Delphi Petroleum v. Magellan Terminals Holdings, L.P. ( 2015 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
DELPHI PETROLEUM, )
)
Plaintiff, )
)
) C.A. No. N12C-02-302 FWW
v. )
)
MAGELLAN TERMINALS )
HOLDINGS, L.P. )
)
Defendant. )
Submitted: April 24, 2015
Decided: June 23, 2015
Upon Defendant’s Motion to Dismiss
GRANTED, in part, DENIED, in part.
Upon Defendant’s Motion for Partial Summary Judgment
GRANTED, in part, DENIED, in part.
Upon Plaintiff’s Motion for Partial Summary Judgment
DENIED, in part, MOOT, in part.
OPINION AND ORDER
Marc S. Casarino, Esquire, White and Williams, LLP, 824 N. Market St., Suite
902, P.O. Box 709, Wilmington, Delaware, 19899-0709; Peter J. Mooney, Esquire
(argued), White and Williams, LLP, 1650 Market Street, One Liberty Place, Suite
1800, Philadelphia, Pennsylvania 19103-7395, Attorneys for Plaintiff.
Herbert W. Mondros, Esquire, Margolis Edelstein, 300 Delaware Avenue, Suite
800, Wilmington, Delaware 19801; David E. Keglovits, Esquire (argued) and Erin
K. Dailey, Esquire, GableGotwals, 1100 ONEOK Plaza, 100 West Fifth Street,
Tulsa, Oklahoma 74103-4217, Attorneys for Defendant.
WHARTON, J.
I. INTRODUCTION
Before the Court are Magellan’s Motion to Dismiss and Motion for Partial
Summary Judgment and Delphi’s Motion for Partial Summary Judgment with
regard to a commercial contract and fraud dispute concerning operations at a
marine terminal located at the Port of Wilmington in Delaware (“Terminal”). The
parties request that the Court resolve several issues to narrow the scope of the
dispute in anticipation of trial. In Magellan’s Motion to Dismiss, Magellan seeks
dismissal of Counts III, IV and V of the Second Amended Complaint (“SAC”),
which all allege fraud. In Magellan’s Motion for Partial Summary Judgment,
Magellan requests that the Court determine that 1) Delphi cannot produce evidence
such that a reasonable trier of fact could find that Magellan breached certain
contract provisions; 2) Count II of the SAC for breach of the implied covenant of
good faith and fair dealing fails as a matter of law; and 3) Delphi is not entitled to
consequential damages as a matter of law. In Delphi’s Motion for Partial
Summary Judgment, Delphi requests that the Court determine that 1) Magellan
owes Delphi $421,603.06 for overbilling of heating charges under the 2005
Agreement; 2) Delphi has no responsibility to Magellan for heating charges under
the 2011 Agreement; 3) Magellan breached the 2011 Agreement by denying
Delphi the right to deliver product to the terminal by truck; 4) Delphi’s
responsibility for tank cleaning is limited to removing product and waste that can
2
be removed by shovel and broom; and 5) Magellan’s Amended Counterclaim fails
for lack of factual support.
The Court applies Super. Ct. Civ. R. 12(b)(6) to Magellan’s Motion to
Dismiss and Super. Ct. Civ. R. 56(c) to Magellan’s Motion for Partial Summary
Judgment and Delphi’s Motion for Partial Summary Judgment. Applying the
Motion to Dismiss standards, the Court finds that 1) Delphi failed to state a claim
for which relief can be granted as to Count III of the SAC; 2) it is premature to
determine whether the statute of limitations precludes recovery under Count IV of
the SAC; and 3) Delphi has adequately pleaded a cause of action under Count V of
the SAC.
Applying Super. Ct. Civ. R. 56(c) to Magellan’s Motion for Partial
Summary Judgment, the Court finds that 1) no reasonable trier of fact could find
that a breach of contract occurred based upon Magellan’s conduct alleged in
¶¶8(k),(d),(o) and (a) of the SAC and that factual issues remained as to ¶¶8(p) and
(e) of the SAC; 2) Count II of the SAC for breach of the implied covenant of good
faith and fair dealing is limited; and 3) the Court cannot find that Delphi is not
entitled to consequential damages as a matter of law.
Applying Super. Ct. Civ. R. 56(c) to Delphi’s Motion for Partial Summary
Judgment, the Court finds that 1) there is a factual dispute regarding whether
Magellan owes Delphi $421,603.06 for overbilling of heating charges under the
3
2005 Agreement; 2) the Court cannot rule as a matter of law that Delphi has no
responsibility to Magellan for heating charges under the 2011 Agreement; 3)
Magellan did not breach the 2011 Agreement by denying Delphi the right to
deliver product to the terminal by truck; 4) the Court cannot grant the relief Delphi
requests regarding responsibility for tank cleaning based upon its prayer; and 5)
Magellan identified the factual basis of its Amended Counterclaim.
Therefore, Magellan’s Motion to Dismiss is GRANTED, in part, and
DENIED, in part; Magellan’s Motion for Partial Summary Judgment is
GRANTED, in part, and DENIED, in part; and Delphi’s Motion for Partial
Summary Judgment is DENIED, in part, and MOOT, in part.
II. PROCEDURAL CONTEXT
Delphi, a Delaware corporation, buys and sells petroleum products.
Magellan, a Delaware limited partnership, operates a marine terminal in
Wilmington, Delaware (“Terminal”) to store and handle petroleum products.
Delphi and Magellan executed several contracts through which Magellan agreed to
provide Delphi with services at the Terminal and Delphi agreed to pay Magellan
certain fees. Delphi and Magellan executed a Terminalling Agreement on
September 1, 2005 (“2005 Agreement”). 1 Delphi and Magellan entered into a
second Terminalling Agreement that was executed by Delphi on May 13, 2011 and
1
SAC, D.I. 165, at Ex. A.
4
by Magellan on May 16, 2011 (“2011 Agreement”). 2 Delphi and Magellan
executed the Flush Oil Agreement on March 1, 2007. 3
On February 29, 2012, Delphi filed a Complaint against Magellan for breach
of contract, negligence, conversion and unjust enrichment related to the 2005 and
2011 Agreements. 4 On October 23, 2013, the Court approved the parties’
stipulation to file an Amended Complaint. 5 The Amended Complaint contained
counts for breach of contract, breach of the implied covenant of good faith and fair
dealing, conversion, unjust enrichment and fraud.6 The Court granted Magellan’s
Motion to Dismiss the Amended Complaint with respect to the conversion, unjust
enrichment and fraud counts 7 and the Court denied Delphi’s Motion for
Reconsideration of the Order.8 On December 22, 2014, Delphi filed a Motion for
Leave to File Second Amended Complaint. 9 On January 16, 2015, both parties
filed Motions for Partial Summary Judgment 10 By Order dated January 20, 2015,
the Court granted Delphi’s Motion for Leave to File Second Amended Complaint,
which revived Delphi’s fraud claims. 11 On February 2, 2015, Delphi filed the SAC
2
Id. at Ex. B.
3
Id. at Ex. C.
4
See Compl., D.I. 1.
5
See Oct. 23, 2013 Order, D.I. 39.
6
Am. Compl., D.I. 33.
7
See May 2, 2014 Order, D.I. 67.
8
See Aug. 1, 2014 Order, D.I. 99.
9
D.I. 137.
10
D.I. 155 (Magellan); D.I. 156 (Delphi).
11
See Jan. 20, 2015 Order, D.I. 164.
5
alleging breach of contract, breach of the implied covenant of good faith and fair
dealing and three claims for fraud.12 On February 17, 2015, Magellan filed a
Motion to Dismiss the three fraud claims in the SAC. 13 The parties appeared
before the Court for oral argument on April 24, 2015 on Magellan’s Motion to
Dismiss, Magellan’s Motion for Partial Summary Judgment and Delphi’s Motion
for Partial Summary Judgment.
III. STANDARD OF REVIEW
A. Super. Ct. Civ. R. 12(b)(6).
Super. Ct. Civ. R. 12(b)(6) provides for dismissal of a complaint for “failure
to state a claim upon which relief can be granted.” When examining the complaint
for purposes of a motion to dismiss, the Court accepts all well-pleaded facts as
true 14 and draws all inferences in the light most favorable to the plaintiff. 15 If the
Court finds that the “plaintiff may recover under any reasonably conceivable set of
circumstances susceptible of proof under the complaint,” the motion will be
denied.16
B. Super. Ct. Civ. R. 56(c).
Super. Ct. Civ. R. 56(c) provides that summary judgment is appropriate
where there is “no genuine issue as to any material fact” and “the moving party is
12
See generally SAC.
13
See Def.’s Mot. to Dismiss, D.I. 175.
14
Loveman v. Nusmile, 2009 WL 847655, at *2, (Del. Super. Mar. 31, 2009).
15
Savor, Inc. v. FMR Corp., 2001 WL 541484, at *1 (Del. Super. Apr. 24, 2001).
16
Spence v. Funk, 396 A.2d 967, 968 (Del. 1978).
6
entitled to a judgment as a matter of law.” When considering a motion for
summary judgment, the Court’s function is to examine the record to determine
whether genuine issues of material fact exist “but not to decide such issues.” 17 The
moving party bears the initial burden of demonstrating that the undisputed facts
support his claims or defenses.18 If the moving party meets its burden, then the
burden shifts to the non-moving party to demonstrate that there are material issues
of fact to be resolved by the ultimate fact-finder. 19 Summary judgment will be
granted if, after viewing the record in the light most favorable to the non-moving
party, no genuine issues of material fact exist and the moving party is entitled to
judgment as a matter of law.20 If the record reveals that material facts are in
dispute, or if the factual record has not been developed thoroughly enough to allow
the Court to apply the law to the factual record, then summary judgment is
inappropriate.21
IV. MAGELLAN’S MOTION TO DISMISS
In the SAC, Delphi added, inter alia, three additional counts alleging fraud:
Count III- Fraudulent Concealment of Overbilling of Heating Charges; Count IV –
17
Merrill v. Crothall-Am., Inc., 606 A.2d 96, 99-100 (Del. 1992).
18
Moore v. Sizemore, 405 A.2d 679, 681 (Del. 1979).
19
Brzoska v. Olson, 668 A.2d 1355, 1364 (Del. 1995).
20
Merrill, 606 A.2d at 99-100.
21
See Cook v. City of Harrington, 1990 WL 35244, at *3 (Del. Super. Feb. 22, 1990) (“Summary
judgment will not be granted under any circumstances when the record indicates . . . that it is
desirable to inquire more thoroughly into the facts in order to clarify the application of law to the
circumstances.”).
7
Fraudulent Billing of Tank Cleaning Charges; and Count V – Fraud in the
Inducement. 22 Magellan moves to dismiss Delphi’s three fraud claims contained in
the SAC. Magellan asserts that Counts V and III fail to state a claim upon which
relief may be granted pursuant to Super. Ct. Civ. R. 12(b)(6) and that Count IV is
barred by the statute of limitations.
A. Delphi has Sufficiently Pleaded Fraud in Count V of the SAC.
In Count V, the SAC provides that “Magellan emailed Delphi that it
‘agreed[d] with your [Delphi’s] two changes dealing with improvement costs and
truck receipt language’” 23 and that the “statement agreeing to the ‘truck receipt
language’ was a false representation.”24 The SAC also states that “[Tony] Bogle, a
key person in the negotiation of the 2011 Agreement and a Magellan employee
implicated in the tank heating fraud, admitted that when Magellan said Delphi
could deliver oil by truck, Magellan knew that it would not allow Delphi to deliver
product by truck.”25 In deposition testimony, Tony Bogle testified: “Q: So you
know when you – when this email went out, that if Delphi tried to deliver by truck,
Magellan would refuse? A: Yes.26 The SAC also provides that one week after the
2011 Agreement was executed, “[Tony] Bogle wrote himself a memo detailing the
reasons he would give Delphi for denying Delphi the right to deliver to the
22
See SAC, at ¶¶ 17-66.
23
Id. at ¶ 50.
24
Id. at ¶ 53.
25
Id. at ¶ 57.
26
Id. (quoting Bogle Dep., Ex. L to SAC at 69:19-22).
8
[Terminal], notwithstanding Magellan had agreed to Delphi’s truck receipt
language…”27
Additionally, the SAC states that “Magellan made its false representation
with the intent to induce Delphi to sign the 2011 Agreement,” 28 that “[i]n
executing the 2011 Agreement, Delphi justifiably relied on Magellan’s statement
and the inclusion of the delivery by truck provision into the contract,” 29 and that
“Delphi has sustained damages…as a result of Delphi’s reliance of Magellan’s
fraudulent statement and representations.”30
Magellan argues that Delphi has not made out a prima facie claim for
fraudulent inducement regarding the Truck Clause because Delphi has not pleaded
that it reasonably relied upon extra-contractual representations by Magellan. 31
Magellan asserts that the alleged misrepresentation that Magellan was “in
agreement with [Delphi’s proposed] changes [to the 2011 Terminalling
Agreement] dealing with…truck receipt language” is not a misrepresentation but a
matter of interpretation.32 Magellan also argues that Delphi’s “fraud claim is
27
Id. at ¶ 58.
28
Id. at ¶ 55.
29
Id. at ¶ 65.
30
Id. at ¶ 66.
31
Def.’s Mot. to Dismiss at 2.
32
Id. at 2-3.
