Broad Street Energy Co. v. Endeavor Ohio, LLC

975 F. Supp. 2d 878, 2013 WL 5487354, 2013 U.S. Dist. LEXIS 140933
CourtDistrict Court, S.D. Ohio
DecidedSeptember 30, 2013
DocketCase No. 2:12-CV-711
StatusPublished
Cited by5 cases

This text of 975 F. Supp. 2d 878 (Broad Street Energy Co. v. Endeavor Ohio, LLC) is published on Counsel Stack Legal Research, covering District Court, S.D. Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Broad Street Energy Co. v. Endeavor Ohio, LLC, 975 F. Supp. 2d 878, 2013 WL 5487354, 2013 U.S. Dist. LEXIS 140933 (S.D. Ohio 2013).

Opinion

OPINION & ORDER

ALGENON L. MARBLEY, District Judge.

This matter is before the Court on the Motion of Plaintiff Broad Street Energy Company (“Broad Street” or “Plaintiff’) for Summary Judgment against Defendant Endeavor Ohio (“Endeavor” or “Defendant”). (Doc. 15.) For the foregoing reasons-, Plaintiffs Motion is DENIED.

I. BACKGROUND

Broad Street is an Ohio oil and gas operator that holds title to various mineral rights, oil and gas leases, easements, facilities, and other interests in lands and assets. In April 2012, Endeavor, the “Buyer,” entered into contract with Broad Street, the “Seller,” to purchase large portions of its land, oil, and gas assets for $35 million dollars (the “Purchase Price”). The parties executed this purchase and sale agreement (“PSA” or the “Agreement”) on April 9, 2012. Closing was scheduled to occur 120 days after the execution of the PSA, or on August 7, 2012.

1. Relevant Contract Provisions

Article IV of the PSA governs “Title, Environmental, and Easement Matters.” Section 4.2 of the Agreement addresses “Title Defects.” Pursuant to Section 4.2(a), “[i]n order to assert a Title Defect, Buyer must deliver to Seller a written ‘Title Defect Notice,’ ” conforming to certain requirements, “as soon as possible but not later than 30 days prior to the Closing Date in connection with each Title Defect (the ‘Title Claim Date’).” Id. at § 4.2(a).1 Pursuant to Section 4.2(b), following issuance of a Title Defect Notice, Broad Street was entitled to cure any title defects prior to Closing. Section 4.2(b) further provides for an adjustment to the Purchase Price for certain properly-noticed, unwaived, uncured title defects. Id. at § 4.2(b).2 Finally, Section 4.2(c) provides that, “[n]ot[881]*881withstanding anything to the contrary in this Agreement, Buyer shall be deemed to have waived any Title Defect as to which Buyer has not delivered to Seller a title Defect Notice on or before the Title Claim Date.” Id. at § 4.2(c).3 Based on the date of execution of the PSA, the Title Claim Date fell on Sunday, July 8, 2012. The terms “Title Defect” and “Title Defect Value” are defined in Section 4.1 of the Agreement. See PSA § 4.1(c), (d).

Article X of the PSA governs termination of the Agreement. Section 10.1 provides for certain “Events of Termination.” In particular, Section 10.1 states:

Events of Termination. At any time commencing on the date hereof and ending upon the occurrence of the Closing, and notwithstanding anything contained in this Agreement to the contrary, this agreement may be terminated in writing as follows:
(b) by Buyer or Seller, notwithstanding anything contained in Article IV to the contrary, in the event that the aggregate amount of all Title Defect Values equals or exceeds 30% of the unadjusted Purchase Price.
(e) by Seller ... if Seller (i) has met all of Buyer’s conditions to the Closing set forth in Section 9.2, (ii) is ready, willing and able to perform as contemplated by this Agreement on the Closing Date, and (iii) the Closing does not occur on the Closing Date because Buyer does not, or cannot as contemplated by this Agreement, perform on the Closing Date[.]

PSA § 10.1(b), (e).

Pursuant to the PSA, contemporaneously with the execution of the Agreement, Broad Street deposited $3.5 million into an escrow account (the “Escrow Amount”). See PSA § 2.2. The Escrow Amount is “non-refundable, except as provided for in Section 10.2” of the Agreement, which governs “Automatic Terminations” due to no fault of either party. Id.; § 10.2.4 Section [882]*88210.3, however, provides that the Escrow Amount is be returned in full to the Buyer in the event that “the Agreement is terminated by Buyer pursuant to any of Sections 10.1(a)-(d),” among other circumstances. In addition, Section 10.3 specifies that the Escrow Amount is to be paid in full to the Seller as liquidated damages, and is the exclusive remedy against the Buyer, in the event the Seller terminates the Agreement pursuant to Section 10.1(e).5

Article XIII of the Agreement contains various miscellaneous provisions. Section 13.15, entitled “Specific Performance,” provides:

Seller agrees that irreparable damage would accrue to Buyer in the event that any of the provisions of this Agreement are not performed by Seller in accordance with the terms hereof and that Buyer shall be entitled to specific performance of the terms hereof, in addition to, and notwithstanding, any other remedy at law or equity available to Buyer.

PSA, § 13.15. In addition, at Section 13.19, the parties included a “Time is of the Essence” provision, which acknowledges that one party’s failure to perform timely its obligations under the contract may cause the other party substantial losses.6

%. Purported Terminations and Current Dispute

Plaintiffs allege that, as early as March 2012, Broad Street began conducting a title review on the assets that were the subject of the PSA. (Arthur Decl., Doc. 15-1, at ¶ 12.) On Sunday, July 8, 2012, Endeavor contacted Broad Street by telephone, and informed them that Broad Street would provide Endeavor with written notice of certain Title Defects the following day.

On Monday, July 9, 2012, Endeavor delivered by facsimile and hand delivery a letter under the subject line “Title Defect Notice and Termination of Purchase and Sale Agreement.” (Arthur Ded., Doc. 15-1, ¶ 10; Termination Letter, Doc. 15-6, 1.) The letter asserted that Broad Street had identified Title Defects on a total of 6,522.00 Net Mineral Acres comprising an aggregate Title Defect value of $19,566,000, or 55.9% of the Purchase Price. (Termination Letter, Doc. 15-6 at 1.) Broad Street then invoked termination of the Agreement pursuant to Section [883]*88310.1(b) of the PSA, and requested the return of the Escrow Amount pursuant to Section 10.3. (Id.) The letter was accompanied by documentation identifying 66 allegedly defective titles. (Arthur Decl., Doc. 15-1, at ¶ 11.) At the time Broad Street accepted delivery of these materials, it signed a Receipt of Title Defect Notice acknowledging “that it received the box of materials labeled Title Defect Notices within the prescribed time allowed pursuant to Section 4.2(a) of the PSA.” (Id. at ¶ 10-11.)

[882]*882Time is of the Essence. The Parties recognize that in the performance of their respective obligations each Party is relying on timely performance by the other, and will schedule operations and incur obligations to third parties in reliance on timely performance by the other Party to this Agreement, and may sustain substantial loses by reason of any failure of timely performance.

[883]*883Broad Street contends that Endeavor had no right to terminate the PSA on these grounds because it did not issue proper Title Defect Notices by the Title Claim Date, and therefore waived any such defects, pursuant to Section 4.2(c). Moreover, Broad Street asserts that it was ready, willing and able to close on the transaction by the Closing Date.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
975 F. Supp. 2d 878, 2013 WL 5487354, 2013 U.S. Dist. LEXIS 140933, Counsel Stack Legal Research, https://law.counselstack.com/opinion/broad-street-energy-co-v-endeavor-ohio-llc-ohsd-2013.