BE&K Eng'g Co. v. Rocktenn CP, LLC
| Decision Date | 15 January 2014 |
| Docket Number | C.A. No. 8837-VCL |
| Court | Court of Chancery of Delaware |
| Parties | BE&K ENGINEERING COMPANY, LLC, n/k/a KBR ENGINEERING COMPANY, LLC, Plaintiff, v. ROCKTENN CP, LLC and ROCK-TENN SHARED SERVICES, LLC, Defendants. |
Joseph R. Slights, III, Jason C. Jowers, Elizabeth A. Powers, MORRIS JAMES LLP, Wilmington, Delaware; George A. Smith, Jonathan R. Friedman, Michael C. Paupeck, WEINBERG, WHEELER, HUDGINS, GUNN & DIAL, LLC, Atlanta, Georgia; Attorneys for Plaintiff BE&K Engineering Company, LLC.
John T. Dorsey, Martin S. Lessner, Mary F. Dugan, Emily V. Burton, YOUNG CONAWAY STARGATT & TAYLOR, LLP, Wilmington, Delaware; C. Walker Ingraham, Anna R. Palmer, Rebecca Woods, Sara M. LeClerc, SEYFARTH SHAW LLP, Atlanta, Georgia; Attorneys for Defendants RockTenn CP, LLC and Rock-Tenn Shared Services, LLC.
LASTER, Vice Chancellor.
Plaintiff BE&K Engineering Company, LLC ("BE&K") and defendant RockTenn CP, LLC ("RKT CP") are parties to an agreement that governs the engineering work that BE&K provides on projects at facilities owned by RKT CP. The agreement selects courts in Wilmington, Delaware as the exclusive forum for any disputes. An affiliate of BE&K and defendant Rock-Tenn Shared Services, LLC ("RKT SS") are parties to a second agreement that governs the construction work that the affiliate and any members of its corporate family provide to RKT SS and any members of its corporate family. The second agreement contains a one-way forum selection provision that allows RKT SS to sue anywhere but would require BE&K to sue in a Georgia court. Through this action, BE&K seeks to determine which contract governs its work on a large construction project so that the parties can litigate their disputes in the appropriate court.
BE&K has moved for partial summary judgment declaring that the Delaware agreement governs the engineering work it provided on the project. BE&K also has moved for narrower declarations establishing that the Delaware agreement governs specific work orders. If successful, BE&K asks the court to convert a previously issued preliminary anti-suit injunction into a permanent anti-suit injunction. The motion is granted and the permanent injunction entered.
The facts are drawn from the parties' submissions in connection with the motion for summary judgment. All factual disputes are resolved in favor of the non-movant defendants, who receive the benefit of all reasonable inferences. This proceduralprinciple does not affect the result, which is dictated by judicial admissions and the plain language of the operative agreements.
RKT CP is a Delaware limited liability company with its principal place of business in Norcross, Georgia. The company manufactures paperboard and paper-based packaging at pulp and paper mills located across the United States. RKT CP formerly was known as Smurfit-Stone Container Corporation, and that entity's predecessor in turn was Stone Container Corporation. Certain agreements in the record were executed by RKT CP's predecessors. For simplicity, this decision refers only to RKT CP.
In August 2010, RKT CP decided to upgrade a 70-year old pulp and paper mill in Hodge, Louisiana (the "Hodge Mill") and convert it to a linerboard-only operation. RKT CP termed the upgrade the "Strategic Project." RKT CP contemplated that the Strategic Project would proceed in phases, starting with design and engineering work and proceeding later to construction.
RKT CP hired BE&K to provide the engineering work and site services for the Strategic Project. BE&K later became known as KBR Engineering Company, LLC. Because BE&K appears in this action under its earlier moniker, this decision refers only to BE&K.
Both RKT CP and BE&K are members of larger corporate groups. RKT CP is a wholly owned subsidiary of non-party Rock-Tenn Company, the ultimate parent of its corporate group. BE&K is a wholly owned subsidiary of non-party KBR, Inc., theultimate parent of its corporate group. The Rock-Tenn and KBR corporate groups have worked together on a range of projects, and various entities in the two corporate families are parties to a range of agreements.
To govern the engineering work and site services for the Strategic Project, RKT CP and BE&K entered into a new agreement dated December 21, 2010, called the Master Engineering Services Contract. Dkt. 62 Ex. A. Because the agreement governs engineering services, this decision refers to it as the "Engineering Agreement" or "EA." The Engineering Agreement defines RKT CP as the "OWNER" and BE&K as the "ENGINEER." For the reader's convenience, this decision substitutes "BE&K" for "ENGINEER" and "RKT CP" for "OWNER" in quotations from the agreement.
