CARBON PROCESSING v. VALERO MARKETING AND SUPPLY No. 09-2127-STA.
823 F.Supp.2d 786 (2011)
CARBON PROCESSING AND RECLAMATION, LLC, and CPR Marine, LLC, Plaintiffs, v. VALERO MARKETING AND SUPPLY CO. and Valero Refining CO. — Tennessee, LLC, Defendants. v. William L. Jones, Third-Party Defendant.
United States District Court, W.D. Tennessee, Western Division.
October 17, 2011.
David E. Goodman, Jr., Douglas F. Halijan, Jef Feibelman, Burch Porter & Johnson, Memphis, TN, Randy J. Hart, Law Office of Randy J. Hart, Solon, OH, for Plaintiffs.
Brian S. Faughnan, Thomason Hendrix Harvey Johnson & Mitchell, Memphis, TN, Erika M. Anderson, Gabriel E. Gore, Dowd Bennett LLP, Clayton, MO, James F. Bennett, John D. Comerford, Dowd Bennett LLP, St. Louis, MO, for Defendants.
ORDER ON THE PARTIES' MOTIONS FOR SUMMARY JUDGMENT
S. THOMAS ANDERSON, District Judge.
Before the Court is Defendants Valero Marketing and Supply Co. and Valero Refining Co.—Tennessee, LLC's (hereinafter "Valero") Motion for Summary Judgment (D.E. # 120) filed on December 29, 2010, as to all claims asserted against them. Plaintiffs Carbon Processing and Reclamation, LLC, and CPR Marine, LLC (hereinafter "CPR") have filed a response in opposition, to which Valero has replied. For the reasons set forth below, Valero's Motion for Summary Judgment is
Also before the Court is Valero's Motion for Summary Judgment (D.E. # 126) filed on January 31, 2011, as to all claims asserted against it by CPR Marine. CPR has filed a response in opposition, to which Valero has replied. For the reasons set forth below, Valero's Motion for Summary Judgment on CPR Marine's claims is
Finally, before the Court is CPR's Motion for Partial Summary Judgment (D.E. # 131) filed on January 31, 2011, as to its claim for breach of contract. Valero has filed a response in opposition, to which CPR has replied. For the reasons set forth below, CPR's Motion for Partial Summary Judgment is
The following material facts are not in dispute for purposes of these Motions unless otherwise noted: slurry is a by-product of the process by which crude oil is refined and, while lower in value than, for instance, gasoline or diesel, is sold and used for numerous industrial applications,
William Jones ("Jones") is the owner and sole member of CPR. (Defs.' Statement of Facts ¶ 1, D.E. # 120-2.) In August 2007, Jones approached Chris Haycraft at L & R Midland, a marine charter brokerage company, about the possibility of leasing barges. (Id. ¶ 2.) CPR and L & R Midland met on August 15, 2007, and after that meeting, L & R Midland began looking for barge equipment for CPR. (Id. ¶ 3.) CPR does not deny this meeting but does state that L & R Midland was looking for barges for CPR prior to August 15, 2007. (Pls.' Resp. to Defs.' Statement of Facts ¶ 3, D.E. # 136-4.)
I. The Parties' Meetings and Negotiations 1
The parties began to negotiate a term contract for the sale of Valero's slurry to CPR. At many of these meetings, CPR was represented by Jones and Steve Mis ("Mis"); Valero was represented by Hal Tryon ("Tryon"), Valero's trader in charge of selling Memphis slurry, and David Olson ("Olson"), Valero's director of heavy products and fuel oil and Tryon's direct supervisor. On August 16, 2007, CPR had its first meeting with Valero to discuss the possibility of CPR purchasing slurry from Valero. (Defs.' Statement of Facts ¶ 4, D.E. # 120-2.)
Meanwhile, on October 4, 2007, L & R Midland contacted CPR about an offer for barge equipment from Martin Marine ("Martin"). (Defs.' Statement of Facts ¶ 10, D.E. # 120-2.) CPR entered into negotiations with Martin; however, the parties did not reach an agreement at that time. (Id. ¶ 11.) Martin sought a barge contract for three years or more; CPR bargained for a one-year term. (Defs.' Statement of Facts ¶ 12, D.E. # 120-2.) CPR emphasizes that the duration of the barge lease was driven by Valero's needs, not CPR. (Pls.' Resp. to Defs. Statement of Facts ¶ 12, D.E. # 136-4). As a result of Martin's demands, CPR endeavored to secure a longer term with Valero. (Defs.' Statement of Facts ¶ 13, D.E. # 120-2; Pls.' Resp. to Defs. Statement of Facts ¶ 13, D.E. # 136-4).
On October 18, 2007, CPR again met with Valero to discuss the sale of slurry from the Memphis refinery. (Defs.' Statement of Facts ¶ 14, D.E. # 120-2.)
Later in November 2007, Valero sent CPR a draft contract containing a one-year term, from January 1, 2008 to December 31, 2008. (Id. ¶ 17.) This writing incorporated Valero's Marketing and Supply Company's General Terms and Conditions For Petroleum Product Purchases/Sales ("GT & C's"). (Id. ¶ 18.) The GT & C's included a paragraph prohibiting the giving or receipt of any gifts or entertainment of "significant value." (Id. ¶ 19.) Specifically, it stated, "Commissions and Gifts: No director, officer, employee or agent of either party shall give or receive any commission, fee, rebate, gift or entertainment of significant value or cost in connection with this Agreement." (Id.) Neither party ever signed the November 2007 draft contract. (Id. ¶ 28.)