9
merely an attempt by Delphi to ‘bootstrap’ its breach of contract claims into fraud
claims. 33
Delphi argues that it sufficiently pleaded all of the elements of fraud. Delphi
asserts that “a claim for fraud can co-exist with a breach of contract claim so long
as the fraud claim is based on a promise or misrepresentation collateral or
extraneous to the terms of the agreement.” 34 Delphi contends that “the May 13,
2011 e-mail chain described in ¶¶48-51 [of the SAC] is indisputably separate from
and collateral to the parties’ Agreement.” 35
“The general elements of common law fraud under Delaware law are: (1)
defendant's false representation, usually of fact, (2) made either with knowledge or
belief or with reckless indifference to its falsity, (3) with an intent to induce the
plaintiff to act or refrain from acting, (4) the plaintiff's action or inaction resulted
from a reasonable reliance on the representation, and (5) reliance damaged the
[plaintiff].” 36
Super. Ct. Civ. R. 9(b) requires a plaintiff to plead fraud with
“particularity.” 37 “The entire purpose of Rule 9(b) is to put the defendant on notice
so that he can adequately prepare a defense.” 38 “The ‘circumstances’ which must
33
Id. at 2.
34
Pl.’s Resp. in Opp’n to Def.’s Mot. to Dismiss, D.I. 184, at 5.
35
Id.
36
Browne v. Robb, 583 A.2d 949, 955 (Del. 1990).
37
Id.
38
Id.
10
be stated with particularity under Rule 9(b) refer to ‘the time, place, and contents
of the false representations, as well as the identity of the person making the
misrepresentation and what he obtained thereby.’” 39
Delphi pleads that “Magellan emailed Delphi that it ‘agreed[d] with your
[Delphi’s] two changes dealing with improvement costs and truck receipt
language’” 40 and that the “statement agreeing to the ‘truck receipt language’ was a
false representation.”41 The SAC also pleads that “[Tony] Bogle, a key person in
the negotiation of the 2011 Agreement and a Magellan employee implicated in the
tank heating fraud, admitted that when Magellan said Delphi could deliver oil by
truck, Magellan knew that it would not allow Delphi to deliver product by truck.” 42
The SAC alleges that “Magellan made its false representation with the intent to
induce Delphi to sign the 2011 Agreement,” 43 that “[i]n executing the 2011
Agreement, Delphi justifiably relied on Magellan’s statement and the inclusion of
the delivery by truck provision into the contract,” 44 and that “Delphi has sustained
damages…as a result of Delphi’s reliance on Magellan’s fraudulent statement and
representations.”45 Delphi has alleged all of the elements of common law fraud
39
Nutt v. A.C. & S., Inc., 466 A.2d 18, 23 (Del. 1983)(quoting Autrey v. Chemtrust Indus. Corp.,
362 F. Supp. 1085, 1092 (D. Del. 1973)).
40
SAC at ¶ 50.
41
Id. at ¶ 53.
42
Id. at ¶ 57.
43
Id. at ¶ 55.
44
Id. at ¶ 65.
45
Id. at ¶ 66.
11
with particularity. Therefore, the Court finds that Delphi has adequately made out
a prima facie case of fraud.
Additionally, the Court finds Magellan’s “bootstrapping” argument
unpersuasive. Delaware courts have permitted a claim for fraud and breach of
contract claim when the fraud claim is based on a “promise collateral or extraneous
to the terms [of] an enforceable agreement in place between the parties.” 46 In
MicroStrategy Inc. v. Acacia Research Corp., 2010 WL 555045, Court of
Chancery explained that “a plaintiff ‘cannot ‘bootstrap’ a claim of breach of
contract into a claim of fraud merely by alleging that a contracting party never
intended to perform its obligations.’” 47 However, the court acknowledged that
…statements of future intent can be “fraudulent
misrepresentations” sufficient to form the basis of a
fraudulent inducement claim only where the Complaint
alleges particularized facts that allow the Court to infer
that, at the time the promise was made, the speaker had
no intention of keeping it. “Indeed, ‘[s]tatements of
intention ... which do not, when made, represent one's
true state of mind are misrepresentations known to be
such and are fraudulent.48
The Court finds that Delphi has sufficiently alleged that Magellan had no
intention of allowing delivery by truck to the Terminal at the time the alleged
promise to allow delivery by truck to the Terminal was made. Delphi quotes the
46
IOTEX Comm’n v. Defries, 1998 WL 914265, at *5 (Del. Ch. Dec. 21, 1998).
47
MicroStrategy Inc. v. Acacia Research Corp., 2010 WL 555045, at *17 (Del. Ch. Dec. 30,
2010)(internal citations omitted).
48
Id. at *15 (internal citations omitted).
12
deposition testimony of Tony Bogle for the proposition that Magellan knew before
adding the truck receipt language to the contract that Magellan would not actually
allow Delphi to deliver by truck to the terminal; specifically, Delphi alleges that
Tony Bogle testified: “Q: So you know when you – when this email went out, that
if Delphi tried to deliver by truck, Magellan would refuse? A: Yes. 49
Additionally, Delphi alleges that Tony Bogle wrote a memo to himself one week
after the 2011 Agreement was memorialized that detailed the reasons that he would
give to Delphi as to why Magellan would deny Delphi’s truck deliveries at the
Terminal.50 Based upon these allegations, a finder of fact could find that, at the
time the promise was made, the speaker had no intention of keeping the alleged
promise to allow Delphi to deliver by truck to the Terminal. Because the Court
finds that Delphi has met the pleading requirements under Super. Ct. Civ. R.
12(b)(6) and Super. Ct. Civ. R. 9(b) to state a claim for fraudulent inducement,
Magellan’s Motion to Dismiss Count V is DENIED.
B. Delphi has Failed to Plead Fraud in Count III of the SAC.
As part of its breach of contract claim, in ¶8(u) of the SAC, Delphi alleges
that “Magellan overbilled Delphi by at least $580,000 between 2005-11 for the fuel
consumed to heat Delphi’s oil tanks, and then concealed its overcharges. Delphi
confirmed Magellan’s overbilling in December, 2014.” In addition, in Count III,
49
SAC at ¶ 57 (quoting Bogle Dep., Ex. L to SAC at 69:19-22).
50
See id. at ¶ 58.
13
the SAC states, in relevant part, that “Magellan did not reveal the more than
$580,000 overbill when it answered, under oath, Interrogatory No. 35 of Delphi's
Second Set of Interrogatories and falsely alleged that it had corrected every error in
its billings to Delphi.” 51 Additionally, the SAC provides that “Magellan knew that
it had overcharged Delphi…for heating over the period from 2007 through 2010” 52
and that “Magellan billed Delphi for heating charges on a monthly basis under the
2005 Agreement and Delphi paid all those charges.” 53 Paragraph 8(r) of the SAC
provides that “Magellan tendered to Delphi inaccurate invoices…and Delphi has
paid Magellan sums not actually due by relying on the accuracy of the invoices and
is entitled to be refunded all amounts overpaid.” Delphi claims damages in excess
of $580,000.54
Magellan argues that Delphi has failed to state a claim for fraud in Count III
of the SAC. Magellan asserts that Delphi’s claim fails because Delphi has not
alleged that Magellan “made any affirmative representation, or took any action, to
prevent Delphi from learning that it was being billed for heating oil according to
measurements from meters that Delphi claims were erroneous.” 55 Magellan also
51
Id. at ¶ 33.
52
Id. at ¶ 22.
53
SAC at ¶ 20.
54
Id. at ¶ 25.
55
Def.’s Mot. to Dismiss at 4.
14
asserts that “Delphi does not allege that it took any action, or refrained from taking
any action, in reliance on any representation or concealment by Magellan.” 56
Delphi argues that it has properly alleged a claim for fraudulent concealment
because pleading fraud is not limited to identifying misrepresentations; fraud may
also be pleaded by asserting the defendant deliberately concealed facts or remained
silent when faced with a duty to speak.57 Delphi contends that the SAC
sufficiently provides that Magellan “committed fraud by concealing that it
overcharged and then kept more than $580,000 of Delphi’s money, while at the
same time representing to Delphi that ‘it had corrected every error in its billings’
and demanding that Delphi pay Magellan additional money and interest.58 Delphi
argues that it “acted in reliance on the accuracy of Magellan’s 72 detailed monthly
heating bills…paid all of them in full and thereby fell victim to Magellan’s overbill
of $580,000 and subsequent concealment.” 59
The Delaware Supreme Court has held that “[f]raud does not consist merely
of overt misrepresentations. It may also occur through deliberate concealment of
material facts.”60 Here, Delphi alleges that Magellan concealed the overbilling and
that Magellan overtly misrepresented that it had corrected every error in its billings
56
Id.
57
Pl.’s Resp. in Opp’n to Def.’s Mot. to Dismiss at 2.
58
Id.
59
Id.
60
Stephenson v. Capano Dev., 462 A.2d 1069, 1074 (Del. 1983).
15
to Delphi. 61 Delphi also alleges that “Magellan knew that it had overcharged
Delphi more than $420,000 for heating over the period from 2007 through 2010.”62
Therefore, Delphi has satisfied the first two elements of the cause of action
regarding alleging a false representation and knowledge of the falsity of the
representation.
Where Delphi fails in its allegations is in not alleging 1) that Magellan made
the false representations with the intent to induce Delphi to take some action or
refrain from taking action; or 2) that Delphi took some action in reasonable
reliance on the false representations. Delphi has not pleaded that Magellan
intended to induce Delphi to act or refrain from acting based upon the alleged
concealment. Exhibit D to the SAC is the January 21, 2011 letter from Alan Cosby
to Tony Bogle, both Magellan representatives, that contains the chart that Delphi
relies upon to allege overbilling.63 The chart covers the time period from 2007
through 2010. 64 Based upon that email and chart, at most, Delphi has pleaded that
Magellan discovered the alleged overbilling that occurred between 2007 and 2010
on January 21, 2011 and formed the intent to induce on that date. However, there
are no well-pleaded facts in the SAC to support Delphi’s assertion that Magellan
had the intent to induce Magellan to act or refrain from acting after that date.
61
SAC at ¶ 33.
62
Id. at ¶ 22.
63
SAC at Ex. D.
64
SAC at Ex. D.
16
Delphi must also plead that Delphi took action in reasonable reliance on
Magellan’s alleged concealment after January 21, 2011. Delphi alleges that
“Magellan billed Delphi for heating charges on a monthly basis under the 2005
Agreement and Delphi paid all those charges” 65 and that “Magellan tendered to
Delphi inaccurate invoices…and Delphi has paid Magellan sums not actually due
by relying on the accuracy of the invoices and is entitled to be refunded all
amounts overpaid.”66 However, those assertions address what action Delphi took
in response to receiving allegedly inflated invoices but do not address Delphi’s
actions in response to the alleged concealment of overbilling that occurred after
January 21, 2011. Delphi has failed to plead with particularity that it did anything
in reliance on Magellan’s alleged concealment of the overbilling after January 21,
2011. Instead, Delphi asserts only that Magellan did not unilaterally credit
Delphi.67 The SAC is silent as to Delphi’s actions as a result of the alleged
concealment.
65
SAC at ¶ 20.
66
Id. at ¶ 8(r).
67
See SAC at ¶¶ 29-32:
29. Magellan did not credit Delphi the more than $580,000 overbill
when it filed its counterclaims in this litigation.
30. Magellan did not credit Delphi the more than $580,000 overbill
when accounting for what Delphi allegedly owed.
31.Magellan did not credit Delphi the more than $580,000 overbill
when claiming Delphi owed more than $300,000 in interest on
amounts allegedly owed Magellan.
17
Similarly, Delphi alleges that the overt misrepresentation that Magellan had
corrected all of its billing errors occurred in response to discovery in December
2013. 68 However, Delphi does not allege that Magellan intended to induce Delphi
to take any action in response to the overt misrepresentation. Furthermore, Delphi
does not allege that Delphi took action in reasonable reliance on the overt
misrepresentation.
Because the Court finds that Delphi has not pleaded that Magellan intended
to induce Delphi to take some action or refrain from taking action based upon
alleged fraudulent statements and that Delphi has not pleaded that Delphi did
anything in reasonable reliance upon Magellan’s alleged fraudulent statements,
Delphi has failed to make out a prima facie claim of common law fraud and
Magellan’s Motion to Dismiss Count III is GRANTED.
C. Dismissal of Count IV is Premature.
In Count IV, the SAC states that “Magellan fraudulently billed Delphi for
tank cleaning charges that were Magellan’s responsibility and purposefully altered
bills to conceal the fact that it was passing off its charges to Delphi.”69 The SAC
also provides that “Magellan overbilled Delphi for the costs relating to the cleaning
of tanks leased to Delphi in violation of Clauses 2.7 and 2.8 of Schedule A of the
32. Magellan did not credit Delphi the more than $580,000 overbill
when it held Delphi’s product hostage under an invalid
warehouseman’s lien…
68
Id. at ¶ 10.
69
Id. at ¶ 36.
18
2005 Agreement”70 and that “Magellan breached Clauses 2.7 and 2.8 of Schedule
A of the 2005 Agreement by arranging for tank cleaning services to be performed
in a manner to minimize the costs of the cleaning for which Magellan was
responsible and maximize the costs for which Delphi was responsible.”71
Magellan argues that Count IV for Fraudulent Billing of Tank Cleaning
Charges is barred by the statute of limitations. Magellan asserts that the three-year
statute of limitations has run because the underlying invoices that Delphi relies
upon to support its claim were issued between 2007 and 2010.72 Magellan
contends that Delphi knew of the invoices in September 2013, if not earlier, when
it filed its First Amended Complaint that included a similar allegation. 73
Delphi argues that the three-year statute of limitations is tolled by the Time
of Discovery Rule. Specifically, Delphi asserts that the “concealment and fraud”
provision of the Rule applies because Magellan “deceitfully altered cleaning
bills.”74 Delphi alternatively claims that the “inherently unknowable and
blamelessly ignorant” provision of the Rule applies. Delphi contends that it was
“not aware that Magellan was altering its bills, rendering false invoices or
colluding with the third party contractor to create fictitious charges” until Magellan
70
Id. at ¶ 8(f).
