Rice's Lucky Clover Honey, LLC. v. Hawley
700 F. App'x 852
| 10th Cir. | 2017Background
- Rice’s Lucky Clover Honey (Rice Honey) hired Jamie Hawley as president under a written employment agreement with internally inconsistent duration language (terms referencing both a one-year period and the third anniversary).
- Parties disputed whether the term was one year (with an option not to renew) or three years; Rice Honey notified Hawley it would not renew after one year, and Hawley claimed premature termination.
- Rice Honey sued Hawley for breach of contract and breach of fiduciary duty; Hawley counterclaimed for breach of contract and sought contractual payments including a $250,000 liquidated-damages provision plus one year’s base salary.
- District court granted JMOL for Hawley on Rice Honey’s claims and on Hawley’s counterclaim (awarding $412,000); Tenth Circuit affirmed JMOL on Rice Honey’s claims but reversed JMOL on Hawley’s counterclaim and the enforceability of the liquidated-damages clause.
- Key factual disputes for the jury on remand: (1) whether Hawley materially breached before Rice Honey’s alleged breach (by continuing work for Liberty after Dec. 31, 2012), (2) whether the contract term is ambiguous (one vs. three years), and (3) whether the liquidated-damages clause is an enforceable estimate of damages or a penalty.
Issues
| Issue | Rice Honey’s Argument | Hawley’s Argument | Held |
|---|---|---|---|
| Whether Rice Honey’s breach-of-contract claim should go to jury | Jury could find no meeting of minds / ambiguity excused Rice Honey | Contract is enforceable as written; Rice Honey failed to prove breach | Affirmed JMOL for Hawley (Rice Honey’s contract claim fails) |
| Whether Rice Honey proved breach of fiduciary duty | Hawley made material misrepresentations and continued outside employment, causing damages | No damages from misrepresentations; economic-loss rule bars tort recovery tied to contract | Affirmed JMOL for Hawley (no fiduciary-liability as to alleged misrepresentations; economic-loss rule bars other theory) |
| Whether Hawley’s counterclaim (contract breach) should be decided by jury | Rice Honey claims Hawley materially breached (continued Liberty work) so Rice Honey’s nonrenewal was justified | Hawley contends Rice Honey wrongfully terminated and owes liquidated/contract payments | Reversed JMOL; jury must decide material breach and ambiguity of term (one vs three years) |
| Enforceability of $250,000 liquidated-damages clause | Clause is a penalty and disproportionate; district court erred by deciding as matter of law | Clause reasonably estimates damages and is enforceable | Remanded: enforceability is a jury question (fact issue), not decided as matter of law |
| Duty to mitigate and double recovery (liquidated damages + specified debt) | Rice Honey urges mitigation and that remedies are inconsistent | Hawley says no duty to mitigate where contract specifies sum; may recover liquidated damages plus specified contractual payment | Court: no duty to mitigate as matter of law here; may recover both liquidated damages and specified debt if jury finds clause valid and Hawley prevails |
Key Cases Cited
- Rupert v. Clayton Brokerage Co. of St. Louis, Inc., 737 P.2d 1106 (Colo. 1987) (elements for breach of fiduciary duty).
- W. Cities Broad., Inc. v. Schueller, 849 P.2d 44 (Colo. 1993) (plaintiff must prove fact of damages with reasonable persuasiveness).
- Town of Alma v. AZCO Constr., Inc., 10 P.3d 1256 (Colo. 2000) (economic-loss rule and when tort duties are independent of contract).
- Rohauer v. Little, 736 P.2d 403 (Colo. 1987) (standards for enforceability of liquidated-damages clauses).
- Klinger v. Adams County School Dist. No. 50, 130 P.3d 1027 (Colo. 2006) (liquidated-damages enforceability is typically a question of fact).
- Drews v. Denver Recycling Co., 727 P.2d 1121 (Colo. App. 1986) (no duty to mitigate where contract specifies payment upon termination).