Westlake Petrochemicals, L. L.C. v. United Polychem, Inc.

• Decision Date: 07 August 2012
• Docket Number: No. 10–20634.,10–20634.
• Citation: 688 F.3d 232
• Parties: WESTLAKE PETROCHEMICALS, L.L.C., Plaintiff–Appellee–Cross–Appellant, v. UNITED POLYCHEM, INC., and Lynne Van Der Wall, Defendants–Appellants–Cross Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

688 F.3d 232

WESTLAKE PETROCHEMICALS, L.L.C., Plaintiff–Appellee–Cross–Appellant,

v.UNITED POLYCHEM, INC., and Lynne Van Der Wall, Defendants–Appellants–Cross Appellees.

No. 10–20634.

United States Court of Appeals, Fifth Circuit.

July 24, 2012.

As Revised Aug. 7, 2012.

Warren W. Harris (argued), Jeffrey L. Oldham, Bracewell & Giuliani, L.L.P., Bradley Mark Whalen, Porter & Hedges, L.L.P., Houston, TX, Plaintiff–Appellee Cross–Appellant.

Martin Jonathan Siegel (argued), Law Office of Martin J. Siegel, P.C., Houston, TX, for Defendant–Appellant Cross–Appellee.

Appeals from the United States District Court for the Southern District of Texas.

Before JONES, Chief Judge, and WIENER and GRAVES, Circuit Judges.

WIENER, Circuit Judge:

Defendants–Appellants–Cross–Appellees United Polychem, Inc. (“UPC”) and Lynne Van Der Wall (“Van Der Wall”) (collectively, “Appellants”) and Plaintiff–Appellee–Cross–Appellant Westlake Petrochemicals, L.L.C. (“Westlake”) appeal different results of a jury trial. At the core of that trial was an agreement between UPC as buyer and Westlake as seller of ethylene, a petroleum product. The jury found that (1) the parties had formed a binding contract, (2) UPC breached that contract, and, as a result, (3) UPC was liable to Westlake for $6.3 million in actual damages and $633,199.67 in attorneys fees. The district court entered a final judgment in which it awarded Westlake damages and attorney's fees against UPC under the jury's verdict and also held Van Der Wall jointly and severally liable under the terms of a guaranty agreement (the “Guaranty”). UPC and Van Der Wall appeal those aspects of the jury verdict and the district court's ruling, contending that (1) a binding contract was not established, (2) the district court did not apply the correct measure of damages, and (3) Van Der Wall is not jointly and severally liable for the jury verdict under the terms of the Guaranty. We affirm in part and reverse and remand in part.

I. Facts & Proceedings

A. Facts

UPC is a distributor of petrochemicals and plastics. In 2008, it sought to enter the market for ethylene, a petroleum product used in making plastics, with the intention of buying and reselling the compound. To facilitate UPC's acquisition of ethylene, Van Der Wall, as UPC's President, gave permission to a bilateral broker, Lawson Brice,¹ to bid for five million pounds of ethylene per month during calendar year 2009 at a fixed price of $0.54 per pound. On July 2, 2008, Brice matched UPC's bid with an offer from Westlake, and Westlake agreed to the transaction, subject to credit approval.

Under industry custom, after a bilateral broker matches a bid with an offer, the broker “lifts the veil,” revealing the buyer's and seller's respective identities to one another. It is at this point that a deal is considered to be “done,” i.e., the parties have reached an agreement. The broker typically sends a written confirmation to each party notifying them that the deal is done, meaning that there is a contract. Following the lifting of the veil, the parties have a brief window of time during which either may cancel the transaction, with or without any grounds.²

After matching UPC's bid with Westlake's offer on July 2, 2008, Brice sent an instant message to Westlake's ethylene commercial manager, Bryan Chappelle, informing him that the deal was done. Brice also sent Chappelle an email that same day stating “Please find your attached confirmation (pending credit with UPC).” That attachment identified the product and stated the price, the volume, and the method, time, and place of delivery. Brice also sent Van Der Wall an email setting out the same transactional terms and stating “... please accept this email as a ‘pre-confirmation,’ detailing today's transaction.”

At trial, Brice testified that his email to Van Der Wall was in fact a confirmation of the deal that he had brokered that afternoon. He further testified that he had used the term “pre-confirmation” because his company had decided to delay billing UPC for the transaction because UPC was to pay additional fees for access to an exchange market of buyers and sellers of ethylene. Westlake presented additional testimony at trial indicating that parties to such transactions typically negotiate specific credit arrangements after a contract has been reached, usually about one or two months before shipment.

