September 21, 2011
Nice Formation Fact Pattern from a Texas Case
Here are the facts as reviewed by the Court of Appeals:
In 2008, Southwest and Meridian discussed the possibility of Southwest's leasing fifteen 23,500 gallon railroad cars to Meridian. The primary negotiations were between Southwest Vice President Jason Huette and Meridian Director of Logistics Trey Walker. On August 20, 2008, Walker sent Huette an email stating, "I want to pull the trigger on 15 of those new 23,500's that you and I spoke about." On August 22, 2008, Huette sent Walker a confirmation letter, a generic master lease, and a credit application. Huette stated that the master lease was "only for review" and asked Walter to respond with any comments or questions concerning the master lease. Huette also requested that Walker print the confirmation letter, providing the company name, town name and the delivering railroad, and then sign and return the confirmation letter to Huette. On August 25, 2008, General Partner Mike Clements complied on behalf of Meridian.The letter, including the information provided by Meridian, contained the following terms: (1) the type and number of rail cars Meridian was leasing (fifteen 23,500 gallon tank cars with insulation and exterior coils); (2) the monthly charge ($650 per car); (3) the length of the contract (three years); (4) the location where the cars would be delivered (Chusei); (5) the condition in which the cars must be returned (clean and free from residue); and (6) the responsibility for the cost of the cars being placed into service (Meridian's). The letter also contained the following: "Please acknowledge your acceptance below and return by fax to [.] Upon your acceptance of this confirmation letter a formal rider and master lease will be forwarded to you."On August 29, 2008, Southwest leased fifteen tank cars from CIT group to be delivered to Chusei. In early September, Meridian requested, for its review, a master lease specific to Meridian, in lieu of the generic lease Southwest had previously provided.Thereafter, Walker and Huette exchanged further emails, with both parties listing proposed changes to the master lease and Huette pressing Walker for a delivery date. In an email dated October 2, 2008, Walker wrote, "Assuming that the attorney's changes are acceptable and neither company have [sic] any other changes or issues needing discussion before we have an agreement, I think that we can look towards the beginning of November to begin the process of shipping the railcars from Mt Pleasant to Bayport." On October 6, 2008, Huette communicated, "Trey, we need to get these cars moving ASAP. I am getting pushed from my supplier and I can't hold them off any more. They are about to place them on rent and start charging me storage as well."On October 13, 2008, however, Meridian General Manager Rick Billings wrote Huette:. . . . I regret to inform you that, for reasons completely beyond the control of Meridian, the project involving the use of fifteen SRI railcars to transport tall oil pitch has been shelved, at least temporarily and perhaps permanently. Therefore, we will not be entering into a lease for the railcars in the immediate future.Notwithstanding your characterization of the 22 August 2008 letter, Meridian has never executed a lease agreement for these railcars and repudiates and will vigorously oppose any attempt on your part to charge Meridian for lease rent or storage on railcars we have not leased.
In March 2009, Southwest sued Meridian for breach of contract. Southwest subsequently filed a motion for partial summary judgment on two elements of its breach of contract claim, i.e. (1) that a contract existed and (2) Meridian breached it.
Curious to see how things came out? You'll have to read the case!
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Great teaching case - I've bookmarked it; thanks for posting it.
Posted by: D. C. Toedt | Sep 21, 2011 11:03:02 AM