[00:00:00] Speaker 04:
Please be seated.

[00:00:05] Speaker 04:
So I'd already called ADA Carbon Solutions versus Atlas Carbon, so you're out of time now.

[00:00:12] Speaker 04:
But if you want to argue, I guess we'll let you.

[00:00:16] Speaker 04:
Mr. Schaeffer?

[00:00:28] Speaker 02:
Good morning.

[00:00:30] Speaker 02:
May it please the court, counsel?

[00:00:34] Speaker 02:
The primary merits-based issue for the court to determine on this appeal is whether the district court's award of damages to ADA after a bench trial complied with Wyoming contract law.

[00:00:52] Speaker 02:
Indeed, ADA does not.

[00:00:54] Speaker 01:
Counsel, can you start with the jurisdictional issue?

[00:00:57] Speaker 02:
Absolutely, Your Honor.

[00:00:59] Speaker 02:
The jurisdictional issue is that the court asked for supplemental briefing on whether or not subject matter jurisdiction attached to this case from its inception.

[00:01:10] Speaker 02:
One of the things that the court addressed or asked the parties to address in supplemental briefing is whether or not there's two different distinct LLCs, whether their membership was completely diverse with the membership of our client ADA.

[00:01:27] Speaker 02:
In our there was a preliminary round of briefing that I believe addressed one of the court's concerns.

[00:01:35] Speaker 02:
went down to the district court and came back up, and now at which resolved that portion of the subject matter jurisdiction issue.

[00:01:44] Speaker 02:
And then over the last two weeks, the court identified an additional issue involving EKT Investments Limited Partnership, which is a limited partnership that was, I believe, formed under the laws of Louisiana that has a general partner, EKT Inc., that is a Florida

[00:02:03] Speaker 02:
corporation and then a series of individuals and I believe trusts, generation-skipping trusts that act as limited partners.

[00:02:15] Speaker 02:
One of the things that was submitted on the supplemental briefing was that the analysis from ATLAS, at least, and these are members of ATLAS LLC, Your Honor, is whether or not the members

[00:02:31] Speaker 02:
of the trust entities were completely diverse from ADA, and whether or not the court, how far the court had to go into determining the members of, or what would be the members of the limited partnership, if it could just stop at the general partnership, or if it had to go to the limited partnership as well, and then dig in further to the actual citizenship of the beneficiaries.

[00:02:55] Speaker 02:
One of the things that, at least we noted in our supplemental reply or response,

[00:03:00] Speaker 02:
was that the analysis from Atlas did not go down to each level that was required of analyzing an unincorporated entity such as a trust or an LLC, essentially anything except for a corporation.

[00:03:15] Speaker 02:
And therefore, without that analysis on if there are any beneficiaries currently in those three generations giving trusts,

[00:03:27] Speaker 02:
we can't really determine at this point.

[00:03:29] Speaker 02:
We don't know one way or the other whether or not there's complete diversity jurisdiction.

[00:03:34] Speaker 01:
So is that your position today that we should remand for determination of these issues?

[00:03:42] Speaker 01:
What is your position?

[00:03:43] Speaker 02:
My understanding of the federal court's bill, the district court and this court, Your Honor, Judge, you bring up a good point, is that

[00:03:53] Speaker 02:
This, it is both coming upon or was to be coming upon the district court and then this court to resolve itself of the jurisdictional issues.

[00:04:02] Speaker 02:
And my understanding of the federal case law is that subject matter jurisdiction either existed or did not at the time of filing and that we cannot determine one way or the other

[00:04:15] Speaker 02:
whether or not it existed without a full accounting of all the members of those unincorporated entities.

[00:04:24] Speaker 02:
That is the law.

[00:04:25] Speaker 02:
I'm not going to disagree with the law.

[00:04:28] Speaker 02:
And I think that the appropriate thing to do here is to remand to the district court to make the appropriate factual findings as far as whether or not the parties are completely diverse.

[00:04:40] Speaker 02:
Are you going to need discovery?

[00:04:42] Speaker 02:
I think we'll need limited discovery, but it also depends

[00:04:45] Speaker 02:
on cooperation of Atlas and what information they can continue to get out of their membership because ultimately... Yeah, I thought it was a member of a member.

[00:04:56] Speaker 04:
It was a member of a member of a member that you don't know their form and you don't have access to these people, but they could be subpoenaed or whatever, couldn't they?

[00:05:05] Speaker 02:
That's absolutely right.

[00:05:07] Speaker 02:
you know, limited requests for production, limited interrogatories.

[00:05:10] Speaker 02:
I think it could probably be dealt with on a simple affidavit as to whether or not as of the date of the filing, if I recall correctly, it was January, I'm sorry, it was July 25th of 2022, whether or not there were any beneficiaries, actual beneficiaries to the trust, and if so, where they lived so that we can determine the full citizenship.

[00:05:34] Speaker 02:
And I think an additional step that should be taken is to analyze each and every one of the entities that are identified in the corporate disclosure statements from analysts to ensure before this matter would come back up to the court that we've fully resolved all issues and gotten to each and every level that's required to get to for an unincorporated entity to satisfy both the district court and ultimately your honors on whether or not parties are completely diverse.

[00:06:02] Speaker 02:
What if there isn't diversity?

[00:06:04] Speaker 02:
If there's not diversity, then there was no jurisdiction to begin with in the court.

[00:06:08] Speaker 02:
And unfortunately, three years of litigation will have to be unwound and they'll have to be refiled in Wyoming State Court.

[00:06:16] Speaker 02:
It's obviously what we would like to avoid.

[00:06:18] Speaker 04:
But there's some doctrines that allow lack of diversity to be cured post trial, dismissing the party or something like that.

[00:06:27] Speaker 04:
I don't know if this member of a member of a member transferred its interest to avoid diversity, whether that cures it.

[00:06:38] Speaker 04:
But there are some doctrines.

