Bruce Foods Corp. v. Tex. Gas Serv.

BRUCE FOODS CORPORATION, Plaintiff, v. TEXAS GAS SERVICE, A DIVISIONOF ONEOK, INC., Defendant.

EP-13-CV-231-KC

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS EL PASO DIVISION

SIGNED February 19, 2014

ORDER

On this day, the Court considered Defendant's Motion to Dismiss Plaintiff's First Amended Original Complaint Pursuant to Fed. R. Civ. P. 12(b)(6) (the "Motion"), ECF No. 15, in the above-captioned case (the "Case").¹ For the reasons described below, the Motion is GRANTED in part and DENIED in part.

I. BACKGROUND

A. Procedural History

Plaintiff filed its Original Petition, ECF No. 1-1, in the District Court of El Paso County, Texas, 210th Judicial District, on June 17, 2013. See Original Pet. 1. Defendant removed the Case to this Court on July 19, 2013. See ECF No. 1. Plaintiff, with the Court's leave, filed the Amended Complaint on October 2, 2013. See ECF No. 14. The Amended Complaint asserts claims of negligence, negligent misrepresentation, breach of warranty, breach of contract, and promissory estoppel against Defendant. Am. Compl. ¶¶ 26-48.

Defendant filed the Motion on October 9, 2013, thereby requesting that the Court dismiss the Case in its entirety pursuant to Federal Rule of Civil Procedure 12(b)(6). See Mot. 1-12. Plaintiff filed a response to the Motion (the "Response"), ECF No. 16, on October 22, 2013. The Response additionally requests leave to further amend the Amended Complaint should the Court deem the Amended Complaint insufficient under Rule 12(b)(6). Resp. ¶ 36. Defendant filed a reply (the "Reply"), ECF No. 17, on October 25, 2013.

On December 6, 2013, the Court requested that the parties further brief certain issues raised by the Motion. See ECF No. 18. Plaintiff filed its brief ("Plaintiff's Brief"), ECF No. 19, on December 23, 2013. Defendant in turn filed its brief ("Defendant's Brief"), ECF No. 20, on January 15, 2014.

B. Factual Background

The Court assumes the following facts to be true for the purposes of this Order:

Plaintiff owns and operates a manufacturing facility in El Paso, Texas (the "Facility") that processes peppers and other vegetables. Am. Compl. ¶ 7. Plaintiff requires a steady supply of natural gas to operate the boilers at the Facility. Id. Because harvesting and processing peppers is a time-sensitive operation, any interruption in Plaintiff's natural gas supply can severely harm Plaintiff's business. See id. ¶ 8.

In 2000, Plaintiff, along with Defendant's predecessor-in-interest, Southern Union Gas Company ("Southern"), entered into an agreement for the transportation² of natural gas (the"Agreement"). ECF No. 2-1, at 2-11.³ The Agreement provides that Southern would transport natural gas to Plaintiff to power the Facility. Am. Compl. ¶ 7; Agreement; Pl.'s Br. ¶¶ 8-9. Specifically, the Agreement provides that, if Plaintiff "deliver[s] or cause[s] to be delivered to" Southern a quantity of natural gas below a contractually-specified maximum, Southern will, subject to certain limitations, "receive, transport and redeliver" an equivalent quantity of natural gas to Plaintiff. Agreement ¶ 1.1. Although the Agreement explicitly provides that Plaintiff has no obligation to deliver any minimum level of gas for Southern to redeliver, see id. ¶ 1.3 ("It is expressly agreed and understood by the parties that nothing herein shall obligate [Plaintiff] to transport any minimum quantity of natural gas."), the Agreement also provides that, if Plaintiff delivers a volume "of gas to [Southern] so that the minimum amount owed by [Plaintiff] for transportation" is less than $7,525.00 per contract year, Southern "shall bill [Plaintiff] for the difference." Id. ¶ 4.2. The Agreement also contains a requirements clause (the "Requirements Clause") that prohibits Plaintiff from obtaining natural gas from other sellers/transporters. See id. ¶ 1.2; Pl.'s Br. ¶¶ 7, 9-11, 14; Def s Br. ¶ 8.

The Agreement is subject to an interruptibility clause (the "Interruptibility Clause"), which provides as follows:

Notwithstanding any other provision to the contrary, [Southern and its assigns] shall have the unconditional right, without giving notice, at any and all times during the term hereof, to immediately decrease, suspend or discontinue in whole or in part the receipt, transportation or delivery of gas quantities under this Agreement and [Southern and its assigns] shall not be liable, in any respect, to [Plaintiff] by reason of any exercise of said right. Notwithstanding the foregoing, [Southern and its assigns] shall, to the extent practicable, give [Plaintiff] at least two hours' notice before effecting any suspension or discontinuation of service.

Agreement ¶ 2.1.

Paragraph 1.1 of the Agreement further affirms that Southern would transport natural gas to Plaintiff "on an interruptible basis." Id. ¶ 1.1.

