Wolf Hollow I, L.P. v. El Paso Marketing, L.P. and Enterprise Texas Pipeline, LLC

409 S.W.3d 879, 2013 WL 4188493, 2013 Tex. App. LEXIS 10200
Court of Appeals of Texas·Decided August 15, 2013·No. 14-09-00118-CV·Published·Cited by 7 cases

Opinions

OPINION ON REMAND

TRACY CHRISTOPHER, Justice.

Wolf Hollow I, L.P. appeals from a final judgment granted in favor of El Paso Marketing, L.P. and Enterprise Texas Pipeline, LLC. On remand from the Texas Supreme Court, our review is limited to deciding whether Wolf Hollow is entitled to replacement-power damages in its claims against El Paso. The trial court ordered that Wolf Hollow take nothing on these claims. Finding error in part, we affirm the judgment of the trial court in part, reverse in part, and remand for further proceedings not inconsistent with this opinion.

I. Factual and Procedural Background

Wolf Hollow owns an electric power plant in Granbury, Texas. The plant generates energy from the burning of natural gas, the supply of which is managed by El Paso. El Paso purchases the gas at a market hub near Pecos, Texas, where it flows into a pipeline owned by Enterprise. Wolf Hollow’s plant is connected to that pipeline.

Wolf Hollow and El Paso operate under a Gas Supply and Fuel Management Agreement (the “Supply Agreement”). El Paso and Enterprise, in turn, operate under a Gas Transportation Agreement (the “Transportation Agreement”). The Transportation Agreement was originally executed between Wolf Hollow and Enterprise. Wolf Hollow assigned the agreement to El Paso with Enterprise’s consent. The Transportation Agreement contemplated that assignment, and the Supply Agreement required it.

In 2006 and early 2007, Wolf Hollow experienced four interruptions in the delivery of natural gas. The first interruption occurred because of an equipment failure on the Enterprise pipeline. The second interruption occurred when an Enterprise technician made a computer error, which caused protective valves to automatically shut down gas flow to Wolf Hollow’s plant. The third and fourth interruptions resulted from other pipeline equipment-failures.

[882]*882El Paso gave notice of these four interruptions to Wolf Hollow, claiming that they were events of force majeure excused by the Supply Agreement. Wolf Hollow disputed that the interruptions were excused, and also complained about the quality of natural gas that it had been receiving. Wolf Hollow alleged that because the gas had been contaminated by heavy liquid hydrocarbons, it fell below the quality specified by the Transportation Agreement.

A. The Trial Court

Faced with these disputes, El Paso petitioned for declaratory judgment, seeking declarations that (1) it was excused from the delivery failures because of events of force majeure, and (2) it was not liable for Wolf Hollow’s claims related to the quality of gas delivered. Wolf Hollow filed counterclaims against El Paso, alleging breach of contract and other causes of action not relevant here. It sought the following damages: costs incurred for purchasing replacement power to meet Wolf Hollow’s output commitments; costs for physical damage sustained to the plant; costs of procuring additional fuel-treatment equipment; and costs for cleaning, replacing, and refurbishing turbine parts.

El Paso filed a third-party petition against Enterprise, seeking to recover contribution and indemnity for any liability that El Paso might have to Wolf Hollow. Wolf Hollow subsequently filed a cross-claim, alleging that Enterprise was negligent in allowing the interruptions of service and in delivering gas that failed to comply with quality specifications. Wolf Hollow sought damages similar to those pleaded in its action against El Paso.

The trial court resolved all issues in the litigation by ruling on a series of summary-judgment motions filed by El Paso and Enterprise. In its rulings, the trial court disposed of Wolf Hollow’s claims against El Paso on multiple grounds, all based on interpretations of language found in the Supply Agreement and the amendments thereto. Among its rulings, the trial court concluded that (1) the four delivery interruptions were caused by events of force majeure, which excused El Paso’s nonperformance; (2) all damages sought by Wolf Hollow were consequential damages barred under the Supply Agreement; (3) the Supply Agreement created an exclusive remedy for Wolf Hollow’s gas-quality claims, which was an assignment by El Paso of any quality claims it might have against Enterprise; (4) there was no evidence of a breach of the fuel-management portion of the Supply Agreement; and (5) Wolf Hollow released all of its claims for damages. The trial court also granted Enterprise’s motion for summary judgment, holding that Wolf Hollow could not assert a negligence cause of action because its claim sounded in contract rather than tort, and because its damages were precluded by the economic-loss rule.

After issuing its summary-judgment orders, the trial court rendered a final judgment that Wolf Hollow take nothing on its claims against El Paso and Enterprise. In the final judgment, the trial court included declarations that (1) the four service interruptions constituted events of force majeure; (2) El Paso gave Wolf Hollow proper notice of these events of force majeure, and El Paso has no liability regarding the incidents; (3) Wolf Hollow’s exclusive remedy on its gas-quality claims for gas delivered by Enterprise is to receive an assignment of El Paso’s claims against Enterprise; and (4) the default- and-remedies provision of the Supply Agreement does not apply to Wolf Hollow’s gas-quality claims.

B. The Appellate Court’s Opinion

On original submission, we agreed with the trial court’s ruling that all of the dam[883]*883ages sought by Wolf Hollow were consequential damages, which were waived under the Supply Agreement. Because this waiver defeated each of Wolf Hollow’s claims against El Paso, we vacated the trial court’s declaratory judgment, concluding that such declarations were moot. We also reversed the trial court’s summary judgment with respect to Enterprise, concluding that Wolf Hollow was entitled to pursue a negligence claim against Enterprise and that the action was not otherwise barred by the economic-loss rule. See Wolf Hollow I, L.P. v. El Paso Mktg., L.P., 329 S.W.3d 628, 645 (Tex.App.-Houston [14th Dist.] 2010). Our disposition of these issues made it unnecessary to address some of the trial court’s other summary-judgment rulings.

C. The Texas Supreme Court’s Opinion

The Texas Supreme Court granted review of our decision, and organized its opinion around the following three issues: (1) whether Wolf Hollow’s claims against Enterprise sounded in contract or tort, (2) whether Wolf Hollow had waived all of the damages it asserted under the terms of the Supply Agreement, and (3) whether we erred in vacating the declaratory judgment. See El Paso Mktg., L.P. v. Wolf Hollow I, L.P., 383 S.W.3d 138, 142 (Tex.2012). As to the first issue, the court concluded that Enterprise’s duties were imposed by contract, rather than by law. Thus, the court held that even though Wolf Hollow no longer had a contractual relationship with Enterprise, Wolf Hollow could not assert an action against Enterprise sounding in negligence.

Addressing the second issue, the court conducted separate analyses of the two types of damages asserted. Wolf Hollow’s “plant damages” represented the alleged damages for plant repairs and equipment upgrades.

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

Wolf Hollow I, L.P. v. El Paso Marketing, L.P. and Enterprise Texas Pipeline, LLC, 409 S.W.3d 879, 2013 WL 4188493, 2013 Tex. App. LEXIS 10200 (Tex. Ct. App. 2013).

409 S.W.3d 879 (Wolf Hollow I, L.P. v. El Paso Marketing, L.P. and Enterprise Texas Pipeline, LLC) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

Related