Buckeye Partners, L.P. v. GT USA Wilmington, LLC

• Court: Court of Chancery of Delaware
• Decided: May 20, 2020
• Docket: C.A. No. 2020-0255-JTL
• Status: Published

Opinion

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

BUCKEYE PARTNERS, L.P., and ) BUCKEYE PT TERMINALS, LP, ) ) Plaintiffs, ) ) v. ) C.A. No. 2020-0255-JTL ) GT USA WILMINGTON, LLC, ) ) Defendant. )

MEMORANDUM OPINION

Date Submitted: May 12, 2020 Date Decided: May 20, 2020

Jody C. Barillare, Amy M. Dudash, MORGAN, LEWIS & BOCKIUS LLP, Wilmington, Delaware; Michael D. Blanchard, MORGAN, LEWIS & BOCKIUS, LLP, Hartford, Connecticut; Julie S. Goldemberg, MORGAN, LEWIS & BOCKIUS LLP, Philadelphia, Pennsylvania; Attorneys for Plaintiffs.

Jonathan M. Stemerman, ELLIOTT GREENLEAF, P.C., Wilmington, Delaware; Thomas J. Elliott, Frederick P. Santarelli, Jack P. Elliott, Colin J. O’Boyle, ELLIOTT GREENLEAF, P.C., Blue Bell, Pennsylvania; Attorneys for Defendant.

LASTER, V.C. From 2008 until the present, Magellan Terminal Holdings, L.P. (“Magellan”) has

operated a terminalling business at the Port of Wilmington involving the transportation and

storage of liquid petroleum. In March 2020, plaintiff Buckeye Partners, L.P. (“Buckeye

Parent”), acquired Magellan and changed its name to Buckeye PT Terminals LP

(“Buckeye”).

After the acquisition, Buckeye continued to operate the terminalling business. In

simplified terms, Buckeye rents a dock from the Port. A manifold under the dock connects

to pipes that run under the Port. The pipes lead to fuel storage tanks located on a property

adjacent to the Port that Buckeye owns (the “Tanks”). When a ship brings liquid petroleum

to the dock, a Buckeye employee connects a hose to the ship, and the liquid petroleum runs

through the hose, into the manifold, through the pipes, and into the Tanks. Buckeye stores

the liquid petroleum in the Tanks until its customers pick it up using tanker trucks.

The principal route in and out of the Port is a private lane called Sico Road. The

only means of accessing the Tanks is via Sico Road. For the past twelve years, Buckeye

and its customers have used Sico Road to access the Tanks.

In 2018, defendant GT USA Wilmington, LLC (“GT”) took over the Port. GT

imposed a “Terminal Usage Fee” on stevedores based on the volume of cargo that they

load or unload. Before it was acquired by Buckeye, Magellan maintained that it was not

obligated to pay the Terminal Usage Fee, both because it was not a stevedore and because

it was already paying a volume-based fee under the lease for the dock. After the acquisition,

Buckeye continued to maintain that it was not obligated to pay the Terminal Usage Fee. The nature of the resulting dispute was simple: GT thought Buckeye owed it money.

Buckeye said it did not. In a civil society, courts exist to resolve this type of dispute.

Instead of filing a lawsuit, GT took matters into its own hands. GT told Buckeye

that it would bar its customers from using Sico Road to access the Tanks unless Buckeye

capitulated, paid the past-due amounts, and agreed to pay the Terminal Usage Fee going

forward. GT then followed through on its threat and barred Buckeye’s customers from

using Sico Road to access the Tanks.

Buckeye responded by filing this action. Buckeye maintains that it does not owe the

Terminal Usage Fee and that even if it did, GT was not entitled to blockade the Tanks.

Buckeye seeks a preliminary injunction barring GT from preventing Buckeye and its

customers from accessing the Tanks pending the outcome of this litigation.

This decision grants the requested preliminary injunction. Buckeye has shown a

reasonable probability of success on the merits of its claims. Buckeye also has established

a threat of irreparable harm and demonstrated that the balancing of the equities favors the

issuance of an injunction.

At bottom, a limited injunction preserving the status quo is necessary so that the

parties can litigate their dispute over the Terminal Usage Fee and obtain a judicial ruling

interpreting the relevant documents. Absent an injunction, GT will resume its blockade and

force Buckeye to capitulate. Due respect for the rule of law requires that a court decide the

underlying dispute.

2 I. FACTUAL BACKGROUND

The facts are drawn from the record developed in connection with the plaintiffs’

application for a preliminary injunction. What follows are the facts as they appear likely to

be found after trial, based on the current record.

A. The Lease

Since 2008, Magellan has leased “[a]pproximately 1,160 linear feet of dock space”

from Diamond State Port Corporation, the owner of the Port. See Dkt. 81 at ’174 (the

“Lease” or “Lease Agr.”). The “Reference Page” for the Lease summarizes its purpose as

follows: “For the purpose of operating certain docking facilities for the transportation and

storage of oil, petroleum products, hydrocarbons and their derivatives and for the

installation and operation of a mooring dolphin with catwalks and utilities.” Id. at ’174.

