Zenith Energy Terminals Joliet Holdings LLC v. CenterPoint Properties Trust

• Court: Superior Court of Delaware
• Decided: July 29, 2024
• Docket: N19C-10-054 EMD CCLD
• Status: Published

Opinion

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

ZENITH ENERGY TERMINALS ) JOLIET HOLDINGS LLC, a Delaware ) Limited Liability Company, JOLIET ) BULK, BARGE & RAIL LLC, a ) Delaware Limited Liability Company, ) ) Plaintiffs, ) C.A. No.: N19C-10-054 EMD CCLD ) v. ) ) CENTERPOINT PROPERTIES TRUST, ) a Maryland Real Estate Investment Trust, ) ) Defendant. )

DECISION AFTER TRIAL

Submitted: March 12, 2024 Decided: July 29, 2024

Christopher Viceconte, Esquire, Gibbons P.C., Wilmington, Delaware, Patrick J. Lamb, Esquire, J’Aimee Crockett, Esquire, ElevateNext Law, Chicago, Illinois. Attorneys for Plaintiffs Zenith Energy Terminals Joliet Holdings LLC and Joliet Bulk, Barge & Rail LLC.

F. Troupe Mickler IV, Esquire, Randall J. Teti, Esquire, Ashby & Geddes, P.A., Wilmington, Delaware, James D. Dasso, Esquire, Mason D. Roberts, Esquire, Jennifer S. Park, Esquire, Zachary R. Kumar, Foley & Lardner LLP, Chicago, Illinois. Attorneys for Defendant CenterPoint Properties Trust.

DAVIS, J.

I. INTRODUCTION

This is a breach of contract action assigned to the Complex Commercial Litigation

Division of this Court. Plaintiffs Zenith Energy Terminals Joliet Holdings LLC (“Zenith”) and

Joliet Bulk, Barge & Rail LLC (“JBBR”) (collectively, “Zenith” or the “Plaintiffs”) filed an Amended Complaint on September 10, 2021, against Defendants CenterPoint Properties Trust

(“CenterPoint” or the “Defendant”) for breach of contract.1

CenterPoint previously owned JBBR.2 CenterPoint, through JBBR, entered into

contracts to design and build a crude-by-rail off-loading terminal in Joliet, Illinois (the

“Terminal”).3 CenterPoint planned that the Terminal would receive, off-load, store, and

distribute crude oil from the Mojo Pipeline.4

CenterPoint and Arc Terminals Joliet Holdings LLC (now known as Zenith Terminals

Joliet Holdings LLC) entered into a Membership Interest Purchase Agreement (the “Purchase

Agreement”).5 Under the Purchase Agreement, CenterPoint sold JBBR and, in effect, the

Terminal to Zenith before the construction project on the Terminal was completed.6 Thereafter,

Zenith, on behalf of JBBR, and CenterPoint negotiated a Construction Management Agreement,

whereby CenterPoint was to continue to manage the construction project.7 Ultimately, the

construction project was incomplete, not meeting alleged key requirements under the design and

build plans.8

Zenith filed suit, alleging CenterPoint breached the Purchase Agreement and the

Construction Management Agreement. CenterPoint maintains no such breaches occurred.

II. PROCEDURAL BACKGROUND

On October 7, 2019, Zenith filed its original Complaint, asserting (1) breach of contract

against CenterPoint under the Purchase Agreement between Zenith and CenterPoint, and (2)

1 Amended Complaint (“Am. Compl.”), Sept. 10, 2021 (D.I. No. 89). 2 See id. ¶ 4. 3 Id. ¶ 3. 4 Id. ¶ 1. 5 Id. ¶ 4. 6 Id. 7 Id. ¶¶ 4-5. 8 Id. ¶ 6.

2 breach of contract against CenterPoint under the Construction Management Agreement between

JBBR and CenterPoint.9 On November 9, 2019, CenterPoint filed its first Motion to Dismiss, or,

in the Alternative, Motion to Stay the Action Pending Resolution of the Related Litigation (the

Motion to Dismiss”).10 On January 28, 2020, the Court heard argument on the Motion to

Dismiss.11 On February 14, 2020, the Court denied the Motion to Dismiss.12 On February 21,

2020, CenterPoint filed its Answer and Affirmative Defenses.13

On August 27, 2021, Zenith filed a Motion to Amend the Complaint under Delaware

Superior Court Civil Rule 15(a),14 which the Court granted on September 9, 2021.15 Zenith filed

the current Amended Complaint on September 10, 2021, which asserts the same two breach of

contract counts as the original Complaint.16 CenterPoint thereafter filed its Answer and

Affirmative Defenses on September 24, 2021.17 CenterPoint then filed a Motion to Amend the

Answer (the “Motion to Amend”) to assert counterclaims on the same day.18 The Court heard

argument on the Motion to Amend on October 18, 2021,19 and denied the Motion to Amend on

January 7, 2022.20

On August 5, 2022, Zenith filed a Motion for Summary Judgment, seeking judgment in

its favor on both counts as to liability and requesting a trial as to damages.21 Also on August 5,

2022, CenterPoint filed its own Motion for Summary Judgment, requesting judgment in its favor