[00:06:41] Speaker 04:
Have you looked into that possibility?

[00:06:43] Speaker 02:
Your Honor, I haven't.

[00:06:46] Speaker 02:
Only for the sole purpose that we have only two parties to the case.

[00:06:50] Speaker 02:
We have an LLC on one side and an LLC on the other side.

[00:06:54] Speaker 02:
And it may be the situation if you have multi-parties that you could satisfy, that you could satisfy that issue by dismissing a party.

[00:07:04] Speaker 02:
But post filing change of ownership of a limited liability company and how that would affect potentially an equitable consideration on determining subject matter jurisdiction, I have not looked at that particular issue.

[00:07:19] Speaker 04:
Anything else on jurisdiction?

[00:07:21] Speaker 02:
OK, let's get to the merits in case we have to decide that.

[00:07:27] Speaker 02:
So the merits-based issue here is whether or not the course determination that essentially ADA was only allowed or entitled to damages for nine and a half weeks of loads of activated carbon deliveries from Atlas complies with Wyoming law.

[00:07:48] Speaker 02:
Under Wyoming law,

[00:07:50] Speaker 02:
Contract damages are designed to place the parties in a position as if the contract had been performed.

[00:07:57] Speaker 02:
And what happened here was the court determined that, and we don't dispute that there was a contract, there was a breach of the contract, that there was harm to ADA, and the ADA was entitled to damages.

[00:08:11] Speaker 02:
Our quibble with the district court's analysis is that

[00:08:14] Speaker 02:
the district court cut off the amount of damages that ADA was entitled to by making a finding, a factual finding that ADA had impliedly terminated or impliedly exercised a right to early termination under the party's supply agreement and that that effectively ended the party's contractual relationship

[00:08:38] Speaker 02:
and limited ADA to only $76,000 with damages.

[00:08:42] Speaker 02:
This was a multi-year complex transaction between two parties that are in the activated carbon space, Fulton Business in Wyoming.

[00:08:52] Speaker 02:
There was a total, under the contract at the time, or as of the date that the district court determined that there was this implied termination, there was still approximately $1.4 million

[00:09:05] Speaker 02:
pounds of activated carbon to be delivered to ADA under the trial period, and then at a minimum, another 5 million pounds of activated carbon to be delivered in what was termed as Contract Year 1.

[00:09:18] Speaker 02:
another at a minimum 4.4 million pounds of activated carbon to be delivered in contract year two, and then a minimum of 3.2 million pounds of activated carbon to be delivered in year three.

[00:09:32] Speaker 02:
And your damages were like 10 cents a pound.

[00:09:35] Speaker 02:
And we don't quibble with the district court's finding that on average, it's that because of the breach, ADA incurred an additional 10 cents per pound

[00:09:47] Speaker 02:
upcharge or surcharge to go and find covering products.

[00:09:51] Speaker 02:
What was the cost per pound total?

[00:09:54] Speaker 02:
The cost per pound total, don't have that right in front of me, Your Honor, I apologize.

[00:09:58] Speaker 02:
It was under the contract, the parties had a fixed price contract that was, I call them modified fixed price contract that had some modifications built in over the three year contract period.

[00:10:11] Speaker 02:
I believe it was in the range of 56 cents per pound.

[00:10:15] Speaker 02:
and that on average from the two suppliers the ADA was able to in a very tight market find covering product four that on average it cost them an additional 10 cents per pound more.

[00:10:27] Speaker 04:
What was your client's obligation under the contract?

[00:10:33] Speaker 04:
Was it obligated to buy that much for each of these yearly terms?

[00:10:38] Speaker 02:
Once the contract term, once the trial period or the initial phase of performance ended,

[00:10:45] Speaker 02:
then ADA was in a take or pay situation.

[00:10:48] Speaker 02:
So it either had to accept deliveries of four million of, for instance, first contractor, your honor, it had to either accept delivery of five million pounds or pay for five million pounds.

[00:11:02] Speaker 02:
Contractor two, same thing, either had to accept delivery of four million or pay for it.

[00:11:06] Speaker 02:
So that was the risk that ADA took on.

[00:11:09] Speaker 02:
What about during the trial period?

[00:11:11] Speaker 02:
During the trial period, it was 2.56.

[00:11:14] Speaker 02:
million pounds.

[00:11:15] Speaker 02:
That you were obligated to purchase?

[00:11:17] Speaker 02:
That we were obligated to accept and purchase before there would be a transition to the subsequent three-year terms.

[00:11:25] Speaker 02:
Yes, Your Honor.

[00:11:26] Speaker 04:
So you couldn't, I mean, if you were going to terminate, you could be liable for not purchasing the extra, the undelivered.

[00:11:39] Speaker 02:
If our clients did not terminate during the trial period,

[00:11:43] Speaker 02:
then, yes, they were on the hook to either take the poundage or pay for the poundage.

[00:11:50] Speaker 02:
And I think that the issue with respect to the district court's terminations and the contract language is the person putting.

[00:11:58] Speaker 02:
So essentially what the district court found, Your Honor, was that Atlas was unwilling to meet the orders or the demands from ADA, whereas the actual

[00:12:12] Speaker 02:
contract language says that ADA has a right, kind of an offer after the trial period to say, if applying commercially reasonable terms, it appears that Atlas is unable to meet the contracts, the product specifications, or the quantity demands, then it could early terminate.

[00:12:32] Speaker 02:
That use of unable, I think, is an important one, because unable is not the same as unwilling.

[00:12:40] Speaker 02:
Unwilling is, that's a breach, that's a default, that's what the court found.

[00:12:44] Speaker 02:
And that would entitle ADA to the full measure of damages, Your Honor.

[00:12:51] Speaker 04:
And were there, could you terminate before the first year contract without any damages?

[00:13:02] Speaker 04:
Yes, Your Honor.

[00:13:03] Speaker 04:
Could you terminate again after the first year?