Near the end of November, Valero and CPR resumed negotiations. (Id. ¶ 20.) The parties again discussed an "evergreen" provision, the specifications of the slurry, and the price of the slurry as well as a "contract from February to February." (Id. ¶¶ 21, 22.)
The parties continued their negotiations on December 15, 2007. (Id. ¶ 29.) Among other things, the parties discussed the quality specifications of the slurry to be purchased under the proposed contract. (Id. ¶ 31.) However, there is no record of the parties discussing the length of the contract. (Id. ¶ 32.) Neither party signed a contract at the end of the December meeting. (Id. ¶ 33.) As of December 28, 2007, attorneys for both CPR and Martin Marine continued to discuss a potential barge contract. (Id. ¶ 34.)
Although the parties dispute whether CPR had a finalized barge lease with Martin by mid-January (Id. ¶ 35; Pls.' Resp. to Defs. Statement of Facts ¶ 35, D.E. # 136-4.), they agree that on February 5, 2008, Jones signed a two-year barge lease with Martin. (Defs.' Statement of Facts ¶ 36, D.E. # 120-2.) At that time CPR did not have a signed contract with Valero. (Id. ¶ 38.)
On February 22, 2008, CPR again met with Valero. (Defs.' Statement of Facts ¶ 41, D.E. # 120-2.)
II. The Parties' Writings 10
On February 26, 2008, Valero faxed two written documents to CPR: contract numbers 40190953 ("the FOB agreement" or "the 953 writing"); and 40190954, ("the delivered agreement" or "the 954 writing"). (Pls.' Statement of Facts ¶ 14, D.E. # 131-45.)
Upon receipt of the 953 and 954 writings, CPR's Jones contacted Olson at Valero to raises issues about the writings, particularly his concern that the writings did not contain all of the terms previously discussed or agreed to by the parties. (Id. ¶ 25.) Olson told Jones that Tryon would address these concerns after Tryon returned to work following a minor surgery. (Id.)
On April 11, 2008, CPR sent Valero copies of the writings with CPR's edits, noting the terms CPR believed to be inconsistent with the parties' previous discussions and agreement. (Pls.' Statement of Facts ¶ 28, D.E. # 131-45.)
Neither Valero's February writings nor CPR's April mark-up contained a two-year
On May 27, 2008, CPR sent Valero another copy of its mark-up of the 953 and 954 writings. (Pls.' Statement of Facts ¶ 28, D.E. # 131-45.) According to Valero, by May 2008, the parties had still not reached a final agreement on a term contract. (Defs.' Statement of Facts ¶ 71, D.E. # 120-2.)
Valero did not respond to CPR's mark-up of the writings until December 22, 2008, when Valero faxed its own edits of the 953 writing to CPR. (Pls.' Statement of Facts ¶ 32, D.E. # 131-45.)
Valero adds that from February 26, 2008 through June 1, 2009, Valero performed all of its obligations under the terms of the 953 and 954 writings even though Valero believes that it never reached an agreement with CPR on those terms. (Defs.' Resp. to Statement of Facts ¶ 39, D.E. # 169.) Furthermore, the terms that applied to each load did not match CPR's April edits to Valero's writings. (Defs.' Statement of Facts ¶ 86, D.E. # 120-2.) For example, the specifications of the slurry CPR accepted from Valero did not meet the proposed minimum and maximum specifications that were set forth in CPR's edits, and the quantity did not met the quantity CPR proposed in its markup of the February 2008 draft contract. (Id.) While admitting that the specifications of the slurry frequently did not conform to the promises Valero made, CPR maintains that the parties performed under the terms of the 953 and 954 writings for each sale of slurry. (Pls.' Resp. to Defs. Statement of Facts ¶ 86, D.E. # 136-4.)
Between February 26, 2008 and September 30, 2008, the WTI for crude oil remained above $100 per barrel for all but nine days. (Pls.' Mot. Summ. J., ex. 19, Hayes Aff., Fig. 1.) Between October 1, 2008 and June 1, 2009, the WTI never exceeded $100 and fell as low $33.87 per barrel on December 19 and 20, 2008. (Id.) By December 2008, Tryon acknowledged in his monthly report that "Memphis is a problem for us right now. We are currently under term contract with CPR, but we are convinced that the oil is worth much more in the spot market. We have not been able to make much progress with changing the price on the CPR contract." (Pls.' Statement of Facts ¶ 44, D.E. # 131-45.) This same statement appears in several other monthly reports from Tryon thereafter. (Id.)
CPR's Jones requested a face-to-face meeting with Olson and Stanich in San Antonio, and the parties agreed to meet on December 11, 2008, in order "to discuss our current Memphis slurry contract." (Pls.' Statement of Facts ¶ 49, D.E. # 131-45.) Subsequently, on January 12, 2011, Olson sent an email to several individuals including Jones, in which he wrote, "Valero gives notice of cancellation on Contract 40190954 and Contract 40190953." (Pls.' Mot. Summ. J., ex. 46, Olson Email, Jan. 12, 2008.) On January 22, 2009, Stanich emailed Jones, indicating that he had "met with David and Hal to review the term sale of slurry from the Memphis refinery" and explaining that the "purpose of the pricing clause in our contract that allows for renegotiation when the price of crude dramatically rises or falls is to ensure a reasonable market value for the product." (Pls.' Mot. Summ. J., ex. 41, Stanich Email, Jan. 22, 2009.) Finally, in his January 26, 2009 email to Jones, Stanich restated Valero's pricing offer and added "I am willing to extend that offer through the remainder of the contract period (6/1/2009). Valero considers the contract cancelled as of 6/1/2009." (Pls.' Mot. Summ. J., ex. 42, Stanich Email, Jan. 26, 2009.)
