ConocoPhillips Alaska, Inc. v. Williams Alaska Petroleum, Inc.

Notice: This opinion is subject to correction before publication in the P ACIFIC R EPORTER .
Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email
corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
CONOCOPHILLIPS ALASKA, INC., )
) Supreme Court Nos. S-14654/14674/14953
Appellant and ) (Consolidated)
Cross-Appellee, )
v. ) Superior Court No. 3AN-08-08998 CI
)
WILLIAMS ALASKA ) OPINION
PETROLEUM, INC., )
) No. 6874 – March 14, 2014
Appellee and )
Cross-Appellant. )
)
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Anchorage, John Suddock, Judge.
Appearances: Spencer C. Sneed and Katherine Demarest,
Dorsey & Whitney, LLP, Anchorage, for Appellant/Cross-
Appellee. Paul L. Davis, K&L Gates, LLP, Anchorage, and
Randolph L. Jones, Jr., Conner & Winters, LLP, Dallas,
Texas, for Appellee/Cross-Appellant.
Before: Fabe, Chief Justice, Winfree, Stowers, Maassen, and
Bolger, Justices.
FABE, Chief Justice.
I. INTRODUCTION
Williams Alaska Petroleum owned and operated a refinery, which
ConocoPhillips Alaska supplied with crude oil pursuant to an Exchange Agreement.
ConocoPhillips demanded that Williams tender a payment of $31 million as adequate
assurances of Williams’s ability to perform if an ongoing administrative rate-making
process resulted in a large retroactive increase in payments that Williams would owe
ConocoPhillips under the Exchange Agreement. ConocoPhillips offered to credit
Williams with a certain rate of interest on that principal payment against a future
retroactive invoice. Williams transferred the principal of $31 million but demanded,
among other terms, credit corresponding to a higher rate of interest. Williams stated that
acceptance and retention of the funds would constitute acceptance of all of its terms.
ConocoPhillips received and retained the funds, rejecting only one particular term in
Williams’s latest offer but remaining silent as to which rate of interest would apply.
Years later, after the conclusion of the regulatory process, ConocoPhillips invoiced
Williams retroactively pursuant to the Exchange Agreement. ConocoPhillips credited
Williams for the $31 million principal already paid as well as $5 million in interest on
that principal calculated using the lower of the two interest rates. Williams sued
ConocoPhillips, arguing that a contract had been formed for the higher rate of interest
and that it was therefore owed a credit for $10 million in interest on the $31 million
principal.
On cross-motions for summary judgment, the superior court initially ruled
for Williams, concluding that a contract for the higher rate of interest had formed under
the Uniform Commercial Code (UCC) § 2-207(1) when ConocoPhillips retained the $31
million while rejecting one offered term but voicing no objection to Williams’s specified
interest term. On a motion for reconsideration, the superior court again ruled for
Williams, this time determining that a contract for the higher rate of interest had formed
based on the behavior of the parties after negotiation under UCC § 2-207(3), or, in the
alternative, that Williams was entitled to a credit for a different, third rate of interest in
-2- 6874
quantum meruit. The superior court also ruled in favor of Williams on all issues related
to attorney’s fees and court costs.
ConocoPhillips and Williams both appeal. We conclude that the superior
court was right the first time and that the parties entered into a contract for the higher rate
of interest under UCC § 2-207(1). Thus, it was incorrect for the superior court to rescind
its initial summary judgment order as improvidently granted. Accordingly, we do not
reach the UCC § 2-207(3) or quantum meruit holdings of the superior court’s order on
reconsideration. Finally, we affirm all of the superior court’s actions with regard to
attorney’s fees and court costs.
II. FACTS AND PROCEEDINGS
A. Facts
1. The parties and the contract
In December 1999, BP Oil Supply Company and Williams Energy
Marketing & Trading Company entered into a contract for the sale of crude oil, called
an Exchange Agreement. Within months, the rights and duties of the original parties to
this Exchange Agreement were assigned to the parties to the present case:
ConocoPhillips and Williams.
Under the Exchange Agreement, ConocoPhillips would provide Williams’s
refinery at North Pole with crude oil from the Trans-Alaska Pipeline System. Williams
would extract valuable components from the crude oil and provide an equal volume of
lower-quality crude back to ConocoPhillips, and ConocoPhillips would then return the
crude oil to the pipeline. The Trans-Alaska Pipeline System operates a “Quality Bank,”
which compensates all pipeline shippers for the degradation in the average quality of
crude in the pipeline downstream caused by tender of less-valuable crude upstream. The
Quality Bank Administrator assesses “degradation charges” to shippers tendering
comparatively lower-value crude to the pipeline based on a quality pricing scheme set
-3- 6874
by the Federal Energy Regulatory Commission (FERC) and the Regulatory Commission
of Alaska (RCA). ConocoPhillips, as the shipper tendering lower-quality crude back into
the pipeline, would be assessed degradation charges by the Administrator. The
Exchange Agreement’s pricing provision, on top of a flat per-barrel fee, required
Williams to reimburse ConocoPhillips for such degradation charges, including any
retroactive adjustments resulting from new FERC regulations.
The Exchange Agreement contained two additional provisions relevant to
this case. First, an adequate-assurances clause specified that when one party “has
reasonable grounds for insecurity,” that party may demand “adequate security for, or
assurances of [the other party’s] ability to perform, all of its obligations under the
Agreement.” If adequate security or assurances were not forthcoming within 48 hours,
the demanding party would “have the right to liquidate the Agreement” and cease
performance of its other obligations under the Exchange Agreement. Second, a signed-
writing clause specified that “[n]o changes, alterations, or modifications . . . of the
Agreement shall be effective unless agreed to in writing by an authorized representative
of the Parties.”
2. The dispute
In 2002, ConocoPhillips believed that it had reasonable grounds for
insecurity. The FERC and the RCA initiated a regulatory rate-making process that could
result in a retroactive increase in Quality Bank degradation charges to ConocoPhillips
for its tender of lower-quality crude back into the pipeline. Under the pricing provision
of the Exchange Agreement requiring reimbursement for retroactive degradation charges,
Williams could owe ConocoPhillips substantial sums of money, the precise amount of
which would depend on the agencies’ promulgation of a revised pricing scheme, perhaps
years in the future. ConocoPhillips, believing Williams and its parent company to be in
a precarious financial position, doubted Williams’s ability to pay a large, retroactively
-4- 6874
assessed charge in the future. Invoking the adequate-assurances provision of the
Exchange Agreement, ConocoPhillips sent Williams an initial demand letter on
October 4 stating its position that Williams “now owes” $31,268,645 in “Quality Bank
adjustments to the price of oil” already exchanged over the prior two years under the
contract. ConocoPhillips proposed a range of options for providing adequate financial
assurances: a cash payment, a trust with ConocoPhillips as beneficiary, a letter of credit,
or a senior security interest in Williams’s property. This letter did not mention whether
or at what rate ConocoPhillips would credit Williams for interest on any such assurance
payment or security.
Following a series of telephone calls, Williams sent ConocoPhillips a letter
on October 8. Williams disputed that it was in financial peril or that ConocoPhillips had
reasonable grounds for insecurity. Williams also stated its view that potential future
Quality Bank adjustments “are not currently due,” as ConocoPhillips would have it, but
rather “may become due in the future upon resolution of the Quality Bank proceedings.”
Nonetheless, fearing the harm that would come from ConocoPhillips halting the flow of
crude, Williams offered to settle the dispute in a package deal that included, among other
terms, wire transfer of $29.01 million to ConocoPhillips. This principal, plus interest
that would accrue on the principal “calculated at the LIBOR six-month rate,”1 would be
“held by ConocoPhillips for Williams’[s] account” pending a resolution in the rate-
making case, at which point “the advance payments to ConocoPhillips, including all
interest thereon, will be applied toward any Quality Bank Amounts so determined to be
due from Williams.” On October 11, ConocoPhillips responded, saying it might be
willing to meet some of Williams’s conditions for settlement but demanding a payment
1
LIBOR, or the London Interbank Offered Rate, is the interest rate that large
London banks charge each other for short-term loans.
-5- 6874
of $35,245,181. The letter made no mention of Williams receiving credit for interest on
that sum in the future. In a follow-up letter dated October 17, ConocoPhillips proposed
that Williams pay $35,245,181 “as a partial preliminary settlement payment” of any
retroactively assessed Quality Bank degradation charges. For the first time,
ConocoPhillips offered to credit Williams for interest earned on the principal at the
LIBOR rate.
On October 18, Williams wired $31,268,645 to ConocoPhillips. Later that
day, Williams sent ConocoPhillips a letter stating that the money was intended to
“avoid[] litigation and resolv[e] the disputes” over retroactive price modifications under
the Exchange Agreement. Williams specified that “ConocoPhillips’[s] receipt and
retention of the $31,268,645 . . . shall constitute ConocoPhillips’[s] agreement with the
terms set forth in . . . this letter.” The letter’s terms included three substantive
provisions: (1) that the “full principal amount” already wired to ConocoPhillips receive
interest at a “rate prescribed by FERC”2 and that the principal and interest would be held
by ConocoPhillips for Williams’s account and later be credited toward any final
retroactive assessments; (2) that ConocoPhillips agree to “continue good faith efforts”
in “vigorous support” of a preexisting joint-negotiating agreement that would present a
united front in the FERC rate-making case; and (3) that the parties agree to keep the
agreement “in strictest confidence.”
On October 29, ConocoPhillips responded, acknowledging that it had
“received and retained the Payment as a preliminary partial settlement,” using language
mirroring Williams’s specification of the mode of acceptance of the terms in its
October 18 letter. ConocoPhillips stated that it “does not agree with all of the terms
2
The parties expected the FERC to impose interest on any retrospectively
assessed degradation charges. The FERC rate imposed by regulation was expected to
be substantially higher than the LIBOR rate.
-6- 6874
stated in [Williams’s October 18 letter]” and “also do[es] not believe it would prove
productive to conduct a letter writing campaign as to what the Payment represents or
specific terms and conditions associated with the Payment.” ConocoPhillips did object
to one term in particular. It noted that it would voluntarily continue to support the joint-
negotiating efforts in front of the FERC under the terms of the preexisting agreement on
the issue, but it denied “[any] linkage whatsoever between ConocoPhillips[’s] right to
adequate assurance under the Agreement and ConocoPhillips’[s] performance with
respect to” the independent joint-negotiating agreement. ConocoPhillips did not address
the issue of whether or at what rate the cash payment would accrue interest.
After ConocoPhillips’s October 29 letter, there was no further
communication between the parties about the principal payment or accrual of interest
until the FERC rate-making case finally came to a close in July 2007. In August 2007,
ConocoPhillips invoiced Williams for reimbursement of the retroactively assessed
Quality Bank degradation charges amounting to over $167 million, giving Williams
credit for the $31 million prepayment as well as accrued interest at the LIBOR rate
amounting to an additional $5 million, yielding a final billed amount of $131 million.