[00:13:05] Speaker 04:
No, Your Honor.

[00:13:07] Speaker 04:
If you entered, if you went through the trial period,

[00:13:09] Speaker 04:
Then you either terminate it or you enter into a three-year binding agreement.

[00:13:16] Speaker 02:
That's a good point.

[00:13:18] Speaker 02:
It's a nice segue into my final point before I'll try to reserve some time for rebuttal.

[00:13:22] Speaker 02:
But that there's been some discussion or issues raised in the briefs about essentially the trial period being a condition precedent to the remainder of the contract term.

[00:13:31] Speaker 02:
And I think that the appropriate way to look at it or frame it is that the end of the trial period

[00:13:36] Speaker 02:
was an extinguishment of the ADA's contract right of early termination.

[00:13:42] Speaker 02:
Once then, that 2,560,000 pounds got delivered, ADA's right to terminate and get off the agreement early was done.

[00:13:52] Speaker 02:
It was over, and it was in the agreement.

[00:13:55] Speaker 02:
And if you're honest, permit me, I'd like to reserve a little bit.

[00:13:58] Speaker 04:
Well, you took, what, eight?

[00:14:01] Speaker 04:
We were down to eight minutes when you started.

[00:14:04] Speaker 04:
I don't think maybe your opposing counsel wants to talk about jurisdiction, but I think you carried the burden for both of you.

[00:14:12] Speaker 04:
So you get another seven minutes of time on the merits.

[00:14:17] Speaker 03:
Did the trial period ever really end here?

[00:14:20] Speaker 03:
I mean, kind of the parties walked away before the end of that trial period, right?

[00:14:27] Speaker 03:
Yes, Your Honor.

[00:14:28] Speaker 03:
And this report found that that was a breach by Atlas.

[00:14:34] Speaker 02:
Yeah, I believe the district court used words like sham acceptance and that ADA got jerked around after Atlas had determined that it was going to re-initiate performance obligations, essentially.

[00:14:49] Speaker 02:
And that's where the force majeure component of this case comes in.

[00:14:52] Speaker 02:
Of course, there was a force majeure declaration in early July of 2022.

[00:14:57] Speaker 03:
You want damages from July of 2022 through year three?

[00:15:02] Speaker 02:
Yes, based on the minimum expectations of the parties, you're kind of correct.

[00:15:06] Speaker 02:
But I think you can, whether it's from July or from November, there was a manifestation from Atlas of its unwillingness to continue to perform under the contract.

[00:15:19] Speaker 02:
And I think the force majeure provision of it is, or the circumstances surrounding the force majeure are important and perhaps evident of

[00:15:30] Speaker 02:
What eventually the district court got to in saying that was a bad faith, essentially a bad faith breach of the contract is that there was no, Atlas didn't back away from the fact that they exercised their force majeure.

[00:15:47] Speaker 02:
that their right to force majeure and suspended performance under the contract based on ADA's unwillingness to agree to and increase the price.

[00:15:56] Speaker 02:
The force majeure provision is very clear that the event of force majeure in order to be an appropriate exercise of that contractual right is that it had to actually affect performance.

[00:16:10] Speaker 02:
Performance here under the agreement was the Atlas delivering activated carbon JDA and as was came out of trial and was in fact undisputed was that at the time

[00:16:22] Speaker 02:
that Atlas had suspended its performance to ADA under the contract, Atlas was experiencing a record demand of its activated carbon product.

[00:16:33] Speaker 02:
And then when it finally, because of litigation expediency, decided that it was going to reinitiate performance obligations under the contract, and when ADA said, okay, we'll take our two loads per week, which was the part as usual custom,

[00:16:49] Speaker 02:
Atlas said, well, you know, we have our pipeline filled with orders all the way essentially through the end of the year.

[00:16:55] Speaker 02:
Performance is never an issue.

[00:16:57] Speaker 04:
But the court, the district court, viewed the force majeure provision as considering a significant increase in costs as being a force majeure event, right?

[00:17:12] Speaker 04:
Yes, Your Honor.

[00:17:14] Speaker 04:
So if that were the case, then

[00:17:18] Speaker 04:
had at least a good argument that it had encountered that situation, didn't they?

[00:17:23] Speaker 04:
Or do you disagree with that reading of the contract, of the provision?

[00:17:28] Speaker 02:
I think even if we accept that as an appropriate reading of the contract, I think that it's nonetheless the erroneous conclusion because of that final clause of the force majeure provision which said

[00:17:41] Speaker 02:
only to the extent that the event affects performance.

[00:17:45] Speaker 04:
But didn't, I thought the, someone from Atlas, maybe it was their president, testified to how much more expensive things got.

[00:17:55] Speaker 04:
Yes.

[00:17:56] Speaker 04:
Why wasn't that adequate?

[00:17:58] Speaker 02:
Well, the expense of the materials or the expenses that increase for the

[00:18:04] Speaker 02:
for the company didn't bring production to a halt.

[00:18:07] Speaker 02:
It didn't bring demand to a halt.

[00:18:10] Speaker 02:
It didn't shut down the factory.

[00:18:11] Speaker 04:
It made it much more expensive.

[00:18:12] Speaker 04:
I thought the way the district court interpreted it, if it just gets much more expensive to perform, you could perform and lose money, but we're not going to make you perform and lose money.

[00:18:24] Speaker 04:
That's the way the district court read the contract, I thought.

[00:18:27] Speaker 02:
And I respectfully submit that that's an erroneous interpretation because of

[00:18:32] Speaker 02:
that last provision, the last essentially sentence of the force majeure provision says that to the extent such event actually affects performance.

[00:18:44] Speaker 02:
And while they testified at trial that the cost of production went up, they also testified that all the rest of their customers had agreed to a price increase and that they were able to continue production, they were able to continue performing.

[00:19:00] Speaker 02:
that they held out on ADA only because ADA would not agree to an increase of the price.

