Sunline Commerical Carriers, Inc. v. CITGO Petroleum Corporation ( 2017 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
SUNLINE COMMERCIAL
CARRIERS, INC.,
Plaintiff,
V. C.A. N0. N15C-03-051 WCC CCLD
CITGO PETROLEUM
)
)
)
)
)
§
CORPC)RATION, )
)
)
Defendant.
Submitted: July 20, 2017
Decided: Decernber 27, 2017
Plaintiff’s Motion for Summary Judgment - GRANTED IN PART
Defendant’s Motion for Summary Judgment - DENIED
MEMORANDUM OPINION
Michael F. Bonkowski, Esquire & Nicholas J. Brannick, Esquire, Cole Schotz P.C.,
500 Delaware Avenue, Suite 1410 Wilmington, DE 19801. Attorneys for Plaintiff.
ROSS A. Mortillaro, Esquire, Michael P. Aigen, Esquire, J. Mich31 Zapendowski,
Esquire and LaWrence Lee Budner, Esquire, Lackey Hershman, LLP, 3102 Oak
LaWn Avenue, Suite 777 Dallas TeXaS 7'5219. Attorneys for Defendant.
Mary F. Dugan, Esquire, Young Conway Stargatt & Taylor, LLP, 1000 North King
Street Wilmington, DE 19801. Attorney for Defendant.
John Zavitsanos, Esquire, Debora Simon Pacholder, Esquire and Edward Goolsby,
Esquire, Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing P.C., 1221 McKinney
Street, Suite 25 00, Houston, Texas 77010. Attorneys for Defendant.
CARPENTER, J.
I. FACTUAL & PROCEDURAL BACKGROUND
On January 9, 2013, Sunline Commercial Carriers, lnc. (“Sunline” or
“Plaintiff”) and CITGO Petroleum Corporation (“CITGO” or “Defendant”) entered
into an Agreement for Motor Transportation Services (the “Master Agreement”).l
Under the Master Agreement, Plaintiff agreed to provide motor carrier services for
the transportation of barrels of petroleum products provided by CITGO. The Master
Agreement set forth Plaintifi’s requirements to provide transportation services,
insurance and liability provisions, and general invoicing procedures but it Was silent
on pricing and the minimum barrel requirements2 These terms Were not defined
until March 2013 in a separate one year agreement also titled Agreement for Motor
Transportation Services (the “Term Agreement”).3 The Term Agreement
incorporated by reference the terms of the Master Agreement stating that “[t]o the
extent of any inconsistent or conflicting terms between this Agreement and the
[earlier] Master Agreement, this Agreement shall govern and control.”4 Together,
the Master Agreement and the Term Agreement operate together to form the parties’
contract (the “Contract”).
1 See Compl. at 114; Pl.’s Ex. A-l at CITGO 000159.
2 See Pl.’s Ex. A-l at CITGO 000159.
3 Pl.’s EX. A-2 at CITGO 0002493.
4 Id.
Pursuant to the Term Agreement, Defendant Was required to use Plaintiff’s
transportation services to ship a specified monthly minimum number of barrels. If
Defendant Was unable to provide the specific monthly minimum of barrels, the
Defendant Was required to pay Plaintiff “$3.33 plus an agreed fuel Service charge of
28%” for each barrel it failed to provide.5 Defendant’s failure to satisfy the monthly
minimum barrel requirements Was deemed a shortfall and each shortfall payment
Was due fifteen days after receipt of Plaintiff’ s invoice.6 Appendix A of the Term
Agreement provided a detailed schedule of the minimum barrel requirements that
the Defendant Was required to provide and the Plaintiff Was obligated to ship. For
eXample, beginning April 2013, Defendant Was required to provide a guaranteed
monthly minimum of 100,000 barrels and Plaintiff s corresponding shipment
obligation Was 100,000 barrels that month.7 ln May 2013, the minimum barrel
requirements increased to 180,0008 and after June 1, 2013, Defendant’s guaranteed
monthly minimum and Plaintiff s corresponding shipment obligation Was a
continuous 240,000 barrels.9
As early as June 2013, the number of barrels provided by Defendant fluctuated
and fell short of the parties’ expectations ln fact, after only three months into the
