Farmers' Ethanol LLC v. Bounty Minerals, LLC
666 F. App'x 421
| 6th Cir. | 2016Background
- Farmers’ Ethanol and Bounty Minerals signed letters of intent describing a "proposed" sale of Farmers’ oil and gas rights; letters required Farmers’ to provide title documents and gave Bounty seven days to review.
- The letters stated that "If after the initial review period, Bounty wants to proceed" it would prepare deeds and payment orders; no express promise by Bounty to purchase was included.
- After the review period, Bounty did not prepare closing documents, requested a lower price, and repeatedly identified a $600,000 judgment lien as an impediment to closing.
- Farmers’ Ethanol voluntarily satisfied the judgment (including a $400,000 premium) and notified Bounty, which did not agree to close and later refused to proceed.
- Farmers’ sued in Ohio court for breach of contract and promissory estoppel; case was removed to federal court. The district court granted judgment on the pleadings for Bounty; Farmers’ appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the letters of intent created a binding contract obligating Bounty to purchase the mineral rights | Letters of intent (esp. the "initial review period" clause) are a satisfaction/conditional contract requiring Bounty to proceed in good faith and close if title was acceptable | The language is an offer or unilateral option: Bounty retained unfettered discretion to decide whether to buy; no mutual, binding commitment | Court: Letters are unambiguous offers/illusory on Bounty’s side; no enforceable bilateral contract obligating Bounty to buy |
| Whether a fact issue exists as to parties’ intent to be bound (requiring jury) | Intent to be bound is typically a factual question; behavior (price counteroffer, later retreat) shows intent | The writings are unambiguous and, even if intent existed, it would only bind Bounty to prepare deeds if it chose to buy; interpretation is a question of law | Court: Contract interpretation is a legal question; this is a clear case for the court, not remand for factfinder |
| Whether Bounty’s silence after Farmers’ agreed to clear the lien gives rise to promissory estoppel | Bounty’s repeated identification of the lien as the obstacle and silence after Farmers’ chose to satisfy it amounted to a promise to close or at least a duty to speak, inducing reliance | Silence did not constitute a clear and unambiguous promise to purchase if the lien were cleared; Bounty made no commitment and cited other title concerns | Court: Promissory estoppel fails — no clear, unambiguous promise; silence did not create a promise to close |
| Whether equitable estoppel or other doctrines salvage recovery | Farmers’ contends equitable principles prevent Bounty from refusing to close after inducing reliance | Bounty argues no promise or misrepresentation; equitable estoppel is a defense under Ohio law, not a cause of action | Court: Even construing facts in Farmers’ favor, no actionable promise or cause of action exists; claim fails |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for pleadings)
- Tucker v. Middleburg-Legacy Place, 539 F.3d 545 (6th Cir. 2008) (standard of review for Rule 12(c) judgments)
- Eastham v. Chesapeake Appalachia, L.L.C., 754 F.3d 356 (6th Cir. 2014) (contract interpretation; unambiguous writings control)
- Arnold Palmer Golf Co. v. Fuqua Indus., Inc., 541 F.2d 584 (6th Cir. 1976) (intent to be bound is generally a question of fact)
- Langley v. DaimlerChrysler Corp., 502 F.3d 475 (6th Cir. 2007) (illusory promises unenforceable)
- McCarthy v. Ameritech Publ., Inc., 763 F.3d 469 (6th Cir. 2014) (elements of promissory estoppel under Ohio law)
- Tackett v. M & G Polymers USA, LLC, 811 F.3d 204 (6th Cir. 2016) (courts avoid constructions that render promises illusory)
- Four Howards, Ltd. v. J & F Wenz Rd. Invest., L.L.C., 902 N.E.2d 63 (Ohio Ct. App. 2008) (construction and interpretation of contracts is a matter of law)