9 See Original Complaint (“Original Compl.”), Oct. 7, 2019 (D.I. No. 1). 10 See Defendant’s First Motion to Dismiss (“First Mot. to Dismiss”), Nov. 19, 2019 (D.I. No. 9). 11 See Judicial Action Form, Jan. 28, 2020 (D.I. No. 25). 12 See Order, Feb. 14, 2020 (D.I. No. 27). 13 See Answer, Feb. 21, 2020 (D.I. No. 28). 14 See Motion to Amend Complaint, Aug. 27, 2021 (D.I. No. 86). 15 Order, Sept. 9, 2021 (D.I. No. 88). 16 See Am. Compl. 17 See Answer, Sept. 24, 2021 (D.I. No. 90). 18 See Motion to Amend Answer, Sept. 24, 2021 (D.I. No. 91). 19 See Judicial Action Form, Oct. 18, 2021 (D.I. No. 94). 20 See Order, Jan. 27, 2022 (D.I. No. 105). 21 See Plaintiffs’ Motion for Summary Judgment (“Pls.’ Mot. for Summ. J.”) (D.I. No. 131).

3 on both counts in the Amended Complaint.22 The Court heard argument on those Motions on

October 28, 2022 and took the Motions under advisement at the conclusion of the hearing. The

Court denied the Motions for Summary Judgment on January 23, 2023 (the “Opinion”).23

The Opinion resolved substantially all of the legal issues between the parties. The Court

held that Delaware’s applicable statute of limitations did not bar Zenith’s breach of contract

claims—i.e., Count I and Count II.24 The Court also addressed issues of contract interpretation.

The Court held that the Purchase Agreement and the Construction Management Agreement were

unambiguous.25 The Court will not readdress these legal issues as part of this Decision. The

Court notes that nothing presented during the Trial (as defined below) would cause the Court to

change any holding as to a legal issue addressed in the Opinion—e.g., that the statute of

limitations bars Zenith’s claim or that the contracts were ambiguous. Finally, the Court found

that genuine issues of material fact existed as to: (i) “Final Completion;”26 (ii) whether

CenterPoint breached Purchase Agreement Section 6.16(a);27 and (iii) whether CenterPoint

breached Construction Management Agreement Section 2(b).28

III. THE TRIAL

The Court held a bench trial on Zenith’s claims from July 5, 2023 through July 7, 2023

and again on August 21, 2023 (collectively, the “Trial”).29 The Court then had both parties

22 See Defendant’s Motion for Summary Judgment (‘Def.’s Mot. for Summ. J.”) (D.I. No. 139). 23 Zenith Energy Terminals Joliet Holdings LLC v. CenterPoint Properties Trust, 2023 WL 615997 (Del. Super. Jan. 23, 2023). 24 Id. at *8-9. 25 Id. at *9-11. 26 Id. at *12 (“Final Completion” as defined below). 27 Id. at *11-12. 28 Id. at *12-14. 29 Civil Trial Activity Sheet (D.I. No. 186).

4 submit their closing arguments in written form, receiving the final post-trial paper on or about

November 20, 2023.30 The Court then held closing arguments on November 28, 2023.31

A. WITNESSES

During the Trial, the Court heard from and considered testimony from the following

witnesses:

Gavin Palmer Tony Henshaw Ira Hanan Douglas Haduch Steven Schnitzer Eric Gilbert Michael Murphy Robert David Vinson

All the witnesses testified on direct and were available for cross-examination. The fact

witnesses in this civil action were Mr. Haduch, Mr. Schnitzer, Mr. Gilbert and Mr. Murphy. The

expert witnesses were Mr. Palmer,32 Mr. Henshaw,33 Mr. Hanan34 and Mr. Vinson.35 The parties

agreed not to admit the various expert reports into evidence.

Normally, the Court would list the witnesses in the order they testified and which party

called the witness; however, because the Trial was a bench trial, the Court could take witnesses

out of order. In addition, the Court allowed for examination of each witness in both parties’

case-in-chief pursuant to Delaware Evidence Rule 611.

Brian Sheehan, CenterPoint’s appointed Construction Manager for JBBR, did not testify

at the Trial. No representatives from Ragnar Benson Construction LLC (“Ragnar”) or Wilson &

30 D.I. No. 201. 31 D.I. No. 202. 32 Mr. Palmer testified and rendered his opinions on July 5, 2023. 33 Mr. Henshaw testified and rendered his opinions on July 5, 2023. 34 Mr. Hanan testified and rendered his opinions on July 5, 2023. 35 Mr. Vinson testified and rendered his opinions on August 21, 2023.

5 Company, Inc. Engineers & Architects (“Wilson”) testified at the Trial. Deposition testimony

has been used in some instances in lieu of live testimony.

