STOWERS, Justice.
Sea Hawk Seafoods, Inc. sued the City of Valdez for damages after Valdez applied for a grant from the State of Alaska for funding to convert Sea Hawk's seafood processing facility into a fish meal plant but then declined to accept the $600,000 grant that the State conditionally awarded to Valdez. On pre-trial motions, the superior court dismissed Sea Hawk's claims for breach of contract, breach of an agreement to negotiate, and breach of a duty to negotiate in good faith. Valdez and Sea Hawk filed cross-motions for summary judgment on Sea Hawk's remaining claim for promissory estoppel, which the court denied. Shortly before trial, the court dismissed Sea Hawk's promissory estoppel claim as a discovery sanction. Sea Hawk and Valdez both appeal.
Sea Hawk owned and operated a seafood processing plant in Valdez. In 2003 in response to declining salmon prices, the State established the Fisheries Economic Development Grant Program to assist qualifying businesses in the seafood industry. Sea Hawk was struggling to survive as a traditional seafood processor at that time, so Terry Bertoson, Sea Hawk's owner and sole shareholder, developed a plan with Norquest Seafoods, Inc. to convert Sea Hawk's processing facility into a fish meal plant. Sea Hawk agreed to contribute its existing buildings and equipment, Norquest agreed to contribute meal plant equipment, and the grant would provide the funds necessary to purchase and install additional odor abatement equipment. Bertoson initially planned to submit his own proposal directly to the State, but decided to ask Valdez to submit the grant application in order to demonstrate to the State that the project would benefit not only a private business but also the local community.
In April 2003 Bertoson contacted David Dengel, the Valdez City Manager, and requested that Valdez submit the grant application on Sea Hawk's behalf. According to Bertoson, Dengel indicated Valdez would be interested in supporting the project and, in the course of their discussions over the next two months, promised him Valdez would submit the grant application and, if awarded the grant, pass the funds through to Sea Hawk.
In May 2003 Bertoson sent a draft grant application to Dengel. On May 27 Dengel presented the plan to the Valdez City Council at a work session.
Bertoson emailed Dengel that same day, agreeing to Valdez's conditions and asking
Valdez submitted the grant application, requesting $950,000 for the proposed fish meal plant. The grant program required local government applicants to provide a resolution of support for their grant application. On June 2, 2003, the City Council passed a formal resolution of support, stating: "The City of Valdez supports the State of Alaska Fisheries Economic Development Grant Application for a Fish Meal Plant."
In August 2003 state officials visited Sea Hawk's facility in Valdez and prepared an analysis of the proposed fish meal plant, noting several issues with the proposal. The report recommended the State set aside $600,000 for the project, contingent upon these issues being addressed.
On March 15, 2004, the State notified Valdez it had been selected as a "potential recipient" of a $600,000 grant and asked Valdez to submit additional information about the proposal. On April 1 Dengel sent Bertoson a letter stating that Valdez had received a $600,000 grant but would not accept it until it had negotiated an agreement with Sea Hawk: "Be advised that even though the City has been notified of a grant award, the City has yet to accept the grant funds. Acceptance of the grant is contingent upon an agreement being successfully negotiated between the City, SeaHawk Seafoods, and Norquest." At a City Council meeting on April 5, council members and local citizens voiced concerns about odors from the proposed fish meal plant impacting the town's tourist industry. The City Council decided to request proposals for a fish meal plant located outside the harbor area of town, but did not receive any proposals in response to its request. On May 3, despite continuing concerns about potential odor issues, the City Council voted to negotiate an agreement with Sea Hawk for the operation of a fish meal plant. Valdez and Sea Hawk went through several proposed contracts, but were ultimately unable to reach a final agreement.
The State notified Valdez that it had until December 23, 2004, to make a decision regarding the grant award. On December 20 a council member moved to approve a final agreement with Sea Hawk and the motion failed. Consequently, Valdez did not accept the $600,000 grant. Sea Hawk continued operating for a few weeks in 2005 and 2007 before closing and selling its facility in 2008.
In December 2006 Sea Hawk filed a complaint for damages against Valdez alleging six causes of action: (1) breach of contract; (2) promissory estoppel; (3) breach of a duty to negotiate in good faith; (4) breach of an agreement to negotiate a contract; (5) breach of fiduciary duties; and (6) failure to expend appropriated money. Over the next three years, Superior Court Judge pro tem Daniel Schally dismissed all of Sea Hawk's claims except for promissory estoppel, on motions for summary judgment and judgment on the pleadings.
