Taita Chemical Co. v. Westlake Styrene Corp.

246 F.3d 377, 2001 U.S. App. LEXIS 4516, 2001 WL 285998
CourtCourt of Appeals for the Fifth Circuit
DecidedMarch 23, 2001
Docket00-30020
StatusPublished
Cited by89 cases

This text of 246 F.3d 377 (Taita Chemical Co. v. Westlake Styrene Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Taita Chemical Co. v. Westlake Styrene Corp., 246 F.3d 377, 2001 U.S. App. LEXIS 4516, 2001 WL 285998 (5th Cir. 2001).

Opinion

SAMUEL B. KENT, District Judge:

Plaintiff-Counter Defendant-Appellant-Cross Appellee, Taita Chemical Co., Ltd. (“Taita”), appeals the District Court’s grant of summary judgment in favor of Defendant-Counter Claimant-Appellee-Cross Appellant, Westlake Styrene Corporation (‘Westlake”). Westlake cross-appeals, protesting the District Court’s grant of a partial summary judgment in favor of Taita and the dismissal of its counterclaim. For the following reasons we affirm in part and reverse in part.

FACTUAL AND PROCEDURAL BACKGROUND

In 1990, four companies, including Taita, entered into a joint venture to form West-lake. The joint venture shareholders owned Westlake in the following percentages: (1) Taita — 40%; (2) BTR Nylex, Ltd. (“BTR”) — 20%; (3) the Chao Group— 20%; and (4) the Sumitomo Corporation and Sumitomo Corporation of America— 20%. 1 Westlake produces and sells styrene monomer.

On January 15, 1991, Taita and West-lake entered into a contract known as the “Off-Take Agreement.” This long-term agreement was a take-or-pay contract, under which Taita agreed to purchase 40% of Westlake’s styrene monomer production capacity each month for the duration of the contract. Price was to be determined on a monthly basis in accordance with the contract’s pricing clause. This clause provided that each month Taita was to receive the lowest of three alternative prices:

4. Price
The Contract Price per pound of Product delivered or ordered for delivery, including Deemed Delivery, during each month shall be the U.S. Gulf Coast Styrene Monomer prices, net after all discounts, for contract transactions as last published in each month by DeWitt & Company, Incorporated in its Benzene & Derivatives Newsletter, or the price for such month charged by WSC [West-lake Styrene Corp.] to a consumer under a firm multi-year contract or the posted contract market price for comparable volumes of Product, whichever is lower. Should such publication cease to be published, Buyer and Seller shall mutually select other representative publications.

The meaning of this pricing clause and the parties’ conduct with respect to its terms lies at the center of this dispute. In essence, Taita argues that Westlake over *381 charged it for styrene because Westlake did not extend Taita a lower price provided by Westlake to another customer as required under Taita’s interpretation of the second pricing mechanism. This second provision states that Taita shall receive “the price for such month charged ... to a consumer under a firm multi-year contract.” The parties have referred to this provision as the “most favored nations” clause, for the obvious reason that it ensures that Taita, as Westlake’s largest investor and principal styrene purchaser, will receive the best available price. West-lake disputes Taita’s interpretation of the pricing clause, but urges that, in any event, the evidence demonstrates that Tai-ta undeniably acquiesced in Westlake’s differing reading of the contract.

A rather substantial factual dissertation is needed in order to lay the groundwork for the Court’s otherwise brief discussion. Many of these facts are not overtly disputed. Other facts, however, as well as what inferences should be drawn from the undisputed facts, remain in issue. As this case comes before us following a grant of Westlake’s motion for summary judgment, our presentation of the facts is thus intentionally colored, to a degree, by our obligation to view the evidence in the light most favorable to Taita.

The harbinger of this dispute could be seen as early as June 1994. At that time Ken O’Neill (“O’Neill”), then Westlake’s president, queried Taita regarding whether Taita would permit Westlake to enter into a long-term contract to sell styrene to another customer at a lower price without Taita asserting its “most favored nations” rights. Taita president Graeme Bulmer (“Bulmer”) responded that Taita would immediately demand the lower price in accordance with the contract. Thus, later that year, when Westlake entered into a contract to sell styrene production,. the contract included a “meet or release” clause, which excused performance if market prices for styrene fell below an agreed level. Taita and Westlake apparently agreed that such a clause prevented the contract from becoming a “firm multi-year contract” as is required to trigger Taita’s “most favored nations” rights. Therefore, despite this foreshadowing, the pricing issue did not ripen until the end of 1994.

Then in December 1994, Westlake’s outgoing president, O’Neill, recommended to the Westlake board that it approve several multi-year contracts to sell styrene, including deals with Novacor Chemicals, Inc. (“Novacor”) and Cook Composites & Polymers Company (“Cook Composites”). 2 The Novacor agreement involved the sale of roughly 25% of the monthly volume that Taita was required to purchase from West-lake, while the Cook Composites arrangement was for less than 10% of Taita’s purchase volume. Thus, although Novacor and Cook Composites were both to be purchasing smaller volumes of styrene than was Taita, they nonetheless were to receive lower prices than Taita was paying.

Soon thereafter, Taita, through O’Neill, now its new president, pointed to the Off-Take Agreement’s “most favored nations” clause and demanded that Westlake honor its right to receive the lower price provided to Novacor. 3 Steve Bayless (“Bay- *382 less”), Westlake’s new president, initially extended the Novaeor discount to Taita. On March 29, 1995, however, Bayless changed his stance, basing his reversal upon a legal opinion regarding the meaning of the “most favored nations” clause. Westlake’s attorney opined that Taita was entitled to a discount for a “firm multi-year contract” only if the sale was for a quantity “comparable” to Taita’s volume. Because Novaeor was only purchasing 25% of Taita’s amount, Bayless informed Taita that the discount had been granted in error. According to Westlake, it only granted Taita the Novaeor price in the first place, because outgoing Westlake president O’Neill informed Bayless that Taita was entitled to the lower price. After apprising Taita of Westlake’s self-perceived error, Bayless demanded that Taita remit the amounts it had underpaid for styrene delivered in January and February. At first, Taita did not comply. Tai-ta’s internal correspondence indicates that it was contemplating how to best advance its position with regard to the sought-after pricing. 4

While Taita dithered and declined to show its hand, Bayless, on May 9, 1995, further corresponded with Taita, arguing that Taita remained in breach of the Off-Take Agreement and, further, threatened to cut off Taita’s styrene supply if Taita did not remit the amounts past due. As of May 31, 1995, Taita had not yet paid West-lake, despite indicating that it would do so, albeit under protest. This prompted another facsimile letter from Bayless to Tai-ta, and yet another on June 9, 1995, by which time Taita had fallen further behind on its payments. At this juncture, Taita finally acceded to Bayless’ request, becoming current and paying invoices in full as they came due.

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246 F.3d 377, 2001 U.S. App. LEXIS 4516, 2001 WL 285998, Counsel Stack Legal Research, https://law.counselstack.com/opinion/taita-chemical-co-v-westlake-styrene-corp-ca5-2001.