Valdez Fisheries Development Association, Inc. v. Alyeska Pipeline Service Company

We address here claims arising from a letter sent and statements made by
Alyeska Pipeline Service Company during negotiations for a proposed three-way
transaction involving Alyeska, Sea Hawk Seafoods, Inc., and Valdez Fisheries
Development Association, Inc. Because Valdez Fisheries’ complaint against Alyeska did
not state a claim on which relief could be granted, we hold that it was not error to dismiss
Valdez Fisheries’ claims. And because there are no genuine issues of material fact, we
hold that it was not error to dismiss Sea Hawk’s claims on summary judgment. We
therefore affirm in all respects.

II. FACTS AND PROCEEDINGS

In December 1993 James McHale, an Alyeska Pipeline Service Company
manager, made a presentation to the Valdez City Council asking the city to provide a
wildlife rehabilitation center for Alyeska’s use in event of an oil spill. In a later city 1
council meeting, Alyeska faced strong opposition from the business community, which wanted Alyeska to obtain the center from the private sector rather than the city.
Raymond Cesarini, president of Sea Hawk Seafoods, then suggested to McHale that
Alyeska buy Sea Hawk’s plant for use as a rehabilitation center. McHale said that
Alyeska “was already thinking favorably of using” Valdez Fisheries Development
Association “for the project” and suggested that Sea Hawk contact Valdez Fisheries.

Cesarini then offered to sell Sea Hawk’s plant to Valdez Fisheries so Valdez
Fisheries could use the plant in its proposal to Alyeska. In January 1994 Cesarini again
spoke with Alyeska’s McHale. McHale again “stated that Alyeska was thinking favorably
of using [Valdez Fisheries] for the project” and suggested that Cesarini speak with Valdez
Fisheries about a “ ‘win, win’ arrangement whereby Sea Hawk would sell its processing
plant to [Valdez Fisheries] and [Valdez Fisheries] in turn would lease the plant to
Alyeska.” McHale described the arrangement as mutually beneficial because it would
allow Alyeska to meet its environmental obligations, Sea Hawk to absolve itself of
existing liabilities, and Valdez Fisheries to have a source of income to help support its fish
hatchery operations.

Cesarini met with McHale for a third time in mid-January 1994 and
expressed concern about selling the plant to Valdez Fisheries rather than directly to
Alyeska because of Valdez Fisheries’ financial problems. Cesarini declared that McHale
“confirmed that [Valdez Fisheries] would get the Alyeska contract, utilizing the Sea Hawk
plant.” Cesarini later declared that McHale “also promised me that, if for any reason
Alyeska did not lease the Sea Hawk plant from [Valdez Fisheries], . . . Alyeska would
lease the Sea Hawk plant directly from Sea Hawk on the same terms and conditions.”

In January 1994 Alyeska sent many companies, including Valdez Fisheries,
a letter soliciting proposals for the wildlife rehabilitation center. Soon thereafter Valdez
Fisheries and Sea Hawk signed an agreement for the sale of the Sea Hawk facility to Valdez Fisheries for $2.5 million, contingent upon Alyeska awarding the wildlife
rehabilitation center contract to Valdez Fisheries. The Sea Hawk-Valdez Fisheries sales
agreement was not to become “effective” until Valdez Fisheries gave Sea Hawk written
notice that Alyeska had approved Valdez Fisheries’ proposal to lease the property to
Alyeska as a wildlife rehabilitation center. The contract permitted Sea Hawk to revoke
the agreement before the effective date upon five-days notice. After the effective date,
Sea Hawk would no longer be able to revoke the agreement, but the purchase price
would increase $500 per day until closing.

Valdez Fisheries submitted a wildlife rehabilitation center proposal to
Alyeska on January 25, 1994. In April 1994 Alyeska informed all bid applicants,
including Valdez Fisheries, that it was “unable to select a contractor from the proposals
received”; it invited bidders to “reconsider the cost proposed and if [their] review
result[ed] in a cost reduction, [to] please submit a revised cost proposal.” Valdez
Fisheries then submitted a revised proposal, offering three alternative leases, a five-year
lease at $43,000 per month, a seven-year lease at $40,000 per month, or a ten-year lease
at $35,000 per month.

