Court Opinion

ID: 4318835
Source: CourtListenerOpinion
Date Created: 2018-10-05 20:01:13.596314+00
Date Added: 2024-06-11T14:18:19.540392
License: Public Domain

UNITED STATES COURT OF APPEALS                      FILED
                           FOR THE NINTH CIRCUIT                         OCT 5 2018
                                                                    MOLLY C. DWYER, CLERK
                                                                      U.S. COURT OF APPEALS
MILLENNIUM DRILLING CO., INC.,                 No.   16-17332

                Plaintiff-Appellee,            D.C. Nos.
                                               2:12-cv-00462-MMD-CWH
 v.                                            2:13-cv-00078-MMD-CWH
                                               District of Nevada,
BEVERLY HOUSE-MEYERS; BEVERLY                  Las Vegas
HOUSE-MYERS REVOCABLE TRUST;
GRACE MAE PROPERTIES, LLC; AND,                ORDER
ROBERT H. HAMRICK AND MOLLY
KAY HAMRICK,

                Defendants-Appellants.

Before: SCHROEDER, EBEL,* and GOULD, Circuit Judges.

      The memorandum disposition in the above-captioned matter filed on July

30, 2018 is amended as follows:

      On page 3, line 15 of the memorandum disposition, replace  with .

      On page 4, line 10 of the memorandum disposition, replace  with .

      On page 5, line 9 of the memorandum disposition, replace  with .

      *
            The Honorable David M. Ebel, United States Circuit Judge for the
U.S. Court of Appeals for the Tenth Circuit, sitting by designation.
      On page 6, line 6 of the memorandum disposition, replace  with 

      On page 6, line 22 in note 5 of the memorandum disposition, replace  with 

      An amended memorandum disposition is filed concurrently with this order.

      The Motion for Leave to File Reply in Support of Petition for Panel

Rehearing is GRANTED. The Petition for Rehearing is DENIED. No future

petitions for rehearing will be entertained.

      IT IS SO ORDERED.

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                                                                         FILED
                           NOT FOR PUBLICATION                            OCT 5 2018
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                    UNITED STATES COURT OF APPEALS

                           FOR THE NINTH CIRCUIT

MILLENNIUM DRILLING CO., INC.,                  No.    16-17332

                Plaintiff- Appellee,            D.C. Nos.
                                                2:12-cv-00462-MMD-CWH
 v.                                             2:13-cv-00078-MMD-CWH

BEVERLY HOUSE-MEYERS, BEVERLY                    AMENDED MEMORANDUM*
HOUSE-MEYERS REVOCABLE TRUST,
HAMRICK TRUST, GRACE MAE
PROPERTIES, LLC, ROBERT H.
HAMRICK, MOLLY KAY HAMRICK,

                Defendants-Appellants.

                   Appeal from the United States District Court
                            for the District of Nevada
                    Miranda M. Du, District Judge, Presiding

                       Argued and Submitted June 15, 2018
                            San Francisco, California

Before: SCHROEDER, EBEL,** and GOULD, Circuit Judges.

      A jury found that Defendant Investors 1) breached the express terms of at

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
            The Honorable David M. Ebel, United States Circuit Judge for the
U.S. Court of Appeals for the Tenth Circuit, sitting by designation.
least one of the contracts they entered into with an oil and gas investment

partnership (Falcon Partnership), and its drilling company (Plaintiff Millennium

Drilling Co.), and also 2) breached the implied covenant of good faith and fair

dealing arising from at least one of those contracts. (The relevant agreements are

governed by Delaware law.) On appeal, Investors argue that the district court erred

in denying their post-judgment Fed. R. Civ. P. 50(b) motion for judgment as a

matter of law on these claims. Reviewing that decision de novo, see Colony Cove

Props., LLC v. City of Carson, 888 F.3d 445, 450 (9th Cir. 2018), we agree that the

district court erred. We, therefore, reverse the judgment entered on the jury’s

verdict with regard to Millennium’s claims pertaining to Falcon and remand for

entry of judgment as a matter of law in Investors’ favor on these claims.1 In light

of that decision, we need not address Investors’ other arguments raised on appeal.

      In granting Investors relief, we conclude as an initial matter, and contrary to

the district court, that Investors adequately preserved their Rule 50(b) arguments

by asserting them in a mid-trial Rule 50(a) motion. See EEOC v. Go Daddy

Software, Inc., 581 F.3d 951, 961 (9th Cir. 2009).2

1
  The trial also involved Millennium’s claims arising from two other oil and gas
investment partnerships, as well as Investors’ claims asserted as third-party
plaintiffs. None of these other claims are at issue here.
2
  We can understand the district court’s confusion with the procedural posture of
the case, for which all parties must share some responsibility. Nevertheless, we

                                          2
      Turning to the merits, Millennium had three theories underlying its claims

for breach of contract and breach of the implied covenant of good faith and fair

dealing, and the district court instructed jurors on each of these three theories.

Because the jury was only asked to return a general verdict, however, we cannot

tell on which theory or theories the jury found for Millennium, requiring there to

be sufficient evidence to support the jury finding for Millennium on all three

theories in order to survive Investors’ Rule 50(b) motion. See United States v.

$11,500.00 in U.S. Currency, 869 F.3d 1062, 1068-70 (9th Cir. 2017) (holding, in

considering challenges to jury instructions in civil case, that when case was

presented to jury under two theories and appellate court cannot determine on which

of those two theories the jury based its general verdict, appellate court will not

exercise its discretion to assume jury’s verdict rested on non-defective theory).

