said: Equally unsupported is [Alaska Foods's] general assertion that Nichiro is to blame for the frustration of purpose of the contract. Plaintiff has offered no evidence to show that Nichiro caused the financial difficulties of [Alaska Foods] which preceded the bank's seizure and acceleration of the [Adak] notes, and which preceded, by several months, Nichiro's alleged abandonment of [Adak]. But as Alaska Foods correctly asserts, to obtain summary judgment against Alaska Foods on the best efforts claim, it was Nichiro's obligation on summary judgment to explain to the trial court WHY [Adak] was in financial problems. A party moving for summary judgment will prevail if there is no genuine issue of material fact and the record establishes that the party is entitled to summary judgment as a matter of law. [31] The moving party bears the burden on both issues the initial burden of establishing the absence of a genuine issue as to any material fact and [establishing] that, based on such undisputed fact, it [is] entitled to a judgment as a matter of law. [32] We have repeatedly emphasized the moving party's affirmative burden: Because a premature grant of summary judgment forecloses a litigant's right to trial ... we must be mindful that both on appeal and at the trial level, it is the moving party that bears the initial burden of proving, through admissible evidence, the absence of genuine factual disputes and its entitlement to judgment. [T]he party seeking summary judgment `has the entire burden of proving that his opponent's case has no merit.' ... [A]lthough prudent counsel for the non-moving party will always attempt to demonstrate a genuine issue for trial, it is not obligated to do so until the moving party makes a prima facie showing of its entitlement to judgment on established facts. [33] Thus, it was not enough for Nichiro to point out that Hikita's affidavit would not be admissible at trial. To prevail on summary judgment, it carried the burden of producing evidence to establish that Alaska Foods's best-efforts claim had no merit. [34] Nichiro could not meet this burden without some affirmative showing that it had not mismanaged the plant. Nichiro's burden was heightened by the fact that it was undisputed that Nichiro owed a contractual duty to use best efforts. The primary issue on summary judgment was whether Nichiro had satisfied this duty. Nichiro's duty to use best efforts entails a standard analogous to the reasonable care standard in a tort case where a defendant undisputedly owes a duty: In cases where no one disputes the existence of a duty running from one party to another, we have disfavored summary adjudication of the precise scope of that duty, or of whether particular conduct did or did not breach it (i.e., constitute negligence). This is particularly so when the scope of the duty poses a fact-specific question, involving policy and circumstantial judgments that our legal system reserves for the jury. On the other hand, summary judgment is proper where the only reasonable inference from the undisputed facts is that one party owed another no duty whatsoever-or owed a duty clearly and vastly narrower in scope than the one that the other party asserts in opposing summary judgment. [35] This distinction reflects the principle that, as a practical matter, it is much harder to show that there are no genuinely disputed material facts when the existence of a duty is clear and the question is of its precise scope, or whether given conduct fulfilled it. [36] Even though Alaska Foods's claim alleges a breach of contract, rather than a tort, the best efforts duty that Nichiro undeniably contracted to undertake makes Nichiro's position analogous to that of a tort defendant who admittedly owes a duty of reasonable care and seeks summary judgment on the ground that the duty was not breached. Accordingly, because Nichiro did not make a sufficient prima facie showing to rebut Alaska Foods's assertions that Nichiro's mismanagement caused Adak's demise, this case was not properly in summary judgment posture, regardless of whether Alaska Foods's assertions were based on an offer of admissible evidence. We have upheld summary judgments dismissing cases where the plaintiff's claims were based only on vague, unsupported, and inadmissible assertions. [37] But here, Hikita's affidavit contains more than vague assertions. He explains with some specificity that Nichiro's plant manager, Mr. Makino, was inexperienced and incompetent in his management, causing problems with personnel and cost overruns, and that he was unable to deal with Alaska fishermen. Nichiro insisted on exclusive control of the plant, and, according to Hikita, steadfastly refused input from others, including suggestions that Makino needed to be replaced. [38] We therefore reverse the superior court's order granting summary judgment and remand for further proceedings on Alaska Foods's claim that Nichiro failed to use its best efforts. [39]