Carbon Processing & Reclamation, LLC v. Valero Mktg. & Supply Co.

• Decision Date: 17 October 2011
• Docket Number: No. 09–2127–STA.,09–2127–STA.
• Citation: 823 F.Supp.2d 786,75 UCC Rep.Serv.2d 831
• Parties: CARBON PROCESSING AND RECLAMATION, LLC, and CPR Marine, LLC, Plaintiffs, v. VALERO MARKETING AND SUPPLY CO. and Valero Refining CO.—Tennessee, LLC, Defendants. v. William L. Jones, Third–Party Defendant.
• Court: U.S. District Court — Western District of Tennessee

75 UCC Rep.Serv.2d 831

823 F.Supp.2d 786

CARBON PROCESSING AND RECLAMATION, LLC, and CPR Marine, LLC, Plaintiffs,

v.VALERO MARKETING AND SUPPLY CO. and Valero Refining CO.—Tennessee, LLC, Defendants.

v.William L. Jones, Third–Party Defendant.

No. 09–2127–STA.

United States District Court,W.D. Tennessee,Western Division.

Oct. 17, 2011.

David E. Goodman, Jr., Douglas F. Halijan, Jef Feibelman, Burch Porter & Johnson, Memphis, TN, Randy J. Hart, Law Office of Randy J. Hart, Solon, OH, for Plaintiffs.

Brian S. Faughnan, Thomason Hendrix Harvey Johnson & Mitchell, Memphis, TN, Erika M. Anderson, Gabriel E. Gore, Dowd Bennett LLP, Clayton, MO, James F. Bennett, John D. Comerford, Dowd Bennett LLP, St. Louis, MO, for Defendants.

ORDER ON THE PARTIES' MOTIONS FOR SUMMARY JUDGMENT

S. THOMAS ANDERSON, District Judge.

Before the Court is Defendants Valero Marketing and Supply Co. and Valero Refining Co.—Tennessee, LLC's (hereinafter “Valero”) Motion for Summary Judgment (D.E. # 120) filed on December 29, 2010, as to all claims asserted against them. Plaintiffs Carbon Processing and Reclamation, LLC, and CPR Marine, LLC (hereinafter “CPR”) have filed a response in opposition, to which Valero has replied. For the reasons set forth below, Valero's Motion for Summary Judgment is GRANTED IN PART, DENIED IN PART.

Also before the Court is Valero's Motion for Summary Judgment (D.E. # 126) filed on January 31, 2011, as to all claims asserted against it by CPR Marine. CPR has filed a response in opposition, to which Valero has replied. For the reasons set forth below, Valero's Motion for Summary Judgment on CPR Marine's claims is GRANTED IN PART, DENIED IN PART.

Finally, before the Court is CPR's Motion for Partial Summary Judgment (D.E. # 131) filed on January 31, 2011, as to its claim for breach of contract. Valero has filed a response in opposition, to which CPR has replied. For the reasons set forth below, CPR's Motion for Partial Summary Judgment is GRANTED IN PART, DENIED IN PART.

BACKGROUND

The following material facts are not in dispute for purposes of these Motions unless otherwise noted: slurry is a by-product of the process by which crude oil is refined and, while lower in value than, for instance, gasoline or diesel, is sold and used for numerous industrial applications, including fuel for power plants, steel mills, and ocean-going vessels. (Pls.' Statement of Facts ¶ 1, D.E. # 131–45.) CPR is engaged in the business of purchasing and selling petroleum products, including slurry and fuel oils. ( Id. ¶ 2.) Valero produces petroleum products of various grades, including conventional gasoline, diesel fuel, other fuel oils, and slurry. ( Id.)

William Jones (“Jones”) is the owner and sole member of CPR. (Defs.' Statement of Facts ¶ 1, D.E. # 120–2.) In August 2007, Jones approached Chris Haycraft at L & R Midland, a marine charter brokerage company, about the possibility of leasing barges. ( Id. ¶ 2.) CPR and L & R Midland met on August 15, 2007, and after that meeting, L & R Midland began looking for barge equipment for CPR. ( Id. ¶ 3.) CPR does not deny this meeting but does state that L & R Midland was looking for barges for CPR prior to August 15, 2007. (Pls.' Resp. to Defs.' Statement of Facts ¶ 3, D.E. # 136–4.)

I. The Parties' Meetings and Negotiations ¹

The parties began to negotiate a term contract for the sale of Valero's slurry to CPR. At many of these meetings, CPR was represented by Jones and Steve Mis (“Mis”); Valero was represented by Hal Tryon (“Tryon”), Valero's trader in charge of selling Memphis slurry, and David Olson (“Olson”), Valero's director of heavy products and fuel oil and Tryon's direct supervisor. On August 16, 2007, CPR had its first meeting with Valero to discuss the possibility of CPR purchasing slurry from Valero. (Defs.' Statement of Facts ¶ 4, D.E. # 120–2.) ² CPR indicated its interest in doing “term business” with Valero. ( Id. ¶ 5.) Valero informed CPR that its term contracts could not exceed a year without involving upper management. ( Id. ¶ 6.) Mis, a CPR employee attending the meeting, wrote in his notes that the parties discussed a “term date with Valero one year, Evergreen.” ( Id. ¶ 7.) Mis's notes contained the following statements as well: “Valero would support a 3 yr barge deal based on economics” and “Evergreen—no definite ending point. Put into contract.” (Pls.' Resp. to Defs. Statement of Facts ¶ 7, D.E. # 136–4.) An “evergreen provision” would allow either party to terminate the contract at the end of a year or allow the contract to be renewed for an additional year. (Defs.' Statement of Facts ¶ 8, D.E. # 120–2.) CPR disputes this assertion and states that Valero explained that the “evergreen provision” would effectively act to extend any agreement between the parties for a second year. (Pls.' Resp. to Defs. Statement of Facts ¶ 8, D.E. # 136–4.) CPR adds that the evergreen provision was added so that a contract could go forward without the delay of waiting for upper management approval at Valero. ( Id.) Valero told CPR that Valero could offer 50 to 75 percent of its Memphis slurry business. (Defs.' Statement of Facts ¶ 9, D.E. # 120–2.) While admitting that Valero made this offer at the August 17, 2007 meeting, CPR adds that Valero later agreed to sell CPR all of its Memphis slurry. (Pls.' Resp. to Defs. Statement of Facts ¶ 9, D.E. # 136–4.)

