Opinion
NO. 2016-CA-000994-MR NO. 2016-CA-001621-MR
03-16-2018
UNITED PROPANE GAS, INC., and STC, INC. APPELLANTS v. NGL SUPPLY TERMINAL COMPANY, LLC, and NGL ENERGY PARTNERS, LP APPELLEES
BRIEF FOR APPELLANTS: Samuel J. Wright Paducah, Kentucky BRIEF FOR APPELLEES: C. Thomas Miller Ryan Polczynski Paducah, Kentucky
NOT TO BE PUBLISHED APPEALS FROM MCCRACKEN CIRCUIT COURT
HONORABLE TIM KALTENBACK, JUDGE
ACTION NO. 15-CI-00643 OPINION
AFFIRMING IN PART, REVERSING IN PART, AND REMANDING
** ** ** ** **
BEFORE: KRAMER, CHIEF JUDGE; JOHNSON AND MAZE, JUDGES. KRAMER, CHIEF JUDGE: In these consolidated appeals, United Propane Gas, Inc. (UPG), and STC, Inc. (STC), appeal two judgments of the McCracken Circuit Court which collectively dismissed their breach of contract claims against appellee, NGL Supply Terminal Company, LLC (NGL Supply); dismissed their intentional contractual interference claims against appellee, NGL Energy Partners, LP (NGL Energy); and awarded attorney's fees to NGL Supply and NGL Energy. Upon review, we affirm in part, reverse in part, and remand.
FACTUAL AND PROCEDURAL HISTORY
UPG and STC are in the business of selling propane. NGL Supply operates terminals where sellers like UPG and STC can pick up loads of propane for resale. On or about February 20, 2015, the parties entered into an agreement with NGL Supply "and its subsidiaries" that allowed UPG and STC to obtain propane from NGL Supply's terminals. The agreement specified it was to be interpreted consistently with Oklahoma law; entitled the prevailing party in any ensuing litigation over its terms and enforcement to costs and attorney's fees; and further provided in relevant part:
This provision is located in Section 19 of the agreement, which provides: "In the event that there is litigation over the terms or enforcement of this Agreement the prevailing party shall be entitled to recover its costs and reasonable attorneys fees from the other party."
4. Revocation , Term and Termination
(a) Revocation. User [UPG] agrees that NGL's grant of permission hereunder to User to enter Terminals is nonexclusive and nonassignable and may be revoked by NGL at any time, in its sole discretion, without prior notice. Upon revocation, User shall immediately cease using all Devices issued hereunder and shall promptly return all such Devices to NGL.
On the date of the agreement, UPG picked up three loads of propane from NGL Supply's Dexter, Missouri terminal without incident. Four days later, on February 24, 2015, NGL Supply revoked the agreement. As to why it did so, NGL Supply did not give UPG and STC any definitive reason. Subsequently, UPG and STC filed suit in McCracken Circuit Court against NGL Supply and NGL Energy (an entity associated with NGL Supply). The relevant allegations of UPG's and STC's joint complaint, which were based upon what is set forth above, were as follows:
UPG and STG also included claims of "promissory estoppel" which their joint complaint delineated as "COUNT III." This count, like the other counts of the complaint, was summarily dismissed by the circuit court. While we agree with the circuit court's decision, it is unnecessary to discuss this point further because the appellants have raised no argument of error in their briefs regarding their promissory estoppel claims. See Osborne v. Payne, 31 S.W.3d 911, 916 (Ky. 2000) ("Any part of a judgment appealed from that is not briefed is affirmed as being confessed.").
COUNT I
BREACH OF CONTRACT
. . .
14. UPG, STC and NGL Supply entered into a binding agreement as referenced above.
15. NGL Supply breached that agreement by failing to allow UPG and STC to access its terminal.
16. UPG and STC performed all their obligations as set forth in the user access agreement; however, as a result of the [sic] NGL Supply's breach, UPG and STC have been damaged in excess of the jurisdictional minimums of this Court.
. . .
COUNT II
INTENTIONAL INTERFERENCE WITH AN
EXISTING CONTRACT
17. Plaintiffs incorporate by reference paragraphs 1 through 16 of this Complaint as if each allegation was set forth herein in its entirety.