[00:19:07] Speaker 02:
So while they testified that their performance got more expensive, they did not give any testimony that the increase in cost prevented them from actually running their plant and producing the activated carbon as long as it got paid for it.

[00:19:25] Speaker 04:
I think the way it interprets the provision

[00:19:28] Speaker 04:
If it made it so expensive that you think you have to go out of business, then that was a force majeure event that would permit them not to perform.

[00:19:43] Speaker 04:
Do you disagree with that?

[00:19:44] Speaker 02:
I don't disagree that that's the way the court interpreted the provision at trial and in issuing the bench memorandum.

[00:19:56] Speaker 02:
I think my point is, Your Honor, is that there was no testimony in that the increase in price prohibited it from actually producing, or the increase in cost prohibited it from actually producing its product.

[00:20:14] Speaker 04:
But the language it relies on that instead applied here, maybe you're disagreeing with that, was

[00:20:21] Speaker 04:
if one of these events makes performance impossible, which seems to be the way you're interpreting it, or economically or financially impractical.

[00:20:31] Speaker 04:
So that would seem to apply if, yeah, I can do it, but I'll lose the bundle and go out of business.

[00:20:37] Speaker 04:
So that's economically or financially impractical.

[00:20:40] Speaker 04:
Do you disagree that that language applies here?

[00:20:43] Speaker 04:
I don't disagree that it applies, Your Honor, but... You don't disagree.

[00:20:47] Speaker 02:
I don't disagree that it applies.

[00:20:48] Speaker 02:
I guess my point that I'm trying to make is that

[00:20:52] Speaker 02:
There were other customers that Atlas had, and that they testified that they agreed to a higher price, which increased their margins, and they were able to continue production.

[00:21:02] Speaker 02:
So, you know, at what point does the force majeure event of increased cost, you know, when does that stop?

[00:21:12] Speaker 04:
Well, it's when it becomes economically or financially impractical.

[00:21:16] Speaker 04:
So you're conceding a number of things I didn't realize you were conceding.

[00:21:21] Speaker 04:
such as that language about economically or financially impractical, you're conceding that that applies here, but then isn't the issue whether the increase in cost made it economically or financially impractical to sell at the terms under the contract?

[00:21:45] Speaker 02:
I think in that sense, Your Honor, I understand what you're asking now, and I apologize if that was unclear.

[00:21:50] Speaker 02:
We have two broad points as far as the language of the force majeure.

[00:21:54] Speaker 02:
Obviously, the one is the last sentence of the provision, which I referenced a few times, is that the whole entire paragraph is subject to proof that it actually affected the ability to perform.

[00:22:08] Speaker 02:
And my point on that particular provision is that

[00:22:13] Speaker 02:
The Atlas essentially isolated that only to ADA.

[00:22:19] Speaker 02:
Otherwise, it was able to actually produce product and give it to customers.

[00:22:24] Speaker 02:
If one customer made it more expensive, I think that that did not impact its ability to perform.

[00:22:31] Speaker 02:
Excuse me, the clock hasn't been running.

[00:22:34] Speaker 04:
I'm not sure.

[00:22:35] Speaker 02:
That is true.

[00:22:35] Speaker 02:
It's stuck on four to five.

[00:22:37] Speaker 04:
Excuse me.

[00:22:39] Speaker 04:
Is there a problem with the clock?

[00:22:40] Speaker 04:
It's been at 4.05 for quite some time, I think.

[00:22:44] Speaker 02:
I thought I had time standing still.

[00:22:49] Speaker 04:
What did you do?

[00:22:51] Speaker 04:
Some sort of voodoo.

[00:22:52] Speaker 04:
Whatever trick, I'm sure there are lots of counsel who would like to learn to do it.

[00:22:55] Speaker 02:
They'll be given lessons on the hallway after argument.

[00:23:01] Speaker 02:
Our second issue with respect to the financial impossibility or impracticability, so we think that there was a

[00:23:10] Speaker 02:
Grammatically, there was an incorrect interpretation as far as what that particular clause was referring to.

[00:23:16] Speaker 02:
It was referring to, I believe, the acts of civil authorities, changes in the law that caused performance to be more expensive or financially impractical.

[00:23:28] Speaker 02:
And I think that basic contract construction

[00:23:31] Speaker 02:
would dictate that you have to read the force majeure provision in the context also of the broader agreement.

[00:23:38] Speaker 02:
And one of the material parts of the agreement, particularly for ADA, was that this was a fixed price agreement.

[00:23:46] Speaker 02:
So the ability for the

[00:23:49] Speaker 02:
It doesn't make sense to interpret that provision as giving either party carte blanche any time to cut more expensive for them to perform the ability to declare force majeure, particularly in light of the fixed price.

[00:24:05] Speaker 03:
If we agree with you that the district court erred on the force majeure, what implications does that have for your damages theory?

[00:24:13] Speaker 02:
A few months.

[00:24:15] Speaker 02:
And Your Honor, I think you get to it.

[00:24:18] Speaker 02:
kind of an overarching point with respect to damages is that we tethered our breach and default arguments essentially on the force majeure.

[00:24:30] Speaker 02:
I think as far as damages go, this was not damages measured on time.

[00:24:35] Speaker 02:
This was damages measured on poundage.

[00:24:37] Speaker 02:
So the damages assessment is essentially

[00:24:42] Speaker 02:
you know, how many pounds were left both under the trial period and then on contract years one through three at the time of the breach.

[00:24:50] Speaker 02:
And the answer is it doesn't make a material difference because after the force majeure, they didn't deliver another pound to us.

[00:24:56] Speaker 02:
So the damages analysis is going to be the same.

[00:24:59] Speaker 03:
Well, does it matter that you never made a demand for more deliveries after December?

[00:25:04] Speaker 02:
That we never made more of a demand?

[00:25:07] Speaker 02:
No.