In an effort to mitigate its damages, CPR ultimately agreed to Valero's new pricing on loads taken on and after January 12, 2009. (Pls.' Statement of Facts ¶ 57, D.E. # 131-45.)
CPR has alleged that Valero was not selling CPR all of the slurry produced in Memphis as promised. On October 22, 2008, Tryon emailed Stanich, writing
Then, on November 7, 2008, Tryon emailed Olson, "We are going to load a spot tow over the weekend at Memphis. At this time CPR does not know about this oil. I can sell it to the guys I have talked to in the past, or we can deliver it to CPR." (Pls.' Statement of Facts ¶ 61, D.E. # 131-45.) Again, on December 1, 2008, Tryon emailed Olson, regarding another sale of Memphis slurry to a third party, noting that the third party would pay $4.25 per barrel more than the contract with CPR provided, and stating "[w]e are loading a barge of slurry from Memphis today. CPR is not aware of this oil movement." (Id. ¶ 62.)
STANDARD OF REVIEW
Federal Rule of Civil Procedure 56(a) provides that "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.
Summary judgment must be entered "against a party who fails to make a showing
I. Breach of Contract
A. Choice of Law
A federal court sitting in diversity applies the law of the forum state, including the forum's choice-of-law rules.
In a contract for the sale of goods, Tennessee's Uniform Commercial Code ("UCC") deviates from the traditional lex loci rule. Tenn.Code Ann. § 47-1-301 states, "when a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties."
It is undisputed that the parties' transactions had some relationship to more than one state. The record shows that the parties' negotiations took place in the state of Texas. Valero produced and CPR took delivery of the slurry under the FOB or 953 writing in the state of Tennessee. Valero provided CPR with slurry under the delivered or 954 writing in the state of Louisiana. Based on the fact that the slurry was produced in Tennessee and CPR took delivery of the goods in Tennessee, it is clear that the transaction bears a reasonable and appropriate relationship to the state of Tennessee. Therefore, the Court will apply Tennessee law to the contract claims in this case, unless the
The Court holds that for purposes of this Motion, it need not reach the issue of whether the parties' had such an agreement. The parties' contract for the sale of slurry was not governed by a single writing. If the parties had a contract at all, they had, as more fully discussed below, a contract by operation of UCC § 2-207(3) based on their conduct and their exchange of the 953 and 954 writings. The 953 and 954 writings contained a choice of law provision stating that Texas law would govern any dispute arising under the contract.
On the other hand, despite the language in the writings, neither party has raised the choice of law provision much less argued that Texas law should apply to the contract claims.
B. The Parties' Arguments
Valero seeks summary judgment on CPR's breach of contract claim. First, Valero argues that the alleged oral contract made in December 2007 violates the statute of frauds. None of the writings subsequently exchanged between the parties included all of the terms of the alleged oral contracts. The writings contained terms different from the terms allegedly agreed to in the December 2007 deal. As such the writings cannot be construed as written confirmations of the oral contract. Second, Valero contends that the conduct of the parties did not establish a contract as a matter of law. Even if the Court conducted a "battle of the forms" analysis of the parties' writings, the writings do not agree on material terms like duration, price, quantity, and quality. The conflicting terms, thus, knock each other out. According to Valero, "as a matter of law, no contract was, or can be, formed without
In its Cross-Motion for Partial Summary Judgment, CPR seeks summary judgment on the issues of (1) whether the parties had a binding, enforceable agreement as to the material terms of product, location, price, quantity, and duration; and (2) whether Valero breached the agreement by refusing to honor its material terms through March 1, 2010. CPR begins by emphasizing the Tennessee UCC's "low bar" for the enforceability of agreements for the sale of goods, particularly the requirement of a writing confirming an agreement. CPR points to the 953 and 954 writings as evidence of the parties' contract. Next, CPR argues that the parties' conduct recognized the existence of a contract. The parties exchanged writings and performed according to the terms of the writings for more than a year. As such, UCC 2-207(3) provides that the terms of the contract are those on which the writings of the parties agree along with the UCC's gap-filling provisions. CPR points to many instances where Valero referred to the writings as the "term contract" and even sought to enforce its terms against CPR. When the parties reached an impasse in later 2008, Valero even gave CPR notice of its termination of the contract. Thus, CPR contends that Valero's own conduct recognized the existence of a contract and any suggestion by Valero that the parties only engaged in a series of spot transactions is without support in the record. The writings exchanged between the parties and their course of performance demonstrates agreement on product, quantity, price, and duration. Therefore, CPR claims that it is entitled to summary judgment on the existence of a contract between the parties and Valero's breach of the contract by refusing to honor it through March 1, 2010.
Under Tennessee law, a plaintiff alleging breach of contract must prove (1) the existence of a contract, (2) breach of the contract, and (3) damages which flow from the breach.