71
Id. at ¶ 8(g).
72
Def.’s Mot. to Dismiss at 3.
73
Id.
74
Pl.’s Resp. in Opp’n to Def.’s Mot. to Dismiss at 3.
19
produced documents during discovery in 2014 and Delphi deposed Magellan
witnesses in November and December 2014. 75
The statute of limitations for claims for fraud is three years under 10 Del. C.
§ 8106.76 However, the statute of limitations may be tolled by the Time of
Discovery Rule under specific circumstances.77
Generally, a cause of action in tort “accrues” at the time
the tort is committed.... Ignorance of the cause of action
will not toll the statute [of limitations], absent
concealment or fraud, or unless the injury is inherently
unknowable and the claimant is blamelessly ignorant of
the wrongful act.... In the latter circumstance, the statute
of limitations begins to run upon the discovery of facts
“constituting the basis of the cause of action or the
existence of facts sufficient to put a person of ordinary
intelligence and prudence on inquiry which, if pursued,
would lead to the discovery” of such facts. 78
75
Id. at 4.
76
See 10 Del. C. § 8106:
No action to recover damages for trespass, no action to regain
possession of personal chattels, no action to recover damages for
the detention of personal chattels, no action to recover a debt not
evidenced by a record or by an instrument under seal, no action
based on a detailed statement of the mutual demands in the nature
of debit and credit between parties arising out of contractual or
fiduciary relations, no action based on a promise, no action based
on a statute, and no action to recover damages caused by an injury
unaccompanied with force or resulting indirectly from the act of
the defendant shall be brought after the expiration of 3 years from
the accruing of the cause of such action…
77
Boerger v. Heim, 965 A.2d 671, 674 (Del. 2009).
78
Id. (quoting Coleman v. Pricewaterhousecoopers, LLC, 854 A.2d 838, 842 (Del. 2004)).
20
In Thomas v. Capano Homes Inc., 2015 WL 1593618, the Court recently
denied a Motion to Dismiss where the parties disagreed as to when the statute of
limitations began to accrue. The Court held that
“[T]he Court will not adjudicate contested issues of fact
on a motion to dismiss, nor will it deem a pleading
inadequate under Rule 12(b)(6) simply because a
defendant presents facts that appear to contradict those
plead by the plaintiff.” It is premature for the Court to
dismiss Plaintiffs' claim as time-barred because, without
discovery, it is unclear when the statute of limitations
began to accrue, and whether the statue of limitations is
tolled by the Time of Discovery Rule.79
The parties have engaged in extensive discovery; however, the limited facts
contained in the pleadings are unclear as to when the statute of limitations began to
accrue and if the Time of Discovery Rule tolls the statute of limitations. In the
SAC, Delphi contends that “Magellan fraudulently billed Delphi for tank cleaning
charges that were Magellan’s responsibility and purposefully altered bills to
conceal the fact that it was passing of its charges to Delphi.” 80 Additionally,
Delphi alleges that “Magellan overbilled Delphi for the costs relating to the
cleaning of tanks leased to Delphi in violation of Clauses 2.7 and 2.8 of Schedule
A of the 2005 Agreement”81 and “Magellan breached Clauses 2.7 and 2.8 of
Schedule A of the 2005 Agreement by arranging for tank cleaning services to be
79
Thomas v. Capano Homes Inc., 2015 WL 1593618, at *2 (Del. Super. Apr. 2, 2015)(quoting
Doe 30’s Mother v. Bradley, 58 A.3d 429, 445 (Del. Super. Mar. 29, 2012)).
80
SAC at ¶ 36.
81
Id. at ¶ 8(f).
21
performed in a manner to minimize the costs of the cleaning for which Magellan
was responsible and maximize the costs for which Delphi was responsible.” 82
Although Magellan argues that the underlying invoices cover the time period
from 2007 through 2010, the pleadings do not establish a timeframe such that the
Court can determine if the claim is barred by the statute of limitations. Therefore,
Magellan’s Motion to Dismiss Count IV is DENIED.
V. MAGELLAN’S MOTION FOR PARTIAL SUMMARY
JUDGMENT
Magellan’s request for summary judgment can be grouped into three parts
for purposes of the Court’s analysis: there are six arguments involving breach of
contract analysis, an argument concerning breach of the implied covenant of good
faith and fair dealing and an argument regarding damages.
Magellan’s seeks summary judgment on some of Delphi’s breach of contract
claims on the grounds that: 1) Delphi’s claim in ¶8(k) of the SAC that Magellan
breached the PSA fails as a matter of law; 2) Delphi cannot produce evidence from
which a reasonable trier of fact could find that Magellan breached the 2005
Agreement by failing to account for 1,100 barrels discharged from the vessel
Asphalt Victory as alleged in ¶8(d) of the SAC; 3) Delphi cannot produce evidence
from which a reasonable trier of fact could find that Magellan’s refusal to accept
product from the vessel Asphalt Seminole was a breach of the 2005 Agreement as
82
Id. at ¶ 8(g).
22
alleged in ¶8(o) of the SAC; 4) Delphi cannot produce evidence from which a
reasonable trier of fact could find that Magellan breached the 2011 Agreement by
failing to credit Delphi for product in the Conectiv pipeline as alleged in ¶8(p) of
the SAC; 5) Delphi cannot produce evidence from which a reasonable trier of fact
could find that Magellan’s refusal to allow delivery of fuel by truck to the
Terminal constitutes a breach of the 2011 Agreement as alleged in ¶8(e) of the
SAC; and 6) Delphi cannot produce evidence from which a reasonable trier of fact
could find that Delphi is entitled to recover the alleged loss of 5,000 barrels under
the 2005 Agreement as alleged in ¶8(a) of the SAC.
Magellan also seeks summary judgment on Count II of the SAC for breach
of the duty of good faith and fair dealing because Magellan argues that Count II
fails as a matter of law. Magellan requests summary judgment to enforce Clause
4.2 of Schedule A of the 2005 and 2011 Agreements, the limitation of damages
provision, arguing that Delphi is not entitled to consequential damages per the
plain terms of the Agreements.
A. Breach of Contract Claims
Magellan’s first six arguments concern subsections of ¶8 of the SAC. The
common prayer for relief is that the Court determine that Delphi cannot produce
evidence from which a reasonable factfinder could find that Magellan breached
various provisions of the Agreements. Although Magellan, in its Opening Brief,
23
frequently frames the issue as a “failure to state a claim,” the Court will examine
the factual record before it on summary judgment.
To prevail on a claim for breach of contract, a plaintiff must show that a
contract existed, that the contract obligation was breached and that Plaintiff
suffered damages as a result of the breach. 83 For purposes of summary judgment,
Super. Ct. Civ. R. 56(c) “mandates the entry of summary judgment…against a
party who fails to make a showing sufficient to establish the existence of an
element essential to that party's case, and on which that party will bear the burden
of proof at trial.” 84 Consequently, if the factual record reveals that Delphi has not
made a showing as to an element of a breach of contract claim, the Court will grant
summary judgment, but if the factual record supports every element, summary
judgment will be denied.
1. The Undisputed Facts Establish that Delphi’s Claim Under ¶8(k)
of the SAC is Time-Barred.
In ¶8(k) of the SAC, Delphi alleges that it suffered damages when
Magellan breached Clause 1.1(c) of a certain September 1,
2005 Purchase and Sale Agreement by failing to negotiate in
its new lease with the Diamond State Port Corporation
(“Port”) a clause reimbursing Delphi for $800,000 of costs
incurred by Delphi’s subsidiary, Delaware Terminal
Company (“DTC”) and by failing to notify Delphi, before
executing its new agreement with the Port, that such a clause
had not been included in the new lease. Delphi would have
83
Interim Healthcare, Inc. v. Spherion Corp., 884 A.2d 513, 548 (Del. Super. 2005).
84
Burkhart v. Davies, 602 A.2d 56, 59 (Del. 1991).
24
received $400,000 had the clause been included in the new
lease. DTC’s rights to the reimburse[sic] were assigned to
Delphi.
Delphi sold the Terminal to Magellan through the execution of a Purchase
and Sale Agreement (“PSA”) in 2005. Clause 1.1(c) of the PSA provides that
…[Delphi] has a claim under the Dock Lease for Eight
Hundred Thousand US Dollars ($800,000) against the
[Port]… for reimbursement of costs incurred by [Delphi] in
the construction of a mooring structure in or about 2001 (the
"Reimbursement Claim"). The Port and [Delphi] entered
into a Memorandum of Understanding on October 19, 2001
in which the Port agreed that [Delphi] would be entitled to
deduct Eight Hundred Thousand Dollars ($800,000.00) in
settlement of the Reimbursement Claim from rental
payments that [Delphi] would owe the Port under a [New
Dock Lease] agreement…Should the New Dock Lease
between the Port and [Delphi] not be finalized prior to the
Effective Date [of the PSA], Magellan shall not negotiate
with the Port to exclude [the Reimbursement Claim] from
any New Dock Lease that [Magellan] may consummate with
the Port. 85
A new dock lease between Delphi and the Port was not finalized prior to the
effective date of the PSA. On April 7, 2008, Magellan notified Delphi via letter
that “[t]he Port has refused to include the [Reimbursement Claim] language or to
provide any alternative settlement proposal concerning the Reimbursement Claim”
in the new dock lease between Magellan and the Port.86 The new dock lease
85
Def.’s Opening Br., D.I. 155, at Ex. 4.
86
Id. at Ex. 8.
25
between Magellan and the Port does not contain the Reimbursement Claim but
provides a $36,000 monthly rent reduction to Magellan.87
Magellan argues that Delphi’s claim in ¶8(k) of the SAC is barred by the
statute of limitations because Delphi was notified on April 7, 2008 that the new
dock lease between the Port and Magellan did not include the $800,000 credit to
Delphi.88 Magellan claims that Delphi’s deadline to file a claim was April 7, 2011
based upon the three-year statute of limitations and that Delphi did not file a claim
until February 29, 2012.89 Magellan also argues that the Memorandum Of
Understanding provided that Magellan and the Port would present the proposed
$800,000 credit to Delphi to their respective boards of directors for consideration
and the undisputed facts are that the Port’s board of directors rejected the
provision.90 Magellan alternatively argues that Delphi cannot prove that Magellan
breached the PSA by negotiating with the Port to exclude the $800,000 credit or
that the Port proposed an alternative settlement that triggered Magellan’s duty to
notify Delphi of the alternative arrangement. 91 Additionally, Magellan asserts that
the parties agreed that if the $800,000 credit was not included in the new dock
87
Pl.’s Answ. Br., D.I. 172, at Ex. 7.
88
Def.’s Opening Br., at 7.
89
Id.
90
Id. at 8.
91
Id. at 7-8.
26
lease between Magellan and the Port and no alternative settlement was presented,
Delphi’s sole remedy is against the Port.92
Delphi argues that the Time of Discovery Rule tolls the running of the
statute of limitations for the claim where the injury is “inherently unknowable” and
the plaintiff is “blamelessly ignorant” or for “concealment or fraud.” 93 Delphi
claims that it did not know of the terms of the new dock lease until June 2013. 94
Delphi contends that “Magellan struck a side deal for reduced rent instead of
negotiating in good faith to keep the $800,000 reimbursement clause in the
agreement on behalf of Delphi as required.” 95 Delphi claims that the alleged side
deal was for a $36,000 per year reduction in rent, that the alleged side deal was
concealed from Delphi and that “[i]t is a fair inference that the Port and Magellan
agreed to the reduced rent in exchange for Magellan giving up to $800,000
reimbursement clause.” 96 Delphi also argues that whether or not the Port’s board’s
approval of the $800,000 credit was required and whether or not the Port’s board
rejected the $800,000 credit provision are questions of fact that cannot be answered
merely by “self-serving affidavits alone” produced by Magellan. 97
92
Id. at 8.
93
Pl.’s Answ. Br., at 9.
94
Id.
95
Id. at 3 (Italics in original).
96
Id. at 6.
97
Id. at 7-8.
27
The statute of limitations for breach of contract claims under 10 Del. C. §
8106 is three years.98 Generally, the statute begins to run when the injury occurs
or, stated differently, when the contract has been breached. 99 The Court applies the
Time of Discovery Rule to breach of contract claims for situations where the injury
is “inherently unknowable” and the plaintiff is “blamelessly ignorant.”100
However, “actual discovery [of the injury] commences the running of the statute;
so will any change in circumstances that renders the injury no longer inherently
unknowable, or the ignorance of the [plaintiff] no longer blameless.” 101
Delphi asserts that it could not have known that the Reimbursement Claim
was not included in the New Dock Lease because Magellan refused to give Delphi
a copy of the New Dock Lease “until Magellan’s June 2013 document
production.” 102 However, the record reflects that on April 7, 2008, Magellan
notified Delphi via letter that “[t]he Port has refused to include the
[Reimbursement Claim] language or to provide any alternative settlement proposal
concerning the Reimbursement Claim.” 103 Therefore, Delphi “actually
discovered” that the Reimbursement Claim was not included in the New Dock
Lease on April 7, 2008. At that point, Delphi was on notice of a possible breach of
98
See supra note 76.
