Court Opinion

ID: 2620382
Source: CourtListenerOpinion
Date Created: 2013-10-30 20:05:35.450223+00
Date Added: 2024-06-11T10:29:45.504544
License: Public Domain

FILED
                           NOT FOR PUBLICATION                                OCT 30 2013

                                                                          MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                          U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

FLAGSTONE DEVELOPMENT, LLC, an                   No. 12-35407
Arizona limited liability company and
LAWRENCE A. HEATH,                               D.C. No. 1:08-cv-00100-RFC

              Plaintiffs - Appellants,
                                                 MEMORANDUM*
  v.

WAYNE JOYNER; et al.,

              Defendants - Appellees.

                   Appeal from the United States District Court
                           for the District of Montana
                Richard F. Cebull, Senior District Judge, Presiding

                      Argued and Submitted October 7, 2013
                               Portland, Oregon

Before: SILVERMAN, W. FLETCHER, and CALLAHAN, Circuit Judges.

       Appellants Flagstone Development, LLC (“Flagstone”) and its owner,

Lawrence A. Heath, appeal from the district court’s grant of summary judgment in

favor of the defendant-appellees Rocky Mountain Timberland (“RMT”), its owner,

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Wayne Joyner, and its operator, Justin Joyner, in this contract dispute over the

purchase of a 13,000-acre tract of real property (a historic cattle ranch, the “30-

Mile Ranch”) located in Musselshell County, Montana. Flagstone also appeals the

district court’s grant of summary judgment in favor of a finance corporation, two

real estate brokers, and an escrow agent on theories of slander and defamation,

tortious interference with contract, civil conspiracy, and breach of fiduciary duty.

In addition, Flagstone appeals the district court’s exclusion of expert testimony

regarding estimated lost profits.

      We reverse and remand the district court’s grant of summary judgment in

favor of appellees RMT and the Joyners on the issue of breach of contract.1 We

affirm the district court’s grants of summary judgment in favor of Developer

Finance Corporation (“DFC”) on the charges of slander and defamation; Jake

Korell and his company Landmark of Billings, Inc. (collectively, “Korell”) on

charges of civil conspiracy and tortious interference; Jon Ussin, d/b/a U Bar S Real

Estate (collectively, “Ussin”), on charges of civil conspiracy and tortious

interference; and American Title & Escrow (“AT&E”) on charges of civil

conspiracy, tortious interference, negligence and breach of fiduciary duty. We also

      1
            Because the parties are familiar with the facts and procedural history,
we do not restate them here except as necessary to explain our decision.

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affirm without prejudice the district court’s grant of AT&E’s motion to exclude an

expert report offered by Flagstone.

      1. Because there are material issues of fact as to whether Flagstone had

abandoned the contract between Flagstone and RMT at the time that RMT sold the

30-Mile Ranch to a third party, the summary judgment by the district court in favor

of RMT and the Joyners was premature. Under Montana law, whether or not a

contract is abandoned has been viewed as an issue for a trier of fact; this is

especially true where the material terms of the contract are contested. See Payne

Realty & Hous., Inc. v. First Sec. Bank, 844 P.2d 90, 94 (Mont. 1992).

      Here, there are multiple disputed material facts that make summary

judgment premature. Shortly after RMT and Flagstone entered into the buy/sell

contract, unforeseen problems arose regarding the transaction, including, for

example, increased road construction costs, a lack of potable water, and the decline

of the real estate market. There is a dispute over whether these factors were fatal to

the financial viability of the project and whether or not Flagstone would be able to

get financing to complete the sale. Further, there is a dispute as to whether RMT

was performing its obligations under the contract to obtain initial government

approval for subdivision; or, was instead subverting Flagstone’s role as future

owner and entering into development plans as the principal, with a view towards

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finding a more advantageous deal for itself. The record reflects that the parties had

executed three addendums to the contract within four months of its execution.

Thus, there is no clarity as to the parties’ reasonable expectations in January 2008

when Flagstone allegedly sought to further renegotiate the terms of the contract.

There does not appear to have been any clear statement of abandonment by

Flagstone, nor does the record clearly show that the deal was “fatally flawed” for

financial reasons. Accordingly, the grant of summary judgment as to the breach of

contract issue was premature, and we reverse and remand on that issue.

      2. We affirm the district court’s grant of summary judgment on Flagstone’s

slander and defamation claims because the statements at issue, even if they were

false, were not capable of bearing a defamatory meaning.2

      Under Montana law, the test for defamation is stringent; for defamation

words to be actionable, they must be of such a nature that the court can presume as

a matter of law that they will tend to disgrace and degrade the plaintiff or cause

him to be shunned and avoided; further, mere opinion is not actionable. McConkey

      2
             In order for allegedly slanderous statements to be actionable under
Montana law, they must be capable of bearing a defamatory meaning. McConkey
v. Flathead Electric Coop., 125 P.3d 1121, 1130 (Mont. 2005).