Tennessee has adopted UCC 2-207(3) at Tenn.Code Ann. § 47-2-207(3), which provides, "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 the months that followed, it is clear that the parties conducted themselves as though they had a term contract. The record shows that up until Valero terminated the contract in early 2009, both parties transacted business as though the 953 and 954 writings controlled their dealings. Although Valero argues that each of its transactions with CPR was an individual "spot deal," Valero does not deny that it conformed to the requirements of the 953 and 954 writings and that Valero's own sales paperwork at all times referred to a term contract with CPR. Perhaps most tellingly, when the parties' relationship deteriorated, Valero terminated the "contract" in accordance with Rider B, a provision the parties had incorporated into the 953 and 954 writings. In fact, Valero gave notice of termination in accordance with this provision on three separate occasions, twice by Olson and once by Stanich. For each notice of termination, Valero referred variously to the contract or "extending the contract" or "Contract 40190954 and Contract 40190953" or "the remainder of the contract period (6/1/2009)." Had Valero not believed that it had a term agreement with CPR, its three notices of termination would have been unnecessary. Ultimately, when their attempts to renegotiate the pricing term failed, Valero informed CPR that the "agreements for Slurry High Sulfur FOB, Memphis conclude on June 1, 2009 and Slurry High Sulfur Delivered, New Orleans concludes on February 28, 2009. Valero considers these contracts cancelled at the conclusion of the contract terms." In the same message, Olson also stated that Valero had "under delivered" 750,000 barrels of oil to CPR under the delivered agreement, another recognition of a binding contractual obligation.
C. Terms of the Contracts
Because the Court holds that the parties had a contract by virtue of their conduct, Valero's Motion for Summary Judgment on the non-existence of a contract must be
The Court begins its analysis by addressing the following initial matters. First, the parties in this case had two separate agreements, the FOB contract governed by the 953 writings and the delivered contract governed by the 954 writings. As a result, the Court will consider each group of writings separately, analyzing the 953 writings to arrive at the terms of the FOB contract and the 954 writings to identify the terms of the delivered contract. Second, CPR has pled the breach of a number of terms in the contracts, specifically, the quantity, the price, fuel specifications, the duration, damages to the barges, and demurrage fees.
1. The FOB Contract
The Court holds that the term of the FOB contract included "a period beginning February 28, 2008 up to and including June 1, 2009" and that the agreement would "automatically renew for two additional one year terms, unless either party gives the other party at least ninety (90) days advance written notice prior to the expiration of the initial term or any renewal term hereunder of its intention not to renew the agreement." Both CPR's April 11, 2008 writings and Valero's December 22, 2008 writings contained the term about automatic renewal for two additional one-year terms, the so-called "evergreen" provision. The term first appeared in CPR's April 11, 2008 revisions, in Rider B, which stated, "The provisions of this Agreement shall automatically renew for two additional one year terms, unless either party gives the other party at least ninety (90) days advance written notice prior to the expiration of the initial term or any renewal term hereunder of its intention not to renew the Agreement." Valero then added the language to its 953 writing in the December 22, 2008 version. Therefore, the Court holds that under Tenn.Code Ann. § 47-2-207(3), this term became part of the parties' FOB contract by conduct.
As for "the initial term" of the contract, the Court holds that the initial term of the FOB contract ran from February 28, 2008, through June 1, 2009. The parties' first writings, CPR's April mark-up and Valero's February 953 writing, contain the following term: "This agreement shall remain in effect for a period beginning on February 28, 2008 up to and including March 1, 2009." Based on the agreement of these writings, the initial term of the FOB contract was to run through March 1, 2009. However, the record shows that the "initial term" was subsequently extended by the parties. CPR concedes in its briefs that "while performing under the 953 and 954 agreements, Valero extended the term [from March 1, 2009] through June 1 [, 2009] on the 953 agreement," presumably without objection from CPR.
CPR argues without elaboration that the end of the "initial term" of the FOB contract continued to be March 1, 2009, even after the parties agreed to the extension through June 1. The Court finds CPR's argument unpersuasive. As a general matter, CPR's position is not supported in the record. There is no evidence that the parties intended anything other than a three-month extension of the "initial term" of the FOB contract, from March 1 to June 1, 2009. CPR's construction of "initial term" is also inconsistent with the writings themselves. CPR first proposed the language
Having held that the "initial term" of the FOB contract ended on June 1, 2009, and that either party had the right to give 90 days advance written notice of nonrenewal prior to the expiration of the initial term, the Court holds that Valero did not breach the term provision of the FOB agreement. The record shows that Valero gave multiple notices of its intention not to renew the FOB agreement, all of which occurred more than 90 days prior to June 1, 2009. In the last of these written notices, a February 20, 2009 email from Olson to Jones, Olson wrote that Valero considered the FOB contract cancelled as of June 1, 2009, "the conclusion of the contract term." The Court finds that the email came more than 90 days prior to June 1, 2009. Therefore, CPR's Motion for Partial Summary Judgment on the issue of whether Valero breached the term provision of the FOB contract must be
2. The Delivered Contract
The Court holds that the term of the delivered contract ran from "a period
Based on the Court's construction of the 954 writings, the Court holds that Valero breached the term provision of the delivered contract. As previously discussed, Valero terminated both contracts with CPR on three different occasions. In each instance, Valero failed to notify CPR within at least 90 days of the expiration of the initial term of its intention not to renew for another year. In order to provide timely notice of non-renewal beyond the initial term, Valero had to give CPR written notice no later than December 1, 2008. Valero first purported to give notice in a December 4, 2008 email from Olson to Jones in which Jones proposed a new price term. Not only was Valero's notice untimely, Olson added, "If this price is unacceptable, we are providing our 90 day notice for cancellation. If we have not received a response by December 8, 2008, we will consider our contract cancelled effective December 9, 2008." The Court holds that this notice was ineffective not only as untimely but also because it asserted that the contracts would be cancelled on December 9, 2008, and not at the end of the initial term.