B. CREDIBILITY OF WITNESSES

Here, the Court is the sole judge of each witness's credibility, including the parties.36 The

Court considers each witness's means of knowledge; strength of memory; opportunity to

observe; how reasonable or unreasonable the testimony is; whether it is consistent or

inconsistent; whether it has been contradicted; the witnesses’ biases, prejudices, or interests; the

witnesses’ manner or demeanor on the witness stand; and all circumstances that, according to the

evidence, could affect the credibility of the testimony.37

The Court finds that—based on their testimony at the Trial and the factors listed above—the

witnesses that testified were generally credible. All witnesses had some form of relationship to

the parties and the Court accounted for that bias. The Court, however, believes that the

witnesses were not evasive, nor did they provide testimony that was not somehow supported by

other evidence. While the Court finds that the witnesses were generally credible, the Court gave

more weight to some testimony based on evidence supporting that testimony. For example, the

Court found Mr. Vinson to be credible but did not give his testimony as much weight as other

experts due to certain evidentiary facts regarding Mr. Sheehan’s conduct.

C. EXHIBITS

The parties submitted an extensive number of exhibits. Most of these exhibits were

admitted without objection. The parties provided the Court with the exhibits in the form of joint

exhibits (“JX”). The exhibits numbered JX1-1511.

36 See Superior Court Civil Pattern Jury Instruction 23.9. 37 Id.

6 IV. FACTUAL FINDINGS

A. THE PARTIES

Zenith is a Delaware limited liability company formerly named Arc Terminals Joliet

Holdings LLC (“ARC”).38 Arc contracted with CenterPoint under the Purchase Agreement to

purchase JBBR.39 As stated above, JBBR controls the Terminal. To avoid confusion, the Court

will refer to Zenith in this Decision, but the Court (and the parties) consider Arc and Zenith to be

the same entity.

CenterPoint is a “Maryland real estate investment trust” that “acquires, develops,

manages and leases warehouse, distribution and manufacturing facilities near major

transportation nodes and is an expert in large rail infrastructure assets.”40 CenterPoint was the

owner of the Terminal prior to the execution of the Purchase Agreement.41 Additionally,

CenterPoint managed the continuing construction of the Terminal post-sale under the

Construction Management Agreement.42

JBBR is a Delaware limited liability company formed by CenterPoint on or around

November 9, 2011.43 CenterPoint, through JBBR, negotiated contracts to design and construct

the Terminal.44 JBBR has owned the Terminal and, by extension, the construction project at all

times relevant to this action.45 On May 14, 2015, CenterPoint sold JBBR to Zenith (still known

as Arc Terminals at the time) under the Purchase Agreement.46

38 Id. ¶ 8. 39 Id. 40 Id. ¶ 10. 41 Id. ¶¶ 2-4; see also Pls.’ Mot. for Summ. J. at 2. 42 Am. Compl. ¶ 4. 43 Id. ¶ 9; Pls.’ Mot. for Summ. J. at 2. 44 Pls.’ Mot. for Summ. J. at 3; Def.’s Mot. for Summ. J. at 5. 45 Am. Compl. ¶ 9. 46 Id. ¶ 11.

7 B. PLANNING AND DEVELOPMENT OF THE TERMINAL

In 2013, CenterPoint determined to develop land it owned into a crude-by-rail offloading

facility.47 CenterPoint began this process by engaging Wilson to design the facility. On April

16, 2014, Wilson and JBBR entered into a Master Services Agreement (“MSA”).48 The MSA

tasked Wilson with providing design, engineering, and construction oversight on the construction

project.49 Additionally, Wilson entered into various task orders that provided details on the

scope of work for the construction project.50

CenterPoint then engaged in negotiations with ExxonMobil Oil Corporation (“Exxon”).51

Exxon owned and operated an oil refinery near CenterPoint’s development site.52 On May 28,

2014, JBBR and Exxon entered into the Terminal Services Agreement (the “TSA”).53 JBBR was

then a wholly owned entity of CenterPoint.

The TSA was a “take or pay” contract, meaning Exxon was required to make regular

minimum payments even if Exxon did not need a specified number of trains unloaded for the

requisite period.54 TSA Section 7.5 provides: “[Exxon] shall be obligated to pay the Monthly

Committed Payment…regardless of whether [Exxon] in fact delivers all or any of the Committed

Volume….”55

The TSA required that the Terminal be available at all times except “short periods of time

due to routine maintenance and repair.”56 Mr. Gilbert testified that an “essential element” of the

47 Aug. 21 Tr. 9:4-16. 48 JX3. 49 Id. 50 Id. 51 Aug. 21 Tr. 9:17-10:7. 52 Id. 53 JX25. 54 Id. §7 (“Volume and Fees”) and §7.5. 55 Id. § 7.5. 56 Id. § 2.8.

8 TSA was the Terminal’s capability to steam and unload a unit train (120 railcars) within 24

hours, including that part of the year between October 1 and March 31.57

On August 26, 2014, Ragnar and JBBR entered into a Construction Contract.58 Under

the Construction Contract, Ragnar was the engineering, procurement, and construction contractor

on the construction project.59 Ragnar purportedly “agreed to construct the Terminal in

conformity with [s]pecifications and the provisions of the Construction Contract.”60

C. THE PURCHASE AGREEMENT AND THE CONSTRUCTION CONTRACT

Shortly after entering the Construction Contract, however, CenterPoint decided to sell the

