Ergon-West Virginia, Inc. v. Dynegy Marketing & Trade
706 F.3d 419
| 5th Cir. | 2013Background
- Dynegy and two Ergon entities contracted for natural gas supply; Hurricanes Katrina and Rita triggered force majeure declarations by upstream suppliers and Dynegy reduced gas to both Ergon entities.
- Ergon Refining and Ergon-WV sued in state court for failure to seek replacement gas during force majeure; case removed and tried in federal court.
- District court held Ergon Refining contract allowed Dynegy to invoke force majeure; Ergon-WV contract required due diligence or replacement, unambiguously.
- District court found extrinsic evidence showed industry practice supported no duty to seek replacement gas under Ergon Refining and awarded Ergon-WV damages for shortfall.
- On appeal, court affirmed Ergon Refining ruling, but reversed and rendered for Dynegy on Ergon-WV contract, finding Ergon-WV was not entitled to damages for lack of replacement gas.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to seek replacement gas under Ergon Refining | Ergon argues Dynegy must search for replacement gas during force majeure. | Dynegy contends no such duty exists under the Refining contract. | No duty to seek replacement gas; force majeure invoked. |
| Due diligence requirement under Ergon-WV contract | Ergon-WV argues due diligence requires finding replacement gas during force majeure. | Dynegy contends no such duty applies to all force majeure events. | Contract ambiguous; court reversed and rendered for Dynegy—no replacement-gas duty established. |
Key Cases Cited
- Virginia Power Energy Mktg., Inc. v. Apache Corp., 297 S.W.3d 397 (Tex.App.-Houston [14th Dist.] 2009) (discusses open-market replacement during force majeure and related duties)
- Tractebel Energy Mktg., Inc. v. E.I. Du Pont De Nemours & Co., 118 S.W.3d 60 (Tex.App.-Houston [14th Dist.] 2003) (supports view that assumption about source of supply is insufficient to excuse performance)
- In re D. Wilson Constr. Co., 196 S.W.3d 774 (Tex. 2006) (ambiguity questions; contract interpretation under Texas law)
- Coker v. Coker, 650 S.W.2d 391 (Tex.1983) (definition of ambiguity and contract interpretation standards)
- Spradlin v. Jim Walter Homes, Inc., 34 S.W.3d 578 (Tex.2000) (last-antecedent canon of construction considerations)
- Balandran v. Safeco Ins. Co. of Am., 972 S.W.2d 738 (Tex.1998) (ambiguous contract meaning and rules of construction)
- C.I.R. v. Bosch’s Estate, 387 U.S. 456 (U.S. 1967) (preeminent considerations for state-law interpretation in diverse cases)