Valero's other cancellations are equally problematic. Valero gave its next "notice of cancellation on Contract 40190954" on January 12, 2009, and its final notice of the conclusion of the delivered contract on February 20, 2009, stating that the "Slurry High Sulfur Delivered, New Orleans concludes on February 28, 2009." The Court holds that these subsequent notices were clearly given less than 90 days prior to the expiration of the initial term. Under the terms of the 954 writings on which the parties agreed, the delivered contract automatically renewed for one year once Valero failed to give timely notice of its intentions. The Court concludes that the initial term of the delivered contract ended on March 1, 2009, and a one-year automatic "renewal term" extended the delivered contract through March 1, 2010. Therefore, CPR's Motion for Partial Summary Judgment on the issue of whether Valero breached the term provision of the delivered contract is
II. Promissory Torts
A. Choice of Law
With respect to CPR's promissory tort claims, the Court again turns to Tennessee's choice-of-law rules. Tennessee has adopted the "most significant relationship" test of the Restatement (Second) of Conflict of Laws to choice-of-law questions for tort claims.
Applying Tennessee's most significant relationship test, the Court holds that Tennessee law governs CPR's promissory tort claims. Neither party has argued that the Court should apply the laws of any state other than Tennessee to CPR's promissory torts even though several other states have a connection to these claims. CPR is an Alabama limited liability company whose sole member, Jones, is a citizen of Florida.
B. The Parties' Arguments
Valero seeks summary judgment on all of CPR's various promissory tort claims. As a general matter, Valero has made two arguments for judgment as a matter of law
In response, CPR contends that factual disputes remain that should preclude summary judgment. CPR emphasizes that its claims are based on Valero's promise of a two-year term and CPR's reliance on that promise in signing a two-year barge lease with a third party. Prior to signing the barge lease on February 5, 2008, Jones believed that Valero had agreed to a two-year term for the sale of its Memphis slurry in December 2007. CPR argues that there is also evidence that Valero confirmed that understanding in February 2008, just before Jones signed the barge lease. The existence of Valero's misrepresentation and CPR' reasonable reliance on the misrepresentation are questions of fact, about which reasonable minds could differ. Therefore, CPR contends that Valero is not entitled to summary judgment on these claims.
Having dismissed CPR's claim for conversion at the pleadings stage, the following tort claims remain: (1) fraud in the inducement/promissory fraud/fraud, (2) promissory estoppel and, (3) equitable estoppel.
C. Jones' Summary Judgment Affidavit
As an initial question, the Court will determine whether it should disregard Jones's summary judgment affidavit. In its response to Valero's Motion for Summary Judgment on the promissory tort claims, CPR has produced the affidavit of William Jones. Valero has argued in its reply brief that Jones's summary judgment affidavit contradicts his previous deposition testimony, and therefore, the Court should disregard it. A party cannot create a genuine issue of material fact for purposes of summary judgment by presenting an affidavit that contradicts prior deposition testimony.
Here Valero argues not that the Jones affidavit contradicts prior testimony but that the affidavit contains statements that expound on Jones's answers given at his deposition. First, Valero requests that the Court strike Jones' affidavit statement that he signed a two-year barge lease in reliance on David Olson's assurances that the parties had a two-year contract for the sale of Valero's slurry. According to Valero, Jones did not testify to this fact when questioned about it at his deposition. Counsel for Valero asked Jones why he was concerned that he "did not have a signed, written agreement with Valero at the time you were committing CPR Marine to this deal with Martin Marine." Jones answered that he had received a petroleum industry report in January 2008 that Valero's Memphis refinery might be up for sale. Jones telephoned Olson to inquire about the report to which Olson responded "don't worry about it; you've got your two years; everything's fine." Valero contends that Jones had the opportunity to provide the information given in his affidavit during his deposition and failed to do so. The Court disagrees. Valero has not shown that the statements in the Jones affidavit contradict or improperly expound upon his prior deposition testimony. On the contrary, the testimony Valero cites from Jones' deposition is consistent with Jones' affidavit that he signed the barge lease in reliance on Valero's representations about the parties' two-year term contract.
Second, Valero objects that Jones had the opportunity to testify to the facts set forth in paragraphs 14 and 15 of his summary judgment affidavit but failed to do so. In paragraph 14 of the affidavit, Jones avers that the initial 953 and 954 writings did not conform to the parties' oral agreements, specifically because the writings only provided for a one-year contract.
Nevertheless, even if Valero had cited to the correct portion of the transcript, Valero could not show that Jones has used his summary judgment affidavit to impermissibly expound upon his prior testimony.
D. Fraud in the Inducement/Fraud/Promissory Fraud
CPR has alleged separate claims for fraud in the inducement and fraud/promissory fraud. In Count I of its Amended Complaint, CPR claims that Valero fraudulently induced CPR to enter into the barge lease by promising to sell CPR all of the slurry produced at Valero's Memphis refinery for a period of two years.
Courts applying Tennessee law have analyzed claims for fraud in the inducement and fraud/promissory fraud under essentially the same tests. The Tennessee Supreme Court has recently held that in order to recover on a claim for fraudulent inducement, also known as fraud in the inducement, a plaintiff must prove the following: (1) the defendant made a false statement concerning a fact material to the transaction (2) with knowledge of the statement's falsity or utter disregard for its truth and (3) with the intent of inducing reliance on the statement; (4) the statement was reasonably relied upon; and (5) an injury resulted from this reliance.
The Court would add that CPR's claims are premised on false promises of future conduct without the present intent to perform. CPR has asserted that in December 2007 Valero promised to sell CPR all of the slurry produced at the Memphis refinery for a period of two years beginning in early 2008. It is clear then that Valero's alleged promises concerned future conduct, and not a past or present fact. Under the circumstances, the Court will analyze CPR's claims for fraud in the inducement as claims for promissory fraud.