Williams paid ConocoPhillips about $5 million less than the invoiced amount, claiming
it deserved credit on the $31 million prepayment at the (higher) FERC interest rate which
would amount to a $10 million interest credit. ConocoPhillips responded by revising its
invoice to give no credit for any interest on the $31 million prepayment, claiming that
no agreement had been reached on the issue.
-7- 6874
B. Judicial Proceedings And The Superior Court’s Holdings
Litigation ensued,3 and in 2009 both parties moved for summary judgment
on the effect of the October 2002 correspondence with respect to interest credits. Both
parties agreed that “no issues of material fact prevent[ed] summary resolution of that
issue.” The superior court applied Ohio’s substantive contract law pursuant to the
Exchange Agreement’s choice-of-law provision and found that there was no conflict
with Alaska law because both states had adopted the Uniform Commercial Code.
The superior court granted summary judgment to Williams. The superior
court concluded that under the Uniform Commercial Code §§ 2-207(1) & (2)4 the
3
In September 2007, the parties entered into a Quality Bank Interest Dispute
Resolution Agreement in which the parties agreed to “jointly file for a Declaratory
Judgment Order” and to limit discovery and briefing. As relevant to the attorney’s fee
dispute in this case, the parties also agreed that “[t]he prevailing Party in the Declaratory
Judgment proceeding shall be entitled to recover reasonable attorney fees and court
costs” to be “paid within twenty (20) days after receipt of an invoice for such costs
containing documentation reasonably supporting the amounts.”
4
Sections 2-207(1) & (2) of the Uniform Commercial Code, codified and
slightly amended at Ohio Rev. Code Ann. § 1302.10(A) & (B) (West 2013), state:
(1) A definite and seasonable expression of acceptance or
a written confirmation which is sent within a reasonable time
operates as an acceptance even though it states terms
additional to or different from those offered or agreed upon,
unless acceptance is expressly made conditional on assent to
the additional or different terms.
(2) The additional terms are to be construed as proposals
for addition to the contract. Between merchants such terms
become part of the contract unless:
(a) the offer expressly limits acceptance to the
terms of the offer;
(continued...)
-8- 6874
October 18 and October 29 letters modified the Exchange Agreement and that the
resulting contract required ConocoPhillips to credit Williams with interest on the
prepayment at the higher FERC interest rate proposed by Williams in its October 18
letter. ConocoPhillips’s October 29 reply letter constituted a “definite and seasonable
expression of acceptance” of Williams’s October 18 offer. Because ConocoPhillips
acknowledged receipt and retention of the $31 million prepayment, mirroring the
conditions of acceptance in Williams’s October 18 offer, and explicitly objected to only
one term of the offer, while remaining silent as to interest and otherwise just hinting at
unspecified additional quibbles, the court found that ConocoPhillips “grudgingly but
definitively assented” to Williams’s reasonable proposal of FERC interest.
Neither party had briefed the application of UCC § 2-207. ConocoPhillips
moved for reconsideration, and the superior court ordered further briefing. The superior
court concluded that it “improvidently granted summary judgment that a contract was
formed pursuant to [UCC § 2-207(1)]” because ConocoPhillips’s “express rejection of
Williams’s joint-negotiating provision” renders disputable the material factual inference
that ConocoPhillips’s letter of October 29, 2002 was a definite and seasonable
expression of acceptance. Nevertheless, the court again granted summary judgment for
Williams, this time concluding that the parties’ behavior after October 2002 created an
implied-in-fact contract under UCC § 2-207(3)5 and that one of the terms of that contract
4
(...continued)
(b) they materially alter it; or
(c) notification of objection to them has already
been given or is given within a reasonable time after notice of
them is received.
5
Section 2-207(3) of the UCC, codified and slightly amended at Ohio Rev.
Code Ann. § 1302.10(C) (West 2013), states:
(continued...)
-9- 6874
was the FERC interest that Williams had proposed on October 18 and ConocoPhillips
had objectively accepted on October 29. In the alternative, the superior court held that,
if this court were to reverse summary judgment as to contract formation, Williams would
be entitled to recovery in quantum meruit for the benefit to ConocoPhillips of the time-
value of the $31 million prepayment, measured by the average market rate for
commercial paper during the relevant period.
The superior court granted Williams’s motion to enlarge time to file a
motion for attorney’s fees and subsequently granted Williams full attorney’s fees and
court costs as the prevailing party under the Dispute Resolution Agreement between
Williams and ConocoPhillips.
C. Arguments On Appeal
Both parties appeal. ConocoPhillips seeks reversal of summary judgment
and entry of summary judgment in its own favor on a theory that no contract was formed
for any interest rate. It also argues that no interest should be paid to Williams under a
theory of quasi-contract or quantum meruit. Williams seeks reversal of the superior
court’s order on reconsideration rescinding the initial summary judgment order as
improvidently granted, arguing that a contract was formed under UCC §§ 2-207(1) & (2)
as the superior court originally held. Williams also seeks reversal of the superior court’s
5
(...continued)
(3) Conduct by both parties which recognizes the
existence of a contract is sufficient to establish a contract for
sale although the writings of the parties do not otherwise
establish a contract. In such case the terms of the particular
contract consist of those terms on which the writings of the
parties agree, together with any supplementary terms
incorporated under any other provisions of this Act.
-10- 6874
alternative quantum meruit holding, arguing that it should receive FERC interest rather
than commercial-paper interest awarded in quantum meruit.
As to attorney’s fees and court costs, ConocoPhillips argues that the
superior court abused its discretion by granting Williams’s motion to enlarge time to file
a motion for attorney’s fees, by enlarging Williams’s time to file a cost bill with the
Clerk of Court, and by granting full attorney’s fees and costs without reducing the award
for various reasons.
III. STANDARD OF REVIEW
We review rulings on motions for summary judgment de novo, “reading the
record in the light most favorable to the non-moving party and making all reasonable
inferences in its favor.”6 A party is entitled to summary judgment only if there is no
genuine issue of material fact and if the party is entitled to judgment as a matter of law.7
“A genuine issue of material fact exists where reasonable jurors could disagree on the
resolution of a factual issue.”8 “Whether the evidence presented a genuine issue of
material fact is a question of law that we independently review.”9 Determinations of
which legal authorities apply in a case10 and interpretations of what those legal
6
Witt v. State, Dep’t of Corr., 75 P.3d 1030, 1033 (Alaska 2003). The same
standard applies to orders granting, denying, and reconsidering summary judgment, all
of which are presented on appeal in this case.
7
Zeman v. Lufthansa German Airlines, 699 P.2d 1274, 1280 (Alaska 1985).
8
Kalenka v. Jadon, Inc., 305 P.3d 346, 349 (Alaska 2013) (quoting Burnett
v. Covell, 191 P.3d 985, 990 (Alaska 2008)).
9
Id.
10
Cf. L.D.G., Inc. v. Brown, 211 P.3d 1110, 1118 (Alaska 2009) (“Where ‘the
admissibility of evidence turns on whether the trial court applied the correct legal
(continued...)
-11- 6874
authorities mean11 are questions of law subject to de novo review. Contract
interpretation is a question of law subject to de novo review.12 When applying the de
novo standard of review, we apply our “independent judgment to questions of law,
adopting the rule of law most persuasive in light of precedent, reason, and policy.”13
IV. DISCUSSION
A. UCC § 2-207 Applies To This Case To Determine Whether An
Original Contract For Sale Of Oil Has Been Modified, And The
Additional Requirements Of § 2-209 Regarding Modification Have
Been Satisfied Or Waived.
The parties vigorously dispute which article and sections of the UCC
govern this case. We conclude that the superior court correctly held that Article 2 of the
UCC and § 2-207 apply to this case, notwithstanding ConocoPhillips’s arguments that
Article 9 or § 2-209 should govern to the exclusion of § 2-207.
1. Article 2 of the UCC, rather than Article 9, applies to this case.
ConocoPhillips and Williams disagree as to which article of the UCC
applies in this case: Article 2, which governs “transactions in goods” but not “any
10
(...continued)
standard, we review the [lower] court’s decision using our independent legal
judgment.’ ” (quoting Marsingill v. O’Malley, 128 P.3d 151, 155-56 (Alaska 2006))).
11
Cf. id. (“Issues regarding the constitutionality of statutes are questions of
law that we review de novo. We review the interpretation of a statute de novo . . . .”
(citing Alaskans For Efficient Gov’t, Inc. v. Knowles, 91 P.3d 273, 275 (Alaska 2004);
State v. Alaska Civil Liberties Union, 978 P.2d 597, 603 (Alaska 1999))).
12
Villars v. Villars, 277 P.3d 763, 768 (Alaska 2012) (citing Burns v. Burns,
157 P.3d 1037, 1039 (Alaska 2007)).
13
Russell ex rel. J.N. v. Virg-In, 258 P.3d 795, 802 (Alaska 2011) (quoting
Jacob v. State, Dep’t of Health & Soc. Servs., Office of Children’s Servs., 177 P.3d 1181,
1184 (Alaska 2008)) (internal quotation marks omitted).
-12- 6874
transaction . . . intended to operate only as a security transaction,” 14 or Article 9, which
governs transactions that “create[] a security interest in personal property or fixtures.”15
ConocoPhillips argues that Article 9 should apply because the parties intended to “create
an interest in the $31 million to secure Williams’[s] future payment obligations.”
Williams argues that Article 2 should apply because the parties’ correspondence in
October 2002 was a modification of the original Exchange Agreement for the sale of
goods and the $31 million was a prepayment of a future obligation under that contract.16
The superior court concluded that the $31 million was a prepayment as part
of a contract modifying the original Exchange Agreement for a sale of goods and was
thus covered by the provisions of Article 2. We agree.
First, the superior court concluded that the parties intended the $31 million
and subsequent agreement to constitute a “prepayment of an unliquidated account
payable” rather than a security transaction. We agree and conclude that there is no
genuine issue of material fact on this point. ConocoPhillips styled the payment as a
“preliminary partial settlement” in its letter of October 29. ConocoPhillips now argues
that it meant to indicate that the payment was a partial settlement of ConocoPhillips’s
14
O HIO REV . CODE A NN . § 1302.02 (West 2013) (codifying U.C.C. § 2-102).
15
Id. § 1309.109(A)(1) (codifying U.C.C. § 9-109).
16
The parties vigorously dispute this preliminary issue because of their
perception that Article 2 and Article 9 differ substantially in how they would apply to
this case. ConocoPhillips argues that Article 9 imposes no duty to give credit for interest
on cash collateral absent any actual interest earned and that any agreement for interest
would have to be established under traditional common law rules of offer and
acceptance. Williams seeks to benefit from the relaxed contract-formation provisions of
§ 2-207 to find a contract for FERC interest resulting from the October 2002
correspondence. Because we hold in favor of Williams under § 2-207(1), we do not
reach ConocoPhillips’s argument about the outcome of the case under Article 9.