The Engineering Agreement is a master agreement in the sense that its use is not limited to the Strategic Project at the Hodge Mill. Rather, the parties can use it to govern engineering work and site services that BE&K might provide on projects at any of RKT CP's facilities. Section 1.2 of the Engineering Agreement describes the scope of the Engineering Agreement as follows:
During the Term of this Agreement, [BE&K] will provide engineering services ("Services") to [RKT CP] in accordance with written work orders ("Work Order(s)") issued by [RKT CP] and approved and accepted by [BE&K] for individual projects relating to [RKT CP's] facilities ("Project(s)") where the total installed per-project cost for any construction arising from the Services will be less than Five Million Dollars ($5,000,000). The terms and conditions of this Agreement shall govern each Work Order and the liability of the parties arising from each Work Order. Each Work Order shall contain the information specified in Exhibit A, including [BE&K's] Scope of Services . . . . For its own internal accounting purposes, [RKT CP] may issue a purchase order related to each Work Order; provided, however, that the terms and conditions of this Agreement will apply and the terms and conditions of the purchase orders(including but not limited to the standard terms and conditions on the back of a purchase order) will not apply.
Section 1.4 of the Engineering Agreement elaborates on the types of services that BE&K might provide that will be governed by the contract. It states:
[BE&K] shall perform the Services specified in each Work Order, which may include but [are] not limited to: studies, conceptual designs, preliminary designs, and detail designs; including, but not limited to, calculations, designs, equipment and material sizing, specifications, procurements, plans, construction drawings, estimates, schedules, and other ancillary engineering and procurement activities as required by the Contract Documents to complete the Project.
Section 2.1 of the Engineering Agreement defines the "Contract Documents" for each Project, stating that "[t]he following Enumerated [sic] documents are incorporated herein by reference . . . [and] such documents, together with this Agreement, constitute the Contract Documents and set forth the Contract." Id. § 2.1. Section 2.1 lists three documents: (i) "Exhibit A - Scope of Project/Work Order Form," (ii) "Exhibit B - Sworn Statement & Waiver of Lien Form," and (iii) "Exhibit C - Basis of Compensation." Id.
The parties selected Delaware law to govern the Engineering Agreement. Id. § 20.3. In the event of disputes, the parties conferred exclusive jurisdiction on the state and federal courts located in Wilmington, Delaware for any dispute that "arises out of or relates to this Contract, any Work Order(s), or the breach thereof." Id. § 17.1 (the "Delaware Forum Clause"). The parties agreed on a range of other provisions to limittheir contractual and extra-contractual liability and to regulate the dispute resolution process. See, e.g., id. § 17.1 ().
In November 2011, RKT CP interviewed companies to undertake the next phase of the Strategic Project, which was the construction work at the Hodge Mill. RKT CP decided to hire non-party SW&B Construction Company, LLC ("SW&B"). SW&B is an affiliate of BE&K and a wholly owned subsidiary of non-party Kellogg Brown & Root, LLC ("Kellogg"), which in turn is a wholly owned subsidiary of KBR.
For the construction phase, RKT CP and SW&B did not contract directly with each other. Instead, the Rock-Tenn corporate family used as its counterparty RKT SS, a Georgia limited liability company with its principal place of business in Norcross, Georgia. RKT SS is a sister subsidiary of RKT CP that provides administrative and management services to Rock-Tenn Company and its affiliates. The KBR corporate family used Kellogg as its counterparty.
As with the Engineering Agreement, the parties did not enter into a contract relating exclusively to the Strategic Project at Hodge Mill. Instead, they prepared a Master Purchase Agreement for Equipment, Parts, Services, which became effective as of December 5, 2011. Dkt. 27 Ex. 7. Because the agreement governs construction services, this decision refers to it as the "Construction Agreement" or "CA." Like the Engineering Agreement, the Construction Agreement is a master agreement that can be used for goods and services that entities in the KBR corporate family might provide for projectsidentified by entities in the Rock-Tenn corporate family, whether at the Hodge Mill or at other facilities.
To this end, the Construction Agreement defines RKT SS as the "Buyer," but it specifically contemplates that Rock-Tenn Company and its affiliates, defined collectively in the agreement as the "Rock-Tenn Affiliates," can make purchases under the agreement. CA at 1 (). The Construction Agreement defines Kellogg as the "Seller," but it specifically contemplates that the agreement can be "employed for Purchase Orders with...
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