[00:25:09] Speaker 02:
Another important point, I think, is that we

[00:25:11] Speaker 02:
We had both a money damages remedy and then also we had asked for specific performance.

[00:25:18] Speaker 02:
That was what we were in the lawsuit to do was get them to specifically perform under the agreement.

[00:25:22] Speaker 02:
And when it became clear that absent a court order, specific performance, that they weren't going to go back to pre force majeure course of performance, that that's kind of, I think, what stopped.

[00:25:33] Speaker 02:
The other thing that stopped is that that final email that Ms.

[00:25:37] Speaker 02:
Cooper sent in November

[00:25:39] Speaker 02:
talked about different processes, different revisions, or terms that they had adopted that apply to their orders.

[00:25:47] Speaker 02:
And that was going to be different from what the parties had originally agreed to.

[00:25:52] Speaker 02:
So therefore, that was, I think, a repudiation, potentially, of the party's contract at 50 seconds left.

[00:25:59] Speaker 04:
The force majeure clause makes a difference for a six or eight week period, does it not?

[00:26:06] Speaker 04:
It does.

[00:26:07] Speaker 04:
Okay.

[00:26:08] Speaker 04:
I thought you said it didn't make any difference.

[00:26:09] Speaker 02:
Well, it doesn't make a difference with respect to how you're going to calculate damages.

[00:26:13] Speaker 04:
Because the damages are... Or the methodology.

[00:26:15] Speaker 04:
But you don't get any... If force majeure provision actually protected Atlas for that six to eight weeks, then you don't get any damages for what happened at that period.

[00:26:26] Speaker 04:
Is that right?

[00:26:27] Speaker 02:
We get damages, but for when things started back up and the amount of poundages left on the table.

[00:26:34] Speaker 02:
That's right.

[00:26:34] Speaker 02:
Thank you, Your Honor.

[00:26:47] Speaker 00:
May it please the court?

[00:26:50] Speaker 00:
My name is Jeff Pope.

[00:26:51] Speaker 00:
I'm here on behalf of the Appellee Atlas Carbon.

[00:26:54] Speaker 00:
I'd like to start very quickly with the jurisdictional issue.

[00:26:57] Speaker 00:
I know Mr. Schaefer covered a lot of it.

[00:27:00] Speaker 00:
I did want to mention that in this latest request for supplemental briefing, I did reach out and spoke with the president of EKT Investments.

[00:27:08] Speaker 00:
The difficulty that I encountered was they were not excited

[00:27:13] Speaker 00:
to provide information about some of their limited partners, which is why we were unable to provide the court with the names of beneficiaries.

[00:27:21] Speaker 00:
I was, in fact, told they didn't know who the beneficiaries were.

[00:27:24] Speaker 00:
And for a couple of the trustees, well, one, Bessemer Trust Company, I was told to, quote, research that for myself.

[00:27:32] Speaker 00:
So as the briefing indicates, I attempted to do that.

[00:27:36] Speaker 00:
Unfortunately, it appears there's a plethora of Bessemer companies, or at least companies that bear that name.

[00:27:43] Speaker 00:
At least the difficulty in regard to that.

[00:27:46] Speaker 00:
But everything else Mr. Schaefer said, I have no reason to disagree with.

[00:27:50] Speaker 04:
Why don't you stop and start his clock at 15 minutes now?

[00:27:55] Speaker 03:
Go ahead.

[00:27:59] Speaker 03:
Does the court need to invoke legal process to find out from your clients what the facts are here?

[00:28:07] Speaker 03:
It seems like we have a jurisdictional duty to figure this out.

[00:28:12] Speaker 00:
Potentially, Your Honor, the difficulty we encountered with the law was how far the onion gets peeled back in these scenarios.

[00:28:20] Speaker 00:
The case that we cited with regards to

[00:28:22] Speaker 00:
identifying for jurisdictional purposes the citizenship of a trust was in relation to a case where the trust was a party.

[00:28:30] Speaker 00:
So obviously in that situation you have to establish citizenship for purposes of diversity.

[00:28:37] Speaker 00:
We couldn't find any cases that talked about this scenario where, I think Judge Hartz you put it, a member of a member of a member, which is

[00:28:44] Speaker 00:
EKT Investments LP is the member of my client.

[00:28:50] Speaker 00:
There is a general partner, a limited partner, and of those limited partners.

[00:28:55] Speaker 04:
But it does look like we need to know that.

[00:28:57] Speaker 04:
And you can, can you not depose these people and get processed to do that?

[00:29:04] Speaker 04:
This fellow who doesn't want to do it might feel differently if he got a court order.

[00:29:09] Speaker 00:
Absolutely, Your Honor.

[00:29:10] Speaker 00:
I don't disagree with that at all.

[00:29:12] Speaker 00:
I think we could if we needed to do discovery.

[00:29:15] Speaker 00:
And that could avoid a tricky legal issue also.

[00:29:18] Speaker 00:
Sure.

[00:29:19] Speaker 00:
Yeah.

[00:29:19] Speaker 00:
I would like to come with the power of the court if I had to, as opposed to a phone call where you can tell me to pound sand if you want to.

[00:29:27] Speaker 00:
Now let's start on the merits.

[00:29:30] Speaker 00:
Turning to the merits now, I'd like to start with the termination question.

[00:29:34] Speaker 00:
Because from our perspective, ADA has improperly framed that in order to raise questions about what the scope of damages really should be.

[00:29:45] Speaker 00:
And here's why I say that.

[00:29:47] Speaker 00:
The district court did not make any findings about repudiation, material breach, waiver, or any of the other arguments that ADA raises in its briefing.

[00:29:57] Speaker 00:
Instead, what the district court found is that under Wyoming law,

[00:30:01] Speaker 00:
you can exercise contract rights by action, by word, or by conduct.

