Empire Petroleum Partners, LLC v. Allen Petroleum Company of East Tennessee, Inc et al
Filing
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MEMORANDUM AND OPINION re 20 MOTION for Summary Judgment filed by Empire Petroleum Partners, LLC. The Plaintiff shall submit an affidavit regarding the amount of attorneys fees and costs of litigation within 20 day s of the entry of this Memorandum Opinion. After deciding the amount of such fees and costs for which the remaining Defendants are liable, the Court will enter a final judgment. See order for details. Signed by Magistrate Judge Clifton L Corker on 7/28/2015. (RLC, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT GREENEVILLE
EMPIRE PETROLEUM PARTNERS,
LLC
V.
ALLEN PETROLEUM COMPANY OF
EAST TENNESSEE, INC., and C&L
PARTNERSHIP, LLP
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NO. 2:14-CV-133
MEMORANDUM OPINION
This action is before the United States Magistrate Judge, upon the written consent of
the parties and referral under 28 U.S.C. § 636 by the District Judge with respect to the
Plaintiff’s Motion for Summary Judgment [Doc. 20]. Plaintiff filed the subject Motion on
April 2, 2015. On May 1, 2015, a suggestion of bankruptcy was filed with respect to
Defendant Lee Hudson [hereinafter referred to as “Hudson”]. This case was stayed and the
remaining Defendants, Allen Petroleum Company of East Tennessee, Inc., and C&L
Partnership, LLP, [hereinafter referred to as “remaining Defendants”] were given until May
15, 2015, to show why the case should not proceed as to them.
On June 9, 2015, with no further response from the remaining Defendants, the Court
entered an order [Doc. 32] lifting the stay as to the remaining Defendants and stating that
“[a]lthough the Defendants’ time to respond expired before the suggestion of bankruptcy was
filed, the Court will allow the remaining Defendants until June 24, 2015, to respond to the
Motion for Summary Judgment.”
No response to the Motion has been filed and it is ripe for decision.
Plaintiff is a wholesale distributor of petroleum products, including gasoline and
diesel fuel. The remaining Defendants along with Hudson entered into very similar
petroleum products supply agreements with Mountain Express Oil Company. The first
agreement, dated January 20, 2012, related to “Store 111” located at 2845 Winfield Dunn
Parkway in Sevierville, Tennessee. [Doc. 1, Exhibit 1]. This agreement was amended on
May 30, 2012. Id. The second agreement, dated January 30, 2012, related to “Store 117”
located at 1402 Tusculum, Greeneville, Tennessee. [Doc. 1, Exhibit 2]. Both of these supply
agreements were assigned to the Plaintiff prior to the losses allegedly incurred in this suit.1 It
is undisputed that the Plaintiff supplied petroleum products to both locations as required by
the supply agreements. Defendants also admitted in their answer that they “were unable to
pay for all deliveries by Empire at Sites 111 and 117, nor cured any defaults, nor purchased
further fuel.” [Doc. 9, paragraph 2].
The pertinent contents of the supply agreements are set forth in the Plaintiff’s
memorandum in support of its motion as follows:
Obligation to Pay for Fuel
Both agreements contain the following provision at Section 3(b) as to the
exclusive nature of the sale of fuel at each location:
Customer covenants and agrees to purchase from [Empire] and offer for sale
at the Location only such gasoline, diesel fuel, or other petroleum products as are
supplied and delivered by [Empire] for the full duration of the stated term of this
Agreement.2
1 Mike Diebus, the executive vice president of the plaintiff, filed an affidavit stating that the facts and assertions in
Doc. 1, the complaint, were true and accurate.
2 The term of the agreement for Site 111 was 15 years while for Site 117, the term was 11 years.
2
The supply agreement for Site 117 also contains the following provision at
Section 3(b) as to the minimum required volume:
… and to purchase not less than 40,000 gallons of gasoline and/or diesel fuel
per month.