The Agreement incorporates by reference a document labeled Appendix A that contains several noteworthy provisions. See id. ¶ 8.4; App. A, ECF No. 2-1, at 12-19. Paragraph 10.1 of Appendix A permits assignment of the Agreement. See App. A ¶ 10.1. Additionally, Paragraph 11.2 of Appendix A permits amendment of the Agreement, but "only by a written instrument executed by the parties hereto and expressly stating that it is an amendment to this Agreement." See id. ¶ 11.2. Appendix A also contains a force majeure clause that, inter alia, excuses performance of any party unable to perform the Agreement due to the "breakage or freezing of pipelines," "the making of repairs or alterations to lines of pipe or plants," the "partial or entire failure of gas supply," or other circumstances "not reasonably within the control of the party claiming 'force majeure.'" See id. ¶ 8.1.

The initial duration of the Agreement was between January 1, 2001, and December 31, 2005. See Agreement ¶ 5.1. Plaintiff and Southern formally amended the Agreement in 2001 to extend the duration of the Agreement to January 31, 2006, but this amendment made no relevant substantive changes to the terms of the Agreement described above. See ECF No. 2-1, at 20-21.Upon the expiration of this term, the Agreement provides that it "shall extend on a year-to-year basis unless written notice of termination is delivered no less than one hundred eighty (180) days prior to the end of the primary term or any extension thereof by either" Plaintiff or Southern. Id.; Agreement ¶ 5.1.

Sometime between 2001 and 2005, Southern assigned the Agreement to Defendant. See Am. Compl. ¶ 7; ECF No. 2-1, at 22 (listing Defendant as the transporter under an amendment to the Agreement); App. A ¶ 10.1 (permitting assignment of the Agreement). In 2005, Plaintiff and Defendant formally amended the Agreement once more. See ECF No. 2-1, at 22-29. As relevant to this order, the 2005 amendment clarified the Interruptibility Clause in a manner described in a subsequent section of this order. See id. at 28. By 2006, the initial term of the Agreement had expired, and Plaintiff and Defendant thereafter extended the Agreement on a year-to-year basis pursuant to the Agreement's extension provision. See id. at 20.

In July 2011, Defendant informed Plaintiff that it intended to perform testing on one or more of the pipelines that supplied natural gas to the Facility. Am. Compl. ¶ 9. Plaintiff responded that such testing would disrupt Plaintiff's operations during its peak production season and thereby cause Plaintiff substantial financial losses. Id. Plaintiff therefore requested that Defendant delay its testing until after the peak season. Id. Defendant assured Plaintiff that it would install a bypass pipeline that would provide the Facility an uninterrupted supply of natural gas while Defendant performed the testing. Id. ¶ 10. In reliance on Defendant's assurance that the Facility would continue to receive natural gas service, Plaintiff hired migrant and transient labor to work at the Facility, and began processing its products. Id. ¶¶ 8, 10, 25.

Defendant installed the bypass pipeline in August 2011. Id. ¶ 11. Defendant then shut off Plaintiff's gas supply from Defendant's main pipeline and began supplying the Facility from the bypass pipeline alone. Id. ¶ 12.

Shortly thereafter, Plaintiff began experiencing increasingly severe boiler shutdowns, which eventually forced Plaintiff to completely cease operations at the Facility. Id. ¶¶ 12-16, 20. This caused Plaintiff substantial financial loss. Id. ¶¶ 15, 25. After some initial unfruitful investigations, Plaintiff determined that Defendant's bypass pipeline was supplying an insufficient level of gas to the boilers at the Facility, thereby causing the boilers to shut down. Id. ¶¶ 14-16, 20.

Plaintiff promptly informed Defendant of the problem. Id. ¶¶ 14-15. Defendant took numerous steps to attempt to remedy the gas supply problem, but these steps all failed. See id. ¶¶ 17-18. Defendant then ran a new bypass line from a metering station owned by El Paso Natural Gas Company to the Facility, which finally corrected the problem. Id. ¶ 18. "In short, once the Facility's gas supply stopped coming from [Defendant's] pipeline, the boiler problems stopped." Id.

In sum, Plaintiff claims that Defendant's failure to properly construct and maintain the bypass pipeline caused the Facility to temporarily shut down, which in turn caused Plaintiff sizable economic damages. Id. ¶¶ 20-21, 25. Plaintiff alleges that it had to dispose of products on the assembly line that it had already begun processing. Id. ¶¶ 10, 25. Plaintiff further alleges that "during shut-down periods, [Plaintiff's] large production workforce was forced to stand idle, with [Plaintiff] paying workers without getting any product produced." Id. ¶ 25. Plaintiff also alleges that "[t]he shut-down forced [Plaintiff] to cancel pending orders with growers, exposing[Plaintiff] to claims from growers and also at minimum disturbing its relationship with growers." Id.

II. DISCUSSION

A. Standard

A motion to dismiss pursuant to Rule 12(b)(6) challenges a complaint on the basis...