In August 2009 both parties moved for summary judgment on the promissory estoppel claim. The superior court denied both parties' motions, ruling "[f]actual issues remain including most importantly whether an actual promise was made by the City to Sea Hawk."
In September 2010, shortly after deposing Sea Hawk's expert witnesses, Valdez filed a motion to compel discovery, alleging Sea Hawk had failed to respond to discovery requests and produce all of the materials its experts relied on in calculating Sea Hawk's damages. Valdez asked the court to exclude Sea Hawk's expert witnesses from testifying at trial or, alternatively, to impose litigation-ending sanctions under Alaska Civil Rule 37(b). On October 12, the day before trial was scheduled to begin, the superior court granted Valdez's motion for litigation-ending sanctions and entered a final judgment in favor of Valdez.
Sea Hawk and Valdez both appeal. Sea Hawk contends the superior court erred by dismissing its breach of contract claim on the pleadings under Alaska Civil Rule 12(c), dismissing its claims for breach of an agreement to negotiate and breach of a duty to negotiate in good faith on summary judgment, and
We review the superior court's rulings under Alaska Civil Rule 12(c) and on summary judgment de novo.
Sea Hawk contends the superior court erred by dismissing its breach of contract claim, arguing it alleged all of the essential elements of a contract in its complaint and whether those allegations established a valid contract is a question of fact to be resolved at trial. A valid contract requires "an offer encompassing all essential terms, unequivocal acceptance by the offeree, consideration, and an intent to be bound."
Sea Hawk alleged that it offered Valdez the right to use its fish meal plant proposal to apply for a grant from the State and that the May 30, 2003 letter from Dengel to Bertoson, which is set out verbatim in the complaint, confirmed Valdez's acceptance of this offer. Sea Hawk also alleged the City Council ratified this agreement when it passed a formal resolution of support for the grant application on June 2, 2003. On appeal, Sea Hawk maintains that Valdez's acceptance is reflected in the May 30 letter.
In Valdez Fisheries Development Association v. Alyeska Pipeline Service Co., we held that a plaintiff failed to allege unequivocal acceptance under similar circumstances.
Here, the May 30 letter stated Dengel was "finalizing the [grant] application" but warned "[i]f the City is successful in the application process ... there are a number of issues that will need to be resolved before the City accepts the grant." It also noted that the State's grant program was "still evolving" and "all of the policy decisions have not yet been made." The letter concluded "[o]nce the State informs the City as to whether we received the grant we will need to put together an agreement that addresses all of these issues and any others that will arise[] between now and then." Even when viewed in the light most favorable to Sea Hawk, the letter does not communicate unequivocal acceptance of an offer. Rather, it demonstrates Valdez contemplated entering into a future agreement with Sea Hawk addressing various issues — both those set forth in the letter and any others that might arise in the meantime — after the State finalized the grant program and determined whether to award a grant to Valdez.
Nor does the City Council's June 2, 2003 resolution of support communicate unequivocal acceptance. The resolution simply stated that Valdez supported the grant application: "The City of Valdez supports the State of Alaska Fisheries Economic Development Grant Application for a Fish Meal Plant." It did not state or imply the City Council was agreeing to unequivocally accept the grant if the State awarded it, or agreeing to pass those funds through to Sea Hawk.
Thus, the letter and resolution Sea Hawk relied on to demonstrate Valdez's acceptance of Sea Hawk's offer do not communicate unequivocal acceptance and are, therefore, insufficient as a matter of law to support Sea Hawk's breach of contract claim. Nor do any other allegations in Sea Hawk's complaint support a reasonable inference of unequivocal acceptance. Accordingly, we affirm the superior court's dismissal of Sea Hawk's breach of contract claim under Civil Rule 12(c).
Valdez contends the trial court erred by denying its motion for summary judgment on Sea Hawk's promissory estoppel claim.
A party must allege four elements to support a claim for promissory estoppel: "(1) an actual promise that induced action or forbearance; (2) the action induced was actually foreseen or reasonably foreseeable; (3) the action amounted to a substantial change in position; and (4) enforcement of the promise is necessary in the interest of justice."
Valdez Fisheries is once again instructive. In addition to a breach of contract claim, Valdez Fisheries asserted a promissory estoppel claim against Alyeska based on the award letter stating "you are the winning bidder."
