Burns Concrete v. Teton County

IN THE SUPREME COURT OF THE STATE OF IDAHO
Docket Nos. 46827/47496
BURNS CONCRETE, INC., an Idaho )
Corporation, and BURNS HOLDINGS, LLC, )
an Idaho limited liability company, )
)
Plaintiffs-Counterdefendants- )
Respondents-Cross Appellants, ) Boise, June 2020 Term
)
v. ) Opinion Filed: November 2, 2020
)
TETON COUNTY, a political subdivision of ) Melanie Gagnepain, Clerk
the State of Idaho, )
)
Defendant-Counterclaimant- )
Appellant-Cross Respondent. )
_______________________________________ )
Appeal from the District Court of the Seventh Judicial District of the State of Idaho,
Teton County. Dane H. Watkins, Jr., District Judge.
The district court’s grant of partial summary judgment on the issue of breach of
contract is affirmed. The judgment of the district court is vacated. The district court’s
orders on attorney fees are vacated. The case is remanded for a recalculation of
damages and an explanation of the attorney fee award.
Billie J. Siddoway, Teton County Prosecuting Attorney, Driggs, for appellant-cross
respondent. Billie Siddoway argued.
Parsons Behle & Latimer, Boise, for respondents-cross appellants. Robert Burns
argued.
___________________
BRODY, Justice.
This appeal arises from a dispute over the construction of a ready-mix concrete
manufacturing facility in Teton County. In 2007, Burns Holdings entered into a development
agreement with Teton County regarding property owned by Burns Concrete. The development
agreement required the construction of a permanent concrete manufacturing facility on the property
within 18 months of the execution of the agreement, but allowed operation of a temporary facility in
the meantime. Burns Concrete, the concrete company that would operate the facility, and Burns
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Holdings, a holding company that was to eventually take title to the property, wanted to build a
permanent facility that was 75-feet tall, but the applicable zoning ordinance limited building heights
to 45-feet. The County denied Burns Holdings’ application for a conditional use permit and its
subsequent application for a variance to exceed the height limit. The Burns Companies operated the
temporary facility for several years but never constructed the permanent facility.
In 2012, the County sent written notice revoking the authority to operate the temporary
facility and demanding that the temporary facility be removed. The Burns Companies subsequently
filed this action, stating claims for breach of contract, declaratory judgment, and unjust enrichment.
The County counterclaimed, alleging breach of contract and seeking declaratory judgment for the
removal of the temporary facility. This began a multi-year period of litigation that included two
appeals to this Court, each followed by a remand to the district court. This case has returned to us
again, this time as a result of the parties’ cross-appeals from the district court’s grant of partial
summary judgment in favor of the Burns Companies on their breach of contract claim, its award of
$1,049.250.90 in damages, and its award of attorney fees. We affirm the district court’s grant of
partial summary judgment on the issue of breach of contract, but vacate the district court’s judgment
for a recalculation of damages. In its recalculation of damages, the district court is instructed to
reverse its reduction of damages by the difference between the Temporary Facility’s sales and cost
of sales. We vacate the district court’s award of attorney fees and remand the matter for an
explanation of the district court’s reduction of requested attorney fees.
I. FACTUAL AND PROCEDURAL BACKROUND
A. Factual Background
Burns Holdings, LLC and Burns Concrete, Inc. are Idaho business entities. Kirk Burns is the
president of Burns Concrete and the manager of Burns Holdings. Burns Holdings and Burns
Concrete are referred to together as “the Burns Companies.”
In 2006, Burns Concrete purchased a 6.5-acre property (“the Property”) in Teton County.
Burns Holdings applied to change the zoning of the Property from C-3 (commercial) to M-1 (light
industrial) in order to build and operate a ready-mix concrete manufacturing facility on the Property.
On February 26, 2007, the County approved the zone change with certain conditions, including that
Burns Holdings enter into a development agreement with the County pursuant to Idaho Code section
67-6511A.
The Property was located within the City of Driggs’ impact area, where the County and
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Driggs had agreed, pursuant to Idaho Code § 67-6526, that the Driggs zoning laws would apply.
Driggs’ zoning ordinance provided that “any building or structure or portion thereof” could not
exceed 45 feet in height unless approved by conditional use permit (CUP).
On June 13, 2007, Burns Holdings applied for a CUP to build a permanent facility (the
“Permanent Facility”) 75 feet in height. The application was first reviewed by Driggs’ planning and
zoning department, which unanimously recommended approval by the County. The application was
sent to the County.
On August 31, 2007, Burns Holdings and the County entered into a development agreement
(the “Development Agreement”). Paragraph 2.b of the Development Agreement required
construction of the Permanent Facility to commence immediately upon execution. Importantly,
Paragraph 2.b also required the construction of the Permanent Facility in accordance with elevation
schematics showing a building 75 feet in height. It further required construction to be completed
within 18 months, subject to acts of force majeure beyond Burns Holdings’ control. Paragraph 2.b
also required the construction of a temporary facility (the “Temporary Facility”). The County had the
authority to revoke the authority to operate the Temporary Facility if the Permanent Facility was not
completed within the allowable time period. Paragraph 9 provided that the Development Agreement
could be terminated, and the Property’s zoning reverted, if Burns Holdings or its successor failed to
comply with the terms of the Development Agreement. Paragraph 10 required Burns Holdings to
comply with all applicable laws. Paragraph 12 provided that the Development Agreement would run
with the land.
On November 15, 2007, the County denied Burns Holdings’ CUP application. Burns
Holdings sought judicial review of the denial. The district court upheld the County’s CUP denial and
Burns Holdings appealed. This Court affirmed on the alternative ground that the Local Land Use
Planning Act (“LLUPA”) required a variance, not a CUP, to modify the height requirements in a
zoning ordinance. Burns Holdings, LLC v. Teton Cnty. Bd. of Comm’rs, 152 Idaho 440, 272 P.3d
412 (2012) (“Burns 2012”). Subsequently, Burns Holdings applied for a zoning variance to build the
Permanent Facility to a height of 75 feet. The County denied this request as well.
By letter dated April 9, 2012, the County revoked the authority to operate the Temporary
Facility and demanded that the Temporary Facility be removed by July 1, 2012. On October 4, 2012,
the County sent another letter to Kirk Burns reminding him of the April 9 demand to remove the
Temporary Facility and requesting removal activity to begin immediately. In response, counsel for
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the Burns Companies sent a letter to the County asserting that the County’s October 4 letter
constituted a breach of the Development Agreement because the Burns Companies’ time limit for
constructing the Permanent Facility was tolled by the Development Agreement’s force majeure
clause and the County had failed to provide the requisite notice of default and opportunity to cure.
By letter dated November 5, 2012, the County’s prosecuting attorney notified the Burns Companies’
that the County rejected their demands, asserted that the force majeure clause was inapplicable, and
threatened to file suit to compel the Burns Companies’ removal of the Temporary Facility.
Subsequently, Burns Concrete executed a quitclaim deed in which it transferred 50% of its
interest in the Property to Burns Holdings. A few days later, Burns Concrete and Burns Holdings
executed an “Assignment and Assumption Agreement.” Through the Assignment and Assumption
Agreement, Burns Holdings transferred to Burns Concrete an undivided interest in all of Burns
Holdings’ rights arising from the Development Agreement. Similarly, Burns Concrete transferred to
Burns Holdings an undivided interest in all of Burns Concrete’s claims related to the Property
“and/or” the Development Agreement.
