United States District Court, D. Nevada
R. HICKS, UNITED STATES DISTRICT JUDGE
a contract dispute between plaintiff CASS, Inc., and
defendant Production Pattern and Foundry Co., Inc.
(“PPF”) stemming from a series of contracts
regarding CASS's sale of aluminum alloy to PPF. PPF has
moved for summary judgment on all of CASS's claims (ECF
No. 107), and CASS has moved for partial summary
judgment on its two separate breach-of-contract claims (ECF
Nos. 108-09). PPF has also moved to strike various
exhibits that CASS included in its summary-judgment motions
(ECF No. 117), while CASS has filed objections to
several of PPF's filings (ECF Nos. 119, 120, 130, 131,
reasons discussed below, the court will deny both parties
summary judgment on CASS's first breach-of-contract
claim. The court will, however, grant CASS summary judgment
on its second contract claim, but only as to the unpaid
invoice balance and not the contractual interest. Moreover,
the court will grant PPF summary judgment on CASS's
unjust-enrichment and quantum-meruit claims but deny it
summary judgment on the breach of the implied covenant of
good faith and fair dealing. The court will also deny
PPF's motion to strike.
an aluminum distributor for non-party Alcoa, an aluminum
producer. PPF is a Nevada-based foundry that works
exclusively with aluminum alloy. Because PPF is a relatively
small enterprise, it is unable to buy aluminum directly from
Alcoa and thus contracts with CASS. One of PPF's clients
is non-party PACCAR, a truck manufacturer. Prior to the
dispute at issue, PPF purchased aluminum alloy primarily from
CASS and used the aluminum to produce aluminum castings for
supply chain and its underlying contracts are best understood
in reverse. PACCAR would place orders with PPF for aluminum
castings. PACCAR does not have a contractual
relationship with either PPF or Alcoa. In order to produce
the requested parts for PACCAR, PPF would order aluminum
alloy directly from CASS through a contractual relationship
that will be described shortly. CASS would then contract with
Alcoa to fill PPF's aluminum orders. Alcoa does not have
a contractual relationship with PPF or PACCAR.
to the beginning of each new calendar year, PPF would
estimate its aluminum needs for that upcoming year based on
projected orders provided by PACCAR. PPF would then contract
with CASS, committing to purchase a specific quantity of
aluminum from CASS for the upcoming year for a fixed price
per pound. The parties refer to this type of transaction as a
“hedge.” These contracts would take the form of a
“sales order” sent from CASS to PPF, specifying
the pounds of aluminum that PPF was committing to purchase
and the fixed price per pound. E.g., ECF No. 107-1 at
benefit of forming a hedge is that PPF is guaranteed the
contracted fixed price per pound for that quantity of
aluminum, even if the current market price of aluminum alloy
increases during the calendar year. ECF No. 108 at 4.
Conversely, there is a risk that the market price can fall
below the fixed price, resulting in PPF being contractually
obligated to purchase aluminum at a higher-than-market price.
Id. Additionally, as demonstrated in this dispute,
PPF is obligated to purchase the contracted quantity
of aluminum, even if PPF's actual demand for aluminum
during the year falls short of this amount.
order to supply PPF the contracted quantity of aluminum at a
fixed price, CASS would separately contract with Alcoa for a
corresponding quantity at a fixed price. Id. at 5.
In order to guarantee this fixed price, Alcoa would hedge the
quantity of aluminum in the futures market. Id.
Accordingly, the quantity of aluminum ordered by PPF for a
particular year could not be adjusted, a fact reiterated in
the relevant sales orders between CASS and PPF, as well as
the contracts between Alcoa and CASS. E.g., ECF No.
107-1 at 9.
PPF would contractually commit to purchasing a fixed quantity
of aluminum for the next calendar year, it was not required
to either receive or pay for the entire quantity up front.