99
Ruger v. Funk, 1996 WL 110072, at *2 (Del. Super. Jan. 22, 1996).
100
Id.; see also Marcucilli v. Boardwalk Builders, Inc., 2002 WL 1038818, at *4 (Del. Super.
May 16, 2002)(“The time of discovery rule applies to breach of contract claims.”).
101
Ruger, 1996 WL at *2.
102
Pl.’s Answ. Br., at 7.
103
Def.’s Opening Br., at Ex. 8.
28
contract action and had a duty to investigate. Instead, Delphi did nothing until
February 29, 2012 when it initiated this lawsuit.
Delphi’s argument that Magellan negotiated a “side deal” with the Port to
obtain reduced rent and concealed the “side deal” from Delphi may have been
sufficient to toll the statute of limitations if Delphi had presented any facts to
establish that the alleged “side deal” exists. Instead, Delphi merely argues that the
fact that Magellan received a $36,000 monthly rent reduction in the New Dock
Lease combined with the fact that the New Dock Lease excluded the
Reimbursement Claim creates “a fair inference that the Port and Magellan agreed
to the reduced the [sic] rent in exchange for Magellan giving up the $800,000
reimbursement clause.” 104 The Court cannot find that Delphi’s bald assertions
regarding the alleged “side deal” create a genuine dispute of material fact.
Therefore, the Court finds that a claim for breach of contract based upon ¶8(k) of
the SAC is time-barred. Consequently, the Court need not address the parties’
additional arguments. Magellan’s Motion for Partial Summary Judgment is
GRANTED.
2. The Undisputed Facts Show that Delphi Suffered No Damages as a
Result of the Conduct Alleged in ¶8(d) of the SAC.
In ¶8(d) of the SAC, Delphi alleges that Delphi suffered damages when
104
Pl.’s Answ. Br., at 6.
29
Magellan failed to properly perform the services it was
obligated to perform under the 2005 Agreement and failed to
properly control the discharge of, and accurately gauge the
quantity discharged from, the vessel “Asphalt Victory” in
December 2010. These failures resulted in the quantity of
the discharge from this vessel to be overstated by more than
1,100 barrels.
Delphi concedes that Kildair, the entity from which Delphi purchased oil in
December 2010, has not yet billed Delphi for the $90,000 Delphi contractually
owes Kildair but asserts that Kildair may bill Delphi before 2016 based upon the
statute of limitations that governs that contract. 105 A bill of lading indicates that
Magellan received 166,024 barrels of product at the Terminal on behalf of Delphi
for the December 2010 delivery. 106
Magellan argues that Delphi cannot recover under ¶8(d) of the SAC for
breach of contract because Delphi has suffered no damages. 107 Magellan asserts
that Delphi concedes that it did not pay for the alleged overstatement of barrels
discharged from the Asphalt Victory in December 2010 but that Delphi merely has
a “risk of paying the ship for the 1,100 barrels.” 108 Magellan argues that such
speculative damages are insufficient to survive a motion for summary judgment. 109
105
Id. at 13.
106
See id., at Ex. 11.
107
Def.’s Opening Br., at 10.
108
Id.
109
Id. at 11.
30
Delphi argues that it has suffered damages as a result of the alleged
overstatement of barrels discharged to the Asphalt Victory. 110 Delphi admits that
“Kildair has not yet billed Delphi for the additional $90,000 but…Kildair has until
the end of 2016 to bring a claim [against Delphi].” 111 However, Delphi argues that
it has already suffered damages in the amount of $26,147.25. 112 Delphi asserts that
its contract with Kildair specifies that Delphi pays only for the actual quantity of
barrels Delphi receives, which registered at 166,024 barrels for the December 2010
delivery. 113 Delphi contends that Delphi should have only paid Kildair for 164,637
barrels because Magellan determined a month or more after the delivery that the
quantity of barrels received by Delphi was overstated by 1,387 barrels because of
an issue with the pipeline.114 Delphi asserts that, as a result of Magellan’s failure
to accurately gauge the quantity of barrels Delphi received in December 2010,
Delphi paid Kildair for the quantity of barrels listed on the Bill of Lading which
was 166,024.115 Delphi asserts that the difference between the Bill of Lading
amount and the amount Delphi should have paid results in Delphi’s overpayment
to Kildair for $26,147.25. 116
110
Pl.’s Answ. Br., at 13.
111
Id.
112
Id.
113
Id.
114
Id.
115
Id.
116
Id. at 14.
31
When the factual record reveals that plaintiff has suffered no damages as a
result of an alleged breach of contract, summary judgment is appropriate. 117
Plaintiff’s damages must be actual and cannot be “merely speculative or
conjectural.”118 The Delaware Court of Chancery has held that damages based on
possible future liability are merely speculative.119 This Court agrees.
For purposes of this Motion, the Court must bifurcate Delphi’s claim for
damages and examine separately the $90,000 portion not yet paid to Kildair and
the $26,147.25 portion allegedly paid to Kildair. First, as to the $90,000, Delphi
concedes that Kildair has not yet billed Delphi in that amount but asserts that
Kildair may bill Delphi before 2016 based upon the statute of limitations
controlling that contract. However, the Court would merely be speculating as to
Kildair’s actions regarding its decision to pursue that claim against Delphi.
Therefore, the Court cannot find that there is evidence that Delphi has incurred that
portion of the damages.
Second, as to the alleged $26,147.25 that Delphi paid to Kildair, no evidence
is before the Court to conclude that Delphi actually paid that amount. The only
fact Delphi presented to the Court is a bill of lading that indicated that Magellan
received 166,024 barrels of product at the Terminal on behalf of Delphi on the date
117
Burkhart, 602 A.2d at 59.
118
Laskowski v. Wallis, 205 A.2d 825, 826 (Del. 1964).
119
See Kuroda v. SPJS Holdings, L.L.C., 971 A.2d 872, 883 (Del. Ch. 2009)(holding that
potential future liability for income taxes that have not been incurred is “speculative harm”).
32
in question. 120 There is no evidence such as a wire transfer, receipt or check
showing that Delphi actually paid Kildair any amount of money for the quantity of
barrels listed on the bill of lading. Delphi instead relies upon its own bare
assertions contained in its Response Brief which are insufficient to create a factual
dispute.121 Therefore, there are no facts from which the Court can find that Delphi
suffered damages as a result of a breach of contract and Magellan’s Motion for
Partial Summary Judgment as to ¶8(d) of the SAC is GRANTED.
3. The Undisputed Facts Establish that Magellan did not Breach
Clause 2.2 of Schedule A of the 2005 Agreement.
In ¶8(o) of the SAC, Delphi alleges that Delphi suffered damages when
Magellan breached the 2005 Agreement by refusing to allow
the discharge of the vessel “Asphalt Seminole” in February
2010 even though the product met, and Delphi had in
addition prearranged to have the product professionally
treated at Delphi’s expense to further guarantee that the
product would meet, the quality requirements detailed in
Clause 2.2 of the 2005 Agreement, resulting in the
incurrence of demurrage and additional freight charges.
Clause 2.2 of Schedule A of the parties’ 2005 Agreement provides that
[i]f Magellan receives non-conforming Product: (a)
Customer will bear the cost of any additional services
required, in the reasonable opinion of Magellan, to receive,
deliver, store, handle or blend the non-conforming Product;
(b) Magellan may halt delivery at any time, including during
the course of delivery, and refuse to continue to receive non-
120
See Pl.’s Answ. Br., at Ex. 11.
121
See Balzereit v. Hocker’s Superthrift, Inc., 2012 WL 3550495 at *1 (Del. Super. Jul. 24,
2012)(“Merely bare assertions or conclusory allegations do not create a genuine issue of material
fact.”).
33
conforming Product; and (c) Magellan may require
Customer to remove any non-conforming Product received
at the Terminal within thirty (30) days of delivery of the
non-conforming Product.
The 2005 Agreement specifies the following quality limitations on product
being delivered to the Terminal:
Specification Limitation
Maximum Product Deliver Temperature 150º F
Minimum Heavy Oil Delivery 30º F above Pour Point
Temperature:
Maximum Product Viscosity: 500SSF at 122º F
Maximum Product Pour Point: 90º F
Maximum Hydrogen Sulfide (H2S) 2 PPM
Content in Liquid Phase of Product:
Maximum Hydrogen Sulfide (H2S) 100 PPM in any one tank of delivery
Content in Vapor Space: vessel and 50 PPM volumetrically
correct weighted average in the vapor
space of all tanks of delivery vessel
A “Certificate of Analysis” contains a laboratory certification that the
“Vessel Composite” level of H2S measured 200 parts per million for the February
2010 delivery from the Asphalt Seminole.122 A “Hydrogen Sulfide Monitoring
Report” for the February 2010 delivery from the Asphalt Seminole showed that
temperature readings taken at various locations on the vessel all indicated that the
product temperature exceeded 150º F. 123 Counsel for Delphi acknowledged that
the “Certificate of Analysis” indicated that the H2S levels exceeded the contract
122
See Def.’s Opening Br., at Ex. 14.
123
See id., at Ex. 17.
34
specifications but presented the Court with a conflicting report that showed that the
H2S levels complied with the contract specifications. 124 Counsel for Delphi also
conceded that the reports measuring the product temperature showed that the
temperature exceeded 150º F. 125
Magellan seeks summary judgment on ¶8(o) of the SAC because Magellan
argues that it had the right to reject non-conforming product under the 2005
Agreement. 126 Magellan asserts that the 2005 Agreement provides that Magellan
may reject nonconforming product for delivery and further defines nonconforming
product as having H2S levels in the vapor space of the vessel’s cargo that exceed
100 parts per million in any one tank of delivery vessel. 127 Magellan contends that
it rightfully rejected delivery from the Asphalt Seminole when the H2S levels in
the vapor space of the Asphalt Seminole were reported to range between 100 parts
124
See Tr., D.I. 193, at 71: 6-7.
125
See Tr. at 71:22-72:7 which provides:
THE COURT: Where it reports H2S readings of port, starboard
and center of the vessel and it says “add,” and then there is a
number after that, which appears to be a temperature…
MR. MOONEY: Yes, sir.
THE COURT: And those temperatures are all over 150 degrees?
MR. MOONEY: Those temperatures are by one or two degrees
over, 152 degrees.
126
Def.’s Opening Br., at 12.
127
Id. at 11.
35
per million and 200 parts per million.128 Additionally, Magellan asserts that the
report showed that the product temperature exceeded the maximum specified in the
2005 Agreement which gave Magellan an additional basis upon which to reject the
delivery. 129
Delphi argues that Magellan wrongfully rejected the delivery from the
Asphalt Seminole because the product met the specifications contained in the 2005
Agreement. 130 Delphi asserts that the on board inspection of the vessel “showed
that the product on board the Asphalt Seminole fully complied with the limitations
contained in the 2005 Agreement” but acknowledges that another test conducted at
the inspector’s laboratory showed that the vapor concentration was higher than
what the contract permitted. 131 Delphi asserts that it was not obligated to report the
results of the second test to Magellan but did so to inform Magellan that it had
arranged for a third-party to treat the product at the dock to “assure that the product
would have an H2S concentration in the vapor phase of zero when stored in
Magellan’s Terminal.” 132 Delphi also asserts that Magellan’s rejection was never
justified because “there was a policy in existence in October 2010 that a vessel
could deliver product with 100 ppm H2S in vapor or 20 ppm in liquid, but it had to
128
Id.
129
Id.
130
Pl.’s Answ. Br., at 15-16.
131
Id. at 16.
132
Id. at 17.
36
be treated” and that Magellan had previously used the same third-party treatment
firm that was to treat the Asphalt Seminole. 133
Where there are no facts to support Delphi’s contention that Magellan
breached the 2005 Agreement by wrongfully rejecting the February 2010 product
delivery to the Terminal by the Asphalt Seminole, summary judgment is
appropriate. 134 Magellan presented a “Certificate of Analysis” in which the level
of H2S measured 200 parts per million for the February 2010 delivery from the
Asphalt Seminole.135 Additionally, Magellan presented a “Hydrogen Sulfide
Monitoring Report” for the February 2010 delivery from the Asphalt Seminole that
showed that temperature readings taken at various locations on the vessel all
indicated that the product temperature exceeded 150º F. 136 At oral argument,
Counsel for Delphi acknowledged that the “Certificate of Analysis” indicated that
the H2S levels exceeded the contract specifications but presented the Court with a
conflicting report that showed that the H2S levels complied with the contract
specifications. 137 However, Counsel for Delphi also conceded that the reports
measuring the product temperature showed that the temperature exceeded 150ºF. 138
133
Id.
134
Burkhart, 602 A.2d at 59.
135
See Def.’s Opening Br., at Ex. 14.
136
See id., at Ex. 17.
137
See Tr. at 71: 6-7.
138
See supra note 125.
37
Based upon the facts in the record, the Court finds that it is undisputed that
the product delivered to the Terminal by the Asphalt Seminole in February 2010
was non-conforming product because the temperature exceeded the contractual
limitations. Therefore, the Court finds that the undisputed facts show that
Magellan did not breach Clause 2.2 of Schedule A of the 2005 Agreement when it
rejected the delivery from the Asphalt Seminole in February 2010. Delphi cannot
recover under ¶8(o) of the SAC and Magellan’s Motion for Partial Summary
Judgment is GRANTED.
