Romo v. USA Biofuels
Romo v. USA Biofuels, 2022 MT 249
Affirmed on December 27, 2022, in a 5 to 0 published opinion — 35 pages and 8,916 words .
Case
DA 21-0416
Opinion
majority
Majority
Beth Baker
35 pages · 8,916 words
Joined by
Mike McGrath
Ingrid Gustafson
Dirk M. Sandefur
Jim Rice
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Cited by
2023 MT 249 State v. B. Hamernick DA 21-0372 2025 MT 52N State v. P. Green DA 22-0556 2024 MT 38 Tcf v. Rames DA 22-0731 2024 MT 179 Doll v. Little Big Warm DA 23-0291Cites to
2018 MT 119 Bassett v. Lamantia OP 17-0322 2012 MT 47 Judith Newman v. Robert Lichfield, et al DA 10-0548 2014 MT 136 Dewey v. Stringer DA 13-0347 2020 MT 312 M. Plakorus v. University of Montana DA 20-0014 2012 MT 298 Murray v. Whitcraft DA 11-0749 2015 MT 296 Siebken v. Voderberg DA 14-0727 2008 MT 426 James Neal v. Jeremy Nelson DA 06-0800 2015 MT 312 Wlw Realty v. Continental Partners DA 14-0663 2021 MT 192 Childress v. Costco OP 20-0526 2010 MT 254 White v. Longley DA 10-0133 2022 MT 74 Rubin v. Hughes DA 21-0272 2008 MT 264 Blue Ridge Homes v. Thein DA 07-0267 2013 MT 367 Harrell v. Farmers Educational Cooperative Union DA 13-0034 2008 MT 360 State v. Triplett DA 07-0492 2019 MT 111 Warrington v. G.F. Clinic DA 18-0120 2017 MT 316 Maier v. Wilson DA 16-0308 2010 MT 187 Peterson v. St.Paul Fire and Marine DA 09-0500 2011 MT 60 Osman and Krone v. Cavalier et al., DA 10-0254Full text
OCR’d from the filed PDF
Majority
Beth Baker
12/27/2022
DA 21-0416
Case Number: DA 21-0416
IN THE SUPREME COURT OF THE STATE OF MONTANA
2022 MT 249
JESS ROMO, et al.,
Plaintiffs and Appellees,
v.
COREY SHIRLEY; OWEN KENNEY; KENT
HOGGAN; SURETY LAND DEVELOPMENT,
LLC, Utah Limited Liability Corporation;
Defendants and Appellants,
and
USA BIOFUELS, LLC, Utah Limited Liability Corporation;
VITALITY NATURAL HEALTH, LLC; EUREKA 93, INC.;
GREG RANGER; DAVID RENDIMONTI; ROBERT
LEAKER; SEAN POLI; STEPHEN ARCHAMBAULT;
VITALITY CBD NATURAL HEALTH PRODUCTS, INC.;
JOHN DOES 11-15,
Defendants.
APPEAL FROM:
District Court of the Fifteenth Judicial District,
In and For the County of Roosevelt, Cause No. DV-2018-45
Honorable Katherine Bidegaray, Presiding Judge
COUNSEL OF RECORD:
For Appellants Corey Shirley, Owen Kenney, Kent Hoggan and Surety Land
Development, LLC:
Mark D. Parker, Michael L. Dunphy, Parker, Heitz & Cosgrove, PLLC,
Billings, Montana
For Appellees:
Ben A. Snipes, Ross T. Johnson, Odegaard Kovacich Snipes, P.C., Great
Falls, Montana
Submitted on Briefs: September 28, 2022
Decided: December 27, 2022
Filed:
ir--6a•—•f
__________________________________________
Clerk
2
Justice Beth Baker delivered the Opinion of the Court.
¶1
Four affiliates of USA Biofuels—Kent Hoggan, Owen Kenney, Corey Shirley, and
Surety Land Development—appeal a 2021 Roosevelt County judgment in favor of a group
of eastern Montana farmers.1 Affiliates argue that Farmers could not pursue tort remedies
because their case was a contract case, not a tort case. Affiliates alternatively argue that
they are entitled to a new trial because Farmers produced insufficient evidence to support
the verdict and because the jury was not properly instructed. Hoggan, Kenney, and Surety
Land—each shareholders of USA Biofuels—additionally challenge the trial court’s
summary judgment ruling that they were alter egos of the company. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
¶2
Hemp is a plant grown to produce a range of industrial and medicinal products,
including CBD oil. In 2018, hemp was removed from the list of Schedule I controlled
substances and became a federally legal agricultural commodity. Upon this development,
two Canadian entrepreneurs—Kenney and Hoggan—planned to enter the hemp and CBD
market. They created a company named USA Biofuels, secured investment from Surety
1
The four appellants were variously affiliated with USA Biofuels, a limited liability corporation
(LLC). Surety Land was a manager of USA Biofuels; Surety Land, Hoggan, and Kenney were
USA Biofuels shareholders; and Hoggan, Kenney, and Shirley were agents and employees of USA
Biofuels and its successor companies. We refer to them as “Affiliates” throughout the opinion.
When referring to the entire Defendant group, we use the term “Defendants.” We refer to the 25
plaintiffs as “Farmers.”
3
Land, and hired a United States agent named Greg Ranger.2 Ranger initiated relationships
with over two dozen family farms in northeast Montana to grow hemp for USA Biofuels.
¶3
In spring 2018, Farmers entered individual written contracts with USA Biofuels to
grow a total of 10,000 acres of hemp. The contracts were nearly identical. They each
contained a “minimum acre guaranty” promising $100 per acre once Farmers planted the
hemp seed. USA Biofuels also promised a payment once Farmers successfully raised,
harvested, and baled the hemp. For this second payment, Farmers were to be paid $500
per dryland acre or $700 per irrigated acre. Half of the second payment was to be paid
when the hemp was ready for shipment. The second half was to be paid thirty days later.
¶4
Farmers received the hemp seed in early summer 2018 and planted it. They notified
Ranger that seeding was complete and requested their initial payments of $100 per acre.
Ranger e-mailed Farmers back, with an attached letter from Hoggan on USA Biofuels
letterhead. Hoggan’s letter described cash flow bumps but explained that such bumps were
ending and that the payments were expected to be made within the week. The payments
did not arrive within the week, however, and Farmers initiated lawsuits for breach of
contract. Farmers eventually received the initial seeding payments in late August 2018.
They took the payments as a positive sign that they would receive their second payments
in the fall once they baled the crop.
2
In March 2018, USA Biofuels and Vitality Natural Health (Vitality USA)—which was another
LLC formed by Kenney and Hoggan and funded by Surety Land—became wholly owned
subsidiaries of Vitality CBD Natural Health Products, Inc. (Vitality Canada). In April 2019,
Defendant Vitality Canada merged with other companies to form Eureka 93, Inc. Vitality USA,
Vitality Canada, and Eureka 93 were all named Defendants.