18. Upon information and belief, NGL Energy communicated with NGL Supply regarding NGL Supply's agreement to allow UPG and STC to access NGL Supply's terminal.
19. Upon information and belief, this communication took place after UPG, STC and NGL Supply had entered into a binding agreement.
20. Upon information and belief, NGL Energy induced NGL Supply not to perform under the contract.
21. As a result of NGL Energy's actions, UPG and STC have incurred significant injury as a result of NGL Energy's actions, UPG and STC are entitled to recover damages.
NGL Supply and NGL Energy filed a joint answer denying liability under the theories asserted by the appellants. Their answer also requested an award of costs and attorney's fees pursuant to the terms of the agreement. Ultimately, following a brief period of discovery, they moved for summary judgment on the following bases: (1) NGL Supply could not have breached the agreement by revoking it because—regardless of its reason for doing so—the plain terms of the agreement gave NGL Supply unqualified discretion to revoke the agreement at any time and for any reason; and (2) Because NGL Supply did not breach the agreement, the appellants' claims for interference of the contract against NGL Energy necessarily failed.
Responding, the appellants argued that despite the plain language of the agreement, NGL Supply did not have an unfettered right to revoke the agreement at any time and for any reason. Rather, under Oklahoma law, any such right was qualified by an implied covenant of good faith and fair dealing. The appellants further argued that to determine whether NGL Supply's reason for revoking the agreement was consistent with that implied covenant, further discovery was needed to ascertain what that reason was.
Upon consideration, and for the reasons discussed in our analysis, the circuit court entered a final and appealable order summarily dismissing the balance of the appellants' claims; that order is the subject of Appeal No. 2016-CA-000994-MR. Shortly thereafter, and despite a motion from the appellants to stay any additional proceedings, the circuit court entered another final and appealable order granting NGL Supply and NGL Energy their costs and attorney fees; that order is the subject of Appeal No. 2016-CA-001621-MR.
See, e.g., Mitchell v. Mitchell, 360 S.W.3d 220, 223 (Ky. 2012) (explaining a pre-judgment request for attorney fees made by a party opposed to the initial action is "akin to a counterclaim and stands on the same legal ground under CR [Kentucky Rule of Civil Procedure] 54.02(1)."
STANDARD OF REVIEW
Summary judgment serves to terminate litigation where "the pleadings, depositions, answers to interrogatories, stipulations, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." CR 56.03. Summary judgment should be granted only if it appears impossible that the nonmoving party will be able to produce evidence at trial warranting a judgment in his favor. Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476 (Ky. 1991). Summary judgment "is proper only where the movant shows that the adverse party could not prevail under any circumstances." Id. at 480 (citing Paintsville Hosp. Co. v. Rose, 683 S.W.2d 255 (Ky. 1985)).
On appeal, we must consider whether the circuit court correctly determined that there were no genuine issues of material fact and that the moving party was entitled to judgment as a matter of law. Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996). Because summary judgment involves only questions of law and not the resolution of disputed material facts, an appellate court does not defer to the circuit court's decision. Goldsmith v. Allied Building Components, Inc., 833 S.W.2d 378, 381 (Ky. 1992). Likewise, we review the circuit court's interpretations of law de novo. Cumberland Valley Contractors, Inc. v. Bell Cty. Coal Corp., 238 S.W.3d 644, 647 (Ky. 2007).
ANALYSIS
We begin with Appeal No. 2016-CA-000994-MR, and specifically with the appellants' breach of contract claims against NGL Supply. The dispositive issue presented is whether NGL Supply's discretion to revoke the agreement was, as the appellants urge, qualified by an implied covenant of good faith. Upon review, it was not.
