Sunline Commerical Carriers, Inc. v. CITGO Petroleum Corporation
N15C-03-051 WCC CCLD
Del. Super. Ct.Dec 27, 2017Background
- Sunline (plaintiff) and CITGO (defendant) executed a Master Agreement (Jan 2013) and a one-year Term Agreement (effective Apr 1, 2013–Mar 31, 2014) under which CITGO guaranteed monthly minimum barrels and Sunline would transport them; the Term Agreement controlled any conflicts with the Master Agreement.
- The Term Agreement set escalating monthly minimums (reaching 240,000 bbls from June 1, 2013) and a shortfall payment formula for unmet volumes; shortfalls accrued in multiple months and many shortfall invoices were unpaid.
- Parties negotiated informally to address shortfalls; around Dec 2013 they agreed (disputed formality) to a 20% cash / 80% deferred payment arrangement for certain 2013 shortfalls and discussed pushing remaining shortfalls to the end of the contractual relationship.
- CITGO sent a 60-day termination notice on Mar 31, 2014 and contended the Term Agreement had expired on Mar 31, 2014 (no renewal because no mutual agreement on terms/volumes); Sunline contended April–May 2014 still required guaranteed minimums under the 60-day notice.
- Sunline sued for breach and damages for unpaid shortfalls; Court found (i) the Term Agreement expired by its own terms on Mar 31, 2014, (ii) the parties had an oral modification to address shortfalls covering April–May 2014, and (iii) Sunline is entitled to summary judgment in part for the unpaid shortfalls; CITGO’s summary-judgment motion on lack of damages expert was denied/moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Term Agreement continued past Mar 31, 2014 such that CITGO owed monthly minimums for Apr–May 2014 | Termination clause (60-day notice) required 60 days prior to expiration, so notice on Mar 31 meant obligations continued through May 31, 2014 | Term provision sets one-year term ending Mar 31, 2014; renewal required mutual agreement on terms/volumes which did not occur, so obligations ended Mar 31 | Term Agreement expired Mar 31, 2014; 60-day notice did not extend Term Agreement obligations into Apr–May 2014 |
| Whether an oral modification existed to extend performance/handle shortfalls in Apr–May 2014 | There was no binding modification; obligations ended with the Term Agreement | Parties orally agreed to move shortfalls to Apr–May 2014 (20/80 arrangement and make-up period) | Court found parties reached a binding oral agreement to address/continue relationship for Apr–May 2014 to make up shortfalls |
| Whether CITGO breached the contract by failing to meet minimums and pay shortfall amounts | Sunline argues breach for the clear, unpaid shortfalls and seeks summary judgment on those amounts | CITGO disputes scope/dates and raised procedural defenses and damages-expert challenges | Court granted summary judgment in part for Sunline on unpaid shortfalls accrued under the Contract; remaining disputes limited to accounting of amounts paid and outstanding |
| Whether a damages expert is required to prove Sunline's damages | Sunline relied on its witness (Flinn) and internal accounting; no separate expert needed | CITGO moved for summary judgment claiming Sunline lacked proper expert testimony on damages | Court held no expert necessary for the reduced accounting issues; CITGO’s motion on this ground denied/moot |
Key Cases Cited
- Alabi v. DHL Airways, Inc., 583 A.2d 1358 (Del. 1990) (summary judgment standard and viewing facts in favor of nonmoving party)
- VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606 (Del. 2003) (elements of breach of contract and contract interpretation principles)
- GMG Capital Investments, LLC v. Athenian Venture Partners I, L.P., 36 A.3d 776 (Del. 2012) (contract interpretation to give effect to all provisions)
- Lorillard Tobacco Co. v. American Legacy Foundation, 903 A.2d 728 (Del. 2006) (contractual plain-meaning and intent analysis)
- Rhone-Poulenc Basic Chemicals Co. v. American Motorists Ins. Co., 616 A.2d 1192 (Del. 1992) (use of extrinsic evidence only when contract ambiguous)