4
¶5
Over the summer and fall of 2018, Farmers raised, swathed, and dried a successful
crop of hemp—together they baled over 6,600 bales. They accordingly expected their
second payments of $500 per dryland acre and $700 per irrigated acre. USA Biofuels never
paid.
¶6
Farmers repeatedly reached out to Ranger and his eventual successor, Shirley, about
payment for the hemp bales, which remained at the edges of Farmers’ fields ready for
shipment.
Between September and December 2018, Shirley and other corporate
representatives responded to Farmers’ inquiries on a near-weekly basis. Defendants
serially stated that funds existed and would imminently be paid to Farmers. Relying on
Defendants’ representations, Farmers did not pursue legal action to acquire ownership of
the bales for resale and mitigation of damages.3 The hemp bales deteriorated as winter
came and, over the course of this litigation, rotted in Farmers’ fields.
¶7
In August 2019, with leave of court, Farmers amended their claims to reflect that
although they had received the initial seeding payments, they never received the second
payments. Farmers sued USA Biofuels and various affiliated companies, agents, and
employees on a variety of contract and tort theories. The lawsuits, filed in four northeastern
Montana counties, were consolidated in Roosevelt County by stipulation. The District
Court declared, on summary judgment, that USA Biofuels breached its contract and
awarded contractual damages against USA Biofuels. Farmers continued to pursue their
3
Farmers’ contracts with USA Biofuels were bailment contracts, which meant that the seed and
crop at all times were owned by USA Biofuels. Farmers thus were unable to resell the bales
immediately upon breach. By comparison, often under a commodities contract for crops such as
hay or corn, farmers may sell the crops to a third party immediately upon breach.
5
contract and tort claims against the remaining Defendants. The case went to trial in June
2021.
Affiliates all appeared and defended.
David Rendimonti, CEO of successor
company Eureka 93, appeared and defended by counsel only. Farmers abandoned their
contract claims and secured a tort judgment exceeding $65 million, comprising $7.5
million in compensatory damages, $2 million in emotional distress damages, and $56
million in punitive damages. Affiliates now appeal; Rendimonti does not.
STANDARD OF REVIEW
¶8
Whether a party owes a duty of care that may give rise to a tort claim is a matter of
law to be decided by the court. Bassett v. Lamantia, 2018 MT 119, ¶ 10, 391 Mont. 309,
417 P.3d 299. We review such a conclusion of law for correctness. Newman v. Lichfield,
2012 MT 47, ¶ 23, 364 Mont. 243, 272 P.3d 625. We discuss separately the standards of
review in our analysis of each remaining issue.
DISCUSSION
¶9
1. May Farmers recover damages in tort when their relationship with Defendants
was grounded in contract?
¶10
Affiliates argue that Farmers should not have been awarded tort remedies because
Farmers brought “purely a contract case.” Affiliates point out each Farmer’s admission
that “the dispute would not have gone to court—at all—if the contracts with USA Biofuels
had been performed.” Because Montana law bars most emotional distress damages and all
punitive damages in contract actions, Affiliates argue that the court should not have
allowed the jury to consider those damages in this “contract action.” See §§ 27-1-310, -220,
MCA.
6
¶11
Farmers counter that tort remedies were appropriate because their claims stem not
from breach of contract but from Defendants’ tortious conduct that occurred after the
breach. Farmers point to evidence they produced at trial that, after failing to pay for the
bales (the breach), USA Biofuels’ representatives strung them along with promises of
payment and negligently failed to release the bales to Farmers for resale. Farmers contend
that Defendants’ misrepresentations of fact, which induced Farmers to withhold pursuing
legal action, and their otherwise negligent acts and omissions constituted tortious conduct
“completely separate from any contractual duty.”
¶12
The District Court repeatedly concluded that Farmers’ claims properly were brought
as tort claims because they were based on Defendants’ post-breach conduct. We address
first whether Farmers’ claims sounded in contract or tort, second whether there was
sufficient evidence for their claims, and third whether the awarded remedies—emotional
distress damages and punitive damages—were lawful.
Contract or Tort Case
¶13
When a party’s claim is based solely upon a breach of the specific terms of an
agreement, the action sounds in contract. We have long recognized, however, that “if a
defaulting party, by breaching the contract, also breaches a duty which he owes to the other
party independently of the contract,” a party may assert a claim of liability in tort.
Dewey v. Stringer, 2014 MT 136, ¶ 8, 375 Mont. 176, 325 P.3d 1236 (quoting
Boise Cascade Corp. v. First Sec. Bank, 183 Mont. 378, 392, 600 P.2d 173, 181 (1979));
Harrington v. Holiday Rambler, 176 Mont. 37, 46, 575 P.2d 578, 583 (1978). “Separate
tort liability depends on whether the breaching party violated a legal duty that would exist
7
in the absence of a contract . . . . There must be active negligence or misfeasance to support
an independent tort claim.” Dewey, ¶ 8 (citations omitted).
¶14
We have recognized in several cases that contract actions and tort actions in the
same case “are not incompatible.” Harrington, 176 Mont. at 46, 575 P.2d at 583. When a
consumer sued a trailer manufacturer for deceitfully misrepresenting the quality of the
trailer it had sold to the consumer, we held that the consumer brought the case in tort,
“separate and distinct from any action arising out of contract.”
Harrington,
176 Mont. at 47, 575 P.2d at 583. Similarly, we held that even though a carpet seller’s
“trickery” and “conspiracy” occurred while contracting with a homeowner, the
homeowner’s case did not arise from contract. Paulson v. Kustom Enters., 157 Mont. 188,
202, 483 P.2d 708, 716 (1971). The homeowner could proceed with proving “a tort arising
independent of the contract.” Paulson, 157 Mont. at 202, 483 P.2d at 716.
¶15
More recently, in Plakorus v. University of Montana, we held that some of a
university soccer coach’s claims arose solely from the university’s contractual duties, while
others arose from separate duties and could be brought as tort claims. 2020 MT 312, ¶ 27,
402 Mont. 263, 477 P.3d 311. The coach’s negligence and invasion of privacy claims were
based on duties that arose from the coach’s employment contract only and thus could not
be brought as tort claims. Plakorus, ¶¶ 18-19. The coach’s claims for defamation and
tortious interference, however, could proceed because the university’s duties not to commit
such acts arose “from statutes and from common law, independently of any contract.”
Plakorus, ¶ 21. In sum, “merely because a contractual relationship exists that gives rise to
8
a set of events and a relationship between parties does not mean the only duties existing
between those parties with respect to those events are in contract.” Plakorus, ¶ 16.
¶16
Farmers brought claims for breach of contract and five torts: negligent
misrepresentation, fraud, constructive fraud, deceit, and negligence. Farmers sought final
judgment on their tort claims alone.4 Each Farmer’s relationship with Defendants was
created through contract, but each was entitled to sue in tort upon establishing that a
separate duty existed. Plakorus, ¶ 16.
