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Alcan Forest Prods., LP v. A-1 Timber Consultants, Inc.

United States District Court, D. Alaska

November 13, 2013

ALCAN FOREST PRODUCTS, LP, an Alaska Limited Partnership, Plaintiff,
v.
A-1 TIMBER CONSULTANTS, INC., a Washington Corporation, Defendant

Page 1017

For Alcan Forest Products LP, an Alaskan Limited Partnership, Plaintiff: H. Clay Keene, LEAD ATTORNEY, Keene & Currall, P.C., Ketchikan, AK.

For A-1 Timber Consultants, Inc., a Washington Corporation, Defendant: Matthew W. Claman, LEAD ATTORNEY, Lane Powell LLC, Anchorage, AK.

OPINION

Sharon L. Gleason, UNITED STATES DISTRICT JUDGE.

Page 1018

ORDER RE FOUR PENDING MOTIONS

This litigation concerns a contract dispute between Plaintiff Alcan Forest Products, LP (" Alcan" ) and Defendant A-1 Timber Consultants, Inc. (" A-1" ). Before the Court are numerous motions, including three motions for summary judgment and a motion to amend the answer. This Order is intended to address these four pending motions. Each has been fully briefed, and on June 21, 2013, the Court heard oral argument on the motions:[1]

1. At Docket 58, A-1 moves for summary judgment on all claims made by Alcan.[2]
2. At Docket 72, Alcan moves for summary judgment on A-1's affirmative defense of impossibility of performance.[3]

Page 1019

3. At Docket 74, A-1 moves for leave to amend its answer and to include various affirmative defenses and counterclaims.[4]
4. At Docket 77, A-1 moves for summary judgment on estoppel grounds.[5]

The remaining motions will be addressed by separate order.

FACTUAL AND PROCEDURAL BACKGROUND

This case arises out of an April 2010 contract between Alcan and A-1, in which A-1 committed to bring a feller buncher to Southeast Alaska to assist Alcan in harvesting second growth timber at Coon Cove and Long Island.[6] Alcan is in the business of buying and selling timber in Southeast Alaska, but Alcan itself does not actually harvest timber.[7] Evergreen Timber, LP (" Evergreen" ), which is not a party to this litigation, is a logging company managed and owned by the same entities as Alcan.[8] Evergreen's business is harvesting timber.[9] As of 2009, A-1 was in the business of " cutting timber, harvesting timber, and buying and selling timber." [10]

I. Alcan Purchases Right to Harvest Timber on Long Island and at Coon Cove.

In 2005, Alcan contracted with Cape Fox Corporation for the " exclusive right to cut, remove and appropriate" certain timber in various locations near Ketchikan, Alaska, including Coon Cove.[11] The timber at Coon Cove was " salvaged timber" --timber left over after prior logging operations--and predominantly second growth.[12] Harvesting the timber at Coon Cove would require that Alcan construct a logging road into the sale area.[13] Through several contract extensions, Alcan had the right to remove timber from Coon Cove through December 31, 2010.[14]

In 2007, Alcan contracted with K-Ply, Inc., a subsidiary of Klukwan, Inc., for the purchase and sale of timber on Long Island.[15] The timber on Long Island was also mostly second growth.[16] Alcan had determined that the most economical way to harvest most of the second growth timber on Long Island was by using a feller

Page 1020

buncher.[17] Timber not cut by the feller buncher could be hand cut.[18] Alcan's right to remove timber from Long Island expired on December 31, 2011.[19]

