Westlake Longview Corp. and Westlake Chemical OpCo LP v. Eastman Chemical Co.

Summary

The Business Court of Texas, Eleventh Division, rules on Westlake’s motion for traditional summary judgment and the parties’ objections to summary-judgment evidence in a dispute concerning a long-term ethylene sales and exchange agreement. Applying Delaware contract law, the court addresses annual and monthly nominations, third-party sales agreements, free exchange rights, and Westlake’s annual purchase obligations. The motion and evidentiary objections are granted and denied in part.

Holdings

1. Under Section 4(f), Eastman must, in good faith, offer Westlake all EEQ that Eastman intends to produce in the following calendar year, subject to the ESA's contractual minimum requirement.
2. The ESA does not require Westlake to satisfy its annual purchase commitment in equal monthly installments.
3. Section 4(f) does not impose a strict December 31 deadline, but it authorizes only one-year third-party contracts for the calendar year covered by the annual nomination; spot sales do not satisfy Section 4(f).
4. Eastman is entitled to free exchange of EEQ sold to third parties in compliance with Section 4(f).
5. Eastman's monthly nominations must include EEQ not already committed to Westlake or a qualifying third party under Section 4(f), and Westlake may purchase any or all such nominated EEQ. Monthly nominations are not limited to EEQ physically produced during the corresponding month.
6. The ESA does not provide for free exchange of converted or tolled ethylene.
7. Because the ESA's exchange provisions are unambiguous and the services aspect of the hybrid transaction is not governed by the Delaware UCC course-of-performance provisions, the court may not use course-of-performance evidence to determine the parties' exchange rights and obligations.
8. The disputed ESA provisions are unambiguous, and the court construed them from the contract's language and structure without resort to extrinsic evidence.

Questions Presented

1. Whether the ESA requires Eastman, in annual nominations, to offer in good faith all EEQ it intends to produce in the following year.
2. Whether the ESA requires Westlake to purchase its annual committed EEQ in equal monthly installments.
3. Whether Section 4(f) imposes a December 31 deadline for third-party sales and whether it authorizes spot sales or only one-year contracts for the nomination year.
4. Whether Eastman is entitled to free exchange of EEQ sold to third parties under Section 4(f).
5. Whether Eastman's monthly nominations must include EEQ not already committed to Westlake or a qualifying third party, and whether Westlake may purchase any such nominated EEQ.
6. Whether free exchange applies to inventory ethylene and converted or tolled ethylene.
7. Whether Delaware Uniform Commercial Code course-of-performance evidence may be used to construe the ESA's unambiguous exchange provisions.
8. Whether the parties' summary-judgment evidence should be excluded in whole or in part under the asserted evidentiary objections.

Disposition

other