Valero argues that it is entitled to summary judgment because CPR cannot establish that Valero promised a two-year contract for the sale of slurry. The Court finds Valero's arguments to be without merit. CPR has adduced proof through Jones and Mis that Valero's agents promised to sell CPR its Memphis slurry for a period of two years.
Although there is evidence that Valero promised to sell CPR all of its slurry for a period of two years, the Court holds that CPR has not adduced evidence that Valero did so with fraudulent intent. Specifically, CPR has not come forward with any direct evidence,
"Where a claim for fraudulent inducement rests on false promises made without the present intent to perform, or promissory fraud, the plaintiff must prove more than a subsequent failure to keep the promise."
Moreover, "[i]n no case may fraud ever be presumed or an inference of fraud made from circumstances that equally permit reasonable inferences of non-fraudulent conduct."
Viewing the record in the light most favorable to CPR, the Court holds that there is no evidence from which a reasonable juror could find that Valero made a false promise without the present intent to perform. CPR has the burden to show that Valero had no intention of honoring its promise in December 2007 to sell all of its Memphis slurry to CPR for two years, a promise Valero reaffirmed in February 2008. The evidence, however, shows that the parties transacted business under the terms of the 953 and 954 writings for some months and did so without any signs of breach until late 2008.
Even as it was looking for ways to renegotiate the pricing for its slurry, Valero continued to recognize the existence of a binding contract. When the parties could not reach an agreement on a new price model, Valero gave notice that it was cancelling the FOB agreement effective June 1, 2009, and the delivered agreement effective March 1, 2009. Construing these facts in a light most favorable to CPR, a reasonable juror could infer that the parties performed until such time as the market price for crude sharply declined. CPR has not shown, however, that Valero's decision to cancel the agreements after months of transactions proves Valero's bad intent at the time the promises were made in late December 2007 and February 2008. Therefore, the Court concludes that there is no proof Valero made its promises without a present intention of carrying them out.
The Court further holds that CPR has not adduced "any other evidence that sufficiently indicates" Valero's intention not to perform as promised at the time it made its promises. Viewing the record in the light most favorable to CPR, there is simply no evidence from which an inference can be drawn of Valero's bad intent at the time it made promises to CPR. It is true that on February 26, 2008, less than a week after reaffirming the oral agreement,
Furthermore, no reasonable juror could conclude that Valero's addition of the "price band" term in the initial 953 and 954 writings implied a present intent not to perform as promised. This term stated that "[p]rice will be based on WTI priced between $85.00 and $115.00 per barrel." Valero does not dispute that the parties had not previously agreed to such a term during their earlier negotiations. The parties disagree over what the term actually meant or how it affected their agreements: CPR maintains that the term is ambiguous and Valero asserts that it speaks for itself. The record shows that Valero invoked the term when it approached CPR about renegotiating the contract price in December 2008. In one email, Olson proposed a new price "for all forward sales" due in part to the fact that "[s]ince October 10, 2008, the price of WTI has quoted below the contractual band of $85.00 to $115.00 per barrel" and "[o]n December 3, 2008, WTI closed at $46.79 per barrel."
Although a party's fraudulent intent is generally a question of fact, the Court holds that CPR has failed to come forward with evidence creating an issue of material fact with regard to Valero's present intent not to undertake its promised conduct. The record evidence equally permits reasonable inferences of non-fraudulent conduct. Therefore, Valero's Motion for Summary Judgment is
E. Promissory Estoppel
Valero next moves for summary judgment on CPR's claim for promissory estoppel. Valero argues that under Tennessee law, the doctrine of promissory estoppel is not a defense to the statute of frauds. Furthermore, Tennessee courts have held that promissory estoppel is only available in exceptional cases where the promisor's actions approach actual fraud. Valero again denies that it ever made any promise to CPR, and even if it had, such a promise is unenforceable because it was never reduced to writing. Finally, just as it did with respect to CPR's promissory fraud claims, Valero contends that CPR has failed to adduce evidence of its reasonable reliance. In response, CPR maintains that there is evidence in the record that Valero did make the alleged promises. CPR also argues that it can prove its reasonable reliance on Valero's alleged promises. Under the circumstances, CPR intends to show that this is an exceptional case, where Valero's conduct borders on actual
The Tennessee Supreme Court has defined promissory estoppel as "a promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance."
The Court holds that CPR has met its burden to show that Valero made certain promises and that CPR reasonably relied on those promises. As the Court stated in its analysis of CPR's promissory fraud claims, CPR has adduced evidence that Valero promised to sell CPR its Memphis slurry for a term of two years. CPR has also come forward with evidence that Valero promised to reduce the parties' agreement to writing. Because the reasonableness of CPR's reliance is a question of fact, the Court also holds that CPR has met its burden as to this element. Finally, the Court finds that viewing the facts in a light most favorable to CPR, evidence satisfying the other limiting factors set forth in Alden exists. CPR's detriment appears to be substantial in an economic sense. CPR has proof that it suffered losses of $9,500 for every day the barges could not transport slurry Valero had agreed to sell CPR. The Court also concludes that the substantial loss to CPR was foreseeable for Valero in so far as Valero knew of the terms of CPR's barge lease and the costs CPR incurred to service the contract. Therefore, the Court must reject Valero's arguments as to these issues.
