Entrust Energy, Inc. v. Shell Energy North America (US), L.P.
21-03930
Bankr. S.D. Tex.Mar 24, 2025Background
- Entrust Energy and Shell Energy North America were parties to energy supply contracts that included risk management provisions; Shell could terminate agreements upon certain defaults by Entrust.
- During Winter Storm Uri (Feb. 2021), Shell terminated its agreements with Entrust, claiming Entrust violated its Risk Policy by improperly hedging energy needs.
- Entrust asserted it obtained required executive approvals for deviations from hedging rules; discrete compliance with approval procedures for rolling 7-day forecasts was disputed.
- The substance of the dispute revolves around whether Entrust was in default warranting Shell’s termination, or whether Shell’s calculation and withholding of a termination payment breached the contracts.
- Entrust sought summary judgment on Shell’s defenses; Shell sought summary judgment on Entrust’s breach claim. The bankruptcy court denied most relief, citing material fact disputes for trial, except as to Shell’s laches defense, which was denied with prejudice.
- The procedural posture is denial of summary judgment on key claims and defenses, requiring a trial for resolution.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was Entrust in default under the Risk Policy? | Entrust complied; CEO approvals given for next-day forecasts, policy satisfied. | Osawa was only Managing Director, not CEO; required approvals not obtained for all forecasts. | Material fact dispute; to be determined at trial. |
| Did Shell properly terminate the contracts? | No event of default, so termination wrongful; Shell breached. | Entrust’s risk non-compliance justified termination. | To be decided at trial based on compliance evidence. |
| Did Shell repudiate the contracts? | Shell’s conduct was a total repudiation excusing Entrust’s further performance. | Termination followed contract procedure; not a repudiation. | Termination notice not unambiguously a repudiation; factual issues to be tried. |
| Is laches a valid defense? | Laches unavailable to breach of contract claims for damages. | Entrust’s claim is essentially for equitable relief, so laches applies. | Denied with prejudice; laches not available here. |
Key Cases Cited
- Martinez v. Agway Energy Servs., LLC, 88 F.4th 401 (2d Cir. 2023) (sets out breach of contract elements under New York law)
- Princes Point LLC v. Muss Dev. L.L.C., 30 N.Y.3d 127 (2017) (defines repudiation for contract law)
- Nat’l Mkt. Share, Inc. v. Sterling Nat. Bank, 392 F.3d 520 (2d Cir. 2004) (on facial sufficiency of pleading damages in breach of contract)
- Garber v. Stevens, 941 N.Y.S.2d 127 (2012) (laches is not a defense to damages-based breach of contract claims)