Instead, PPF would periodically send CASS purchase orders
throughout the contracted year for a specific quantity of
aluminum that PPF needed in order to fill PACCAR's
orders. ECF No. 106 at 4. Each purchase order would be drawn
from the total contracted quantity and shipped to PPF.
Id. CASS would then invoice PPF for that specific
aluminum shipment, with payment due within thirty days.
asserts that the sales orders did not require it to commit to
a firm delivery schedule with CASS-i.e., one in which PPF was
required to receive monthly shipments of a fixed or minimum
quantity of aluminum. Id. PPF alleges that it could
not commit to a firm delivery schedule and that a long-term
custom and practice had developed between itself and CASS,
whereby PPF would only place purchase orders with CASS based
on PPF's “current production requirements.”
Id. In other words, PPF would not order aluminum
from CASS until after PPF had received a production order
from PACCAR. Id. PPF alleges that it would normally
place orders with CASS on a weekly or semi-weekly basis.
Id. At no point does CASS directly address this
contention or offer a conflicting narrative.
the summer of 2007, CASS and PPF entered into three separate
sales orders to provide PPF with aluminum alloy at a fixed
price for 2008. It is undisputed that these sales orders were
later consolidated into a single contract, Sales Order 17675
(the “2008 sales order”), wherein CASS agreed to
sell and PPF agreed to purchase 3, 060, 000 lbs. of aluminum
alloy at a fixed price per pound. ECF No. 108 at 4-5; ECF No.
107-1 at 9.
juncture, the case's facts diverge into two streams. CASS
has brought two separate breach-of-contract claims, and each
factual stream is relevant to a different claim.
First breach-of-contract claim
first claim is premised on the undisputed fact that PPF did
not purchase over 400, 000 lbs. of aluminum from the 2008
sales order. The claim is also premised on the undisputed
fact that PPF did not purchase any of the aluminum from the
2009 sales orders, which are described immediately below.
Modification of 2008 sales order & formation of 2009
the economic downturn that began in 2007, PPF realized in May
2008 that, for the first time in its relationship with CASS,
it would not be able to purchase all of the hedged aluminum
it had contractually committed to purchasing. ECF No. 106 at
5. Thus, in mid-2008, CASS agreed to allow PPF to
“carry over” the unused portion of the 2008
aluminum into 2009 at a penalty of .005 cents per pound per
is a lack of clarity, however, regarding the terms of this
modification. PPF asserts that the modification of the 2008
sales order allowed PPF to carry over the unused portion of
the 2008 aluminum until the end of 2009. E.g.,
id. Because there was a per-month penalty, the
longer into 2009 it took PPF to purchase the 2008 aluminum,
the higher the penalty per pound would be. Conversely, CASS
asserts-for the first time in its first summary-judgment
motion-that “PPF was expected to take delivery of the
remaining aluminum in January and February 2009.” ECF
No. 108 at 5. CASS never explains this assertion.
it is undisputed that, at the same time that PPF and CASS
negotiated the modification of the 2008 sales order, they
entered into several sales orders for 2009 (collectively
“2009 sales orders”). These sales orders, like
each prior sales order, guaranteed PPF a quantity of aluminum
at a fixed price-in this case, 1, 587, 000 lbs. of aluminum
in total. Id. at 6. But unlike the original 2008
sales order, the 2009 sales orders contained an explicit
provision that allowed PPF to carry over any unused aluminum
from 2009 into 2010: “Total contracted tonnage must be
taken during the contracted terms. Tonnage forwarded into
2010 at a $.005/LB penalty per month.” ECF No. 107-1 at
16-19 (emphasis added). These sales orders each set a
delivery schedule of quarter 2 through quarter 4 of 2009.
discussed above, CASS would contract with Alcoa each year in
order to fill its sales orders with PPF. Thus, the 2008
contracts between Alcoa and CASS (“2008 Alcoa
contracts”) supplied the aluminum that was guaranteed
in the 2008 sales order between CASS and PPF for the
latter's purchase of aluminum in 2008-with CASS
permitting PPF's carry over into at least some portion of
2009 at a penalty. ECF No. 106 at 4-5; see also ECF
No. 107-1 at 12-14. Similarly, the 2009 contracts between
Alcoa and CASS (“2009 Alcoa contracts”) supplied
the aluminum that was guaranteed in the 2009 sales orders
between CASS and PPF-with CASS permitting PPF's carry
over into 2010 at a penalty. ECF No. 106 at 4-5; see
also ECF No. 107-1 at 21-24.