5 See Pl.’s Mot. Summ. J. at 5.
6 Pl.’S EX. A-2 at CITGO 0002495.
7 See z``d.
8 See ia’.
9 See id.
Term Agreement, Defendant was unable to supply the guaranteed monthly minimum
of 240,000 barrels and often failed to pay the associated shortfall fees The chart
below illustrates the shortfall amount, the shortfall obligation, and if the Defendant
satisfied such obligation.10
Month Shortfall Barrels Shortfall Shortfall
__ _ _ Obligation Obligation Met?
_l__ June 2013 __ 97,595 $415,989 No
July 2013 81,477 $347,288 No
August 2013 143,372 $611,109 No
September 2013 50,410 $214,445 No
December 2013 49,607 $211,445 No
February 2014 16,402 $69,912 Yes
March 2014 96,085 $409,553 Yes
Because of these early and recurring shortfalls, the parties began to discuss
how Defendant could meet its obligations Defendant proposed pushing all shortfall
barrels and obligations to the end of the Contract term. Plaintiff, however, was only
willing to move some of the shortfalls to the end of the Contract, if and only if the
Defendant paid a portion of the shortfall obligations each month, which would cover
the Plaintiff s expenses Plaintiff s President Mr. John Flinn (“l\/lr. Flinn”) told
Defendant in an email on October 15, 2013, that Sunline “did not want to lose this
business [] but [they] did not know what else to do.”ll Plaintiff continued to remind
10 Pl.’s Compl. at 114
ll D€f.’S EX. 49 at ClTGO 002179.
Defendant of Sunline’s cash loss but wanted to try to figure out a solution. Plaintiff
also told Defendant’s Senior Hydrocarbon Trader J ones Khan (“Mr. Khan”):
Let me know what CITGO decides as losing the business over
something I did not cause is difficult for me to understand l thought
our proposal was fair considering the size of the full amount and l do
not have deep enough pockets to absorb August as l did in June and
July.12
In October 2013, while many of Plaintiff’ s invoices remained unpaid, the Defendant
proposed extending the term of the Term Agreement an additional month to
April 30, 2014, and paying 30% of its shortfall obligations up front, and pushing the
remaining 70% to the end of the extended contract term.13 Such discussions
continued for two more months with no agreement.14
Since there is no written document, it is still unclear to the Court exactly when
a modification was finally agreed upon, however; the parties seemed to have reached
some understanding around December 2013 for the outstanding shortfall obligations
for June, July, August, and September 2013.15 The modification required Defendant
to pay 20% of the existing shortfall obligations, and push the remaining 80% of the
shortfall obligations to a later date at the end of the Contract (“20/ 80
l\/Iodification”). 16 Unfortunately whatever was agreed to was not set forth in a formal
12 ld.
13 Def.’s Ex. 50, at CITGO 002566-67 (providing copy presentation from Defendant regarding
proposed contract modification).
14 See Pi.’s Ex. A-23 at CiTGo 002361_62.
15 See Pl.’s Ex. A-27 at CITGO 0000691-94.
16 See id.
written contract, and there is a great deal of dispute regarding the parties’
responsibilities and obligations and even the Contract’s end date.17
To add further confusion to this relationship, in a series of email chains,
Plaintiff appears to have automatically waived full payment for shortfalls incurred
in December 2013 but refused to waive full payment for shortfalls incurred in
February and March of 2014. More specifically, when the Defendant failed to meet
its minimum monthly barrel requirements in December, it seems without any
additional discussions, Plaintiff applied the 20/80 Modification to the December
invoice.18 However, in February and March of 2014, when Defendant also failed to
meet its minimum monthly barrel requirements and incurred additional shortfalls,
Plaintiff refused to accept anything but full payment.19 ln fact, Mr. Flinn stated “it
does look like l permitted a shortfall adjustment in December for 20% cash payment
and 80% to be made up[,] however l am unaware of any waiver given by me for
February.” 20 As such, Defendant paid the shortfalls in February and March in full.
ln February, it also appears the parties engaged in an additional round of
discussions regarding how to handle shortfalls While a “proposal” from CITGO is
mentioned in email exchanges, a copy of Defendant’s proposal has not been
17 Flinn Dep. 124:9-18 Sept. 21, 2016.
18 See Pl.’s Ex. A-35 at ciTGo 000187.001.
19 see Pi.’s Ex. A-29 at CiTGo 000061_63.