-13- 6874
demands for an adequate security interest, but the record supports the superior court’s
contrary conclusion. The October 29 letter refers to the payment as a preliminary partial
settlement, not of ConocoPhillips’s demands for an adequate security interest, but rather
of a dispute over the pricing provision of the Exchange Agreement with respect to
retroactive Quality Bank adjustments.17 The course of negotiations provides further
support for this view. ConocoPhillips’s first demand letter argued that Williams “now
owes” ConocoPhillips $31 million under the Exchange Agreement’s pricing provision
due to forthcoming Quality Bank adjustments that would be made retroactive. Williams
disagreed, arguing in its letter of October 8 that the money was “not currently due” under
the contract. It was this dispute over when the retroactive assessment charges would
come due that the parties intended to settle with the wire transfer and subsequent
agreement. The superior court correctly interpreted the Exchange Agreement’s
adequate-assurances provision, not as providing a right to demand security interests, but
rather as “invit[ing] a negotiation between the parties regarding the nature and extent of
additional consideration for the [continued] sale of goods” with a “contemplated outcome
[of] a modification of the original sale contract such that the ground for insecurity be
abated or ameliorated.” ConocoPhillips treated the adequate-assurances provision
similarly in its initial demand letter of October 4 when it cited the adequate-assurances
provision and then laid out a number of options for settling the dispute going beyond
mere security interests, including making a cash payment, establishing a trust, providing
a letter of credit, and providing a security interest.
Second, as a matter of law, the Ohio courts have held that Article 2’s scope,
covering “transactions in goods,” encompasses far more than just the original contract
17
Five years later, ConocoPhillips continued to view the $31 million payment
as an “advance[],” at least in an internal email.
-14- 6874
for sale and also includes subsequent agreements to modify the original contract, such
as by establishing new payment schedules.18 Thus, we conclude that the superior court
correctly determined that, due to the parties’ intent to modify the original contract for the
sale of goods, Article 2 would apply to the question of contract formation in this case.
2. UCC § 2-207 applies to the contract modification in this case
alongside the additional requirements of § 2-209.
ConocoPhillips and Williams also disagree as to which specific sections of
Article 2 of the UCC, if any, should apply in this case: § 2-209 to the exclusion of
§ 2-207, or § 2-209 in addition to § 2-207? We conclude that the superior court
correctly held that § 2-209 should apply in addition to § 2-207, and we further conclude
that the superior court correctly determined that the additional requirements of § 2-209
have been satisfied in this case.
As relevant here, UCC § 2-209, titled “Modification, Rescission and
Waiver,” establishes several important rules governing modification of contracts within
the scope of Article 2 of the UCC. First, § 2-209(1) abrogates the common law and
specifies that “[a]n agreement modifying a contract within [Article 2 of the UCC] . . .
needs no consideration to be binding.”19 Second, § 2-209(2) establishes that “[a] signed
agreement which excludes modification or rescission except by a signed writing” is
enforceable and that the agreement “cannot be otherwise modified or rescinded.”20
18
See, e.g., May Co. v. Trusnik, 375 N.E.2d 72, 74-75 (Ohio App. 1977)
(holding that Article 2 governed an installment payment agreement modifying an original
sales contract for consumer goods after the buyer defaulted under the original payment
plan).
19
O HIO REV . CODE A NN . § 1302.12(A) (West 2013) (codifying U.C.C. § 2­
209(1)).
20
Id. § 1302.12(B) (codifying U.C.C. § 2-209(2)).
-15- 6874
Finally, § 2-209(4) states that even if an attempted modification “does not satisfy the
requirements of [subsection (2)] . . . it can operate as a waiver.”21
As discussed in greater detail in section IV.B below, UCC § 2-207, titled
“Additional Terms in Acceptance or Confirmation,” relaxes the common law mirror-
image rule, which held that a contract could be formed only if the acceptance was a
“mirror image” of the offer, replicating all of the terms of the offer without adding
conflicting or additional terms.22 Instead of requiring a mirror-image acceptance,
UCC § 2-207(1) permits contract formation whenever “[a] definite and seasonable
expression of acceptance . . . is sent within a reasonable time . . . even though it states
terms additional to or different from those offered or agreed upon, unless acceptance is
expressly made conditional on assent to the additional or different terms.”23
ConocoPhillips argues that, even if Article 2 of the UCC were to apply in
this case, UCC § 2-209 should govern to the exclusion of the lenient contract-formation
rules of § 2-207.24 ConocoPhillips reasons that § 2-207 addresses only initial contract
formation and that any subsequent modification must satisfy § 2-209. ConocoPhillips
21
Id. § 1302.12(D) (codifying U.C.C. § 2-209(4)).
22
RESTATEMENT (SECOND ) OF CONTRACTS § 59 (1981); 1 JAMES J. W HITE ,
ROBERT S. SUMMERS & ROBERT A. H ILLMAN , U NIFORM COMMERCIAL CODE § 2:9, at 79
(6th ed. 2012).
23
O HIO REV . CODE A NN . § 1302.10(A) (codifying U.C.C. § 2-207(1)).
24
Williams argues that ConocoPhillips failed to make this argument to the
superior court and thus should not be able to raise it for the first time in this court. But
a review of the record reveals that ConocoPhillips did argue to the superior court in its
motion for reconsideration that “UCC 2-209 preempts UCC 2-207” and styled its
arguments about UCC § 2-207’s application to this case in the alternative. Thus, the
superior court was premature in stating in its order on motion for reconsideration that
“Conoco and Williams now agree that UCC section 2-207 is applicable.” We conclude
that ConocoPhillips did not waive its § 2-209 argument.
-16- 6874
contends modifications governed by § 2-209 can gain no help from § 2-207’s limited
alterations of the common law because § 2-209 leaves untouched the common law
mirror-image rule for agreements modifying a contract.25
The superior court held that both § 2-209 and § 2-207 apply to the issue of
contract modification in this case, and we agree. Precedent indicates that under Ohio
law, § 2-207 applies to contract formation as well as subsequent contract modification.26
Nor is Ohio alone in this conclusion; many other jurisdictions agree.27 The text of
§ 2-209 supports this conclusion. It does not purport to supplant any other provisions
of Article 2; rather, it is best read as providing five additional rules that apply to
modifications of preexisting contracts, supplementing other applicable rules elsewhere
25
ConocoPhillips presses this point because, in its view, § 2-209 and common
law rules of acceptance would mean that “[e]ven if ConocoPhillips’[s] October 29 letter
had assented to all terms of Williams’[s] October 18 letter except the FERC interest term,
UCC § 2-209 would still require that the parties expressly assent to FERC interest.”
Because we hold that § 2-207 applies to the contract modification in this case, we do not
address what the outcome would be under common law rules of contract formation and
modification.
26
See Energy Mktg. Servs., Inc. v. Homer Laughlin China Co., 186 F.R.D.
369, 375 (S.D. Ohio 1999) (applying the substantive contract law of Ohio and analyzing
under UCC § 2-207 a non-mirroring acceptance of an offer to modify a preexisting
contract), aff’d, 229 F.3d 1151 (6th Cir. 2000).
27
See, e.g., Step-Saver Data Sys., Inc. v. Wyse Tech., 939 F.2d 91, 98 (3d Cir.
1991) (“In the absence of evidence demonstrating an express intent to adopt a writing
as a final expression of, or a modification to, an earlier agreement, we find UCC § 2-207
to provide the appropriate legal rules for determining whether such an intent can be
inferred from continuing with the contract after receiving a writing containing additional
or different terms.” (emphasis added)); U.S. Surgical Corp. v. Orris, Inc., 5 F. Supp. 2d
1201, 1206 (D. Kan. 1998) (same), aff’d sub nom. U.S. Surgical Corp. v. Lorris, Inc.,
185 F.3d 885 (Fed. Cir. 1999); Ariz. Retail Sys., Inc. v. Software Link, Inc., 831 F. Supp.
759, 764 (D. Ariz. 1993) (applying § 2-207 and § 2-209 to an attempted contract
modification).
-17- 6874
in the Code. Nothing in § 2-209 purports to restrict the application of § 2-207 to contract
modifications, nor does anything in § 2-207 indicate that its scope should be restricted
to initial contract formation to the exclusion of subsequent contract formations modifying
the initial contract. Therefore, we conclude that § 2-207 may apply alongside § 2-209
to modifications of a preexisting contract, at least under the facts presented in this case.28
28
ConocoPhillips cites no authority for the proposition that § 2-209 displaces
§ 2-207 and requires that all modifications of preexisting contracts satisfy the old
common law mirror-image rule. Those cases that ConocoPhillips does cite do not
address this issue but rather establish a distinct proposition: because all modifications
(like all contracts) require mutual assent, unilateral modification of a preexisting contract
is impossible and mere silence in the face of an offer to modify a contract is ineffective
to convey acceptance of the offered modification. See U.S. Surgical Corp., 5 F. Supp. 2d
at 1206 (when seller attached a label to the packaging of surgical equipment purporting
to limit the customer to a single use of the equipment the buyer had already purchased
pursuant to contract, no contract modification occurred simply by performing the original
agreement and opening the package); Ariz. Retail Sys., Inc., 831 F. Supp. at 764 (when
seller attached a shrink-wrap license to software packaging that buyer had already
contracted to purchase, merely opening the package and continuing to perform the
original contract did not function as a modification for lack of mutual assent); Wachter
Mgmt. Co. v. Dexter & Chaney, Inc., 144 P.3d 747, 752-55 (Kan. 2006) (same); Jones
v. Best, 950 P.2d 1, 5 (Wash. 1998) (when a realtor and seller of real property had a
preexisting contract for realty services, the realtor’s proposed modification to his
commission did not effect a modification because the seller’s silence to the proposal did
not manifest mutual assent); Alaska Pac. Trading Co. v. Eagon Forest Prods., Inc., 933
P.2d 417, 420 (Wash. App. 1997) (when seller sent a proposal for modification of
preexisting contract to buyer and buyer did not respond, no contract modification
occurred because modification requires mutual assent). These cases do not establish
what type of mutual assent is required to effectuate a contract modification — mirror-
image acceptance as under the common law or something less as permitted by § 2­
207(1). Accordingly, ConocoPhillips’s unsupported assertion that § 2-209 displaces § 2­
207 with regard to contract modification does not affect our conclusion to the contrary,
which is supported by the case law of Ohio and other jurisdictions as well as a
commonsense reading of the statute.
-18- 6874
3. The additional requirement of § 2-209(2) for a signed writing to
modify the Exchange Agreement was satisfied or waived.