Similar language appeared in Section 7(b) of the Lease. See id. § 7(b).

Section 2 of the Lease states that in addition to the approximately 1,160 linear feet

of dock space, the Landlord (Diamond State) grants the Tenant (Magellan)

full rights of access for ingress and egress to the dock, walkway, and if available, reasonable parking space at the dock, and ingress and egress over existing roads owned or controlled by Landlord for access to the dock (collectively the “Premises”) and as depicted on the drawing marked as Exhibit “A” attached hereto . . . .

Id. § 2 (emphasis in original). Diamond State also committed to grant and convey to the

Tenant “an easement with rights and privileges for all existing and planned dock lines and

the existing Conectiv pipeline” and a further easement “to facilitate Tenant’s dock lines

and the Conectiv pipeline . . . .” Id. And the Landlord agreed to grant the Tenant any other

3 easements involving its property that were “necessary or desirable for the performance of

Tenant’s business . . . .” Id. § 9.

Consistent with the commitment in the Lease, Diamond State granted Magellan a

“pipeline easement and a temporary construction easement over and across a portion of the

[Port] in connection with the construction of the new Pipelines . . . .” Dkt. 63 Ex. 20 at ’759

(Recitals); see Lease Agr. §§ 2, 9. The easement allowed Magellan to access the Port “to

survey, construct, install, operate, protect, use, inspect, maintain, replace, remove and

repair the Pipelines.” Dkt. 63 Ex. 20 § 1(a).

Magellan already owned the parcel of land adjacent to the Port where the Tanks are

located. The Lease quite obviously recognized the connection between the dock and the

Tanks. The Lease acknowledged that Magellan would be storing liquid petroleum, and that

only happened at the Tanks.

The parties also clearly contemplated that Magellan would accept liquid petroleum

at the dock, run it through the manifold under dock and into the pipes under the Port, then

store it in the Tanks. To that end, Magellan agreed to pay a fee to Diamond State based on

the amount of liquid petroleum that crossed the dock. Section 5(c) of the Lease stated,

In addition to Rent, Tenant shall pay to Landlord a fee based on the total number of barrels of oil, petroleum products, hydrocarbons and their derivatives crossing the dock entering into the Premises plus the total number of barrels of oil crossing the dock exiting from the Premises annually throughout the term of this Lease.

Lease Agr. § 5(c) (the “Volume-Based Fee”).

For the past twelve years, Magellan (now Buckeye) has used these rights to provide

the “terminalling services” described in the Lease. Magellan (now Buckeye) receives liquid

4 petroleum at the dock by connecting a hose to a barge or other ocean-going ship. The liquid

petroleum flows through the hose, into a manifold under the dock, through the pipes under

the Port, and ultimately into the Tanks. The liquid petroleum then is stored in the Tanks

until customers take delivery using tanker trucks.

For the past twelve years, Sico Road has provided the only means of accessing the

Tanks. During this period, Magellan and its customers have used Sico Road to access the

Tanks.

B. GT Takes Over The Port.

In October 2018, GT took over the management of the Port under a concession

agreement with Diamond State. Compl. Ex. D (the “Concession Agreement” or “Con.

Agr.”). GT agreed to “materially invest in redeveloping the existing port” and to pay “a

Concession Fee” to Diamond State. Id. at 1 (Recitals). The Concession Fee is calculated

based on the volume of various types of cargo that travel through the Port. See id. § 4.3.

The Concession Agreement requires GT to “faithfully obey and comply with all existing

leases and agreements . . . .” Id. § 2.3(b).

On December 1, 2018, GT published a “Terminal Tariff,” which included a schedule

of rates that GT would levy against “persons who use or benefit from use of the terminal.”

Compl. Ex. E at 8. Under federal maritime regulations, the Terminal Tariff operates as “an

implied contract between the marine terminal operator and the party receiving the services

rendered by the marine terminal operator . . . .” 46 C.F.R. § 525.2(a)(2). But “[i]f the marine

terminal operator has an actual contract with a party covering the services rendered by the

5 marine terminal operator to that party,” then the “actual contract” controls. Id.

§ 525.2(a)(3).

The Terminal Tariff established a “Terminal Usage Fee,” defined as “a charge,

separate from Wharfage, against the Stevedore for fees related to the public private

partnership agreement” and calculated based on “all cargo discharged or loaded at the

Port.” Compl. Ex. E at 7, 44. The Terminal Tariff defined “Stevedoring” as “the physical

handling of Container(s) or Cargo between the Vessel and the [Container Yard].” Id. at 7;

see also id. at 5 (defining “Cargo” to include “all types of bulk . . . or any other forms of

Cargo whatsoever, including but not limited to any . . . liquid”).1

C. The Dispute Between Magellan And GT

Magellan did not pay the Terminal Usage Fee. GT maintained that Magellan owed

the Terminal Usage Fee and contacted Magellan to about the unpaid amounts. In August

2019, GT sent a “Final Notice” instructing Magellan to pay $172,401.96. See Compl. Ex. F.

