Bristol Metals, LLC v. Messer, LLC

• Decision Date: 02 November 2020
• Docket Number: Civil No. 3:20cv203 (DJN)
• Citation: 498 F.Supp.3d 840
• Parties: BRISTOL METALS, LLC, Plaintiff, v. MESSER, LLC, Defendant.
• Court: U.S. District Court — Eastern District of Virginia

498 F.Supp.3d 840

BRISTOL METALS, LLC, Plaintiff,

v.MESSER, LLC, Defendant.

Civil No. 3:20cv203 (DJN)

United States District Court, E.D. Virginia, Richmond Division.

Signed November 2, 2020

Joseph Earl Blackburn, III, Harold Edward Johnson, Williams Mullen, Richmond, VA, for Plaintiff.

Thomas Marshall Wolf, Joseph M. Rainsbury, Miles & Stockbridge PC, Richmond, VA, for Defendant.

MEMORANDUM OPINION

David J. Novak, United States District Judge

Plaintiff Bristol Metals, LLC ("Plaintiff") brings this action against Messer LLC ("Defendant"), alleging that Defendant breached its contract (the "Product Agreement") with Plaintiff by increasing prices for the gasses that Defendant sold to Plaintiff by more than 2% per year. Plaintiff seeks damages for the overcharges and a declaratory judgment declaring that the Product Agreement limits yearly price increases to 2% and/or allows Plaintiff to terminate the parties’ relationship immediately. This matter comes before the Court on the parties’ cross Motions for Summary Judgment (ECF Nos. 15, 17), moving the Court to grant summary judgment in favor of each party on their respective interpretations of the Product Agreement and a subsequent addendum to it (the "2008 Addendum" or the "Addendum").

For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART the Motions for Summary Judgment (ECF Nos. 15, 17). The Court GRANTS Plaintiff's Motion on the issue of whether the Product Agreement limits Defendant's ability to increase gas prices to 2% per year beyond January 24, 2020, but DENIES Plaintiff's Motion to the extent it seeks damages from before January 24, 2020, and a declaration that Plaintiff may terminate the parties’ relationship immediately. Likewise, the Court GRANTS Defendant's Motion on the issue that Plaintiff waived the right to enforce the 2% price-escalation provision before January 24, 2020, but DENIES Defendant's Motion on the issue of whether the 2008 Addendum effected a permanent change to the Product Agreement. In short, the Court finds that Plaintiff may only enforce the 2% price-escalation term as of January 24, 2020.

I. BACKGROUND

For purposes of factual background, the Court recites the basic allegations in Plaintiff's Complaint, the parties’ agreed Stipulations and the undisputed fact sections of the parties’ memoranda. Except as otherwise indicated, the parties do not dispute the facts stated below.

A. Factual Allegations

Plaintiff filed its Complaint against Defendant on March 25, 2020. (Compl. (ECF No. 1).) Plaintiff manufactures steel pipe for various industrial uses and sells its products to customers around the world. (Compl. ¶ 1.) In 1998, Defendant's predecessor-in-interest entered into a Product Agreement with Plaintiff's predecessor-in-interest whereby Defendant's predecessor agreed to sell and deliver certain industrial gases to Plaintiff's predecessor at a facility in Munhall, Pennsylvania.¹ (Stip. ¶¶ 1-3 (ECF No. 14).) Relevant here, the Product Agreement contained a price-escalation clause that limited annual price increases to 2%. (Stip. Ex. 1, at 3.) Further, the Product Agreement allowed the parties to negotiate individual price increases by affording Plaintiff the opportunity to solicit a bona fide offer from a third party. (Stip. Ex. 1, at 2.) If Defendant matched the offer, the Product Agreement would extend by another seven years. (Stip. Ex. 1, at 2.) If Defendant did not match the offer, Plaintiff could cancel the contract. (Stip. Ex. 1, at 2.) By its terms, the Product Agreement contemplated a continuing relationship that governed the parties’ relationship for the next ten years. (Stip. Ex. 1, at 1.) Additionally, the Product Agreement would automatically renew for another ten years unless terminated by either party with at least twelve months’ advance notice. (Stip. Ex. 1, at 1.) The Product Agreement would also renew for ten years after the first delivery to the last storage tank that Defendant installed at the Munhall facility. (Stip. Ex. 1, at 1.)

In September 2008, on the eve of the Product Agreement's ten-year renewal, the parties executed an addendum to the Product Agreement (the "2008 Addendum" or "the Addendum"). (Stip. Ex. 2.) The 2008 Addendum extended the Product Agreement by five years and set forth a new price-escalation schedule that allowed Defendant to increase prices by up to 9% in year two and 8% in years three through five. (Stip. Ex. 2, at 1.) The 2008 Addendum says nothing about price caps beyond year five, nor does it say anything about the Product Agreement's automatic renewal provisions. (Stip. Ex. 2, at 1.) Plaintiff alleges that it first learned of the 2008 Addendum in January 2020.² (Compl. ¶ 19.) Neither party gave written notice of their intent to terminate the Product Agreement as of September 1, 2013. (Stip. ¶ 5.)