ConocoPhillips argues that even if § 2-207 applies in this case, no
agreement could have been reached to modify the Exchange Agreement because the
negotiations in October 2002 did not comply with the signed-writing requirement of the
Exchange Contract as made enforceable by § 2-209(2). Section 2-209(2) states that “[a]
signed agreement which excludes modification or rescission except by a signed writing
cannot be otherwise modified or rescinded,”29 and the Exchange Agreement specifies
that “[n]o changes, alterations, or modifications . . . of the Agreement shall be effective
unless agreed to in writing by an authorized representative of the Parties.” The superior
court concluded that the signed-writing requirement was satisfied in this case because
“the parties communicated their offers by signed letters” or, in the alternative, because
ConocoPhillips’s actions in accepting and retaining the $31 million and behaving “as if
a contract had in fact been formed” constituted a waiver of the signed-writing
requirement as permitted by § 2-209(4).30 We agree.
ConocoPhillips argues that a signed writing within the meaning of § 2-209
must include express assent to all proposed terms and that ConocoPhillips never
explicitly agreed to FERC interest. But nothing in § 2-209 indicates that a signed writing
must include express assent to all proposals, and we have already concluded that
§ 2-209’s requirements are additions to other Article 2 rules such as those in § 2-207.
29
O HIO REV . CODE A NN . § 1302.12(B) (West 2013) (codifying U.C.C.
§ 2-209(2)).
30
Id. § 1302.12(D) (codifying U.C.C. § 2-209(4)) (“Although an attempt at
modification . . . does not satisfy the [signed-writing] requirement[] of [subsection (2)]
. . . it can operate as a waiver.”).
-19- 6874
The signed-writing requirement of § 2-209(2) is not a back-door route to reintroduce the
common law requirements that are modified by § 2-207.
ConocoPhillips also argues that its October 2002 correspondence could not
be found to waive the signed-writing clause, citing Saydell v. Geppetto’s Pizza & Ribs
Franchise Systems, Inc.31 But, as relevant here, that case indicates only that the delay of
a franchisee in requesting the return of his franchise fee from the franchisor will not be
held as a waiver of his right to recover the fee under the franchise contract at a later
date.32 Moreover, that case rests on the common law of contract rather than the UCC.33
We agree with ConocoPhillips that waiver under § 2-209(4) may be accomplished only
through affirmative statements or actions indicating intent to waive and not merely by
silence or inaction of ambiguous import, but we also agree with the superior court that
ConocoPhillips’s actions and statements in this case could be construed as a matter of
law only as indicating waiver of a signed-writing requirement. The following facts are
decisive on this matter: ConocoPhillips’s characterization of the payment as a
“preliminary partial settlement” of the dispute over the Exchange Agreement’s pricing
provision, ConocoPhillips’s use of the “received and retained” language mirroring the
mode of acceptance laid down in Williams’s offer, and the entire course of conduct
following these negotiations in which the parties indicated their belief that the deal was
done and that they could move on to other matters.
31
652 N.E.2d 218, 225-26 (Ohio App. 1994).
32
Id.
33
Id.
-20­ 6874
B. The Superior Court Did Not Err In Its Initial Grant of Summary
Judgment to Williams Under UCC § 2-207(1) And Should Not Have
Rescinded Its Order As Improvidently Granted.
At common law, a contract could be formed only if the acceptance were a
“mirror image” of the offer, replicating all of the terms of the offer without adding
conflicting or additional terms.34 Bowing to the “modern realities of commerce” in
which parties exchange non-mirroring writings and nonetheless proceed as if the deal is
done, the UCC abrogated the mirror-image rule and replaced it with the provisions of
UCC § 2-207.35 UCC § 2-207(1) permits contract formation whenever “[a] definite and
seasonable expression of acceptance . . . is sent within a reasonable time . . . even though
it states terms additional to or different from those offered or agreed upon, unless
acceptance is expressly made conditional on assent to the additional or different terms.”36
The purpose of UCC § 2-207(1) is to bring commercial practice and legal doctrine closer
together: “Under this Article . . . a proposed deal which in commercial understanding
has in fact been closed is recognized as a contract.”37
When a contract is formed under UCC § 2-207(1), the terms of that contract
generally include all of the offeror’s terms “which are not contradicted by the
34
RESTATEMENT (SECOND ) OF CONTRACTS § 59 (1981); 1 W HITE , SUMMERS
& H ILLMAN , supra note 22, § 2:9, at 79.
35
1 W HITE , SUMMERS & H ILLMAN , supra note 22, § 2:9, at 79. See also O HIO
REV . CODE A NN . § 1302.10 cmt. 1 (replicating U.C.C. § 2-207 cmt. 1) (indicating that
this section was “intended to deal with” a situation in which “the seller’s form contains
terms different from or additional to those set forth in the buyer’s form”); Idaho Power
Co. v. Westinghouse Elec. Corp., 596 F.2d 924, 926 (9th Cir. 1979) (“Section 207 . . .
rejects the ‘mirror image’ rule, and converts a common law counteroffer into an
acceptance even though it states additional or different terms.”).
36
O HIO REV . CODE A NN . § 1302.10(A) (West 2013).
37
Id. cmt. 2 (replicating U.C.C. § 2-207 cmt. 2).
-21- 6874
acceptance.”38 The “additional terms” found in the acceptance “are to be construed as
proposals for addition to the contract.”39 UCC § 2-207(2) governs the conditions under
which those proposals for additional terms become part of the contract: When the
contracting parties are merchants,40 “the terms become part of the contract unless one of
the following applies: (1) The offer expressly limits acceptance to the terms of the offer.
(2) They materially alter it. (3) Notification of objection to them has already been given
or is given within a reasonable time after notice of them is received.”41
The superior court initially granted Williams’s motion for summary
judgment on the grounds that ConocoPhillips’s letter of October 29 was a “definite and
seasonable expression of acceptance” of the offer contained in Williams’s letter of
October 18, within the meaning of UCC § 2-207(1), and that the contract that formed
included a term for FERC interest.42 On reconsideration, the superior court concluded
38
1 W HITE , SUMMERS & H ILLMAN , supra note 22, § 2:11, at 89; see also id.
at 89 n.1 (collecting cases).
39
O HIO REV . CODE A NN . § 1302.10(B) (codifying U.C.C. § 2-207(2)).
40
O HIO REV . CODE A NN . § 1302.01(A)(5) (codifying U.C.C. § 2-104(1))
(“ ‘Merchant’ means a person who deals in goods of the kind or otherwise by the
person’s occupation holds the person out as having knowledge or skill peculiar to the
practices or goods involved in the transaction . . . .”).
41
Id. § 1302.10(B) (codifying U.C.C. § 2-207(2)).
42
The superior court’s conclusion depended on six important facts, as
summarized in its order on motion for reconsideration:
1. Contrary to Conoco’s litigation position,
Conoco’s October 29 letter failed to state it was a rejection of
and counteroffer to Williams’s October 18 offer.
2. Conoco affirmatively indicated receipt and
(continued...)
-22- 6874
that “it should not have ruled summarily that Conoco’s letter of October 29, 2002 was
a ‘definite and seasonable expression of acceptance,’ given Conoco’s express rejection
of Williams’s joint-negotiating provision. The court’s characterization of Williams’s
term as non-material constitutes a disputable inference, which defeats summary
judgment.” We conclude that the superior court correctly granted summary judgment
to Williams on the grounds that ConocoPhillips’s letter of October 29 was a definite and
42
(...continued)
retention of the wire transfer, quoting Williams’s specified
means of acceptance.
3. Conoco stated that while it did not agree with all
of Williams’s proposed terms, no further negotiation was
necessary. It thereby reasonably communicated its
acceptance of all but the explicitly rejected joint-negotiation
provision in the Williams counteroffer.
4. Conoco explicitly stated that it “received and
retained the payment as a preliminary partial settlement” of
Williams’s contingent liability in the FERC proceeding. By
this rhetoric, Conoco suggested that the matter was settled.
This would only occur if Conoco accepted Williams’s
counteroffer.
5. Conoco stated no objection to Williams’s
interest provision. Conoco had previously proposed that the
payment would accrue interest in its initial offer on
October 17.
6. Conoco closed its letter by indicating
satisfaction with Williams’s proffered assurance and agreeing
to continue to honor the exchange agreement, thereby lifting
its threat to cease deliveries of crude oil to Williams’s
refinery. This language is inconsistent with a call for further
negotiation.
-23- 6874
seasonable expression of acceptance under § 2-207(1), and that its order on
reconsideration was an understandable error resulting from an overabundance of caution.
1. Under UCC § 2-207(1), ConocoPhillips’s reply letter of
October 29 was a definite and seasonable acceptance leading to
contract formation.
The superior court correctly held in its grant of summary judgment that
ConocoPhillips’s letter of October 29 43 was a “definite and seasonable expression of
acceptance” of the offer made in Williams’s letter of October 18, within the meaning of
UCC § 2-207(1). In that letter, ConocoPhillips acknowledged that it had “received and
retained the Payment as a preliminary partial settlement” of the disagreement over the
pricing provision of the oil exchange contract, mirroring the language Williams used in
its letter of October 18 specifying the mode of acceptance of its offer:
“ConocoPhillips’[s] receipt and retention of the [money] . . . shall constitute
ConocoPhillips’[s] agreement with the terms set forth in . . . this letter.” ConocoPhillips
did not state that its letter was a rejection of and counteroffer to Williams’s offer of
October 18 but rather indicated that the dispute over the pricing provision of the
Exchange Agreement was now settled and that no further negotiation was necessary to
close the deal. ConocoPhillips agreed to continue to honor the Exchange Agreement,
43
We note that ConocoPhillips also sent a reply email on October 18
following receipt of the wire transfer and Williams’s letter specifying the terms of the
offer, in which ConocoPhillips acknowledged receipt and concluded that it could “now
focus [its] efforts on getting [the FERC rate-making case] settled.” We do not reach the
issue of which reply led to contract formation under § 2-207(1): the email of October 18
or the subsequent letter of October 29. We follow the influential and persuasive
authority of other jurisdictions in deciding that “[w]e see no need to parse the parties’s
[sic] various actions to decide exactly when the parties formed a contract” under
§ 2-207(1). Step-Saver Data Sys., Inc. v. Wyse Tech., 939 F.2d 91, 98 (3d Cir. 1991).
Rather, the content of both documents informs the analysis and drives our conclusion
that a contract was formed under § 2-207(1).
-24- 6874
thus lifting the threat to halt crude oil deliveries and indicating satisfaction with
Williams’s assurance. Finally, ConocoPhillips closed the letter by indicating that the
matter was settled and the parties could move on with their regular business:
“ConocoPhillips looks forward to continuing to work with Williams under the parties’
various agreements.”44 All of these facts indicate that ConocoPhillips gave Williams a
definite and seasonable expression of acceptance of its offer of October 18.
Our conclusion is not altered by the fact that ConocoPhillips’s letter of
October 29 seemed to object to the joint-negotiating provision,45 as well as vaguely hint
that “ConocoPhillips does not agree with all of the terms stated in your letter.” The
44
That ConocoPhillips considered the matter settled as per the October 18
letter is further supported by an email sent from ConocoPhillips to Williams on
October 18: “We received your letter and our treasury guys just confirmed receipt of the
funds. We can now focus our efforts on getting [the] Quality Bank [rate-making case]
settled.”