GT told Magellan that “if payment in full is not made by August 31, 2019, you will be

denied access to the Port of Wilmington.” Id.

Magellan responded that it was not obligated to pay the Terminal Usage Fee.

Magellan noted that “the Terminal Usage Fee is assessed against a stevedore,” and

“Magellan does not employ third-party stevedores . . . .” Compl. Ex. G. Magellan also

1 On January 1, 2020, GT published a revised tariff. Compl. Ex. H. It defined the “Terminal Usage Fee” as “[a] separate charge assessed against the Stevedore.” Id. at 6. It defined “Stevedoring” as “[t]he act of unloading or loading of ship’s cargo from the ship.” Id. It defined “Stevedore” to mean “[t]he entity hired to load or unload the vessel.” Id.

6 argued that the Terminal Usage Fee was “redundant” because it duplicated the Volume-

Based Fee in the Lease. Id. Magellan contended that that the Terminal Usage Fee was “an

attempt to renegotiate the Lease and to twice charge Magellan for its receipt and delivery

of barrels of product to and from the Premises.” Id.

In September 2019, Magellan and GT began negotiating a settlement. According to

GT, Magellan agreed to pay additional amounts, although less than the total amount owed,

and to blend the Terminal Usage Fee into a higher rental rate under the Lease. The

negotiations continued into early January 2020. See Iannarelli Decl. ¶¶ 14–15 & Exs. 4, 5.

D. Buckeye Parent Acquires Magellan.

In mid-January 2020, Buckeye Parent agreed to acquire Magellan. As a result,

Buckeye Parent would gain control of the Tanks, Magellan’s rights under the Lease, and

the related easements.

On January 23, 2020, Magellan notified GT that Buckeye Parent would acquire

Magellan. In early February, Buckeye Parent and GT discussed the dispute over the

Terminal Usage Fee. Buckeye Parent said that it would negotiate to resolve the dispute,

but not until after the acquisition closed because of anti-gun-jumping restrictions under the

antitrust laws. Buckeye Parent told GT that the deal would close sometime between early

March and early June and that they could discuss the dispute then.

GT rejected that timeline as unacceptable. GT insisted on full payment of all

outstanding invoices, plus interest, within the next ten calendar days. Buckeye Parent stood

by its position.

7 On March 13, 2020, GT contacted Magellan about a number of issues, including the

Terminal Usage Fee. GT asserted that the balance due now exceeded $1 million, up from

the $172,401.96 that GT had identified seven months earlier. GT told Magellan that as of

March 31, 2020, GT would require Magellan to maintain a deposit of $260,000 with the

Port. GT rescinded its earlier agreement not to bill the Terminal Usage Fee while GT and

Magellan had been negotiating a resolution.

E. GT Blockades The Tanks.

On March 20, 2020, Buckeye Parent completed its acquisition of Magellan and

changed its name to Buckeye. On March 23, Buckeye notified GT that the acquisition had

closed. Eight days later, on April 1, GT told Buckeye that it would block Buckeye’s

customers from using Sico Road to access the Tanks unless Buckeye paid the past-due

Terminal Usage Fee by April 6.

Also on April 1, 2020, GT contacted Buckeye’s largest customer, Wawa Wholesale

Fuels, LLC, to inform them that unless Buckeye capitulated, GT would prevent Wawa from

using Sico Road to access the Tanks beginning on April 6. GT even contacted the tanker

truck companies that Wawa frequently used to let them know that they would be denied

access to Sico Road and the Tanks.

Wawa immediately contacted Buckeye. Wawa told Buckeye that the situation

“raised a great deal of angst” and “caused [Wawa] great concern.” Compl. Ex. Q.

On April 2, 2020, Buckeye told GT that it remained committed to reaching a

commercially reasonable resolution and asked GT to revoke its demand and retract its

8 threats. On April 3, GT asked for a good faith economic proposal and reiterated that it

would deny access to the Port if the dispute was not resolved.

F. This Litigation

On April 6, 2020, GT blocked Wawa’s tanker trucks from entering Sico Road and

accessing the Tanks. Because of the blockade, Wawa’s tanker trucks could not retrieve

Wawa’s fuel.

That same day, Buckeye filed this litigation. Buckeye immediately moved for a

temporary restraining order to restore the status quo. Later that day, this court held a

hearing and issued the temporary restraining order. The court scheduled a prompt hearing

to determine whether the temporary restraining order should be replaced with a preliminary

injunction.