II. Alcan Arranges to Harvest, Contracting with Evergreen and Contacting A-1.

In March 2010, Alcan contracted with Evergreen to harvest timber on Long Island.[20] Evergreen's responsibilities included " furnish[ing] all labor, equipment, supplies and competent supervision." [21] This seems to include housing and feeding loggers, building roads, moving fallen timber, and bundling timber for transportation.[22] The contract provided that Evergreen would be paid based on the volume of board feet of timber harvested (commonly referred to as MBF).[23] If Evergreen did not produce logs, it was not paid.[24] The parties dispute why Alcan planned to harvest Long Island in the 2010 timeframe. A-1 asserts that Alcan was not in a hurry to harvest Long Island and that Alcan profited from delaying the harvest " due to a longer period for growth." [25] A-1 directs the Court to Nichols's deposition testimony explaining the delay where he testified " that the market situation was such that we were waiting for a better market." [26] Alcan asserts that it chose 2010 because of the unavailability of a contractor prior to that time--that is, before that, Evergreen was committed on other contracts.[27] Alcan also asserts that its decision whether to harvest Coon Cove was dependent upon finding a contractor that could complete the harvesting on Long Island and at Coon Cove prior to expiration of both contracts.[28] Alcan would not harvest Coon Cove unless it could find a contractor that could do both, thus making it economical for Alcan to build the necessary access road.[29]

As noted above, because much of the timber on Long Island and at Coon Cove was second growth, Alcan sought to use a feller buncher. Neither Alcan nor Evergreen had a feller buncher in Southeast Alaska, so Alcan representatives Brian Brown and Eric Nichols reached out to A-1 president, Tom Loushin, to discuss a potential contract for use of A-1's feller buncher. Brown, Nichols, and Loushin met in Ketchikan, Alaska, in March 2010 to discuss the project.[30] Alcan asserts that

Page 1021

during that meeting, Brown and Nichols informed Loushin of their time restrictions on harvesting Coon Cove and Long Island because of the 2005 and 2007 contracts.[31]

In his declaration, Nichols states that he inquired as to Loushin's other projects in Alaska because Alcan would not have contracted with A-1 if it had known that A-1 intended to engage in other contracts at the same time.[32] Alcan's concern was that A-1 might spread its resources too thin.[33] Ultimately, Loushin contracted with Leisnoi, Inc. to harvest on Kodiak Island during the same time period as the Long Island and Coon Cove project.[34] But at Loushin's deposition, he testified that Brown and Nichols never told him that they would not hire A-1 if it was to accept other projects.[35]

Loushin's general practice is to visit a job site before contracting to send a feller buncher.[36] At the meeting in March 2010, Loushin was shown pictures of Long Island and Coon Cove.[37] However, the parties dispute whether Brown and Nichols offered or were willing to take Loushin to see the sites. Loushin asserts that Alcan could not or would not take him to view the sites.[38] Nichols, on the other hand, states that Loushin declined an offer to visit and view conditions.[39] There is no dispute that Loushin did not see the sites at Long Island and Coon Cove prior to signing the contract on behalf of A-1.

III. Alcan and A-1 Contract, and the Harvesting Begins.

On or about April 15, 2010, the parties entered into their contract, pursuant to which A-1 would bring a single feller buncher to harvest second growth timber at Long Island and Coon Cove.[40] The contract indicated that its " term" would be for " one 1 logging season, commencing on or about April 15, 2010 and terminating on October 31, 2010 or upon completion." [41]

The contract provided that Alcan would pay " $220 per cutting hour" for a single " Tigercat 370" feller buncher (the " Tigercat" ).[42] The parties entered into a pay-per-cutting-hour agreement, rather than a pay-per-volume-cut agreement, which is more typical in the industry. In Loushin's declaration, he states that the parties used the pay-per-cutting-hour agreement for a variety of reasons, including to " reduce[] risks to both parties because of mutual uncertainties about the ground conditions, camp conditions, and whether a feller buncher in Southeast Alaska could fall timber at a rate consistent with normal operating conditions." [43] He also states that

Page 1022

A-1 contracted for this payment method because it was difficult to distinguish between mechanically and hand-cut trees, and because of " Alcan's refusal to take" him to visit the sites.[44] Alcan asserts that Loushin negotiated an " exceedingly high hourly rate" to cover A-1's risk of any uncertainty from not seeing the sites.[45]