The supply agreement for Site 117 also contains the following provision at
Section 22 relating to "Shortfall Payments":
In the event that Customer has a shortfall by failing to purchase at least
25,000 gallons of fuel in any given month, Customer shall pay over to [Empire]
within seven days of notice by [Empire] of such shortfall, charges in an amount
equal to $.04 times the difference between the number of actual gallons purchased
and the minimum purchase requirement for such month.
Obligation to Pay for Rebranding Costs and Liquidated Damages
The parties hereto agree and stipulate that in the event of default by
Customer and early termination of this Agreement, Supplier's actual damages cannot
be calculated with a degree of certainty as Supplier is relying upon Customer's
continuing purchase of petroleum products throughout the term of this Agreement.
The parties further agree that, in addition to the repayment of Supplier's branding
investment and reimbursable expenses, a sum equal to $.04 times the previous 12
months gallons purchased times the number of years of the term of this Agreement, is
a reasonable pre-estimate of damages that may be suffered by Supplier in the event
of such breach and termination. Provided further, said sum of liquidated damages
shall be reduced by an amount equal to the amount of liquidated damages divided by
the number of years of the term of this Agreement, multiplied by the number of each
fully expired year, prior to Customer's default, during the term of this Agreement.
In addition to the foregoing, in the event of termination, Customer shall pay
to [Empire] the cost of "debranding" the Location. "Debranding" is hereby defined
as the removal of all brand signage and brand color scheme at the Location.
Attorneys' Fees and Litigation Expenses
In the event it becomes necessary for either party to employ the services of an
attorney to enforce any aspect of this Agreement, the losing party agrees to pay the
prevailing party actual attorneys' fees and costs of litigation.
Choice of Law
This Agreement has been entered into in and shall be construed under the
laws of the State of Georgia.
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[Doc. 26, pgs. 4-6].
Summary judgment is proper where the pleadings, the discovery and disclosure
materials on file, and any affidavits show that there is no genuine issue of material fact and
that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). In ruling on a
motion for summary judgment, the Court must view the facts contained in the record and all
inferences that can be drawn from those facts in the light most favorable to the non-moving
party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Nat’l
Satellite Sports, Inc. v. Eliadis, Inc., 253 F.3d 900, 907 (6th Cir. 2001). The Court cannot
weigh the evidence, judge the credibility of witnesses, or determine the truth of any matter in
dispute. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
The moving party bears the initial burden of demonstrating that no genuine issue of
material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). To refute such a
showing, the non-moving party must present some significant, probative evidence indicating
the necessity of a trial for resolving a material factual dispute. Id. at 322. A mere scintilla of
evidence is not enough. Anderson, 477 U.S. at 252; McClain v. Ontario, Ltd., 244 F.3d 797,
800 (6th Cir. 2000). This Court’s role is limited to determining whether the case contains
sufficient evidence from which a jury could reasonably find for the non-moving party.
Anderson, 477 U.S. at 248-49; Nat’l Satellite Sports, 253 F.3d at 907. If the non-moving
party fails to make a sufficient showing on an essential element of its case with respect to
which it has the burden of proof, the moving party is entitled to summary judgment. Celotex,
477 U.S. at 323. If this Court concludes that a fair-minded jury could not return a verdict in
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favor of the non-moving party based on the evidence presented, it may enter a summary
judgment. Anderson, 477 U.S. at 251-52; Lansing Dairy, Inc. v. Espy, 39 F.3d 1339, 1347
(6th Cir. 1994).
The party opposing a Rule 56 motion may not simply rest on the mere allegations or
denials contained in the party’s pleadings. Anderson, 477 U.S. at 256. Instead, an opposing
party must affirmatively present competent evidence sufficient to establish a genuine issue of
material fact necessitating the trial of that issue. Id. Merely alleging that a factual dispute
exists cannot defeat a properly supported motion for summary judgment. Id. A genuine issue
for trial is not established by evidence that is merely colorable, or by factual disputes that are
irrelevant or unnecessary. Id. at 248-52.
