Wyatt Energy, Inc. v. Motiva Enters., LLC

• Decision Date: 04 June 2013
• Docket Number: No. 18811.,18811.
• Citation: 308 Conn. 719,66 A.3d 848
• Parties: WYATT ENERGY, INC. v. MOTIVA ENTERPRISES, LLC, et al.
• Court: Connecticut Supreme Court

308 Conn. 719

66 A.3d 848

WYATT ENERGY, INC.

v.MOTIVA ENTERPRISES, LLC, et al.

No. 18811.

Supreme Court of Connecticut.

Argued Jan. 11, 2013.

Decided June 4, 2013.

Robert A. Izard, Jr., West Hartford, with whom was Mark P. Kindall, West Hartford, for the appellant (plaintiff).

Sheila A. Huddleston, Hartford, with whom were Paul D. Sanson, Hartford, and, on the brief, Paul S. Bailin, Hartford, for the appellees (defendants).

NORCOTT, PALMER, ZARELLA, ESPINOSA and SHELDON, Js.

ZARELLA, J.

In this breach of contract action, the plaintiff, Wyatt Energy, Inc. (Wyatt), appeals from the judgment of the Appellate Court, which affirmed the judgment of the trial court in favor of the named defendant, Motiva Enterprises, LLC (Motiva).¹ Wyatt unilaterally terminated an agreement ² with Motiva granting Motiva exclusive use of logistical and storage services provided by a gasoline distribution terminal (terminal) owned by Wyatt after Motiva purchased a competing terminal owned by Cargill, Inc. (Cargill).³ Wyatt subsequently sold its terminal to Williams Energy, ⁴ a distributor of petroleum products, without requiring Williams Energy to assume Wyatt's obligations under the agreement with Motiva. In the litigation that followed, including a complaint by Wyatt against Motiva and a counterclaim by Motiva, each of which charged breach of contract by the other party, Wyatt asserted a special defense of illegality premised on purported antitrust violations arising out of Motiva's purchase of the Cargill terminal. On appeal, Wyatt claims that the Appellate Court improperly based its affirmance of the trial court's judgment on a flawed analysis that relied on legally incorrect definitions of the product and geographic markets served by the Wyatt terminal. Motiva responds that the Appellate Court's analysis of the product and geographic markets was correct and that it properly upheld the trial court's judgment. As an alternative ground for affirmance, Motiva argues that the issue raised by Wyatt regarding the proper definition of the product and geographic markets is moot because Wyatt did not appeal from the trial court's finding that excess capacity and other competitive factors would have prevented Motiva from imposing higher, noncompetitive prices for the services supplied by Wyatt, even if it is assumed that Wyatt's definitions of the product and geographic markets were correct.⁵Having considered the parties' arguments, we dismiss the appeal as moot.

In its memorandum of decision, the trial court made the following findings of fact. On May 1, 1997, Wyatt entered into a ten year terminalling agreement with the defendant Shell Oil Company (Shell). The agreement provided for the delivery of gasoline to the Wyatt terminal by ship or barge, transportation by pipe into the terminal's storage tanks and distribution from the storage tanks to trucks through truck loading racks or to other gasoline terminals through a pipeline. The agreement also provided that all current or future truck loading racks within the facility or any other facility purchased or leased by Wyatt or its New Haven affiliates would be dedicated for use by Shell or its customers and that Wyatt would consult with Shell before any changes were made that might reduce the facility's capability or level of service.

Shell, in turn, agreed that it would endeavor to establish, where there were no preexisting agreements, throughput rates at Shell's terminal in Bridgeport equal to the rates at the Wyatt terminal for similar services. The agreement defined “throughput” as “the total revenue generated from a [c]ustomer including any dock use fee, rack access fee, additive injection verification and record keeping fees (excluding additive product costs), transshipment fee or any other fee collected for throughput of Shell's or its [c]ustomers' products.”

Shell also agreed to pay Wyatt a terminalling fee for the use of its facility and for the services to be provided by Wyatt. Shell guaranteed Wyatt a minimum payment of $37,000 per month through December 31, 1997, and $65,000 per month from January 1, 1998, through the end of the agreement.⁶

The agreement further provided that, if Wyatt received a bona fide written offer of purchase for its New Haven terminal and intended to accept the offer, it was obligated to provide Shell with written notice, along with a copy of the offer. Upon receipt of the offer, Shell was guaranteed the exclusive right, within forty-five days, to enter into a binding agreement with Wyatt for the purchase of the facility under the same conditions provided in the written offer. If Shell elected not to purchase the terminal, Wyatt would be free to sell the facility to the third party, provided that the third party would accept assignment of the agreement and honor all of its terms and obligations regarding the provision of terminal services to Shell and its customers, should they desire the same services, except to the extent that the agreement allowed specific rights of cancellation by Wyatt in the event of a sale of the terminal.