20 See Pi.’s Ex. B-6 at SUNCIT00533-36.
provided to the Court and it appears no formal agreement was reached. There are
email exchanges critiquing Defendant’s proposal, where Defendant’s representative
Mr. Khan ultimately responded to Plaintiff:
[t]here are couple of minor changes we’ll need to make. Otherwise, all
looks good. Term and Termination: The term of this Agreement (the
“Term”) shall commence as of April lst, 2014 and shall terminate on
April 30, 2014. Each party will have the option to extend the contract
for the month of May 2014 by giving an advance written notice on or
prior to April 1, 2014. There is a reason for using this kind of language.
Let me know what you think. 21
However, there was no response by Plaintiff provided in either parties’
discovery.
On March 31, 2014, Defendant sent Plaintiff its 60-day notice of termination
Defendant’s termination notice stated that “[t]he transportation services, therefore
will continue thru the month of May, ending on May 31st, 2014.”22 The parties
disagree whether Defendant was required to provide the monthly minimum barrel
requirements for April and May of 2014 or if those months acted simply as a make-
up period for the remaining shortfall obligations Defendant believed no monthly
minimums were required and Mr. Khan provided Mr. F linn with a copy of
Defendant’s attorney’s discussions in a May 29, 2014 email:
[t]he subsequent agreement on a new one-month term for April 2014
trumps the 60-day cancellation notice. There was no agreement for a
one-year extension nor does the 3/21/ 13 agreement provide for one. In
order to renew the agreement, there was a condition that must be met:
21 See Pi.’s Ex. A-55 at ciTGo 000032-33.
22 see Pi.’S Ex. A-30 at CiTGo 000066.
‘If both parties agree on terms and volumes, this Agreement will be
renewed with the agreed upon start date and term of the Agreement.’
That condition precedent was not met. Additionally, there is nothing in
the 3/21/13 agreement that indicates any renewal must be on a one-year
basis The agreement specifically contemplates that the parties will
need to agree upon a start date and term. The agreement does state that
there will be a 60-day notice to terminate and Mr. Khan honored that
intent by providing a 60-day notice even though the agreement was
currently on a one-month term. We did not specifically agree on any
terms and volumes (including minimums) for April and May. The only
term we agreed on was to use up the adjusted shortfall bbls until such
time that volume has been exhausted23
Plaintiff asserts the opposite, that there were minimum monthly requirements for
both April and May. ln fact, on May 12, 2014, Plaintiff sent an invoice to Defendant
for the April shortfall and Defendant did not pay that invoice.24 Plaintiff also
responded to Defendant’s May 29, 2014 email stating:
...[s]o that the record is clear, we do not agree with Citgo’s
interpretation of the two Agreements for Motor Transportation Services
or the subsequent agreement theory advanced. Mr. Benson made that
clear as well in his email dated April 3, 2014. While we sort through
those issues in due course, l do need Citgo to address the numerous
invoices that Citgo is currently past due on. The agreement(s) payment
terms are for 15 days from invoice receipt and Citgo is behind
$396,585, the shortfall invoice we have been discussing is not in the
number past due. Please advise on when Sunline can expect payment
on its past due obligations‘.725
23 Pi.’s Ex. A-40 at ciTGo 001322-23.
24 See Pi.’s Ex. B-7 at sUNciT 005497-005500.001.
25 Pi.’S Ex. A-40 at CITGo 001322.
Similarly, on June 25, 2014, Plaintiff sent an invoice to Defendant for the May
shortfall and Defendant did not pay that invoice.26 Despite receiving Plaintiff’ s
invoices, Defendant continues to assert after March 31, 2014 the minimum barrel
requirements terminated and Defendant was only required to pay its shortfall balance
of 337,969 barrels accrued as of March 31, 2014.27 lt is unclear whether Defendant
made any effort to address, through payment or providing additional barrels, the
remaining 80% shortfall in April and May of 2014.
Pursuant to the Contract’s notice and cure provision, Plaintiff provided
Defendant notice of its breach, giving CITGO 30 days to cure.28 Defendant failed
to cure and has yet to pay Plaintiff the alleged shortfall payments29 On March 6,
2015, Plaintiff commenced the instant action alleging breach of contract by
Defendant and seeking damages of 3§1,904,371.30 On April 28, 2015, Defendant
replied and filed counterclaims alleging breach of contract, unjust enrichment,
breach of the implied covenant of good faith and fair dealing by Plaintiff, and
seeking an accounting and the return of amounts by which Defendant overpaid.31
Plaintiff replied to Defendant’s counterclaims on May 18, 2015, and moved
to dismiss two of Defendant’s counterclaims The Court dismissed Defendant’s
26 see Pi.’s Ex. B-8 ar sUNCiT 005484_86.
