656 B.R. 871
Bankr. E.D. Ky.2023Background
- Coal Network, LLC (Debtor) and CEMEX Construction Materials Atlantic, LLC (Creditor) entered into a coal supply contract governed by Tennessee law.
- Debtor failed to supply coal as required, leading Creditor to purchase replacement coal from other sources.
- Creditor filed a proof of claim in Coal Network’s Chapter 11 bankruptcy seeking the full purchase price paid for the replacement coal, plus other costs, less a set-off.
- Debtor objected, arguing damages should be limited to the difference between the contract price and the replacement coal price (cover damages) under Tennessee’s UCC.
- The parties sought a court determination as to whether the agreement permitted full reimbursement or only cover damages.
- The Court was asked to interpret the contract and consider whether the UCC or the agreement controlled the damages calculation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Creditor is entitled to the full purchase price for replacement coal or limited to cover damages under the Agreement and the UCC. | The Agreement allows recovery of "any and all costs," meaning the full amount paid for replacement coal. | The UCC damages rule applies: damages limited to the difference between the contract price and replacement price (cover damages). | Creditor is limited to cover damages under the UCC; "any and all costs" is not defined clearly enough to override the UCC remedy. |
| Whether "costs" in § 1.2 includes the full replacement price. | "Any and all costs" encompasses the entire replacement expenditure. | The term “costs” is narrower than the full purchase price and does not equal all replacement expenditures. | "Costs" must be interpreted in light of the entire contract and does not mean full price; only cover damages permitted. |
| If the contract’s remedy provision is ambiguous, does the UCC gap-fill? | Contract provides a specific remedy, making UCC unnecessary. | Absence of a clear contractual alternative means UCC fills the gap. | UCC applies due to lack of defined remedy in the Agreement. |
| Whether ambiguous terms should be resolved by the contract’s own use of the term. | Contract language favors Creditor’s reading of “costs.” | Structure of contract shows distinction between “costs,” “damages,” and other remedies. | Contract context means “costs” does not equate to all amounts expended; use UCC default rule. |
Key Cases Cited
- Wallace Hardware Co. v. Abrams, 223 F.3d 382 (6th Cir. 2000) (enforced choice of law provision in UCC contracts).
- Planters Gin Co. v. Fed. Compress & Warehouse Co., Inc., 78 S.W.3d 885 (Tenn. 2002) (interpretation of ambiguous contract language).
- Individual Healthcare Specialists, Inc. v. BlueCross BlueShield of Tennessee, Inc., 566 S.W.3d 671 (Tenn. 2019) (intent of parties governs contract interpretation).
- Allstate Ins. Co. v. Watson, 195 S.W.3d 609 (Tenn. 2006) (ambiguity in contract interpretation).
- D & E Const. Co. v. Robert J. Denley Co., 38 S.W.3d 513 (Tenn. 2001) (meaning of terms throughout a contract must be consistent).