In addition, the agreement required compliance with all federal, state and local laws, regulations, and rules, and with certain stipulated procedures if a default should occur. A default was defined in the agreement as “[a] material breach of any of the terms and conditions of the [a]greement by either party....” The agreement specifically provided that, “[u]pon default, the non-defaulting party shall, within thirty (30) days of knowledge thereof, notify, in writing, the defaulting party of the particulars of such default and the defaulting party shall have thirty (30) days thereafter to cure such default. Upon the defaulting party's failure to cure the default within the thirty (30) day grace period, any and all obligations, including payments of fees due hereunder, shall, at the option of the non-defaulting party, become immediately due and payable. In the event of default and [the] defaulting party's failure to cure during the cure period, the non-defaulting party shall also have the option to terminate the [a]greement upon written notice to the defaulting party.”

In August, 1999, approximately one year after Shell assigned the agreement to Motiva, Wyatt entered into a confidentiality agreement with Williams Energy for the purpose of allowing Williams Energy to evaluate the possible acquisition of the Wyatt terminal. Williams Energy subsequently made two preliminary offers to Wyatt, one for between $35 and $40 million, and the other for between $30.75 and $32 million. Motiva, however, estimated the value of the terminal to be between $14 and $20 million and thus was unwilling to match Williams Energy's offers.

In November, 1999, Motiva learned that the Cargill terminal was available for purchase, which Motiva initially valued at $13.5 million. Motiva therefore prepared and sent a nonbinding letter of intent, dated December 17, 1999, to Cargill and purchased the Cargill terminal in May, 2000.

Meanwhile, after Wyatt and Williams Energy became aware in early 2000 that Motiva was interested in buying the Cargill terminal, Wyatt unsuccessfully sought to persuade Motiva to relinquish its rights under the agreement or to cancel the agreement outright. On June 8, 2000, Wyatt sent a letter to Motiva stating that Motiva's purchase of the Cargill terminal had undermined the purpose of the agreement, which, according to Wyatt, was to give Motiva complete control over the Wyatt terminal's gasoline distribution facilities in exchange for Motiva's promise to use the Wyatt terminal as its sole terminal in the New Haven area. Wyatt also noted in the letter that Motiva already had begun to move customers to the Cargill terminal in violation of the agreement.

On June 15, 2000, Williams Energy determined that the value of the Wyatt terminal without the agreement in place was $31.375 million and with the agreement in place was $15 million. Williams Energy then made its first binding offer to purchase the Wyatt terminal for $31.375 million. In the letter containing its offer, Williams Energy noted that it had been advised by Wyatt that Wyatt believed it had the contractual right to terminate the agreement due to Motiva's material breaches and that Wyatt had commenced an action to do so. The letter also required Wyatt to accept the offer by June 26, 2000, or it would terminate.

On June 23, 2000, Wyatt faxed a letter to Motiva terminating the agreement due to what Wyatt claimed to have been Motiva's material breaches. The letter described the material breaches as Motiva's purchase of the Cargill terminal and Motiva's failure to use the Wyatt facility, as contemplated by the agreement.

On or about July 6, 2000, following receipt of the termination letter, Motiva delivered to Wyatt a demand for arbitration, alleging that Wyatt had breached the agreement. In August, 2000, Wyatt responded with a statement of arbitration defenses and counterclaims, which it subsequently withdrew. On September 1, 2000, Wyatt sold its terminal to Williams Energy without requiring it to assume Wyatt's obligations to Motiva under the agreement, including the requirement to dedicate exclusive use of the truck racks to Motiva.

Thereafter, on July 23, 2002, Wyatt brought an action in the trial court, alleging negligent misrepresentation, fraudulent misrepresentation, breach of contract, breach of the implied covenant of good faith and fair dealing, and violations of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42–110a et seq., and the Connecticut Antitrust Act, General Statutes § 35–24 et seq. Prior to trial, however, each of the various causes of action that Wyatt originally had asserted was either withdrawn or found to be arbitrable under the agreement.

Motiva filed an answer, special defenses and a counterclaim, including one count alleging breach of contract. In its counterclaim, Motiva alleged that Wyatt had breached the...