27 Pl.’s Ex. A-55 at CITGO 000032~33.
28 Pl.’s Ex. A-33 at CITGO 000378-80.
29 See Pl.’s Mot. Summ. J. at 11.
30 See id.; see also Compl. at 1125.
31 Def.’s Answ. Affirmative Defenses and Countercls. at 18-21.
8
accounting claim but allowed the unjust enrichment claim to proceed. During the
Motion to Dismiss hearing, “the Court noted that the disputes between the parties
regarding the scope of discoverable information stemmed from the parties’ differing
positions on whether there is a liquidated damages provision in the parties’
contract.”32 The Court then required the parties to submit additional briefing on the
liquidated damages issue.33 After reviewing the parties’ briefings, the Court
concluded that the damages calculation was straightforward and clear and no
liquidated damages clause existed.34 With the Court’s decision on liquidated
damages, the parties engaged in additional discovery. Defendant filed a Motion for
Leave to File its Answer With Amended Affirmative Defenses and Amended
Counterclaims, which was granted by the Court in November 2016. Plaintiff
subsequently filed its Motion for Summary Judgment and Defendant filed its own
Motion and responded to Plaintiffs Motion.
At the Motion for Summary Judgment hearing, the Court denied Defendant’s
Motion for Summary Judgment in regards to Count l and Count ll, finding
Defendant’s assignment and lack of capacity arguments to be unpersuasive35 The
Court reserved decision on Plaintiffs Motion for Summary Judgment based on
32 Def.’s Mot. Summ. J. at 2.
33 See Mot. Dismiss Tr. 17, Feb. 24, 2016.
34 Sunline Commercial Carrz'ers, Inc. v. C[TGO Petroleum Corp., Del. Super., C.A. No. N15C-
03-051 WCC - CCLD, Carpenter, W. (l\/Iay 27, 2016) (Letter Op.).
35 Mot. summ. J. Tr. 97,Ju1y 20, 2017.
breach of contract, as well as Defendant’s Motion for Summary Judgment for Count
III, whether an expert is needed to testify on damages36 The Court reserved
judgment on Count lll, so Plaintiff could provide the Court more information
regarding Mr. Flinn’s 30(b)(6) deposition and ability to testify at trial. Plaintiff
issued a letter to the Court on July 26, 2017 after reviewing Mr. Flinn’s deposition
and continued to assert his competency regarding the damages model and as a live
witness at trial.37 On November 30, 2017, the Defendant abandoned its
counterclaims against Plaintiff, therefore making Plaintiff’ s Motion for Summary
Judgment regarding Defendant’s counterclaims moot. This is the Court’S decision
on the parties’ remaining cross-motions for summary judgment
II. STANDARD OF REVIEW
The Court will grant summary judgment pursuant to Delaware Superior Court
Civil Rule 56 “if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled to a judgment as a
matter of law.”38 ln reviewing a Rule 56 motion, the Court must consider the facts
in a light most favorable to the non-moving party.39 The Court will deny summary
36 See id. at 98.
37 Def.’s Mot. Summ. J. at 34.
38 Super. Ct. Civ. R. 56(0).
39 See Alabi v. DHLAl'FwayS, ]nC., 583 A.Zd 1358, 1361 (D€l. 1990).
10
judgment where the record before it “reasonably indicates that a material fact is in
dispute or ‘if it seems desirable to inquire more thoroughly into the facts in order to
clarify the application of law to lthe circumstances.”’40 This well-established
standard is not altered where, as here, the parties have filed cross-motions for
summary judgment.41 “When cross-motions for summary judgment are presented
to the Court, neither party’s motion will be granted unless no genuine issue of
material fact exists and one of the parties is entitled to judgment as a matter of law.”42
III. DISCUSSION
The parties’ motions for summary judgment center on when the Contract
ultimately terminated, if a binding oral modification existed, and the obligations of
the parties thereunder. Plaintiff argues that the Contract terminated on May 31,
2014, pursuant to Defendant’s 60-day notice given on March 31, 2014.43 Plaintiff
argues such notice obligated Defendant to meet the minimum barrel requirements
until the end of May. 44 ln contrast, Defendant argues that the Contract terminated
40 See Comet Sys., Inc. S’hola'ers'Agenl' v. M]VA, Inc., 980 A.2d 1024, 1029 (Del. Ch. 2008)
(quoting Ebersole v. Lowengrub, 180 A.2d 467, 470 (Del.l962)).