Alcoa alters its hedging policies
asserts that the carry-over policy in the modification of the
2008 sales order and the 2009 sales orders partially mirrored
provisions in CASS's 2008 and 2009 contracts with Alcoa.
The 2008 Alcoa contracts state, “A rescheduling fee of
$.005/lb per month will be levied to move any tonnage beyond
the hedged month.” ECF No. 107-1 at 12-14. The 2009
contracts had a similar but not identical provision:
“If you reschedule any or all committed tonnage for a
given month[, ] a rescheduling fee will be assessed at the
quoted by our broker to move any tonnage beyond the hedged
month.” Id. at 21-24. PPF thus asserts
that, by allowing PPF to carry over its unused 2008 and 2009
aluminum into 2009 and 2010 respectively, CASS was merely
exercising a similar contractual right in its own contracts
on October 14, 2008, less than a week after CASS executed the
2009 Alcoa contracts, Alcoa wrote to CASS informing it that
Alcoa had “revised” its hedging service.
Id. at 61. In order to carry over a hedged month,
CASS would now need to seek approval from one of Alcoa's
vice presidents. Id. Three months later, on January
22, 2009, an Alcoa sales director emailed a CASS
representative informing him that, “[s]ince about a
week ago[, ] [Alcoa] management is not allowing us to roll
positions forward anymore.” Id. at 63.
week later, on January 29, Alcoa emailed CASS, informing it
that Alcoa would “no longer move fixed price metal
positions forward.” Id. at 167. Alcoa
elaborated that its new position meant that CASS would have
to either (1) take the aluminum “as priced for the
respective monthly quantities” or (2) “the hedge,
or a portion of the hedge will need to be ‘unwound'
and the mark to market difference will be invoiced . . .
or “ringing out” a hedge refers to rescinding the
contract, which entails the buyer paying the difference
between the aluminum's contract price and its market
price at the time of rescission. ECF No. 106 at 8.
makes demands of PPF regarding the 2008 & 2009 sales
February 2, 2009, CASS emailed PPF, informing it that, until
PPF returned to “the weekly payment program, ”
CASS could not ship any additional aluminum to PPF. ECF No.
108 at 8; ECF No. 108-3 at 74. This reference, although
relevant to this first breach-of-contract claim, appears to
stem from CASS's second claim, which involves PPF not
paying the balance on several invoices for purchase orders it
placed under the 2008 sales order. However, this is the only
mention in either of CASS's summary-judgment motions of a
weekly payment plan, and CASS provides no elaboration.
February 13, a conference call took place between PPF and
CASS officers and sales representatives. PPF asserts-and CASS
does not appear to dispute-that CASS made two primary demands
of PPF during this call. ECF No. 106 at 9. First, CASS
demanded that PPF convince PACCAR to form a contract
committing to either (1) take possession of the remainder of
the unused 2008 aluminum (from the 2008 sales order)
or (2) unwind the hedges for the remaining
aluminum. Id. Second, CASS demanded that
PPF convince PACCAR to consent to CASS and PPF modifying the
2009 sales orders to negate the provision allowing PPF to
carry over the 2009 aluminum into 2010. Id.
parties do, however, dispute whether CASS presented these
demands as an ultimatum. PPF alleges that CASS threatened to
stop shipping aluminum to PPF starting April 1, 2009, if PPF
did not agree to its demands. Id.
