Karm Enterprises, Inc. v. Blue Ace, Llc ( 2013 )

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IN THE COURT OF APPEALS FOR THE STATE OF WASHINGTON
KARM ENTERPRISES, INC., a
Washington corporation, and JOHN No. 68843-0-
SJONG, an individual and resident
of the State of Washington,
Appellants,
DIVISION ONE
v.
BLUE ACE, LLC, a Washington limited
liability corporation, and MICHAEL
BURNS, and his marital community, UNPUBLISHED OPINION
Respondents. FILED: July 22, 2013
Spearman, A.C.J. — Karm Enterprises, Inc. and John Sjong (collectively,
"Karm") appeals the trial court's summary dismissal of their unjust enrichment
claim against Blue Ace, LLC and Michael Burns, (collectively "Blue Ace"). Karm's
claim is based on allegations that Blue Ace, after buying Karm's fishing vessel,
wrongfully benefited from the use of catch history associated with Karm's fishing
license to obtain "harvest shares" from a private fishing cooperative. Where
Karm's appeal relies on arguments it did not make below, and where the trial
court properly applied the cited legal authority to the claim before it, we affirm.
No. 68843-0-1/2
FACTS
On June 30, 2004, Karm sold its fishing vessel, the Storfjord (now the Blue
Ace), to Blue Ace for $500,000.00. The terms of the sale were set forth in a
written agreement titled "FA/ Storfjord Purchase and Sale Agreement"
("Purchase Agreement"). The Purchase Agreement incorporated an option for
Blue Ace to purchase from Karm its Federal License Limitation Program (LLP)
license LLG4513 and all catch history associated with the license for
$2,000,000.00, if the license ever became transferable. At the time, LLG4513
was nontransferable and Karm's administrative appeal, seeking transferability of
the license, was pending with the National Marine Fisheries Service (NMFS). In
light of the uncertainty as to the license, Blue Ace acquired license LLG4508
from a third party in 2004 to maintain eligibility to participate in Bering Sea and
Aleutian Islands groundfish fisheries.
Blue Ace is a member of the Freezer Longline Conservation Cooperative
(FLCC), a voluntary fishery cooperative. Around January 2007, FLCC members
met to negotiate terms on which to cooperatively harvest Pacific cod amongst
themselves. Each year, NMFS allocated a certain percentage of the total
allowable catch of Pacific cod to the FLCC's subsector. 50 C.F.R. §
679.20(a)(7)(ii)(A) (2011). While that allocation was unavailable to participants in
other subsectors, FLCC members still had to compete against each other for the
fish allocated to the FLCC subsector.
No. 68843-0-1/3
FLCC had previously hired Tagart Consulting to compile NMFS catch
history data for FLCC members' vessels for an unrelated "Capacity Reduction
Program." Clerk's Papers at 113. Those data were used by the FLCC in
allocating available catch of Pacific cod by "harvest shares" to its members. Id.Blue Ace's harvest share allocation was negotiated in connection with the
admission of the Blue Ace, and Blue Ace was tentatively assigned a harvest
share of 1.39% of the FLCC subsector's Pacific cod allocation. Id.Sometime afterthe January 2007 FLCC meeting, Thor Tollessen1 and
Sjong of Karm met with Burns of Blue Ace. By that time, the parties considered it
unlikely that Karm would prevail in its appeal regarding LLG4513. At that
meeting, according to Tollessen, Burns acknowledged that Blue Ace stood to
receive a FLCC harvest share of 1.39% and that the share was largely derived
from Tagart's calculations, which incorporated catch history of the Blue Ace
associated with Karm's ownership of the vessel. Tollessen stated that the catch
history did not belong to Blue Ace and proposed that the parties take the fair
market value of Blue Ace's FLCC harvest shares, pay Karm and Sjong
$2,000,000 for the catch history associated with LLG4513, reimburse Blue Ace
for certain costs, and split the remainder evenly. Burns responded that part of the
catch history supporting the harvest share allocation had been generated while
Blue Ace owned the vessel, justifying an adjustment to the payment amount.
1Tollessen is the sole owner and manager of Karm.
3
No. 68843-0-1/4
According to Tollessen, he and Sjong agreed with and shook hands with Burns.