II. LEGAL ANALYSIS

At bottom, the parties disagree over whether Buckeye has to pay the Terminal Usage

Fee. That is a dispute over money damages, and a lawsuit should have been filed in an

appropriate court to resolve that issue. Instead, GT exercised self-help by blockading the

Buckeye’s application for a preliminary injunction seeks to maintain the pre-

blockade status quo so that the parties can litigate their dispute over the Terminal Usage

Fee. To obtain a preliminary injunction, a plaintiff must demonstrate (i) a reasonable

probability of success on the merits, (ii) a threat of irreparable harm if an injunction is not

granted, and (iii) that the balance of the equities favors the issuance of an injunction.

Revlon, Inc. v. MacAndrews & Forbes Hldgs., Co., 506 A.2d 173, 179 (Del. 1986). “The

9 elements are not necessarily weighted equally. A strong showing on one element may

overcome a weak showing on another element. However, a failure of proof on one of the

elements will defeat the application.” Cantor Fitzgerald, L.P. v. Cantor, 724 A.2d 571, 579

(Del. Ch. 1998).

A. The Probability Of Success On The Merits

The first element of the test for a preliminary injunction requires that the plaintiff

establish a reasonable probability of success on the merits. See Gimbel v. Signal Cos., Inc.,

316 A.2d 599, 602 (Del. Ch. 1974), aff’d, 316 A.2d 619 (Del. 1974) (per curiam). “A party

showing a reasonably probability of success must demonstrate that it will prove that it is

more likely than not entitled to relief.” C & J Energy Servs., Inc. v. City of Miami Gen.

Emps.’, 107 A.3d 1049, 1067 (Del. 2014) (internal quotation marks omitted). To prevail at

trial, a plaintiff need only establish its claims by a preponderance of the evidence, which

“means proof that something is more likely than not. It means that certain evidence, when

compared to the evidence opposed to it, has the more convincing force and makes you

believe that something is more likely true than not.” Agilent Techs., Inc. v. Kirkland, 2010

WL 610725, at *13 (Del. Ch. Feb. 18, 2010) (internal quotation marks omitted). Linking

the standards together demonstrates that a plaintiff need not show at the preliminary

injunction stage that it will prevail at trial. The resulting standard for a preliminary

injunction “falls well short of that which would be required to secure final relief following

trial, since it explicitly requires only that the record establish a reasonable probability that

this greater showing will ultimately be made.” Cantor Fitzgerald, 724 A.2d at 579 (internal

quotation marks omitted). That said, the “burden is not a light one,” and a preliminary

10 injunction “will never be granted unless earned.” Wayne Cty. Emps.’ Ret. Sys. v. Corti, 954

A.2d 319, 329 (Del. Ch. 2008).

Buckeye has established a reasonable probability of success on the merits of its

claims that by blocking access to Sico Road, GT (i) breached the express terms of the

Lease, and (ii) breached the implicit terms of the Lease that are supplied by the implied

covenant of good faith and fair dealing. This does not mean that Buckeye ultimately will

prevail, only that Buckeye has made a showing sufficient to warrant preserving the status

quo so that Buckeye can have a fair opportunity to present its claims and have them

adjudicated. Because these claims are sufficient to support the issuance of injunctive relief,

this decision does not reach Buckeye’s other claims.

1. Breach Of The Lease

Buckeye has established a reasonable probability of success on a claim that GT

breached its obligations under the Lease. “Under Delaware law, the elements of a breach

of contract claim are: 1) a contractual obligation; 2) a breach of that obligation by the

defendant; and 3) a resulting damage to the plaintiff.” H-M Wexford LLC v. Encorp, Inc.,

832 A.2d 129, 140 (Del. Ch. 2003); see Connelly v. State Farm Mut. Auto. Ins. Co., 135

A.3d 1271, 1279 n.28 (Del. 2016). “A lease is a contract by which one person divests

himself of, and another takes the possession of [real property] for a term, whether long or

short.” Lewes Sand Co. v. Graves, 8 A.2d 21, 24 (Del. 1939) (internal quotation marks

omitted). “The customary rules of construction of written contracts and instruments apply

in the construction of [a] lease . . . .” Grotto Pizza, Inc. v. Ocean Bay Mart, Inc., 1998 WL

11 388402, at *6 n.32 (Del. Ch. June 30, 1998) (quoting 49 Am. Jur. 2d Landlord & Tenant

§ 509 (Lawyers Coop. 1995)).

When interpreting a contract, “the role of a court is to effectuate the parties’ intent.”

Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 739 (Del. 2006). Absent

ambiguity, the court “will give priority to the parties’ intentions as reflected in the four

corners of the agreement, construing the agreement as a whole and giving effect to all its

provisions.” In re Viking Pump, Inc., 148 A.3d 633, 648 (Del. 2016) (internal quotation

marks omitted). “It is well established that a court interpreting any contractual provision .

. . must give effect to all terms of the instrument, must read the instrument as a whole, and,

if possible, reconcile all the provisions of the instrument.” Elliott Assocs., L.P. v. Avatex

Corp., 715 A.2d 843, 854 (Del. 1998).