41 See Capano v. Lockwooa', 2013 WL 2724634, at *2 (Del. Super. Ct. 2013) (citing Total Care
Physl'cl'ans, P.A. v. O'Ham, 798 A.2d 1043, 1050 (Del. Super. Ct. 2001)).
42 Nal"l Union Fire InS. CO. of Pitl‘sburgh, PA. v. Rhone-Poulenc Basic Chems. CO., 1992 WL
22690, at *5 (Del. Super. Ct. 1992) (quoting Empire of Am. Relocatl'on Servs., lnc. v.
Commercial Crea'it C0., 551 A.2d 433, 435 (Del. 1988)), a]j”’d sub nom, Rhone-POulenc Basz'c
Chems. C0. v. Am. Moto)"ists Ins. C0., 616 A.2d 1192 (Del. 1992).
:: Pl.’s Reply to Def.’s Answ. Resp. Pl’s Mot. Summ. J. at 5.
Ia'.
ll
on March 31, 2014, because the one-year term of the Term Agreement expired.45
However, pursuant to the parties’ oral modification, April and May of 2014 operated
as a two-month period for the Defendant to make up the remaining shortfall
obligations.46
Plaintiff also contends that the Contract is unambiguous and Defendant’s
repeated failures to meet the monthly minimum barrel requirements and pay any
shortfall obligations constitute a breach of contract and entitle Plaintiff to summary
judgment.47 Defendant, on the other hand, seeks summary judgment because
Plaintiff has failed to provide a proper witness to testify as to the damages it claims.48
The Court will first address the written contract provisions and determine when the
Contract terminated It will then turn to the alleged oral modification and the issue
regarding a damage expert.
A. The Contract
The elements of a breach of contract claim are: (1) the existence of a contract;
(2) the breach of an obligation imposed by that contract; and (3) resulting damages49
When interpreting a contract, the Court will give effect to all provisions contained
43 Def.’s Answering Br. Opp’n to Pl.’s Mot. Summ. J. at 6.
461d
47 Pl.’s Reply to Def.’s Answ. Resp. Pl’s Mot. Summ. J. at 5.
48 Def.’s Mot. Summ. J. at 33.
49 See VLIW T€C//l., LLC, 840 A.2d at 612.
12
in the contract’s four corners50 The Court must discern the parties’ intent based on
the parties’ words and the plain and ordinary meaning of those words.31 In doing so,
the Court measures the intent based on what a reasonable person in the same or
similar circumstances of the parties would have thought the contract language
means32
“The proper construction of any contract. . .is purely a question of law.”53 lf
the contract terms are ambiguous, the Court may consider extrinsic evidence.34 lf the
contract terms are unambiguous, the Court must interpret the disputed term(s) using
only the contract itself. The Court will not find a contract term or phrase to be
ambiguous “merely because the parties dispute its proper construction.”33
In fact, if the issue before the Court is simply conflicting interpretations of a
contract, and “one interpretation better comports with the remaining contents of the
document or gives effect to all the words in dispute[.] [T]he court may, as a matter
of law and without resorting to extrinsic evidence, resolve the meaning of the
disputed term in favor of the superior interpretation.”36
30 GMG Capz'tal lnvestments, LLC v. Athenian Vem‘ure Partners 1, L.P., 36 A.3d 776, 779 (Del.
2012).
31 Lorillara’ Tobacco C0. v. Amer. Legacy Foundation, 903 A.2d 728, 739 (Del. 2006).
32 Rhone-Poulenc, 616 A.2d at 1195~96.
33 Ia’. at 1195.
34 Smartmatz'c Im"l Corp. v. Dominz``on Votl``ng Sys. Im"l Corp., 2013 WL 1821608, at *4 (Del. Ch.
2013).
33 Charlol'te Broadcasting, LLC v. Davz``s Broadcastz'ng of Atlanta, L.L.C., 2015 WL 3863245, at
*3 (Del. Super. Ct. 2015).
