806 F.2d 1524 (11th Cir. 1986), 85-3999, Air Products and Chemicals, Inc. v. Louisiana Land and Exploration Co.

Docket Nº:85-3999, 86-3018.
Citation:806 F.2d 1524
Party Name:AIR PRODUCTS AND CHEMICALS, INC., Plaintiff-Appellee, v. The LOUISIANA LAND AND EXPLORATION COMPANY, Defendant-Appellant. The LOUISIANA LAND AND EXPLORATION COMPANY, Plaintiff-Appellant, v. AIR PRODUCTS AND CHEMICALS, INC., Defendant-Appellee.
Case Date:December 31, 1986
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
 
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Page 1524

806 F.2d 1524 (11th Cir. 1986)

AIR PRODUCTS AND CHEMICALS, INC., Plaintiff-Appellee,

v.

The LOUISIANA LAND AND EXPLORATION COMPANY, Defendant-Appellant.

The LOUISIANA LAND AND EXPLORATION COMPANY, Plaintiff-Appellant,

v.

AIR PRODUCTS AND CHEMICALS, INC., Defendant-Appellee.

Nos. 85-3999, 86-3018.

United States Court of Appeals, Eleventh Circuit

December 31, 1986

Page 1525

Peter J. Winders, Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A., Tampa, Fla., for defendant-appellant.

Robert P. Gaines, Beggs & Lane, Pensacola, Fla., for defendant-appellee.

Appeals from the United States District Court for the Northern District of Florida.

Before RONEY, Chief Judge, GODBOLD, Circuit Judge, and ATKINS [*], Senior District Judge.

ATKINS, Senior District Judge:

The Louisiana Land and Exploration Company ("LL & E") appeals from an order granting Air Products and Chemicals, Inc.'s ("Air Products") motion for summary judgment in a declaratory judgment action involving consolidated cases. This court must resolve two issues on appeal. First, we must determine whether LL & E can apply the substitute fuel index retroactively, pursuant to the terms of the contract with Air Products, to the first period of 1980, and the first and second periods of 1981. Second, we must review the district

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court's finding that Air Product's payment constituted an accord and satisfaction of the disputed claim.

After carefully reviewing the record, the briefs, and having considered counsels' oral arguments, we find that the district court properly interpreted the contract to permit retroactive application of the substitute index; however, the district court incorrectly construed the "pendency period" described in the contract. Further, we find that the trial court erred in holding that the parties had entered into an accord and satisfaction. Finally, we remand the case to the district court for consideration of the affirmative defenses of waiver and estoppel.

I STATEMENT OF FACTS

On June 1, 1974, LL & E entered into a contract with Air Products under which Air Products agreed to buy certain ethane gas produced by LL & E. The parties agreed that the price for the ethane would be determined for each six month period beginning with the second period of 1976 1 according to the formula identified in section 5.9 of the contract 2 which required Air Products to pay the higher of the base price, or an inflation escalation price, or a fuel index price which was to be established with reference to posted prices for a certain grade of fuel oil in Platt's Oilgram, a trade publication. Furthermore, in section 5.3 of the contract, the parties agreed that if Platt's Oilgram discontinued its postings, a substitute method of computing the fuel index would be determined in accordance with section 5.12. 3 This section provides that the old price remains in effect during the determination of a substitute index. However, once this substitute is determined, the price is increased retroactively.

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In 1975, Platt's Oilgram ceased to publish prices of the particular grade fuel oil used in calculating the fuel index. Therefore, Air Products wrote LL & E early in 1976 regarding the selection of a substitute, but the parties did not reach an agreement. This problem, however, was largely ignored by both parties until it became apparent the fuel index price was the highest.

Until 1980, economic conditions were such that the inflation formula always provided the highest price. As conditions changed, Air Products' management realized that a fuel index price would control, and set up a reserve fund for the projected increased costs. In April, 1980, Air Products personnel prepared an internal memorandum which recognized that LL & E had apparently made an oversight regarding the selection of a substitute fuel index and noted the potential retroactive application of the substitute fuel index. 4

On December 29, 1981 Air Products personnel noted that a substitute fuel index had not yet been selected by the parties. Moreover, they estimated that the application of a substitute fuel index to the second price period of 1981 would increase Air...

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