Under Georgia law, Plaintiff is obligated to prove that the parties had a valid contract
and that the parties mutually assented to all of the essential terms at issue. Lamb v. Decatur
Federal Sav. & Loan Ass’n, 411 S.E.2d 527 (Ga. App. 1991). Also, it must then show that it
performed its obligations, that the other side breached the contract, and prove the damages
from the breach. Layer v. Clipper Petroleum, Inc., 735 S.E.2d 65 (Ga App. 2012).
Based upon the answer, and the unrebutted affidavit of Plaintiff’s Executive Vice
President, Mike Diebus, the Court finds that the Plaintiff has proven the existence of a valid
contract, that the parties mutually assented to all of the essential terms, that the Plaintiff
performed its obligations under the contract, that the remaining Defendants breached the
contract, and as a result, the Plaintiff has been damaged.
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The agreement also contains a liquidated damages provision and provides a formula
for determining the amount. Georgia law provides that such liquidated provisions are
enforceable if (1) the injury caused by the breach of contract is difficult or impossible to
accurately estimate; (2) the parties intended to provide for damages rather than a penalty; and
(3) the sum stipulated is a reasonable pre-estimate of the probable loss. Southeastern Land
Fund v. Real Estate World, 237 Ga. 227, 230 (1976). The burden is on the defaulting party
to prove that a liquidated damages clause is an unenforceable penalty. Joyce’s Submarine
Sandwiches v. Cal. Public Employees’ Retirement System, 395 S.E.2d 257 (Ga. App. 1990).
The enforceability of a liquidated damages clause is a question of law. Jamsky v. HPSC,
Inc., 519 S.E.2d 246 (Ga. App. 1999).
The Court finds that the defaulting party has not come forward with any evidence on
any of these three criteria. The Court finds that the injury in this circumstance was difficult
to accurately estimate. The Court further finds that the parties intended to provide for
damages rather than a penalty based on how the damages were calculated. Finally as to this
issue, the court finds that the sum stipulated is a reasonable pre-estimate of the probable loss.
This was an arm’s length transaction. The remaining Defendants, along with Defendant
Hudson, entered into not one, but two such agreements several months apart with this same
provision. Thus, the Court finds the liquidated damages provision to be enforceable.
Having found a valid contract and a breach by the remaining Defendants, the next
issue is one of damages. Based on the terms of the agreement and the affidavit of Mr.
Diebus, the Court finds that the remaining Defendants are liable to the Plaintiff for fuel they
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ordered and received but for which they did not pay in the amount of $149,877.00.
Similarly, the Court finds that the remaining Defendants are liable to the Plaintiff for
rebranding costs in the amount of $203,873.00. The Court also accepts the liquidated
damages calculations under the supply agreement provisions and the affidavit of Mr. Diebus
and finds that the remaining Defendants are liable to the Plaintiff for $578,954.00 in
liquidated damages.3
Finally, the Plaintiff asserts that it is entitled to reasonable attorney’s fees under the
agreements. Clearly, Plaintiff is the “prevailing party” under the clause in the agreements,
and the remaining Defendants are the “losing party.” Accordingly, the Court finds that the
remaining Defendants are liable to the plaintiff for its “actual attorney’s fees and costs of
litigation” as specified in the agreements.
The Plaintiff shall submit an affidavit regarding the amount of attorney’s fees and
costs of litigation within 20 days of the entry of this Memorandum Opinion. After deciding
the amount of such fees and costs for which the remaining Defendants are liable, the Court
will enter a final judgment.
SO ORDERED:
s/ Clifton L. Corker
UNITED STATES MAGISTRATE JUDGE
3 Mr. Mike Diebus’ affidavit, while he calculates the total amount of liquidated damages correctly, actually
mistakenly refers to Site 111 when he meant to refer to Site 117 and vice-versa. (Doc. 21-1, pageID# 113). That
error does not affect the total liquidated damages calculation.
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