“Contract language is not ambiguous merely because the parties dispute what it

means. To be ambiguous, a disputed contract term must be fairly or reasonably susceptible

to more than one meaning.” Alta Berkeley VI C.V. v. Omneon, Inc., 41 A.3d 381, 385 (Del.

2012) (footnote omitted). If the language of an agreement is ambiguous, then the court

“may consider extrinsic evidence to resolve the ambiguity.” Salamone v. Gorman, 106

A.3d 354, 374 (Del. 2014). Permissible sources of extrinsic evidence include “overt

statements and acts of the parties, the business context, prior dealings between the parties,

[and] business custom and usage in the industry.” Id. (internal quotation marks omitted).

A court may consider “evidence of prior agreements and communications of the parties as

well as trade usage or course of dealing.” Eagle Indus., Inc. v. DeVilbiss Health Care, Inc.,

702 A.2d 1228, 1233 (Del. 1997). “When the terms of an agreement are ambiguous, ‘any

12 course of performance accepted or acquiesced in without objection is given great weight

in the interpretation of the agreement.’” Sun-Times Media Gp. v. Black, 954 A.2d 380, 398

(Del. Ch. 2008) (quoting Restatement (Second) of Contracts § 202).

The parties agree that the Lease is a valid contract, but they dispute whether it

entitles Buckeye to use Sico Road. Under the Lease, the Tenant leased from the Landlord

approximately 1,160 linear feet of docking space together with full rights of access for ingress and egress to the dock, walkway, and if available, reasonable parking space at the dock, and ingress and egress over existing roads owned or controlled by Landlord for access to the dock (collectively the “Premises”) and as depicted on the drawing marked as Exhibit “A” attached hereto . . . .

Lease Agr. § 2 (first emphasis added). Exhibit A to the Lease depicts the docking space,

but it is not clear whether Sico Road is a route that can be used to access the dock.

Buckeye and GT offer different interpretations of this provision. Buckeye argues

that it has a right to use Sico Road because it is an “existing road owned or controlled by

[the] Landlord for access to the dock.” GT responds that Buckeye does not have any

“legally recognizable right to travel upon [Sico Road] absent GT’s permission.” Dkt. 77 at

51. The parties also dispute whether the right of access to Sico Road authorizes Buckeye

and its customers to use Sico Road to access the Tanks, as opposed to the dock.

At this stage of the case, both sides have offered a reasonable reading of the Lease.

It is not possible at this stage to determine as a matter of law that either Buckeye or GT is

correct.

For present purposes, the scope of Buckeye’s right of access under the Lease is

ambiguous. “In light of the general principle which gives the tenant free use of demised

13 premises, any restrictions are construed narrowly against the landlord and ambiguities are

resolved in favor of the lessee.” Grotto Pizza, 1998 WL 388402, at *7 (quoting 49 Am.

Jur. 2d § 510). This interpretative canon favors Buckeye.

The extrinsic evidence at this stage of the case also favors Buckeye. The parties’

past practice, before any dispute arose, provides strong evidence of how the parties

themselves understood the provision. For at least twelve years, Buckeye and its customers

have used Sico Road to access the Tanks. A barrier gate separates Sico Road from the

adjoining public roads, so GT (or Diamond State) had to take action to allow Buckeye (or

Magellan) and its customers to travel through the barrier gate to reach Sico Road and the

Tanks. The fact that Buckeye and its customers have accessed the Tanks via Sico Road for

twelve years is strong evidence that the Lease includes a right to use Sico Road to access

the Tanks.

GT observes that “[i]n giving sensible life to a real-world contract, courts must read

the specific provisions of the contract in light of the entire contract.” Dkt. 77 at 39–40

(quoting Heartland Payments Sys., LLC v. inTEAM Assocs., LLC, 171 A.3d 544, 557 (Del.

2017)). Reading the Lease as a whole indicates that the parties contemplated that the Tenant

would have the right to access the Tanks via Sico Road. Under the Lease, the Tenant leases

the dock “for the transportation and storage” of liquid petroleum. Lease Agr. at ’174. The

storage function takes place at the Tanks. In the Lease, the Landlord committed to grant

the Tenant an easement for the pipes that run under the Port and connect the dock to the

Tanks. Customers retrieve the liquid petroleum from the Tanks using tanker trucks.

Schaller Decl. ¶ 6. The tanker trucks can only get to the Tanks using Sico Road. Id. ¶ 11.

14 The business arrangement relies on the seamless transportation of liquid petroleum from

the dock to the Tanks and from the Tanks to customers. If customers cannot use Sico Road,

then the commercial arrangement unravels, and it becomes impossible to give sensible life

to the real-world contract reflected by the Lease.

It is undisputed that on April 6, 2020, GT blocked Buckeye’s customers from

accessing Sico Road and reaching the Tanks. If Buckeye had a right under the Lease to use

Sico Road, then GT breached that right.