We also hold that Dengel's alleged oral promises were not sufficiently specific to constitute an "actual promise" for promissory estoppel purposes. Bertoson alleged in an affidavit that at some point during his discussions with Dengel in April and May 2003, Dengel promised him "the City would submit the grant application for the fish meal plant at Sea Hawk's facility in the City's name, and if the State ... awarded the grant, then the City would `pass through' those funds to Sea Hawk." Bertoson alleged Dengel "reiterated his earlier promise on behalf of the City" after the May 27, 2003 City Council work session, but also "advised that the City had three conditions prior to submitting the Sea Hawk grant application." Three days after this alleged conversation, Dengel sent the May 30 letter outlining Valdez's conditions, informing Sea Hawk these issues would need to be resolved before Valdez accepted the grant funds, and stating the parties would need to enter in to an agreement once the State decided whether to award Valdez the grant. Thus, even assuming Dengel made
Sea Hawk relies on Zeman v. Lufthansa German Airlines
Unlike Zeman, where the parties' ambiguous letters had to be interpreted in light of their more detailed verbal discussions regarding terms, conditions, and prices, Dengel's alleged oral promises were general and his letter more specific. These alleged oral promises were not sufficiently "definitive," "clear," and "precise" to constitute an actual promise, particularly when considered in conjunction with the May 30 letter.
Because Sea Hawk's allegations, even if accepted as true, do not establish that Valdez made an actual promise to Sea Hawk, Valdez was entitled to summary judgment on Sea Hawk's promissory estoppel claim and the superior court should have granted Valdez's summary judgment motion.
Sea Hawk also contends the superior court erred by dismissing its negotiation claims on summary judgment. In granting Valdez's motion for summary judgment on these issues, the superior court relied on Valdez Fisheries
The cases the superior court relied on outline the requirements for establishing an enforceable agreement to negotiate giving rise to a duty to negotiate in good faith. In Valdez Fisheries, we considered whether Valdez Fisheries' wildlife rehabilitation center proposal and Alyeska's award letter stating "[w]e intend to begin the process of negotiating a contract as soon as possible" constituted a binding agreement to negotiate.
Similarly, a duty to negotiate in good faith arises out of an agreement to negotiate and is defined by the scope of that agreement. In Apothekernes, the Seventh Circuit explained "the purpose and function of a preliminary letter of intent [to negotiate] is not to bind the parties to their ultimate contractual objective" but "`to provide the initial framework from which the parties might later negotiate a final ... agreement, if the deal works out.'"
Consistent with the principles discussed in Apothekernes, we considered and rejected a claim for breach of an agreement to negotiate in good faith in Brady v. State.
Here, the May 30 letter did not provide the type of framework contemplated in these cases. Even viewing the letter in the light most favorable to Sea Hawk, the parties simply agreed to negotiate an agreement in the future without establishing a specific process of negotiation or a method for resolving disputes. The parties then attempted to negotiate a contract but were unable to reach a final agreement. Based on this letter, we would not be able to discern when the agreement to negotiate was breached. As in Valdez Fisheries, this letter is "[a]t best ... evidence of an agreement to negotiate that fails to spell out a method by which differences are to be resolved."
We AFFIRM the superior court's orders dismissing Sea Hawk's breach of contract claim under Civil Rule 12(c) and dismissing Sea Hawk's claims for breach of an agreement to negotiate and breach of a duty to negotiate in good faith on summary judgment. We REVERSE the superior court's denial of Valdez's summary judgment motion on Sea Hawk's promissory estoppel claim, and REMAND for the court to enter judgment in favor of Valdez.
WINFREE and CHRISTEN, Justices, not participating.
Here, the superior court's order imposing litigation-ending sanctions did not identify a specific discovery order that Sea Hawk failed to comply with or the discovery materials that Sea Hawk failed to produce. Instead, the court appeared to rely on Sea Hawk's general pattern of discovery abuse, describing the "long and tortured history of discovery issues and problems in this case." Additionally, the court did not analyze the Rule 37(b) factors, instead stating "[f]or the most part the court agrees with the City's assessment of the Rule 37(b)(3) factors," without identifying which parts or factors the court agreed with, and concluding "Sea Hawk willfully failed to provide discovery as alleged." Finally, the order did not adequately address alternative remedies. The court found that with trial scheduled to commence "less than 24 hours from now" it would be "impossible for the City to prepare to meet Sea Hawk's damages claims even if at this very moment Sea Hawk fully complied with all discovery requests." But the court did not consider ordering Sea Hawk to produce the requested expert materials and granting a short continuance to allow Valdez to prepare for trial and depose Sea Hawk's experts again, if necessary. Such a conclusory ruling is inadequate to support imposing litigation-ending sanctions.