Emails between CASS, PPF, & PACCAR regarding CASS's
support of its assertion, PPF highlights several emails it
sent to CASS and PACCAR over the following
month. On February 16, 2009, PPF emailed CASS
to summarize what terms PPF believed it was expected to
present PACCAR based on the February 13 conference call. ECF
No. 107-2 at 26. Because the email is presented as bullet
points, the content is not completely clear. However, PPF
explicitly wrote, “Without these agreements in place
PPF/PACCAR takes a risk in Alcoa-CASS stop[ping] shipment of
supporting alloys by April 1st.”
Id. CASS allegedly never contradicted this email,
but rather forwarded it on to Alcoa. ECF No. 106 at 9; ECF
No. 107-1 at 178.
February 25, PPF once again emailed CASS, “mak[ing]
sure” it understood Alcoa's demands before
communicating them to PACCAR. ECF No. 107-2 at 28. PPF made
no mention of CASS's alleged threat to halt aluminum
shipments; however, PPF did discuss CASS's demand that
PACCAR contractually agree to negate “the
‘current carry forward option' and [put] in place
an agreement to unwind 2009 hedges as they are unused.”
Id. CASS replied that “[e]verything looks
fine.” Id. at 29. That same day, PPF emailed
PACCAR, outlining the following demands by CASS:
CASS/Alcoa will allow PPF to continue to carry the 2008
contract forward into Qtr 2 without unwinding the hedges.
CASS/Alcoa needs, from PACCAR, a signed contract negating the
current “carry forward option” and in place an
“agreement” to unwind 2009 hedges as they are
Id. at 31. PPF further stated that “Alcoa has
made it clear to our broker that they will no longer be
offering this carry foreword option and it is imperative that
this issue gets resolved prior to April 1st or our
broker has instructed us that Alcoa/CASS will stop shipment
of aluminum until we can resolve this matter.”
Id. PPF then forwarded this email to CASS.
alleges that on March 3, 2009, CASS, due to demands from
Alcoa, pushed the April 1 deadline for acceding to the
above-mentioned demands forward to March 6. ECF No. 106 at
10. PPF cites to an email from CASS in which CASS stated that
Alcoa would “liquidate”- presumably unwind-the
hedges for the 2008 sales order by March 6 unless PPF
provided a “commitment to close out the 2008 hedges or
a consumption plan for the outstanding hedged material in
March & April that all stake holders can agree to.”
ECF No. 107-2 at 38. CASS further stated it would “also
need to have a real understanding of 2009 hedges (4 truck
loads a month)[, ] which start April 1st[, ] and
planned consumption.” Id. The following day,
PPF emailed these demands and the March 6 deadline to PACCAR
and forwarded this email to CASS. Id. at 48.
March 6, PPF emailed CASS, informing it that “PACCAR is
unwilling to sign any agreement that negates the current
contract that is in place or to accept any costs associated
with unwinding of the current hedges.” Id. at
50. PPF also asked whether “Alcoa intends on stopping
shipment if this does not get resolved[, ]” stating
that PPF is “concerned that PACCAR is trying to call
Alcoa's bluff as to if they will stop shipping or not at
the contracted price.” Id.
March 09, PPF sent CASS the following email:
I received word form PACCAR and they are reluctant to sign
into an agreement that would accept the unwinding of the
hedges for 2008-2009. It is their position that PPF hold to
the current contract in place and request CASS to seek relief
from Alcoa[, ] as it seems they are the ones attempting to
modify the contract terms. I understand from past
conversations that Alcoa was going to begin invoicing for
these hedges and stop shipments until a new agreement was in
place. Obviously PPF is unable to cover the cost for
unwinding and stopping shipment to us would be even more
devastating. Please ask Alcoa to reconsider these changes for
all parties involved.