2. Breach Of The Implied Covenant

Buckeye has established a reasonable probability of success on the merits of a claim

that GT breached the implied covenant of good faith and fair dealing that inheres in the

Lease by blocking access to Sico Road.

The implied covenant is inherent in all contracts and is used to infer contract terms to handle developments or contractual gaps that the asserting party pleads neither party anticipated. It applies when the party asserting the implied covenant proves that the other party has acted arbitrarily or unreasonably, thereby frustrating the fruits of the bargain that the asserting party reasonably expected. The reasonable expectations of the contracting parties are assessed at the time of contracting.

Dieckman v. Regency GP, 155 A.3d 358, 367 (Del. 2017) (footnotes and internal quotation

marks omitted).

To prevail on a claim for breach of the implied covenant, a plaintiff must prove “a

specific implied contractual obligation, a breach of that obligation by the defendant, and

resulting damage to the plaintiff.” Fitzgerald v. Cantor, 1998 WL 842316, at *1 (Del. Ch.

Nov. 10, 1998). To establish the implied contractual obligation, the plaintiffs must show

“from what was expressly agreed upon that the parties who negotiated the express terms of

15 the contract would have agreed to proscribe the act later complained of . . . had they thought

to negotiate with respect to that matter.” Katz v. Oak Indus. Inc., 508 A.2d 873, 880 (Del.

Ch. 1986). “The implied covenant seeks to enforce the parties’ contractual bargain by

implying only those terms that the parties would have agreed to during their original

negotiations if they had thought to address them.” Gerber v. Enter. Prods. Hldgs., LLC, 67

A.3d 400, 418 (Del. 2013) (internal quotation marks omitted), overruled on other grounds

by Winshall v. Viacom Int’l, Inc., 76 A.3d 808, 814 n.13 (Del. 2013). “The implied

covenant is well-suited to imply contractual terms that are so obvious . . . that the drafter

would not have needed to include the conditions as express terms in the agreement.”

Dieckman, 155 A.3d at 361.

Based on the record at this stage, it is reasonably probable that if the parties had

thought to address the issue when negotiating the Lease, they would have agreed that the

Landlord could not block the Tenant or its customers from using Sico Road to access the

Tanks. The Lease and related easements evidence the parties’ understanding that the

Tenant would use the dock as part of a terminalling business that was integrated with the

Tanks. It would have been obvious to the parties that the Tenant’s customers needed to

access the Tanks via Sico Road and that without that access, the commercial arrangement

documented in the Lease and associated easements made no sense. The need for access to

the Tanks via Sico Road is so obvious that it would not have occurred to the parties to

address it. Not surprisingly, the Tenant in fact has used Sico Road to access the Tanks for

at least twelve years.

16 It also is reasonably probable that if the parties had thought to address the issue

when negotiating the Lease, they would have agreed that the Landlord was required to act

in good faith when restricting access to the leased premises and the Tanks. It is reasonably

probable that GT did not act in good faith when it demanded that Buckeye Parent address

the dispute over the Terminal Usage Fee before it completed its acquisition of Magellan,

when Buckeye Parent could not discuss the issue because of antitrust regulations. GT then

informed Buckeye one week after the acquisition had closed, and in the midst of the

COVID-19 pandemic, that GT would cut off access to Sico Road and the Tanks if Buckeye

did not capitulate within five business days.

It is undisputed that on April 6, 2020, GT blocked Buckeye’s customers from

accessing Sico Road and reaching the Tanks. Buckeye has established a reasonable

probability of success on its claim that GT breached the implied covenant by blockading

the Private Road.

3. The Additional Dimension Of Self Help

The likelihood of Buckeye prevailing on its claims is stronger because GT resorted

to self-help. Under Delaware law, “landlords, including commercial landlords, cannot use

the remedy of self-help.” Affordable Autos, Inc. v. Dietert, 2016 WL 1169244, at *5 (Del.

Super. Mar. 24, 2016); Carriage Realty P’ship v. All-Tech Auto., Inc., 2001 WL 1526301,

at *8 (Del. Ch. Nov. 27, 2001); see also 25 Del. C. §§ 5101(b), 5313. Self-help is any

“attempt to redress a perceived wrong by one’s own action rather than through the normal

legal process.” Self-help, BLACK’S LAW DICTIONARY (11th ed. 2019). The purpose of the

prohibition on the use of self-help is to force landlords to invoke proper legal remedies

17 through a court of law, rather than engaging unilaterally in conduct that could lead to

breaches of the peace. See Malcolm v. Little, 295 A.2d 711, 713–14 (Del. 1972).