                                          4
v. Flathead Electric Coop., 125 P.3d 1121, 1130-31 (Mont. 2005) (citing Frigon v.

Morrison-Maierle, Inc., 760 P.2d 57, 62 (Mont. 1988)).

      Here, the record is clear that the statements that are the basis of this claim

were mostly opinion. To the extent that they were not opinion, they did not as a

matter of law tend to disgrace or degrade. Therefore, we affirm summary

judgment in favor of DFC.

      3. As to the claims of tortious interference that Flagstone brought against

escrow agent AT&E and real estate brokers Ussin and Korell, we find that even if

there was a valid contract in place at the time of the sale of the 30-Mile Ranch to

Powers, the claims of tortious interference cannot survive summary judgment.

      Under Montana law, tortious interference with contract or economic

advantage requires an intentional and willful act, calculated to cause damage to the

plaintiff in his business, with the purpose of causing damage, without right or

justifiable cause, and resulting in actual damages and loss. Randolph V. Peterson,

Inc. v. J.R. Simplot Co., 778 P.2d 879, 884 (Mont. 1989). Even if there was in fact

a valid contract between Flagstone and RMT, the real estate brokers were entitled

to rely on assurances by RMT and its attorney that the contract with Flagstone had

been terminated, and AT&E’s involvement was limited to the narrow terms of the

escrow agreement. In addition, the record simply does not show the requisite

                                          5
commission of an intentional and willful action calculated to cause damage by

either of the brokers or by the escrow agent. Therefore, we affirm the district

court’s grant of summary judgment as to all tortious interference claims.

      4. We also affirm the district court’s grant of summary judgment as to the

civil conspiracy charges levied against the two real estate brokers and against the

escrow agent. Under Montana law, civil conspiracy requires a showing of more

than one person agreeing to act for an unlawful purpose with one or more unlawful

overt acts, resulting in damages. Schumacker v. Meridian Oil, 956 P.2d 1370,

1373 (Mont. 1998).

      a. The grant of summary judgment in favor of Ussin on the civil conspiracy

charge is affirmed because Ussin was the agent of Powers, and Flagstone has not

challenged the grant of summary judgment as to Powers. Accordingly, because

Powers is not liable, neither is Ussin. See Mont. Code Ann. § 28–10–602; see also

Crane Creek Ranch, Inc. v. Cresap, 103 P.3d 535, 537 (Mont. 2004) (“An agent . .

. is not liable to third persons for acts performed in the course of his agency unless,

with the consent of his principal, he receives personal credit for a transaction, he

enters into a written contract in the principal’s name without believing in good

faith belief he has the authority to do so, or his acts are wrongful in their nature.”).

                                           6
      b. In addition, as to Korell and AT&E, the record is devoid of any evidence

of an unlawful overt act and damages. The real estate brokers and escrow agent

were entitled to rely upon RMT’s representations that the contract with Flagstone

had been terminated. Thus, summary judgment was appropriate as to the civil

conspiracy claims against the brokers and escrow agent.

      5. Further, the district court was correct to conclude that there was no

genuine issue of material fact regarding the claims against the escrow agent,

AT&E, for negligence and breach of fiduciary duty. Montana law limits the

fiduciary duty of an escrow agent to the narrow terms of the escrow contract.

Brandt v. Sande, 1 P.3d 929, 933 (Mont. 2000). Here, no reasonable trier of fact

could conclude that AT&E breached any of the terms of its escrow contract with

Flagstone.

      6. We find that Flagstone has not carried its burden of showing that the

district court abused its discretion in granting a motion to exclude its expert report

on damages. See United States v. Serang, 156 F.3d 910, 915 (9th Cir. 1998). The

district court rejected the report, finding that it offered no independent basis for its

calculations, which appeared to have been copied from financial projections

created before several costly development issues were uncovered.

                                           7
      However, on remand, Flagstone is free to seek reconsideration by the district

court or to proffer further expert reports on damages.

      For the above-stated reasons, (1) we reverse the district court’s grant of

summary judgment on the breach of contract issue and remand for further

proceedings, and (2) we otherwise affirm the district court’s orders challenged in

this appeal.

      Flagstone Development, LLC, Lawrence A. Heath, Rocky Mountain

Timberland, and Wayne and Justin Joyner shall each bear its own costs on appeal.

Flagstone Development, LLC and Lawrence A. Heath shall bear the costs of

Developer Finance Corporation, Jake Korell, Landmark of Billings, Inc., Jon

Ussin, d/b/a U Bar S Real Estate and American Title & Escrow on appeal.

      REVERSED AND REMANDED IN PART, AFFIRMED IN PART,

AND AFFIRMED WITHOUT PREJUDICE IN PART.

                                          8