Exxonmobil Oil Corp. v. Black Stone Petroleum Inc.
221 F. Supp. 3d 755
E.D. Va.2016Background
- ExxonMobil (New York corp.) sold a New Jersey service station to Black Stone under a written Exxon Agreement requiring 15 years of exclusive sale of Exxon-branded fuel and a liquidated-damages formula if breached; the Exxon Agreement designated Virginia law and Virginia federal courts for disputes.
- Two days earlier Black Stone (lessee/buyer) and FDD Realty entered an FDD Agreement by which FDD advanced the purchase funds, agreed to receive title, assumed Black Stone’s obligations under the Exxon Agreement, and agreed to indemnify and pay damages; the FDD Agreement specified New Jersey law.
- After tank upgrades, the station ceased selling Exxon fuel; Exxon paid its $350,000 tank-contribution and demanded liquidated damages of $299,870.76; Black Stone and FDD refused to pay.
- Exxon sued Black Stone and (later added) FDD Realty in federal court (diversity); both defendants defaulted and Exxon moved for default judgment for the liquidated damages plus pre- and post-judgment interest.
- The Magistrate Judge recommended default judgment only against Black Stone, found Exxon was not an intended third-party beneficiary of the FDD Agreement (so no standing against FDD), and denied pre- and post-judgment interest because the amended complaint did not expressly request them.
- The District Court sustained Exxon’s objection on beneficiary standing (holding Exxon is an intended beneficiary under New Jersey law) and on post-judgment interest (mandatory under federal law), but overruled Exxon’s objection as to pre-judgment interest (Rule 54(c) and Virginia law require pleading it). Judgment entered jointly and severally against both defendants for $299,870.76 plus post-judgment interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Exxon is an intended third-party beneficiary of the FDD Agreement (standing to sue FDD) | FDD assumed Black Stone’s obligation to pay Exxon liquidated damages, evidencing intent to benefit Exxon | No clear, definite intent to benefit Exxon; FDD Agreement harmed Exxon by enabling breach | Exxon is an intended beneficiary under New Jersey law; standing sustained |
| Choice of law for contract interpretation | Exxon argued Virginia law should govern related issues | Defendants relied on contract choice-of-law clauses | Exxon Agreement governed by Virginia law; FDD Agreement governed by New Jersey law |
| Entitlement to prejudgment (pre-judgment) interest on liquidated damages | Prejudgment interest is part of compensatory damages and should be awarded; defendants had notice via the default-judgment filings | Amended complaint did not expressly demand prejudgment interest so Rule 54(c) bars awarding it in a default judgment | Prejudgment interest denied: Rule 54(c) requires prejudgment interest to be pleaded; under Virginia law it is discretionary and must be sought in the complaint |
| Entitlement to post-judgment interest | Post-judgment interest should be awarded | Defendants argued plaintiff failed to plead post-judgment interest | Post-judgment interest is mandatory under federal law (28 U.S.C. §1961); award sustained |
Key Cases Cited
- Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (federal choice-of-law in diversity cases)
- Hitachi Credit Am. Corp. v. Signet Bank, 166 F.3d 614 (4th Cir.) (forum/state law governs prejudgment interest in diversity)
- Ryan v. Homecomings Fin. Network, 253 F.3d 778 (4th Cir.) (default admits well-pled factual allegations)
- Nat’l Equip. Rental, Ltd. v. Szukhent, 375 U.S. 311 (parties may waive personal-jurisdiction defenses via contract)
- Burger King Corp. v. Rudzewicz, 471 U.S. 462 (forum-selection clauses enforceable when freely negotiated)
- Silge v. Merz, 510 F.3d 157 (2d Cir.) (Rule 54(c) bars awarding prejudgment interest in default judgment if not pleaded)
- Quesinberry v. Life Ins. Co. of N. Am., 987 F.2d 1017 (4th Cir.) (post-judgment interest is governed by federal law)
- Forest Sales Corp. v. Bedingfield, 881 F.2d 111 (4th Cir.) (post-judgment interest governed by federal law)