B. Procedural History
On May 21, 2013, the Burns Companies filed a complaint against the County that stated
causes of action for breach of contract and rescission, declaratory judgment, and unjust enrichment.
The County counterclaimed, alleging breach of contract and seeking declaratory judgment for the
removal of the Temporary Facility. The Burns Companies subsequently filed a motion for partial
summary judgment on the liability components of its claims, and the County filed a cross-motion for
summary judgment on each of its claims.
Following a hearing, the district court entered a memorandum decision and order on the
parties’ cross-motions for summary judgment (the “first summary judgment order”) denying the
Burns Companies’ motion for partial summary judgment and granting, in part, the County’s motion
for summary judgment. The district court held that because the County’s refusal to grant zoning
approval of a 75-foot structure was foreseeable, the force majeure clause did not excuse the Burns
Companies’ failure to complete construction of the Permanent Facility within 18 months. It then
entered a final judgment (the “first final judgment”) in accordance with its order.
The Burns Companies filed a timely notice of appeal from the first final judgment. This
Court vacated the judgment of the district court and remanded the case for further proceedings.
Burns Concrete, Inc. v. Teton Cnty., 161 Idaho 117, 384 P.3d 364 (2016) (“Burns 2016”). We held
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that the force majeure clause applied because the County’s decision to withhold zoning approval for
a 75-foot Permanent Facility was not foreseeable given the terms of the Development Agreement
and not within the Burns Companies’ control. Id. at 121, 384 P.3d at 368.
Following remand, the Burns Companies filed a renewed motion for partial summary
judgment. They sought summary judgment on their declaratory judgment claim and on the liability
components of their breach of contract and rescission claims, leaving the issue of damages for trial.
The district court entered an order (its “second summary judgment decision”) granting the Burns
Companies’ renewed motion for partial summary judgment. The district court granted summary
judgment on the liability component of the Burns Companies’ breach of contract and rescission
claims. The Burns Companies had withdrawn their request for summary judgment on their
declaratory judgment claim and also, apparently, on their unjust enrichment claim.
The County then filed a motion in limine to exclude evidence of reliance damages at trial,
arguing that only expectation damages were appropriate in this case. On the same day, the County
filed a motion for reconsideration of the second summary judgment decision. The district court
entered a memorandum decision and order in which it granted in part and denied in part both
motions. Specifically, the district court denied the County’s motion to reconsider the grant of
summary judgment in favor of the Burns Companies on their breach of contract claim, but vacated
the portion of its previous order granting rescission of the Development Agreement. The district
court denied the County’s motion in limine to the extent it sought to exclude evidence of reliance
damages, but allowed the admission of evidence of losses Burns Holdings would have suffered if the
County had not breached the Development Agreement. Finally, it deferred any determination as to
prejudgment interest and whether Burns Holdings, as opposed to Burns Concrete, incurred all
claimed damages.
Trial was held on the issue of damages. Allen Barger, Burns Concrete’s controller, testified
regarding the various exhibits he had prepared in support of the Burns Companies’ damages claims.
He explained that Exhibit 8 was a summary all the expenditures that Burns Concrete had made in
order to “get the [Temporary Facility] up and running.” Exhibit 8 was admitted. It contained over
7,000 line items, each associated with a particular category of expense. Barger testified that the total
amount of damages listed on Exhibit 8 was $1,905,344.78, exclusive of prejudgment interest.
Kirk Burns testified that shortly before Kathy Rinaldi’s election to the Teton County Board
of County Commissioners, she wrote letters to concrete customers that effectively said, “[d]on’t use
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Burns Concrete.” Kirk Burns testified that this had an adverse effect on his companies’ operations.
He also testified that following the County’s denial of the CUP request, newspapers ran articles that
effectively stated his concrete plant was “extinguished.” This “pretty much stopped all the
customers” because they thought he could no longer run the plant. The County’s expert witness
Richard Hoffman, a forensic accountant, testified that the Burns Companies would have suffered a
loss in operating the Temporary Facility even if the County had not breached the Development
Agreement. However, he also testified that the Burns Companies would have produced a net income
by 2017.
Following trial, but before the district court entered its findings of fact and conclusions of
law, the Burns Companies entered into a contingency fee agreement with Parsons Behle & Latimer
(“Parsons Behle”). The Burns Companies had initially contracted with their counsel on an hourly
basis, plus costs. However, by the time of trial, the Burns Companies allegedly were no longer able
to pay Parsons Behle “on a reasonably current basis.” Therefore, they entered into a contingency fee
agreement. The contingency fee agreement required the Burns Companies to pay triple the amount
of fees that were not paid within 120 days of their invoice dates, but only out of damages recovered
from the County.
Subsequently, each party filed proposed findings of fact and conclusions of law. The County
noted that it had abandoned its counterclaims prior to trial. The district court then issued its findings
of fact and conclusions of law. It found that “Burns Concrete’s decision to cease operations in 2010
was based, at least in part, on the existence of an unfavorable environment in Teton County, created
by the actions of [the County].” It also found that if Burns Concrete had been able to continue
operating the Temporary Facility, it would have made a net profit by 2017. It further found that only
$1,461,393.53 of the Burns Companies’ expenditures were made in reasonable reliance on the
Development Agreement, but it did not identify the specific line items of the expenditures it had
denied. Finally, the district court further reduced the amount of damages awardable by subtracting
the difference between Burns Concrete’s sales and the cost of sales arising from operation of the
Temporary Facility, arriving at a final damage award of $1,049,250.90. In relevant part, the district
court made the following conclusions of law: (1) the County was liable to both Burns Holdings and
Burns Concrete for its breach of the Development Agreement; (2) it would not revisit its previous
holding that rescission was not available as a matter of law; (3) the Burns Companies were entitled
to $1,049,250.90 in reliance damages; (4) the County did not establish that in the absence of its
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breach, the Burns Companies would have suffered losses entitling the County to a reduction of
damages; and (5) the Burns Companies were not entitled to prejudgment interest.
The parties then each filed motions for additional and amended findings of fact and
conclusions of law, and the Burns Companies filed a motion for reconsideration on the issue of
rescission. The district court entered a memorandum decision and order: (1) denying the County’s
motion for additional findings of fact; (2) granting in part and denying in part the Burns Companies’
motion for amended and additional findings of fact and conclusions of law; and (3) denying the
Burns Companies’ motion for reconsideration on the issue of rescission. The district court also
denied the Burns Companies’ claim for declaratory and injunctive relief on the grounds that they
were untried, but did agree that the 18-month time limit was tolled pursuant to this Court’s decision
in Burns 2016. The district court then entered a final judgment (the “second final judgment”) jointly
awarding the Burns Companies $1,049,250.90 in damages. The judgment also provided that the
running of the 18-month period for construction of the Permanent Facility would be tolled in
accordance with Burns 2016. The County filed a timely notice of appeal from the second final
judgment and the Burns Companies filed a timely notice of cross-appeal from the second final
judgment.