Id. at 56. CASS responded, asking how much aluminum
PACCAR would commit to purchasing per month. Id. at
55. PPF replied that PACCAR would not commit to purchasing a
fixed quantity of aluminum per month. Id. PPF then
asked “CASS to honor the current contract in place and
allow PACCAR/PPF to continue the practice of moving metal
forward.” Id. CASS did not respond to this
email. ECF No. 106 at 11.
purchases aluminum from another supplier & CASS denies
threatening to stop aluminum shipments
March 12, 2009, PPF placed an aluminum order with Custom
Alloy Light Metals (“CALM”), one of CASS's
rival distributors. ECF No. 108-3 at 94. PPF continued
placing orders with CALM throughout 2009 and 2010, ultimately
ordering 1, 760, 731 lbs. and 2, 470, 231 lbs. respectively.
Id. at 9 (citing ECF No. 108-3 at 94-126; ECF No.
108-4 at 1-85). PPF alleges that it began ordering from CALM
in direct response to the alleged threats by Alcoa and CASS
to stop aluminum shipments unless PPF acceded to their
demands. ECF No. 106 at 12. PPF asserts that “[a]ny
lapse in the delivery of aluminum to PPF would [have]
cause[d] PPF to have to shut down completely.”
Id. Conversely, CASS alleges that PPF began
purchasing from CALM in order to take advantage of the
substantially lower aluminum prices available on the
“spot market” due to the economic downturn. ECF
No. 119 at 29.
March 16, PPF informed CASS that it had placed an aluminum
order with CALM. See ECF No. 107-2 at 58-59. The
following day, CASS emailed PPF, stating that
CASS intends to fill the existing contracts PPF placed on
behalf of PACCAR for the 2008 & 2009 Hedged Contracts.
CASS never indicated we would not ship material unless
PPF stopped making payments against the outstanding
aging due to the large amount past due.
To the contrary, if PPF would provide the shipping schedule
as CASS has repeatedly requested, CASS would be happy to ship
the balance of the 2008 Hedged Contract promptly to
facilitate starting the 2009 Hedged Contract on time.
. . . .
CASS intends to ship your metal per the 2008 & 2009
Hedged Contract until they are complete unless PPF or PACCAR
elects to unwind & realize the difference either
(positive or negative) for the material that will not be
used, per [Alcoa's] request.
Id. (emphasis in original).
immediately responded, stating that CASS's “email
is contradictory to what [PPF] was told by CASS to ask of
PACCAR.” Id. at 58. PPF further asserted that
“[o]n multiple occasions, [CASS] told [PPF] of April
1st being the cut off date (stop shipment of
supporting alloys) if [PPF] could not get PACCAR to sign a
new agreement to unwind the hedges and negate the current
contract in place.” Id. CASS does not appear
to have responded to this email.
Discussion after the CALM purchase
the disagreement over whether CASS threatened to cut off
aluminum shipments if PPF did not accede to its demands, the
parties continued to communicate regarding the status of the
unused portion of the 2008 aluminum and the yet-to-be-used
2009 aluminum. On April 13, 2009, CASS emailed PPF that it
“need[s] a response as to where everything currently
stands with Paccar[, ]” stating that “[t]he
hedges cannot be ignored or pushed out to 2010.”
Id. at 79. PPF responded that it is “trying to
get PACCAR engaged but they are taking the stance that [PPF]
push out the contract and use the metal they have
purchased.” Id. It is not clear if PPF was
referring to the CALM aluminum or another source.
early July 2009, PPF and CASS exchanged a series of emails
regarding conversations between CASS's sales
representative and a PACCAR representative and the
possibility of CASS allowing PPF to carry the 2008 and 2009
aluminum over into 2010. ECF No. 106 at 13; ECF No. 108 at 9;
ECF No. 107-2 at 64-65. In this exchange, CASS stated and PPF
confirmed that PACCAR verbally agreed to PPF “passing
through” the penalties from the 2008 and 2009 sales
orders to PACCAR. ECF No. 107-2 at 64.
CASS requested that PACCAR provide written confirmation of
this agreement and confirmation that PACCAR would
“consume these hedged metal units in 2010.”