¶17
We examine whether Farmers established a separate duty for the tort of negligent
misrepresentation. In an early case considering the existence of a legal duty not to make
negligent misrepresentations, we held that a Montana stockyard could be sued after its
freight agent falsely informed a rancher that the stockyard’s scales were in good condition.
Sult v. Scandrett, 119 Mont. 570, 576-77, 178 P.2d 405, 408 (1947). The stockyard claimed
it owed no duty to the rancher, but we disagreed. Because the stockyard knew that the
rancher planned to bring his cattle there to be weighed and shipped, the stockyard owed
the rancher “the duty to speak with care.” Sult, 119 Mont. at 576, 178 P.2d at 408. We
explained, “An inquiry made of a stranger is one thing; of a person with whom the inquirer
has entered, or is about to enter, into a contract concerning the goods which are, or are to
be, its subject, is another.”
Sult, 119 Mont. at 576, 178 P.2d at 408 (quoting
Int’l Prods. Co. v. Erie R.R. Co., 244 N.Y. 331, 338, 155 N.E. 662, 664 (1927)).
4
As stated, the District Court ruled on summary judgment that USA Biofuels breached its contract
with Farmers when it failed to pay for the hemp, and the court awarded damages for the breach.
USA Biofuels did not appear in the proceedings below and has not appeared in this appeal; the
contract damages are not at issue.
9
¶18
Here, Farmers entered contracts with USA Biofuels to grow hemp in exchange for
payment. Like a stockyard’s duty to speak with care to a rancher with whom it did
business, Defendants owed the inquiring Farmers a duty to speak with care when
representing the availability and timing of funds for payment after Farmers met their
contractual obligations. Defendants’ false statements prevented Farmers from pursuing
legal action that could have mitigated damages. “When the plaintiff alleges a duty imposed
by law that does not depend on a contractual provision or breach of a contractual obligation,
‘the gravamen of the action is the breach of the legal duty rather than a breach of the
contract, and so is a tort.’” Plakorus, ¶ 22 (quoting Billings Clinic v. Peat Marwick Main
& Co., 244 Mont. 324, 328, 797 P.2d 899, 908 (1990)). Notwithstanding Farmers’
contracts with USA Biofuels, and their related relationship with Affiliates, Defendants’
alleged repeated false statements after the breach is conduct rooted in tort law. The District
Court properly determined that a separate tort duty existed and Farmers could sue for
negligent misrepresentation.
¶19
For similar reasons, legal duties existed for the remaining tort claims, which were
based on the same conduct but with minor variations in elements of proof. Defendants’
other duties similarly arose from statutes and from common law, independently of the
contracts, and the elements of each tort and the evidence produced are largely similar.5
5
There is some question whether a separate duty relating to negligence existed outside of Farmers’
contracts. See Section 27-1-701, MCA (“Liability for Negligence”) (describing each person’s
responsibility “for an injury occasioned to another by the person’s want of ordinary care or skill
in the management of the person’s property or person”). Defendants raised this challenge during
the settling of jury instructions, arguing that every breach of contract could be theoretically
recharacterized as negligence. The general duty of care that USA Biofuels owed Farmers in this
10
See Franks v. Kindsfather, 2005 MT 51, ¶ 17, 326 Mont. 192, 108 P.3d 487 (listing
elements of fraud); § 28-2-406, MCA (listing elements of constructive fraud); § 27-1-712,
MCA (listing elements of deceit). We do not step through each claim element-by-element
because the verdict form—without objection on this point—asked the jury to award one
aggregate sum of compensatory damages for the combined tort claims. The District Court
correctly determined that Farmers’ claims stemmed from Defendants’ duties to Farmers
existing outside of the contracts.
Sufficiency of the Evidence
¶20
Affiliates argue next that Farmers presented insufficient evidence to prove each
element of the alleged torts. We review de novo the sufficiency of evidence to support a
jury’s verdict. Giambra v. Kelsey, 2007 MT 158, ¶ 27, 338 Mont. 19, 162 P.3d 134. In
that review, it is not our function “to agree or disagree with the jury’s verdict.”
Murray v. Whitcraft, 2012 MT 298, ¶ 26, 367 Mont. 364, 291 P.3d 587 (quoting
Renville v. Taylor, 2000 MT 217, ¶ 14, 301 Mont. 99, 7 P.3d 400). “[I]f conflicting
evidence exists, we do not retry the case because the jury chose to believe one party over
the other.” Murray, ¶ 26 (quoting Ele v. Ehnes, 2003 MT 131, ¶ 25, 316 Mont. 69,
68 P.3d 835). We do not disturb on appeal a judgment with substantial record evidence
supporting it. Siebken v. Voderberg, 2015 MT 296, ¶ 12, 381 Mont. 256, 359 P.3d 1073.
case may be indistinguishable from the duty imposed by their contractual relationship. Plakorus,
¶ 14 (“Tort and contract causes of action may not coexist where the duty allegedly breached arises
solely under one.”). Nevertheless, any error in allowing the negligence claim to proceed is of no
consequence because Defendants were found individually responsible for all five torts. That is to
say, even if the negligence claim did not arise from a separate duty, the jury’s award is validly
based on the other four torts, which contain clearly separate duties from the contractual duty.
11
Substantial evidence is evidence “that a reasonable mind might accept as adequate to
support a conclusion, even if weak and conflicting.” Siebken, ¶ 12. When the sufficiency
of evidence is challenged, it is our job as an appellate court to probe the record for evidence
to support the fact-finder’s determination. Murray, ¶ 26. In doing so, we view the evidence
in a light most favorable to the prevailing party. Neal v. Nelson, 2008 MT 426, ¶ 15,
347 Mont. 431, 198 P.3d 819.
¶21
We review the evidence as it pertained to Farmers’ negligent misrepresentation
claim. A successful claim for negligent misrepresentation requires a plaintiff to prove six
elements: (1) the defendant made a representation as to a past or existing material fact;
(2) the representation was untrue; (3) regardless of actual belief, the defendant made the
representation without any reasonable ground for believing it to be true; (4) the
representation was made with the intent to induce the plaintiff to rely on it; (5) the plaintiff
was unaware of the falsity of the representation and justified in relying upon the
representation; (6) the plaintiff, as a result of reliance, sustained damage.
Cechovic v. Hardin & Assocs., Inc., 273 Mont. 104, 112, 902 P.2d 520, 525 (1995).
¶22
In this case, Farmers produced e-mails demonstrating that USA Biofuels
representatives, in the fall of 2018, made several statements that funds were available and
numerous excuses for delay in payment. Ranger e-mailed Farmers in August, stating that
“major funds are being transferred sometime in the next couple of days” and that he was
“confident that we will have everyone paid up.” Ranger e-mailed Farmers again in
September, explaining that there was “an unanticipated delay in the release process on the
Canadian side” but that “Corporate has confirmed that funds are in place and ready to go.”