Blue Ace denies making any such oral agreement.
In late 2007, NMFS denied Karm's appeal as to LLG4513 and that license
expired effective January 1, 2008. Because the license never became
transferable, Blue Ace did not purchase it under the option in the Purchase
Agreement. Upon termination of LLG4513, Karm was ineligible to participate in
the FLCC.
Harvest share allocations of FLCC members were finalized on February 1,
2010, when members entered into a "Freezer Longline Conservation Cooperative
Membership Agreement." That agreement lists Blue Ace's harvest share for
Pacific cod as 1.4%. CP at 95. Subsequently, Karm alleged, Blue Ace fished its
quota but did not provide an accounting to Karm of sales revenue or honor its
oral agreement with Karm.
Karm filed suit against Blue Ace in September 2011. In its complaint,
Karm alleged a breach of oral contract claim and, in the alternative, an unjust
enrichment claim. As to the latter, the complaint stated:
20. Alternatively, the Court should find a constructive contract or
contract implied at law between the plaintiffs and defendants, as
the defendants have been unjustly enriched by obtaining individual
fishing quota based on a wrongful presentation to NMFS of catch
history belonging to the plaintiffs.
21. The catch history and quota share belonging to the plaintiffs
were conferred on the defendants. Defendants had a knowledge
and appreciation of these benefits being conferred on them. The
defendants accepted these benefits under circumstances that make
it inequitable for them to receive the benefits.
No. 68843-0-1/5
CP at 4-5.
Blue Ace moved for summary judgment. With respect to the unjust
enrichment claim, Blue Ace cited Young v. Young, 164 Wn.2d 477, 191 P.3d
1258 (2008) and argued that Karm was required to show that Blue Ace was
enriched through a benefit obtained from Karm. Blue Ace argued that Karm could
not make such a showing where (1) upon termination of LLG4513, no federal
fishing right could be issued on the basis of LLG4513 and its associated fishing
history; (2) no party could have gained admission to the FLCC on the basis of
LLG4513; (3) Blue Ace could not have obtained any benefit in connection with
LLG4513 and its fishing history because no interest in that license and fishing
history could be transferred by Karm; and (4) even if Blue Ace obtained its FLCC
harvest share allocation by a claim of ownership of LLG4513 or its catch history,
that benefit was a result of its private negotiations with FLCC members and was
not conferred by or obtained from Karm.
In opposition, Karm asserted that Blue Ace was unjustly enriched because
it used Karm's catch history to obtain FLCC harvest shares, even if no NMFS
regulation prevented Blue Ace from doing so.
The trial court granted Blue Ace's motion and dismissed both claims.2 As
to the unjust enrichment claim, the court concluded that Karm did not confer a
benefit on Blue Ace for which the law would require Blue Ace to pay. The court
2 The trial court dismissed the breach of oral contract claim under the statute of frauds.
Karm does not appeal the dismissal of that claim.
No. 68843-0-1/6
granted Blue Ace's motion for attorney's fees under a provision in the Purchase
Agreement and entered final judgment. Karm moved for reconsideration, which
the trial court denied. Karm appeals the dismissal of its unjust enrichment claim.
DISCUSSION
This court reviews a trial court's order granting summary judgment de
novo. Cerrillo v. Esparza. 158 Wn.2d 194, 199, 142 P.3d 155 (2006). "Summary
judgment is appropriate when there are no genuine issues of material fact and
the moving party is entitled to judgment as a matter of law." ]d. at 200.
Karm argues that the trial court applied the incorrect legal standard to its
unjust enrichment claim. Karm contends it did not need to show that it conferred
the benefit at issue (FLCC harvest shares) on Blue Ace, only that the benefit to
Blue Ace was at Karm's "expense." Conceding that it suffered no injury or loss as
a result of Blue Ace's alleged use of its catch history to obtain harvest shares
from the FLCC,3 Karm contends that the expense requirement does not require
an observable loss to Karm. Rather, it contends, it need only show that Blue Ace
wrongfully gained through its violation of Karm's "legally protected rights" under
3Reply Brief at 20 ("Here, Karm suffered no discernible 'injury' or 'loss' when Blue Ace
breached the Vessel Purchase Agreement by using the catch history Karm retained to obtain
FLCC harvest shares.").