45
For the purposes of this analysis, we assume arguendo that ConocoPhillips
actually rejected Williams’s joint-negotiating term. However, on this record, that is far
from certain. Williams had offered as a term in its letter of October 18 that
“ConocoPhillips agrees that it will continue good faith efforts to resolve all Quality Bank
issues through negotiated settlement and vigorous support of the Eight-Party Joint
Defense Position before FERC and the RCA.” In its reply letter of October 29,
ConocoPhillips stated that it “is continuing ‘good faith efforts to resolve all Quality Bank
issues through negotiated settlement and vigorous support for the Eight-Party Joint
Defense Position before FERC and the RCA,’ ” but it insisted that this obligation was
“[c]ompletely independent of the Payment” and that “[t]here is no linkage whatsoever”
between ConocoPhillips demanding adequate assurances and the joint-negotiating
position in the rate-making case. We note that the superior court concluded that
ConocoPhillips “rejected” the joint-negotiating term and are mindful of the need to make
all reasonable inferences in favor of the non-moving party when considering a grant of
summary judgment. Witt v. State, Dep’t of Corr., 75 P.3d 1030, 1033 (Alaska 2003).
But we note that if the best view of the facts were that ConocoPhillips did not reject the
joint-negotiating provision, our conclusion about contract formation under § 2-207(1)
would be even stronger.
-25- 6874
UCC makes clear that a “definite and seasonable expression of acceptance” results in
contract formation “even though it states terms additional to or different from those
offered.”46 Indeed, the entire purpose of UCC § 2-207(1) was to abrogate the common
law mirror-image rule and allow for non-mirroring acceptances to nonetheless result in
contract formation.47
To be sure, there is an outer limit to how much a return letter may differ
from an offer and still result in contract formation under § 2-207(1), and the contours of
that limit are not entirely clear from the Code, the case law, or treatises. UCC § 2-207(2)
presupposes that a return document can be an acceptance under § 2-207(1) even though
it includes additional terms that “materially alter[]” the offer,48 and a respected treatise
concludes that “it is clear that a document may be an acceptance . . . and yet differ
substantially from the offer.”49 A Court of Appeals in Ohio has held in Alliance Wall
Corp. v. Ampat Midwest Corp. that a return letter does not constitute an acceptance under
§ 2-207(1) “where the parties disagree as to ‘dickered for’ terms.”50 The court did not
46
O HIO REV . CODE A NN . § 1302.10(A) (codifying U.C.C. § 2-207(1)).
47
Id. § 1302.10 cmt. 1 (replicating U.C.C. § 2-207 cmt. 1) .
48
UCC § 2-207(2) governs when additional, non-mirroring terms from a
return letter constituting an acceptance under § 2-207(1) will become part of the contract
thus formed. UCC § 2-207(2)(b) indicates that, among merchants, non-mirroring terms
automatically become part of the contract unless those terms “materially alter” the
contract formed under § 2-207(1). See also 1 W HITE , SUMMERS & H ILLMAN , supra
note 22, § 2:10, at 83.
49
1 W HITE , SUMMERS & H ILLMAN , supra note 22, § 2:10, at 83 (emphasis
added).
50
477 N.E.2d 1206, 1211 (Ohio App. 1984). See also 1 W HITE , SUMMERS
& H ILLMAN , supra note 22, § 2:17, at 112 (“Not all return documents are 2-207(1)
(continued...)
-26- 6874
define “dickered-for terms” but cited an example used in the learned treatise: No
contract forms when a purchase order requests a certain amount of a commodity at $0.10
per pound and the acknowledgment proposes $0.15 per pound.51 Another example
comes from Alliance Wall itself, where the court concluded that no contract formed
under § 2-207(1) when time was of the essence, the parties did not reach agreement on
a delivery date, the delivery date was of utmost importance to each party, and the return
document struck the offeror’s delivery date and inserted its own.52 We conclude based
on these authorities that, whatever the precise boundaries of the dickered-for exception
to § 2-207(1) acceptance, the return document will qualify for that exception only if it
differs significantly (not just materially) from the offer on a sufficiently important term.53
50
(...continued)
‘acceptances.’ If the return document diverges significantly as to a dickered term, it
cannot be a 2-207(1) acceptance.”).
51
See 477 N.E.2d at 1211 n.5; 1 W HITE , SUMMERS & H ILLMAN , supra
note 22, § 2:17, at 112-13.
52
477 N.E.2d at 1210. In that particular case, the delivery date appears to
have been a crucial and hotly disputed term throughout negotiations. Indeed, the
delivery date “appears to have been more important to the buyer than was the exact
price” and “[t]he seller appeared to be just as adamant not to be bound to any particular
date.” Id.
53
The parties offer competing interpretations of the scope of the dickered-for
exception, both of which we reject.
Williams argues that a dickered-for term is one which is “both material and
. . . previously negotiated between the parties” and that the joint-negotiating provision
cannot qualify because it was not negotiated prior to the October 18 letter. Not only does
Williams not cite any authority for this proposition, but it also conflicts with the
established example of a dickered-for term in the Alliance Wall case, where the court
cited as an example of a dickered-for term a price change that had not previously been
disputed by the parties. See 477 N.E.2d at 1211 n.5.
(continued...)
-27- 6874
ConocoPhillips’s letter of October 29 is clearly outside of those bounds and
results in contract formation under § 2-207(1). First, the joint-negotiating provision was
not sufficiently important in the context of the overall transaction to stymie § 2-207(1)
contract formation. Unlike the delivery date in Alliance Wall, the joint-negotiating
provision was not of utmost importance to the parties in this case, subjectively or
objectively: From an objective perspective, it would be difficult to conclude that a term
merely purporting to reaffirm ConocoPhillips’s commitment to a preexisting joint-
negotiating agreement is important in the context of the overall settlement. Indeed, the
53
(...continued)
ConocoPhillips argues that dickered-for terms are defined in opposition to
“standard boiler-plate terms” and encompass all those terms “that are unique to each
transaction such as price, quality, quantity, or delivery terms as compared to the usual
unbargained terms on the reverse side [of a form] concerning remedies, arbitration, and
the like[.]” (Alterations in original.) ConocoPhillips argues that “[i]n this case, all of the
terms in the parties’ correspondence were ‘dickered for’ terms.” (Emphasis in original.)
But a distinction between front-side terms and reverse-side or boilerplate terms is not
useful in this context, where the parties have negotiated every provision of the contract
rather than engaging in a traditional battle of the forms. Under ConocoPhillips’s theory,
§ 2-207(1) has no application outside of the boilerplate context. Yet nothing in the text
of § 2-207 would limit itself in such a way, and courts have often applied § 2-207 in
situations not involving boilerplate forms but rather detailed negotiation among
sophisticated parties, on the theory that § 2-207 applies whenever an acceptance does not
mirror an offer. See, e.g., Energy Mktg. Servs., Inc. v. Homer Laughlin China Co., 186
F.R.D. 369 (S.D. Ohio 1999) (stating that, as a matter of Ohio contract law,
UCC § 2-207(1) applies “when an acceptance differs in terms from an offer,” id. at 374,
including where the parties had negotiated a contract amendment over the course of
years, id. at 371-73), aff’d, 229 F.3d 1151 (6th Cir. 2000). We reject any interpretation
of the dickered-for terms exception that would swallow the more general § 2-207(1) rule
and bring common law rules in through the back door.
Accordingly, we reject both parties’ proffered definitions of the scope of
the dickered-for terms exception in favor of our formulation here of the outer bounds of
the exception, whatever its precise definition.
-28- 6874
relative unimportance of this provision may explain why the parties indicate little
subjective interest in the provision. The joint-negotiating term was first introduced into
negotiations in Williams’s letter of October 18. That the parties considered this
provision to be relatively unimportant is confirmed by the parties’ actions indicating that,
in their minds, the deal was done following acceptance of the payment notwithstanding
ConocoPhillips’s objections.54 Second, the degree of change to the contested term
proposed by the October 29 acceptance is also relatively small. Unlike the 50% increase
in price in the treatise hypothetical cited in Alliance Wall, there is relatively little distance
between the offer to reinscribe a preexisting, independent agreement and the return
proposal to voluntarily commit to continue performing a preexisting, independent
agreement.
Simply put, ConocoPhillips’s rejection of Williams’s joint-negotiating
provision was a relatively unimportant and relatively small discrepancy within the
context of the larger deal. The course of negotiation and the parties’ post-negotiation
behavior indicate that neither party thought the term sufficiently important or the change
sufficiently great to require additional negotiation.55 In short, the parties thought they
54
The superior court concluded that “Conoco accepted the proffered $31
million and behaved as if a contract had in fact been formed.”
55
In addition to ConocoPhillips’s purported rejection of the joint-negotiating
provision, ConocoPhillips also stated in its letter of October 29 that it “d[id] not agree
with all of the terms stated in [Williams’s] letter” but that it “also d[id] not believe it
would prove productive to conduct a letter writing campaign as to what the Payment
represents or specific terms and conditions associated with the Payment.” In the words
of the superior court in its order on motion for summary judgment, such “seemingly
studied ambiguity” hinting at “undisclosed issues with at least one term of Williams’[s]
counteroffer” cannot preclude the conclusion that there was a definite and seasonable
expression of acceptance in this case. As the superior court properly concluded, “If
Conoco perceived no need to further discuss the terms Williams proposed, but elected
(continued...)
-29- 6874
were done negotiating, and the purpose of § 2-207(1) is to step in to supply a contract
in just such a situation.
Finally, ConocoPhillips garners no help from § 2-207(1)’s narrow
exception for acceptances “expressly made conditional on assent to the additional or
different terms.” That exception “has been construed narrowly” by courts56 to apply
“only to an acceptance which clearly reveals that the offeree is unwilling to proceed with
the transaction unless he is assured of the offeror’s assent to the additional or different
terms therein.”57 Here, ConocoPhillips failed to state explicitly in its letter of October 29
55
(...continued)
to retain the $31 million, the reasonable implication is that Conoco grudgingly but
definitively assented to the Williams terms, except those explicitly rejected.” Vague
hints of disagreement combined with acceptance of payment in the form prescribed by
the offer and explicit disagreement with one term cannot be allowed to convert an
otherwise-definite expression of acceptance into an ineffective counteroffer. To hold to
the contrary would be to undermine the guiding principle of interpretation of
UCC § 2-207: preventing one party from obtaining an “unearned advantage.” See
1 W HITE , SUMMERS & H ILLMAN , supra note 22, § 2:9, at 81. In order for objections in
a return letter to foreclose contract formation under § 2-207(1), those objections must be
sufficiently explicit as to which provisions they pertain to, or sufficiently clear as to the
respondent’s intent to reject the offer in general. See id. § 2:11, at 89 (arguing that
silence in a § 2-207(1) acceptance as to a term in the offer constitutes grudging
acceptance of that term); id. at 89 n.1 (collecting cases). Here, ConocoPhillips never
characterized its letter of October 29 as a rejection in general, and the only specific term
it registered disagreement with was the joint-negotiating provision. Accordingly, its
exercise in studied ambiguity cannot succeed where its more specific objections failed.