36 Wills v. Morrl``s, James, Hitchens & Williams, 1998 WL 842325, at *2 (Del. Ch. 1998).
13
The parties do not dispute, for purposes of the present motions, that the
elements of an existing contract are satisfied. Rather, they disagree as to how specific
terms of the Contract should be interpreted, and if a subsequent modification was
made.
Before addressing the issues raised by the parties, it is clear to the Court that
the documents provided reflect that the interest of an oilman and a trucker were more
critical and paramount to the drafting of those documents than ensuring that they
were legally sound. While a step up from an oral agreement and a handshake (which
appears later in this Opinion), these documents lack the clarity that should be
expected in such a relationship, particularly when it involves a corporation the size
and significance of Defendant. That said, the Court first finds that the Contract is
not so ambiguous to require resorting to extrinsic evidence. The Court is able to
read the Term Agreement and the Master Agreement together and reach reasonable
conclusions as to the parties’ intentions set forth in those writings The fact that
these documents do not rise to a level that the Court would expect is not fatal to the
Court’s interpretation
While there is a dispute regarding the parties’ obligations in April and May
2014, there appears to be no dispute regarding Defendant’s failure to provide the
minimum monthly barrel requirements in June, July, August, September, and
14
December of 2013 and February, and March of 2014.37 Some accounting issues for
these time periods may remain but it is clear that Defendant did not meet its
obligations under the Contract for those months So the real issue here is what the
parties’ obligations were under the Contract in April and May of 2014. Plaintiff
asserts that the termination language in the Term Agreement is clear and required
Defendant to provide written 60-day notice before its obligation to provide the
monthly minimum barrels ended. Because Defendant sent termination notice on
March 31, 2014, Plaintiff argues that Defendant was obligated to provide 240,000
barrels in both April and May 2014.58 To support this continued obligation, Plaintiff
relies on the “Termination” provision and the “Volume/minimum” provision of
Appendix A of the Term Agreement.39 Plaintiff asserts that these provisions provide
the most specific language of termination and control over other general provisions
Specifically, Plaintiff contends the “Volume/minimum” provision creates an
indefinite obligation for Defendant to provide 240,000 barrels per month as of
June 1, 2013 as the provision has no specific end-date.60 Similarly, the
37 See Pl.’s Mot. Summ. J. at 14.
38 See Pl.’s Reply to Def.’s Answ. Resp. Pl’s Mot. Summ. J. at 5.
39 “Term of Agreement: 1 Year agreement with a start date of April 1, 2013. Both parties agree
to review terms 60 days prior to expiration date and review pricing and volumes lf both parties
agree on terms and volumes, this Agreement Will be renewed with the agreed upon start dalte
and term of agreement
Termination: Termination of the Agreement by either party must be given at least 60 days prior
to the expiration of the Agreement in writing.” Pl.’s Ex. A-2 at CITGO 002494-96.
60 Ia'. at CITGO 002496.
15
“Termination” provision does not include a specific end-date, instead termination
requires a party to provide 60 days’ written notice prior to the expiration of the
Agreement.61 Plaintiff argues, this continued obligated coupled with the 60 days’
written notice, requires the Defendant to provide minimum barrel requirements
“until the Master Agreement [] expired [in December 2014] or was terminated
[sooner by 60 days written notice].”62 Further, Plaintiff argues that both parties
understood this reading of the Term Agreement and provides a CITGO internal
email that acknowledges such understanding:
the contract actually states that we have to give 60 days[’] notice prior
to the EXPIRATION (CITGO’s emphasis) of the contract. The contract
expires on April 1, 2014. So, even with 60 days[’] notice we are
committed to the contract till at least April 1, 2014.63
Defendant, in response to Plaintiff s Motion for Summary Judgment, presents
a different understanding of the Term Agreement. Defendant relies on the “Term of
Agreement” provision to assert that the Term Agreement began on April 1, 2013,
and expired on March 31, 2014, along with Defendant’s monthly minimum
obligations.64 ln order for the Term Agreement to continue past March 316t, the
“Term of Agreement” provision required “both parties [to first] agree on terms and