Around the same time that those appeals were filed, the Burns Companies filed a
memorandum of attorney fees and costs (the “first fee request”), which the County opposed. The
district court issued a memorandum decision and order on costs and fees (the “first fee order”) in
which it held, in relevant part, that the Development Agreement authorized an award of fees to both
Burns Concrete and Burns Holdings and the Burns Companies were entitled to $792,529.25 of their
requested $1,071,753.73 in attorney fees. While the district court’s decision walked through the
factors set forth in Rule 54(e) of the Idaho Rules of Civil Procedure, the district court’s decision did
not explain why a reduction of this amount was appropriate. The County filed a timely notice of
appeal from the first fee order, and the Burns Companies filed a motion seeking supplemental fees
based on legal services billed after it filed its first fee request, as well as fees that had become subject
to the contingency fee agreement.
The district court then filed its second fee order, in which it awarded the Burns Companies
$16,254.50 of their requested $88,603.50 in additional fees. Again, the district court did not explain
why a reduction of this amount was warranted. The Burns Companies filed a timely notice of cross-
appeal from the district court’s first and second fee orders.
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II. ANALYSIS
A. The district court did not err when it awarded damages to both Burns Concrete and
Burns Holdings.
The County contends the district court erred when it held the County liable to both Burns
Holdings and Burns Concrete. The County reasons that Burns Holdings was a party to the
Development Agreement, but did not suffer any damages. Conversely, Burns Concrete may have
incurred expenses to construct the Temporary Facility, but it was not a party to the Development
Agreement. In its findings of fact and conclusions of law, the district court concluded as a matter of
law that the County was liable to both companies, reasoning that the Burns Companies assigned to
each other an undivided interest in their claims arising from the Development Agreement and they
have had an equal ownership interest in the Property since 2013. We agree with the Burns
Companies that the district court did not err.
This Court’s review of a trial court’s conclusions following a bench trial is limited to
determining whether the evidence supports the findings of fact and whether the findings of fact
support the conclusions of law. Caldwell Land & Cattle, LLC v. Johnson Thermal Sys., Inc., 165
Idaho 787, 795, 452 P.3d 809, 817 (2019). We exercise free review over the trial court’s conclusions
of law to determine whether the trial court correctly stated the applicable law and whether its legal
conclusions are sustained by the facts found. Kunz v. Nield, Inc., 162 Idaho 432, 438, 398 P.3d 165,
171 (2017).
Paragraph 12.b of the Development Agreement specifically provides that the Development
Agreement inures to the benefit of and is enforceable by the parties and their assigns: “The parties
agree that this Agreement shall run with the land and bind the property in perpetuity, and shall inure
to the benefit of and be enforceable by the parties, and any of their respective legal representatives,
heirs, successors, and assigns.” In this case, Burns Holdings assigned to Burns Concrete an
undivided interest in Burns Holdings’ rights and benefits and duties and obligations in the
Development Agreement. The assignment stated:
2. Assignment and Assumption of Agreement and Claims. Burns Holdings hereby
assigns and delegates, respectively, to Burns Concrete an undivided interest in all of
Burns Holdings’ rights and benefits and duties and obligations in, to, and under the
Agreement, including all claims, causes of action, and rights of enforcement of Burns
Holdings related to the Agreement, that are now in existence or may hereafter arise;
and Burns Concrete hereby accepts and assumes, respectively, all such rights and
benefits and duties and obligations.
It is true that in order to be effective, an assignment must “confer a complete and present right on the
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transferee.” First State Bank of Eldorado v. Rowe, 142 Idaho 608, 612, 130 P.3d 1146, 1150 (2006).
Here that requirement was satisfied. The language of the Assignment and Assumption Agreement
makes it clear that Burns Holdings effected a complete transfer of a present interest in the
Development Agreement. The fact that it was an undivided partial interest is of no moment. There is
nothing in our case law that precludes the assignment of a partial interest so long as the transfer is
complete.
Similarly, Burns Concrete assigned to Burns Holdings an undivided interest in all of Burns
Concrete’s present or future claims related to the Property and the Development Agreement. The
assignment stated:
3. Assignment of Claims. Burns Concrete hereby assigns to Burns Holdings an
undivided interest in all claims and causes of action of Burns Concrete, whether
sounding in or arising under contract, statute, ordinance, or otherwise, related to the
Property and/or the Agreement that are now in existence or may hereafter arise.
Like Burns Holdings’ assignment, this was a complete transfer of a partial interest. Again, nothing in
our case law precludes the assignment of a partial interest as long as the transfer is complete.
The district court correctly stated the applicable law and its legal conclusions regarding the
County’s liability to both Burns Companies are sustained by its findings. We are satisfied that both
Burns Holdings and Burns Concrete are the real parties in interest and that damages can properly be
awarded to both of them.
B. The district court did not err in granting summary judgment to the Burns Companies
on the issue of breach of contract.
The County contends that the district court erred in granting partial summary judgment to the
Burns Companies on the issue of breach of contract. The district court held that the County breached
the Development Agreement in two ways: (1) it revoked the Burns Companies’ authority to operate
the Temporary Facility in contravention of Paragraph 2.b of the Development Agreement and failed
to provide the Burns Companies with notice of default and opportunity to cure; and (2) it violated the
implied covenant of good faith and fair dealing. The County contends these determinations were
error for three reasons: (1) the County had alternative support for its demand that the Burns
Companies cease operations and remove the Temporary Facility, (2) its demand for removal of the
Temporary Facility did not violate the implied covenant of good faith and fair dealing, and (3) the
Burns Companies were given sufficient notice and opportunity to cure.
When reviewing rulings on summary judgment motions, this Court applies the same standard
that the trial court did. Sec. Inv’r Fund LLC v. Crumb, 165 Idaho 280, 285, 443 P.3d 1036, 1041
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(2019). The trial court must grant summary judgment if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law. Id. at 286,
443 P.3d at 1042. The same standard of review applies, at both the trial and appellate levels, to
motions for reconsideration of summary judgment rulings. Id.
1. The County’s asserted alternative support for its revocation of authority to
operate the Temporary Facility is a new argument on appeal.
The district court held that the County breached the Development Agreement by ordering the
cessation of operations and removal of the Temporary Facility. It reasoned that Burns 2016
established that the 18-month time limit to construct the Permanent Facility had been tolled by the
County’s unforeseeable denial of required zoning approvals. As an alternative argument against the
district court’s conclusion regarding this breach, the County argues that it had other grounds
justifying its revocation of authority to operate the Temporary Facility. Specifically, it argues that
that the Temporary Facility violates the height restriction, like the proposed Permanent Facility,
because it is approximately 65-feet high.
This argument was not preserved. Our review is limited to the evidence, theories and
arguments that were presented below. Nelson v. Franklin Grp., Inc., 166 Idaho 702, ___, 462 P.3d
1166, 1169 (2020). The County previously raised this argument in a cross-motion for summary
judgment filed before Burns 2016. The district court agreed with the County, ruling that the
Temporary Facility was in violation of the height limitation and granting the County declaratory
judgment on that issue. That ruling was vacated in Burns 2016 and the County did not raise this
issue again on remand. Therefore, we will not consider this argument for the first time on appeal.
2. The district court correctly determined that the County breached the
implied covenant of good faith and fair dealing.