12
Shirley sent an e-mail in October stating, “We are still waiting on the next tranche of funds
to arrive from our Canadian Head Office. We have been expecting them all week and
could receive them at any time, but it could also take another week.” In November, Shirley
sent another e-mail describing purported incoming funds from a lender and a customer, the
sum of which would be used to satisfy Farmers’ balance. Shirley stated that, “it looks like
we are almost at the goal line payment-wise.” Shirley e-mailed again in December,
promising that he “will be making every effort over the weekend to have everything ready
for first thing Monday to have the wires out and will inform you as soon as the funds hit
our account.” A few of these statements were future-facing—that Farmers would be
paid—and thus do not meet the first element of negligent misrepresentation requiring a
misrepresentation “as to a past or existing material fact.” See WLW Realty Partners,
LLC v. Cont’l Partners VIII, LLC, 2015 MT 312, ¶¶ 24-27, 381 Mont. 333, 360 P.3d 1112.
The remaining statements, however, were about existing material facts—that funds were
in place and that Defendants were working on getting them to Farmers. Affiliates point to
no evidence in the record that these funds existed or that Ranger or Shirley had reasonable
grounds to believe they did.
¶23
Farmers also produced evidence that Defendants made these misrepresentations
with the intent to induce Farmers to rely on them. Shirley testified that, during the summer
and fall of 2018, he and Kenney were attempting to court investors, make an initial public
offering on the stock market, and obtain a commodity dealer’s license from the Montana
Department of Agriculture. In their marketing materials and financial statements, they
included the value of the unprocessed hemp as a substantial part of their assets. By making
13
payment promises to Farmers, Defendants induced Farmers to wait before seeking legal
possession of the hemp bales. In the meantime, the bales remained a listed asset for
Defendants. Farmers also testified that they believed the funds were coming because they
had been paid, albeit late, the initial seeding payment. Farmers further testified about the
financial and emotional injuries they suffered because they waited to act, watching the
bales rot on the edges of their fields as the hemp market crashed.
¶24
Based on this evidence, “[w]e have an inquiry such as might be expected in the usual
course of business made of one who alone knew the truth. We have a negligent answer,
untrue in fact, actual reliance upon it, and resulting proximate loss.” Sult, 119 Mont. at 576,
178 P.2d at 408. Though Affiliates presented a conflicting version of events, we conclude
when viewing the evidence in a light most favorable to the prevailing party that the record
contains substantial credible evidence to support the jury’s finding that Farmers proved the
tort of negligent misrepresentation. Farmers thus could pursue related tort damages.
¶25
For the same reason we did not analyze the existence of a duty for each tort claim,
it is unnecessary to analyze the sufficiency of evidence for the remaining torts. The jury
was instructed to award compensatory damages if it found for Farmers on the question of
Defendants’ “negligence, fraud, constructive fraud, negligent misrepresentations or
deceit.” (Emphasis added.) The jury found that USA Biofuels and each Affiliate was
individually responsible for all five torts and awarded $7.5 million in compensatory
14
damages.6 The verdict form described the compensatory award as a “single award for all
Plaintiffs collectively” for “lost profit or other prospective gain resulting from
defendant(s)[’] acts.” On appeal, Affiliates do not argue that it was error for the court to
submit the five tort claims together for the purpose of assessing damages. Because the
award was not divided by claim, and because Affiliates do not challenge the sufficiency of
evidence to support each claim, we need not address the individual sufficiency of evidence
of the remaining four tort claims.
The compensatory damages award may remain
undisturbed based on the jury’s finding of responsibility.7
Emotional Distress Damages
¶26
In accordance with law, the jury was instructed that emotional distress “includes
mental anguish or suffering, sorrow, grief, fright, shame, embarrassment, humiliation,
anger, chagrin, disappointment, or worry.” Section 27-1-310, MCA. The jury awarded
emotional distress damages to Farmers in individual awards ranging from $75,000 to
$200,000.
The court determined as a matter of law that Eureka 93 committed negligence, negligent
misrepresentation, fraud, constructive fraud, promissory estoppel, and deceit. The court also
determined as a matter of law that Rendimonti committed negligence, negligent misrepresentation,
and deceit. The Special Verdict Form instructed the jury to award damages for injury caused by
Eureka 93 and Rendimonti, in addition to any damages it identified for which the other Defendants
were responsible. The jury did so, awarding $9.5 million for lost profit and emotional distress
caused by all Defendants.
6
Affiliates also raise the argument that they are not individually liable because they acted within
the scope of an agency relationship. The jury, however, found each Defendant liable for his or its
individual wrongs. Section 28-10-702, MCA (“[A]n agent is responsible to third persons as a
principal for acts . . . when the agent’s acts are wrongful in their nature.”); Williams v. DeVinney,
259 Mont. 354, 361, 856 P.2d 546, 551 (1993) (concluding that negligent misrepresentation was
a wrongful act).
7
15
¶27
Damages for emotional distress are prohibited in contract actions unless the action
involved “actual physical injury to the plaintiff.” Section 27-1-310, MCA. Because
Farmers’ case sounded in tort, they were entitled to seek damages for emotional distress
without needing to demonstrate actual physical injury. We consider Affiliates’ claim that
Farmers’ alleged distress is not the type that can support recovery of emotional distress
damages.
¶28
We review de novo whether there is sufficient evidence of distress to support an
award of emotional distress damages. Giambra, ¶ 27. The decision to submit emotional
distress damages to the jury is reviewed for abuse of discretion. Giambra, ¶ 28.
¶29
Affiliates argue that such damages are barred in this case by our decision in
Childress v. Costco Wholesale Corp., 2021 MT 192, 405 Mont. 113, 493 P.3d 314. We
held in Childress that a family who had various items of personal property taken from their
stolen vehicle could not recover emotional distress damages because the items were not so
“intrinsically intertwined” with the family’s dynamic that without the items “their ‘personal
identity’ would be irreparably impacted.” Childress, ¶ 14.
Instead, the family was
deprived of “fungible property whose value is derived from its utility.” Childress, ¶ 14.
Affiliates argue that Farmers’ damages similarly were “purely economic.”
¶30
Farmers counter that their distress implicated the loss of use and enjoyment of land
and that such implication warrants emotional distress damages.
In support of this
argument, Farmers cite Maloney v. Home & Investment Center, Inc., in which we held that
emotional distress damages are appropriate for torts involving real property and plaintiffs’
16
“subjective relationship with the property on a ‘personal-identity’ level.” 2000 MT 34,
¶ 71, 298 Mont. 213, 994 P.2d 1124.
¶31
In its order on post-trial motions, the District Court determined that the jury’s
individualized awards indicated that the jury considered the unique nature of each Farmer’s
emotional distress.