By letter of May 6, 1994 Alyeska responded to Valdez Fisheries’ “bid
submittals” stating:

We have completed our review of the revised proposals
received in response to our invitation TAPS/5890 for A150
Wildlife Rehabilitation Center.

This is to inform you that based on a thorough evaluation of
all factors, you have been selected as the winning bidder.
Your proposal was deemed to best meet our requirements for
this facility.

We intend to begin the process of negotiating a contract as
soon as possible. For your planning purposes, we would like
to begin discussions the week of May 16, 1994. You will be
contacted by telephone to schedule the place and time to
meet.

We look forward to a successful association between our two
companies. This facility will be a welcome addition to our oil
spill contingency program.

(Emphasis added.)

Valdez Fisheries faxed a copy of Alyeska’s letter to Sea Hawk; Valdez
Fisheries and Sea Hawk thereafter acted as if the effective date of their contract for sale
had been triggered.

In June 1994 Alyeska and Valdez Fisheries began meeting to negotiate the
contract. Valdez Fisheries prepared a draft of the lease agreement and sent it to Alyeska
to serve as a framework for the meetings to follow. But at a July 7, 1994 meeting,
Alyeska advised Valdez Fisheries that it was reanalyzing the costs of the wildlife
rehabilitation center and declined to discuss further the finalization of the lease agreement.
At this meeting, Alyeska also asked Valdez Fisheries about “the status of [the]
negotiations” with Sea Hawk.

In a July 29, 1994 letter, Alyeska advised Valdez Fisheries not to expend
funds on developing the center until Alyeska notified it to proceed. The letter also
included a revised program and facility space requirements. On August 8, 1994 Alyeska
sent Valdez Fisheries a letter stating that Alyeska had “chosen to pursue other avenues
to accomplish our objective” and that “further negotiations are unnecessary.”

Sea Hawk sued Valdez Fisheries alleging breach of contract and promissory
estoppel. Valdez Fisheries answered and filed a third-party complaint against Alyeska,
claiming, among other things, breach of contract and promissory estoppel. Sea Hawk
then asserted direct claims against Alyeska. Superior Court Judge John Reese ultimately
dismissed all of Valdez Fisheries’ claims against Alyeska under Alaska Civil Rule
12(b)(6), and granted summary judgment to Alyeska on Sea Hawk’s claims. The case
between Valdez Fisheries and Sea Hawk went to trial, and the jury returned a large
verdict for Sea Hawk. Sea Hawk and Valdez Fisheries have since settled their disputes,
leaving the Sea Hawk-Alyeska disputes and the Valdez Fisheries-Alyeska disputes.

Valdez Fisheries appeals the Rule 12(b)(6) dismissal of its contract and
promissory estoppel claims against Alyeska, the denial of leave to amend the third-party
complaint to assert newly discovered claims, the refusal to sanction Alyeska for improper
discovery conduct, and the limitation of Valdez Fisheries’ damages to its out-of-pocket
costs in negotiating with Alyeska. Sea Hawk appeals the summary judgment dismissing
its claims of promissory estoppel, negligent misrepresentation and omission, third-party
beneficiary, and breach of duty to negotiate in good faith. Alyeska appeals the superior
court’s denial of Alyeska’s request for an enhanced attorney’s fees award.

III. DISCUSSION

* * *

The superior court granted Alyeska’s Civil Rule 12(b)(6) motion and
dismissed Valdez Fisheries’ contract claim, holding that no contract was formed. Valdez
Fisheries argues that this was error because its third-party complaint against Alyeska
alleged an agreement with terms that are sufficiently definite and certain for contract
formation.

* * *

The pertinent allegations are found in the text of Alyeska’s May 6, 1994
“winning bid” letter, set out verbatim in the third-party complaint. The letter’s second paragraph contains the language most strongly supporting Valdez Fisheries’ contract
claim. It states, “you have been selected as the winning bidder.” But this language does
not unequivocally express acceptance because it is susceptible to at least two alternative
interpretations. These words could mean either “we accept your bid as written,” or “we
have chosen you as the contractor with whom we will negotiate.” The remainder of the
letter fully resolves this ambiguity. The letter’s next paragraph, also set out in the thirdparty
complaint, states that “[w]e intend to begin the process of negotiating a contract as
soon as possible.” This passage requires a conclusion that Alyeska was not
communicating an unequivocal acceptance of a Valdez Fisheries’ offer.