Landlords wrongfully use self-help if they physically retake possession of the leased

premises or exclude the tenant, such as by changing the locks. See, e.g., Bayview Loan

Servicing LLC v. Edwards, 2017 WL 1019729, at *1 (Del. Super. Mar. 13, 2017)

(ORDER); Affordable Autos, 2016 WL 1169244, at *5. GT did not literally do that, but its

actions were closely analogous. GT blocked Buckeye’s customers from accessing Sico

Road. By doing so, GT prevented Buckeye’s customers from reaching the Tanks. As GT

knows, Buckeye’s business at the Port depends on a seamless relationship between the

dock and the Tanks. Under the Lease, Buckeye has the right to use the dock for the purpose

of “the transportation and storage” of liquid petroleum. As GT knows, the “storage” takes

place at the Tanks.

By blocking Buckeye’s customers from accessing Sico Road and the Tanks, GT

deprived Buckeye of the right to use the docks for the purposes that had been agreed upon

in the Lease. GT deprived Buckeye of its rights indirectly, rather than directly, but the

result remained the same: GT used self-help in an effort to force Buckeye to concede on

an issue that fairly was subject to dispute. Buckeye has established a reasonable likelihood

of being able to show at trial that GT’s resort to self-help was wrongful.

4. The Dispute Over The Terminal Usage Fee

Buckeye separately argues that GT acted wrongfully by imposing the blockade

based on the Terminal Usage Fee because Buckeye is not obligated to pay the Terminal

Usage Fee. This is the gravamen of the underlying dispute, and the outcome turns on the

18 answers to three questions. First, is the Volume-Based Fee in the Lease an “actual contract”

that supersedes the Terminal Usage Fee in the Terminal Tariff? If not, is Buckeye a

“Stevedore” or did it employ “Stevedores” such that Buckeye is subject to the Terminal

Usage Fee? And if so, should GT be barred from collecting the Terminal Usage Fee

because it has collected the fee selectively in violation of federal law?

These are difficult issues, and both parties have advanced credible arguments in

their favor. On the issue of whether Buckeye engages in stevedoring within the customary

industry understanding of that term, both parties have submitted opinions from experts,

and they reach diametrically opposite conclusions.

At this stage of the case, it is not necessary to predict how the court may rule after

trial on the competing arguments. The purpose of this ruling is to preserve the status quo

so that these issues can be addressed in due course, rather than by GT forcing Buckeye to

capitulate through the exercise of self-help.

B. Irreparable Harm

The second requirement for a preliminary injunction is a showing of irreparable

harm if the injunction is not granted. Revlon, 506 A.2d at 179. Harm is irreparable unless

“[a]lternative legal redress [is] clearly available and [is] as practical and efficient to the

ends of justice and its prompt administration as the remedy in equity.” T. Rowe Price

Recovery Fund, L.P. v. Rubin, 770 A.2d 536, 557 (Del. Ch. 2000) (alteration in original)

(footnotes and internal quotation marks omitted). “Irreparable injury exists when

[damages] would involve speculation,” such as harmed “reputation, goodwill, customer

relationships, and employee morale.” In re Shawe & Elting LLC, 2015 WL 4874733, at

19 *28 (Del. Ch. Aug. 13, 2015) (internal quotation marks omitted), aff’d sub nom., Shawe v.

Elting, 157 A.3d 152 (Del. 2017). For that reason, “the danger of losing valuable revenue-

generating relationships is a harm that may not be compensable in any manner other than

injunctive relief.” ZRii, LLC v. Wellness Acq. Gp., Inc., 2009 WL 2998169, at *13 (Del.

Ch. Sept. 21, 2009).

Absent an injunction, Buckeye faces a threat of irreparable harm. Buckeye cannot

operate its business without access to the Tanks. The blockade threatens Buckeye with

irreparable harm to its reputation, goodwill, and customer relationships.

The effect on Buckeye’s relationship with Wawa is both illustrative and sufficient

to satisfy the requirement of irreparable harm. Wawa accounts for approximately 85% of

Buckeye’s business at the Port. Under the agreement between Wawa and Buckeye, Wawa

transfers fuel to the Tanks from two refineries via pipelines and ocean-going vessels. The

fuel is stored in the Tanks until Wawa can retrieve it using tanker trucks. On average,

Wawa throughputs at least 25,000 barrels of fuel every day from the Tanks to its

convenience stores and gas stations in Delaware, Pennsylvania, New Jersey, and Maryland.

This volume equates to approximately 150 tanker trucks accessing the Tanks each day.

Depriving Wawa of access to the Tanks risks disrupting the supply of fuel to

approximately 150 Wawa gas stations in the four-state region. Depriving Wawa of access

to the Tanks also could force Wawa to shut down its refineries until Wawa could make

other arrangements to transport its fuel. It could take weeks or even months for Wawa to

make alternative arrangements.

20 Given the negative effect that the blockade would have on Wawa’s business, it is

obvious that the blockade would negatively affect Buckeye’s relationship with Wawa.

Indeed, after learning that GT planned to blockade the Private Road, Wawa threatened to

sue Buckeye for breach of contract. Accordingly, Buckeye has established a threat of

irreparable harm sufficient to support injunctive relief.

