The opinion of the court was delivered by: Judge Amy J. St. Eve
BP AMOCO CHEMICAL COMPANY'S MEMORANDUM IN SUPPORT OF MOTIONS FOR JUDGMENT AS A MATTER OF LAW UNDER FRCP 50(a) ON FLINT HILLS RESOURCES LLC'S ESTIMATED FUTURE DAMAGES FOR CERTAIN CLAIMS, INCLUDING CLAIMS 21, 56, AND 77, AND FLINT HILLS RESOURCES LLC'S CLAIM FOR PRODUCTION CAPACITY BREACH-OF-CONTRACT AND FRAUD WITH RESPECT TO THE WASTEWATER FEED TANKS
Flint Hills has owned the Joliet Plant for five-and-a-half-years. But over half of the damages it seeks at trial, approximately $56 million, are for future estimated costs that it has not yet spent. Indeed, many of the projects for which it seeks damages have not even had initial scoping analyses prepared or funding authorized, and there is no planned date for these projects to begin or end.
Before trial, the Court specifically explained the elements and standards that Flint Hills would have to meet and prove in order to justify sending its estimated future damages claims to the jury, including black letter law such as proving that such costs were reasonably certain to be incurred and that their amounts could be proven with reasonable certainty. Now that Flint Hills has closed its case, the witness testimony and other record evidence demonstrate that Flint Hills has failed to meet the Court's standards for many of its estimated future damages claims. Accordingly, judgment as a matter of law should be granted in favor of BP Amoco and against Flint Hills' future estimated damages claims for four specific Claims-Nos. 9, 21, 56, and 77.
Moreover, the record also establishes that Flint Hills cannot prove its alleged production capacity claim for the EF-501 and EF-511 wastewater feed tanks. There is no competent evidence that the tanks constrain production, and Flint Hills knew about the condition of the tanks before the sale. Therefore, judgment as a matter of law should be granted dismissing the portions of Flint Hills' production capacity claim (Claim 21) for breach-of-contract and fraud related to the wastewater feed tanks.
A motion for judgment as a matter of law should be granted when "a party has been fully heard on an issue during a jury trial and the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue." Fed. R. Civ. P. 50(a). "If reasonable persons could not find that the evidence justifies a decision for a party on an essential element of its claim, the court should grant judgment as a matter of law." Waubanascum v. Shawano County, 416 F.3d 658, 664 (7th Cir. 2005). "[T]o avoid a directed verdict or a JNOV, a plaintiff must do more than merely argue that the jury might have chosen to disbelieve all of the defendant's evidence. A plaintiff must offer substantial evidence to support the argument." Millbrook v. IBP, Inc., 280 F.3d 1169, 1181 (7th Cir. 2002) (ellipsis and internal quotation marks removed); see also Perfetti v. First Nat'l Bank, 950 F.2d 449, 456 (7th Cir. 1991). "A mere scintilla of evidence, however, will not suffice" to avoid judgment as a matter of law. Hall v. Forest River, Inc., 536 F.3d 615, 619 (7th Cir. 2008).
To prove its estimated future damages claims, Flint Hills must establish each of the following: (i) that the future estimated costs Flint Hills seeks to recover are "reasonably certain to occur," and (ii) that the future estimated costs "can be calculated with reasonable certainty." (Dkt. 767 at 2, citing Dkt. 437 at 20; see also Dkt. 831, Breach of Contract No. 5) The Court held that while Flint Hills may seek to use various types of evidence such as documents and witness testimony to prove such damages, whatever type of evidence is used must be sufficient to support an award of future estimated damages. Specifically, the Court held that for documents such as third-party cost estimates, Flint Hills must show that: (i) the third-party estimates were integrated into Flint Hills' records; (ii) it relied upon the third-party estimates; and (iii) the documents are accompanied by sufficient indicia of reliability. (Dkt. 767 at 3) Similarly, the Court held that Flint Hills could have employee-witnesses provide testimony regarding the estimated amount of Flint Hills' future repair costs, but only if they satisfied the requirements of FRE 702. (Id. at 5) For internal cost estimates, "Flint Hills must establish that these documents are business records and that the documents upon which they rely (third-party estimate or pre-sale BP Amoco estimates) are admissible (as business records or party admissions, respectively)." (Dkt. 767 at 5)
Flint Hills' own evidence demonstrates that it has failed to satisfy these requirements for four of its future estimated damages claims-Nos. 9, 21, 56 and 77.
