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GQ Sand, LLC v. Range Management Systems, LLC

United States District Court, W.D. Wisconsin

September 30, 2017

GQ SAND, LLC, Plaintiff and Counterclaim Defendant,
RANGE MANAGEMENT SYSTEMS, LLC, and NEJGID, LLC, Defendants and Counterclaim Plaintiffs.



         A jury found in favor of plaintiff GQ Sand, LLC, on breach of contract and tortious interference claims asserted against defendants Range Management Systems, LLC ("RMS") and NEJGID, LLC, and awarded total damages of $934, 400. (Dkt. ##285, 286.) After accounting for the amount plaintiff received from a settling defendant, the court entered final judgment in its favor. (Dkt. #289.) Before the court are a number of post-judgment motions. In the first motion, defendants move for judgment as a matter of law under Federal Rule of Civil Procedure 50(b) and for a new trial under Rule 59. (Dkt. #303.) That motion will be denied in its entirety because the court finds that (1) defendants waived certain of these challenges by failing to raise them in a Rule 50(a) motion; and (2) as to those challenges that were preserved, the jury's verdict is supported by a sufficient evidentiary basis.

         In the second motion, plaintiff seeks an order holding defendants and their counsel in civil contempt based on defendants' disclosed confidential information subject to the court's protective order to third parties and used that information for a purpose unrelated to this litigation. (Dkt. #330.) While the court finds that defendants' sole member, Cody Lyon, and defendants' counsel, Attorney Kolten Jennings with the law firm Puis Haney, PLLC, violated the court's protective order, it is uncertain whether GQ Sand suffered any loss. Whether plaintiff was actually injured by the disclosures ends up being a moot issue, since the relief that plaintiff seeks is the same as that requested in itss own motion to alter or amend the judgment, asking that the court not reduce the judgment by any anticipated payment by the settling defendant with an assignment of a credit, since both the assignment itself and the amount of any assignment remain uncertain. (Dkt. #290.) For the court will grant this motion, finding that since the court was apparently mistaken in reducing the jury's award of damages for tortious interference with the Sand Supply Agreement in light of the uncertainty of that payment, the court will grant both of plaintiff's motion and the requested relief in the form of entry of the corrected amount as reflected in the order below.

         Finally, plaintiffs move for attorneys' fees as contemplated under the Rail Delivery Agreement and costs for the prevailing party. (Dkt. ##293, 294.) Having found defendant Range Management Systems breached that agreement, the court will grant that motion as well, including supplementing the award to reflect fees accrued post-judgment. (See dkt. #353.) Relatedly, plaintiff's unopposed bill of costs is well-documented and limited to approved categories of expenses. Accordingly, the court will further award plaintiff its costs against both defendants.


         Plaintiff GQ Sand brought this civil action against defendants Conley Bulk Services, LLC, RMS and NEJGID, arising out of a multi-million dollar frac sand deal gone awry. All defendants in turn filed counterclaims against plaintiff, while NEJGID also asserted a cross-claim against Conley. The parties' disputes involve two, core agreements: a Sand Supply Agreement ("Supply Agreement" or "SSA") between GQ Sand and Conley; and a Rail Delivery Agreement ("Delivery Agreement" or "RDA") between GQ Sand and RMS. NEJGID's manager Carl Hudspeth played an intermediary role in establishing the Supply Agreement. Then at some point in 2015, after the events at issue in this action, RMS's sole member, Cody Lyon, purchased NEJGID from Hudspeth. In addition to the breach of contract claims, plaintiff also asserted various tortious interference with a contract claims and a civil conspiracy claim.

         On the eve of trial, Conley and GQ Sand settled their cross-claims, leaving only plaintiff GQ Sand's claims against defendants NEJGID and RMS. At trial, the jury returned a liability verdict in favor of GQ Sand, finding that defendant RMS breached the Delivery Agreement (or RDA) and tortiously interfered with both the Supply Agreement (or SSA), and that NEGJID tortiously interfered with both agreements. (Liability Verdict (dkt. #285).) After the damage phase, the jury further awarded plaintiff: $45, 000 in compensatory damages against RMS for breach of contract, $772, 200 in compensatory damages against both defendants for tortious interference with the SSA, and $77, 200 in compensatory damages against NEJGID for tortious interference with the RDA. (Damages Verdict (dkt. #286).)


