Wolf Hollow I, L.P. v. El Paso Marketing, L.P.
329 S.W.3d 628
Tex. App.2010Background
- Wolf Hollow I, L.P. owns a natural gas-fired power plant in Granbury, Texas and a Gas Supply and Fuel Management Agreement governs gas supply from El Paso Marketing, L.P. (and its successor) with an amended First Amendment modifying terms.
- Wolf Hollow and El Paso disputes include four gas delivery interruptions in 2006–2007 and a claim of contaminated gas affecting plant operations and repairs.
- Wolf Hollow assigned its Transportation Agreement to El Paso, with Enterprise Texas Pipeline, LLC as the transporter; the Transportation Agreement and tariff contain assignment language that could affect liability.
- Wolf Hollow sought damages for replacement power, plant damage, and equipment costs; El Paso and Enterprise moved for summary judgments arguing force majeure, waiver of consequential damages, and other contract-based defenses.
- The trial court granted summary judgment for El Paso on damages as consequential waivers and for Enterprise on negligence; the court also issued a declaratory judgment favorable to El Paso and dismissed Wolf Hollow’s damages claims.
- The Texas Court of Appeals modified and affirmed in part, reversing as to Enterprise’s negligence on a property-damage claim and remanding for further proceedings consistent with the opinion, while deleting the declaratory judgment language affecting El Paso.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are replacement power costs consequential damages waived by 24.11? | Wolf Hollow: replacement power is direct damages; waiver does not apply. | El Paso: costs are consequential damages barred by 24.11, not saved by other provisions. | Damages are consequential and waived; yes. |
| Does Section 21.1(c) permit replacement-power recovery independent of (a) and (b)? | Wolf Hollow: subsection (c) authorizes recovery regardless of (a)/(b). | El Paso: (c) remedies depend on following (a) and (b) prerequisites. | Remedies in (c) apply only after (a) and (b) steps are followed; no independent recovery. |
| Is Wolf Hollow's gas-quality claim subject to exclusive remedy under 14.1 or waiver under 24.11, or may it be pursued via assignment? | Wolf Hollow argues for alternative remedies beyond assignment and exclusive remedy limitations. | El Paso: 14.1 provides an exclusive remedy by assignment; 24.11 waives other damages. | Gas-quality claims are not protected by exclusive remedy; 24.11 waiver stands; assignment governs relief. |
| Does the economic loss rule bar Wolf Hollow's negligence claim against Enterprise for physical damage to property? | Wolf Hollow: tort claims may proceed for property damage independent of contract. | Enterprise: economic loss rule precludes torts arising from contract defects unless physical injury to other property is shown. | Economic loss rule does not bar property damage claims; reversal as to Enterprise; remand for proceedings consistent with opinion. |
Key Cases Cited
- Minco Oil & Gas, Inc. v. El Paso Natural Gas Co., 8 S.W.3d 309 (Tex. 1999) (UCC control in goods contracts; direct vs consequential damages context)
- Valence Operating Co. v. Dorsett, 164 S.W.3d 656 (Tex.2005) (contract interpretation and harmonizing provisions; utilitarian approach)
- Grynberg v. Grey Wolf Drilling Co., L.P., 296 S.W.3d 132 (Tex.App.-Houston [14th Dist.] 2009) (contract interpretation; courts cannot rewrite agreements)
- Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132 (Tex.1994) (contract interpretation; effect of specific vs general provisions)
- Seagull Energy E&P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342 (Tex.2006) (assignment consequences between assignor and assignee under contract)
- Equistar Chemicals, L.P. v. Dresser-Rand Co., 240 S.W.3d 864 (Tex.2007) (economic loss rule; physical harm allows tort recovery)
- Coastal Conduit & Ditching, 29 S.W.3d 282 (Tex.App.-Hou. [14th Dist.] 2000) (economic loss rule limitations; related to contract damages)
- Hou-Tex, Inc. v. Landmark Graphics, 26 S.W.3d 103 (Tex.App.-Hou. [14th Dist.] 2000) (economic loss rule scope and exceptions)
- Natural Gas Clearinghouse v. Midgard Energy Co., 113 S.W.3d 400 (Tex.App.-Amarillo 2003) (UCC interpretation in gas transactions)