volumes, [and then the Term Agreement] [] will be renewed with the agreed upon
61 Id
62 Pl.’s Reply to Def.’s Answ. Resp. Pl’s Mot. Summ. J. at 5.
63 Pl.’s Ex. A-4 at chGo 000593_96.
64 Def.’s Answering Br. Opp’n to Pl.’s Mot. Summ. J. at 6.
16
Start date and term of [the] agreement.”65 Defendant argues this language on how to
extend the Term Agreement is more specific than the language in the “Termination”
provision which simply implements a notice requirement. As such, since the parties
never came to an agreement regarding terms and volumes nor did they have an
agreed upon new start date, the Term Agreement was not renewed.66 Defendant
contends that the remaining two months in 2014 were therefore only governed by
the Master Agreement and were designed for Defendant to handle the remaining
shortfall barrels.67 The Court will first review the consequences to the parties of
their initial contractual agreement.
As discussed above, in January of 2013 the parties executed the Master
Agreement which set forth a general understanding that Plaintiff would provide
trucking services for Defendant and Defendant would utilize those services to
transport its petroleum products To the Court the Master Agreement appears to be
no more than a formal engagement letter, which set forth the basic requirements for
insurance, liability, and some invoicing procedures lt was not intended to set forth
the parameters of the specific services and obligations of the parties As a result, the
Master Agreement was silent on pricing, any agreed upon monthly minimum barrel
requirements, and any guarantees for either party regarding trucking services or
63 Pl.’s Ex. A-z ar CiTGo 002494.
66 Def.’s Answering Br. Opp’n to Pl.’s l\/Iot. Summ. J. at 6.
67 See ia’.
17
providing petroleum products to transport. The Master Agreement was to be
effective until December 31, 2014 unless terminated by either party with 60 days’
written notice.
Subsequently on March 18, 2013, the parties entered into the Term Agreement
that for the first time established agreed-upon pricing and the Defendant’s guarantee
to provide a minimum number of barrels per month for Plaintiff to transport. The
Term Agreement had an effective date of April 1, 2013 and was for a period of one
year with no guaranteed renewal period beyond March 31, 2014.68 To avoid any
disputes with the Master Agreement, the Term Agreement specifically reflected that
any inconsistency between the Master Agreement and the Term Agreement would
be controlled by the Term Agreement.69
Based upon these contractual documents the Court finds Plaintiff and
Defendant had a one-year agreement from April 1, 2013 to March 31, 2014 for
Plaintiff to provide transportation Services for a guaranteed minimum amount of
petroleum products which Defendant was obligated to provide. However, if there
was no agreement to modify the Term Agreement before March 31, 2014, the Term
Agreement by its own terms expired. Therefore, the Court finds that as of
March 31, 2014, CITG() had no obligation to supply petroleum products to Plaintiff
68 Pl.’s Ex. A-2 at CITGO 002494 (stating that the Term Agreement will only be renewed if both
parties can agree on new terms and volumes).
69 Pl.’s Ex. A-2 at CITGO 002493.
18
nor did Plaintiff have any obligation to provide transportation for those products
The Court finds the Plaintiffs 60-day notice argument from the “Termination”
provision of the Term Agreement is simply unprevailing. Once the one-year term
ended, so did any obligation under the Term Agreement. ln this case, neither party
“terminated” the Term Agreement, it simply ended by its own terms
As such, if there was no other agreement between the parties, all monthly
minimum barrel requirements ended on March 31, 2014 and ClTGO would only be
liable for the minimums it failed to meet during the one-year term. The Court agrees
that while the Term Agreement ended on March 31, 2014, the Master Agreement
would have continued until December 2014 if no notice of termination was given.
However, that agreement placed no obligation on the parties to use each other’s
services because it was merely a formal engagement document with no enforcement
provision. Therefore, the Court finds the Term Agreement had expired on March 31,
2014, and at most, the 60 days’ notice provided by ClTGO, that same day, only
related to its continued relationship under the Master Agreement. Again, since there
was no pricing or minimum set forth in the l\/laster Agreement, Defendant was under
no obligation to meet monthly minimum barrel requirements in April or May of 20 l 4
pursuant to that document.
