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Hess Corporation v. Ball Corporation; Ball

April 25, 2012

HESS CORPORATION, PLAINTIFF,
v.
BALL CORPORATION; BALL PACKAGING CORPORATION; BALL PLASTIC CONTAINER CORPORATION; AND BALL METAL BEVERAGE CONTAINER CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: Neal P. McCurn, Senior District Judge

MEMORANDUM-DECISION and ORDER

I. Introduction

In this diversity action for breach of contract under New York common law, the parties have filed respective motions for summary judgment, which are now fully briefed. Plaintiff, Hess Corporation ("Hess") brings this action against defendants, Ball Corporation; Ball Packaging Corporation; Ball Plastic Container Corporation; and Ball Metal Beverage Container Corporation ("Ball"), seeking close to five million dollars in damages on its claims for breach of contract and breach of the duty of good faith and fair dealing. Ball moves for summary judgment as to the entire action, and Hess moves for summary judgment solely as to liability. Decision is rendered on the submitted papers, without oral argument.

II. Legal Standard

A motion for summary judgment shall be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The movant has the initial burden to show the court why it is entitled to summary judgment. See Salahuddin v. Goord, 467 F.3d 263, 272 (2d Cir. 2006) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548 (1986)). If the movant meets its burden, the burden shifts to the non-movant to identify evidence in the record that creates a genuine issue of material fact. See id., at 273 (citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348 (1986)).

When the court is deciding a motion for summary judgment, it must resolve all ambiguities and draw all reasonable inferences in the non-movant's favor. See Vermont Teddy Bear Co., Inc. v. 1-800 Beargram Co., 373 F.3d 241, 244 (2d Cir. 2004) (citing Adickes v. S. H. Kress & Co., 398 U.S. 144, 157, 90 S. Ct. 1598 (1970)). Where, as here, a court is considering multiple motions for summary judgment, each party's motion must be evaluated "on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration." Byrne v. Rutledge, 623 F.3d 46, 53 (2d Cir. 2010) (quotation and citation omitted).

III. Factual Background

On October 23, 2006, Hess and Ball entered into a contract entitled "Base Agreement for the Purchase and Sale of Electricity" ("the Base Agreement"). On June 30, 2008, Hess and Ball entered into a Transaction Confirmation ("the Transaction Confirmation"). Together, the Base Agreement and the Transaction Confirmation comprise a single contract.

Hess is an integrated energy company engaged in, among other things, the marketing of electricity. As part of its energy marketing business, Hess arranges for the supply of electricity directly to commercial, industrial and institutional customers. At the time of the execution of the Base Agreement and Transaction Confirmation, which comprise the agreement at issue in this action, Ball was engaged in the business of manufacturing plastic containers at property it leased at 2900 Mclane Drive in Baldwinsville, New York. Ball maintained a plant at this location totaling 496,200 square feet. Ball's lease runs through at least May 2013.

Pursuant to the Base Agreement, "[Ball] is obligated to purchase and receive, and [Hess] is obligated to sell and deliver, 100% of [Ball's] usage requirements at the Delivery Point*fn1 during the specified time period." ¶ 2 to Base Agreement at Ex. A to Aff. of Richard Switzer, June 29, 2011, Dkt. No. 44 and Ex. D. to Decl. of Kenneth M. Alweis, June 30, 2011, Dkt. No. 55 ("Base Agreement"). Ball is further bound to use the electricity "only at the listed Service Locations" and is prevented from reselling the electricity or using it at other locations without Hess's written consent. See id. "Service Location" is defined in the Transaction Confirmation as 2900 McLane Drive, Baldwinsville, New York, 13027. The definition also includes an accompanying utility account number.

The Base Agreement further provides that "[i]f in any month, [Ball] fails to timely notify [Hess] of any actual or anticipated Material Usage Deviation so that [Hess] may be able to adjust deliveries accordingly, and if as a result of [Ball's] failure to provide such timely notice, [Hess] incurs additional costs to serve [Ball, Hess] may invoice [Ball] for such additional costs and [Ball] agrees to pay such invoice." ¶ 4 to Base Agreement. A "Material Usage Deviation" is defined as "a non weather related shift or change in [Ball's] monthly usage of 25% or more compared to [Ball's] Base Monthly Usage." Id. at ¶ 3. "Base Monthly Usage" is defined as the "estimate of [Ball's] usage determined by using historical average usage information." Id. Under the heading, "Contract Quantity," the Transaction Confirmation lists Ball's Base Monthly Usage each month from January through December, presumably for the year previous to its execution.

Pursuant to Paragraph Ten of the Base Agreement, entitled "Plant Closure/ Sale of Facility," [i]n the event that [Ball] elects to close or sell a facility ("Facility") that is a Service Location under this Agreement, [Ball] will inform [Hess] by written notice at least sixty (60) days prior to the proposed shut-down or sale of the Facility. Such notice by [Ball] will be deemed a request by [Ball] to terminate this Agreement as it relates to such Facility ("Early Termination") and for [Hess] to liquidate all Electricity and related financial products purchased by [Hess] to serve the Facility. ... [F]ailure of [Ball] to provide [Hess] with the requisite notice of an Early Termination will be deemed an Event of Default under this Agreement. ¶ 10 to Base Agreement. Paragraph Twelve of the Base Agreement provides for certain remedies to the non-defaulting party due to an Event of Default. These remedies include (1) the withholding of any payments or the suspension of any deliveries due; (2) with at least one day's notice, acceleration of any and all amounts owing as well as termination and liquidation of any or all transactions; (3) determination of a settlement amount for each transaction by calculating gains, losses and costs associated with the liquidation; and (4) calculation of a net settlement amount by aggregating all settlement amounts and other amounts owing between the parties.

Hess has contracted for the sale of electricity to Ball at the Baldwinsville, New York Service Location since 2003. The October 23, 2006 Base Agreement was a renewal contract, as was the June 30, 2008 Transaction Confirmation.

On April 6, 2009, Ball's Chairman, President and Chief Executive Officer formally authorized the closure of Ball's plant in Baldwinsville, New York. On April 8, 2009, Ball notified Hess by letter that effective mid-July 2009, Ball "intends to reduce electricity consumption at our Baldwinsville, NY facility . . . by more than 25% of our 'Base Monthly Usage' as identified in [the Transaction Confirmation]." Hess's Statement of Material Facts ("SOMF") at ¶ 77, Dkt. No. 45; Ball's Resp. to Hess's SOMF at ¶ 77, Dkt. No. 57. By that same letter, Ball further notified Hess that it would be decreasing its electricity consumption at the Baldwinsville, New York plant by 97% from an average of four million kilowatt hours per month to an estimated 90,000 kilowatt hours. Nowhere in the letter does Ball state that the Baldwinsville plant would be closing. On July 30, 2009, Hess notified Ball that it disagreed with Ball and ...


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