Terminal.61 CenterPoint hired Wells Fargo to broker the sale and considered several prospective

purchasers.62

Zenith sought to purchase the Terminal. CenterPoint did not accept Zenith’s initial

proposal to purchase the Terminal. However, after CenterPoint failed to obtain a better purchase

proposal CenterPoint re-engaged with Zenith.63 On December 14, 2014, Zenith submitted a

letter of intent to acquire the membership interests of JBBR from CenterPoint.64

On February 19, 2015, after a brief due diligence period, Zenith and CenterPoint entered

into the Membership Interest Purchase Agreement—i.e., the Purchase Agreement.65 Zenith

purchased JBBR from CenterPoint for $216 million, plus $27 million in deferred payments, for

57 Aug. 21 Tr. 44:16-45:19. 58 JX1. 59 Id.; JX2. 60 Def.’s Mot. for Summ. J. at 8-9. 61 Id. 22:1-23:21. 62 Id. 22:1-23:21; 24:2-8. 63 Id. 24:2-8. 64 JX19. 65 JX20.

9 an aggregate amount of $243 million.66 The parties completed closing on May 14, 2015.67 On

May 14, 2015, therefore, Zenith became JBBR’s parent company.68

The Terminal was still under construction when Zenith and CenterPoint entered into the

Purchase Agreement.69 Zenith had no experience with the construction of a project like the

Terminal.70 Moreover, Zenith had no prior relationship with Ragnar or Wilson.71 CenterPoint

had the needed construction experience and relationships with critical vendors.72 The parties

memorialized this in Section 6.15(a) of the Purchase Agreement, titled “Final Completion,”

which states:

After Closing, on and subject to the terms of the Construction Contract [with Ragnar] and the Construction Management Agreement, [CenterPoint] shall use its reasonable best efforts to achieve, and to cause the EPC Contractor [Ragnar] (and any other applicable third party contractors or service providers) to achieve, Final Completion in accordance with the Approved Cost Plan and the Project Schedule and otherwise in accordance with the terms and conditions of the Construction Contract and the Construction Management Agreement in all material respects.73

In the Purchase Agreement, “Final Completion” is defined as “the meaning given in the

Construction Contract.”74 The Construction Contract between JBBR and Ragnar, dated August

26, 2014, defines “Final Completion” as:

[T]hat point in time in the progress of the Work after Mechanical Completion when (a) the Work has been completed and is operational; (b) all testing (including hydrotesting) and coating is complete; (c) all pipe, valves, and Equipment installation and tie-ins are complete; (d) all essential Equipment and lines have been hydrotested and had a geometry tool run through them; (e) the Work is capable of transporting refined products in a safe uninterrupted manner 24 hours per day, seven days per week without further anticipated shutdowns, except for preventative maintenance; (f) and all other requirements of this [Construction Contract] with

66 Am. Compl. ¶ 4; JX20. 67 JX29. 68 Pls.’ Mot. for Summ. J. at 11; Def.’s Mot. for Summ. J. at 5. 69 JX20; JX5. 70 Cubbage Dep. 33:2-34:24; 103:22-104:23. 71 Id. 72 Aug. 21 Tr. 27:19-28:18. 73 JX20 § 6.15(a) (emphasis added). 74 Id. at Annex I.

10 respect to Final Completion ([including those set forth in Construction Contract Exhibit A]) have been satisfied.75

The Construction Contract defines “Work” to

[M]ean all of [Ragnar’s] obligations, duties and responsibilities under this [Construction Contract], including the design, engineering, procurement, manufacturing, supply, installation, erection, construction, commissioning, and testing of the Facilities, all work and services described in Exhibit A and all Warranty Work.”76

Exhibit A of the Construction Contract sets out the “Minimum Requirements for Final

Completion” and defines them as:

(a) Final Completion includes, at a minimum, the following: (i) any liquidated damages payable by [Ragnar] to [JBBR] pursuant to th[is Construction Contract] have been paid and/or satisfied; (ii) [Ragnar] has completed all the Work required by this [Construction Contract]; (iii) [Ragnar] has executed and delivered to [JBBR] and [JBBR] has accepted the lien waiver . . .; (iv) [Ragnar] has provided the final close-out report to [JBBR]; (v) there are no outstanding claims or disputes as between [Ragnar and JBBR]….77

Exhibit A additionally required that “any liquidated damages payable by Contractor to

Company pursuant to the Agreement have been paid and/or satisfied” and that “there are no

outstanding claims or disputes between the Parties.”78

The Construction Contract also required Final Lien Waivers from the Contractor and all

subcontractors be provided to and accepted by JBBR before Final Completion was achieved.79

D. THE CONSTRUCTION MANAGEMENT AGREEMENT

In tandem with the Purchase Agreement, Zenith and CenterPoint executed the

Construction Management Agreement on May 14, 2015.80 The Construction Management

75 Am. Compl., JX1 § 1.1. 76 Id. § 1.1 (underlining in original). 77 Id. at Ex. A. 78 Id. 79 Id. at Ex. E. 80 JX6.

11 Agreement made CenterPoint the agent of JBBR,81 and it states that “[JBBR] has requested that

[CenterPoint] provide certain construction management services to [JBBR] . . . for a limited

period following the Closing Date, and [CenterPoint] has agreed to provide such services.”82

Construction Management Section 2(a), titled “Construction Management Services,”

states:

Subject to the terms of this Agreement, [CenterPoint] agrees to provide to [JBBR] and [JBBR] agrees to accept from [CenterPoint], the construction management services described on Schedule A . . .. [JBBR] hereby (i) [appoints CenterPoint as its agent for all purposes] under the Construction Contract [and CenterPoint accepts], and (ii) authorizes [CenterPoint] to take all actions on behalf of [JBBR] that [CenterPoint], in [CenterPoint]’s sole and good faith discretion, considers reasonably necessary to provide the Services, including all invoices, payments, change orders and certifications under the Construction Contract; provided that [CenterPoint] shall (A) obtain [JBBR]’s prior written consent (which shall not be unreasonably withheld, conditioned or delayed) before (1) issuing the Final Completion Certificate (as defined in the Construction Contract) and making payment therefor.83

Construction Management Agreement Schedule A states that “[CenterPoint] shall

manage EPC Contractor’s [Ragnar’s] performance and completion of the Work under the

Construction Contract until the Final Completion Certificate is issued and accepted by [JBBR]

thereunder and payment is made therefor.”84

Construction Management Section 2(b) is also referenced. Section 2(b) provides:

[CenterPoint] shall perform the Services with substantially the same standard of care (including quality) as the Services were performed by or on behalf of [JBBR] prior to the Effective Date, including, without limitation, by performing the Services, at all times, as would a reasonably prudent construction manager in the construction management industry.85

81 Id. 82 Id. at Recitals. 83 Id. § 2(a) (underlining in original). 84 Id. at Schedule A. 85 Id. § 2(b).

12 Construction Management Agreement Section 2(h) limits the obligations under Section 2,

and it provides that “except as expressly set forth in Section 2, no representations, warranties or

guaranties of any kind, express or implied . . . are made by [CenterPoint] with respect to the

services provided under [the Construction Management Agreement],” and that all representations

and warranties are waived and disclaimed to the fullest extent of the law.86

E. EVENTS AFTER EXECUTION OF THE AGREEMENTS AT THE TERMINAL

1. Final Completion was not achieved.

The record on Final Completion is one created by JBBR and CenterPoint. CenterPoint’s

decision (and contractual right)87 to litigate its issues with JBBR in Delaware and not participate

in the Illinois Action88 means that the participation of Ragnar and Wilson was, at best, limited.

From the record at Trial, the Court finds, by a preponderance of the evidence, that Final

Completion was never achieved by Ragnar.

JBBR and Ragnar certified and agreed that conditions for Mechanical Completion had

been satisfied. On April 30, 2015, JBBR and Ragnar signed the Mechanical Completion

Certificate.89 The Mechanical Completion Certificate provides that all conditions for Mechanical

Completion had been satisfied.90 In addition, the Mechanical Completion Certificate provided:

Notwithstanding the issuance of the issuance of this Mechanical Completion Certificate, [Ragnar] shall not be relieved of any obligations under the [Construction Contract] or at law that survive the issuance of this Mechanical Completion Certificate.91

86 Id.§ 2(h). 87 JX6 § 11(h); JX20 § 12.10(a). 88 The Illinois Action is defined and discussed below. 89 JX5. 90 Id. 91 Id.

13 The Construction Contract initially required Final Completion to be achieved by March

15, 2015.92 Ragnar first requested to extend the date to July 1, 2015.93 Ragnar then asked to

extend Final Completion until September 30, 2015.94 Ragnar finally asked to extend the Final

Completion Date until October 16, 2015.95 JBBR (through CenterPoint) approved each of

Ragnar’s requests.

The change order submitted by Ragnar, approved by CenterPoint and then by JBBR,

cited the lack of trains as one reason for extending the Final Completion date.96 Specifically, the

October 9, 2015 request from Pablo M. Hernandez of Ragnar reads as follows:

Dear Eric [Gilbert],

JBBR’s executed Change Order Request #15 previously extended the dates for Mechanical Completion to April 16, 2015 and for Final Completion to July 1, 2015. In accordance with the aforementioned change order request, Mechanical Completion was achieved on April 16, 2015. However, due to several factors beyond Ragnar Benson’s control, we are hereby requesting an extension to the Date for Final Completion from July 1, 2015 to October 16, 2015.

Factors which contributed to the delayed Date for Final Completion include, but are not limited to the following:

• Delays in Train Schedules. Start-up and commissioning were completed in order to satisfy Mechanical Completion, however, certain items required additional commissioning efforts beyond the first couple of trains. The delays in train schedules delayed the additional commissioning efforts which impacted the critical path for Final Completion.

• Added Scope Items. Scope items were added to Ragnar Benson’s contract which also directly affected the critical path for Final Completion. Please reference Change Order Request #17 R-2. Increased scope items included, but were not limited to, Pipeline Cathodic Protection, heat trace redesign (added pumps and structural supports) and industrial waste monitoring.97

92 JX1460. 93 Id. 94 JX1457. 95 JX1408. 96 Id. 97 Id.

14 The evidence at Trial shows that, as of October 9, 2015, Ragnar, CenterPoint and JBBR

agreed that Mechanical Completion had been achieved and that Final Completion had not been

achieved. The reasons why the Date of Final Completion needed to be extended were “delays in

train schedules” and “added scope items.”