[00:30:07] Speaker 00:
And the district court, and these findings are not challenged here on appeal, found that ADA invoked section 21 of the contract, which gave it a right during the trial period to terminate all its obligations, cease performance, if it was to be found that Atlas couldn't consistently meet

[00:30:29] Speaker 00:
the specifications in delivering the product.

[00:30:32] Speaker 00:
An important fact here for your honors is the parties stipulated that Atlas was never able to deliver a single pound of activated carbon that met the specifications in the contract.

[00:30:44] Speaker 00:
In fact, one of the kind of larger issues at trial that's not present here on appeal

[00:30:49] Speaker 00:
was why was that?

[00:30:51] Speaker 00:
Why was Atlas having difficulty meeting those specifications?

[00:30:54] Speaker 00:
There was expert testimony on that front and, you know, as Atlas's expert explained, that it was impossible given the manufacturing process that Atlas used to meet that.

[00:31:04] Speaker 04:
So the district court found that based on the plain language... The ADA carbon took it all and just mixed it with other product to get something that was acceptable.

[00:31:13] Speaker 00:
Correct.

[00:31:13] Speaker 04:
It didn't meet specs, but they were willing to take it.

[00:31:17] Speaker 00:
Certainly, Your Honor, that was the testimony at trial.

[00:31:19] Speaker 00:
But the plain language of Section 21 did afford ADA the right to unilaterally terminate.

[00:31:26] Speaker 00:
And the district court found that ADA's silence, ceasing communication with Atlas after November 10th of 2022, met that standard of conduct to invoke that right.

[00:31:38] Speaker 04:
Well, that concerns me because of

[00:31:43] Speaker 04:
what could happen and what seems to have happened here.

[00:31:46] Speaker 04:
Say you have two parties with a contract like this to supply goods at a particular price.

[00:31:53] Speaker 04:
And the party's supposed to, the supplier just decides to jerk around the buyer and deliver slowly, never keep promising and then not delivering.

[00:32:07] Speaker 04:
So the buyer just says, I give up.

[00:32:11] Speaker 04:
I'll go look elsewhere.

[00:32:12] Speaker 04:
I don't want to waste my time with these folks because they're just not going to perform.

[00:32:17] Speaker 04:
At that point, I would think the buyer could get entire contract damages for the entire period of the contract and say, this is what I lose from this.

[00:32:28] Speaker 04:
I'm going to have to pay an extra 10 cents a pound for this product.

[00:32:33] Speaker 04:
And if your theory, if the district court's theory is correct,

[00:32:40] Speaker 04:
then that's an easy way to limit damages in these sort of contracts.

[00:32:44] Speaker 04:
Just screw up, so on, because ADA never explicitly said canceling.

[00:32:52] Speaker 04:
What they did suggest total frustration and say, okay, we'll just get our damages for how they didn't perform.

[00:32:59] Speaker 04:
Tell me what I'm missing.

[00:33:01] Speaker 00:
So I think there's two important responses to that, Judge Hartz.

[00:33:04] Speaker 00:
The first is the sham acceptance that Mr. Schaeffer talked about and are jerking around, depending upon how you want to characterize it.

[00:33:12] Speaker 00:
That was related to a very specific element in the contract, namely that there were specific timelines about when an order has to be placed and when Atlas had to accept the order.

[00:33:25] Speaker 00:
But the terms of shipment or fulfillment or whatever you want to call it

[00:33:29] Speaker 00:
are not present in the contract.

[00:33:31] Speaker 04:
And so the assumption... There was no provision saying you have to deliver within so much time.

[00:33:37] Speaker 04:
Okay.

[00:33:37] Speaker 00:
Correct.

[00:33:37] Speaker 00:
And we argued, and the district court didn't really reach this, but that Wyoming's UCC would provide a fill-in for that.

[00:33:44] Speaker 00:
A reasonable time.

[00:33:45] Speaker 00:
Correct, Your Honor.

[00:33:46] Speaker 00:
And so the district court found the acceptance was insufficient, but there was no finding that a delivery or a fulfillment would never take place.

[00:33:57] Speaker 04:
The second important thing never or would not take place within a reasonable time.

[00:34:04] Speaker 00:
The district court made no findings whatsoever on that front.

[00:34:07] Speaker 00:
But but one of the important findings the district court did make is it found that all of the witnesses were credible.

[00:34:13] Speaker 00:
It had no reason to disagree with what the witnesses testified to.

[00:34:18] Speaker 00:
And both Atlas witnesses, the CEO, as well as the head of sales, Ms.

[00:34:23] Speaker 00:
Cooper, all explained that Atlas stood willing to fulfill those orders had ADA confirmed.

[00:34:29] Speaker 00:
Now, Mr. Schaeffer alluded to the November 10th email, which was the final communication between the parties, did lay out some new procedures that Atlas had adopted and those that had historically not been present.

[00:34:42] Speaker 00:
That is true, but there is no basis to assume

[00:34:48] Speaker 00:
that ATLAS would not have fulfilled the dates that it had specified for the better part of two months saying, ADA, if you would like these two orders, we will fulfill them on this date and on this date.

[00:35:01] Speaker 00:
That is undisputed in the record, and the district court made findings that those were credible documents as well as testimony.

[00:35:10] Speaker 03:
How did the district court then deal with the repudiation argument?

[00:35:15] Speaker 00:
The district court didn't confront that argument, Your Honor.

[00:35:18] Speaker 00:
Admittedly, it was a close call in briefing this case about whether we wanted to raise a waiver issue.

[00:35:23] Speaker 00:
There were, at least in our mind, some statements made during closing argument that maybe suggest that ADA was trying to argue for repudiation.

[00:35:32] Speaker 00:
But the district court made no findings on repudiation.

[00:35:36] Speaker 00:
ADA and its proposed findings and conclusions did not suggest repudiation.

[00:35:41] Speaker 00:
But critically, Your Honor, I think you can resolve that one on the law.