On June 23, 2017, Plaintiff sent Defendant a letter giving Defendant notice of Plaintiff's intent to terminate the Product Agreement. (Stip. Ex. 3, at 1.) Plaintiff apparently believed that the Product Agreement would expire in September 2018. (Stip. Ex. 3, at 1.) On June 30, 2017, Defendant responded to the letter with a rejection of Plaintiff's notice to terminate, asserting that the Product Agreement did not expire until December 19, 2023. (Stip. Ex. 4, at 1.) According to Defendant, the Product Agreement had renewed for another ten-year term on December 19, 2013, when Defendant installed a vertical hydrogen storage tank at the Munhall facility. (Stip. Ex. 4, at 1.) Plaintiff later sent a letter noting its intent to terminate the Product Agreement upon its expiration on December 19, 2023. (Stip. Ex. 5, at 1.)

On January 24, 2020, Plaintiff sent a letter to Defendant advising that Plaintiff recently learned of the 2008 Addendum. (Stip. Ex. 7, at 1-2.) In that letter, Plaintiff staked out its belief that the Addendum's silence with respect to price escalation after year five meant that the original 2% price-escalation limit in the Product Agreement took effect after September 2013. (Stip. Ex. 7, at 1-2.) Plaintiff now alleges that Defendant has and continues to overcharge Plaintiff by failing to comply with the 2% price-escalation cap. (Compl. ¶ 24-26.) On February 3, 2020, Defendant responded to Plaintiff with its own letter, arguing that Defendant consistently charged prices in excess of the 2% cap since 2013, and that Plaintiff never complained about the charges. (Stip. Ex. 8, at 2.) The parties do not dispute that Defendant has increased its prices beyond the 2% cap for each year since 2014, and that Plaintiff paid the invoiced costs each year without complaint until January 24, 2020. (Stip. ¶¶ 8, 16, Ex. 9, at 1; Def.s’ Mem. in Supp. of Summ. J. ("Def.s’ Mem") (ECF No. 18) at 9, 10.)

Plaintiff alleges that Defendant breached the Product Agreement by escalating its prices more than 2% each year since 2017. (Compl. ¶¶ 33-40.) Accordingly, Plaintiff brings two causes of action against Defendant for breach of contract and declaratory judgment, respectively. (Compl. ¶ 33-48.) In its request for declaratory judgment, Plaintiff asks the Court to declare that the 2% price escalation-limit binds Defendant for the remainder of the contract. (Compl. ¶¶ 42-48.) Alternatively, Plaintiff seeks a declaration that the 2008 Addendum expired on September 1, 2013, meaning that the parties have been operating under an at-will relationship since that time. (Compl. ¶¶ 42-48.)

B. Motions for Summary Judgment

As mentioned, both parties have moved the Court for summary judgment based on their respective interpretations of the 1998 Product Agreement and its 2008 Addendum. In support of its Motion, Plaintiff argues that the 2008 Addendum abrogated the Product Agreement's automatic renewal provisions. (Pl.’s Reply in Supp. of Mot. Summ. J. ("Pl.’s Reply") (ECF No. 21) at 3-5.) And because the 2008 Addendum expired in 2013, Plaintiff posits that the parties have operated under an at-will relationship since that time. (Pl.’s Reply at 3-5.) From there, Plaintiff reasons that because Defendant relied on the Product Agreement's renewal provisions to bind Plaintiff to that contract until December 2023, Defendant ratified the Product Agreement and now must likewise heed its terms (to include the 2% price-escalation provision). (Pl.’s Reply at 3-5.)

Conversely, Defendant argues that the 2008 Addendum effected a permanent change to the Product Agreement's price-escalation provision. (Def.’s Mem. at 6.) According to Defendant, the 2008 Addendum's silence with respect to price escalation beyond year five evinces the parties’ intent to operate without price caps beyond that time. (Def.’s Mem. at 11-15.) In any event, Defendant contends that the parties’ course of performance — namely, Plaintiff's silent acquiescence to the price increases every year after 2013 — confirms that the parties did not intend to impose price caps on Defendant. (Def.’s Mem. at 16-23.) On those same grounds, Defendant argues that even if the 2% price-escalation clause applied after 2013, the parties’ course of performance either modified the price cap or waived Plaintiff's right to enforce it. (Def.’s Mem. at 20-22.)

On August 21, 2020, Defendant filed its Opposition to Plaintiff's Motion for Summary Judgment, (Def.’s Opp. to Pl.’s Mot. for Summ. J. ("Def.’s Resp.") (ECF No. 20)), and, on August 31, 2020, Plaintiff filed its Reply (Pl.’s Reply.) Likewise, on August 21, 2020, Plaintiff filed its Memorandum in Opposition to Defendant's Motion for Summary Judgment (Pl.’s Opp. to Def.’s Mot. for Summ. J. ("Pl.’s Resp.") (ECF No. 19)), and, on August 31, 2020, Defendant filed its Reply Brief in Support of Motion for Summary Judgment (Def.’s Reply Br. in Supp. of Mot. Summ. J. ("Def.’s Reply") (ECF No. 22)), rendering the matter now ripe for review.

II. STANDARD OF REVIEW

Pursuant to Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment should be granted "if the movant shows that there is no genuine dispute as to any material fact...