The district court determined that the County violated the implied covenant of good faith and
fair dealing. It reasoned that by denying Burns Holdings’ right to operate the Temporary Facility, the
County “violated, nullified and significantly impaired” one of the Development Agreement’s
benefits: that Burns Holdings could continue to operate the Temporary Facility beyond 18 months if
a delay outside of its control occurred. The County argues that it did not violate the implied covenant
of good faith and fair dealing because express terms of an agreement negate any conflicting implied
covenants, and here, the Development Agreement expressly required Burns Holdings to comply with
all relevant laws, including the applicable height restriction.
The district court did not err in its determination that the County violated the implied
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covenant of good faith and fair dealing. A party violates this covenant when it “violates, nullifies or
significantly impairs any benefit of the contract.” River Range, LLC v. Citadel Storage, LLC, 166
Idaho 592, ___, 462 P.3d 120, 131 (2020) (ellipsis omitted). In Burns 2016, we held that the force
majeure clause in Paragraph 2.b excused the Burns Companies’ failure to complete construction of
the Permanent Facility within 18 months because the County’s decision to withhold required zoning
approvals was neither foreseeable nor within the Burns Companies’ control given the fact that the
Development Agreement expressly required the construction of a Permanent Facility that was 75 feet
in height. Burns 2016, 161 Idaho at 120–21, 384 P.3d at 367–68. In so doing, we noted that the
Development Agreement required the Burns Companies to construct and operate a temporary facility
and provided that if construction was not completed within the allowable time period, the County
could revoke the authority to operate the Temporary Facility. Id. at 119, 384 P.3d at 366.
For the Burns Companies, the Temporary Facility was not only a requirement of the
Development Agreement, but it was also one of the advantages they derived from the parties’
contract. Paragraph 2.b provided that the purpose of the requirement to construct and operate the
Temporary Facility was to “facilitate and support the construction of the Permanent Facility and to
allow [the Burns Companies] to expedite commercial operations” and that the grant of authority to
operate the Temporary Facility was meant to allow the Burns Companies to “operate [their] business
until the Permanent Facility [was] constructed.” Thus, our decision in Burns 2016 essentially
established that the County’s unwarranted order to stop operating the Temporary Facility nullified
one of the key benefits afforded to the Burns Companies by the Development Agreement: the ability
to continue to operate the Temporary Facility, even if the Permanent Facility had not been
constructed within 18 months, if an unforeseeable delay outside of the Burns Companies’ control
occurred. Therefore, we uphold the district court’s conclusion that the County violated the implied
covenant of good faith and fair dealing. Because we hold that that the district court did not err in
granting partial summary judgment on the breach of the covenant of good faith and fair dealing, we
need not address the notice issue.
C. The district court did not err in its determination regarding causation.
The County argues that the district court erred in granting summary judgment on the issue of
causation. It cites Merry Gentleman, LLC v. George & Leona Prods., Inc., 76 F. Supp. 3d 756 (N.D.
Ill. 2014), aff’d, 799 F.3d 827 (7th Cir. 2015) for the proposition that even in a case where reliance
damages are sought, the plaintiff must show that the defendant’s breach of contract caused its
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damages. It argues that because the Burns Companies stopped operating the Temporary Facility in
2010 and the breaches identified by the district court occurred in 2012, their breaches could not have
caused the Burns Companies’ damages and summary judgment should not have been granted. We
disagree with the County’s analysis.
To begin with, we must clarify that the district court did not decide the causation issue at the
summary judgment stage of the litigation. In its memorandum decision and order on reconsideration,
the district court only decided that a breach of contract occurred and that the Burns Companies were
not entitled to rescission; it did not decide whether the County’s breach caused the Burns
Companies’ damages.
The district court actually determined the issue of causation after hearing the evidence at
trial. The district court specifically found that the Burns Companies’ reliance damages would not
have been incurred but for the Development Agreement. It also found that cessation of the operation
of the Temporary Facility in 2010 was caused in part by the conduct of the County.
The district court correctly cited the standard applicable to reliance damages: “A party
aggrieved by a breach of contract may be entitled to reimbursement for losses caused by its reliance
on the contract . . . . Reliance damages include expenses reasonably related to the purposes of the
contract which would not have been incurred but for the contract’s existence.” Beco Const. Co. v.
Harper Contracting, Inc., 130 Idaho 4, 9, 936 P.2d 202, 207 (Ct. App. 1997) (citations omitted). It
then properly applied this standard to the facts of this case. The Burns Companies met the but-for
test articulated in Beco because of the district court’s finding that the Burns Companies would not
have incurred their expenses made in reliance on the Development Agreement “if not for the
Agreement’s existence,” and those expenses were reasonably related to the purpose of the
Development Agreement. Finally, the district court accurately concluded that the fact the County had
not yet breached the Development Agreement when many of the Burns Companies’ expenses were
incurred was “immaterial.” The district court found that the County had created a sufficiently hostile
environment to cause, at least in part, the Burns Companies’ decision to stop operating the
Temporary Facility. As a result, the fact that the Burns Companies stopped operating the Temporary
Facility in 2010 did not interrupt the causal link between the existence of the Development
Agreement and the expenditures made in reliance on the Development Agreement. Therefore, the
district court did not err in determining the Burns Companies had made a sufficient showing to
satisfy the causation requirement for reliance damages.
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The fact that the issue of causation was determined after hearing the evidence at trial rather
than at the summary judgment stage is important because it changes our standard of review. When
reviewing summary judgment rulings, we consider whether the movant showed that there was no
genuine dispute as to any material fact and that the movant was entitled to judgment as a matter of
law. Crumb, 165 Idaho at 286, 443 P.3d at 1042. However, when reviewing a trial court’s
conclusions following a bench trial, we only review whether the evidence supports the findings of
fact and whether the findings of fact support the conclusions of law. Caldwell, 165 Idaho at 795, 452
P.3d at 817. We do not disturb a trial court’s findings of fact if they are supported by substantial and
competent evidence. Id. Here, substantial and competent evidence supports the district court’s trial
findings regarding causation. For example, Kirk Burns testified that a soon-to-be County
Commissioner wrote letters to concrete customers effectively telling them not to buy from Burns
Concrete. After the County denied the CUP, newspaper articles appeared in the local paper stating
that the plant could not be operated. This evidence supported the district court’s finding that the
County’s actions at least partly caused the Burns Companies’ decision to stop operations in 2010.
Therefore, we will not disturb the district court’s findings regarding causation on appeal.
Finally, we disagree with the County’s interpretation of Merry Gentlemen, a case decided by
the Seventh Circuit Court of Appeals which the County contends should guide the Court’s legal
analysis. In Merry Gentlemen, a production company sued Michael Keaton for $5.5 million when the
critically acclaimed movie he directed bombed at the box office. 799 F.3d at 828–29. Keaton filed a
motion for summary judgment on the issue of causation, arguing that the production company had
failed to produce sufficient evidence that his alleged breaches of the directing contract caused its
damages. Id. at 828. The production company’s only evidence of causation was an affidavit from the
movie’s executive producer stating that the production company spent over $5 million in reliance on
the directing contract. Id. at 829. In its opinion affirming the district court order granting Keaton’s
motion for summary judgment, the Seventh Circuit distinguished causation in typical reliance
damages cases from causation in unusual cases like the one before it:
In the typical case where reliance damages are sought, the defendant has simply
repudiated the contract and walked away from the deal. This causal link will be
straightforward in those cases. As the district court explained, in such cases the non-
breaching plaintiff is left ‘holding the bag after having made its expenditures.’ In
those cases, it is appropriate for the injured party to claim as damages all
expenditures it made in preparation for performance because the other side failed to
perform at all. In such cases, the complete loss of investment will often be the
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proximate result of the breach.