Neither party cancelled the transaction either immediately or within five days after the veil was lifted on July 2, 2008. Instead, they began negotiating credit terms and planning for performing the transaction. UPC's Chief Financial Officer, Mark Selawski, sent credit references and banking and financial information to one of Westlake's credit analysts, Leticia Aleman. Concurrently, Westlake began purchasing ethane, the feedstock for ethylene, for the dual purposes of fulfilling its obligation to UPC and supplying one of its subsidiaries with ethylene.

After reviewing UPC's financial information, Westlake rejected “open credit” for UPC whereby it would simply deliver the ethylene and await payment. In response, UPC proposed that Van Der Wall would execute a personal guaranty as security for UPC's credit. It was at this point that Westlake provided a printed guaranty form to Van Der Wall which Westlake had drafted. It stated that Van Der Wall is responsible for:

all liabilities or obligations of [UPC] whether from invoices, promissory notes, drafts, checks, and all other charges, which may now be outstanding or owing from, or which may be incurred hereafter by [UPC] to [Westlake] ...

Westlake's form also states that Van Der Wall has the right to terminate the Guaranty on 30 days' written notice, and that, on such termination, Van Der Wall:

shall not be responsible for any indebtedness created or incurred by [UPC] hereafter, but shall remain liable hereunder for any indebtedness created or incurred by [UPC] prior to such termination.

Van Der Wall signed the guaranty form and returned it to Westlake on July 23, 2008.

In August, Westlake rejected extending credit to UPC based on the Guaranty alone. On September 22, 2008, Selawski sent an email to Aleman proposing to secure UPC's credit with a $2 million letter of credit in addition to Van Der Wall's Guaranty. On October 3, 2008, Aleman updated Westlake's system with the proposal. She testified that she left Selawski a voicemail message requesting that UPC open the letter of credit before the first shipment and inquiring about the bank that would issue the letter of credit. Selawski testified that he never received that message.

Westlake presented evidence indicating that the market price for ethylene dropped sometime in the fall of 2008, thus turning against UPC's ethylene position. On October 30, 2008, Chappelle sent an email to Van Der Wall, informing him that Westlake was setting up billing in its system for the sale. Van Der Wall replied, “[w]e never closed the deal. We were not approved for credit.” On November 4, Westlake contacted UPC to inform it that Westlake had approved UPC's credit on the terms of Selawski's September 22 offer of security and sought assurance of performance on the contract. Later that day, Van Der Wall informed Westlake that UPC would not perform under the contract because Westlake had not confirmed credit. After UPC repudiated, Westlake decided not to proceed with acquiring ethylene from a supplier in anticipation of delivering ethylene to UPC, although it had procured ethane, the feedstock of ethylene, for the purpose of supplying one of its subsidiaries in addition to meeting its obligation to UPC.

Westlake filed this suit in state court on November 10. On December 10, 2008, Van Der Wall formally notified Westlake, through his attorney, that he was terminating his Guaranty. The Guaranty's termination took effect thirty days later, on January 9, 2009.

B. Proceedings

As noted, Westlake filed suit in state court against UPC and Van Der Wall on November 10, 2008, claiming that UPC breached its contract by refusing to perform and that Van Der Wall breached the Guaranty by refusing to satisfy UPC's obligations. UPC removed the case to federal court under diversity jurisdiction pursuant to 28 U.S.C. § 1332 and counterclaimed that Westlake had breached the agreement.

At the conclusion of a two-week trial in April 2010, the jury found that UPC and Westlake had formed a binding contract in July of 2008 and that UPC had breached that contract. The jury awarded Westlake $6.3 million in damages and $633,199.67 in attorneys fees. The jury did not decide whether Van Der Wall had breached the Guaranty because the parties had agreed to have the presiding judge decide this issue.³

The district court entered a Final Judgment in which Westlake was awarded damages and attorneys fees pursuant to the jury verdict. The district court later entered an Amended Final Judgment in which it awarded interest to Westlake and held that Van Der Wall was jointly and severally liable under the Guaranty for the full amount of the award.

Appellants now appeal the jury verdict and the district court's judgment, asserting that (1) they and Westlake never formed a binding contract, (2) the district court did not apply the correct measure of damages, and (3) Van Der Wall is not jointly and severally liable with UPC under the Guaranty. Westlake conditionally cross-appeals, asserting that the district court had jurisdiction to enter its Amended Final Judgment, and Appellants agrees with Westlake's position.⁴

II. UPC and Westlake's Contract

A. Standard of Review

“Whether a particular agreement is an enforceable contract is a question of law reviewed de novo.”⁵ Even though the question whether an agreement is legally binding is a question of law, whether an agreement was reached at all is a question of fact.⁶

In this case, the jury made a factual determination that the parties intended to bind themselves to a contract. This court is “wary of upsetting...