On October 16, 2015, Ragnar delivered its request for Final Completion to Michael

Murphy of CenterPoint.98 Mr. Sheehan, CenterPoint’s Construction Manager for the Terminal,

forwarded the request to JBBR requesting JBBR’s approval.99

Ragnar’s certification for Final Completion was signed by Ragnar’s project manager, Mr.

Hernandez. Mr. Hernandez did not have personal knowledge as to the facts and executed a letter

provided by David Bergstrom, Ragnar’s Senior Vice President.100

The record reflects that Ragnar did not satisfy the Exhibit A Construction Contract’s lien

waiver requirement.101 For example, Ragnar did not obtains final lien waivers from Wilson or

Mechanical, Inc., the entities responsible for commissioning the steam condensate system.102

The record also indicates that other waivers were missing as well.103

As Construction Manager, Mr. Sheehan would have known the identity of Ragnar’s

subcontractors.104 The record is incomplete on whether Mr. Sheehan (or CenterPoint) did

anything to verify the accuracy of Ragnar’s representations regarding any lien waivers or any

other aspect of its “Certification.” Testimony indicated that CenterPoint believed that Final

Completion could be achieved by completion of items on Ragnar’s punch lists.105

98 JX7. 99 JX10. 100 Hernandez Dep. 35:14-37:21. 101 JX1 at Ex. A. 102 JX8. 103 JX150 (Ragnar informing Chicago Title Ins. Co. of missing final lien waivers). 104 July 5 Tr. at 167:1-170:12. 105 Aug. 21 Tr. at 40:10-15; Aug. 21 Tr. at 86:20-88:20.

15 Ragnar knew commissioning the steam condensate system was a prerequisite to Final

Completion.106 Final Completion, in part, means that point in time after Mechanical Completion

when the “Work has been completed and is operational.” Work is defined as meaning all

Ragnar’s obligations including commissioning and testing of the Terminal.107

Ragnar engaged Wilson as its subcontractor to commission the system.108 Ragnar and

Wilson entered into the MSA109 and after agreeing to a change order, Wilson was to “provide

design/engineering support of the verification/commissioning of the steam/condensate, hot oil

and inbound crude systems.”110 Wilson’s invoices to Ragnar indicated that commissioning was

not attempted until March through May 2016—a date after Ragnar’s Final Completion

request.111 As such, Ragnar should have known that commissioning was not done prior to its

requesting Final Completion.

CenterPoint, as Construction Manager, 112 knew or should have known that the system

had not been commissioned when Ragnar requested Final Completion.113

Mr. Haduch, JBBR’s terminal manager, communicated to Mr. Sheehan the lack of

commissioning on October 7, 2015, in an email stating Mr. Haduch believed the system had not

been commissioned.114 Moreover, on October 27, 2015, Mason Whipple, Wilson’s senior

project engineer who designed the steam condensate system, responded to Mr. Haduch, copying

Mr. Sheehan, noting that “steam needs to be commissioned under load.”115

106 JX1§ 1.1. 107 Id. 108 JX1400. 109 Id. 110 JX151. 111 JX1401; JX1402; Jx1403; JX1404. 112 JX20, § 6.15(a); JX6, §2(a)-(b). 113 July 5 Tr. at 149:12-150:6; 158:17-161:16; 166:20-167:18; 214:21-215:16. 114 JX1180. 115 Id.

16 There is no evidence that Mr. Sheehan notified Steven Schnitzer, JBBR’s General

Counsel, of the lack of commissioning before Mr. Schnitzer submitted JBBR’s response to

Ragnar on October 29, 2015. As such, JBBR’s response to Ragnar denying the request for Final

Completion necessarily focused on deficiencies with the hot oil system.116

Evidence at Trial shows that the Terminal did not function properly. Mr. Haduch

testified that the “hot oil system was problematic essentially from the day it was commissioned”

and there were “a number of seal failures on a fairly regular occurrence where these booster

pumps [would] blow their seals” leaving thermal oil on the ground.117 Moreover, the pump seals

repeatedly failed on the thermal booster oil pumps.118 Mr. Haduch also testified (and Ragnar

acknowledged) that two years into operations, JBBR had to “replace the same seal that keeps

failing time and time again.”119

The record supports the conclusion that steam condensate system deficiencies were not

discovered until the parties attempted to commission the system. Mr. Haduch testified the

steam/condensate system had multiple issues that became apparent from its first cold weather

use.120 At an attempted offloading on February 10, 2016, he observed “poor unloading rates”

because “[t]he temperature of the oil [in the railcars] wasn’t hot enough, and we had just a very

difficult time getting the crude oil … unloaded from the railcars.”121

Issues with the system continued into February and March.122 The problems involved

both the condensate system and the boilers.123 Eventually JBBR and Wilson came up with an

116 JX11. 117 Aug. 21 Tr. at 31:14-32:17. 118 Aug. 21 Tr. at 39:18-22. 119 Aug. 21 Tr. at 48:3-9. See also JX1125 (Ragnar acknowledging the issue but disagreeing that it applies to “Final Completion”). 120 July 6 Tr. at 50:2-5. 121 July 6 Tr. at 50:2-5. See also JX1421. 122 July 6 Tr. at 54:13; JX1421; July 5 Tr. at 57:4-16; JX1185; July 6 Tr. at 62:8-11; JX1117. 123 July 6 Tr. at 65:22-66:18.