But in cases like this one, where the breaching party has substantially performed and
the alleged breaches have to do with the quality of the final product, the causal link
between reliance damages and the breach is not so direct. An injured party cannot
reasonably claim that all of its expenditures were caused by the other party’s breach
without some reason to think the breach destroyed the entire value of the breaching
party’s performance. In this context, the breach does not cause the complete loss of
investment.
Id. at 830-31 (citations omitted).
The County argues that this is an “unusual” case, but it is actually a typical one. The district
court found that the Development Agreement was a but-for cause of the Burns Companies’ reliance
damages. The Burns Companies’ decision to stop operating in 2010 did not cut off that but-for
causation because, as explained above, the district court found that this decision was at least partly
caused by the County’s creation of an unfavorable environment for the Burns Companies’ business.
Moreover, the County’s characterization of the holding in Merry Gentlemen is inaccurate. The
County does not actually quote the Seventh Circuit’s holding in its briefing, but instead paraphrases
the holding as: “In cases where the breaching party has substantially performed, the injured party
cannot claim all of its expenditures as damages, because the breach did not cause the complete loss
of the investment.” The actual holding, however, contained an important limiting factor: “But in
cases like this one, where the breaching party has substantially performed and the alleged breaches
have to do with the quality of the final product, the causal link between reliance damages and the
breach is not so direct.” Id. at 831 (emphasis added). The decision goes on to say: “An injured party
cannot reasonably claim that all of its expenditures were caused by the other party’s breach without
some reason to think the breach destroyed the entire value of the breaching party’s performance. In
this context, the breach does not cause the complete loss of investment.” Id. The County never
addresses this important limiting language from Merry Gentlemen. In this case, the County breached
the covenant of good faith and fair dealing and left the Burns Companies, in the words of the
Seventh Circuit, “holding the bag” after they made substantial expenditures. For these reasons, we
affirm the district court’s determination on the issue of causation.
D. The district court erred in granting declaratory judgment to the Burns Companies.
In their supplemental proposed conclusions of law, the Burns Companies requested the
following declaratory relief: (1) estopping the County from rezoning the Property, (2) declaring the
18-month period for construction of the Permanent Facility was tolled, and (3) ordering the County
14
to rescind and withdraw its revocation of the Burns Companies’ authority to operate the Temporary
Facility. The district court rejected the first and third forms of requested declaratory relief, but
declared that the running of the 18-month time period was tolled in accordance with Burns 2016.
The County advances several arguments against the district court’s award of declaratory judgment,
including that the declaration could lead to confusion and double recovery. The Burns Companies
respond that any confusion can be cured by rescission of the Development Agreement. We agree
with the County that declaratory relief should not have been granted where reliance damages were
awarded.
The district court erred in declaring that the 18-month period was tolled as a matter of law. In
this case, that relief was inconsistent with an award of reliance damages, which included costs
related to demobilization of the Temporary Facility. Awarding reliance damages and allowing the
Burns Companies to continue to operate the Temporary Facility would provide a double recovery to
the Burns Companies for their losses. We are not holding that reliance and expectation damages can
never both be awarded. (Here, expectation damages would be in the form of continued operation of
the Temporary Facility.) However, in this case, the Burns Companies’ inclusion of demobilization
expenses makes it clear that the declaration tolling the 18-month period should not have been made.
Additionally, the Burns Companies seek rescission of their obligations under the
Development Agreement, seemingly because they believe that rescission is necessary. Rescission is
not necessary. The County breached the Development Agreement, the Burns Companies sued for
damages, and they have been awarded damages. Rescission is unnecessary because the County’s
breach excused the Burns Companies’ performance. One party’s material breach of a contract
suspends the other party’s obligation to perform. 14 Williston on Contracts § 43:5 (4th ed.). At this
point, the Development Agreement is of no further force or effect.
E. Damages Issues
Our review of a trial court’s conclusions following a bench trial is limited to determining
whether the evidence supports the findings of fact and whether the findings of fact support the
conclusions of law. Caldwell, 165 Idaho at 795, 452 P.3d at 817. This standard of review applies to
review of a trial court’s findings of fact regarding the amount of damages proven by a claimant.
Mortensen v. Berian, 163 Idaho 47, 53, 408 P.3d 45, 51 (2017).
1. It is unnecessary to address the issue of whether a party is entitled to choose
between reliance and expectation damages.
The County argues that this Court should adopt a rule that a party cannot recover reliance
15
damages when expectation damages are ascertainable. Applying that rule to this case, the County
argues, would mean that the district court’s award of damages should be reversed because the Burns
Companies’ expectation damages were ascertainable. In response, the Burns Companies argue that a
non-breaching party can choose either expectation or reliance damages, citing SilverWing at
Sandpoint, LLC v. Bonner Cnty., 164 Idaho 786, 797, 435 P.3d 1106, 1117 (2019). In any case, the
Burns Companies add, expectation damages were not ascertainable here.
It is unnecessary for us to address the issue of whether a party is entitled to choose between
reliance and expectation damages. In SilverWing, another case involving a dispute between a
developer and a county, the trial court determined that the developer’s expectancy testimony was too
speculative. Id. at 796, 435 P.3d at 1116. Therefore, the developer had no choice but to ask for
reliance damages. Similarly, in this case, the trial testimony of Kirk Burns establishes that he could
not calculate lost profits because of the erosion of Burns Concrete’s customer base as a result of the
County’s actions. He was acknowledging that lost profits were too speculative. Therefore, the Burns
Companies were limited to seeking reliance damages, and could not choose to claim expectation
damages instead. There are many other cases involving nascent businesses in which courts have
denied lost profits because they were too speculative. See, e.g., Tipton v. Mill Creek Gravel, Inc.,
373 F.3d 913, 920 (8th Cir. 2004) (new mining corporation’s lost profits too speculative where it had
sold only a small amount of the “paltry” quantity of gravel produced by the mine); Ciraolo v. Miller,
138 A.D.2d 443, 525 N.Y.S.2d 861 (1988) (commercial tenant’s twelve-month projection of lost
profits too speculative where they were based on a one-month profit history); Springwell Dispensers,
Inc. v. Hall China Co., 204 Ga. App. 245, 245, 419 S.E.2d 112, 113 (1992) (lost profits too
speculative where claimant “was a new business with no history of profits and, in fact, was operating
at a loss”). Therefore, it is unnecessary to address the issue of whether a party may choose between
reliance and expectation damages.
2. The district court did not misapply the law regarding capping of damages.
The County argues that the district court misapplied the law regarding capping of reliance
damages. When an injured party seeks reliance damages, those damages must be reduced by “any
loss that the party in breach can prove with reasonable certainty the injured party would have
suffered had the contract been performed.” Restatement (Second) of Contracts § 349 (1981). This
rule is sometimes referred to as the “losing contract limitation.” The County asserts that this Court’s
decision in King v. Beatrice Foods Co., 89 Idaho 52, 402 P.2d 966 (1965) set forth the correct
16
measure of reliance damages, and that if the district court had applied King’s methodology, the
Burns Companies could only recover reliance damages up to the amount of lost profits that they
were able to prove. In this case, the County asserts, that would mean the Burns Companies could
recover nothing for the period ending in 2016 and, at most, $115,602 for the period ending in 2017.