No. 68843-0-1/7
the Purchase Agreement to control the LLG4513 catch history.4 Karm admits that
the record is inadequate to address this issue on appeal because the trial court
was not asked to consider whether Blue Ace deliberately breached the Purchase
Agreement in light of RESTATEMENT (THIRD) OF RESTITUTION AND UNJUST
ENRICHMENT § 39 (2011)5 by using Karm's catch history. Karm requests that we
reverse the judgment in favor of Blue Ace and remand for the trial court to
address this issue.
Blue Ace argues, among other things, that summary judgment should be
affirmed because the arguments made by Karm on appeal were not made below
4To support its argument thata violation of its legally protected rights is sufficient
to show an expense, Karm cites Restatement (Third) of Restitution § 1 cmt. a and § 3
cmt. a. The former states:
While the paradigm case of unjust enrichment is one in which the benefit
on one side of the transaction corresponds to an observable loss on the
other, the consecrated formula "at the expense of another" can also mean
"in violation of the other's legally protected rights," without the need to
show that the claimant has suffered a loss.
Restatement (Third) of Restitution § 1 cmt. a. The latter states:
[T]here can be restitution of wrongful gain in cases where the plaintiff has
suffered an interference with protected interests but no measurable loss
whatsoever... Familiar statements to the effect that a cause of action for
unjust enrichment or restitution requires "a benefit conferred by the
plaintiff on the defendant" are seriously out of place in any discussion of
restitution of wrongful gain.
Restatement (Third) of Restitution § 3 cmt. a. We note that Karm points to no authority
showing that these Restatement principles have been adopted by Washington courts.
5 Restatement (Third) of Restitution § 39 states, in pertinentpart:
(1) Ifa deliberate breach of contract results in profit to the defaulting
promisor and the available damage remedy affords inadequate
protection to the promisee's contractual entitlement, the promisee has a
claim to restitution of the profit realized by the promisor as a result of the
breach. Restitution by the rule of this section is an alternative to a
remedy in damages.
Restatement (Third) of Restitution § 39.
No. 68843-0-1/8
and summary judgment was properly granted based on the parties' arguments
below.6 We agree with Blue Ace and affirm.
Karm's Arguments on Appeal Were Not Made Below
We decline to consider Karm's main arguments on appeal, which were not
made below. With respect to review of an order granting summary judgment, we
"will consider only evidence and issues called to the attention of the trial court."
RAP 9.12. Thus, "[a]n argument neither pleaded nor argued to the trial court
cannot be raised for the first time on appeal." Sourakli v. Kyriakos, Inc., 144 Wn.
App. 501, 509, 182 P.3d 985 (2008) (citing Sneed v. Barna, 80 Wn. App. 843,
847, 912 P.2d 1035 (1996)). Furthermore, we "may refuse to review any claim of
error which was not raised in the trial court." RAP 2.5.
Nowhere below did Karm argue that it was not required to show that it
conferred a benefit on Blue Ace; that an "expense" to the plaintiff does not
require an injury or loss; or that the basis of its unjust enrichment claim was that
Blue Ace wrongfully gained through an opportunistic breach of the Purchase
Agreement, violating Karm's legally protected rights to control its catch history
under that agreement. Nor did it cite to any of the Restatement principles on
which it relies on appeal. Even as late as its motion for reconsideration,7 Karm
did not contest the unjust enrichment standard set forth in Blue Ace's motion for
6 Blue Ace also argues that summary judgment should be affirmed because (1) any
failure by the trial court to consider Karm's new theory is harmless error where recovery under
that theory is barred by the statute of limitations and (2) Karm's claim fails even under the
Restatement principles on which it relies. We do not reach those arguments.
7Karm designates the orderdenying its motion for reconsideration in its notice ofappeal.
8
No. 68843-0-1/9
summary judgment. In its motion for reconsideration, Karm stated that the unjust
enrichment claim was wrongly dismissed because there was a "[gjenuine issue
of fact and law as to whether defendants' FLCC quota was obtained through a
benefit conferred by plaintiffs." CP at 206 (emphasis added).