17 ad hoc solution where the system was fueled by a local city fire hydrant with a fire hose to use

city water.124 Despite JBBR’s and Wilson’s attempts at a solution, there was another train

steaming failure on March 8, 2016.125

Another issue involved the deaerator and an oversized 10-inch butterfly valve that failed

to allow proper deaeration.126 As such, the failure to deaerate negated the benefits of chemical

treatment and contributed to boiler degradation.127 JBBR repeatedly experienced issues with the

deaerator overflowing and flooding rooms, including the boiler room.128 Attempts to address the

issue with modified drains failed.129 In addition, Wilson’s design utilized rubber hoses that were

not appropriate for cold weather unloading.130

The problems with the steam condensate system continued without resolution into

2017.131

The Court’s factual conclusions regarding “Final Completion” are supported by the

testimony of experts concerning the work done and problems with the Terminal: (i) Mr.

Henshaw’s testimony;132 (ii) Mr. Hanan’s testimony;133 and (iii) Mr. Palmer testifying that Final

Completion had not happened given the deficiencies in steam and condensate system, including

124 July 6 Tr. at 65:22-66:18 (Mr. Haduch testified about “…going to a local city fire hydrant with fire hose and filling up this 1800-foot-long pipe with city water… so that condensate would return to our DA.”). 125 July 6 Tr. at 69:2-4; JX1187. 126 July 6 Tr. at 71:17-72:16; JX1088. 127 July 5 Tr. at 53:12-54:18. 128 July 6 Tr. at 73:8-74:1-8 (flooding into area containing medium voltage cabinet cause dangerous situations); July 5 July 5 Tr. at 52:2-53:1. 129 July 6 Tr. at 73:8-74:1-8. 130 July 6 Tr. at 80:3-82:12. 131 July 6 Tr. at 76:7-77:11; JX155 (notes indicating slugging and overflow issues). 132 July5 Tr. at 100:10-133:4 (includes testimony on problems at terminal and design flaws). 133 July 5 Tr. at 159:19-172:20 (Ragnar should not have requested a Final Completion certificate because the system had not been successfully commissioned).

18 the inability of the system to operate in any reliable manner.134 CenterPoint did not provide any

expert testimony on whether Final Completion had been achieved.135

2. CenterPoint failed to use reasonable best efforts.

The Court has found that Final Completion was not achieved. The next factual question

is whether CenterPoint used its reasonable best efforts to achieve or cause Ragnar to achieve

Final Completion. The Court finds, by a preponderance of the evidence, that CenterPoint failed

to use reasonable best efforts. Central to this finding is the unusual conduct of CenterPoint as

agent to JBBR. The Construction Management Agreement provides that CenterPoint is the agent

of JBBR.136 In addition, the Construction Management Agreement states that CenterPoint needs

to exercise “good faith discretion” when providing Services under this agreement.137

The evidence at Trial showed that CenterPoint appeared to be assisting Ragnar and

Wilson instead of its principal, JBBR. The Court could come to no other conclusion given the

failure of Mr. Sheehan to testify and explain his conduct in 2015 and 2016.

CenterPoint had two separate obligations under Purchase Agreement Section 6.15: (i) to

“use its reasonable best efforts” to achieve Final Completion, and (ii) to “cause the EPC

Contractor [Ragnar] (and any other applicable third-party contractors or service providers) to

achieve Final Completion.”138 According to testimony, EPC Contractor means a contractor with

engineering, procurement, and construction responsibilities, rather than simply construction

responsibilities.139

Mr. Sheehan acted as the Construction Manager for the Terminal.140

134 July 5 Tr. at 62:19-65:1. 135 See, e.g. Aug. 21 Tr. at 147:15-21. 136 JX6, §2(a)(i). 137 Id., §2(a)(ii). 138 JX20 §6.15. 139 July 5 Tr. at 154:8-155:6. 140 Aug. 21 Tr. at 12:10-15 and 42:10-15.

19 Mr. Sheehan did not testify at Trial. Given this, Mr. Sheehan was not able to explain

some of his conduct that came out in Trial testimony and through exhibits. Mr. Sheehan seems

to have failed provided JBBR with relevant information even though he was an agent of JBBR.

This seemed especially true following Ragnar’s October 16, 2015 request for Final Completion.

For example, Mr. Sheehan did not respond to an email on the status of commissioning but did

give advice to Wilson on how to respond to that same email.141 Mr. Sheehan failed, on JBBR’s

behalf, to address information Wilson provided to Mr. Sheehan that “steam needs to be

commissioned under load,”142 with Ragnar even though Ragnar claimed Final Completion.143

At one point, S-Mechanical informed Mr. Sheehan about problems with the hot oil

system auxiliary pumps.144 However, the record does not show Mr. Sheehan sharing that

information with JBBR.145 Moreover, Mr. Sheehan does not seem to have forwarded to JBBR

information from Wilson that the condensate system was not fully operational.146

Mr. Sheehan had other lapses in communication and apparent misdirected loyalties. The

record shows that after Ragnar’s October 16, 2015 request for Final Completion, JBBR and

Ragnar exchanged letters on a regular basis regarding that issue.147 For JBBR, Mr. Schnitzer

authored each letter for Bradley Oswald to send.148 Mr. Sheehan communicated with Mr.