Unfortunately, this does not end the dispute. Because ClTGO continually
failed to meet the minimum barrel requirements set forth in the Term Agreement. lt
19
appears this caused the parties to orally agree to a continuation of the relationship
for an additional two months As such, the Court must now determine what was
agreed to by the parties
The only legal basis for Plaintiff arguing that Defendant had a continuing
obligation in April and May of 2014 to continue to meet the minimum requirements
was its interpretation of the Term Agreement and the 60-day notice language in the
“Termination” provision. As mentioned previously, Plaintiff asserted that since the
60-day notice was not given until March 31, 2014, the minimum obligation set forth
in the Term Agreement continued into April and May. Unfortunately for Plaintiff,
that interpretation of the Term Agreement has been rejected by the Court. Since the
Court has held the end of the Term Agreement to be March 31, 2014, all that remains
is an undisputed agreement between the parties that during the months of April and
May of 2014, CITGO would make up the shortage during these months either by
providing petroleum products for Plaintiff to transport or monetarily making up the
difference. There is ample correspondence between the parties to demonstrate a
willingness and a mutual assent to move the 2013 shortages to the end of the Term
Agreement.70 lt is equally clear Plaintiff’s willingness to do so was motivated by its
70 See e.g., Pl.’s Ex. A-14 at CITGO 001860 (showing Defendant’s understanding that
outstanding shortfalls be pushed to end of contract); see also Pl.’s Ex. A-52 at ClTGO 001447;
see Flinn Dep. 176:1-25, Jan. 27, 2016 (stating parties intended outstanding shortfalls to be
pushed to end of contract).
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hope that this would lead to an extension of its business relationship with ClTGO.71
Defendant benefitted by being able to meet its shortfall obligations by shipping
petroleum products instead of making a monetary payment. While this arrangement
did not work out as expected by Plaintiff, it was able to continue to use its trucks and
drivers at full operation for an additional two-month period72 The parties agree this
was a binding agreed-upon obligation, so there is no need for the Court to explore
whether it met the legal standard for an oral contract.73 As such, to the extent there
are any matters remaining to litigate, the Court believes they are limited to the extent
of the shortages and what monetary payments have been made to compensate
Plaintiff for them. There is no longer a need for a damage expert as asserted by
Defendant, the issue of whether Plaintiff has appropriately mitigated those damages
disappears and the case has been reduced to a simple accounting exercise. As such,
this is a matter the parties should now easily resolve without further litigation.
The Court appreciates that this decision may be a particularly bitter pill for
Plaintiff to swallow. ClTGO failed to provide the petroleum products required under
the Contract, and it also failed to timely pay Plaintiff for outstanding shortfalls ln
response, Plaintiff attempted to accommodate the Defendant to obtain favorable
71 See Def.’s Ex. 49 at ClTGO 002179 (showing Plaintiffs desire to keep Defendant’s business
despite shortfalls).
72 Michael Barret Dep. 22:10-23:15, Feb. 27, 2016.
73 lf the Court had to, it would have found there was sufficient consideration for an oral
agreement
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status as its main hauling company. lnstead of acknowledging Plaintiff s goodwill
and continuing with the relationship, ClTGO pulled out of the Contract. While this
is all true, in reality Sunline is getting exactly what it contracted for. lf Plaintiff
thought there was another agreement, Plaintiff should have documented it. Because
it did not, Plaintiff must live with the consequences of that conduct.
lt is, however, also important for Plaintiff to appreciate it would have been
extremely difficult to convince a jury that having failed seven months out of the
twelve-month agreement to meet the minimum barrel requirements ClTGO would
actually agree to continue that same pattern for another two months or longer with
the shortage barrels added on top of the minimum. That is simply unrealistic and
would have been an incredibly poor business decision.
That said, the Court also suggests it is time for CITGO to live up to its
obligation and pay Sunline for the shortages This is not only ethically the right
thing to do, but it is a wise business decision. Defendant’s performance under this
contract was atrocious and reflected a total lack of corporate responsibility, and it is
time for it to end this litigation.
IV. CONCLUSION
While the Court has not ruled in a manner that provides all the relief requested
by Plaintiff, it has found Defendant has breached the Contract and Plaintiff is entitled
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to summary judgment as to the shortfalls unmet by the Contract. As such, Plaintiffs
Motion is GRANTED IN PART. To the extent Defendant’s Motion for Summary
Judgment asserts that Plaintiff s Complaint should be dismissed due to the lack of
an expert on damages the Motion has been mooted by the Court’s decision and is
therefore DENIED.
lT lS SO ORDERED.
’.|``udge William C. Carpenter:``jr.
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