As the superior court correctly concluded, “Conoco grudgingly but definitively assented
to the Williams terms, except those explicitly rejected.”
56
Idaho Power Co. v. Westinghouse Elec. Corp., 596 F.2d 924, 926 (9th Cir.
1979).
57
Dorton v. Collins & Aikman Corp., 453 F.2d 1161, 1168 (6th Cir. 1972).
Indeed, such a narrow interpretation is required by the nature of UCC § 2-207(1) as
(continued...)
-30- 6874
that its acceptance was conditioned on Williams’s assent to the omission of the joint-
negotiating provision from the contract. ConocoPhillips instead appeared eager to
proceed with the transaction as concluded and move on to address other issues. As
ConocoPhillips told Williams in an email after receiving the $31 million transfer, “We
can now focus our efforts on getting [the Quality Bank rate-making case] settled.”
Accordingly, we conclude that the superior court’s initial grant of summary
judgment in favor of Williams under UCC § 2-207(1) was proper.
2. The terms of the resulting contract included a provision to
credit the $31 million prepayment with interest at the FERC
rate.
When a contract is formed under UCC § 2-207(1), the terms of that contract
generally include all of the offeror’s terms “which are not contradicted by the
acceptance.”58 We have previously held that an offeree’s failure to “manifest any
objection to the terms” of an offer or to “mak[e] its acceptance of the offer conditional
on [the offeror’s] assent to different terms” results in the offeror’s terms “be[coming] part
of the contract.”59 This position is amply supported by persuasive authority in other
jurisdictions.60 It is true that in response to an entire offer, mere silence or inaction
57
(...continued)
abrogating the mirror-image rule of the common law: If non-mirroring acceptances were
construed too liberally as being conditioned on the assent of the offeror, the rigidity of
the mirror-image rule would re-enter the Code through the back door of an exception to
§ 2-207(1).
58
1 W HITE , SUMMERS & H ILLMAN , supra note 22, § 2:11, at 89; see also id.
at 89 n.1 (collecting cases).
59
Armco Steel Corp. v. Isaacson Structural Steel Co., 611 P.2d 507, 518
(Alaska 1980).
60
See, e.g., Constr. Aggregates Corp. v. Hewitt-Robins, Inc., 404 F.2d 505,
(continued...)
-31- 6874
generally do not indicate assent.61 But silence as to one term, coupled with assent to the
offer as a whole, cannot defeat inclusion of that term in the resulting contract.
The superior court’s order on summary judgment correctly concluded that,
on the facts of this case, ConocoPhillips’s acceptance of October 29 formed a contract
under § 2-207(1), the terms of which included a provision to credit Williams with
interest on the $31 million principal prepayment at the rate prescribed by the FERC.
ConocoPhillips’s letter of October 29 was a definite and seasonable expression of
acceptance resulting in contract formation. ConocoPhillips indicated that no further
negotiation was necessary, thereby communicating acceptance of all but the explicitly
rejected terms. ConocoPhillips did not object to Williams’s provision specifying that the
principal would accrue interest at the FERC rate but rather objected only to the joint-
negotiating provision. Moreover, ConocoPhillips had already proposed that the
prepayment would accrue interest (at the LIBOR rate) on October 17, so as a matter of
law its silence as to Williams’s counteroffer of October 18 for FERC interest constitutes
assent to Williams’s proposal. Finally, as the superior court correctly noted, “[t]he
demand for FERC interest was not an implausible overreach” but rather was a reasonable
proposal in light of the deal, such that its inclusion in the resulting contract is proper.62
60
(...continued)
510 (7th Cir. 1968) (concluding that offeror “could reasonably have assumed that
[offeree’s] single objection was an acquiescence in the remaining terms of the counter­
offer”); Earl M. Jorgensen Co. v. Mark Const., Inc., 540 P.2d 978, 983 (Haw. 1975)
(holding that “silence was not an effective rejection or a counteroffer” when an offer
included a specific provision and the response otherwise indicated assent but omitted
reference to the provision).
61
See supra note 28.
62
ConocoPhillips disagrees and argues that it would be unfair to credit
(continued...)
-32- 6874
We conclude that the contract formed by ConocoPhillips’s acceptance includes a term
for FERC interest.
3. The superior court was correct in its first entry of summary
judgment, and thus it should not have rescinded its initial order
as improvidently granted.
After granting Williams’s motion for summary judgment and concluding
that a contract for FERC interest was formed under § 2-207(1), the superior court granted
ConocoPhillips’s motion for reconsideration and ordered additional briefing on the
UCC § 2-207 issues because the parties had not briefed them before. ConocoPhillips
62
(...continued)
interest at the administratively prescribed FERC rate rather than the “market rate” of
LIBOR. ConocoPhillips argues that LIBOR is inherently fair because “[h]ad the parties
proceeded on this basis, neither party would have gained or lost value” because
“Williams would have lost the time value of its $31 million, but it would have received
interest at a market rate from ConocoPhillips to make up for that time value loss.”
ConocoPhillips confuses the issue by hypothesizing a single market rate of interest and
thus attempts to make Williams’s demand for FERC interest seem unreasonable. But it
is axiomatic that there is no single “market rate” of interest; rather, market rates of return
depend on which market the investor chooses to enter and the concomitant risk the
investor chooses to assume. See, e.g., Edwin J. Elton & Martin J. Gruber, Modern
Portfolio Theory, 1950 to Date, 21 J. BANKING & FIN . 1743, 1744 (1997). If Williams
knew it would be responsible for the higher FERC interest rate on retroactively assessed
Quality Bank degradation charges, then it would be reasonable for Williams to attempt
to earn FERC rates of interest on the principal it set aside for such charges by purchasing
assets in a market with correspondingly high levels of risk and return. Accordingly, it
might be reasonable for Williams to insist when it transferred ownership of the principal
corpus to ConocoPhillips that ConocoPhillips agree to credit Williams with the FERC
rate of interest Williams would have otherwise attempted to earn for itself. Indeed, in
oral argument, counsel for Williams stated that this was precisely the rationale behind
Williams’s proposal for FERC interest. Thus, LIBOR interest is not the only “ ‘break
even’ point” in the transaction, ConocoPhillips’s assertions to the contrary
notwithstanding. Rather, the prospective time-value of money is an endogenous variable
susceptible to influence by the actions of the person making investment decisions.
-33- 6874
argued: (1) its letter of October 29 was not a definite and seasonable expression of
acceptance within the meaning of § 2-207(1); (2) a contract under § 2-207(3) was formed
in the course of performance but only for retention of the transferred money; (3) no
agreement was reached for interest; and (4) the gap-filling interest provision of
UCC § 9-207(3), which does not mandate accrual of interest on cash collateral obtained
in a security transaction, governs this case. Williams supported the original grant of
summary judgment.
On reconsideration, the court concluded that it had improvidently granted
summary judgment because “it should not have ruled summarily that Conoco’s letter of
October 29, 2002 was a ‘definite and seasonable expression of acceptance,’ given
Conoco’s express rejection of Williams’s joint-negotiating provision. The court’s
characterization of Williams’s term as non-material constitutes a disputable inference,
which defeats summary judgment.”63
We conclude that the superior court correctly granted Williams summary
judgment the first time around and erred in concluding on reconsideration that it had
63
As an additional reason favoring its reconsideration of the grant of
summary judgment, the superior court stated that its “characterization of Conoco’s
rejection of the joint-negotiating term . . . fits awkwardly within the actual wording of
UCC section 2-207(B) [sic], which speaks of additional terms being construed as
‘proposals for addition to the contract.’ ” (Emphasis in original.) The superior court’s
concerns were inapposite to the question before the court. UCC § 2-207(1) and (2)
address two distinct issues: (1) addresses the issue of contract formation, while
(2) addresses the issue of which additional terms from the non-mirroring acceptance
come into the new contract. The § 2-207(2) question in this case — whether
ConocoPhillips’s apparent rejection of the joint-negotiating provision would cause that
provision to fall out of the contract formed under § 2-207(1) or whether, in the
alternative, the rejection of a term in the offer cannot be effective under § 2-207(2)
because that section addresses only “additional” terms — has no bearing on the
§ 2-207(1) question in this case — whether the October 29 letter constitutes a definite
expression of acceptance of Williams’s October 18 offer.
-34- 6874
improvidently granted summary judgment.64 As we have already noted, the superior
court’s error was understandable, resulting from an abundance of caution. This is a
complex case. But as we concluded in section IV.B.1 above, ConocoPhillips’s rejection
of Williams’s joint-negotiating provision was neither a sufficiently large change in that
provision nor a sufficiently important part of the overall bargain to vitiate contract
formation under § 2-207(1). That conclusion of law is not a disputable inference of fact
that could foreclose summary judgment.65 Indeed, the parties do not dispute any material
issues of fact, as the superior court correctly noted in its initial order granting Williams
summary judgment. The only remaining disputes were about the legal conclusions to be
drawn from those facts. Accordingly, we hold that the superior court’s order rescinding
summary judgment as improvidently granted was error. We reverse that order and affirm
the initial order granting summary judgment on the basis of UCC § 2-207(1).66
64
Because we conclude that a contract for FERC interest was created in
October 2002 under UCC § 2-207(1), we decline to reach other issues raised on appeal,
including whether a contract for FERC interest was reached under § 2-207(3) and
whether or at what rate Williams is owed interest on a theory of quantum meruit.
65
To the extent that the superior court was under the impression that a reply
letter containing a mere “material” change to the contract could prevent contract
formation under § 2-207(1), the court erred. UCC § 2-207(2)’s provisions governing
which non-mirroring terms enter a contract formed under § 2-207(1) make clear that a
materially different term in the reply letter can nonetheless result in contract formation.
See O HIO REV . CODE A NN . § 1302.10(B)(2) (West 2013) (codifying U.C.C.
§ 2-207(2)(b)) (stating that, when the parties to a contract formed by acceptance under
§ 2-207(1) are merchants, non-mirroring terms in an acceptance do not automatically
become part of the resulting contract where those terms “materially alter” the offer).
66
We ordinarily do not review denials of motions for summary judgment after
a trial on the merits, “at least when the ‘motions are denied on the basis that there are
genuine issues of material fact.’ ” Larson v. Benediktsson, 152 P.3d 1159, 1169 (Alaska
2007) (quoting Ondrusek v. Murphy, 120 P.3d 1053, 1056 n.2 (Alaska 2005)). We have
(continued...)