[00:35:44] Speaker 00:
The Rusalis case and the Skyco case, which we've cited in our briefing, very clearly say that under Wyoming law, delay, insufficient performance, breach, uncertainty about whether you're able to perform cannot rise to the level of repudiation.

[00:36:01] Speaker 00:
It has to be an unequivocal statement or act

[00:36:04] Speaker 00:
that you are not going to perform the contract.

[00:36:07] Speaker 00:
ADA doesn't cite any evidence in its briefing where Atlas said that.

[00:36:11] Speaker 00:
Instead, what ADA attempts to do is take statements that don't say that and say, well, you should construe them as such.

[00:36:19] Speaker 00:
So for example, ADA says the force majeure clause was a repudiation.

[00:36:24] Speaker 00:
Well, there's no language in there that says that.

[00:36:27] Speaker 00:
And as we point out, that creates a weird dynamic where if you're invoking a contract right that allows you to suspend performance, to read that then as total repudiation, we can't find any cases that would support that proposition.

[00:36:46] Speaker 04:
the refusal, the failure to deliver because you gave new customers, Atlas gave new customers priority over the one that had a contract, the customer there was a contract with.

[00:36:59] Speaker 04:
That wouldn't, that could not be construed as a repudiation.

[00:37:04] Speaker 00:
No, for two reasons, Your Honor.

[00:37:05] Speaker 00:
The first is those same cases, Rosales and Skycoast say that a breach, which assuming ADA's interpretation is correct about this, thou shalt supply us first

[00:37:15] Speaker 00:
That would not rise the level of repudiation.

[00:37:18] Speaker 00:
And second, ADA, excuse me, Atlas did not have a duty in the trial period to supply ADA before any other customer.

[00:37:29] Speaker 00:
What ADA is attempting to do is conflate some terms, and I'll unpack those right now.

[00:37:34] Speaker 00:
So the trial period does not have a, it lasts for this long a period of time.

[00:37:41] Speaker 00:
Instead, it's a quantity-based,

[00:37:44] Speaker 00:
period of time where once you deliver a certain amount, you transition to the contract years, which do run on an annual basis.

[00:37:52] Speaker 00:
They have what's referred to as an annual quantity.

[00:37:55] Speaker 00:
And the provision that ADA is citing for this Provide Us First specifically says that Atlas has a duty to provide the annual quantity before it supplies other customers.

[00:38:09] Speaker 00:
The plain reading of that

[00:38:11] Speaker 00:
is that that kicks in when we're in contract years one, two, and three, but not in the trial period.

[00:38:18] Speaker 00:
Now, admittedly, the district court didn't reach that issue.

[00:38:21] Speaker 00:
That legal argument wasn't phrased and presented to the district court.

[00:38:25] Speaker 00:
Was there any good faith and fair dealing argument here?

[00:38:28] Speaker 00:
Well, actually, so that is what the district court ultimately found, is that there was a breach of the implied covenant of good faith and fair dealing based on how

[00:38:37] Speaker 00:
Atlas accepted the order within one day, it would send a communication, but then say, we're going to fulfill later than what historically the parties did.

[00:38:46] Speaker 04:
A breach of good faith and fair dealing.

[00:38:48] Speaker 04:
But then damages for that are cut off because ADA, as a result of the breach of good faith and fair dealing covenant, implied covenant, can't practically deal with Atlas anymore.

[00:39:05] Speaker 04:
It's just too unreliable.

[00:39:06] Speaker 04:
They need the product.

[00:39:08] Speaker 04:
Why would that not be the proper interpretation of what happened here?

[00:39:15] Speaker 00:
I would submit this, Your Honor, that there's no facts to support the ADA could no longer work with Atlas piece of that.

[00:39:24] Speaker 00:
If there were facts in the record to suggest that, testimony from ADA, for example, then maybe we have a different argument.

[00:39:31] Speaker 04:
ADA did not put on evidence about how it was impacted by these delays.

[00:39:36] Speaker 00:
It did.

[00:39:36] Speaker 00:
It put on evidence about ordering cover product.

[00:39:39] Speaker 00:
But ADA never had any of its witnesses say, we had lost all faith.

[00:39:44] Speaker 00:
We're never going to be able to get product.

[00:39:46] Speaker 00:
They won't deliver it.

[00:39:47] Speaker 00:
Here's why.

[00:39:47] Speaker 00:
None of that is in the record.

[00:39:50] Speaker 00:
There is an assumption, at least how the briefing is laid out, that that's the case.

[00:39:56] Speaker 00:
But there's no facts in the record.

[00:39:58] Speaker 00:
An assumption by whom?

[00:40:00] Speaker 00:
By ADA.

[00:40:01] Speaker 00:
That when Atlas sent its final communication in November 10 saying,

[00:40:06] Speaker 00:
If you'll confirm your order, we will fulfill it on these dates that the assumption is that was a lie, that there was never going to be a fulfillment at that time.

[00:40:18] Speaker 00:
Again, that flies in the face of the credibility findings from the district court, and it doesn't have any supporting evidence in the record.

[00:40:27] Speaker 00:
The last thing I will note on this termination issue is two things.

[00:40:31] Speaker 00:
One is the specific performance piece Mr. Schaefer raised.

[00:40:35] Speaker 00:
Yes, they argued that as an alternative remedy, but they didn't ask for that.

[00:40:39] Speaker 00:
They didn't brief or argue any of the equitable factors under Wyoming law.

[00:40:43] Speaker 00:
And in fact, the seeking of a money judgment and the millions of dollars they sought disproves the theory of specific performance, which under Wyoming law, you need no adequate remedy at law.

[00:40:56] Speaker 00:
The second thing, just note, in the reply brief, there's an argument about a material breach, another way to sort of access full contract damages.

[00:41:04] Speaker 00:
That's a new argument that was not raised in the opening brief or below.

[00:41:09] Speaker 00:
We would request the court find that waived.

[00:41:12] Speaker 00:
I'm sorry.