The court concluded that Farmers provided testimony regarding
specific circumstances each faced and that their testimony reflected distress regarding their
real property. Some Farmers testified that after investing time and land into the hemp crop
but receiving no payment, they were unable to properly clothe and feed their children.
Several Farmers testified to the distress of having to drive past rotting stacks of bales at the
edge of their property. As part of the financial fallout, some Farmers lost portions of their
family farms; others lost leases and equipment. The court concluded that Farmers’ distress
exceeded what Affiliates had characterized as a few sleepless nights and uncomfortable
conversations with bankers.
¶32
Emotional distress damages, as a matter of law, are not appropriate in all tort cases.
Maloney, ¶ 57. Determining whether damages for emotional distress are appropriate
depends on a case’s peculiar facts. Maloney, ¶ 71. “[E]motional distress damages resulting
from purely economic loss in non-contractual matters are rarely compensated . . . . The
implication stems . . . from the notion that in the world of business transactions most all
emotional distress is of the ‘transient and trivial’ variety.” Maloney, ¶ 66.
¶33
A plaintiff may seek damages on independent claims of negligent or intentional
infliction of emotional distress or may seek “parasitic” emotional distress damages as an
element of damages for other claims. Childress, ¶¶ 8-9. Independent claims require
17
plaintiffs to demonstrate distress “so severe that no reasonable person could be expected to
endure it.” Childress, ¶ 8 (quoting Sacco v. High Country Indep. Press, 271 Mont. 209,
335, 896 P.2d 411, 426 (1995)). Plaintiffs asserting parasitic claims, on the other hand, do
not have to demonstrate that heightened standard of proof. Childress, ¶ 9. Instead, for
parasitic damages, “the severity of the distress affects the amount of damages recovered
but not the underlying entitlement to recover.” Childress, ¶ 9 (quoting White v. Longley,
2010 MT 254, ¶ 48, 358 Mont. 268, 244 P.3d 753). And “the amount of damages is not
the amount which in our opinion would compensate the injured party; rather, ‘it is a
question of what amount of damages will the record in the case support when viewed, as it
must be, in the light most favorable to the plaintiff.’” Maloney, ¶ 71 (quoting French v.
Ralph E. Moore, Inc., 203 Mont. 327, 336, 661 P.2d 844, 849 (1983)).
¶34
This Court has differentiated between distress caused by damage to real property
and distress caused by damage to personal property, recognizing the unique emotional
impact of harm to real property. Childress, ¶¶ 12-13. Emotional distress damages typically
are prohibited in cases where “the underlying harm is economic.” Childress, ¶ 10. But the
law makes an exception for cases involving the disruption of use and enjoyment of real
property. Childress, ¶ 11.
¶35
In Maloney, plaintiff landowners—the Maloneys—testified that they were
devastated when the adjacent property they had been promised was wrongfully sold to
someone else. They painfully watched as the purchaser built a home on the precise location
where they envisioned their own retirement home would rest one day. They later saw the
property sold for almost six times what they may have paid for it themselves. Maloney,
18
¶¶ 69-70.
We concluded that because the Maloneys’ injuries involved the use and
enjoyment of land, the emotional distress they suffered was compensable. Maloney, ¶ 69.
We reasoned that the Maloneys
“were not developers in search of investment property to buy, improve, and
then sell for purely economic gain; rather, they had formed a subjective
relationship with the property on a ‘personal-identity’ level. That
compensable emotional distress would arise from the tortious interference
with the Maloneys’ rights to the property in question should have been
clearly foreseeable by any person professionally involved with such
transactions.”
Maloney, ¶ 71.
¶36
Maloney concerned an independent claim for emotional distress damages. In
Rubin v. Hughes, however, we recognized that a nuisance claim demonstrating interference
with enjoyment of their property may support an award of parasitic emotional distress
damages. 2022 MT 74, ¶ 34, 408 Mont. 219, 507 P.3d 1169. The property-owner plaintiffs
testified about the negative effects of their neighbors’ behavior (building barriers,
surveilling, etc.) on their enjoyment of property: they no longer viewed their property as a
dream; they felt discomforted on their own property; the neighbors’ actions had a
deleterious impact on personally significant family memories; and the plaintiffs no longer
received visitors.
We concluded that their testimony “demonstrated a subjective
relationship with their property on a ‘personal-identity level’ supporting emotional distress
damages.” Rubin, ¶ 33.
¶37
Here, Farmers testified about their decades-long connection with the land, their
hopes to pass their family farms on to their children, their despair about the hemp crop
rotting and becoming infested with rodents and mold, their annoyance and physical
19
sickness at seeing the rows of deteriorating hemp bales, their stress talking to bankers, their
forced sale of land and equipment they owned, and their inability to feed their families.
Like in Maloney and Rubin, Farmers were distressed by viewing the effects on their land
and became disillusioned with being landowners. Whereas in Childress the family was
unable to show a subjective relationship with the fungible stolen items, here Farmers
showed a personal-identity connection to their family farms—farms they hoped to be able
to pass to future generations. These Farmers were not corporate entities interested only in
a profit for shareholders. They demonstrated that their property-related distress warranted
the emotional distress awards rendered by the jury.
¶38
In addition to their overarching claim about insufficient evidence of distress,
Affiliates single out in their briefing two Farmers—Amber Anderson and Stephanie
Anderson. Amber and Stephanie each received emotional distress awards of $75,000, the
smallest individual amount the jury awarded. Amber and Stephanie are married to Beau
and Ty Anderson, respectively. Both Beau and Ty testified at trial. Affiliates argue that
Amber and Stephanie produced insufficient evidence of distress because neither testified.
¶39
In determining whether substantial evidence supports the verdict, we view the
evidence in a light most favorable to the prevailing party. Neal, ¶ 15. Our review of
Amber’s and Stephanie’s husbands’ testimony reveals evidence that a “reasonable mind
might accept as adequate” to support a finding of emotional distress on behalf of their
wives. See Siebken, ¶ 12. Beau testified about Amber’s involvement: she helped make the
decision to contract with USA Biofuels and she attended the initial meeting with a USA
Biofuels representative. Beau testified about the financial and emotional impacts of
20
Defendants’ conduct. He described going into debt, taking out loans, and refinancing,
including paying $6,000 for an appraisal on an 80-acre piece of their property. He referred
to “Amber and I” when discussing the steps they took to stay afloat. When asked how it
impacted him and his wife personally, he responded, “It was very stressful . . . as husband
and wife of course it was stressful because we were $400.00 an acre short on the crop that
we raised for a company that wouldn’t pay us.” Finally, Beau testified about the stress of
being the spokesman for the group of Farmers and shouldering the responsibility of having
involved others. Ty Anderson repeatedly described his farm as a “family farm.” He
described the hemp crop as having “mice and mold, net wrap was shot,” and stated that the
bales still sat on the edges of their fields at the time of trial. When asked about what being
unable to sell the hemp bales did to the family farm financially, he responded that the farm
experienced financial stress, that the relationship with their banker deteriorated, and that it
became harder to obtain an operating loan. As to emotional distress, Ty testified that he
was sure he had “aged a few years.”
