Conagra Trade Group, Inc. v. Fuel Exploration, LLC

• Decision Date: 03 June 2009
• Docket Number: Civil Action No. 07-cv-02438-CMA-MEH.,Civil Action No. 07-cv-02552-CMA-MEH.
• Citation: 636 F.Supp.2d 1166
• Parties: CONAGRA TRADE GROUP, INC., Plaintiff, v. FUEL EXPLORATION, LLC, Defendant.
• Court: U.S. District Court — District of Colorado

636 F.Supp.2d 1166

CONAGRA TRADE GROUP, INC., Plaintiff, v. FUEL EXPLORATION, LLC, Defendant.

Civil Action No. 07-cv-02438-CMA-MEH.

Civil Action No. 07-cv-02552-CMA-MEH.

United States District Court, D. Colorado.

June 3, 2009.

J. Thomas MacDonald, Kathryn Irene Hopping, Otten, Johnson, Robinson, Neff & Ragonetti, P.C., Denver, CO, James Gregory Powers, Patrick Donald Pepper, McGrath North Mullin & Kratz, P.C., Omaha, NE, for Plaintiff.

Fuel Exploration, LLC, Denver, CO, pro se.

Thomas J. Kimmell, Zarlengo & Kimmell, P.C., Denver, CO, for Defendant.

ORDER

CHRISTINE M. ARGUELLO, District Judge.

This matter is before the Court on Plaintiff/Consolidated Defendant ConAgra Trade Group, Inc.'s ("ConAgra") Motion for Summary Judgment (Doc. # 49) in its favor and against counterclaims filed by Defendant/Consolidated Plaintiff Fuel Exploration, LLC's ("Fuel Ex"). For the following reasons, the Motion (Doc. # 49) is GRANTED IN PART AND TAKEN UNDER CONSIDERATION IN PART.

INTRODUCTION

This is a breach of contract case. On October 30, 2007, Fuel Ex filed a lawsuit against ConAgra in state court alleging breach of contract and seeking a declaratory judgment. On November 20, 2007, ConAgra sued Fuel Ex in this Court, alleging one claim for breach of contract.¹ On December 7, 2007, ConAgra removed the state court lawsuit and the Court consolidated the removed suit, captioned No. 07-cv-2552, with ConAgra's federal suit, captioned No. 07-cv-2438, on January 4, 2008. (Doc. # 16.) ConAgra has now moved for summary judgment in its favor on its contract claim in the federal suit, No. 07-cv-2438, and for dismissal via summary judgment of Fuel Ex's counterclaims, which originated in the removed state court suit, No. 07-cv-2552.

FACTUAL BACKGROUND

The following facts are derived from the record and are undisputed for purposes of the Motion for Summary Judgment. From 2006 through October 2007, ConAgra and Fuel Ex bought and sold crude oil or options to purchase crude oil from each other. The parties transacted business using verbal agreements for each deal. (Doc. # 63, Ex. 1 ¶ 2.) They would memorialize the transactions in writing after each oil/option order had been placed. (Id.) Fuel Ex's sole business was engaging in these transactions with ConAgra.

Apparently, ConAgra grew fearful of operating without a binding, written agreement in place to govern the parties' relationship. So, in August 2007, ConAgra asked for and the parties began to negotiate a pair of written contracts. (Doc. # 49, Ex. 1 ¶ 4.) In September 2007, the parties executed a "Master Crude Oil Purchase and Sale Agreement" ("Master Agreement") and a "Credit Support Annex to the Crude Oil Master Agreement" ("Credit Agreement") (collectively, the contracts will be referred to as the "Agreement"). (Doc. # 49, Ex. 3.) The Agreement became effective on September 1, 2007. (Id.)

Fuel Ex's Manager, Raymond Danton, states that ConAgra demanded that Fuel Ex execute the Agreement or face dire consequences. According to Mr. Danton, if Fuel Ex refused to execute the Agreement, ConAgra threatened to refuse to allow Fuel Ex to place additional orders to meet its obligations to deliver oil. (Doc. # 63, Ex. 1 ¶ 3.) Had ConAgra enforced these threats, Mr. Danton stated that it would have taken Fuel Ex approximately one month to purchase replacement oil from another vendor so that Fuel Ex could meet pre-existing obligations. (Id.) This delay would have caused Fuel Ex to suffer considerable financial hardship. (Id.)

ConAgra alleges that Fuel Ex breached two provisions in the Agreement, one in the Credit Agreement and one in the Master Agreement. The Credit Agreement allowed ConAgra to demand that Fuel Ex deliver a "margin payment" to ConAgra when the amount of the owed by Fuel Ex under the Agreement, the "settlement amount," exceeded Fuel Ex's credit limit of $500,000. (Credit Agreement § 8.1.) The amount of the margin payment equaled the difference between the settlement amount and the credit limit threshold amount (i.e., settlement amount minus $500,000 equals margin payment). (Id.) The Credit Agreement required Fuel Ex to make the margin payment within two business days after the date Fuel Ex received a margin demand. (Id.)