         I. Defendants NEJGID and RMS's Motion for Judgment as a Matter of Law (dkt. #303)

         Under Rule 50, judgment may be granted as a matter of law where there is no "legally sufficient evidentiary basis" to uphold the jury's verdict on that issue. Fed.R.Civ.P. 50(a). In reviewing a Rule 50 motion, the court will "examine the evidence presented, combined with any reasonably drawn inferences, and determine whether that evidence sufficiently supports the verdict when viewed in the light most favorable to the non-moving party, " which in this case, is the plaintiff GQ Sand. E.E.O.C. v. AutoZone, Inc., 707 F.3d 824, 835 (7th Cir. 2013).

         In particular, the court will not make credibility determinations or weigh the evidence. Rather, the court must assure that more than "a mere scintilla of evidence" supports the verdict, Hossack v. Floor Covering Assocs. of Joliet, Inc., 492 F.3d 853, 859 (7th Cir. 2007). reversing "only if no rational jury could have found for the prevailing party." AutoZone, Inc., 707 F.3d at 835. Moreover, "[b]ecause the Rule 50(b) motion is only a renewal of the preverdict motion, it can be granted only on grounds advanced in the preverdict motion." Wallace v. McGlothan, 606 F.3d 410, 418 (7th Cir. 2010); see also Thompson v. Mem'l Hosp. of Carbondale, 625 F.3d 394, 407 (7th Cir. 2010) (refusing to consider the defendant's argument that plaintiff failed to demonstrate that he suffered an adverse employment action, in part, because the defendant did not raise argument in Rule 50(a) motion); Fed.R.Civ.P. 50 cmt. 1991 Amendments ("A post-trial motion for judgment can be granted only on grounds advanced in the pre-verdict motion.").

         Defendants also move for a new trial under Rule 59, which "may be granted only if the jury's verdict is against the manifest weight of the evidence." King v. Harrington, 447 F.3d 531, 534 (7th Cir. 2006) (citing ABM Marking, Inc. v. Zanasi Fratelli, S.R.L., 353 F.3d 541, 545 (7th Cir. 2003)). To meet this standard, defendants must demonstrate that no rational jury could have rendered a verdict against them. See King, 447 F.3d at 534 (citing Woodward v. Corr. Med. Servs. of III, Inc., 368 F.3d 917, 926 (7th Cir. 2004)). In making this evaluation, the court must view the evidence in a light most favorable to plaintiff, leaving issues of credibility and weight of evidence to the jury. King, 447 F.3d at 534. "The court must sustain the verdict where a 'reasonable basis' exists in the record to support the outcome." Id. (quoting Kapelanski v. Johnson, 390 F.3d 525, 530 (7th Cir. 2004)).

         Defendants cannot overcome these high hurdles. First, defendants argue that "[t]he evidence is legally insufficient to support the verdict rendered by the jury in regards to RMS breaching the RDA as it was void from the onset because it was impossible to perform." (Defs.' Mot. (dkt. #303) ¶ 15.) More specifically, defendants contend that RMS could not have performed the terms of the contract because the Allied Rail Terminal in Tomah, Wisconsin, could not accept railcars. RMS made the same arguments in its motion for summary judgment, which the court also rejected. (6/10/16 Op. &l Order (dkt. #221) 28-32.) Defendants similarly raised a challenge to the breach of contract claim based on impossibility in their Rule 50(a) motion. (6/28/16 Trial Tr. (dkt. #301) 126-27.) Consistent with the law, the jury was instructed that: "If performance of a promise is impossible because of a state of facts existing when the contract was made and the promisor had no knowledge or reason to know of such facts, there is no duty to perform." (Jury Instr. (dkt. #282) 5.) See also Scherrer Construction Co. v. Burlington Mem'l Hosp., 64 Wis.2d 720, 733, 221 N.W.2d 855 (1974) ("[A] promise imposes no duty if performance of the promise is impossible because of facts existing when the promise is made of which the promiser neither knows nor has reason to know.").

