Court Opinion

ID: 4237224
Source: CourtListenerOpinion
Date Created: 2018-01-17 21:00:27.263123+00
Date Added: 2024-06-11T14:43:00.720322
License: Public Domain

FILED
                           NOT FOR PUBLICATION
                                                                             JAN 17 2018
                    UNITED STATES COURT OF APPEALS                       MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

LENCE FAMILY TRUST,                              No. 16-35223

              Plaintiff-Appellant,               D.C. No. 9:12-cv-00171-DWM

 v.
                                                 MEMORANDUM*
ELMER C. CHRISTENSEN;
LANDTECH ENTERPRISES LTD, CO,

              Defendants-Appellees.

                    Appeal from the United States District Court
                            for the District of Montana
                    Donald W. Molloy, District Judge, Presiding

                          Submitted November 9, 2017**
                                Portland, Oregon

Before: TASHIMA and W. FLETCHER, Circuit Judges, and LASNIK,*** District
Judge.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
      ***
            The Honorable Robert S. Lasnik, United States District Judge for the
Western District of Washington, sitting by designation.
      Appellant Lence Family Trust appeals the district court’s finding that

Appellees Landtech Enterprises Ltd. Co. (“Landtech Ltd.”) and Elmer

Christensen’s 2005 Release of All Claims (“2005 Release Agreement”) was

enforceable under Montana Law. We have jurisdiction under 28 U.S.C. § 1291.

We review the district court’s order de novo. Altera Corp. v. Clear Logic, Inc.,

424 F.3d 1079, 1091 (9th Cir. 2005).

      The district court applied the appropriate standard when considering, on

remand, the possible unconscionability of the 2005 Release Agreement. A

determination of unconscionability resides with the Court. MCA § 30-2-302(2). It

is the burden of the party seeking to void a provision to raise sufficient facts

demonstrating a contract’s unconscionability. Fisher ex rel. McCartney v. State

Farm Mut. Auto. Ins. Co., 305 P.3d 861, 872 (Mont. 2013). Appellant failed to

demonstrate that the 2005 Release Agreement was unconscionable.

      Under Montana Law, unconscionability requires a two-fold analysis,

addressing: (1) whether the Lence Family Trust had a meaningful choice when it

agreed to the 2005 Release Agreement; and (2) whether the contractual terms were

within the Lence Family Trust’s reasonable expectations, or were unreasonably

favorable to the drafter. Id. No single factor is determinative of unconscionability;

however, it may be evinced where there is “unequal bargaining power, lack of

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meaningful choice, oppression, and exploitation of the weaker party’s vulnerability

or lack of sophistication.” Kelly v. Widner, 771 P.2d 142, 145 (Mont. 1989).

      Appellant failed to show that it did not have a meaningful choice. John

Lence is the senior trustee of the Lence Family Trust. Lence was incarcerated at

the time he signed the 2005 Release Agreement. James Bartlett, an attorney for

Landtech, served as a conduit for Lence, during his correspondence with Appellees

and Gary Jackson, an attorney representing Landtech Ltd. Jackson sent the 2005

Release Agreement to Bartlett and Lence for initial consideration. After receiving

the 2005 Release Agreement, Bartlett asked Jackson for documents verifying the

value of the company. Jackson informed Bartlett that since Lence did not own a

membership interest in Landtech Ltd., he would not receive the requested

information. The signed 2005 Release Agreement explicitly states that the Lence

Family Trust “had an opportunity to obtain advice from counsel” before signing.

Moreover, Appellant failed to return the $100,000 in consideration, despite its

Notice of Recession. See Mont. Code Ann. § 28-2-1713.

      Appellant also failed to show the contractual terms were unreasonably

favorable to Appellees. Whether the terms were unreasonably favorable to the

drafter turns on whether the terms were within Appellant’s reasonable

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expectations. Arrowhead Sch. Dist. No. 75 v. Klyap, 79 P.3d 250 54 (Mont.

2003).

         The terms of the 2005 Release Agreement contained no ambiguity. Kelly,
771 P.2d at 144-145. Appellees required that Appellant affirmatively acknowledge

its lack of membership interest in Landtech Ltd. and that Lence understood the

contract.

      Sophistication of the parties weighs heavily in determining whether

unconscionability exists. Pennington’s, Inc. v. Brown-Forman Corp., 785 F. Supp.
1412, 1415-16 (D. Mont. 1991). When the 2005 Release Agreement was executed,

Lence was the senior trustee for the Lence Family Trust. He was also an attorney

and a certified public accountant.

         A party claiming economic duress must show the opposing party caused the

economic duress which hindered its freedom of choice. Stanley v. Holms, 975 P.2d
1242 ¶¶ 35-38 (Mont. 1999). Lence’s financial distress was not caused by

Appellees. United States v. Lence, 466 F.3d 721, 723 (9th Cir. 2006).

Additionally, the financial situation of the Lence Family Trust at the time the 2005

Release Agreement was signed is unknown because Appellant refused to produce

its financial or organizational information in discovery.

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       Inadequacy of consideration does not by itself invalidate a contract, but may

be a factor in determining conscionability. Kelly, 771 P.2d at 145. Lence and the

Lence Family Trust never held a membership interest in Landtech Ltd., but the

Trust received $100,000 in spite of its admitted lack of membership interest.

AFFIRMED.

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