Avidity Partners v. State of California
221 Cal. App. 4th 1180
| Cal. Ct. App. | 2013Background
- Historic Headwaters Agreement involved Pacific Lumber transferring 7,000 acres to the federal government and State in exchange for other land and $495.5 million.
- Avidity Partners, LLC, as litigation trustee for Scotia Pacific, sued the State for damages for breach of contract, breach of the implied covenant of good faith and fair dealing, and promissory estoppel.
- The Agreement contemplated approvals of an HCP, ITP, and SYP but did not promise a fixed harvest level; THP was not guaranteed by the SYP.
- EPIC declared the SYP invalid, and the federal/state regulators’ actions and timing affected harvest opportunities.
- Avidity sought damages, arguing that the State’s actions prevented Pacific Lumber from harvesting at 176.2 million board feet per year, and that adaptive management and waivers supported this expectation.
- The trial court granted summary judgment on grounds including a damages waiver in the Implementation Agreement; the Court of Appeal affirmed, clarifying scope of the waiver and nonexistence of an express harvest-level guarantee.
- The court held that the Agreement and related documents do not contain an express or implied promise of a minimum harvest level or regulatory exemption from water quality laws.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the Headwaters documents guarantee a harvest level of 176.2 mmbf/yr? | Avidity argues there was an implied/express harvest guarantee. | State contends no guarantee exists; SYP/HCP do not assure a fixed harvest. | No express or implied harvest guarantee found. |
| Does the damages waiver in the Implementation Agreement bar contract damages? | Waiver applies to all damages for breach of the Agreement. | Waiver should apply to HCP terms; damages barred. | Damages waiver applies to HCP/Implementation Agreement remedies, not to every document. |
| Can an implied covenant of good faith and fair dealing be read into the Agreement to require timely THP approvals? | Implied covenant ensures timely, fair consideration of THPs. | No implied covenant beyond express terms; negotiations rejected THP timing. | No implied covenant; terms were negotiated and no timely-THP assurance implied. |
| Does promissory estoppel apply where consideration was bargained for? | Promises enforceable despite consideration gaps. | Reliance was bargained-for consideration; estoppel not applicable. | Promissory estoppel requires unbargained-for reliance; here reliance was bargained-for. |
Key Cases Cited
- United States v. Winstar Corp., 518 U.S. 839 (U.S. (1996)) (contracts enforceable if not defeating sovereign power)
- Environmental Protection Information Center v. California Dept. of Forestry & Fire Protection, 44 Cal.4th 459 (Cal. 2008) (SYP invalid; no guaranteed harvest level in agreement)
- Third Story Music, Inc. v. Waits, 41 Cal.App.4th 798 (Cal. App. 1995) (implied covenants require clear, contemplated promises)
- Pasadena Live v. City of Pasadena, 114 Cal.App.4th 1089 (Cal. App. 2004) (implied covenant cannot create illusory contract)
- Locke v. Warner Bros., Inc., 57 Cal.App.4th 354 (Cal. App. 1997) (discretionary performance limits; honest satisfaction standard)
- Guz v. Bechtel National, Inc., 24 Cal.4th 317 (Cal. 2000) (implied covenant limited to contract terms)