4. The Facts Pertaining to ¶8(p) of the SAC are Disputed.
A ten-inch pipeline runs between the Terminal and a power plant that was
owned by Conectiv at the time of the allegation contained in ¶8(p) of the SAC. For
various reasons, Magellan determined that the pipeline needed to be purged and
discovered that the pipeline still contained some product. Magellan did not know
whether the product belonged to Delphi before it searched its records. Magellan
discovered a document titled “Delaware Terminal Company Hourly Rate Sheet,”
dated “12/17/04” and states “T[ank]-12 to Conective [sic]” in the top left corner.139
Karen Peterson, a Delphi representative, testified 140 in response to the question
“Do you know whether that product [in the pipeline] belonged to Delphi?” that
139
Def.’s Opening Br., at Ex. 20.
140
Relevant excerpts of the deposition can be found in Def.’s Opening Br., at Ex. 16.
38
“[she] believe[d] at that time it belonged to Conectiv.” 141 Based upon this
information, Magellan transferred the product to Conectiv.
In excerpts from email communications between Magellan representatives,
Paul Hafner indicated that “[the product] belongs to [Conectiv]” while Tony Bogle
indicated that “[a coworker] asked about Delphi’s product in the 10” [Conectiv]
line” and Mark Roles stated that “[i]t might be Delphi’s product.” 142 Additionally,
Alan Cosby’s June 11, 2009 email summarizing a meeting with Delphi indicates
that Magellan contacted Delphi about purging the pipeline and noted that “Delphi
loses the rights to the DOT 10” line in Sept 2010” and that “staff remembers this
product belonging to Conectiv not Delphi.” 143
Paragraph 8(p) of the SAC alleges that “Magellan breached the 2005
Agreement by failing to properly credit Delphi for approximately 2,000 barrels of
No. 2 oil in the pipeline to Conectiv’s power plant in Edgemoor, Delaware.”
Magellan argues that Delphi’s claims under ¶8(p) of the SAC fails as a
matter of law because Conectiv, and not Delphi, owned the pipe when the alleged
transfer happened.144 Magellan asserts that in 2010, when Magellan needed to
treat a ten-inch pipeline at the terminal, it discovered product still contained in the
141
Peterson Dep. at 186: 19-22.
142
Pl.’s Answ. Br., at Ex. 14.
143
Id. at Ex. 15.
144
Def.’s Opening Br., at 13.
39
pipeline.145 Magellan claims that it searched its records and determined that the
product contained in the pipeline belonged to Conectiv so Magellan transferred the
product to Conectiv.146 Magellan asserts that it “discovered a transfer order
showing that the product in the line had been transferred to Conectiv” and that
“Delphi representative Karen Peterson admitted that the product belonged to
Conectiv at the time of the transfer.” 147
Delphi argues that there is a genuine issue of material fact in dispute.
Specifically, Delphi contends that ownership of the pipeline is disputed for
purposes of this Motion.148 Delphi asserts that Magellan misconstrues the “transfer
order” and contends that the document does not establish that Conectiv owned the
product in the pipeline but rather covered testing of the pipeline. 149 Additionally,
Delphi contends that email communications between Magellan representatives
establish that the product in the pipeline belonged to Delphi at the time of the
transfer. 150
145
Id.
146
Id. at 13-14.
147
Id. at 13.
148
Pl.’s Answ. Br., at 18-19.
149
Id. at 19.
150
See Pl.’s Answ. Br., at 18 (“Bogle responded that ‘[t]here may be a potential issue…when I
met with Ron [Gumbaz] last week …he asked about Delphi’s product in the 10” Delmarva
[Conectiv] line.’”; “Bogle’s supervisor further commented: ‘It might be Delphi’s product.’”;
“Alan Cosby, Magellan’s Wilmington area supervisor, also admitted to having been informed by
Domenic DiPiero, Delphi’s President, that the product was owned by Delphi.”)(internal citations
omitted).
40
Where a genuine dispute of material facts exists, summary judgment is not
appropriate. 151 If Magellan meets its burden on summary judgment, Delphi must
show that there are material issues of fact in dispute.152 It is not enough for Delphi
to assert the existence of a disputed fact.153 The alleged disputed fact must be one
which affects the outcome of the case. 154
Magellan relies on the document, titled “Delaware Terminal Company
Hourly Rate Sheet,” for the proposition that it represents a transfer of ownership of
product from Delphi to Conectiv because the document states “T[ank]-12 to
Conective [sic].” Additionally, Karen Peterson, a Delphi representative, testified
in response to the question “Do you know whether that product belonged to
Delphi?” that “[she] believe[d] at that time it belonged to Conectiv.” 155 Therefore,
Magellan has presented factual information to establish that Conectiv, and not
Delphi, owned the product in the pipeline at the time of the transfer. Therefore, the
burden shifts to Delphi to show the existence of a material factual dispute.
Delphi identifies facts that show that the product contained in the pipeline
belonged to Delphi at the time of the transfer. Excerpts from email
communications between Magellan representatives illustrate the dispute: Paul
Hafner indicated that “[the product] belongs to [Conectiv]” while Tony Bogle
151
Super. Ct. Civ. R. 56(c).
152
Brzoska, 668 A.2d at 1364.
153
Id.
154
Id.
155
Peterson Dep. at 186: 19-22.
41
indicated that “[a coworker] asked about Delphi’s product in the 10” [Conectiv]
line” and Mark Roles stated that “[i]t might be Delphi’s product.” 156 Additionally,
Alan Cosby’s June 11, 2009 email summarizing a meeting with Delphi indicates
that Magellan contacted Delphi about purging the pipeline and noted that “Delphi
loses the rights to the DOT 10” line in Sept 2010” and that “staff remembers this
product belonging to Conectiv not Delphi.” 157
Based upon the factual record, the Court finds that a genuine issue of
material fact exists because whether Delphi owned the product contained in the
10” pipeline at the time of the transfer alleged in ¶8(p) of the SAC would affect the
outcome of the claim. Therefore, summary judgment is not appropriate and
Magellan’s Motion is DENIED.
5. The Undisputed Facts Show that Delphi is Not Entitled to Relief
for Breach of Contract as Alleged in ¶8(a) of the SAC.
In ¶8(a) of the SAC, Delphi alleges, in part, that
[i]n January 2012 Magellan refused to allow Delphi to
deliver No. 6 oil to the Terminal by truck resulting in
Delphi losing the supply of approximately 26,000 barrels
of No. 6 oil. In May 2012, Magellan again refused to
allow Delphi to deliver No. 6 oil to the Terminal by
truck, and Delphi consequently lost the supply of 24,000
barrels of No. 6 oil. These refusals constituted breaches
of Clause 2.1(a) of Schedule A of the 2011 Agreement…
156
Pl.’s Answ. Br., at Ex. 14.
157
Id. at Ex. 15.
42
During the negotiation phase of the 2011 Agreement, on May 13, 2011, Delphi
proposed the language contained in Clause 2.1(a) of Schedule A of the 2011
Agreement in an email to Magellan.158 The email stated: “[p]lease see revised
draft. Delphi had the right to, and did, deliver to the terminal by truck in the
original agreement and needs that in this agreement…” 159 On the same day,
Magellan responded to Delphi’s proposal via email that it “[a]greed with
[Delphi’s] two changes dealing with improvement costs and truck receipt
language.”160 Delphi executed the 2011 Agreement that day. 161
Clause 2.1(a) of Schedule A of the 2011 Agreement provides that
[r]eceipt and deliveries of Product from the Terminal via
truck will be made to a Carrier in accordance with the
Terminal’s operating procedures and in accordance with
this Schedule A, Section 2.4…
Clause 2.4 of Schedule A of the 2011 Agreement provides various Terminal
operating guidelines. Clause 2.4 provides that “Customer may request the
ability to load trucks with Heavy Oil at the Terminal…” 162 Clause 2.9 of
Schedule A of the 2011 Agreement provides that “Magellan will maintain two
158
SAC at Ex. J.
159
Id.
160
Id. at Ex. K.
161
Id. at ¶4.
162
Clause 2.4 of Schedule A of the 2011 Terminalling Agreement.
43
(2) positions for the loading of Heavy Oil from tanks 3,4,8,17 and 18…”. 163
Additionally, Clause 4.1(b) of Schedule A of the 2011 Agreement provides that
If Customer is unable to load Heavy Oil at the Back
[Truck] Rack…If Customer is unable to load Heavy Oil
at a single (1) position of the Back [Truck] Rack…If
Customer is unable to load Heavy Oil at the slower of the
two truck loading positions at the Back [Truck]
Rack…. 164
Magellan argues that, as a matter of law, the language contained in Clause
2.1(a) of Schedule A of the 2011 Agreement does not give Delphi the right to
deliver products by truck to the Terminal. 165 Magellan asserts that the 2011
Agreement provides that
…‘[r]eceipt and deliveries of Product from the Terminal
via truck will be made to a Carrier in accordance with
the Terminal’s operating procedures and in accordance
with this Schedule A, § 2.4....’ (Ex. 1 at Schedule A,
§ 2.1(a) (emphasis added).) Section 2.4, in turn, contains
no provisions regarding the unloading of trucks at the
Terminal, and instead addresses only the loading of
product onto trucks for delivery from the Terminal, as
contemplated in § 2.1. 166
Magellan further asserts that parol evidence shows that the Terminal was not
equipped to handle deliveries to the Terminal by truck. 167 Magellan contends that
“Magellan proposed an Amendment to the 2011 Agreement that would allow
163
Clause 2.9 of Schedule A of the 2011 Terminalling Agreement.
164
Clause 4.1(b) of Schedule A of the 2011 Terminalling Agreement.
165
Def.’s Opening Br., at 15.
166
Id. at 18.
167
Id.
44
delivery to the Terminal by truck once certain modifications to the Terminal are
made… but Delphi refused to enter into such an amendment.” 168
Magellan alternatively argues that if the Court determines that 2.1(a) of
Schedule A of the 2011 Agreement affords Delphi the right to deliver product to
the terminal by truck, Delphi has suffered no recoverable damages by Magellan’s
alleged failure to allow delivery by truck. 169 Magellan contends that Section 4.2 of
Schedule A of the Terminalling Agreements limits damages and provides that
‘“[n]either party will be liable for other party’s lost profits, lost business
opportunities, or other indirect, special, incidental, punitive, or consequential
damages in connection with this Agreement.”’ 170 Magellan contends that Delphi
has identified “only two specific opportunities it claims it had to purchase product
for delivery to the Terminal by truck.” 171 Magellan asserts that “[r]egarding the
first alleged lost opportunity, in January 2012, Delphi never bid to purchase the
product in question, nor did Delphi offer the product for sale to another party.” 172
Magellan also asserts, as to the second alleged lost opportunity, “Delphi purchased
and immediately sold the product directly to a third party, without putting the
product in storage.” 173
168
Id.
169
Id.
170
Id. at 18-19 (quoting Clause 4.2 of Schedule A of 2005 and 2011 Agreements).
171
Id.
172
Id.
173
Id. at 18.
45
Delphi argues that “the 2011 Agreement permits Delphi to deliver product to
the Terminal by truck because the 2011 Agreement and extrinsic evidence
shows[sic] that the parties agreed and intended that Delphi would have the truck
delivery right.”174 Additionally, Delphi asserts that Magellan knew that Delphi
required that the 2011 Agreement contain the right to deliver product to the
Terminal by truck and that Magellan fraudulently induced Delphi into entering into
the 2011 Agreement. 175 Delphi claims that “[s]ummary judgment on this claim
should be denied since at minimum there is an issue as to what the parties intended
as to the inclusion of the truck receipt language in the 2011 Agreement.” 176
Issues of contract interpretation are matters of law for the Court to decide. 177
When interpreting a contract, the Court gives priority to the parties’ intentions as
reflected within the four corners of the document. 178 “In upholding the intentions
of the parties, a court must construe the agreement as a whole, giving effect to all
provisions therein.” 179 “Delaware law adheres to the objective theory of contracts,
i.e., a contract's construction should be that which would be understood by an
objective, reasonable third party.” 180
174
Pl.’s Answ. Br., at 20.
175
Id. at 20-22.
176
Id. at. 23.
177
Klair v. Reese, 531 A.2d 219, 222 (Del. 1987).
178
GMG Capital Investments, LLC v. Athenian Venture Partners I, L.P., 36 A.3d 776, 779 (Del.
2012).
179
E.I. du Pont de Nemours and Co., Inc. v. Shell Oil Co., 498 A.2d 1108, 1113 (Del. 1985).
180
Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010).
46
Clear and unambiguous language will be given its “ordinary and usual
meaning.”181 “When a contract's plain meaning, in the context of the overall
structure of the contract, is susceptible to more than one reasonable interpretation,
courts may consider extrinsic evidence to resolve the ambiguity.” 182 However,
[a] contract is not rendered ambiguous simply because
the parties do not agree upon its proper construction.
Rather, a contract is ambiguous only when the provisions
in controversy are reasonably or fairly susceptible of
different interpretations or may have two or more
different meanings. Ambiguity does not exist where a
court can determine the meaning of a contract without
any other guide than a knowledge of the simple facts on
which, from the nature of language in general, its
meaning depends. 183
Although the Clause contains the word “deliveries,” the remainder of the
Clause contemplates only moving product away from the Terminal. Parsing out
the language, it is apparent to the Court that “receipt of Product from the Terminal
via truck” means that Delphi is receiving product at the Terminal in its trucks to be
taken away from the Terminal. Additionally, it is equally as apparent to the Court
that “delivery of Product from the Terminal via truck” means that Delphi is
transporting the product that it loaded onto its trucks at the Terminal to another
location not at the Terminal.
181
AT&T Corp. v. Lillis, 953 A.2d 241, 252 (Del. 2008).
182
Salamone v. Gorman, 106 A.3d 354, 374 (Del. 2014).