¶40
Beau and Ty Anderson’s testimonies demonstrated the impacts of Defendants’
conduct on their wives, who were involved with their family farms and depended on the
farm’s success for their day-to-day existence. They met the broad definition of emotional
distress given to the jury and in accordance with state law, which includes not only “mental
anguish or suffering,” but also “shame, embarrassment, humiliation . . . disappointment, or
worry.” Parasitic emotional distress damages do not require a heightened standard of
proof; proof of any of these conditions of distress is sufficient. Beau and Ty provided
substantial evidence, “even if weak,” that reasonable minds could accept as adequate to
21
support a finding that Amber and Stephanie had experienced emotional distress.
See Siebken, ¶ 12.
¶41
We conclude that sufficient evidence of emotional distress supports Farmers’
awards and that the District Court did not abuse its discretion in sending emotional distress
damages to the jury.
Punitive Damages
¶42
Montana law bars plaintiffs from recovering punitive damages in any action arising
from contract or breach of contract. Section 27-2-220(2), MCA. This rule is typical of
other jurisdictions. 11 Corbin on Contracts § 59.2 (2022). It rests on the theory that an
aggrieved party in a contract case should be placed in the same economic position as if the
contract had been performed, but not a better position. 11 Corbin on Contracts § 55.11
(2022). We have consistently held, however, that a party may recover punitive damages
for tort claims, even if the relationship between the tortfeasor and injured party at some
point involved a contract. See, e.g., Harrington, 176 Mont. at 47, 575 P.2d at 583;
State ex rel. Dimler v. Dist. Court, 170 Mont. 77, 82, 550 P.2d 917, 920 (1976);
Grenfell v. Anderson, 2002 MT 225, ¶ 80, 311 Mont. 385, 56 P.3d 326; Daniels v. Dean,
253 Mont. 465, 474, 833 P.2d 1078, 1084 (1992). As reasoned above, the District Court
properly submitted Farmers’ tort claims to the jury after concluding that Defendants
harmed Farmers separately from the USA Biofuels contract breaches. Punitive damages
accordingly were an appropriate remedy for Farmers to seek.
¶43
We must determine, then, whether the evidence in this case supported an award of
$56 million in punitive damages. Punitive damages may be awarded in cases only where
22
a defendant has committed “actual fraud or actual malice.” Section 27-1-221(1), MCA;
Weter v. Archambault, 2002 MT 336, ¶ 40, 313 Mont. 284, 61 P.3d 771. In this case, the
jury rendered individual punitive damage awards, ranging from $1 million to $10 million,
against each Defendant. The District Court reviewed the jury’s award and concluded that
it was not above the limits of Montana law and could remain undisturbed.
¶44
Affiliates argue that the punitive damages award should be vacated because it is
unsupported by the facts. They claim that two awards of $10 million against USA Biofuels
and its eventual successor, Eureka 93, demonstrated that the verdict was a product of
passion and prejudice, unmoored from the evidence. They contend that these awards
indicate that the jury “implicitly found” that the companies were worth at least $330 million
because of a Montana statute limiting punitive damage awards to “$10 million or 3% of a
defendant’s net worth, whichever is less.” Section 27-1-220(3), MCA. They argue that
the jury’s implicit finding cannot be reconciled with the District Court’s summary
judgment ruling that USA Biofuels was assetless. Affiliates also briefly argue that the
award violates several of the statutory factors district courts must consider when reviewing
punitive damage awards. Section 27-1-221(7)(b), MCA.
¶45
Farmers respond that Montana’s punitive damage cap applies only if a defendant
“first meets his burden of demonstrating an accurate calculation of his net worth.”
Blue Ridge Homes, Inc. v. Thein, 2008 MT 264, ¶ 70, 345 Mont. 125, 191 P.3d 374. They
contend that Affiliates offered no documentary evidence and only weak testimonial
evidence regarding their net worth. They also point out that USA Biofuels and Eureka 93
did not appear or participate in the litigation and thus presented no evidence of their net
23
worth. Farmers argue that while the District Court determined that USA Biofuels was
undercapitalized at the time of contracting, that determination did not prove USA Biofuels’
assets at the time of trial for the purpose of deciding punitive damages.
¶46
District courts must review punitive damages awards to determine whether they
should be increased, decreased, or left undisturbed. Section 27-1-221(7), MCA (listing
nine factors for courts to consider when reviewing punitive damage awards). We review a
district court’s punitive damages findings under the three-part DeSaye test to determine
whether they are clearly erroneous. Deonier & Assocs. v. Paul Revere Life Ins. Co.,
2004 MT 297, ¶ 39, 323 Mont. 387, 101 P.3d 742 (citing Interstate Prod. Credit v. DeSaye,
250 Mont. 320, 820 P.2d 1285 (1991)). We first review the record to see if the findings
are supported by substantial evidence. Second, if the findings are supported by substantial
evidence, we determine if the trial court has misapprehended the effect of the evidence.
Third, if substantial evidence exists and the effect of the evidence has not been
misapprehended, this Court still may conclude that a finding is clearly erroneous when,
although there is evidence to support it, a review of the record leaves us with the definite
and firm conviction that a mistake has been committed. Deonier, ¶ 39. The ultimate
decision of a district court to enter judgment on a punitive verdict and the application of
the
statutory
punitive
damage
cap
are
reviewed
for
abuse
of
discretion.
Blue Ridge Homes ¶ 20.
¶47
We first consider whether the District Court’s findings regarding the jury’s punitive
damage award were supported by substantial evidence in the record. The court found the
following facts. Each Defendant had “actively and intentionally participated in a scheme
24
to build a publicly traded, global CBD life sciences company.” Shirley and Hoggan made
claims without a good-faith basis that Farmers would be paid what they were owed. Surety
managed USA Biofuels and lent a substantial amount of money to its eventual
co-subsidiary, Vitality USA. Documentary evidence demonstrated that Kenney had been
heavily involved in the operations of USA Biofuels and Vitality USA, despite his trial
testimony to the contrary. Defendants harmed Farmers separately from the contract
breaches by “fraudulently and negligently claiming,” over the course of several months,
that Farmers would be paid. These statements induced Farmers not to take legal action.
Defendants unreasonably released the bales a year later when the bales were rotted and
worthless. Defendants chose to spend a few million dollars on a hemp processing facility
in New Mexico in November 2018 instead of paying Farmers. By participating in this
scheme, each Defendant knew or intentionally disregarded that they were involved in
operations that had a high probability of injuring Farmers and deliberately proceeded to act
with indifference or conscious disregard to this high probability. Defendants committed
these injurious acts because their ownership of the hemp bales was paramount to claiming
the bales as an asset in presentations to investors, in their commodity dealer’s license
application with the State, and a desired bid to enter the public stock market to increase
their personal wealth. The court summed up its findings: “Evidence convinced the jury
that Defendants engaged in reckless, malicious, and fraudulent conduct under Montana law
in their dealings with [Farmers].”