Oklahoma law generally favors the proposition that parties in commercial transactions "should be free to contract for any lawful purpose and upon such terms as they believe to be in their mutual interest." Rodgers v. Tecumseh Bank, 756 P.2d 1223 (Okla. 1988). To that end, the Supreme Court of Oklahoma has explained that with few exceptions, Oklahoma law will not imply a contractual term that conflicts with an express contractual term. Jones v. Univ. of Cent. Oklahoma, 910 P.2d 987, 990 (Okla. 1995). Elaborating further, the Court explained:
The rule is the same in other jurisdictions; if an express contract between parties is established, a contract covering the identical subject cannot be implied, because an implied agreement cannot coexist with the express contract. In Triangle Mining Co. v. Stauffer Chemical Co., 753 F.2d 734 (9th Cir. 1985), the defendant had terminated a mining contract with the plaintiffs in accordance with an express provision in the agreement. Because some of the circumstances had changed since the agreement was originally written, the plaintiffs argued that the agreement contained an implied covenant of good faith to limit the exercise of the express,
unambiguous discretionary power of termination. The Ninth Circuit discussed the circumstances where implied covenants of good faith were applicable, and decided that under the facts of the case, there was no implied covenant of good faith. No special element of reliance or unequal bargaining existed. The court concluded that the clause was enforceable, and that under those circumstances, the plaintiffs could not recover on an implied contract. Triangle Mining Co., 753 F.2d at 742.Id. (Emphasis added.)
Here, the situation is not meaningfully different from what occurred in Triangle Mining, the case cited with approval above. An unambiguous contract expressly provided NGL Supply with an unqualified, discretionary power of termination. The appellants have never argued that a special element of reliance or unequal bargaining existed in this matter. Therefore, the appellants cannot argue that an implied covenant purporting to limit NGL Supply's discretion "trumps" an express, mutually bargained-for, contractual provision that contains no such limitation. For parity of reasoning, see Devery Implement Co. v. J.I. Case Co., 944 F.2d 724, 728-29 (10th Cir. 1991) (applying Oklahoma law in determining the implied covenant of good faith and fair dealing "cannot trump a bargained-for termination-at-will clause."). The appellants have failed to demonstrate NGL Supply breached their contract. To that extent, we affirm the circuit court's judgment.
As to the appellants' remaining claims of "intentional interference with an existing contract" against NGL Energy, we reach a different result. As pled, their claims conform to the Restatement (Second) of Torts § 766,, which provides:
The parties seem to disagree over whether Kentucky or Oklahoma law applies to this tort claim, but it makes little difference for our purposes. This provision of the Restatement has been adopted as law in Kentucky and Oklahoma. See, e.g., National Coll. Athletic Ass'n v. Hornung, 754 S.W.2d 855, 858-59 (Ky. 1988); Wilspec Tech., Inc. v. Dunan Holding Group Co., LTD., 204 P.3d 69, 71 (Okla. 2009).
The appellants also argue their "intentional interference with an existing contract" claim could have fallen under the purview of the Restatement (Second) § 766A, which provides:
One who intentionally and improperly interferes with the performance of a contract (except a contract to marry) between another and a third person, by preventing the other from performing the contract or causing his performance to be more expensive or burdensome, is subject to liability to the other for the pecuniary loss resulting to him.
One who intentionally and improperly interferes with the performance of a contract (except a contract to marry) between another and a third person by inducing or otherwise causing the third person not to perform the contract, is subject to liability to the other for the pecuniary loss resulting to the other from the failure of the third person to perform the contract.
As discussed, the circuit court's sole basis for dismissing the appellants' claims (and NGL Energy's sole appellate argument in support of why the circuit court should be affirmed on this point) is that no breach occurred when NGL Supply terminated the contract. The contract was, as discussed above, terminable at will.
In and of itself, however, that provided no basis for dismissing the appellants' claims. This tort contemplates that liability may be predicated upon causing a third person "not to continue an existing contract terminable at will[.]" See Restatement (Second) of Torts § 768(1). Whether the contract was terminable at will is simply a factor to be considered in determining whether the defendant was free to interfere with it, and the full extent of the plaintiff's damages. Specifically, the Restatement (Second) of Torts § 766, comment g, explains:
Contracts terminable at will. A similar situation [to a voidable contract] exists with a contract that, by its terms or otherwise, permits the third person to terminate the agreement at will. Until he has so terminated it, the contract is valid and subsisting, and the defendant may not improperly interfere with it. The fact that the contract is terminable at will, however, is to be taken into account in determining the damages that the plaintiff has suffered by reason of its breach. (See § 774A).