I. FLINT HILLS HAS NOT PROVEN THAT THE FUTURE DAMAGES COSTS FOR THE SPECIFIED CLAIMS ARE REASONABLY CERTAIN TO OCCUR
Flint Hills has failed to meet its burden of satisfying the first requirement-that future damages were reasonably certain to occur-by failing to introduce evidence of specific facts showing that the projects at issue in the four claims would be completed in the future. Instead, the evidence put forth for most claims was simply the conclusory statement of witnesses agreeing with Flint Hills' counsel's questions that the projects are "reasonably certain to occur" or "reasonably likely to occur" but without any supporting facts, factual basis for the conclusory statement, or evidence. The Seventh Circuit "repeatedly ha[s] held that conclusory statements, not grounded in specific facts, are not sufficient to avoid summary judgment." Lucas v. Chicago Transit Auth., 367 F.3d 714, 726 (7th Cir. 2004); see also Keri v. Bd. of Trs. of Purdue Univ., 458 F.3d 620, 628 (7th Cir. 2006); Laborers' Pension Fund v. RES Envtl. Servs., Inc., 377 F.3d 735, 739 (7th Cir. 2004). "And the standard for granting summary judgment 'mirrors' the standard for judgment as a matter of law, such that 'the inquiry under each is the same.'" Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-251 (1986)). Given that the standard for granting summary judgment is the same as that for judgment as a matter of law, if conclusory statements are insufficient to survive summary judgment, they are equally insufficient to survive judgment as a matter of law.
Indeed, despite its conclusory and unsupported statements, the specific facts in evidence show there is no basis for the jury to conclude that it is reasonably certain that the estimated futures damages will ever be spent. For the four specific claims subject to this motion, Flint Hills does not know when the costs will be spent. Indeed, in some cases, Flint Hills has not spent a single penny of the alleged future costs it seeks-even though it has owned the Joliet Plant for five-and-a-half years and this suit began four years ago. Moreover, Flint Hills has not even authorized any of the funding at issue. And for some of the projects, Flint Hills has not decided whether to proceed with the project at all, or it has not decided what type of repair or replacement to make.
* Specifically, as part of Claim 21, Flint Hills seeks $23,350,000 for estimated future damages for a long-term waste water treatment plant ("WWTP") project, which supposedly consists of replacing the current waste water treatment reactor with a new twin UASB reactor. Flint Hills' former plant manager Timothy Nicol responded "yes" when asked by Flint Hills counsel if such costs were "reasonably likely" to be incurred (Ex. 1, 10/13/09 Tr. at 5109:18-20), and later answered "yes" again when asked if such costs were "reasonably certain" to be incurred (Ex. 2, 10/14/09 Tr. at 5285:19-21). But Mr. Nicol is not the current plant manager; and he provided no specific facts or factual basis to support these bare conclusory assertions. He did not, for example, provide a date by when the reactor would be replaced, testify that Flint Hills had authorized funding for the project, or testify that Flint Hills had signed a contract with a vendor to purchase and install the reactor.
Instead, the specific facts required under Seventh Circuit precedent establish that whether the costs Flint Hills seeks will ever be incurred is highly uncertain. Not only has this reactor not been built, but Flint Hills' management currently is reviewing the project and has not yet decided whether to proceed-as Mr. Roman admitted: "My understanding is that management is reviewing the UASB twin reactor system and a decision is pending." (Ex. 3, 10/8/09 Tr. (Roman) at 4662:5-10, Ex. 4, 10/9/09 Tr. (Roman) at 4700:15-23) What that decision will be is unknown. When that decision will be made is also unknown. In fact, Mr. Kelly testified that Flint Hills was in the process of educating its new plant manager about the options. (Ex. 5, 9/17/09 Tr. at 1201:18-1202:4 (stating that the process design is "undergoing review " and "my process design is being reviewed, and we're trying to get the plant manager and the process supervisor to a point where they understand what it is that we're recommending")) Given that Flint Hills has not decided whether to proceed with the reactor project, it cannot be said to be reasonably certain. Supporting this uncertainty is the fact that Flint Hills has not even authorized funding for the new anaerobic reactor. (Ex. 2, 10/14/09 Tr. (Nicol) at 5233:23-5234:6) One final point-no witness with decision making authority, who can actually authorize the WWTP project or spending the $23.35 million ever took the stand to testify that a decision has been made to proceed or to spend the claimed damages, that the project will be done as outlined, or other facts necessary to establish that these costs are reasonably certain to be incurred. There is, in short, a complete absence of proof on this point.
* Another part of Claim 21 seeks $17.2 million to add a fourth TMA reactor to the Joliet Plant. While Mr. Nicol offered up the unsupported conclusion that Flint Hills is "reasonably certain to incur the costs for adding a fourth reactor" (Ex. 2, 10/14/09 Tr. (Nicol) at 5136:22-24), he did not testify to any specific facts to support this conclusory statement. To the contrary, when asked whether he knew when the reactor would be installed, Mr. Nicol acknowledged "I would only be speculating." (Id. at 5247:3-6) In fact, there is not even a Phase 0 AFE for this project. (Ex. 2, 10/14/09 Tr. (Nicol) at 5246:14-15) In other words, the project is in a stage before the phase "where a conceptual idea is developed." (Ex. 3, 10/8/09 Tr. (Roman) at 4620:7-10) Moreover, Mr. Nicol is no longer the Joliet Plant manager, and is no longer in charge of the Plant. No witness with authority over the Plant, or its expenditures took the stand and testified that this fourth reactor would be added, or what its cost would be, or when it would be added, or any of the other necessary facts to show that the costs Flint Hills seeks are reasonably certain to be incurred.