-35- 6874
C. The Superior Court Did Not Abuse Its Discretion By Granting
Attorney’s Fees And Court Costs To Williams.
ConocoPhillips and Williams agreed in a Dispute Resolution Agreement
at the outset of litigation in 2007 that the “prevailing Party . . . shall be entitled to recover
reasonable attorney fees and court costs” to be “paid within twenty (20) days after receipt
of an invoice for such costs containing documentation reasonably supporting the
amounts.” Both parties agree that Williams is the prevailing party in this litigation
because Williams “obtained the relief it sought.” But ConocoPhillips argues that the
superior court abused its discretion by granting Williams’s motion for leave to enlarge
time to file a motion for attorney’s fees, extending the time to file a cost bill with the
Clerk of Court, and awarding full attorney’s fees to Williams while rejecting
ConocoPhillips’s suggested reductions. We affirm the superior court’s actions with
regard to attorney’s fees and court costs in all respects.
66
(...continued)
reviewed denials of summary judgment after a trial on the merits when the order was
entered on a legal ground that affected the subsequent trial. Id. at 1169 (citing W.
Pioneer, Inc. v. Harbor Enters., Inc., 818 P.2d 654, 658 (Alaska 1991)). But the
situation before the court today is entirely different. Rather than seeking to roll back the
tape to summary judgment after having proceeded through trial to resolve disputed facts,
Williams seeks merely to roll back the tape to the initial grant of summary judgment
under § 2-207(1) after we find that the order on reconsideration was error as a matter of
law. Neither Larson nor any other precedent of this court prevents us from reviewing
a prior motion for summary judgment in this procedural context. Indeed, Larson and
Western Pioneer support the proposition that review in this context is proper because the
error in the order on reconsideration was a legal error.
-36- 6874
1. The superior court did not abuse its discretion by granting
Williams additional time to file its motion for attorney’s fees.
Under Alaska Civil Rule 82, in order to recover an “award of attorney’s
fees . . . pursuant to contract,” the prevailing party must file a motion “within 10 days
after the date shown in the clerk’s certificate of distribution on the judgment” or within
“such additional time as the court may allow.”67 Failure to file a timely motion “shall be
construed as a waiver of the party’s right to recover attorney’s fees.”68 Alaska Civil
Rule 6(b) further specifies that, where the Alaska Civil Rules require an act “be done at
or within a specified time, the court for cause shown may at any time in its discretion . . .
upon motion made after the expiration of the specified period permit the act to be done
where the failure to act was the result of excusable neglect.”69 Finally, Alaska Civil
Rule 94 provides that the Civil Rules “are designed to facilitate business and advance
justice” and they “may be relaxed or dispensed with by the court in any case where it
shall be manifest to the court that a strict adherence to them will work injustice.”70
In this case, the clerk’s certificate of distribution on the final judgment
shows the date February 9, 2012, and the ten-day period for Williams to file a motion for
costs and attorney’s fees ended on February 20 or 22, 2012.71 Williams did not file
67
Alaska R. Civ. P. 82(c).
68
Id.
69
Alaska R. Civ. P. 6(b).
70
Alaska R. Civ. P. 94.
71
The parties disagree as to when the ten-day clock ran in this case. Williams
argues that it filed its motion to enlarge time to file a motion for attorney’s fees “eight
days after it was due” on March 1, implying that the clock would have run on
February 22. (2012 was a leap year.) ConocoPhillips argues that Williams’s motion was
(continued...)
-37- 6874
within that period. On March 1 Williams filed a motion for leave to enlarge time to file
a motion for attorney’s fees, asking the court to accept an attached motion for
$469,331.68 in attorney’s fees and several exhibits. Williams argued that its failure to
meet the ten-day deadline was the result of excusable neglect under Rule 6(b) because
it did not know that Rule 82’s requirements would apply to its motion for attorney’s fees
under the Dispute Resolution Agreement. Williams further argued that the delay “does
not impact the judicial proceedings in this case and it does not prejudice
ConocoPhillips.” ConocoPhillips argued that an attorney’s mistake as to the applicable
rules in this context cannot constitute excusable neglect.
The superior court granted Williams’s motion to enlarge time to file a
motion for attorney’s fees, finding “excusable neglect and no prejudice.” The superior
court explained that “[t]he court was inartful” in its Final Judgment, in which the court
stated that “Williams may move the Court for an award of attorney fees” as the
“prevailing party . . . pursuant to . . . the parties’ Dispute Resolution Agreement.” The
superior court explained that it “should also have struck the ‘pursuant to’ . . . clause,
because the attorney fee entitlement is pursuant to ARCP 82.”
On appeal, ConocoPhillips argues that the superior court abused its
discretion when it “took the blame for Williams’[s] failure to timely file its motion.”
ConocoPhillips reasoned that there was no excusable neglect for the late motion because
Rule 82(c)’s applicability to contract-based fee motions was clear on the face of the Rule
and that nothing in the superior court’s final judgment created ambiguity on that issue.
71
(...continued)
due by Monday, February 20, 2012 and that its motion was ten days late. Neither party
adequately explains the legal theory underlying these assertions. But we conclude that
the two-day difference between being late by eight days (Williams’s theory) and being
late by ten days (ConocoPhillips’s theory) would not change the outcome of our holding
in this case.
-38- 6874
ConocoPhillips also reasoned that the mere lack of prejudice to ConocoPhillips alone
cannot sustain a finding of excusable neglect. We review a trial court’s disposition of
a motion to enlarge time for abuse of discretion.72
We affirm the superior court’s order granting Williams’s motion to enlarge
time to file a motion for attorney’s fees. The superior court certainly did not abuse its
discretion in this case. The delay of ten days in this case is well within the zone of
permissible discretion suggested by our precedent. In T & G Aviation, Inc. v. Footh,73
we held that the superior court did not abuse its discretion by allowing a party to file a
motion for attorney’s fees 70 days late, even in the absence of a persuasive explanation
for the delay.74 Indeed, when there is no showing of prejudice, it may be an abuse of
discretion not to allow an untimely motion for attorney’s fees on facts such as those
presented in this case.75 In short, Williams’s neglect in failing to recognize the
applicability of Rule 82(c)’s deadlines is “that type of excusable inadvertence or neglect
72
State v. 1.163 Acres, More or Less, Chuckwm, Inc., 449 P.2d 776, 779
(Alaska 1968); see also Worland v. Worland, 193 P.3d 735, 742 (Alaska 2008) (quoting
Estate of Lampert Through Thurston v. Estate of Lampert Through Stauffer, 896 P.2d
214, 218 (Alaska 1995)) (holding that the “authority to enlarge the time allowable for an
act pursuant to Rule 6(b) is a function addressed to the sound discretion of the trial
court”).
73
792 P.2d 671 (Alaska 1990) (per curiam).
74
Id. at 672; see also Alderman v. Iditarod Props., Inc., 32 P.3d 373, 397
(Alaska 2001) (holding it was not an abuse of discretion to allow a motion for attorney’s
fees filed 70 days late where there was no showing of prejudice).
75
See Conger v. Conger, 950 P.2d 119, 122-23 (Alaska 1997) (directing
superior court to accept late-filed opposition to custody modification where delay was
caused by a miscalculation of the due date).
-39- 6874
common to all who share the ordinary frailties of [hu]mankind,”76 and the superior court
did not abuse its discretion by granting Williams’s motion to enlarge time to file a
motion for attorney’s fees.
2. The superior court did not abuse its discretion by granting
Williams additional time to file its motion for court costs.
Alaska Civil Rule 79(b) requires77 a prevailing party seeking to recover
costs to “file and serve an itemized and verified cost bill, showing the date costs were
incurred, within 10 days after the date shown in the clerk’s certificate of distribution on
the judgment . . . or such additional time as the court may allow.” The rule further
specifies that “[f]ailure of a party to file and serve a cost bill . . . will be construed as a
waiver of the party’s right to recover costs.”78 Just as discussed previously with regard
to Rule 82(c) motions for attorney’s fees, Rules 6(b) and 94 provide further discretionary
76
Id. at 122 (quoting Jenkins v. Arnold, 573 P.2d 1013, 1016 (Kan. 1978)).
77
We assume without deciding that Civil Rule 79(b) applies in this case, even
though court costs were sought pursuant to contractual entitlement rather than Rule 79
itself. ConocoPhillips and Williams both couch their arguments as if Rule 79(b)
provided the relevant deadlines for filing a cost bill. But we note sua sponte that
Rule 79(b), unlike Rule 82(c), does not purport to require a cost bill filing for an award
of court costs “under this rule or pursuant to contract.” Alaska R. Civ. P. 82(c). Rather
than purporting to apply specifically to contract-based awards of court costs, Rule 79(b)
states flatly that “[t]o recover costs, the prevailing party must file and serve an itemized
and verified cost bill . . . within 10 days.” Alaska R. Civ. P. 79(b). Whether Rule 79
applies to contractual court-cost awards, or whether its rules should apply only by
analogy or by the adoption and stipulation of the parties, we leave for another day when
that issue is presented to the court squarely. We hold today that, even if Rule 79’s
requirements apply in full force in this case, the superior court did not abuse its
discretion in granting leave to Williams to file its cost bill late.
78
Alaska R. Civ. P. 79(b).
-40- 6874
flexibility on a showing of excusable neglect or when a strict adherence to the ten-day
limit would “work injustice.”79
Eight to ten days after it would have been due under Rule 79(b)’s ten-day
period,80 Williams filed a motion for leave to enlarge the time to file its motion for
attorney’s fees on March 1, 2012. Although this motion did not mention Civil Rule 79
by name, it clearly indicated that Williams was seeking compensation for court costs.
Specifically, that motion mentioned the difficulty Williams experienced assessing fees
and costs; included a costs calculation of $10,489.05 as an exhibit attached to the motion;
included a section for the clerk’s ruling on the cost bill and a separate line for
“recoverable costs” of $10,489.05 in the attached motion for attorney’s fees; and it
concluded the motion for attorney’s fees by asking for “$479,819.73 as reasonable
attorney fees and court costs.” ConocoPhillips argued that Williams had waived any
right to costs because “[c]ost bills are considered by the clerk pursuant to a separate
procedure, . . . and Williams may not ‘piggyback’ an untimely cost bill onto its attempt
to file an untimely fee motion.” The superior court granted Williams’s motion for leave
to enlarge time to file a motion for attorney’s fees and also “deemed filed” the motion
for attorney’s fees as well as “exhibits supporting [Williams’s motion for attorney’s
fees],” which included the cost bill.
79
Rule 6(b) provides that, where the Alaska Civil Rules require an act “be
done at or within a specified time, the court for cause shown may at any time in its
discretion . . . upon motion made after the expiration of the specified period permit the
act to be done where the failure to act was the result of excusable neglect.” Alaska R.