[00:41:13] Speaker 04:
What issue was waived?

[00:41:15] Speaker 00:
In the reply brief, ADA argues that the way this court should view the termination damages issue is from a material breach perspective, citing cases about material breach under Wyoming law, what that means, and what kind of damages that unlocks.

[00:41:30] Speaker 00:
That wasn't raised in their opening brief, and it wasn't raised before the district court.

[00:41:34] Speaker 04:
So what else would you seek damages for except a material breach?

[00:41:40] Speaker 00:
Well, Wyoming law, the law that they cite, and maybe we have a terminology difference here, talks about cases where you can consider the breach so total that your obligations terminate regardless of what terms.

[00:41:53] Speaker 00:
That's what they argued in your view.

[00:41:55] Speaker 00:
In the reply brief, that's what they explicitly argue.

[00:41:57] Speaker 00:
They don't argue that in their opening brief or below.

[00:42:01] Speaker 00:
So it's just an alternate way of attacking the district court's findings about the cap on damages.

[00:42:07] Speaker 03:
If we disagree with the district court on the force mature interpretation, what does that do to the court's award of damages?

[00:42:15] Speaker 00:
It would open up about another four, five week period of time where you would do the 10 cent cover price at two truckloads per week.

[00:42:24] Speaker 03:
Would that require remand?

[00:42:26] Speaker 00:
I think the court could probably do that math based on how the district court did its math, but it could remand.

[00:42:33] Speaker 04:
That's what I thought came up coming in here, but when I see that the damages is just 10 cents a pound for the remainder of the contract term, what difference does it make if there was a six-week drop?

[00:42:49] Speaker 04:
Did they incur any, I mean, they had to pay 10 cents a pound extra, and it doesn't matter whether

[00:42:56] Speaker 04:
a non-delivery was before or after or during the force majeure period.

[00:43:03] Speaker 00:
I think it matters from this perspective, Your Honor, that because the court found that force majeure was properly invoked based upon its terms, there were no damages for that period of time because it was not a breach.

[00:43:14] Speaker 04:
Yeah, but the damages are just based on how much was supposed to be delivered in the trial period versus how much was delivered.

[00:43:22] Speaker 04:
And the force majeure issue doesn't affect that, does it?

[00:43:26] Speaker 00:
I understand now, Your Honor.

[00:43:27] Speaker 00:
So that's actually not how the district court calculated damages.

[00:43:30] Speaker 00:
So the district court said Atlas began resuming performance on, and I don't remember the exact date, I think it was sometime in August is when that notice went out, from August to November 10th when the court found there was a termination.

[00:43:45] Speaker 00:
That's the period of time for which the district court calculated damages.

[00:43:49] Speaker 00:
So our view would be- How did it do that?

[00:43:52] Speaker 04:
How did it determine how many pounds they had to pay the Tencent section?

[00:43:55] Speaker 00:
The parties had historically delivered, Alice had fulfilled two truckloads per week, and a truckload is, I believe, 40,000 pounds.

[00:44:05] Speaker 00:
So it was 80,000 pounds a week times 10 cents for the duration that the court found there was a breach.

[00:44:13] Speaker 04:
And that period would be longer if we took the force majeure period?

[00:44:18] Speaker 03:
Correct, Your Honor.

[00:44:19] Speaker 03:
Basically four or six weeks of two deliveries.

[00:44:22] Speaker 03:
Okay.

[00:44:22] Speaker 00:
Correct, Your Honor.

[00:44:23] Speaker 00:
I see I'm out of time.

[00:44:25] Speaker 00:
Could I briefly just address one issue on force majeure?

[00:44:28] Speaker 00:
I just want to correct something.

[00:44:30] Speaker 00:
I think the court, based on its questions, understands the terminology issue and the interpretation issue.

[00:44:37] Speaker 00:
I want to address this idea that 88 Atlas was able to fulfill other customers.

[00:44:43] Speaker 00:
That is an incorrect reading of the agreement.

[00:44:45] Speaker 00:
Section 12, which is the force majeure clause, the very first

[00:44:49] Speaker 00:
part of that clause says, quote, if performance of this agreement or any obligation under this agreement is prevented.

[00:44:59] Speaker 00:
And then it goes on to define those force majeure events.

[00:45:01] Speaker 00:
So this idea of there's evidence that Atlas supplied other customers under different contracts has no bearing on the legal or factual findings related to the force majeure clause.

[00:45:15] Speaker 00:
So unless the court has questions.

[00:45:16] Speaker 04:
Thank you.

[00:45:17] Speaker 00:
Thank you.

[00:45:19] Speaker 04:
Is there some time remaining?

[00:45:20] Speaker 03:
40, 405.

[00:45:26] Speaker 03:
40?

[00:45:27] Speaker 03:
Four minutes and five seconds.

[00:45:31] Speaker 04:
Oh, right.

[00:45:33] Speaker 04:
You can have 45 seconds.

[00:45:39] Speaker 02:
I think I've had about 25 minutes starring you, so I'll try to be as brief as possible.

[00:45:44] Speaker 02:
I think the termination question comes down to the use of unable versus unwilling.

[00:45:49] Speaker 02:
I think what we had here was a party that was unwilling to fulfill their obligations on the contract.

[00:45:53] Speaker 02:
That's classic.

[00:45:55] Speaker 02:
That's classic breach.

[00:45:56] Speaker 02:
One thing I wanted to bring up for the Court's attention, this concept of time, that the performance of the trial period was not a matter of time, but of poundage.

[00:46:10] Speaker 02:
prolonging the deliveries they could hold, essentially ADA and kind of trial period purgatory.

[00:46:17] Speaker 02:
And there is a time of the essence provision in this contract, which I think is important with respect to the parties' obligations.

[00:46:28] Speaker 02:
Thank you very much for your time.

[00:46:29] Speaker 02:
I very much appreciate it.