183
Rhone–Poulenc Basic Chemicals Co. v. American Motorists Ins. Co., 616 A.2d 1192, 1195–
96 (Del.1992).
47
Other provisions of the 2011 Agreement support the Court’s interpretation
of Clause 2.1(a). Clause 2.4 of Schedule A of the 2011 Agreement provides
various Terminal operating guidelines. Clause 2.4 specifies the procedure for
removing product from the Terminal by truck but does not provide an operating
procedure for delivering product to the Terminal by truck. 184 Likewise, Clause 2.9
of Schedule A of the 2011 Agreement provides a procedure for loading product
from specific tanks but does not provide a provision for delivering product to the
tanks. 185 Additionally, Clause 4.1(b) of Schedule A of the 2011 Agreement
contemplates limitations of liability for situations in which Delphi cannot load
product onto trucks but does not provide for the same limitations if Delphi cannot
deliver product by truck. 186 Therefore, in the context of the overall structure of the
2011 Agreement, Clause 2.1(a) is not susceptible to more than one meaning.
The Court finds that the contract, as written, objectively reflects that the
parties’ intention was for Delphi to only receive product from the Terminal via
truck. Consequently, the Court will not consider the parties’ negotiations or other
184
See Clause 2.4 of Schedule of the 2011 Agreement (“Customer may request the ability to load
trucks with Heavy Oil at the Terminal…”).
185
See Clause 2.9 of Schedule of the 2011 Agreement (“Magellan will maintain two (2) positions
for the loading of Heavy Oil from tanks 3,4,8,17 and 18…”).
186
See Clause 4.1(b) of Schedule of the 2011 Agreement:
If Customer is unable to load Heavy Oil at the Back [Truck]
Rack…If Customer is unable to load Heavy Oil at a single (1)
position of the Back [Truck] Rack…If Customer is unable to load
Heavy Oil at the slower of the two truck loading positions at the
Back [Truck] Rack…
48
extrinsic evidence. Moreover, unless Delphi can show that Magellan acted
fraudulently or in bad faith, Clause 4.2 of Schedule A of the 2005 and 2011
Agreements prevents Delphi from recovering consequential damages. 187
Magellan’s Motion for Partial Summary Judgment is GRANTED.
6. It is Desirable to Further Develop the Factual Record Regarding
Whether or Not Magellan Failed to Exercise Due Care as Alleged
in ¶8(e) of the SAC.
In ¶8(e) of the SAC, Delphi alleges that
[o]n various dates, Magellan breached Clause 4.2 of
Schedule A of the 2005 Agreement by failing to exercise
reasonable care to safeguard Delphi’s product in storage
and/or in the gauging of the quantity of the receipts and
deliveries of Delphi’s product, resulting in the loss of more
than 5,000 barrels of Delphi’s produce in excess of the loss
allowance provided Magellan in such Clause.
Section 4.2 of Schedule A of the 2005 Terminalling Agreement provides that
Magellan will only be liable to Customer for damaged, lost,
or destroyed Product to the extent that the damage, loss or
destruction is caused by the failure of Magellan to use
reasonable care in the storage and handling of the Product.
Without limiting the foregoing, Magellan will only be liable
for losses of Heavy Oil…in excess of 0.25% of the quantity
of Heavy Oil…discharged at the Terminal in the Quarter in
which the loss occurred…
In an email to another Magellan employee, Brett Hunter, Magellan’s
representative, stated that “I don’t believe that we’ve had one quarter since the start
187
See infra Part V.C.
49
of the [2005] contract where we’ve had net gains in Delphi’s tankage.” 188 In an
April 7, 2011 email to Delphi, Tony Bogle, a Magellan representative, stated, with
regard to process improvements made to reduce the overall product loss, that the
process improvements/changes include:
Install [sic] new gauge and float on flush oil tank
Install new thermometer on flush oil tank
Calibrate thermometer quarterly
Reduce volume of over flush
Mix the flush oil tank before and after a product move to obtain a
uniform temperature. 189
Magellan argues that the record is void of any factual support for the lack of
reasonable care alleged in by Delphi in ¶8(e) of the SAC. 190 Magellan claims that
“[t]he 2005 Agreement provides that Magellan ‘is not an insurer’ of Delphi’s
product, and is responsible only for losses in excess of 0.25%, and then only if the
losses are caused by Magellan’s failure to use due care.”191 Magellan contends
that there are no facts that show that Magellan “was negligent in the handling or
measurement of [Delphi’s] product.”192
Delphi argues that the factual record establishes that Magellan regularly lost
quantities of Delphi product in excess of the 0.25%. 193 Delphi asserts that
Magellan acknowledged responsibility for the alleged excess losses while the
188
Pl.’s Answ. Br., at Ex. 24.
189
Id. at Ex. 27.
190
Def.’s Opening Br., at 19.
191
Id. (quoting Clause 4.2 of Schedule A of the 2005 Agreement).
192
Id.
193
Pl.’s Answ. Br., at 24.
50
product was in Magellan’s custody and care. 194 Delphi contends that “when losses
exceeded .25% …, the excess was due to Magellan’s lack of care in storing,
gauging, and handling Delphi’s product…Among the reasons for the product
shortages were Magellan’s failure to mix the tanks, failure to calibrate
measurement equipment, and use of outdated gauges and floats in the tanks.” 195
Delphi claims that Magellan failed to use due care when discovered various causes
of product loss and applied remedial measures to its own tanks but did not apply
the same measures to Delphi tanks until much later.196
The process improvements may be evidence to ultimately persuade a
factfinder whether or not Magellan’s behavior prior to the implemented
improvements constituted lack of due care; however, the Court cannot find that the
implementation of the improved process indicates, as a matter of law, that
Magellan either exercised or failed to exercise due care in storing or handling
Delphi’s product. Moreover, what is “reasonable” behavior that constitutes “due
care” is a highly factual determination. Therefore, the Court finds that “it is
desirable to inquire more thoroughly into the facts in order to clarify the
application of law to the circumstances.”197 Magellan’s Motion for Partial
Summary Judgment is DENIED.
194
Id.
195
Id. at 25.
196
Id. at 25-26.
197
Cook, 1990 WL 35244, at *3.
51
B. Count II of the SAC for Claims for Breach of the Implied
Covenant of Good Faith and Fair Dealing is Limited.
Magellan argues to exclude specific allegations pertaining to Count II of the
SAC because Magellan asserts that claims for breach of the implied covenant of
good faith and fair dealing cannot be based upon conduct governed by an express
contractual provision. 198 In Magellan’s Opening Brief, Magellan created a chart 199
that identifies forty-nine specific allegations contained in either ¶8 of the SAC or in
Delphi’s responses to Magellan’s Second Set of Interrogatories.200 The first
column is titled “Delphi’s Allegations” and the second column is titled
“Corresponding Express Contractual Provision.” In the first column, Magellan
identifies the various allegations raised by Delphi and in the second column,
Magellan identifies by clause and/or section number the provision for which
Magellan alleged expressly governed the allegation. Magellan argues that the
identified allegations can be resolved by express contractual provisions of the 2005
and 2011 Agreements such that a claim for breach of contract and a claim for
breach of the implied covenant of good faith and fair dealing cannot co-exist.201
Delphi acknowledges that claims based upon the implied covenant of good
faith and fair dealing are not viable where the matter is expressly covered by
198
Def.’s Open. Br., at 20.
199
The Court will not replicate Magellan’s chart which can be found in Def.’s Opening Br., 21-
30.
200
Id. at 21-30.
201
Id. at 20-21.
52
contractual terms. 202 At oral argument, Delphi conceded that all but the following
subsections of ¶8 of the SAC are governed by express contractual provisions:
¶¶8(c), (n), (q), (r), (u), (v) and (w).203 However, Delphi asserts that “[w]here there
is no ‘specific language governing the implied obligation,’ Delaware courts will
permit claims for both express and implied breaches to move forward even when
there is general contractual language covering the implied obligations.” 204 Delphi
contends that “it is the burden of the movant to cite a ‘specific provision’ in the
agreement which governs the injuries allegedly suffered.”205 Delphi argues that
Magellan has not identified specific contractual provisions that govern ¶¶8(c), (n),
(q), (r), (u), (v) and (w) but merely relies upon general contractual provisions. 206
202
Pl.’s Answ. Br., at 27.
203
See Tr. at 61:3-12:
MR. MOONEY: And, specifically, we have identified the claims
in 8(c) where Magellan used our product to flush their pumps, the
claim in 8(n) where we allege that Magellan improperly
contaminated our product, the claim in 8(q), which is another
contamination claim, the claim in 8(u), which is overbilling for oil
used to heat the tanks, (v) is overcharged for cleaning, and (w),
which is that they forced Delphi on threat of a warehouseman's lien
to send it $2 million in collateral.
So those are the claims that we are citing to support the notion that
the Court may not find that these -- specifically that Magellan's
conduct specifically breached contractual terms that govern that
kind of conduct, but that the conduct, nonetheless, breached its
covenant of good faith and fair dealing.
204
Pl.’s Answ. Br., at 27 (quoting Alltrista Plastics, LLC v. Rockline Indus., Inc., 2013 WL
5210255, at *7 (Del. Super. Sept. 4, 2013)).
205
Id.
206
Id. at 28.
53
At oral argument, counsel for Delphi acknowledged on the record that
Delphi agrees with Magellan’s representation of the law as to this matter. 207 “The
‘implied covenant of good faith and fair dealing involves…inferring contractual
terms to handle developments or contractual gaps that…neither party
anticipated’” 208 or to “fill gaps in the contract’s provisions.” 209 The implied
covenant of good faith and fair dealing cannot be invoked when the contract
addresses the specific conduct at issue. 210 The burden is on the movant to cite a
specific provision of the agreement which governs the allegation. 211
Because Delphi acknowledges that only ¶¶8(c), (n), (q), (u), (v) and (w) of
the SAC allege conduct to support claims for breach of the implied covenant of
good faith and fair dealing, the Court’s discussion is limited to whether Magellan
has met its burden to cite a specific provision of the contract that governs those six
subsections. The Court’s findings are as follows:
- As to ¶8(c), regarding Magellan’s alleged improper use of Delphi’s
product, and ¶8(v), regarding alleged inappropriate tank cleaning
207
Tr. at 61:20-62:2 (“THE COURT: First of all, do you agree on the law? MR. MOONEY: I
think we do.”).
208
Nationwide Emerging Managers, LLC v. Northpointe Holding, LLC, 112 A.3d 878, 896 (Del.
2015)(quoting Nemec v. Shrader, 991 A.2d 1120, 1125 (Del. 2010)).
209
Alltrista, 2013 WL 5210255 at *7.
210
Nationwide, 112A.3d at 896.
211
See Alltrista, 2013 WL 5210255 at *7 (“[Defendant] cites no specific provision in the
[contract] that [Defendant] alleges would govern the injury suffered by [Plaintiff].”).
54
charges, of the SAC,212 the Court finds that the express terms of the
contract do not govern the conduct alleged. Therefore, Delphi is not
precluded from pursuing a claim for breach of the implied covenant of
good faith and fair dealing based upon the allegations contained therein.
- As to ¶¶8(n) and (q), relating to alleged instances of tank contamination,
of the SAC,213 the Court finds that Magellan did not address the conduct
at issue in its submissions to the Court and, therefore, has not identified
any express contractual provision that would preclude a claim for breach
of the implied covenant of good faith and fair dealing.
212
¶ 8(c) provides that “Magellan improperly used Delphi’s product during the term of the 2005
Agreement and during the term of the 2011 Agreement to flush the pumps at the heavy oil truck
loading rack.
¶ 8(v) provides that “Magellan disguised and altered contractor invoices, which included
inappropriate tank cleaning charges such as water washing, and then passed these inaccurate
invoices to Delphi.”
213
¶ 8(n) provides:
Magellan contaminated Delphi’s product in Tank 17 in September,
2011 when Magellan required Delphi to take back a portion of the
product that Magellan had borrowed from Delphi, at a time when
Delphi did not have a suitable tank available to accept such
product, thereby causing contamination to the product already in
the tank into which such product was placed. Delphi incurred
costs for inspection, and mixing and transfer charges, and suffered
the downgrade of the product used to cure the contamination.
¶ 8(q) provides: “On June 7, 2011, Magellan improperly transferred higher sulfur
into a Delphi tank containing lower sulfur oil, thereby contaminating it. Magellan
thereafter agreed to pay Delphi $16,957.82 for such contamination but has failed
and refused to make payment.”
55
- As to ¶8(u) of the SAC, 214 the Court finds that the express terms of the
contract do not entirely control the allegation. The contract terms control
to the extent that Magellan allegedly overbilled Delphi for heating costs.
However, the contract does not govern to the extent of the alleged
concealment of overbilling. Therefore, a claim for breach of the implied
covenant of good faith and fair dealing may proceed with respect to the
alleged concealment of overbilling.
- As to ¶8(w) of the SAC, 215 Second Amended Complaint, the Court finds
that the express terms of the contract do not apply to the entire claim.
The express provisions of the contract control whether the
warehouseman’s lien Magellan allegedly imposed is valid under the 2005
and 2011 Agreements; however, the express terms of the contract do not
govern to the extent that Magellan allegedly failed to credit a known
overbilling issue. Therefore, Delphi’s claim for breach of the implied
214
¶ 8(u) provides that “Magellan overbilled Delphi by at least $580,000 between 2005-11 for
the fuel consumed to heat Delphi’s oil tanks, and then concealed its overcharges. Delphi
confirmed Magellan’s overbilling in December, 2014.”
