Orion Refining Corp. v. Uop, 01-05-00681-CV.

• Decision Date: 04 October 2007
• Docket Number: No. 01-05-00681-CV.,01-05-00681-CV.
• Parties: ORION REFINING CORPORATION and John Stanley, Appellants, v. UOP, A General Partnership; UOP LLC; EM Sector Holdings, Inc.; and Catalysts, Adsorbents and Process Systems, Inc., Appellees.
• Court: Texas Court of Appeals

259 S.W.3d 749

ORION REFINING CORPORATION and John Stanley, Appellants, v. UOP, A General Partnership; UOP LLC; EM Sector Holdings, Inc.; and Catalysts, Adsorbents and Process Systems, Inc., Appellees.

No. 01-05-00681-CV.

Court of Appeals of Texas, Houston (1st Dist.).

October 4, 2007.

Alexander C. Chae, Gardere, Wynne, Sewell & Riggs, L.L.P., Joe C. Holzer, John A. Lee, Andrews & Kurth, L.L.P., Houston, Elizabeth Ann Wiley, Stacy R. Obenhaus, Andrews Kurth LLP, Austin, Lisa L. Honey, Gardere Wynne Sewell LLP, Dallas, TX, for Appellant.

Jason Luong, Lee L. Kaplan, Smyser Kaplan & Veselka, L.L.P., Houston, TX, for Appellee.

Panel consists of Chief Justice RADACK and Justices JENNINGS and BLAND.

OPINION

SHERRY RADACK, Chief Justice.

Appellant, Orion Refining Corporation, challenges the summary judgment rendered in favor of appellees, UOP, a General Partnership; UOP, LLC; and Catalysts, Adsorbents and Process Systems, Inc. (collectively, UOP) on Orion's breach-of-contract and extra-contractual claims.¹ Orion's first issue presents a broad challenge to the summary judgment that dismissed all of Orion's claims; Orion's fifth issue asks whether Orion's summary judgment evidence raises material questions of fact on elements of Orion's claims. In addition to these global issues, Orion presents three specific challenges, as follows (1) whether UOP conclusively defeated Orion's extra-contractual claims under Illinois law, (2) whether Orion stated a viable action for common-law fraud under Illinois law or under the Illinois Consumer Fraud and Deceptive Business Practices Act,² and (3) whether Orion has viable claims for breach of contract and negligence under Illinois law. Appellant John Stanley presents a single issue contending that the trial court abused its discretion by striking Stanley's petition to intervene in Orion's action. We affirm.

Facts and Procedural History

A. Background

UOP obtained a licensing agreement from the BAR-CO Processes Joint Venture (BARCO) in 1994. By this agreement, UOP acquired rights to use BARCO's "patents and technical information relating to the MSCC process,"³ as an improvement over existing catalytic-conversion processes used in oil refining. It is undisputed that the MSCC process was newly patented technology.

UOP and Orion's predecessor-in-interest, TransAmerican Refining Corporation (TransAmerican), executed an agreement, described as a license,⁴ engineering, and guarantee agreement (the agreement, or the TransAmerican-UOP agreement), which is dated May 1, 1995 and incorporates six attachments. The agreement recites that UOP and TransAmerican exchanged mutual rights and responsibilities concerning TransAmerican's use of the "MSCC process"⁵ at a refinery in Louisiana, where TransAmerican planned to replace the refinery's existing catalytic converter with one using the MSCC process. Stanley signed the agreement in a representative capacity, as chairman and chief executive officer of TransAmerican.

The agreement recites background information explaining that TransAmerican solicited bids relating to the MSCC process from UOP for the "detailed design, procurement, construction, operation and maintenance" of an existing TransAmerican unit at Norco, Louisiana.⁶ TransAmerican sought to "revamp and convert" the Norco unit to an "MSCC Process unit."⁷ The agreement specifies that TransAmerican consulted UOP to "provide engineering and technical advisor services" relating to the MSCC process for the Norco unit,⁸ but that "design, procurement, construction, operation, and maintenance" of the unit remained with TransAmerican. TransAmerican paid UOP $3.5 million for the rights conferred by the agreement.

UOP had previously extended an MSCC license to only one other facility, a New Jersey refinery known as CEPOC. According to Orion's pleadings, although only three refineries in the world use the MSCC process, the Norco unit is one-of-a kind among these three. Orion became the owner of the Norco unit in 1998, when TransAmerican was forced to sell the unit to creditors who financed the reconstruction and foreclosed. The shareholders of Orion are TransAmerican's former creditors. The record reflects that Orion's purchase was an asset transfer of TransAmerican's property, including TransAmerican's rights under the agreement with UOP.⁹

Construction of the Norco unit was not yet complete when TransAmerican transferred its assets to Orion in 1998, and TransAmerican did not even begin construction until 1997, over two years after the TransAmerican-UOP agreement was executed. Construction was halted in 1998 due to TransAmerican's financial difficulties. After taking over TransAmerican's assets in 1998, Orion paid UOP $135,000 to conduct a study to determine whether to continue constructing the Norco unit.¹⁰ Operation of the unit did not occur until June 2000, when the unit was completed. Problems developed after startup, however, and required several months of shutdowns and expenses for repairs.