Nonetheless, Karm requests this court to consider these arguments. It
cites Rahman v. State. 170 Wn.2d 810, 823-24, 246 P.3d 182 (2011),
superseded on other grounds by statute, S.H.B. 1719, 2011 Wash. Sess. Laws,
ch. 82. and Downev v. Pierce County. 165 Wn. App. 152, 163 n.11, 267 P.3d445
(2011). review denied. 174Wn.2d 1015,281 P.3d 688 (2012), for the proposition
that an appellate court may consider relevant or correct law in deciding an issue,
regardless of whether a party has cited it. Neither of these cases requires this
court to consider arguments not raised below—particularly where a party's failure
to raise certain arguments admittedly results in a deficient record with respect to
those arguments—and we decline to do so.
Summary Judgment Proper Under Young
We next determine whether the trial court properly applied Young to
Karm's unjust enrichment claim. We conclude that it did. UnderYoung, and as
Blue Ace cited below,
'Three elements must be established in order to sustain a claim
based on unjust enrichment: a benefit conferred upon the
defendant by the plaintiff; an appreciation or knowledge by the
defendant of the benefit; and the acceptance or retention by the
defendant of the benefit under such circumstances as to make it
inequitable for the defendant to retain the benefit without the
payment of its value.'
No. 68843-0-1/10
Young, 164 Wn.2d at 484 (quoting Bailie Commc'ns, Ltd. v. Trend Bus. Svs..
Inc., 61 Wn. App. 151, 159-160, 820 P.2d 12 (1999). Karm's claim was properly
dismissed where it admits on appeal that it did not confer the benefit at issue—
FLCC harvest shares—on Blue Ace.
Karm instead argues on appeal that the quoted language does not contain
the correct legal standard for unjust enrichment, the standard actually applied in
Young. It contends the correct legal standard is set forth later in the opinion when
the court states:
In other words the elements of a contract implied in law are: (1) the
defendant receives a benefit, (2) the received benefit is at the
plaintiffs expense, and (3) the circumstances make it unjust for the
defendant to retain the benefit without payment.
]d_. at 484-85. Under this standard, Karm contends, a plaintiff need not show that
it conferred a benefit on the defendant, only that the benefit to Blue Ace was at
Karm's expense. While we need not reach this argument given Karm's failure to
raise it below, it is not well taken. The two statements in Young are expressing
the same concept in different terms: the benefit to the defendant must
correspond to some loss to the plaintiff, by having conferred the benefit or
incurred some expense. This is apparent by the phrase "[i]n other words" that
precedes the court's restatement of the legal standard in the portion quoted by
Karm. Moreover, Young itself involved facts in which a plaintiff alleged the
defendant was unjustly enriched by benefits provided by the plaintiff. There, the
defendant was alleged to have benefited when the plaintiff made improvements
to the defendant's real property. Young, 164 Wn.2d at 480-82. Finally, after
10
No. 68843-0-1/11
Young, courts have applied the "plaintiff conferred a benefit" language in stating
the elements of an unjust enrichment claim. See, e.g.. Austin v. Ettl. 171 Wn.
App. 82, 92, 286 P.3d 85 (2012) (citing Young for proposition that unjust
enrichment requires showing that "a plaintiff conferred a benefit upon the
defendant"); Nat'l Sur. Corp. v. Immunex Corp., 162 Wn. App. 762, 778 n.11, 256
P.3d 439 (2011) (affd and remanded. 176 Wn.2d 872, 297 P.3d 688 (2013)
(citing Young for proposition that party claiming unjust enrichment must show "a
benefit conferred upon the defendant by the plaintiff'). The trial court did not
apply an incorrect legal standard to Karm's claim.
Attorney's Fees
As we affirm the dismissal of Karm's unjust enrichment claim on summary
judgment, we also affirm the trial court's award of attorney's fees below and we
award attorney's fees and costs on appeal to Blue Ace pursuant to its request
under RAP 18.1 and the Purchase Agreement.8
Affirmed.
WE CONCUR: * >
:^
8 Karm does not dispute the availability of attorney's fees and costs to the substantially
prevailing party, itargues only that reversal of the decision on summary judgment requires
reversal of the fee award.
11