However, the record here is insufficient to support a jury finding for Millennium

on any of its three theories of breach.

      1. Millennium alleged that Investors’ future obligation to repay their

Subscription Notes with interest was accelerated when Investors disavowed those

obligations in 2011 and 2012, and Investors then failed to repay those obligations

have held that even ambiguous or inartfully made Rule 50(a) motions are sufficient
to preserve arguments for Rule 50(b) purposes. See Go Daddy Software, 581 F.3d
at 961.

                                           3
immediately. But disavowing their future obligation to repay the notes is not an

“Event of Default” listed in the Subscription Notes that would have made that

obligation immediately due and payable.3 See Elliott Assocs., L.P. v. Bio-

Response, Inc., No. CIV.A. 10624, 1989 WL 55070, at *1, *3 n.1, *4 (Del. Ch.

May 23, 1989) (unpublished) (holding, under New York law, that even if

defendant repudiated its future obligation to pay debentures when they became due

and payable, defendant would not yet be in default under the terms of the

debentures, which did not list anticipatory repudiation as one of the events of

default; noting Delaware law does not differ).4

      2. Millennium next alleged that Investors breached their future obligation to

pay a portion of Falcon’s debt owed to Millennium on those two parties’ Turnkey

Note. Falcon’s debt to Millennium under the Turnkey Note was accelerated in

2011 because of Falcon’s insolvency. Further, under their Assumption

3
 Investors adequately raised this issue in their Rule 50(a) motion when they
argued “that the maturity date on these notes [is] the year . . . 2030,” “[t]he
evidence is clear that there has been no default event that would trigger
acceleration of any of these notes,” and Millennium’s expert testified that no
“event of default” listed in the Subscription Notes had occurred.
4
  Millennium asserts on appeal that, because Investors never argued that the term
“default” as used in the Subscription Notes was unambiguous, it was appropriate
for the trial court implicitly to treat “default” as ambiguous and have the jury
interpret it. But no one argued this theory to the district court, at least not before
the jury’s verdict, and the jury was never instructed to determine whether the term
“default” under the Subscription Notes included repudiation of future obligations.

                                           4
Agreements with Millennium and Falcon, Investors “unconditionally and

irrevocably assume[d] [their] Share . . . of the principal amount of any and all

indebtedness, liabilities or obligations of the [Falcon] Partnership to Millennium

arising out of the Turnkey Note and the Turnkey Agreement.” Investors’ share of

Falcon’s debt corresponds to the amount Investors owe on their Subscription

Notes. But each Assumption Agreement’s “Time of Payment” provision states

that, “[e]xcept as otherwise expressly provided in this Agreement, [Investor] shall

not be required to pay the Indebtedness assumed in accordance with this

Agreement until the maturity of the Subscription Note unless accelerated by reason

of a default under the Subscription Note.” As previously explained, Investors did

not default under their Subscription Notes.

      Citing to the initial clause in the Assumption Agreement’s “Time of

Payment” provision—“[e]xcept as otherwise expressly provided in this

Agreement”—Millennium points to the Assumption Agreement’s “Default”

provision. That provision lists several circumstances that would result in “the

Indebtedness assumed under this Agreement . . . becom[ing] immediately due and

payable.”

      The first such event of default under the Assumption Agreement would be if

Investors “default[ed] in payment of the Subscription Note[s].” But, as just

explained, Investors did not default on repaying their Subscription Notes.

                                          5
      A second event of default under the Assumption Agreement would be if

Investors “default[ed] . . . in any obligation assumed by him under this

Agreement.” But Investors did not default on their obligations under the

Assumption Agreement because, according to that agreement’s “Time of Payment”

provision, Investors are not obligated to pay their assumed share of Falcon’s debt

until the Subscription Notes matured, no earlier than 2025.5

      Third, the Assumption Agreement’s “Default” provision provides that “the

Indebtedness assumed under this Agreement shall . . . become immediately due

and payable” if

      the Participant [Investor] should become insolvent or be unable to meet
      his debts as they mature, or make any assignment for the benefit of
      creditors, or if a petition for relief under any bankruptcy or insolvency
      law or code should be filed by or against the undersigned, or if a
      custodian or similar agent is authorized or appointed to take charge of
      any of the property of the [Investor] . . . .

No one argued that any of these default events occurred here.

      3. Lastly, Millennium alleged that Investors’ “stated intention not to honor

their obligations under the Assumption Agreements” was a default that accelerated

those obligations. But, as just explained, disavowal or repudiation is not an “event

5
  It may be, then, that Investors must repay Millennium the amount they owe on
their Subscription Notes, principal and interest, but they are not obligated to do so
until the Subscription Notes mature. That issue, however, is not before us in this
appeal.

                                          6
of default” expressly listed in the Assumption Agreements.6 See Elliott Assocs.,

1989 WL 55070, at *1, *3 n.1, *4.

      In conclusion, the record does not support accelerating Investors’ obligations

under either the Subscription Notes or the Assumption Agreements. Investors,

therefore, have not breached those agreements by not yet repaying the amounts

owed on their Subscription Notes.

      REVERSED AND REMANDED.

6
  Investors adequately challenged the evidence to support Millennium’s second and
third theories of breach in their Rule 50(a) motion, as well.

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