¶48
“Substantial evidence” is “evidence which a reasonable mind might accept as
adequate to support a conclusion.” Deonier, ¶ 40 (quoting Sandman v. Farmers Ins. Exch.,
25
1998 MT 286, ¶ 40, 291 Mont. 456, 969 P.2d 277). Our review of the record reveals
support for the District Court’s findings of an intentional multi-layered corporate scheme,
numerous false representations over the course of months for corporate or personal gain,
and a resulting loss to Farmers. Though not undisputed, there is record evidence that the
reasonable minds of the Roosevelt County jury could accept as adequate to support the
conclusion that the Defendants had committed “actual fraud” warranting punitive damages.
¶49
On appeal, Affiliates take issue with only three of the nine statutory factors a court
must consider when reviewing a punitive damages award: the nature and reprehensibility
of the defendant’s wrongdoing; the intent of the defendant in committing the wrong; and
the defendant’s net worth. Section 27-1-221(7)(b)(i), (iii), (vi), MCA. As to the nature
and reprehensibility of their conduct, Affiliates argue that no Defendants “were even
accused of fraud or deceit regarding the initial contract’s formation” and that Farmers did
not “make any specific showing of actionable conduct” by any Defendant. Affiliates’
argument misses the mark. Defendants were accused of and found responsible for fraud
and deceit in their post-breach actions—any lack of fraud in contract formation is
irrelevant. As to intent, Affiliates argue that their intentions were “certainly innocuous and
no secret; they all sought to make money.” The District Court found that Defendants
intended to commit the wrongs in order to gain financially with little regard to Farmers.
Our review of the record similarly reveals substantial evidence that Defendants intended
to string Farmers along for their own advantage by listing the unpaid-for hemp bales in
their marketing materials and financial statements in order to court investors, procure a
state agricultural license, and make an initial public offering for their own personal gain.
26
¶50
Finally, as to net worth, Affiliates argue that they do not possess wealth nearly to
the degree to justify the magnitude of the award. A defendant bears the burden to prove
that
its
net
worth
does
not
support
an
award
of
punitive
damages.
Cartwright v. Equitable Life Assurance Soc’y of the U.S., 276 Mont. 1, 37, 914 P.2d 976,
999 (1996); Blue Ridge Homes, ¶ 62. Because USA Biofuels and Eureka 93 did not appear
at trial and thus produced no evidence of their net worth, the awards of $10 million rendered
against them are not capped based on net worth and thus are lawful. See § 27-1-220(3),
MCA.
No Affiliate produced financial statements or other documentary evidence
regarding net worth. Only one Affiliate, Kenney, testified in the punitive damages phase;
his testimony regarding net worth was limited. He stated that his own net worth was down
$18 million, that he and Hoggan had pursued a hand sanitizer business that failed and cost
them $4.5 million, that Surety Land had “nothing,” and that Shirley had given his last
$10,000 to his attorney.
Based on this weak evidence, the District Court correctly
concluded that Defendants did not provide sufficient evidence to prove net worth.
See Harrell v. Farmers Educ. Co-op Union, 2013 MT 367, ¶ 92, 373 Mont. 92, 314 P.3d
920.
¶51
Our review of the record does not reveal that the District Court misapprehended the
effect of the evidence and does not leave us with a definite and firm conviction that a
mistake has been made. Thus, under the DeSaye test, we conclude that the District Court’s
findings related to punitive damages were not clearly erroneous.
¶52
Affiliates additionally argue that the statutory cap on punitive damage awards
should apply to the Defendant group collectively and not to each Defendant. That is, they
27
argue that punitive damages should be capped at $10 million for the entire case and not
capped at $10 million for each Defendant. Affiliates requested a jury instruction indicating
as much, but the District Court denied it. The District Court addressed the argument in its
order on post-trial motions. It explained that while USA Biofuels was a “shell company”
without assets at the time of contracting, by the time of trial it had become a subsidiary of
Vitality Canada and ultimately merged with several companies to form Eureka 93.
Evidence of the relative assets and net worth of these companies was not presented to the
jury during trial or during the consideration of punitive damages.
¶53
The interpretation and construction of a statute is a matter of law, and we review de
novo whether a district court correctly interpreted and applied a statute. State v. Triplett,
2008 MT 360, ¶ 13, 346 Mont. 383, 195 P.3d 819. Section 27-1-220, MCA, limits an
award for punitive damages to “$10 million or 3% of a defendant’s net worth, whichever
is less.” The explicit wording of the statute indicates that the cap is individual to each
defendant because it states that the cap is either $10 million or 3% of a defendant’s—
singular—net worth. There is no indication from the Legislature that the cap is to be
applied to a defendant group. Instead, the statutory purpose of punitive damages is written
with an eye toward individual conduct. Juries award punitive damages “for the sake of
example and for the purpose of punishing a defendant.” Section 27-1-220(1), MCA
(emphasis added). Not every defendant’s conduct may be equally reprehensible, if at all.
¶54
Affiliates cite an unreported case from the U.S. District Court for the District of
Montana holding that where a plaintiff makes the case that multiple defendants acted as
one entity and each defendant was the “alter ego” of the others, the plaintiff is estopped
28
“from switching theories to apply the punitive damages cap on an individual defendant
basis.” Hull v. Ability Ins. Co., No. CV-10-116-BLG-RFC, 2012 U.S. Dist. LEXIS 173487,
at *6 (D. Mont. Dec. 6, 2012). The federal court examined the same state statutory cap at
issue in this case, concluding that the “plain text of the statute imposes the $10 million cap
on the total award, not on each defendant.” Hull, at *5.
¶55
Hull is readily distinguishable, and we find it unpersuasive. For starters, the Hull
jury awarded a single award of $32 million against a defendant group. Hull, at *2. Here,
Farmers proceeded against each Defendant individually when it came to punitive damages.
The jury found each Defendant liable for actual fraud and followed the special verdict form,
making separate punitive awards based on each Defendant’s own conduct. The jury’s
finding that Defendants acted in concert was directed to Farmers’ negligence claims for the
purposes of allocating responsibility, if needed, among the various faulty parties.
See § 27-1-703, MCA.
Further, as described below, the District Court’s alter ego
determination at the summary judgment stage did not materially affect the final judgment,
in which each Defendant was found to be individually responsible for each tort.
¶56
The federal court in Hull, without explanation, stated that the plain text of the statute
imposes a cap on the total award, but it considered the statute in the context of one
aggregate claim for a collective group of defendants. In our reading, the statute does not
plainly impose a collective cap and such a cap would be contrary to the statutory purpose
of punitive damages, which is to punish an individual defendant’s conduct.