Civ. P. 6(b). Rule 94 provides that the Civil Rules “are designed to facilitate business
and advance justice” and they “may be relaxed or dispensed with by the court in any case
where it shall be manifest to the court that a strict adherence to them will work injustice.”
Alaska R. Civ. P. 94.
80
See supra note 71.
-41- 6874
Six months later, and eight months following the expiration of the ten-day
period under Rule 79, the superior court ruled on Williams’s motion for attorney’s fees
and awarded Williams full attorney’s fees. In that order, the court also noted that
“Williams should submit its cost bill to the Clerk of Court for a reasonableness review.”
ConocoPhillips objected that “[t]his sua sponte grant of an 8-month extension of time
was improper” because Williams had never requested it and because Williams did not
show excusable neglect. The Clerk of Court granted $6,441.70 in court costs to
Williams, and the superior court rejected ConocoPhillips’s motion for review of cost
award. The superior court’s final judgment on attorney’s fees and costs included
$6,441.70 of court costs.
ConocoPhillips argues that the superior court abused its discretion when it
granted Williams an extension of time to file its cost bill. ConocoPhillips reasons that
Rule 6(b) allows extension after the time period lapses only “ ‘upon motion’ establishing
that ‘the failure to act was the result of excusable neglect.’ ” Under its view, neither
condition was met here because the court awarded an extension sua sponte and because
there was no showing of excusable neglect for such a long delay. Williams argues that
it sought an extension of the Rule 79 deadline by including costs in its motion for leave
to enlarge time to file a motion for attorney’s fees and that this same motion showed
excusable neglect. It argues that the superior court “deemed filed” its cost bill, as an
attached exhibit, when it granted its motion for leave to enlarge time for filing a motion
for attorney’s fees, and that the court’s subsequent invitation to file its cost bill with the
Clerk of Court was within the court’s discretionary authority.
-42- 6874
We conclude that the superior court did not abuse its discretion in granting
Williams leave to file a late cost bill with the Clerk of Court. In Vazquez v. Campbell,81
we confronted a situation in which the prevailing plaintiff timely filed a sufficiently
detailed cost bill, not as a cost bill presented to the Clerk of Court as required by
Rule 79(b), but rather as a motion to the superior court.82 We held that the prevailing
party had “substantially complied with the requirements of rule 79” because “[i]f the
superior court had wished, it could have referred the question of costs to the clerk for an
initial decision.”83 Unlike in Vazquez, Williams did not timely file its motion for court
costs under Rule 79(b) (instead, it filed its cost bill with the Clerk of Court eight months
late), and it is unclear on this record whether its cost accounting associated with its
motion for leave to enlarge time to file a motion for attorney’s fees was sufficiently
detailed to meet the requirements of Rule 79. Nevertheless, we conclude that the
superior court did not abuse its discretion in granting an extension to Williams to file its
cost bill with the Clerk of Court. ConocoPhillips does not argue that it was prejudiced
by the delay.84 It had a chance to object when the final cost bill was submitted, and it
even succeeded in reducing the bill significantly. In this case, because of the lack of
prejudice and because the motion for leave to enlarge time to file a motion for attorney’s
81
146 P.3d 1 (Alaska 2006).
82
Id. at 2.
83
Id. at 2-3.
84
This distinguishes this case from Pruitt v. State, Department of Public
Safety, Division of Motor Vehicles, 825 P.2d 887 (Alaska 1992), in which we held that
“the state’s motion for attorney’s fees, filed seven months after final judgment has been
entered, was not filed within a ‘reasonable time.’ ” Id. at 896. Our holding in that case
was influenced by the finding that the non-prevailing party “was prejudiced by the state’s
delay.” Id.
-43- 6874
fees had objective indications on its face that Williams was also seeking an extension of
time to seek court costs, we conclude that the superior court did not abuse its discretion
in granting Williams an extension of the Rule 79(b) deadline.
3. The superior court did not abuse its discretion by refusing to
reduce the award of attorney’s fees.
This court reviews an award of attorney’s fees for an abuse of discretion.85
Under this standard, “[t]he trial court has broad discretion in awarding attorney’s fees;
this court will not find an abuse of discretion absent a showing that the award was
arbitrary, capricious, manifestly unreasonable, or stemmed from improper motive.”86
When evaluating a motion for attorney’s fees, “a court should carefully consider all
factors relevant to reasonableness.”87 There is no exhaustive list of factors a court may
consider to determine whether the attorney’s fees claimed are objectively reasonable, but
the factors listed in Rule 82(b)(3) may be instructive.88 Those factors include “the
reasonableness of the claims and defenses pursued by each side” and “vexatious or bad
85
See Ware v. Ware, 161 P.3d 1188, 1192 (Alaska 2007) (citing United Servs.
Auto. Ass’n v. Pruitt, 38 P.3d 528, 531 (Alaska 2001)).
86
Id. (quoting Power Constructors, Inc. v. Taylor & Hintze, 960 P.2d 20, 44
(Alaska 1998)).
87
Krone v. State, Dep’t of Health & Soc. Servs., 222 P.3d 250, 258 (Alaska
2009).
88
See Valdez Fisheries Dev. Ass’n v. Froines, 217 P.3d 830, 833 & n.17
(Alaska 2009).
-44- 6874
faith conduct.”89 This court reviews “a trial court’s fact-based determinations regarding
whether attorney’s fees are reasonable for an abuse of discretion.”90
After granting Williams’s motion for enlargement of time to file a motion
for attorney’s fees, the superior court granted Williams’s motion for attorney’s fees in
the full amount of $465,451. As relevant here, ConocoPhillips had argued that the
superior court should reduce the attorney’s fee award by 50% because Williams’s legal
arguments had been rejected by the superior court at every stage of litigation.
ConocoPhillips also sought an additional reduction for fees spent relative to Williams’s
(unsuccessful) claim for $30 million in damages resulting from ConocoPhillips’s alleged
tortious conduct during litigation. The superior court rejected ConocoPhillips’s requests
for reductions in the award of attorney’s fees. The superior court “decline[d] to adjust
the fee merely because arguments were ultimately rejected,” reasoning that it would be
“unfair to reduce the Williams fee by 50 percent, given that it prevailed on the relief it
sought” because “the case was very difficult” and “[t]he parties’ briefing was high
quality and helpful.” The superior court noted that “if Williams strayed in its initial
briefing, so too did Conoco.” The superior court also rejected the request for a reduction
in fees relative to the tort claim, reasoning that “[b]oth [parties] adopted aggressive
positions,” that “[n]either party spent great time or energy on these positions,” and that
it had already concluded that it would “decline[] to adjust the fee merely because
arguments were ultimately rejected.” ConocoPhillips raises three primary arguments on
appeal.
First, ConocoPhillips argues that the superior court abused its discretion by
not reducing the award of attorney’s fees in light of the fact that the superior court
89
Alaska R. Civ. P. 82(b)(3)(F) & (G).
90
Valdez, 217 P.3d at 832 (citations omitted).
-45­ 6874
resolved the dispute on different legal grounds than those advanced by the prevailing
party. But ConocoPhillips cites no authority for the proposition that such a reduction
should be forthcoming simply because the prevailing party advocates a legal position not
adopted by the court. Indeed, ConocoPhillips states that this is an issue of first
impression in this court. Whether or not this is truly an issue of first impression, we
reject ConocoPhillips’s proposed rule. Although the superior court ultimately rested its
orders on grounds not directly advanced by Williams,91 the superior court necessarily
considered the issues raised in Williams’s briefs in making its determinations.92 And the
superior court found that Williams’s briefing was of “high quality and helpful.” We
conclude that the superior court did not abuse its discretion by refusing to reduce an
award of attorney’s fees when the court rested its orders on legal grounds not advanced
by the prevailing party. Fee-shifting contracts and Rule 82 already create ex ante
uncertainty about who will bear the ultimate burden of litigation expenses; we are
unwilling to create additional uncertainty as to the ultimate size of litigation expenses
by telling litigants that they must accurately predict the exact legal basis of the court’s
holding in order to receive a full award as the prevailing party.
Second, ConocoPhillips argues that the superior court, in stating that “if
Williams strayed in its initial briefing, so too did Conoco,” abused its discretion by
91
The superior court rested its first grant of summary judgment on
UCC § 2-207(1), an issue which Williams had not briefed, and the superior court rested
its order on reconsideration on UCC § 2-207(3), even though Williams had supported
the original grant of summary judgment under § 2-207(1).
92
The superior court must have been informed by Williams’s initial argument
that a contract had been formed under the common law in reaching its conclusion that
UCC § 2-207(1) governed the case and displaced the common law, and the superior
court necessarily considered Williams’s argument on reconsideration that UCC
§ 2-207(1) governed the case before it held that summary judgment was improvidently
granted under § 2-207(1) and instead granted summary judgment under § 2-207(3).
-46- 6874
“obligat[ing] the losing party to identify the prevailing party’s winning argument.” But
ConocoPhillips misinterprets the superior court’s statement. The superior court did not
give ConocoPhillips the burden of identifying the correct legal theory in order to prevail
on its motion to reduce the award of attorney’s fees for Williams’s failure to identify the
correct legal theory. Rather, the superior court merely used ConocoPhillips’s parallel
failure to do so as evidence that the theories advanced by Williams were not
unreasonable such that no reduction in attorney’s fees would be warranted. Accordingly,
we reject ConocoPhillips’s argument and conclude that the superior court did not abuse
its discretion by relying on such a parallel failure as evidence supporting the
reasonableness of the arguments advanced by the prevailing party.
Finally, ConocoPhillips argues that the superior court abused its discretion
by refusing to reduce the award of attorney’s fees by the amount Williams spent pursuing
its unsuccessful tort claim: $14,888.96. ConocoPhillips reasons that its own litigation
position (that no contract was formed and no interest credit was due) was reasonable and
“the central issue in the case” while Williams’s tort claim was “utterly unsupportable,”
such that the superior court made a clearly erroneous factual finding when it
characterized both as “aggressive positions” that nonetheless were reasonable in the
context of the litigation. (Emphasis in original.) But beyond its bare assertion that
“Williams’[s] attempt to recover $30 million . . . was utterly unsupportable,”
ConocoPhillips does not offer any reason to believe that the tort claim was frivolous or
was “not reasonably intended to advance the litigation.”93 We conclude that
ConocoPhillips has not met its burden of showing that the superior court’s factual
finding on this issue was clearly erroneous or that its order refusing to reduce attorney’s
fees was an abuse of discretion.
93
Valdez, 217 P.3d at 833.
-47- 6874
V. CONCLUSION
Because the superior court’s decision on summary judgment was correct
and should not have been rescinded on reconsideration, the initial grant of summary
judgment is REINSTATED and AFFIRMED. Because we conclude that the superior
court was right in its initial grant of summary judgment, we do not reach the
UCC § 2-207(3) or quantum meruit holdings from its order on reconsideration. The
superior court’s rulings on attorney’s fees and costs are AFFIRMED.
-48- 6874