B. Key Terms of the Agreement

Article 7 of the agreement between TransAmerican and UOP addresses "Responsibility and Liability" of both TransAmerican and UOP. Pursuant to article 7.1, UOP warranted that the services to be provided under the agreement would be "performed according to accepted engineering practices."¹¹ As article 7.1 further provided, "the exclusive remedy" for breach of "this warranty"—specifically, the warranty to perform according to accepted engineering practices—UOP would "reperform," at its own expense, "that portion of the services for which a breach ha[d] occurred." "Any claim for breach of this warranty," however, had to "be made in writing within one year after the Start of Initial Operation,¹² but in no event later than three years after the date of this agreement."

With respect to performance, article 7.2 of the agreement states that the "guarantees relating to the performance of the Unit are specified in Attachment V,"¹³ and further states, "Except as specified in article 7 and in Attachment V, UOP MAKES NO WARRANTIES OR GUARANTEES, EXPRESS OR IMPLIED." (Emphasis and upper case in original.)

Attachment V specifies the details of UOP's performance guarantee, the performance tests contemplated, and UOP's responsibility. Article 1, paragraph 1.1 of Attachment V guaranteed that "during a Performance Test¹⁴ conducted according to 2.1," the unit would meet rates, as specified in paragraph 1.1(a)—(d) for processing, minimum percentage of gasoline yield and conversion, and maximum consumption of catalyst.¹⁵ Article 2.1 of Attachment V imposed six "Conditions" on the article 1.1 guarantee. Pursuant to one of these conditions, however, as stated in article 1.2 and its subsection (b), the guarantee would apply "only if . . . the Start of Initial Operation occurs within three years after the start of this agreement."¹⁶

Article 7.3 of the agreement qualified that TransAmerican would "at all times remain solely responsible for the detailed design, procurement, construction[,] and maintenance of the Unit." Pursuant to article 7.4, UOP's liability for bodily injury or property damage arising out of its services was restricted to damages "caused by the willful misconduct or negligence of UOP." And as article 7.4 further specified,

IN NO EVENT [WOULD] UOP BE LIABLE FOR SPECIAL, CONSEQUENTIAL, OR INDIRECT DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS OR LOSS OF USE. This limitation shall apply whether the cause of action relates to this agreement or arises out of the technology, goods[,] or services provided by UOP under this agreement, and shall apply regardless of the legal theory (tort or contract) upon which the action is based.

(Emphasis and upper case in original.) In addition, article 7.7 expressly limited "UOP's aggregate liability" under the agreement to $1.4 million, "except for UOP's expenses (if any) associated with any breach of the warranty in Article 7.1," specifically, the engineering warranty to perform according to accepted engineering practices.

Finally, pursuant to Article 13, the May 1, 1995 agreement "embodie[d] the entire understanding between the parties relating to the subject of th[e] agreement"; there were "no related prior representations or agreements."

D. Procedural History

Orion sued UOP in March 2002. Orion's live pleadings allege that UOP (1) fraudulently misrepresented the MSCC process by knowingly, and with reckless disregard for the truth, concealing material information that, if provided, would have precluded the agreement; (2) fraudulently induced the agreement, which fraud was not excused by the agreement's "NO WARRANTIES OR GUARANTEES, EXPRESS OR IMPLIED" provision (emphasis and upper case in original); (3) owed UOP attorney's fees under the Illinois deceptive trade practices act; (4) was negligent; (5) was equitably estopped from denying its liability; (6) negligently misrepresented the MSCC process; (7) breached the agreement; and (8) violated the Illinois Consumer Fraud Act.

Soon after Orion filed its original petition, UOP filed a unified pleading that combined special exceptions and a motion for traditional summary judgment. UOP based its motion for summary judgment solely on the agreement. Orion then conducted extensive discovery and filed several responses, to which UOP filed replies. Orion amended its pleadings three times. The trial court conducted three oral hearings that are not part of the record on appeal.

After an initial interlocutory summary judgment rendered in UOP's favor on all of Orion's claims except one, for which the trial court sustained UOP's special exceptions, the trial court later rendered a final summary judgment in favor of UOP and granted UOP's motion to strike the petition by which Stanley sought to intervene in the lawsuit. The trial court did not state the grounds on which it rendered summary judgment, but the record reflects that the trial court took judicial notice of Illinois case law, in...