DK Trading & Supply, LLC v. Wink to Webster Pipeline LLC

Summary

The Texas Business Court, Eleventh Division, addresses cross-motions for summary judgment in a dispute over crude-oil terminal storage and pipeline transportation agreements. The court holds that the terminal agreement requires two tanks to be allocated exclusively for the plaintiff's use and that all actually shipped crude oil, including shipments paid with deficiency credits, reduces deficiency payments. The court denies summary judgment on whether improper invoicing constituted an event of default but holds that timely written notice was a condition precedent to pursuing claims concerning the oldest six deficiency-payment invoices.

Holdings

1. The Terminal Services Agreement grants Delek exclusive use of two tanks for storing up to 566,000 barrels of crude oil, subject to permitted substitutions that preserve the contractually specified capabilities and terms. Wink may not unilaterally place other crude oil in tanks designated for Delek.
2. For each true-up period, Wink must calculate Delek's deficiency payment by accounting for every barrel of product actually shipped during that period, regardless of whether the shipment was paid for with deficiency credits earned during an earlier billing period.
3. Wink's affirmative defenses of waiver, ratification, estoppel, and modification did not preclude summary judgment because Wink failed to identify the elements of those defenses or present evidence raising a genuine issue of material fact on each element.
4. The Transportation Agreement makes timely written notice of a dispute over a deficiency-payment invoice a condition precedent to pursuing any right or remedy concerning that billing dispute. Delek's claims concerning the six oldest disputed invoices were therefore barred because Delek failed to provide timely notice.
5. Delek's alleged prior material breach theory did not excuse its failure to comply with Section 8.02 because Delek did not present evidence supporting material breach and the agreement contemplated that invoice errors would be addressed through the notice-and-cure process.
6. Section 8.02 does not unlawfully shorten the statute of limitations because it requires timely notice of a billing dispute rather than shortening the time in which to bring suit.
7. The court denied Delek's motion for summary judgment seeking a legal determination that improper deficiency-payment invoicing would constitute an event of default, because Delek presented only a theoretical breach and had not established the required notice, failure to cure, or other contractual predicates.
8. Because the agreements were unambiguous, subjective statements and course-of-performance evidence offered to alter or aid contract construction were inadmissible, while evidence offered to establish the timing of invoices and notice was admissible for that non-interpretive purpose.

Questions Presented

1. Whether the Terminal Services Agreement required Wink to provide two tanks for Delek's exclusive use and prohibited Wink from placing other crude oil in those tanks.
2. Whether the Transportation Services Agreement required deficiency payments to be calculated by deducting all crude oil actually shipped during a true-up period, including shipments paid for with previously earned deficiency credits.
3. Whether Wink's affirmative defenses of waiver, ratification, estoppel, or modification created a fact issue precluding summary judgment on the deficiency-payment calculation.
4. Whether the Transportation Agreement's written-notice requirement for disputes over deficiency-payment invoices was a condition precedent to pursuing legal or equitable remedies.
5. Whether Delek's alleged prior material breach theory excused its failure to comply with the notice requirement.
6. Whether the notice requirement unlawfully shortened the statute of limitations.
7. Whether Delek established as a matter of law that improper deficiency-payment invoicing constituted an event of default.
8. Whether the parties' summary-judgment evidence and declarations were admissible.

Disposition

other