The County misreads King. King involved a milk deliverer who sought both reliance
damages and lost profits after a milk processor breached its contract with him. 89 Idaho at 56–57,
402 P.2d at 968. The Court explained that both reliance and expectation damages may be awarded,
but only to the extent that does not result in a double recovery for the plaintiff. As a result, the Court
held, the milk deliverer was entitled to his net reliance expenses plus any lost profits over and above
those expenses. Id. at 59, 402 P.2d at 970. Therefore, King stands for the proposition that when an
expense was both incurred in reliance on the contract and was a cost of performance, it cannot be
double counted in an award of reliance and expectation damages. See id. Nothing about King
suggests that the amount of lost profits a plaintiff can prove acts as a cap on the plaintiff’s allowable
reliance damages. This rule would run contrary to the general principle that a plaintiff can seek
reliance damages when expectation damages are not ascertainable. See, e.g., 24 Williston on
Contracts § 64:4 (4th ed.) (“[W]here the proof of lost profits is not reasonably certain, the promisee
may seek, as an alternative to protection of his or her expectation interest, damages based instead on
his or her reliance interest.”) (emphasis added). Therefore, the County’s argument that the district
court misapplied the losing contract limitation on reliance damages is unpersuasive.
3. The district court did not err in its determination of the appropriate time period
for reliance damages.
The district court allowed the Burns Companies to recover reliance damages actually
incurred from February 26, 2007, through the time of trial, along with demobilization costs to cover
the expense of removing their equipment. It cited French v. Nabob Silver-Lead Co., 82 Idaho 120,
350 P.2d 206 (1960) for the proposition that this Court has held that reliance damages may include
expenses incurred before the parties reach an agreement. The County argues that the district court
should have limited awardable damages to those incurred after August 31, 2007—the date of the
Development Agreement—and before February 26, 2011—the date on which it asserts that it was
statutorily authorized to rezone the Property. The County contends that damages incurred outside of
these dates may not be awarded because this was the only range of time in which reliance was
reasonable. In response, the Burns Companies argue that the County presents no persuasive reason
why French’s allowance of pre-contractual expenses is not controlling in this case.
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We agree with the district court that pre-contractual expenses may be awarded in certain
cases, and were awardable here. The reliance period is best characterized as a foreseeability issue.
See, e.g., Bases for damages—Reliance interest, 24 Williston on Contracts § 64:4 (4th ed.)
(“Reliance damages are designed to compensate the plaintiff for any reasonably foreseeable costs
incurred or expenditures made in reliance on the promise that has now been broken.”) (emphasis
added). The district court found that that the Burns Companies’ expenditures were reasonably
foreseeable once the County approved their requested zone change. Furthermore, French is the law
in Idaho and the County has not persuaded us to reverse it. Therefore, we affirm the district court’s
decision to allow damages incurred from the time of the zone change approval until the date of
demobilization.
4. The district court did not err by declining to reduce the Burns Companies’
damages by the amount of their purported losses during the damages period.
In its memorandum decision and order on the County’s motion for additional findings of fact
and the Burns Companies’ motion for amended additional findings of fact and conclusions of law,
the district court declined the County’s request to reduce the Burns Companies’ reliance damages
after determining that the County failed to prove the Burns Companies would have suffered a net
loss absent breach. The County argues that the district court erred by failing to reduce the Burns
Companies’ damages award by the amount the County claims it proved, through the testimony of its
expert witness Hoffman, that the Burns Companies would have lost absent the County’s breach. We
disagree. The County is arguing that the district court only had to look at losses sustained during the
four-year damages period. This argument is logically flawed and relies on a misreading of Section
349 of the Restatement (Second) of Contracts. Section 349 explains that an injured party has a right
to reliance damages “less any loss that the party in breach can prove with reasonable certainty the
injured party would have suffered had the contract been performed.” Restatement (Second) of
Contracts § 349 (1981). Therefore, under the Restatement, the breaching party is entitled to an offset
for losses that would have occurred had the contract been performed. The performance period is not
limited to the four-year damages period. There was evidence that no loss would have occurred if the
Burns Companies had been allowed to operate. Therefore, we affirm the district court’s
determination that the County failed to show it was entitled to a reduction of damages.
5. The district court erred in its reduction of the Burns Companies’ damages by
the difference between their sales and cost of sales.
In its findings of fact and conclusions of law, the district court determined that the Burns
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Companies expended $1,461,393.53 in reasonable reliance on the Development Agreement.
However, it then subtracted $412,142.63: the difference between the Burns Companies’ sales
proceeds ($625,196.45) and cost of sales ($213,053.82) during their operation of the Temporary
Facility. The Burns Companies argue that this reduction was improper because they actually suffered
a net loss during their operation of the Temporary Facility. We agree that the record does not contain
substantial and competent evidence to support the district court’s reduction.
The district court’s reduction was based on the sales proceeds and cost of sales figures
included in the Burns Companies’ Exhibit 7, which was admitted at trial. However, the Burns
Companies’ evidence established that they also incurred expenses for equipment and plant costs, the
write-off of uncollected receivables, labor costs, and fuel costs. Exhibit 7 actually reflected a
$325,606.72 net loss from operating the Temporary Facility, not a net profit as apparently found by
the district court. Both Allen Barger and Kirk Burns testified to that effect at trial. Moreover, the
district court itself expressly found that the Temporary Facility lost money after taking incremental
profits, debt service, and sunk costs into account. The district court’s reduction of reliance damages
by the difference between sales proceeds and costs of sales failed to account for those additional
costs incurred in operating the Temporary Facility. Therefore, the district court’s finding that the
Burns Companies’ damages should be reduced by $412,142.63 is unsupported by substantial and
competent evidence. We direct the district court to remove this improper subtraction from the Burns
Companies’ damages award.
6. The district court did not err by refusing to provide an itemization of the
reliance damages it declined to award.
In its findings of fact and conclusions of law, the district court recognized that Burns
Concrete’s financial records showed net expenditures of $1,905,344.78 from December 2006
through the date of trial, but found that Burns Concrete expended only $1,461,393.53 in reasonable
reliance on the Agreement. Specifically, the district court found that several categories of
expenditures were not sufficiently proven or were not incurred in reliance on the Agreement. It
explained which categories these were and why it eliminated them, although it did not identify
specific line items of excluded expenditures:
The evidence in the record does not indicate how expenditures described as
“travel” were incurred. Plaintiffs did not persuade the Court that travel expenses
were reasonable or were incurred in reliance on the Agreement.
The record does not establish how each of the line entries for “Legal
Expenses” was incurred. Plaintiffs did not persuade the Court that the claimed legal
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expenses were incurred in reliance on the Agreement.
Plaintiffs’ [sic] lost and were unable to recover the records verifying the cost
of consumables labeled as “truck alloc” on Exhibit 8. This Court finds those charges
to be speculative and does not include them in damages.
Costs incurred to prepare presentations to Teton County for a CUP or zone
variance were made for the purpose of complying with land use statutes and
ordinances and are not attributable to reliance on the Agreement.
