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M.M. Silta, Inc. v. Cleveland Cliffs

August 17, 2010

M.M. SILTA, INC., APPELLANT,
v.
CLEVELAND CLIFFS, INC., CLIFFS MINING COMPANY; CLIFFS ERIE, L.L.C., APPELLANT.



Appeal from the United States District Court for the District of Minnesota.

The opinion of the court was delivered by: Wollman, Circuit Judge.

Submitted: February 10, 2010

Before WOLLMAN, HANSEN, and MELLOY, Circuit Judges.

M.M. Silta, Inc. (Silta) appeals from the district court's*fn1 dismissal of its breach of contract action and related claims against Cleveland Cliffs, Inc. and its subsidiaries (collectively, Cliffs). Because a jury in a previous action found that Cliffs properly terminated the parties' agreement, and because we conclude that the contract unambiguously precludes the post-termination obligations on which Silta's claims are premised, we affirm.

I. Background

Cliffs is an international iron ore producer with mining operations in Michigan, Minnesota, and eastern Canada. In early 2002, Cliffs began liquidating the assets of a Hoyt Lakes, Minnesota, taconite mine that it had purchased from a bankrupt competitor. Melvin Silta, the owner and primary employee of M.M. Silta, Inc., learned of the liquidation and sought the opportunity to perform salvage and reclamation work at the Hoyt Lakes facility. Between 2002 and 2006, Silta engaged in a variety of tasks at the mine and entered into agreements with Cliffs for the purchase of used mining equipment. One such agreement was the subject of a prior appeal, in which we affirmed a $7.3 million jury verdict in Silta's favor. See M.M. Silta, Inc. v. Cleveland Cliffs, Inc., 572 F.3d 532 (8th Cir. 2009).

A. The Reclamation Services Agreement

The contract giving rise to this appeal concerned the reclamation of iron ore remaining from when the mine was operational. Melvin Silta believed that the leftover ore would be marketable, and he proposed entering into an agreement with Cliffs to sell the material to third parties. Accordingly, in 2004 Silta and Cliffs signed a Reclamation Services Agreement that called for Silta to excavate, screen, and load the material and for Cliffs to attempt to find a buyer. The agreement further provided that Cliffs would immediately pay Silta a non-refundable advance of $300,000 and thereafter continue to pay Silta weekly non-refundable advances of $100,000 while Silta performed the work. Upon the sale and shipment of the reclaimed ore, Cliffs agreed to pay Silta an additional amount-ranging from $16.00 to $18.50 per net ton-but only to the extent that the additional sum exceeded the advances that Silta had already been paid. The contract did not require Cliffs to sell any particular amount of the material but instead permitted Cliffs to terminate the contract if it made a good faith determination that the ore could not be economically sold. The relevant termination provisions read as follows:

TERM AND TERMINATION

2.1 The Services to be performed and related rights granted hereunder shall commence on the Effective Date of this Agreement and shall terminate upon the earlier of (a) such time when the Product can no longer be economically sold by [Cliffs] as determined by [Cliffs] or (b) November 30, 2006 ("Term"). Upon termination of this Agreement the parties shall discuss the potential sale of any unsold Product, provided, however, that any future agreement relating to unsold Product shall only be effective upon the mutual agreement of the parties as evidenced by a separate written agreement.

2.2 All of the covenants and agreements set forth in this Agreement shall survive the expiry of the Term.

Throughout 2004 and 2005, Silta reclaimed leftover ore and was paid advances totaling $4.8 million. Sale of the material, however, proved difficult and controversial. In October 2005, having sold only a small portion of the reclaimed ore, Cliffs sent Silta a letter formally terminating the agreement. The letter referred to Cliffs' termination power pursuant to Section 2.1 and asserted that the ore could no longer be economically sold. It stated that Cliffs would discontinue its advance payments to Silta and requested that Silta cease the reclamation work. In addition, the letter provided that:

Cliffs realizes that it has an ongoing obligation to Silta with respect to § 1.2 of the Agreement, and that, if and when the remaining Product is sold, amounts may be owed to Silta. If a buyer is located, Cliffs will notify Silta of the sale of the Product and shall net out what has already been paid to Silta with what is owed. Until such time, no further payments shall be made to Silta as either an advance or on the sale of the Product.

B. The 2008 Trial

Two years later, with the reclaimed ore still unsold, Silta sued Cliffs, arguing that Cliffs had acted in bad faith in failing to sell the material. During the jury trial in 2008, both sides presented extensive testimony about the value of the unsold ore and Cliffs' efforts to find a buyer. Cliffs argued that the poor quality and irregular quantity of the reclaimed material made it difficult to sell. Silta maintained that the international market for iron ore was strong and that Cliffs had ulterior motives for terminating the agreement. Silta also claimed that if the remaining material was sold, Cliffs would owe Silta approximately $3.2 million over and above the advance payments that Cliffs had already made.

In the course of explaining the termination decision, several witnesses for Cliffs referred to the October 2005 termination letter or other communications in which Cliffs had indicated its intent to pay Silta if the reclaimed ore was sold. For example, Lee English, Cliffs' Director of Sales and Marketing, ...


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