The contract included a " time is of the essence" clause. It also included a clause requiring A-1 to comply with the Worker's Compensation Act and provide Alcan with a certificate of compliance.[46] At paragraph 21, the contract provided Alcan the right to terminate:

21. ALCAN'S RIGHT TO TERMINATE - REMEDIES: In case Contractor shall fail to perform any part of this contract by him to be performed promptly and in the manner herein specified, Alcan may, at its option, terminate this contract and all rights of the Contractor hereunder by giving written notice of such termination to Contractor personally or by mail addressed to the Contractor at the address appearing herein. In such event Alcan shall be entitled to take immediate possession of the above described lands and the timber thereon and all logs cut therefrom and to remove Contractor, his agents, servants and employees from said lands.[47]

The contract also included a clause in which each party agreed to maintain an on-site representative to assist in " day-to-day management issues" :

27. ON SITE REPRESENTATION: The parties agree that each of them will have a representative on site authorized to represent them on day-to-day management issues. Each party agrees to keep the on[-]site representative of the other informed of all material developments and all items requiring notice.[48]

In the contract, Alcan identified Eric Nichols and A-1 identified Dan Ward, a feller buncher operator, as on-site representatives.[49]

A-1's Tigercat arrived at Long Island on April 29, 2010. At his deposition, Ward testified that he had concerns about the operation of the Tigercat " from an hour after being there" because " [t]here was way too much debris on the ground [and] the ground was too soft," which caused the Tigercat to sink.[50] During the initial days of operation, Alcan provided no telephone communication at the Long Island camp, so Ward was not able to immediately communicate these problems to Loushin.[51] But Ward shared his concerns with Mike Doig, Evergreen's supervisor of operations at Long Island.[52]

Due to mechanical breakdowns, A-1's feller buncher operated only 25 or 32 out of 69 days between April 29, when the machine arrived at Long Island, and July 6, when Alcan terminated the contract.[53]

Page 1023

For example, the Tigercat did not operate from April 30, 2010, when the turbo charger failed, until after it was repaired on or about May 5, 2010.[54] During that breakdown, Ward made a trip to Ketchikan for replacement parts, at which time he was able to share his concerns with Loushin.[55] The machine broke down again on May 10, 2010, when the tool tilt cylinder failed, and was inoperable until May 28, 2010.[56] Then, on June 15 or June 22, 2010, a cutting blade failed.[57] The Tigercat was not repaired again until after Alcan terminated the contract.[58] During this time, Evergreen employees at Long Island conducted mostly " non-logging related jobs to keep busy, but were able to log as trees were handcut." [59] According to Nichols, Evergreen employees were kept on the payroll to discourage them from leaving the remote camp at Long Island to find paying jobs elsewhere.[60] Ward testified in his deposition, however, that there was nevertheless high employee turnover due to the " conditions" at the Long Island camp.[61]

Despite the on-site representative clause in the contract, the evidence demonstrates that neither party's designated on-site representative was present at Long Island every day. Nichols was present at Long Island to " set[] the camp up" [62] and to watch the Tigercat operate during the first few days.[63] He also made subsequent visits.[64] But he was on Long Island only approximately 13 days during the course of the contract.[65] A-1's representative, Ward, who was also the Tigercat operator, was present every day that the Tigercat was operable, but he was also absent many days.[66]

After A-1 began operating on Long Island, Alcan learned that A-1 had contracted with Leisnoi, Inc. for timber operations on Kodiak Island.[67] A-1 asserts that after this, Alcan withdrew logistical support for

Page 1024

the Long Island operation.[68] Ward testified that Alcan representatives were not helpful when A-1 requested assistance.[69] But there does not appear to be any clause in the contract requiring Alcan to provide assistance to A-1.

IV. After Several Tigercat Breakdowns, Alcan's " Terminates" the Contract, but Proceeds with Harvesting on Long Island and at Coon Cove.

On July 6, 2010, about 20 days after the mid-June cutting blade failure, Brown wrote a letter on behalf of Alcan to A-1, terminating ...


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