Moreover, Valdez Fisheries’ proposal contained three alternative lease
proposals that differed significantly with respect to the duration and monthly rent for any
lease. Even if we were to interpret Alyeska’s letter to say unequivocally that “we accept
your offer,” we could not say which of the three offers it was accepting, and whether
Alyeska was agreeing to lease the property for five years, seven years, or ten years, with
monthly rent payments of $43,000, $40,000, or $35,000, respectively. Duration and
price are important contract terms. Such great differences in important contract terms preclude finding a meeting of minds. The significant differences in the alternatives 15
confirm that the May 6 letter was not an unequivocal acceptance but, at most, was an
agreement to negotiate.

Valdez Fisheries argues that an internal Alyeska document — a May 1994
Authorization for Expenditure — obtained in discovery after the contract claim was
dismissed resolves the ambiguity and substantiates Alyeska’s intent to accept one
particular offer. Valdez Fisheries theorizes that the Authorization for Expenditure set out
the material price and duration terms by choosing the five-year, $43,000 payment
alternative, thus removing any uncertainty about the contract terms. But Alyeska did not
send this document to Valdez Fisheries in 1994. Indeed, Valdez Fisheries asserts on
appeal that “Alyeska’s execution of the [Authorization] was unknown” to Valdez
Fisheries until 1997. Therefore, this internal memorandum could not have communicated
to Valdez Fisheries Alyeska’s acceptance of one of the offers and it could not have made
certain terms that were otherwise unenforceably uncertain.

Finally, Valdez Fisheries’ complaint does not permit a reasonable inference
that other facts not specifically plead might demonstrate unequivocal acceptance. We
could hypothesize that Alyeska might have communicated acceptance via some other
unspecified document sent in the period between the “winning bid” letter and the
termination of contract negotiations. In this case, however, the superior court was not 18
required to make such a strained inference to salvage Valdez Fisheries’ complaint.

We cannot hold parties to a standard that requires them to effectively plead
evidence prior to conducting discovery. But even without discovery, Valdez Fisheries 20
should have had access to any documents that might have supported its claim that
Alyeska accepted an offer. As explained above, documents not transmitted to Valdez
Fisheries before Alyeska terminated contract negotiations could not demonstrate
unequivocal acceptance.

Further, to the extent that Valdez Fisheries argues that dismissal of its
contract claim was premature because it was entered prior to discovery, this argument
must be rejected because subsequent litigation allowed Valdez Fisheries to correct any
pleading deficiency and avoid any prejudice. Although the court dismissed the contract
claim in 1995, it did not enter final judgment for Alyeska until July 1997. In the interim,
Valdez Fisheries engaged in extensive discovery on its remaining claims, including its
promissory estoppel and promise-to-negotiate claims. Because these claims depended
upon similar facts, Valdez Fisheries effectively remained free to continue discovery that
might have helped it revive its dismissed contract claim.

Valdez Fisheries indeed discovered facts which it relied upon in 1997 when
it sought to revive its contract claim in its proposed second amended third-party
complaint. But the second amended third-party complaint and the supporting motion
papers submitted after eighteen additional months of discovery and investigation failed
to point to any Alyeska document transmitted in 1994 to Valdez Fisheries, other than the
“winning bid” letter discussed above, that arguably constituted an unequivocal acceptance
of one of Valdez Fisheries’ three offers. Thus, even assuming the Rule 12(b)(6) 22
dismissal was premature, it did not prejudice Valdez Fisheries. Valdez Fisheries had
ample opportunity before final judgment to amend and reinstate its contract claim if it
discovered relevant facts supporting that claim.

* * *

Click the case caption above for the full text of the Court's opinion.

For these reasons we AFFIRM in all respects.

Unknown

Unknown

None