Meanwhile, on October 4, 2007, L & R Midland contacted CPR about an offer for barge equipment from Martin Marine (“Martin”). (Defs.' Statement of Facts ¶ 10, D.E. # 120–2.) CPR entered into negotiations with Martin; however, the parties did not reach an agreement at that time. ( Id. ¶ 11.) Martin sought a barge contract for three years or more; CPR bargained for a one-year term. (Defs.' Statement of Facts ¶ 12, D.E. # 120–2.) CPR emphasizes that the duration of the barge lease was driven by Valero's needs, not CPR. (Pls.' Resp. to Defs. Statement of Facts ¶ 12, D.E. # 136–4). As a result of Martin's demands, CPR endeavored to secure a longer term with Valero. (Defs.' Statement of Facts ¶ 13, D.E. # 120–2; Pls.' Resp. to Defs. Statement of Facts ¶ 13, D.E. # 136–4).

On October 18, 2007, CPR again met with Valero to discuss the sale of slurry from the Memphis refinery. (Defs.' Statement of Facts ¶ 14, D.E. # 120–2.) ³ According to Steve Mis's notes, Valero and CPR again discussed a “term deal 1 year (evergreen deal)” during this meeting. ( Id. ¶ 15.) ⁴ Following the meeting, on November 7, 2007, CPR resumed its barge negotiations with Martin. ( Id. ¶ 16.) Martin had commenced construction of the barges and proposed a barge lease with a two-year term. ( Id.) CPR still did not execute a final barge contract with Martin at that time.

Later in November 2007, Valero sent CPR a draft contract containing a one-year term, from January 1, 2008 to December 31, 2008. ( Id. ¶ 17.) This writing incorporated Valero's Marketing and Supply Company's General Terms and Conditions For Petroleum Product Purchases/Sales (“GT & C's”). ( Id. ¶ 18.) The GT & C's included a paragraph prohibiting the giving or receipt of any gifts or entertainment of “significant value.” ( Id. ¶ 19.) Specifically, it stated, “Commissions and Gifts: No director, officer, employee or agent of either party shall give or receive any commission, fee, rebate, gift or entertainment of significant value or cost in connection with this Agreement.” ( Id.) Neither party ever signed the November 2007 draft contract. ( Id. ¶ 28.)

Near the end of November, Valero and CPR resumed negotiations. ( Id. ¶ 20.) The parties again discussed an “evergreen” provision, the specifications of the slurry, and the price of the slurry as well as a “contract from February to February.” ( Id. ¶¶ 21, 22.) ⁵ CPR indicated that it needed a “copy of General Terms of Agreement,” which Valero provided later that day. ( Id. ¶¶ 23, 24.) During this meeting, Valero again informed CPR that it could not agree to a two-year contract and keep approval of the contract at the level of the trading floor. ( Id. ¶ 25.) Although CPR expressed interest in obtaining slurry from various refineries owned by Valero, Valero never promised to supply product to CPR from other refineries. (Defs.' Statement of Facts ¶ 27, D.E. # 120–2.)

The parties continued their negotiations on December 15, 2007. ( Id. ¶ 29.) Among other things, the parties discussed the quality specifications of the slurry to be purchased under the proposed contract. ( Id. ¶ 31.) However, there is no record of the parties discussing the length of the contract. ( Id. ¶ 32.) Neither party signed a contract at the end of the December meeting. ( Id. ¶ 33.) As of December 28, 2007, attorneys for both CPR and Martin Marine continued to discuss a potential barge contract. ( Id. ¶ 34.)

Although the parties dispute whether CPR had a finalized barge lease with Martin by mid-January ( Id. ¶ 35; Pls.' Resp. to Defs. Statement of Facts ¶ 35, D.E. # 136–4.), they agree that on February 5, 2008, Jones signed a two-year barge lease with Martin. (Defs.' Statement of Facts ¶ 36, D.E. # 120–2.) At that time CPR did not have a signed contract with Valero. ( Id. ¶ 38.) ⁶ The only writing exchanged by Valero and CPR up to that point was Valero's November draft contract, which neither party had signed. (Defs.' Statement of Facts ¶ 39, D.E. # 120–2.)

On February 22, 2008, CPR again met with Valero. (Defs.' Statement of Facts ¶ 41, D.E. # 120–2.) ⁷ Prior to this meeting, CPR's Mis wrote “notes for [himself] to know what to talk about the next day” with Valero. ( Id. ¶ 42.) These points included: “Length of Contract; Auto Renewals; Monetary Terms & Discounts; Make–Up Barges During T/A; Barge Usage when Lo OutPut [sic]; Start Contract After T/A.” ( Id. ¶ 43.) At the meeting the following day, Mis recorded that the parties discussed the applicable pricing discount: “Valero wants $6.50. CPR wants $7.00.” ( Id. ¶ 44.) ⁸ Next to Olson's name in the margin, Mis wrote “Looking at...