215
¶ 8(w) provides:
Magellan forced Delphi to make $2,065,942.02 in collateral
deposits in response to Magellan’s threatened and actual
imposition of an invalid warehouseman’s lien on Delphi’s product,
which was not permitted under the 2005 or 2011 Agreements,
exceeded any legitimate amount owed, and failed to credit Delphi
with amounts Magellan knew it had overbilled Delphi.
56
covenant of good faith and fair dealing is limited to the alleged failure to
credit a known overbill.
Therefore, Count II of the SAC for Breach of the Duty of Good Faith and
Fair Dealing is limited by the aforementioned findings of fact and Magellan’s
Motion for Partial Summary Judgment is GRANTED, in part, and DENIED, in
part.
C. The Court Cannot Find that Clause 4.2 of Schedule A of the 2005
and 2011 Agreements is Enforceable as a Matter of Law or that it
Applies to Claims Under Count II of the SAC.
Delphi and Magellan are sophisticated business entities. 216 The 2005 and
2011 Agreements govern the commercial relationship between Delphi and
Magellan.217 The 2005 and 2011 Agreements each contain provisions waiving the
parties’ rights to recover “lost profits, lost business opportunities, or other indirect,
special, incidental, punitive, or consequential damages in connection with this
Agreement.” 218
Magellan argues that the limitation of liability provision contained in Clause
4.2 of Schedule A of the 2005 and 2011 Agreements is enforceable under
Delaware law. 219 Magellan urges the Court to “rule as a matter of law that Delphi
is not entitled to recover ‘lost profits, lost business opportunities, or other indirect,
216
SAC at ¶¶ 1-2.
217
See generally, SAC at Ex. A; Ex. B.
218
Clause 4.2 of Schedule A of the 2005 and 2011 Agreements.
219
Def.’s Opening Br., at 31.
57
special, incidental, punitive, or consequential damages in connection with [the
Agreements].’” 220 Additionally, Magellan asserts that, to the extent that the Court
denies its Motion and allows Delphi to pursue claims for breach of the implied
covenant of good faith and fair dealing, damages related to those claims also are
limited by the terms of Clause 4.2 of Schedule A of the 2005 and 2011 Agreements
because the parties did not carve out an exception for instances of bad faith. 221
Magellan does not argue that Clause 4.2 of Schedule A of the 2005 and 2011
Agreements is enforceable as to any of Delphi’s fraud claims that survive
Magellan’s Motion to Dismiss. 222
Delphi argues that Clause 4.2 of Schedule A of the 2005 and 2011
Agreements is not fully enforceable because Delphi has pleaded instances of fraud
that are outside of the contract.223 Delphi also asserts that the Court recognizes an
exception to the rule that limitations of liability clauses are generally
enforceable.224 Delphi contends that the Court will set aside limitations of liability
clauses for fraudulent or bad faith breaches of contract. 225 Delphi also asserts that
the limitation of damages clause is unconscionable because “[b]y intentionally
breaching the Agreements with the intent of relying on the limitation provision to
220
Id. (quoting Clause 4.2 of Schedule A of 2005 and 2011 Agreements).
221
Id.
222
Def.’s Reply Br., D.I. 182, at 15.
223
Pl.’s Answ. Br., at 30.
224
Id. at 32-33.
225
Id.
58
escape accountability for its misconduct, Magellan has unfairly taken advantage of
Delphi.”226 Finally, Delphi asserts that it is entitled to rescission or disgorgement
because “Magellan’s breach of the 2011 Agreement by refusing to permit Delphi
to deliver product to the terminal by truck substantially frustrated Delphi’s
principal purpose in making the agreement – use of the terminal to store its
product.” 227
In its Answering Brief, Delphi requested the equitable remedies of
disgorgement and rescission for the first time in this litigation. The Court finds the
request inappropriate. Additionally, even it were a proper request, the Court found
that Clause 2.1(a) of Schedule A of the 2011 Agreement did not give Delphi the
right to deliver product to the Terminal via truck.228 Therefore, the Court cannot
find that Magellan’s alleged actions to refuse delivery of product to the Terminal
via truck substantially frustrated Delphi’s principal purpose in making the 2011
Agreement.
There is no dispute that damages recovered under Counts IV and V of the
SAC are not limited by Clause 4.2 of Schedule A of the 2005 and 2011
Agreements because the Counts allege fraudulent conduct. 229 However, the issue
is whether the Court carves out a “bad faith” exception to the damages limitation
226
Id. at 33-34.
227
Id. at 34.
228
See supra Part V.A.5.
229
Had the Court not dismissed Count III of the SAC in §V.A.2, supra, the limitation of liability
clause would not be enforceable as to that Count.
59
clause as it pertains to the contractual claims in Count I of the SAC and the implied
covenant of good faith and fair dealing claims in Count II of the SAC.
Generally, limitation of liability clauses that preclude consequential damages
are enforceable under Delaware law. 230 The Delaware Court of Chancery explains
that
Delaware upholds the freedom of contract and enforces
as a matter of fundamental public policy the voluntary
agreements of sophisticated parties. Delaware law
generally elevates contract law over tort to allow parties
to order their affairs and bargain for specific results, to
the point where Delaware law enforces contractual
provisions that eliminate the possibility of any tort
liability short of actual fraud based on explicit written
contractual representations.231
Recently, in eCommerce Indus., Inc. v. MWA Intelligence, Inc., 2013 WL 5621678,
that Court of Chancery held that even a bad faith breach of contract would not
invalidate a limitation of liability provision. 232 The eCommerce court determined
that “there does not appear to be any Delaware precedent for striking a limitation
on contractual liability because of a party's willful or bad faith breach of the
contract.”233 The court reasoned that
a limitation on liability will be set aside due to willful
misconduct or bad faith involved contractual provisions
that purported to limit tort liability, which is liability
230
eCommerce Indus., Inc. v. MWA Intelligence, Inc., 2013 WL 5621678, at *45 (Del. Ch. Sept.
30, 2013).
231
NACCO Indus., Inc. v. Applica Inc., 997 A.2d 1, 35 (Del. Ch. 2009).
232
eCommerce, 2013 WL 5621678, at *45.
233
Id.
60
arising from breach of a duty that does not arise under
contract…Had the parties desired to carve out an
exception to the [contract’s] limitation of liability
provision for instances of bad faith or willful breach, they
could have done so, but they did not. 234
The case law from the Superior Court carves out an exception for bad faith
breaches of contract in specific instances. 235 For example, in J.A. Jones Const. Co.
v. City of Dover, 372 A.2d 540, in the context of interpreting a construction
contract provision that did not specifically carve out an exception for bad faith, the
Court observed that “[e]ven if a contract purports to give a general exoneration
from ‘damages,’ it will not protect a party from a claim involving its own fraud or
bad faith.” 236
In Data Mgmt. Internationale, Inc. v. Saraga, 2007 WL 2142848, the Court
recognized an exception for conversion, an intentional tort. 237 In that case, the
Court commented that “[clauses purporting to exonerate a party from liability for
its own negligence] can be enforced in commercial leases negotiated in an arm's-
length transaction, but the parties' intent to provide immunity from even simple
negligence must be stated clearly and unequivocally in order to be enforceable.” 238
The corollary to that seems to be that where the intent to exonerate a party from
234
Id.
235
Id.
236
J.A. Jones Const. Co v. City of Dover, 372 A.2d 540, 545 (Del. Super. 1977). J.A. Jones, 372
A.2d at 545.
237
Id.
238
Id.
61
liability for its own negligence is not clearly and unequivocally stated, there is no
immunity for that party’s negligence. However, “[i]t has been repeatedly
recognized that the issue of whether limitation provisions are enforceable under the
contractual relations of the parties and the nature of the contractual performance
are matters which generally should not be decided on the pleadings or on summary
judgment.” 239
It appears to the Court that the law required to resolve this issue is not
absolute and that there seems to be a spectrum of behavior for which the Court
may invalidate limitations of damages clauses depending upon the particular facts
of the parties’ conduct. It is undisputed that parties cannot absolve themselves for
their own conduct amounting to fraud. However, as to claims that fall somewhere
short of fraud, such as claims for bad faith, the Court must undergo a factual
analysis that is premature on summary judgment. Therefore, the Court cannot rule
as a matter of law that the limitations of damages clause is enforceable and that it
applies to claims for breach of the implied covenant of good faith and fair dealing.
Magellan’s Motion for Partial Summary Judgment is DENIED as to the limitation
of damages provision.
239
Id. at 553.
62
VI. DELPHI’S MOTION FOR PARTIAL SUMMARY JUDGMENT
In Delphi’s Motion for Partial Summary Judgment, Delphi requests that the
Court address five issues. Delphi asserts that there are no genuine issues of
material fact and that Delphi is entitled to judgment as a matter of law on the
following claims: 1) Magellan owes Delphi $421,603.06 for overbilling of heating
charges under the 2005 Agreement; 2) Delphi has no responsibility to Magellan for
heating charges under the 2011 Agreement; 3) Magellan breached the 2011
Agreement by denying Delphi the right to deliver product to the terminal by truck;
4) Delphi’s responsibility for tank cleaning is limited to removing product and
waste that can be removed by shovel and broom; and 5) Magellan’s Amended
Counterclaim.
A. Facts Regarding Magellan’s Alleged “Overbill” are not Well
Developed.
In light of the Court’s decision to dismiss Delphi’s Count III for fraudulent
overbilling, what remains is Delphi’s contract claim regarding the alleged
overbilling. Delphi moves for summary judgment on its contract claim that
Magellan overbilled Delphi $421,603.06 in tank heating charges from 2007
through 2010 under the 2005 Agreement and requests leave to supplement the
amount plus interest based upon a chart prepared by Magellan employees. 240
Delphi argues that the chart establishes that Magellan overbilled Delphi for heating
240
Pl.’s Opening Br., at 5.
63
costs between 2007 and 2010. 241 Delphi claims that deposition testimony of
Magellan employees establishes that the chart was prepared in the ordinary course
of business by a Magellan employee and asserts that there are no facts to
undermine the accuracy of the chart.242 Delphi contends that the chart and
deposition testimony together establish that Delphi suffered damages in the amount
of $421,603.03 from 2007 through 2010 as a result of Magellan’s overbilling for
heating costs.243 In its Reply Brief, Delphi asserts that the statute of limitations is
tolled because the conditions were inherently unknowable and Delphi is
blamelessly ignorant or, alternatively, that Magellan concealed the overbilling. 244
Magellan argues that the chart does not conclusively establish that Magellan
overbilled Delphi for heating costs from 2007 through 2010. 245 Magellan asserts
that, at most, the chart shows that “meters and hand gauging generated different
measurements, not that one was better or correct, or even that the two were
measuring the same thing at the same time.” 246 Magellan contends that Magellan
should be permitted to introduce evidence at trial as to “what product was
consumed, and what impact (if any) any discrepancy in measurement actually had
241
Id.
242
Pl.’s Reply Br., D.I. 185, at 4.
243
Pl.’s Opening Br., at 5.
244
Pl.’s Reply Br., at 6.
245
Def.’s Resp. Br., D.I. 171, at 4.
246
Id. at 3.
64
on customer billing.” 247 Additionally, Magellan asserts that the parties agreed to
tolling agreements for claims that arose between September 2011 and the filing of
the lawsuit but that the statute of limitations bars earlier claims to recover heating
bills that were issued and paid before September 2008 based upon the three-year
statute of limitations for breach of contract claims under Delaware law. 248
For economy, the Court will not repeat the previously stated law regarding
breach of contract claims and the statute of limitation that can be found at §V.A,
supra. The question for the Court is whether the chart and deposition testimony
relied upon by Delphi are undisputed material facts that support each element of a
claim for breach of contract. Because neither party disputes that a valid contract
exists, the inquiry for the Court is focused on whether the chart and deposition
testimony support the elements of breach and damages. As a preliminary matter,
the Court agrees with Magellan that Delphi’s prayer for relief is limited to
$421,603.06 for purposes of this Motion.249
The chart was prepared by Stu Horsey, a deceased Magellan employee. 250
In the first column, the chart lists “Heat Charges by Meter” and in the second
column, the chart lists “Heat Charges by Tank Gauge.” 251 The third column is
247
Id. at 4.
248
Id. at 5.
249
See Tr. at 94: 12-18 (arguing that at most, Delphi can ask the Court to award it the specific
amount in the chart on summary judgment).
250
Hafner Dep., at 35:6-7.
251
Pl.’s Opening Br. at Ex. D.
65
titled “Overbill.”252 When asked during a deposition “What does overbill mean
here?” Paul Hafner, a Magellan representative, testified “I’m assuming it’s the
difference between the two numbers, charges between…the meters and tank
gauges.”253 Additionally, Paul Hafner testified that the tank gauge was a more
reliable measure and that it was his understanding that customers, including
Delphi, were billed based upon the higher meter reading. 254
However, the Court still has concerns regarding the content of the chart and
its meaning. The label “Overbill” is one employee’s characterization of the
difference between the amounts contained in the first two columns. Because the
chart itself and the individual who created the chart cannot be cross-examined, the
Court is wary of accepting this employee’s conclusion as an undisputed fact.
Rather, the Court finds “that it is desirable to inquire more thoroughly into the facts
in order to clarify the application of law to the circumstances.” 255
Moreover, the Court finds that the claim may be barred by the statute of
limitations. The chart covers years 2007 through 2010. Ordinarily, breach of
contract claims must be raised within three years of the injury and Delphi did not
sue Magellan until February 29, 2012. However, Delphi contends that “Magellan
never notified Delphi of the overbilling and Delphi first discovered it when
252
Id.
