Buckeye Partners, L.P. v. GT USA Wilmington, LLC, 052020 DECH, 2020-0255-JTL
| Opinion Judge | LASTER, V.C. |
| Party Name | BUCKEYE PARTNERS, L.P., and BUCKEYE PT TERMINALS, LP, Plaintiffs, v. GT USA WILMINGTON, LLC, Defendant. |
| Attorney | Jody C. Barillare, Amy M. Dudash, MORGAN, LEWIS & BOCKIUS LLP, Wilmington, Delaware; Michael D. Blanchard, MORGAN, LEWIS & BOCKIUS, LLP, Hartford, Connecticut; Julie S. Goldemberg, MORGAN, LEWIS & BOCKIUS LLP, Philadelphia, Pennsylvania; Attorneys for Plaintiffs. Jonathan M. Stemerman, ELLIOTT GR... |
| Case Date | May 20, 2020 |
| Court | Court of Chancery of Delaware |
Date Submitted: May 12, 2020
Jody C. Barillare, Amy M. Dudash, MORGAN, LEWIS & BOCKIUS LLP, Wilmington, Delaware; Michael D. Blanchard, MORGAN, LEWIS & BOCKIUS, LLP, Hartford, Connecticut; Julie S. Goldemberg, MORGAN, LEWIS & BOCKIUS LLP, Philadelphia, Pennsylvania; Attorneys for Plaintiffs.
Jonathan M. Stemerman, ELLIOTT GREENLEAF, P.C., Wilmington, Delaware; Thomas J. Elliott, Frederick P. Santarelli, Jack P. Elliott, Colin J. O'Boyle, ELLIOTT GREENLEAF, P.C., Blue Bell, Pennsylvania; Attorneys for Defendant.
MEMORANDUM OPINION
LASTER, V.C.
From 2008 until the present, Magellan Terminal Holdings, L.P. ("Magellan") has operated a terminalling business at the Port of Wilmington involving the transportation and storage of liquid petroleum. In March 2020, plaintiff Buckeye Partners, L.P. ("Buckeye Parent"), acquired Magellan and changed its name to Buckeye PT Terminals LP ("Buckeye").
After the acquisition, Buckeye continued to operate the terminalling business. In simplified terms, Buckeye rents a dock from the Port. A manifold under the dock connects to pipes that run under the Port. The pipes lead to fuel storage tanks located on a property adjacent to the Port that Buckeye owns (the "Tanks"). When a ship brings liquid petroleum to the dock, a Buckeye employee connects a hose to the ship, and the liquid petroleum runs through the hose, into the manifold, through the pipes, and into the Tanks. Buckeye stores the liquid petroleum in the Tanks until its customers pick it up using tanker trucks.
The principal route in and out of the Port is a private lane called Sico Road. The only means of accessing the Tanks is via Sico Road. For the past twelve years, Buckeye and its customers have used Sico Road to access the Tanks.
In 2018, defendant GT USA Wilmington, LLC ("GT") took over the Port. GT imposed a "Terminal Usage Fee" on stevedores based on the volume of cargo that they load or unload. Before it was acquired by Buckeye, Magellan maintained that it was not obligated to pay the Terminal Usage Fee, both because it was not a stevedore and because it was already paying a volume-based fee under the lease for the dock. After the acquisition, Buckeye continued to maintain that it was not obligated to pay the Terminal Usage Fee.
The nature of the resulting dispute was simple: GT thought Buckeye owed it money. Buckeye said it did not. In a civil society, courts exist to resolve this type of dispute.
Instead of filing a lawsuit, GT took matters into its own hands. GT told Buckeye that it would bar its customers from using Sico Road to access the Tanks unless Buckeye capitulated, paid the past-due amounts, and agreed to pay the Terminal Usage Fee going forward. GT then followed through on its threat and barred Buckeye's customers from using Sico Road to access the Tanks.
Buckeye responded by filing this action. Buckeye maintains that it does not owe the Terminal Usage Fee and that even if it did, GT was not entitled to blockade the Tanks. Buckeye seeks a preliminary injunction barring GT from preventing Buckeye and its customers from accessing the Tanks pending the outcome of this litigation.
This decision grants the requested preliminary injunction. Buckeye has shown a reasonable probability of success on the merits of its claims. Buckeye also has established a threat of irreparable harm and demonstrated that the balancing of the equities favors the issuance of an injunction.
At bottom, a limited injunction preserving the status quo is necessary so that the parties can litigate their dispute over the Terminal Usage Fee and obtain a judicial ruling interpreting the relevant documents. Absent an injunction, GT will resume its blockade and force Buckeye to capitulate. Due respect for the rule of law requires that a court decide the underlying dispute.
I.
FACTUAL BACKGROUND
The facts are drawn from the record developed in connection with the plaintiffs' application for a preliminary injunction. What follows are the facts as they appear likely to be found after trial, based on the current record.
A.
