Wolf Hollow I, L.P. v. El Paso Marketing, L.P. and Enterprise Texas Pipeline, LLC
472 S.W.3d 325
Tex. App.2015Background
- Wolf Hollow operates a gas-fired power plant; El Paso supplies gas under a Supply Agreement and uses Enterprise’s pipeline (governed by a Transportation Agreement).
- Between 2006–2007 Wolf Hollow experienced delivery interruptions and episodes of contaminated/variable-quality gas; Wolf Hollow alleges resulting costs for replacement power and plant repairs.
- Supply Agreement: Article XIV (Quality) requires minimum gas specs and provides an assignment remedy against Enterprise if Enterprise delivers nonconforming gas; Article XXI (Default and Remedies) prescribes a three-step procedure in §21.1 for recovering replacement-power costs tied to failures to deliver the Scheduled Delivery Quantity (measured in MMBtus).
- Procedural history: Trial court granted El Paso summary judgment and entered declaratory judgments that Article XIV’s assignment was the exclusive remedy and that Article XXI did not apply to gas-quality claims; this court and the Texas Supreme Court have previously reviewed and remanded multiple issues (Wolf Hollow I, II, IV).
- The Supreme Court remanded for this court to decide whether Article XXI applies only to quantity claims or also to gas-quality claims and whether Wolf Hollow may recover replacement-power damages from El Paso.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Article XXI §21.1 (replacement-power) applies to gas-quality claims | §21.1 uses defined term "Quantity of Gas" (MMBtus) and speaks of "delivery failure," so it can encompass quality shortfalls that result in insufficient MMBtus | §21.1 addresses only quantity shortfalls (it uses "Quantity"/Scheduled Delivery Quantity); quality disputes belong to Article XIV and its assignment remedy | §21.1 can apply to a gas-quality claim only when the quality failure results in delivery of insufficient Scheduled Delivery Quantity (measured in MMBtus); trial court's blanket declaration that Article XXI never applies to quality claims was overbroad and vacated |
| Whether Wolf Hollow alleged facts satisfying §21.1 prerequisites to recover replacement-power costs in this case | Wolf Hollow points to alleged Btu variability and shutdowns requiring replacement power; also argues §21.2 Event of Default + §21.3 allow recovery | El Paso contends §21.1 requires failure to deliver the Scheduled Delivery Quantity in MMBtus; allegations of off-spec liquids or excessive heat content are not allegations that Scheduled Delivery Quantity (MMBtus) was unmet | Held: Wolf Hollow did not plead facts showing a failure to deliver the Scheduled Delivery Quantity (MMBtus); excessive Btu or contamination alone does not satisfy §21.1(a), so replacement-power damages cannot be recovered on the pleaded quality claims here |
| Whether broad §21.3 (remedies during Event of Default) allows bypassing §21.1's three-step procedure | Wolf Hollow argues §21.3 permits pursuing any remedy during an Event of Default, including replacement power | El Paso argues §21.1 is the specific, controlling procedure for replacement-power recovery and §21.3 cannot be used to circumvent §21.1 prerequisites | Held: Specific provisions (§21.1) control over general (§21.3); §21.3 cannot be used to obtain replacement-power damages unless §21.1's prerequisites are met |
| Whether Article XIV’s assignment remedy is exclusive (i.e., bars suing El Paso) | Wolf Hollow contends assignment is not exclusive and it may sue El Paso directly for damages | El Paso and trial court argued Article XIV assigned exclusive remedy to an assignment/subrogation against Enterprise | Held: Supreme Court and concessions show assignment is not exclusive; Wolf Hollow may sue El Paso (third declaration vacated) |
Key Cases Cited
- Wolf Hollow I, L.P. v. El Paso Mktg., L.P., 329 S.W.3d 628 (Tex. App.—Houston [14th Dist.] 2010) (initial court of appeals decision addressing consequential damages waiver and procedures under §21.1)
- El Paso Mktg., L.P. v. Wolf Hollow I, L.P., 383 S.W.3d 138 (Tex. 2012) (Texas Supreme Court ruling distinguishing replacement-power damages from other consequential damages and remanding whether replacement power available)
- El Paso Mktg., L.P. v. Wolf Hollow I, L.P., 450 S.W.3d 121 (Tex. 2014) (per curiam) (clarified that the Supreme Court had not decided whether Article XXI applies to quality claims and remanded that question)
- Valence Operating Co. v. Dorsett, 164 S.W.3d 656 (Tex. 2005) (standard for reviewing summary judgment and contract interpretation principles)
- Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132 (Tex. 1994) (specific contract provisions control over general ones)