253
Hafner Dep., at 37:21-24.
254
Id. at 36:20-24; 38:1-3.
255
Cook, 1990 WL 35244, at *3.
66
reviewing Magellan’s 35,000 page 2014 document production.” 256 Delphi asserts
that the conditions of the alleged overbilling were “inherently unknowable” and
Delphi is “blamelessly ignorant” or, alternatively, that Magellan concealed the
overbilling such that Delphi could not know about it.257 There are no facts which
inform the Court about when Delphi discovered or was on notice of the alleged
overbilling other than a claim in Delphi’s Reply Brief that “Delphi did not discover
Magellan’s overbilling practice until it found Magellan’s spreadsheet and
correspondence detailing these overcharges among the 35,000 documents
Magellan produced in March 2014” 258 without reference to the record.
Consequently, the record is unclear regarding when the statute of limitations began
to run.
Based upon the Court’s desire to inquire more into the factual information
contained in the chart as well as the factual information regarding commencement
of the statute of limitations, the Court cannot find that Delphi has presented
undisputed facts to support the elements of its breach of contract claim. Therefore,
Delphi’s Motion for Partial Summary Judgment is DENIED.
B. The Court Cannot Determine, As a Matter of Law, that Delphi
has No Liability or Heating Charges Under the 2011 Agreement.
Clause 2.10(e) of Schedule A of the 2011 Agreement provides that
256
Pl.’s Opening Br., at 5.
257
Pl.’s Reply Br., at 6.
258
Id.
67
Magellan will only use the heaters that exist on the
Effective Date, or the replacements thereof during the
Term of the Agreement, to heat the Tankage unless
Customer agrees otherwise in writing.
Tankage is defined as “the tankage allocated to Customer in Section V of
this Agreement.”259 Section V of the 2011 Agreement refers to six specific tanks
allocated to Delphi, the tank capacities and the type of product the tanks contain. 260
Magellan admitted that it used the same heaters to heat Delphi’s tank as it
used to heat Magellan’s other customers’ tanks.261 Ronald Gumbaz, a Delphi
representative, admitted in deposition testimony 262 that Delphi has some
responsibility for heating costs under the 2011 Agreement. 263
Delphi argues that Magellan breached Clause 2.10(e) of Schedule A and
Schedule C of the 2011 Agreement regarding heating charges. 264 Delphi asserts
that Clause 2.10(e) of Schedule A and Schedule C of the 2011 Agreement provides
259
Clause 1.16 of Schedule A of the 2011 Agreement.
260
Section V of the 2011 Agreement.
261
Def.’s Answ. to SAC, D.I. 174, at ¶8(b).
262
Relevant excerpts from Ronald Gumbaz’s deposition can be found in Def.’s Resp., at Ex. 3.
263
See Gumbaz Dep., at 35:13-23:
[Ronald Gumbaz]: [Delphi] do[es]n’t want any liability for the
heating bills that Magellan has sent us under the 2011 agreement.
BY MS. DAILEY: Q. You don’t think [Delphi] should pay for
heating at all [under the 2011 Agreement]?
A. I think [Delphi] should pay something for heating. I think that
if somebody would calculate accurately how much it cost[sic] to
heat [Delphi] tanks in accordance with [Delphi’s] instructions, that
it would be a cost that [Delphi] should pay.
264
Pl.’s Opening Br., at 10-11.
68
that Magellan was to use certain heaters to heat six Delphi tanks only (and not
other customers’ tanks) to ensure that the heating charges for Delphi would be
accurate.265 Delphi asserts that because Magellan used the specified heaters to heat
other customers’ tanks, Magellan’s heating charges to Delphi are “completely
unsupportable” because there was no way to allocate the heating costs accurately
between Delphi and the other customers. 266 Delphi requests that the Court enter an
Order declaring that “[Delphi] has no liability for heating charges assessed by
Magellan under the 2001 Agreement.” 267
Magellan argues that Clause 2.10(e) of Schedule A of the 2011 Agreement
does not give Delphi the exclusive right to use the heaters for only Delphi tanks. 268
Magellan argues that the Clause “constitutes Magellan’s agreement to use only the
then-existing heaters (or their same model replacements) to heat Delphi’s product,
unless Delphi agrees a different heater can be used. This is not a limitation on
Magellan’s right to use those heaters for other customers’ products.” 269 Magellan
asserts that Delphi representatives admitted in deposition testimony that Delphi
265
Id.
266
Id. at 11.
267
Pl.’s Opening Br., at 12.
268
Def.’s Resp. Br., at 6.
269
Id.
69
“should pay something for heating.” 270 At oral argument, Magellan asserted that
that admission alone defeats Delphi’s prayer for relief. 271
Based upon Delphi’s prayer for relief, the question before the Court is a
narrow one: Do the undisputed facts establish that Delphi “has no liability for
heating charges assessed by Magellan under the 2011 Agreement?” The Court
need not decide the meaning of Clause 2.10(e) of Schedule A of the 2011
Agreement to resolve that question because Ronald Gumbaz, a Delphi
representative, admitted in deposition testimony that Delphi has some
responsibility for heating costs under the 2011 Agreement. 272 Therefore, the Court
cannot rule as a matter of law that Delphi has no responsibility to pay for heating
charges under the 2011 Agreement and Delphi’s Motion for Partial Summary
Judgment is DENIED.
C. The Court Previously Determined that Clause 2.1(a) of Schedule
A of the 2011 Agreement Does Not Give Delphi the Right to
Deliver Product to the Terminal by Truck.
In light of the Court’s decision that Clause 2.1(a) of the Schedule A of the
2011 Agreement does not give Delphi the right to delivery product to the Terminal
by truck,273 Delphi’s Motion for Partial Summary Judgment is DENIED.
270
Id. at 8.
271
See Tr. at 102: 4-6 (“Delphi’s own representative’s testimony is at odds with the summary
judgment relief it seeks”).
272
See supra note 263.
273
See supra Part V.A.5.
70
D. Delphi’s Prayer for Relief is Improper Regarding Clause 2.8 of
Schedule A of the 2011 Agreement.
Under the heading “Tank Condition,” Clause 2.8 of Schedule A of the 2005
and 2011 Agreements provides, part, that: “At [Delphi’s] expense, Magellan will
remove the remaining Product and waste from the tank that can be removed by
shovel and broom…”
In Delphi’s Opening Brief, Delphi’s prayer for relief states that Delphi
seeks a ruling that Delphi is not responsible for the entire
cleaning of the tank and that Clause 2.8 means what it
clearly states: that Delphi pays the cost of removing the
remaining product and waste that can be removed by
shovel and broom. Magellan would be responsible for
any additional tank cleaning it desired, including water
washing.274
Counsel for Delphi acknowledged at oral argument that Clause 2.8 is a point of
heated dispute between the parties:
THE COURT: …What are you asking with respect to the tank
cleaning? Are you asking for summary judgment, or are you
just asking for declaratory judgment?
MR. MOONEY: Well, a declaration that the language of 2.8
means that Delphi is responsible for removing product and
waste such as can be removed by shovel and broom because
that’s a point of heated dispute.275
Delphi argues that it is entitled to summary judgment regarding the extent of
its liability for tank cleaning charges. Delphi contends that “Magellan has taken
274
Id.
275
Tr. at 92: 4-12 (emphasis added).
71
the unsupportable position that Delphi is responsible for all costs of removing
product and waste from the tanks, which is at odds with the plain language of
Clause 2.8.”276 Delphi asserts that it is only responsible for what can be removed
by “shovel and broom.” 277
Magellan argues that the issue is not appropriate for summary judgment
because there is more than one clause which governs tank cleaning responsibilities
and reading one clause in isolation ignores the rest of the Agreement. 278 Magellan
contends that the meaning of the language contained in Clause 2.8 is a “deeply
factually-intensive dispute.”279 Additionally, Magellan asserts that Delphi’s prayer
for relief “is not a product of undisputed facts. There are no facts to support
[Delphi’s] request [for relief].” 280
The Court finds that Delphi’s prayer for relief requesting that the Court
determine that “Clause 2.8 means what it clearly states” is undermined by
Counsel’s admission at oral argument that the issue is a “point of heated dispute.”
Therefore, the Court cannot grant the relief Delphi requests. Delphi’s Motion for
Partial Summary Judgment is DENIED.
276
Pl.’s Opening Br., at 16.
277
Id.
278
Def.’s Resp. Br., at 14.
279
Tr. at 108: 5-6.
280
Tr. at 105: 14-106:3.
72
E. The Parties Agree that Magellan has Identified the Basis for its
Amended Counterclaim.
On February 16, 2015, Magellan filed an Answer to Plaintiff’s Second
Amended Complaint and Affirmative Defenses.281 The Answer contained
Magellan’s Amended Contingent Counterclaim that requested payment of certain
invoices and alleged, in part, that
6. Delphi wired payment to Magellan and then, after the
funds were received by Magellan, claimed the payments
were made under protest. Delphi also has attempted to
characterize the payment as “collateral” and has sought
to recover the payment made.
7. If Delphi’s payment is determined by the Court to be
unconditional (as Magellan believes it should be), then
no amount is currently due from Delphi. However, if
Delphi’s payment is determined to be merely “collateral”
or “contingent” then Delphi has breached the parties’
Agreements in the amount not unconditionally paid. 282
Delphi moves for summary judgment on Magellan’s Amended Counterclaim
for failure to make payments because Delphi asserts that Magellan has not
identified the factual basis to support the Amended Counterclaim. 283 Delphi
asserts that the Amended Counterclaim “does not specify the amount allegedly
owed by Delphi and does not attach any alleged unpaid invoices.” 284 Delphi
contends that it “will be unfairly prejudiced if Magellan is permitted to submit its
281
D.I. 174.
282
Id. at ¶¶6-7.
283
Pl.’s Opening Br., at 17.
284
Id.
73
unsupported and conclusory allegations of non-payment at trial since Magellan has
refused to provide information that would enable Delphi to verify Magellan’s
contentions.”285
Magellan claims that it provided Delphi with sufficient factual information
to support its Amended Counterclaim. Magellan asserts that “Magellan produced
all invoices that are the subject of Magellan’s counterclaim. Magellan also
produced Brett Hunter as a corporate representative for deposition, and he testified
extensively to the unpaid invoices that form the basis of Magellan’s
counterclaim.” 286
At oral argument, Magellan identified on the record the invoices that are at
issue for purposes of the Amended Counterclaim. 287 Delphi acknowledged on the
record that the identification of the invoices by Magellan was sufficient to clarify
the factual basis of Magellan’s Amended Counterclaim. 288 Therefore, Delphi’s
Motion for Partial Summary Judgment is MOOT.
285
Id. at 19.
286
Def.’s Resp. Br., at 17.
287
Tr. at 111: 4-5 (“MR. KEGLOVITS: All of [the unpaid invoices discussed at the first
deposition] if it is collateral. None of [the unpaid invoices discussed at the first deposition] if it
is a payment.”).
288
See Tr. at 112: 17-113: 1:
THE COURT: …for the limited purpose of what is before the
Court now on a partial motion for summary judgment, on that
contingent counterclaim, you know what you are talking about
now and that goes away; am I right?
MR. MOONEY: I think so, Your Honor.
74
VII. CONCLUSION
Regarding Magellan’s Motion to Dismiss, the Court finds that 1) Delphi
failed to state a claim for which relief can be granted as to Count III of the SAC; 2)
it is premature to determine whether the statute of limitations precludes recovery
under Count IV of the SAC; and 3) Delphi has adequately pleaded a cause of
action under Count V of the SAC. Therefore, Magellan’s Motion to Dismiss is
GRANTED as to Count III of the SAC; DENIED as to Count IV of the SAC; and
DENIED as to Count V of the SAC.
As to Magellan’s Motion for Partial Summary Judgment, the Court finds
that 1) no reasonable trier of fact could find that a breach of contract occurred
based upon Magellan’s conduct alleged in ¶8(k),(d),(o) and (a) of the SAC and that
factual issues remained as to ¶8(p) and (e) of the SAC; 2) Count II of the SAC for
breach of the implied covenant of good faith and fair dealing is limited; and 3) the
Court cannot find that Delphi is not entitled to consequential damages as a matter
of law. Therefore, Magellan’s Motion for Partial Summary Judgment is
GRANTED as to ¶8(k),(d),(o) and (a) of the SAC; DENIED as to ¶8(p) and (e);
GRANTED, in part, and DENIED, in part, as to Count II of the SAC; and
THE COURT: As a summary judgment claim.
MR. MOONEY: As a summary judgment claim.
75
DENIED as to the enforceability of Clause 4.2 of Schedule A of the 2005 and
2011 Agreements.
Regarding Delphi’s Motion for Partial Summary Judgment, the Court finds
that 1) there is a factual dispute regarding whether Magellan owes Delphi
$421,603.06 for overbilling of heating charges under the 2005 Agreement; 2) the
Court cannot rule as a matter of law that Delphi has no responsibility to Magellan
for heating charges under the 2011 Agreement; 3) Magellan did not breach the
2011 Agreement by denying Delphi the right to deliver product to the terminal by
truck; 4) the Court cannot grant the relief Delphi requested regarding responsibility
for tank cleaning based upon its prayer; and 5) Magellan identified the factual basis
of its Amended Counterclaim. Therefore, Delphi’s Motion for Partial Summary
Judgment is MOOT as to Magellan’s Amended Counterclaim; and DENIED as to
the remainder of Delphi’s arguments.
IT IS SO ORDERED.
_____________________
/s/Ferris W. Wharton, Judge
76