For its part, ConAgra also agreed to provide margin security if Fuel Ex demanded it. (Id.) The Credit Agreement also obligated ConAgra's parent corporation to provide a $15,000,000 guarantee to Fuel Ex for ConAgra's performance under the Agreement. (Id. § 8.4.) Moreover, under the Master Agreement, each party had the obligation to "provide adequate assurances of its ability to perform all of its obligations under this Agreement within two (2) Business Days of a written request to do so when the other Party has reasonable grounds for insecurity." (Master Agreement § 4.1(c).)

Failure by a party to make a timely margin payment or provide adequate assurances constituted an "Event of Default" under the Agreement. (Id. § 4.1.) If a party defaulted, the non-defaulting party had the right to

liquidate any or all Transactions then outstanding by closing-out each Transaction being liquidated . . . calculating the Loss, if any, for each such Transaction, and aggregating or netting such amounts and . . . any or all other amounts owing under this Agreement to a single liquidated settlement payment that will be due and payable within one (1) Business Day after the liquidation is completed.

(Id. § 4.2(a).) The Agreement defined "Loss" as the cost of entering into a replacement transaction. (Id.) The Agreement allowed the non-defaulting party to determine the amount of a Loss in a "commercially reasonable manner" by taking into account applicable market prices for similar transactions and delivery costs. (Id.)

The Agreement did not last long. On October 9, 2007, the settlement amount Fuel Ex owed to ConAgra under the Agreement exceeded Fuel Ex's $500,000 credit limit. (Doc. # 49, Ex. 4.) Thus, ConAgra demanded that Fuel Ex make a margin payment under the Credit Agreement. (Id.) ConAgra demanded payment of $2,508,000, which was the settlement amount ($3,383,631.34) less Fuel Ex's credit limit ($500,000), less the cash margin held by ConAgra ($376,440). (Id.) ConAgra's margin demand letter requested Fuel Ex to remit payment by the close of business on October 10, 2007. (Id.) Mr. Danton responded to ConAgra by e-mail. (Id., Ex. 5.) He stated that Fuel Ex disputed the margin demand and refused to make the payment. (Id.)

In response to Mr. Danton's e-mail, ConAgra requested that Fuel Ex provide adequate assurances of Fuel Ex's ability to perform under the Agreement. (Id.) Con-Agra notified Fuel Ex that failure to provide adequate assurance under the Agreement would constitute default and that ConAgra would enforce its legal remedies against Fuel Ex. (Id.) Fuel Ex never provided assurances of its ability to perform.

On October 15, 2007, ConAgra sent Fuel Ex a "Notice of Default." (Id., Ex. 6.) The Notice stated that Fuel Ex had defaulted by failing to deliver the margin payment and failing to provide adequate assurances of its ability to perform under the Agreement. (Id.) On October 19, 2007, ConAgra notified Fuel Ex that ConAgra would close-out and liquidate all outstanding transactions and that Fuel Ex's final payment of $3,419,673.00 would be due one business day from the date of the letter. (Id., Ex. 8.) On October 31, 2007, ConAgra sent Mr. Danton a spreadsheet purporting to account for liquidation of the parties' outstanding transactions. (Id., Ex. 7.) Fuel Ex has not made any payment to settle the account.

PROCEDURAL BACKGROUND

As noted above, this case actually consists of two lawsuits, both dealing with the same parties, facts and contracts. In the process of consolidation, Fuel Ex adopted its breach of contract and declaratory judgment claims from the removed state court case and plead them as counterclaims in its answer to ConAgra's federal complaint. (Doc. # 18.) Other than that, there is nothing particularly remarkable about the early procedural history of this case. However, the Motion for Summary Judgment contains some wrinkles and corollary requests that require an explanation.

Fuel Ex's original counsel withdrew from representation of Fuel Ex on November 17, 2008, (Doc. # 48) and ConAgra filed its Motion for Summary Judgment on January 5, 2009, at a point in time when Fuel Ex was unrepresented by counsel. (Doc. # 49.) Fuel Ex attempted to respond to the Motion for Summary Judgment via a pleading signed by Mr. Danton. (Doc. # 50.) ConAgra moved to strike Mr. Danton's response because the response violated the prohibition on pro se representation of a corporate entity.² (Doc. # 51.) The Court granted the Motion to Strike. (Doc. # 69.) However, Fuel Ex eventually retained counsel and filed a compliant response to ConAgra's Motion for Summary Judgment. (Doc. # 63.) ConAgra then filed a reply in support of its Motion. (Doc. # 70.)

In its compliant response brief, Fuel Ex contends that ConAgra has not properly supported its claim for damages and that Fuel Ex needs additional discovery to properly respond to the Motion for Summary Judgment. (Doc. # 63 at 7-8.) The Court might construe Fuel Ex's request as a Motion for Discovery under Federal Rule 56(f). See Fed.R.Civ.P. 56(f). However, to the extent that Fuel Ex moves for discovery in its response brief, that motion is now moot because one week after it filed its compliant response brief, Fuel Ex filed a separate "Motion to Reopen Discovery as to Damage Issues." (Doc. # 66.)

The Court granted the Motion to Reopen Discovery and re-set certain discovery limits and deadlines. (Doc. # 72.) Notably, the Court allowed Fuel Ex to submit written discovery to ConAgra no later than March 30, 2009, with responses due April 29, 2009. (Id.) The Court also allowed Fuel Ex to depose a ConAgra representative regarding damages no later than May 15, 2009. (Id.) These additional discovery deadlines have passed, but the...