…
This Court is not convinced . . . that Teton County did or could have foreseen
Plaintiffs’ expenditures, which arose prior to the zone change made on February 26,
2007. Plaintiffs’ expenditures, incurred in preparation for Plaintiffs’ performance
under the Agreement, shall be permitted from February 26, 2007, onward.
However, in a footnote, the district court noted that it had reviewed each line item: “For the sake of
clarity, this Court notes that in calculating this amount it reviewed each line item in Exhibit 8. Where
the Court eliminated certain claimed expenditures for reasons discussed above, it also eliminated any
corresponding credit (where applicable).” In its memorandum decision and order on the Burns
Companies’ motion for amended and additional findings of fact and conclusions of law, the district
court rejected the Burns Companies’ argument that it should have specified which Exhibit 8 line
items it eliminated in calculating damages. It stated that its findings provided a clear understanding
of the basis of its decision, and that it did not need to specifically identify each line item by number
or make findings specific to each column.
On appeal, the Burns Companies argue that the district court improperly reduced their
damages award by $443,951.25 because it did not identify the specific line items of costs that were
disallowed and because it did not point to any substantial evidence contradicting the trial testimony
of two witnesses supporting those costs. In response, the County argues that the district court
appropriately analyzed the Burns Companies’ claim by category rather than by line item because
given the large number of line items, conducting a line-by-line analysis would be unduly
burdensome. The County further argues that the categories identified by the district court correlate to
items described in Exhibit 8 with enough specificity to demonstrate the district court’s reasoning.
We agree with the County.
Several of the categories used by the district court were used by the Burns Companies
themselves in Exhibit 8, and the costs are easily identifiable. “Travel” is a term listed under the “JOB
PHASE DESC / NOTES” column for a series of line items on page 6 of Exhibit 8, among other
pages in Exhibit 8. “Legal Expenses” is a term listed under the “DESCRIPTION” column for a
series of line items on page 65 of Exhibit 8, among other pages in Exhibit 8. “Truck Allocation” is a
20
term listed under the “RELATED PAYROLL TAX / INS / TRUCK” column for a series of line
items on page 62 of Exhibit 8, among other pages in Exhibit 8. There is not a label in Exhibit 8 for
costs incurred to prepare presentations to Teton County for a CUP or zone variance, but they were
likely included with the previously disallowed category of “Legal Expenses,” given that one of the
County’s reasons for arguing that legal expenses should be disallowed was that they included “fees
related to the failed application for a conditional use permit and appeal of its denial.” Finally, it is
easy to determine whether a particular line item was incurred before or after February 26, 2007,
because the Burns Companies included a column called “CHECK # / EFT DATE / FINANCED
DATE” in Exhibit 8. Barger testified that the date under this column was the date of payment and
that he had no reason to believe any expenses were paid before they were incurred.
Moreover, the Burns Companies do not sufficiently challenge the reasons for the district
court’s reduction of the award, as opposed to its failure to sufficiently identify what claimed
damages it was disallowing. They only make the conclusory statement that the district court did not
“identify any substantial evidence in the record supporting its determination to reject the trial
testimony of Allen Barger and Kirk Burns supporting those costs,” without citing to the parts of their
testimony that they view as supporting those costs. Our standard of review requires that a cogent
argument be presented.” Matter of Doe I, 166 Idaho 79, 454 P.3d 1162, 1167 (2019). Even if the
Court considers this statement to be a sufficient challenge to the evidence supporting the district
court’s decision, it is not persuasive. Neither Barger nor Kirk Burns testified regarding “travel”
expenses. The district court’s comment about the Burns Companies’ loss of records related to “truck
alloc” costs was likely based on Barger’s testimony about timecards that were not keyed in correctly.
As mentioned above, the district court’s disallowance of legal expenses is likely related to its
disallowance of costs incurred to prepare presentations to Teton County for a CUP or zone variance.
In its proposed findings of fact and conclusions of law, the County pointed out that the Burns
Companies’ claimed legal expenses included fees that predated the Agreement, fees related to their
failed CUP application, and others arguably unrelated to reliance on the Agreement. The County
supported this argument by citing to pages of supporting documentation in the 73 binders that the
Burns Companies brought to trial that it claimed supported its claims for legal expenses. These pages
were admitted as Defense Exhibit O. Finally, the district court’s disallowance of costs incurred
before the zone change is supported by the reasoning it gave: the County could not have foreseen
those expenditures that occurred before its zone change. The Burns Companies do not explain why
21
this reasoning is unsound. Therefore, even though Barger and Kirk Burns may have testified in
general support of the damages claimed in Exhibit 8, there was substantial evidence supporting the
district court’s disallowance of certain categories of expenditures. In these situations, our Court does
not second guess the district court’s determination. Dep't of Envtl. Quality v. Gibson, 166 Idaho 424,
432, 461 P.3d 706, 714 (2020) (“Findings of fact that are supported by substantial and competent
evidence are not clearly erroneous—even in the face of conflicting evidence in the record.”)
(emphasis added). As such, the district court did not err in its disallowance of these claimed reliance
damages.
7. The district court did not abuse its discretion by declining to award
prejudgment interest.
In its findings of fact and conclusions of law, the district court determined that the Burns
Companies were not entitled to prejudgment interest on their award of damages. It reasoned that the
County could not have ascertained the amount of damages prior to trial, given (1) the extensive work
Barger had to do to compute the Burns Companies’ damages, and (2) its finding that some of the
expenditures were not made in reliance on the Development Agreement. The Burns Companies
argue that the district court abused its discretion by disallowing prejudgment interest because at least
$1,049,250.90 of their damages were undisputed and therefore ascertainable. They also assert that
the County did not dispute either the amount or the date of any of Exhibit 8’s line items of costs.
Awards of prejudgment interest are reviewed for abuse of discretion. Med. Recovery Servs.,
LLC v. Neumeier, 163 Idaho 504, 511, 415 P.3d 372, 379 (2018). When applying the abuse of
discretion standard, this Court asks whether the trial court: (1) correctly perceived the issue as one of
discretion; (2) acted within the outer boundaries of its discretion; (3) acted consistently with the legal
standards applicable to the specific choices available to it; and (4) reached its decision by the
exercise of reason. Lunneborg v. My Fun Life, 163 Idaho 856, 863, 421 P.3d 187, 194 (2018).
The district court did not abuse its discretion by disallowing prejudgment interest.
Prejudgment interest is only justified when the principal amount of liability is liquidated or
ascertainable by mere mathematical process. Kelly v. Wagner, 161 Idaho 906, 912, 393 P.3d 566,
572 (2017). The district court correctly applied this law in determining that the Burns Companies
were not entitled to prejudgment interest. For example, in order to create Exhibit 8, Barger testified
that he had to go through thousands of business records and determine what portion of the claimed
expenses were attributable to the Temporary Facility. Furthermore, the district court acted within the
outer boundaries of its discretion when it determined that the amount due was not determined until
22
trial. Therefore, we affirm the district court’s determination that the Burns Companies are not
entitled to prejudgment interest.
F. Attorney Fees Awarded Below
Both parties challenge the district court’s award of attorney fees to the Burns Companies.