Section 27-1-220(1), MCA. The District Court thus correctly determined that the statutory
cap for punitive damages applied to each Defendant individually.
29
¶57
We conclude that the District Court did not abuse its discretion when it entered
judgment on the punitive damages award.
¶58
2. Did the court err in instructing the jury?
¶59
Farmers’ contracts stated that the hemp crop was to be owned at all times by USA
Biofuels. Before the end of trial, Defendants requested a jury instruction stating, “USA
Biofuels was under no legal duty to surrender the bales of hemp to the plaintiffs.” The
District Court denied the instruction.
¶60
Affiliates argue that the District Court’s refusal of the instruction warrants a new
trial, given the court’s acknowledgment that the contractual language clearly demonstrated
USA Biofuels’ ownership of the bales. Affiliates contend that this error afforded plaintiffs
“open field running to assert that USA Biofuels somehow nefariously asserted ownership
of the bales and wrongfully refused to surrender them,” giving rise to the jury’s large
verdict.
¶61
Farmers counter that the District Court properly denied the jury instruction because
the instruction included the vague term “legal duty,” which conflated contractual
obligations with other legal duties USA Biofuels may have owed to Farmers. Farmers do
not claim they owned the bales under the bailment contracts but argue that they had a legal
interest in the bales in the form of a lien. Farmers also contend that they had a possible
legal interest in the bales because Defendants promised the State, as part of their
agricultural licensure process, that they would pay Farmers prior to delivery or taking
ownership of the hemp in a storage situation. Farmers argue that had Defendants not made
several promises of payment, Farmers would have acted to enforce these legal interests.
30
¶62
We review a trial court’s decision regarding jury instructions for abuse of discretion.
Warrington v. Great Falls Clinic, LLP, 2019 MT 111, ¶ 10, 395 Mont. 432, 443 P.3d 369.
Jury instructions “must fully and fairly instruct the jury regarding the applicable law.”
Maier v. Wilson, 2017 MT 316, ¶ 16, 390 Mont. 43, 409 P.3d 878 (quoting
Peterson v. St. Paul Fire & Marine Ins. Co., 2010 MT 187, ¶ 22, 357 Mont. 293,
239 P.3d 904). We consider the instructions in their entirety and in connection with other
instructions given and evidence introduced at trial. Warrington, ¶ 10. If the instructions
as a whole state the applicable law of the case, a party cannot demonstrate prejudice to its
substantial rights by the refusal of a different proposed instruction. Warrington, ¶ 10.
¶63
We agree with Farmers that the District Court did not abuse its discretion in rejecting
the proposed instruction. Farmers successfully disputed the idea that USA Biofuels had no
legal duty to surrender the bales by presenting a case that they could have pursued various
legal recourses had it not been for Defendants’ misrepresentations. Without the instruction,
Defendants still were free to, and did, produce evidence of their contractual ownership of
the bales. Reflecting that evidence, the District Court instructed the jury that, “A party
who executes a written contract is presumed to have read and understood the contract and
assented to its terms.” In light of this given instruction, the evidence presented at trial, and
the vagueness of the term “legal duty” in the proposed instruction, we conclude that
Affiliates have not demonstrated that the denial of the instruction affected their substantial
rights. Warrington, ¶ 10. The District Court did not abuse its discretion when it denied
the instruction.
31
¶64
3. Did the court err in ruling, on summary judgment, that three shareholders were
alter egos of USA Biofuels?
¶65
Farmers sought a ruling on summary judgment that they could pierce USA Biofuels’
corporate veil and hold three USA Biofuels shareholders—Kent, Hoggan, and Surety
Land—liable for the company’s torts and breaches. Following consideration of the parties’
submissions, the District Court determined that Shareholders failed to produce substantial
evidence to raise a genuine issue of material fact about veil-piercing. The court accordingly
held that Shareholders were “alter egos” of USA Biofuels and would be jointly and
severally liable for the company’s torts and breaches proven in this action.
¶66
Shareholders acknowledge on appeal that the alter ego determination did not
ultimately form the basis of any portion of the money judgment against them. They argue
nonetheless that the District Court inappropriately decided this fact-based issue at the
summary judgment stage. They further contend that § 35-8-304, MCA, protects members
of an LLC from liability without applicable exception. Finally, they rely on a federal
bankruptcy case, In re Atlantis Water Sols., LLC, BAP No. MT-18-1315-BKuF,
2019 Bankr. LEXIS 3133 (B.A.P. 9th Cir. Oct. 1, 2019), to argue that the District Court
erred in basing the veil-piercing on “undercapitalization alone.”
¶67
Farmers respond that the District Court’s ruling applied only to a judgment for
breach of contract and, because no breach-of-contract claims were included in the final
judgment, the issue is not properly before the court. This argument is incorrect because
the District Court’s summary judgment order states that Shareholders were to be held
“jointly and severally liable for the torts and breaches” that USA Biofuels committed
32
against Farmers in this action. The District Court’s ruling thus applied to a judgment for
torts as well. Farmers also defend the District Court’s ruling on the merits.
¶68
We find it unnecessary to consider the merits of this claim. Shareholders state in
their briefing that they must appeal the issue to avoid “downstream collateral effects.”
They do not explain such possible consequences, however, or develop additional argument
after acknowledging that the judgment on appeal does not raise the issue. The jury’s verdict
found each Defendant responsible for each tort and found further that Defendants acted in
concert with one another in committing negligence and negligent misrepresentation. The
jury accordingly did not apportion fault among Defendants when awarding compensatory
damages. Under the jury’s verdict, each Defendant is jointly and severally liable for the
damages. Section 27-1-703(1), MCA (“[E]ach party against whom recovery may be
allowed is jointly and severally liable for the amount that may be awarded to the claimant
but has the right of contribution from any other person whose negligence may have
contributed as a proximate cause to the injury complained of.”).
The alter ego
determination aside, Shareholders are responsible for the compensatory damages.
¶69
Affiliates are correct that the District Court’s alter ego ruling is immaterial to the
final judgment in the case, and they do not develop their argument about “collateral effects”
or explain why this issue merits further analysis. It is not the Court’s job to conduct legal
research on a party’s behalf, to guess a party’s precise position, or to develop legal analysis
that may lend support to that position. Osman v. Cavalier, 2011 MT 60, ¶ 8, 360 Mont. 17,
251 P.3d 686. We conclude it is unnecessary to consider this issue, especially given our
33
upholding of the verdict otherwise. See M. R. Civ. P. 61 (dictating that courts must
disregard all errors and defects that do not affect a party’s “substantial rights”).
CONCLUSION
¶70
The jury’s verdict in favor of Farmers and the District Court’s final judgment on the
verdict are affirmed in their entirety.
/S/ BETH BAKER
We Concur:
/S/ MIKE McGRATH
/S/ INGRID GUSTAFSON
/S/ DIRK M. SANDEFUR
/S/ JIM RICE
34