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Lindau Chemicals Inc v. Matheson Tri-Gas Inc.

United States District Court, D. South Carolina, Columbia Division

November 2, 2018

Lindau Chemicals, Inc., Plaintiff,
v.
Matheson Tri-Gas, Inc., Defendant.

          ORDER AND OPINION

         This matter is before the court pursuant to a Motion for Summary Judgment filed by Plaintiff Lindau Chemicals, Inc. against Defendant Matheson Tri-Gas, Inc. (ECF No. 30.)

         I. JURISDICTION

         The court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332(a)(1) because there is complete diversity of citizenship[1] between the parties and the amount in controversy herein exceeds the sum of Seventy-Five Thousand ($75, 000.00) Dollars, exclusive of interest and costs. (See ECF No. 1 at 3-4, ¶¶ 10-12.)

         II. FACTUAL AND PROCEDURAL BACKGROUND

         Air Liquide U.S., L.P., (“Air Liquide”) (later acquired by Defendant) entered into the Bulk Product Agreement (the “Agreement”) with Plaintiff for the supply of liquid nitrogen from Air Liquide to Plaintiff. (ECF Nos. 30 at 1; 30-1; 31 at 1.) The parties executed the Agreement in January of 2011 with a retroactive effective date of October 25, 2010. (ECF Nos. 30 at 2; 30-1; 31 at 2.) The Agreement is a requirements contract for Defendant to supply Plaintiff with bulk liquid nitrogen which is housed in Defendant's tank on Plaintiff's facility. (ECF Nos. 8 at 1-2; 19 at 1-2.) The Agreement required that it would last for an initial term of 84 months which was set to expire as of October 25, 2017. (ECF Nos. 8 at 1; 30-1; 31 at 2.) The contract would automatically renew for an additional 84 month term unless cancelled by either party by providing 12 months' notice before the expiration of the initial or renewal term. (ECF Nos. 8 at 1-2; 30-1; 31 at 2.)

         Paragraph 5(d) of the Agreement states:

if Customer requests relocation or modification of the Systems, Supplier may, at its option, carry out the relocation or modification. In that case, the term of this Agreement will be extended to a new Initial Term of the same length as the original Initial Term. The new term shall begin on the first day of the month following the completion of the relocation or modification.” (ECF No. 30-1.)

         Paragraph 5(b)(v) of the Agreement states that “Customer shall at its expense . . . reimburse Supplier for costs associated with the installation of any System installed by the Supplier.” (Id.)

         In August 2015, Plaintiff requested that Air Liquide install a new regulator manifold system. (ECF Nos. 30 at 3; 31 at 2.) Paragraph 5(e) of the Agreement states “[c]ustomer shall not tamper with, modify, or repair the Systems.” Plaintiff's Maintenance Manager John Hinkle determined Plaintiff needed a new manifold and coordinated this installation. (ECF Nos. 30-2 at 1; 30-13 at 21.) Hinkle has a bachelor of science degree in chemical engineering and over 18 years of experience in the chemical manufacturing industry. (ECF No. 30-2 at 1.) In his deposition, Hinkle stated that the new manifold was “necessary” and “critical” to Plaintiff's manufacturing processes because it provided a “better safety factor” for Plaintiff's use of the nitrogen tank. (ECF No. 30-13 at 29, 30.) Discussing the work completed on August 21, 2015, Hinkle stated “an element of it was not part of the routine service, the installation of the manifold.” (Id. at 33-34.) He also stated that Defendant's technician Steve Kimbrough, who installed the manifold, told him that Defendant would not charge Plaintiff for the installation. (Id. at 45-46.)

         Steven Doudoukjian, who authorized Hinkle's request to Air Liquide for the new manifold, has been working as Plaintiff's Plant Manager since the 1980s and has a bachelor of science degree in chemical engineering. (ECF No. 30-14 at 15-18.) In his deposition, he stated that the new manifold was necessary so the nitrogen tank could deliver nitrogen at a higher pressure to the plant (from 35 PSI to 120 PSI). (Id. at 29-30.)

         Robert Watkins worked as Air Liquide's Sales Manager for 28 years and had sales management responsibility for the Agreement. (ECF No. 31-3 at 1.) Watkins joined Defendant as Regional Sales Manager in January 2017. (Id.) He asserted in his Declaration that “[p]ursuant to industry custom and practice, the installation of the higher pressure manifold is a system modification.” (Id.)

         Air Liquide completed the work on August 21, 2015. (ECF Nos. 30 at 3; 31 at 2.) Plaintiff did not pay Defendant for this work. (ECF No. 30 at 4.) Plaintiff alleges the manifold would have cost roughly $2, 000.00 to $5, 000.00 to acquire on the open market in 2015 and that the installation took several hours to complete. (ECF No. 30 at 3-4.) Defendant alleges the manifold would have cost roughly $8, 000.00. (ECF No. 31-3.)

         Watkins signed a letter dated August 28, 2015, which is addressed to Hinkle, and stated that the installation was completed on August 21, 2015 and “in accordance with Section 5 d) of the Bulk Product Agreement between our firms, the Term of the Agreement is extended for a new Initial Term. The new Initial Term will commence on September 1, 2015 and shall remain in effect for a period of 84 consecutive months.” (ECF No. 30-12.) Plaintiff alleges it has no record of receiving this letter prior to October 12, 2017, when it was attached to an email from Defendant in which Defendant alleged that the new initial term had been triggered in August 2015. (ECF Nos. 30-11; 30-13 at 54-55; 30-14 at 35.) Watkins alleged in his Declaration that it was standard practice of Air Liquide to send a letter like the August 28, 2015 letter memorializing a new term but did not allege that the letter was ever sent to Plaintiff prior to October 12, 2017. (ECF No. 31-3.)

         In September of 2016, Defendant acquired the rights to the Agreement with Plaintiff from Air Liquide and began providing liquid nitrogen to Plaintiff at its facilities. (ECF Nos. 30 at 4; 30-3; 31 at 3.) On October 20, 2016, Plaintiff sent a letter notifying Defendant of its intention to terminate the Agreement. (ECF Nos. 30 at 4; 30-4; 31 at 3.) Defendant alleges that it was not aware of the purported new initial term at that time. (ECF No. 31 at 3.) In the Spring of 2017 Defendant engaged in negotiations with Plaintiff in an effort to continue the relationship, but the negotiations failed. (ECF Nos. 30 at 4-5; 31 at 3.) Watkins declared that although he previously worked for Air Liquide before moving to Defendant in January of 2017, he did not recall during the price negotiations that the Agreement had purportedly been renewed until 2022. (ECF No. 31-5.) On June 29, 2017, Defendant sent Plaintiff a letter stating that, effective July 11, 2017, Defendant would increase its monthly prices. (ECF Nos. 30 at 5; 30-10; 31 at 11.) Plaintiff purports the increase was 15% for liquid nitrogen and 10% for the addition of various other fees. (ECF No. 30 at 5.) Plaintiff alleges that because the price increase was above 5%, Defendant's actions potentially triggered the “Revision of Prices” clause in ...


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