         However, GQ Sand presented more than sufficient evidence from which a jury could reasonably reject this impossibility defense. For example, GQ Sand points to evidence that it specifically relied on the sand supplier WWS's representation that the Allied Terminal could receive 20 covered hopper rail cars. (Pl.'s Opp'n (dkt. #324) 6-7.) Plaintiff GQ Sand also presented evidence that RMS was the party with an account with the Union Pacific ("UP") railroad and knew of the plan to use the Allied Terminal a week before the execution of the RDA, providing ample time for RMS to confirm the viability of that terminal. (Id. at 7.)

         Plaintiff further presented evidence that RMS learned of the unavailability of the Allied Terminal (at least initially and at the full 20 car requirement) within one hour of signing the RDA, yet failed to inform GQ Sand. (Id. at 8.) The evidence also demonstrated that RMS continued to assure GQ Sand the cars were being released and moved into position, even though the cars were never in Wisconsin, or at least a reasonable jury could so find. (Id. at 8.) Finally, plaintiff presented evidence demonstrating that even after UP approved delivery of 10 cars to the Allied Terminal, RMS still failed to produce those cars.[2]

         Defendants' motion to dismiss also ignores the fact that plaintiff alleged, and the court instructed, on a breach of duty of good faith and fair dealing, which was part of the breach of contract verdict question. The jury was instructed that "[a] contracting party can breach the duty of good faith even if it did not violate any express term of the contract." (Jury Instr. (dkt. #282) 4.) Consistent with this claim, plaintiff presented compelling evidence of: (1) RMS's acceptance of the security deposit and other payments; (2) RMS's failure to inform plaintiff of difficulty it encountered in performing the contract, repeatedly assuring that the railcars were moving into position; and (3) RMS's assent to the change of location to Hixton and continued failure to perform. This evidence was more than sufficient to support the jury's finding of a breach of duty of good faith and fair dealing.

         Defendants further argue that the submission of a jury instruction on modification of contract by conduct was "improper" because the RDA's express terms required any amendment to the agreement to be in writing. (Defs.' Mot. (dkt. #30) ¶¶ 21-22.) As an initial matter, defendants failed to raise any objection to this instruction at any point, thus waiving it. (Pl.'s Opp'n (dkt. #324) 9-10.) Tellingly, defendants also failed to respond to plaintiff's waiver argument in their reply, presumably conceding that they have no basis to object to the instruction at this late date. Regardless, the court finds no error in giving a modification by conduct instruction, especially when viewed in light of the waiver of strict performance instruction, which permitted the jury to find waiver of contractual provisions -- including the written amendment requirement -- either "expressly or . . . inferred from the conduct of the parties." (Jury Instr. (dkt. #282) 4-5.) See also Royster-Clark, Inc. v. Olsen's Mill Inc., 2006 WI 46, ¶¶ 3, 46-48, 290 Wis.2d 264, 714 N.W.2d 530 (holding that contracts with unambiguous provisions requiring written modification could be modified by an oral agreement of the parties). As such, the court rejects defendants' motion for either judgment as a matter of law or a new trial on the jury's finding that RMS breached the RDA.

         Second, defendants challenge the jury's finding that both RMS and NEJGID tortiously interfered with the Sand Supply Agreement between GQ Sand and Conley. In support of their motion, defendants contend that: (1) the SSA was impossible to perform; and (2) Conley terminated the contract unilaterally. (Defs.' Mot. (dkt. #303) ¶ 22.) As plaintiff points out, defendants again failed to move for directed verdict on this claim, instead solely moving on the breach of contract claim. (See 6/28/16 Trial Tr. (dkt. #301) 126-27 (limiting Rule 50(a) motion to breach of contract claim).) Defendant similarly failed to address this waiver argument in their reply brief, again apparently conceding that their Rule 50(b) challenge is not proper. See Wallace, 606 F.3d at 418.

         Even if preserved, defendants failed to present any evidence or argument to the jury in support of their claim that the plaintiff's performance on the SSA was impossible given the timing of sand deliveries. As for any argument based on the sand quality, GQ Sand presented sufficient evidence from which a reasonable jury could find that the sand met the required specifications. Regardless, defendants' challenge does not directly address the jury's determination that defendants interfered with the SSA; instead, defendants' argument that plaintiff could not have performed the contract terms would only be relevant to the jury's determination that ...

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