One's interest in a contract terminable at will is primarily an interest in future relations between the parties, and he has no legal assurance of them. For this reason, an interference with this interest is closely analogous to interference with prospective contractual relations. (See § 766B). If the defendant was a competitor regarding the
business involved in the contract, his interference with the contract may be not improper. (See § 768, especially Comment i).
In short, the circuit court did not cite a valid basis for dismissing the appellants' tort claims against NGL Energy. The appellees do not argue an alternative basis exists for otherwise affirming the circuit court's decision. Therefore, we reverse the circuit court's judgment in this respect.
As to Appeal No. 2016-CA-001621-MR, the sole issue is the propriety of awarding the appellees their attorney's fees.
As it relates to NGL Supply, we find no error. The appellants do not contest that the agreement entitled NGL Supply to an award of attorney's fees. Rather, the only argument the appellants raise in this regard is that it was legal error for the circuit court to not stay its adjudication until Appeal No. 2016-CA-000994-MR was resolved. The appellants cite no legal authority for this argument; we are aware of none; accordingly, it is unnecessary to address this point further. See Cherry v. Augustus, 245 S.W.3d 766, 781 (Ky. App. 2006).
As it relates to NGL Energy, we reverse for two reasons. First, this is mandated in light of our conclusion that the appellants' tort claims against that entity were improperly dismissed. Second, even if NGL Energy is ultimately successful in this litigation, we are left to guess at how the circuit court could award NGL Energy attorney's fees. The sole basis for the circuit court's award of attorney's fees was the contractual agreement between (1) NGL Supply; (2) NGL Supply's "subsidiaries;" (3) UPG; and (4) STC. And, pursuant to Section 19 of that agreement, referenced above, the agreement only allowed attorney's fees "[i]n the event there is litigation over the terms or enforcement" of the agreement. Here, NGL Energy does not appear to have been a party to that agreement because NGL Energy is not UPG; it is not STC; it is not NGL Supply; nor, for that matter, does the record demonstrate that NGL Energy is one of NGL Supply's "subsidiaries" within the common meaning of the word. Furthermore, the appellants' suit against NGL Energy was not about the "terms or enforcement" of the agreement; it was about NGL Energy's alleged interference with the agreement.
According to the pleadings and associated exhibits filed of record by the appellees, NGL Supply is a subsidiary of NGL Energy. An issue was raised below regarding whether it was a wholly owned subsidiary of NGL Energy, but that issue played no role in the circuit court's judgment and has not been raised on appeal. --------
Upon remand, the circuit court shall recalculate its award of attorney's fees to represent only what NGL Supply was entitled to receive. If NGL Energy ultimately prevails in this litigation, the circuit court shall then revisit and make an appropriate ruling with respect to whether NGL Energy was likewise entitled to its attorney's fees under the terms of the agreement.
CONCLUSION
We AFFIRM and REVERSE the judgments of the McCracken Circuit to the extent set forth above, and REMAND this matter for further proceedings not inconsistent with this opinion.
JOHNSON, JUDGE, CONCURS.
MAZE, JUDGE, CONCURS IN RESULT ONLY. BRIEF FOR APPELLANTS: Samuel J. Wright
Paducah, Kentucky BRIEF FOR APPELLEES: C. Thomas Miller
Ryan Polczynski
Paducah, Kentucky
We disagree for three equally important reasons. First, to the extent that Kentucky law applied to the appellants' tort claims, Kentucky tort law has never adopted § 766A. See Atmos Energy Corp. v. Honeycutt, No. 2011-CA-000601-MR, 2013 WL 285397 at *18 (Ky. App. Jan. 25, 2013) (unpublished; cited here pursuant to CR 76.28(4)(c)). Second, the appellants did not allege in their complaint that NGL Energy interfered with their performance of the contract, which is the essence of any claim under § 766A. See Restatement (Second) § 766A, cmt. a (explaining "[t]his Section is concerned only with the actor's intentional interference with the plaintiff's performance of his own contract, either by preventing that performance or making it more expensive or burdensome. . . ." (Emphasis added.)). Third, the appellants raised this particular argument for the first time in a post-judgment CR 59.05 motion. A party cannot invoke CR 59.05 to raise arguments that could and should have been presented during the proceedings before entry of the judgment. See Hopkins v. Ratliff 957 S.W.2d 300, 301 (Ky. App. 1997).