The dispute centers around an unconventional fee agreement that the Burns Companies entered into
with Parsons Behle about 60 days after trial, but prior to the district court’s entry of findings of fact
and conclusions of law. The Burns Companies initially hired their attorneys at their regular hourly
rates. After years of litigation, however, the Burns Companies allege they were unable to keep their
financial obligations current and faced the prospect of their attorneys withdrawing. The Burns
Companies assert they entered into a new fee agreement with Parsons Behle to ensure continued
representation. The new fee agreement required the Burns Companies to pay the law firm three times
the regular hourly rate on any amounts more than 120 days past due. The fees were to be paid solely
out of funds received from the County and the risk of non-recovery or a shortfall rested with Parsons
Behle. The fee agreement provided in relevant part:
3. All future payments made by the Burns entities will be applied by the Firm so as to
bring the outstanding balances on the various matters for which the Firm is providing
legal services into compliance with the foregoing payment protocol before any
application is made to the fees owed for the Lawsuit, with the application of all
payments for fees owed for the Lawsuit being applied to the oldest fees outstanding
that have not been converted to the modified contingent-fee basis provided in the
following part 4.
4. All fees (but not costs) previously or subsequently billed for the Lawsuit that have
not yet been or are not hereafter, as applicable, paid within 120 days from the
respective invoice dates (of which there are currently $44,297.50 in such fees) shall
be converted to the following modified contingent-fee terms:
(a) Three times (300%) the total amount of such fees shall be payable to the
Firm out of the first dollars collected from Teton County with respect to the
Lawsuit, whether received on judgment entered against or upon settlement
with Teton County; and
(b) Payment of those fees not paid within 120 days from their respective
invoice dates is contingent upon the collection of money from Teton County
with respect to the Lawsuit, and none of such fees shall be payable by the
Burns entities other than out of any moneys collected from Teton County
with respect to the Lawsuit.
5. Excepting only those fees relating to the Lawsuit converted to the modified contingent-fee
terms provided in the foregoing part 4, the Burns entities will remain personally liable for the
payment of the Firm’s fees and costs previously or subsequently billed to them.
23
The Burns Companies submitted an initial attorney fee request to the district court totaling
$1,071,753.73. The fee request included $514,672.77 in hourly fees plus $557,080.96 in what they
called “supplemental contingency fees.” The supplemental contingency fees were calculated as
follows: $278,540.48 in fees more than 120 days past their invoice dates (and therefore subject to the
contingency fee agreement) x 2 = $557,080.96 in supplemental contingency fees. The district court
awarded the Burns Companies all of the hourly fees requested plus supplemental contingency fees
equal to one time the regular hourly rate. In other words, the district court awarded the Burns
Companies two times the regular hourly rate on fees more than 120 days old.
Following the initial award of attorney fees the Burns Companies filed a motion to
reconsider, seeking an additional award of $88,603.50. The request consisted of $16,254.50 in
hourly fees incurred after the initial award plus $72,349.00 in supplemental contingency fees for
additional amounts unpaid for more than 120 days past their invoice date. The district court awarded
the Burns Companies $16,254.50, thereby denying any supplemental contingency fees.
The Burns Companies argue that the district court erred by reducing their requested fees
without adequate explanation. The County argues that the district court erred by awarding any
“supplemental contingency fees” because the fee agreement imposed a fixed fee with a usurious rate
of interest designed to put an unreasonable burden on the County. We agree with the Burns
Companies and the County that the district court failed to provide an adequate explanation for its
awards and provide guidance on remand to address arguments made by the parties.
The district court correctly perceived the award of attorney fees as one of discretion and
analyzed the factors set forth in Idaho Rule of Civil Procedure 54(e)(3) in both of its decisions. See
Lunneborg, 163 Idaho at 863, 421 P.3d at 194 (describing this Court’s abuse of discretion standard
of review). What is missing from the decisions, however, is the link between the factors set forth in
Rule 54(e)(3) and the specific final awards that were made. Stated differently, the district court failed
to “explain[] the relationship between the [district] court’s evaluation of the Idaho Rule of Civil
Procedure 54(e)(3) factors and its decision regarding the amount to award for attorney[] fees.” H2O
Envtl., Inc. v. Farm Supply Distributors, Inc., 164 Idaho 295, 300, 429 P.3d 183, 188 (2018). As this
Court has explained, “[i]t is not enough for a trial court to acknowledge the existence of the Rule
54(e)(3) factors; rather, it must appear that there is a reasoned application of those factors in the trial
court’s decision regarding the amount of attorney[] fees to be awarded.” Id. Here, the reasoned
application of the Rule 54(e)(3) factors to the district court’s decision is missing. Thus, we vacate the
24
district court’s awards of attorney fees and remand the matter to the district court with instruction to
explain how the application of the factors in Idaho Rule of Civil Procedure 54(e)(3) logically lead to
the specific amount of fees awarded.
For purposes of remand we emphasize that all fees awarded under Rule 54(e) must be
reasonable, and whether a fee is fixed or contingent is a factor the district court must consider.
I.R.C.P. 54(e)(3)(E). The Rule does not further explain how the district court should weigh this
factor, but we observe that it must be weighed in light of the function of contingency fees in our
legal system—to enable those who are unable to pay hourly fees to secure representation and to
compensate attorneys reasonably for the risks they have taken in representing the client.
Contingency fee agreements involve risk and uncertainty for attorneys—the risk of not being paid if
the client does not prevail; uncertainty about the amount that will ultimately be recovered;
uncertainty about the amount of time and money that will be required to obtain recovery; and,
uncertainty about how much time will be required to obtain recovery. Herbert M. Kritzer, Seven
Dogged Myths Concerning Contingency Fees, 80 Wash. U. L.Q. 739, 748 (2002). Given these risks,
“the attorney’s client will sometimes pay more than he or she would have paid under an hourly fee
agreement . . . .” Parsons v. Mut. of Enumclaw Ins. Co., 143 Idaho 743, 748, 152 P.3d 614, 619
(2007).
To determine whether the attorney fees requested by the Burns Companies are reasonable, it
is necessary to assess several interrelated issues. What were the risks for the Burns Companies at the
time they entered into the contingency fee agreement given their alleged inability to pay Parsons
Behle? Similarly, what were the risks and uncertainties for Parsons Behle and the individual
attorneys responsible for the case? Given the fact that partial summary judgment on liability had
been granted and the case was to be tried solely on the issue of damages, was there a risk of a non-
recovery or shortfall? Was that risk significant? Is the amount of the contingent fee commensurate
with the time and effort needed to obtain payment? These are all matters that the district court is
positioned to evaluate in its discretion.
G. Attorney Fees on Appeal
Both parties request attorney fees on appeal pursuant to Paragraph 12 of the Development
Agreement. Because both parties have prevailed in part, neither is awarded attorney fees on appeal.
Likewise, we decline to award costs.
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III. CONCLUSION
The district court’s grant of partial summary judgment on the issue of breach of contract is
affirmed. The district court’s judgment is vacated for a recalculation of damages. In its recalculation
of damages, the district court should reverse its reduction of damages by the difference between the
Temporary Facility’s sales and cost of sales. The district court’s orders on attorney fees are vacated
and the issue is remanded with instruction to the district court to explain the basis of its attorney fee
awards.
Chief Justice BURDICK, and Justices BEVAN and STEGNER, and Justice Pro Tem
TROUT CONCUR.
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