C. Balancing Of Hardships

The final element of the injunction standard is the balancing of hardships:

[A] court must be cautious that its injunctive order does not threaten more harm than good. That is, a court in exercising its discretion to issue or deny such a preliminary remedy must consider all of the foreseeable consequences of its order and balance them. It cannot, in equity, risk greater harm to defendants, the public or other identified interests, in granting the injunction, than it seeks to prevent.

Lennane v. ASK Comput. Sys., Inc., 1990 WL 154150, at *6 (Del. Ch. Oct. 11, 1990) (Allen,

C.). The equities favor Buckeye.

The preliminary relief that Buckeye requests merely will preserve the status quo as

it has existed for twelve years while the parties litigate their dispute over the Terminal

Usage Fee. GT argues that the injunction would force GT to suffer Buckeye and its

customers’ heavy traffic on the Port’s private property without compensation, resulting in

a continuing trespass. See Dkt. 66 at 57. But that supposed continuing trespass has been

going on for twelve years, and GT has never sought compensation for it. This decision also

has held that Buckeye has a reasonable probability of succeeding on the merits on its claim

that it is entitled to use Sico Road to access the Tanks. If Buckeye prevails on that claim,

then Buckeye has the right to access Sico Road in return for the rent it pays under the Lease.

21 This decision has found that without an injunction, Buckeye faces a threat of

irreparable harm to its business. For its part, GT merely is seeking fees that it has been

pursuing since 2019. GT has not suffered any irreparable harm from the delay in payment,

nor will it. An award of interest can address the lost time value of money. Any supposed

harm to GT is far outweighed by the risk of irreparable harm to Buckeye’s business and

the public interest. The balancing of the equities favors granting the injunction.

D. The Injunction Bond

Under Court of Chancery Rule 65(c), “[n]o restraining order or preliminary

injunction shall issue except upon the giving of security by the applicant, in such sum as

the Court deems proper, for the payment of such costs and damages as may be incurred or

suffered by any party who is found to have been wrongfully enjoined or restrained.” When

this court entered the temporary restraining order on April 6, 2020, the bond was set at $1

million, without security, because GT’s counsel identified that figure as the amount that

GT claimed was due, and Buckeye’s counsel agreed to a bond in that amount. See Dkt. 16;

Dkt. 54.

The amount of an injunction bond must be tied to the losses that can be proximately

caused by a wrongful injunction. See Guzzetta v. Serv. Corp. of Westover Hills, 7 A.3d

467, 470 (Del. 2010). The amount of the unpaid Terminal Usage Fee defines the damages

that GT stands to recover if it succeeds on its underlying claim. That is a different issue

than the amount of harm that GT potentially faces from a wrongful injunction. GT’s claim

to the Terminal Usage Fee will be adjudicated on the merits. If GT prevails, then it will be

entitled to the full amount due, notwithstanding the issuance of the injunction. Nor does

22 GT risk any loss from a delay in receiving any amounts that are due because Delaware law

awards pre-judgment interest as a matter of right. See Moskowitz v. Mayor & Council of

Wilm., 391 A.2d 209, 210 (Del. 1978). If GT loses, then it is not entitled to any funds and

will not have been harmed.

The amount of the Terminal Usage Fee thus has no logical relationship to the harm

from a wrongful injunction. The real risk of harm from a wrongful injunction is any damage

from Buckeye and its customers accessing the Tanks from Sico Road during the pendency

of this litigation. There necessarily is some degree of wear and tear associated with access.

There also is the risk of an accident, which logically would be addressed through insurance.

More broadly, there is some amount of executive time and expense that GT must devote to

addressing the injunction. See Emerald P’rs v. Berlin, 1998 WL 474195, at *4 (Del. Ch.

Aug. 3, 1998), aff’d, 726 A.2d 1215 (Del. 1999).

“The party seeking an injunction bond must support its application with facts of

record or some realistic [sic] as opposed to a yet-unproven legal theory from which

damages could flow to the party enjoined.” Guzzetta, 7 A.3d at 470 (alterations and internal

quotation marks omitted). GT has not quantified any harm that would result from the

injunction, as opposed to its claim for the Terminal Usage Fee.

Given the absence of any quantification by GT, the $1 million bond remains

sufficient to protect GT’s interests in the event that GT has been enjoined wrongfully. It

seems likely that this amount errs considerably to the high side. To reiterate, regardless of

whether GT has been enjoined wrongfully, it will be entitled to recover the Terminal Usage

23 Fee if it prevails on its underlying claim. The sole purpose of the injunction is to re-

establish the status quo that existed for twelve years before GT exercised self-help.

III. CONCLUSION

GT is enjoined from preventing Buckeye and its customers from accessing the

Tanks from Sico Road pending a final ruling on the merits in this litigation. Bond remains

set at $1 million, without any requirement to post security.