In addition, Flint Hills does not have a contract with any vendor to purchase a fourth reactor, and does not even have a contract for a vendor to perform design work for the alleged reactor. (Ex. 2, 10/14/09 Tr. (Nicol) at 5243:5-7, 13-18) In fact, Flint Hills has not received any estimates, quotes, or budgetary estimates from third-party vendors for a fourth TMA reactor. (Id. at 5242:4-13) In sum, Flint Hills has not authorized spending one penny in connection with a fourth TMA reactor.*fn1 (Id. at 5246:16-18) Having failed to do any work over the last five years to advance the fourth TMA reactor project, Flint Hills cannot prove now that it is reasonably certain to occur. This is particularly true given that no person with decision making authority with respect to the fourth TMA reactor testified, and there are no other facts in the record which establish the who, the what, the when, the how, and a reasonably certain amount that would be spent for a fourth reactor.
* For the dryer seals portion of Claim 21, Mr. Nicol concurred with counsel's conclusions that Flint Hills was "reasonably likely" to incur those costs (Ex. 1, 10/13/09 Tr. (Nicol) at 5114:16-20), and then later that such costs were "reasonably certain" (Ex. 2, 10/14/09 Tr. (Nicol) at 5285:13-15). These conclusory statements without specific factual bases are not sufficient. Lucas, 367 F.3d at 726; see also Keri, 458 F.3d at 628; RES, 377 F.3d at 739. Flint Hills has not replaced the dryer seals in the five-plus years it has owned the Plant. (Ex. 2, 10/14/09 Tr. (Nicol) at 5177:3-5) Indeed, Mr. Nicol is not aware of Flint Hills spending even one penny to replace the dryer seals. (Id. at 5177:6-14) Nor is Mr. Nicol aware of any contracts with vendors to spend money in the future. (Id. at 5178:14-17) Moreover, there is no target date for completion of the project. (Id. at 5177:16-18) In fact, the dryer seals project has not even reached Phase 0 of Flint Hills' seven project phases. (Id. at 5178:3-5) And again, no person with decision making authority to spend the funds took the stand to provide the factual basis of the when, the what, or a reasonably certain amount that would be spent on this project.
* Another part of Claim 21 involves overhauling the HC-2101 air compressor. (Ex. 6, 10/7/09 Tr. (Morris) at 4206:21-4207:10, 4213:3-7) Mr. Nicol testified there was no date certain for when Flint Hills planned to overhaul the air compressor. (Ex. 2, 10/14/09 Tr. (Nicol) at 5279:16-19) In fact, from June 2006 through June 2009, Nicol was not aware of any activity in connection with overhauling the HC-2101 air compressor. (Id. at 5280:6-9)
* Yet an additional portion of Claim 21 concerns refurbishing the HT-505 dehydration tower. (Ex. 1, 10/13/09 Tr. (Nicol) at 5111:11-13) As with the other projects, Flint Hills has not scheduled the refurbishment of the HT-505 tower (Ex. 2, 10/14/09 Tr. (Nicol) at 5240:13-16), and thus there is no evidence as to when this project might be started much less completed. Indeed, Flint Hills does not even have a Phase 0 estimate for the project. (Id. at 5240:17-19) Recall that Phase 0 means that the project is not yet even on the drawing board, but is "where a conceptual idea is developed." (Ex. 3, 10/8/09 Tr. (Roman) at 4620:7-10)
* Claim 77 involves a utility boiler, and Flint Hills' witness Rick Morris agreed with counsel's conclusion that the work was "reasonably certain" to occur, but again without providing any specific factual support such as a date by when the costs would be spent. (Ex. 6, 10/7/09 Tr. (Morris) at 4203:8-18) In fact, the question of whether to repair or replace the utility boiler is still under management review, and a final decision has not yet been made. (Ex. 3, 10/8/09 Tr. (Roman) at 4637:9-17; Ex. 4, 10/9/09 Tr. (Roman) at 4692:25-4693:7) Moreover, this project is still in phase 1, of a total of seven phases. (Ex. 4, 10/9/09 Tr. (Roman) at 4690:19-4691:1) Phase 1, like Phase 0, is "where a conceptual idea is developed" (Ex. 3, 10/8/09 Tr. (Roman) at 4620:7-10), and such phase 1 estimates can have an error range of up to plus or minus 50 percent. (Ex. 8, 10/8/09 (Morris) at 4390:20-23) Costs for a project in the conceptual development stage and currently under management review-five-and-a-half years after Flint Hills ...