Id. PPF responded that the request was not possible.
It explained that PACCAR's position was that the sales
orders at issue were contracts only between PPF and CASS and
that PACCAR had not agreed to purchase a certain quantity of
aluminum from PPF but had rather agreed to purchase a certain
quantity of finished product from PPF. Id. There
does not appear to be a response from CASS regarding
PACCAR's refusal to commit to purchasing the hedged
the remainder of July 2009, there were a series of emails
exchanged between Alcoa employees regarding the situation and
direct conversations with PACCAR. ECF No. 107-1 at 213-20. On
July 25, PACCAR's purchasing executive emailed an Alcoa
vice president, stating that “[i]t is PACCAR's
intention to consume the aluminum currently under a fixed
price contract with [PPF] & [CASS] in the 2010 calendar
year.” Id. at 223.
Discussions regarding aluminum purchases in 2010
emailed PPF in October 2009 to “address” the
carry over of the 2008 and 2009 aluminum into 2010. ECF No.
108-4 at 111. After several follow-up emails, PPF responded
in early November, stating that it would begin consuming the
aluminum in early January 2010. Id. at 117. From
December 2009 through early March 2010, CASS contacted PPF
seeking an answer on when PPF would begin placing orders. ECF
No. 108 at 10. On March 27, PPF informed CASS that it would
commit to “start taking one load [of aluminum] per
month . . . with the possibility to take additional quantity
or pay for the unused hedges” at the end of 2010. ECF
No. 108-4 at 128.
March 29, 2010, PPF sent CASS a purchase order requesting 40,
000 lbs. of aluminum per month for three months, starting
April 30, 2010. ECF No. 108-7 at 122. However, the price per
pound cited on the order was lower than the price per pound
required in the 2008 sales order, even without the per-month
carry-over penalty. ECF No. 108 at 10. CASS responded by
emailing PPF the correct price and enclosing a sales order
for PPF's signature. Id. at 11. After PPF failed
to return the form, CASS emailed PPF asking for an update but
received no response. Id. (citing ECF No. 108-4 at
19, 2010, PPF emailed CASS confirming its “intent to
fulfill the contract for Aluminum hedges[, ]” stating
that it would “consume these hedges by taking receipt
of the tonnage or unwinding them . . . .” ECF No. 108-4
at 144. Alcoa's sales director, who was copied on this
email, responded by asking if PPF would be issuing orders
that day, stating that it would no longer be carrying over
the hedges and requesting a physical delivery schedule.
Id. Alcoa further stated that, if it did not receive
an order from PPF that afternoon, it would generate an
invoice the following day for the cost of unwinding the
hedges, plus the carry-over penalties. Id.
acceding to Alcoa's demand, PPF sent CASS a purchase
order that same day requesting 40, 000 lbs. of aluminum per
month for two months, starting June 30, 2010. ECF No. 108-7
at 124. The price per pound listed in the order was once
again below the price fixed by the 2008 sales order, even
without the carry-over penalty. Id. CASS emailed PPF
on May 24, confirming whether the purchase order was related
to the 2008 sales order and asking how PPF calculated the
price per pound. ECF No. 108-4 at 148.
Alcoa unwinds the 2008 and 2009 sales orders and invoices
24, 2010, Alcoa invoiced CASS for $1, 041, 352.60, which
represented the cost of unwinding the hedges for a combined
1, 989, 990 lbs. of unused aluminum from the 2008 and
2009 sales orders, plus the carry-over penalties. ECF No. 108
same day, CASS emailed Alcoa, stating that it had
“worked with Alcoa under the impression that Paccar /
PPF would have until the end of the year to consume or unwind
the outstanding hedges.” ECF No. 107-1 at 66. CASS
further stated that its “understanding from reading the
contracts is that [CASS was] allowed to roll the hedges
forward until year end and would appreciate Alcoa doing
so.” Id. Alcoa responded that ...