The Lease
Since 2008, Magellan has leased "[a]pproximately 1, 160 linear feet of dock space" from Diamond State Port Corporation, the owner of the Port. See Dkt. 81 at '174 (the "Lease" or "Lease Agr."). The "Reference Page" for the Lease summarizes its purpose as follows: "For the purpose of operating certain docking facilities for the transportation and storage of oil, petroleum products, hydrocarbons and their derivatives and for the installation and operation of a mooring dolphin with catwalks and utilities." Id. at '174. Similar language appeared in Section 7(b) of the Lease. See id. § 7(b).
Section 2 of the Lease states that in addition to the approximately 1, 160 linear feet of dock space, the Landlord (Diamond State) grants the Tenant (Magellan) full rights of access for ingress and egress to the dock, walkway, and if available, reasonable parking space at the dock, and ingress and egress over existing roads owned or controlled by Landlord for access to the dock (collectively the "Premises") and as depicted on the drawing marked as Exhibit "A" attached hereto . . . .
Id. § 2 (emphasis in original). Diamond State also committed to grant and convey to the Tenant "an easement with rights and privileges for all existing and planned dock lines and the existing Conectiv pipeline" and a further easement "to facilitate Tenant's dock lines and the Conectiv pipeline . . . ." Id. And the Landlord agreed to grant the Tenant any other easements involving its property that were "necessary or desirable for the performance of Tenant's business . . . ." Id. § 9.
Consistent with the commitment in the Lease, Diamond State granted Magellan a "pipeline easement and a temporary construction easement over and across a portion of the [Port] in connection with the construction of the new Pipelines . . . ." Dkt. 63 Ex. 20 at '759 (Recitals); see Lease Agr. §§ 2, 9. The easement allowed Magellan to access the Port "to survey, construct, install, operate, protect, use, inspect, maintain, replace, remove and repair the Pipelines." Dkt. 63 Ex. 20 § 1(a).
Magellan already owned the parcel of land adjacent to the Port where the Tanks are located. The Lease quite obviously recognized the connection between the dock and the Tanks. The Lease acknowledged that Magellan would be storing liquid petroleum, and that only happened at the Tanks.
The parties also clearly contemplated that Magellan would accept liquid petroleum at the dock, run it through the manifold under dock and into the pipes under the Port, then store it in the Tanks. To that end, Magellan agreed to pay a fee to Diamond State based on the amount of liquid petroleum that crossed the dock. Section 5(c) of the Lease stated, In addition to Rent, Tenant shall pay to Landlord a fee based on the total number of barrels of oil, petroleum products, hydrocarbons and their derivatives crossing the dock entering into the Premises plus the total number of barrels of oil crossing the dock exiting from the Premises annually throughout the term of this Lease.
Lease Agr. § 5(c) (the "Volume-Based Fee").
For the past twelve years, Magellan (now Buckeye) has used these rights to provide the "terminalling services" described in the Lease. Magellan (now Buckeye) receives liquid petroleum at the dock by connecting a hose to a barge or other ocean-going ship. The liquid petroleum flows through the hose, into a manifold under the dock, through the pipes under the Port, and ultimately into the Tanks. The liquid petroleum then is stored in the Tanks until customers take delivery using tanker trucks.
For the past twelve years, Sico Road has provided the only means of accessing the Tanks. During this period, Magellan and its customers have used Sico Road to access the Tanks.
B.
GT Takes Over The Port.
In October 2018, GT took over the management of the Port under a concession agreement with Diamond State. Compl. Ex. D (the "Concession Agreement" or "Con. Agr."). GT agreed to "materially invest in redeveloping the existing port" and to pay "a Concession Fee" to Diamond State. Id. at 1 (Recitals). The Concession Fee is calculated based on the volume of various types of cargo that travel through the Port. See id. § 4.3. The Concession Agreement requires GT to "faithfully obey and comply with all existing leases and agreements . . . ." Id. § 2.3(b).
On December 1, 2018, GT published a "Terminal Tariff," which included a schedule of rates that GT would levy against "persons who use or benefit from use of the terminal." Compl. Ex. E at 8. Under federal maritime regulations, the Terminal Tariff operates as "an implied contract between the marine terminal operator and the party receiving the services rendered by the marine terminal operator . . . ." 46 C.F.R. § 525.2(a)(2). But "[i]f the marine terminal operator has an actual contract with a party covering the services rendered by the marine terminal operator to that party," then the "actual contract" controls. Id. § 525.2(a)(3).
The Terminal Tariff established a "Terminal Usage Fee," defined as "a charge, separate from Wharfage, against the Stevedore for fees related to the public private partnership agreement" and calculated based on "all cargo discharged or loaded at the Port." Compl. Ex. E at 7, 44. The Terminal Tariff defined "Stevedoring" as "the physical handling of Container(s) or Cargo between the Vessel and the [Container Yard]." Id. at 7; see also id. at 5 (defining "Cargo" to include "all types of bulk . . . or any other forms of Cargo whatsoever,...
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