Still the Court finds that Valero's argument that the doctrine of promissory estoppel is not an exception to the statute of frauds presents a closer question. Generally speaking, the application of the doctrine of promissory estoppel in cases where the statute of frauds is a defense is unsettled under Tennessee law. To begin with, the Tennessee Supreme Court has never directly addressed whether promissory estoppel is a possible exception to the statute of frauds. In Steelman v. Ford Motor Credit Co., the Tennessee Court of Appeals stated that "[o]ur supreme court. . . refused to apply the doctrine of promissory estoppel as an exception to the statute of frauds" and cited the Tennessee Supreme Court's decision in Southern Industrial Banking Corp. v. Delta Properties, Inc.
Not only are Steelman and its progeny not persuasive, but these cases are contradicted by another line of cases from the Tennessee courts. The Tennessee Court of Appeals and federal courts applying Tennessee law have held that promissory estoppel is a viable cause of action even where the statute of frauds renders an oral promise unenforceable.
For example, the Tennessee Court of Appeals in EnGenius Entertainment, Inc. v. Herenton held that the statute of frauds would not bar an independent claim for promissory estoppel.
Likewise, the Tennessee Court of Appeals in Calabro v. Calabro held that the lower court erred in granting summary judgment on a promissory estoppel claim even though the defendant had argued that the oral promises at issue were not enforceable under the statute of frauds.
And in Launius v. Wells Fargo Bank, the United States District Court for the Eastern District of Tennessee addressed the issue presented in the case at bar, whether promissory estoppel is an exception to the statute of frauds.
The Court finds that these cases are representative of those holding that a statute of frauds defense will not preclude a claim for promissory estoppel. It is not clear to the Court how this reasoning squares with other decisions in which the Tennessee Court of Appeals has held that promissory estoppel is not an exception to the statute of frauds.
Even if the Court assumed that a cause of action for promissory estoppel is available where a defendant raises the statute of frauds as a defense, the Tennessee Supreme Court has not defined the limits for applying promissory estoppel to promises that are unenforceable under the statute of frauds. The court has cited with approval the definition of promissory estoppel set forth in the Restatement of Contracts.
Generally, the kind of promissory estoppel described in Restatement (Second) § 90 governs the enforcement of promises unsupported by consideration.
Section 139(2) goes on to set forth a list of equitable factors for determining whether injustice can be avoided only by enforcing an alleged promise.
Based on the number of unresolved issues concerning promissory estoppel under Tennessee law, the Court finds that the appropriate course is to certify questions to the Tennessee Supreme Court. Tennessee Supreme Court Rule 23 permits a District Court for the United States in Tennessee to certify questions of law to the Supreme Court of Tennessee. Under Rule 23, this Court may certify a question of law when the Court determines that (1) there is a question of law that is determinative of the cause, and (2) there is no controlling precedent in Tennessee Supreme Court decisions.
The Court finds that both criteria of Tennessee Supreme Court Rule 23 are satisfied with respect to this issue. Whether promissory estoppel is an exception to the statute of frauds and, if so, the quantum of proof required to establish such a claim are determinative of CPR's claim for promissory estoppel. Additionally, the Tennessee Supreme Court has never addressed the issues presented, and the Tennessee Court of Appeals has issued conflicting decisions. Therefore, the Court does not believe that a reasonably clear and principled course on the issue exists. As a result, the Court will exercise its discretion to certify these questions to the Tennessee Supreme Court. The Court will enter a separate order of certification. The Court hereby reserves ruling on CPR's promissory estoppel claim until such time as the Tennessee Supreme Court answers or otherwise disposes of the certified questions.
F. Equitable Estoppel
In Count III of the Amended Complaint, CPR has alleged a claim for "Promissory Estoppel and Equitable Estoppel." In its Motion for Summary Judgment, Valero briefed the applicable law on the doctrine of promissory estoppel only. Valero's opening brief does not refer to the doctrine of equitable estoppel. In its response to Valero's arguments about CPR's claim for promissory estoppel, CPR draws attention to this omission and argues that Valero has moved for summary judgment only on CPR's claims for promissory estoppel. CPR emphasizes that equitable estoppel is "a separate doctrine" from promissory estoppel. CPR states that in light of Valero's failure to mention equitable estoppel in its Motion for Summary Judgment, CPR has elected not to brief the merits of such a claim in its response. In its reply memorandum, Valero argues that the Amended Complaint alleges a single count for "promissory estoppel and equitable estoppel" and that it is entitled to summary judgment on the entire count.
The Court notes that some confusion surrounded Count III of CPR's Amended Complaint at the pleadings stage. The Amended Complaint does, in fact, include a single count captioned as "Promissory Estoppel and Equitable Estoppel." In support of this count, CPR alleged that Valero made three distinct promises: (1) to sell CPR all of the No. 6 fuel oil (i.e. slurry) Valero was generating at the Memphis refinery; (2) to do so for a term of two years; and (3) to reduce the parties' December 14, 2007 oral agreement to writing.
Construing the allegations in the light most favorable to CPR at the pleadings stage, the Court simply held (on reconsideration) that CPR had alleged sufficient factual material to survive Valero's Rule 12 motion. The Court stated that each form of estoppel is "a distinct and disparate doctrine" and that the principle difference between the two is "that equitable estoppel is a recognized exception to the Statute of Frauds."
Despite Valero's failure to brief the issue, the Court holds that CPR's claim on this theory must fail for the same reasons as CPR's other claims sounding in fraud. CPR has failed to adduce evidence from which a reasonable juror might find that Valero acted with fraudulent intent at the time it made its promises. Unlike promissory estoppel, the Tennessee courts have consistently held that equitable estoppel is a recognized exception to the Statute of Frauds.
The Court holds that even though it did not brief this issue in its opening brief, Valero is entitled to judgment as a matter of law on CPR's equitable estoppel claim. CPR has failed to adduce evidence of fraud in this case. For the reasons already discussed, there is no evidence that Valero made with bad intent a false representation to CPR that it would sell CPR all of its Memphis slurry for a term of two years and reduce the parties' agreement to a writing. There is, likewise, no evidence that Valero concealed any material facts in order to convey the impression that the facts were otherwise than what they were. Therefore, Valero is entitled to summary judgment on this claim, and its Motion is
III. Tennessee Consumer Protection Act
Valero next argues that it is entitled to summary judgment on CPR's TCPA claim. In order to recover under the TCPA, a plaintiff must demonstrate "(1) that the defendant engaged in an unfair or deceptive act or practice declared unlawful by the TCPA and (2) that the defendant's conduct caused an `ascertainable loss of money or property, real, personal, or mixed, or any other article, commodity, or thing of value wherever situated.'"
The Court holds that CPR has adduced sufficient evidence to create an issue of material fact as to its TCPA claims. Questions of fact about Valero's conduct remain, especially, whether Valero's conduct was unfair or deceptive. CPR has also shown an ascertainable loss of money and presented evidence from which a reasonable juror might conclude that
Valero has raised a second argument in support of its Motion for Summary Judgment on the TCPA claims, namely, that CPR's claim is time-barred. Valero contends that CPR's cause of action accrued on February 26, 2008, the date on which Valero sent CPR the initial 953 and 954 writings. At that time, "CPR had full notice that Valero did not understand any deal between the parties to be two years." The Court finds Valero's argument unpersuasive.
A TCPA claim must be brought within one year from discovery of the unlawful act or practice.
IV. Claims Asserted by CPR Marine
Valero has sought summary judgment as to all claims alleged against it by CPR Marine (D.E. # 126.) The following facts are not in dispute for purposes of that Motion. Bill Jones founded CPR Marine in approximately 2008. (Defs.' Statement of Facts ¶¶ 1, 2, D.E. # 126-2.) Jones is the sole member and employee of CPR Marine. (Id. ¶ 3.) Jones alone has the authority to enter into contracts on behalf of CPR Marine. (Id. ¶ 4.) Jones testified that he created CPR Marine for the purpose of entering into barge contracts, including a barge arrangement with L & R Midland for the barges CPR then used to transport slurry from the Memphis refinery. (Id. ¶ 5.) CPR Marine entered into a contract with Martin Marine for barges on February 5, 2008. (Id. ¶ 6.) Jones signed the contract on behalf of CPR Marine. (Id. ¶ 7.)
In addition to the contract and tort claims alleged by CPR against Valero, CPR Marine has pled the same claims: breach of contract, fraud/fraud in the inducement, promissory fraud, promissory estoppel, and equitable estoppel. Valero argues that it is entitled to summary judgment on CPR Marine's claims because CPR Marine is not a real party in interest. Valero contends that it was never a party to any dealings with CPR Marine. Therefore, CPR Marine cannot prove any claims against Valero. In response, CPR Marine asserts that it can recover for breach of contract. According to CPR a reasonable juror could infer that CPR Marine was a third-party beneficiary of the contract between Valero and CPR. With respect to
The Court holds that much of its analysis of CPR's claims against Valero largely applies to CPR Marine's identical claims against Valero. First, with respect to CPR Marine's promissory estoppel claim, the Court will reserve its ruling on this claim until the Tennessee Supreme Court has answered or otherwise disposed of the certified questions discussed above. Second, because Valero is entitled to judgment as a matter of law on CPR's fraud-based tort claims, Valero is entitled to judgment as a matter of law on CPR Marine's identical tort claims. Therefore, Valero's Motion for Summary Judgment is
This leaves only CPR Marine's beach of contract claim. The Court holds that Valero is entitled to judgment as a matter of law on these claims as to both contracts. It is undisputed in this case that CPR Marine was not a party to the contracts at issue. A third party may sue to enforce a contract only "when the contracting parties express an intent that the benefits of the contract flow to a third party."
CPR Marine has failed to show that it was a third-party beneficiary of any agreement between CPR and Valero. First, there is no evidence that CPR intended to confer a benefit on CPR Marine by entering into the delivered contract with Valero. Under the terms of the delivered contract, Valero promised to deliver slurry to CPR in New Orleans. There is no evidence that the barges leased by CPR Marine were ever involved in the transportation of this slurry. As a result, there is no evidence that CPR Marine was an intended beneficiary of this contract. Therefore, Valero's Motion for Summary Judgment on any claim for breach of this contract is
Second, CPR Marine has failed to come forward with sufficient evidence to show that CPR and Valero entered into the FOB agreement for the direct or primary benefit of CPR Marine. CPR Marine cites only the fact that CPR furnished Valero with copies of unsigned documents showing that CPR Marine, and not CPR, was to be a party to the two-year barge lease. Based on that evidence, CPR Marine argues that Valero "was well aware of CPR Marine's existence and the fact that it would be entering into a two year barge lease based upon the two year agreement between CPR and Valero."
Even if the Court concluded that CPR Marine was a third-party beneficiary of the FOB contract, Valero would still be entitled to summary judgment on the issue of duration. The Court has already held that Valero did not breach the duration term of the parties' FOB contract. For the same reasons, Valero would be entitled to summary judgment on CPR Marine's claim that Valero breached the two-year term of the FOB contract. Therefore, Valero's Motion is
Valero's Motion for Summary Judgment on all of CPR's claims and CPR's Motion for Partial Summary Judgment are
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