Schnitzer about Final Completion issues.149

141 JX302; July 6 Tr. at 24:9-25:22. 142 JX1180. 143 July 6 Tr. at 25:23-28:1. 144 JX1089. 145 July 6 Tr. at 32:18–39:3. 146 JX1185 (“condensate system not fully operational”); July 6 Tr. at 55:16–58:10. 147 See, e.g., JX4, JX12, JX13, JX109, JX1158, JX1159, JX1160a, JX1162, JX1163, JX1164, and JX1165 148 July 7 Tr. at 24:19-25:1; 32:16–33:2; 34:8-13; and 37:11-15. 149 July 7 Tr. at 16:2-19:3; 21:10–22:16; 23:2-8; and 36:8-14; see also JX9, JX10, JX1153, JX1155, JX1156, JX1157, and JX1166.

20 Yet it appears that Mr. Sheehan also engaged with representatives of Ragnar to help

Ragnar respond to JBBR’s letters. For example, on October 19, 2015, Mr. Schnitzer emailed

Mr. Sheehan suggesting specific language acceptable to JBBR for a Final Completion

certificate.150 Mr. Sheehan, without including anyone from JBBR, emailed representatives of

Ragnar and Wilson.151 Mr. Sheehan addressed the Ragnar/Wilson group as “Team” and said,

“here is the language I propose.”152 Thereafter, Mr. Sheehan stated: “This is all related to the

construction contract between JBBR and Ragnar. As you know, Zenith now owns JBBR, so the

language can say whatever you guys want it to say. I’m just the messenger.”153 The email makes

sense only in the context of Mr. Sheehan’s having advised Ragnar and Wilson of Mr. Schnitzer’s

language and providing appropriate responses to that language.

On December 4, 2015, JBBR sent a letter to Ragnar.154 On December 5, 2015, Mr.

Sheehan assisted Ragnar on its negotiating posture, suggesting arguments to make and payouts to

request.155 Mr. Schnitzer testified that he did not know that Mr. Sheehan was communicating

with Ragnar and Wilson.156

On December 11, 2015, Mr. Hernandez, a Ragnar employee, drafted a response to a

JBBR letter.157 Mr. Hernandez sent the draft to Tim Jagielski, an attorney for Ragnar, and Mr.

Sheehan for comment.158 Mr. Sheehan responded with suggestions.159 Mr. Jagielski responded

with another draft.160 Mr. Sheehan then forwarded Mr. Jagielski’s email to CenterPoint’s

150 JX1411. 151 Id. 152 Id. 153 Id. 154 JX1159. 155 JX1123; JX1128. 156 July 7 Tr. at 30:3–31:21. 157 JX1128. 158 Id. 159 Id. 160 Id.

21 outside counsel at Vinson & Elkins.161 Outside counsel commented and supposedly redlined the

letter.162 Mr. Sheehan forwarded edits to Ragnar and requested times “later this week” for a

conference call with Vinson & Elkins.163 The draft letter was further edited with additional input

from Mr. Sheehan.164 Ragnar then sent a responsive letter to JBBR on December 16, 2015165

This responsive letter included some of Mr. Sheehan’s suggested changes, including proposing

“the ‘outside date’ of 1/31/16” for testing.166

The evidentiary record at Trial does not demonstrate that Mr. Sheehan ever made JBBR

aware of his work with Ragnar and Wilson regarding the correspondence related to Final

Completion.

Mr. Sheehan was given information on whether the Terminal was operational. Kenneth

Hancock, Wilson’s Senior VP, wrote on February 25, 2016, “As you know, the steam condensate

system is not currently operational and has not yet been commissioned.”167 In a March 2, 2016,

email to Mr. Sheehan, among others, Mr. Hancock said “please note that with the condensate

system not fully operational at this time…”168 Mr. Sheehan apparently never relayed that

information on to JBBR.

161 JX1127. 162 Id. 163 Id. 164 JX1128. 165 JX1160a. 166 Compare JX1128 with JX1160a. 167 JX1421. 168 JX1185.

22 3. Remediation by Ambitech.

JBBR retained Ambitech in early 2017 to deal with unresolved issues at the Terminal.169

Ambitech inspected the Terminal and prepared a report of its findings170 In addition, Ambitech

made recommendations to JBBR for Phase 1 and Phase 2 remediation work.171

Ambitech performed the Phase 1 remediation work in 2017 so that JBBR could fulfill its

obligations under the TSA for the 2017—2018 heating season.172 JBBR spent $3,091,157.64 on

the Phase 1 remediation work.173 Mr. Haduch testified that the Phase 1 remediation work caused

an improvement in the operability of the Terminal.174 JBBR was able to service 10-15 trains per

month during the 2017-2018 heating season175

JBBR made a demand for indemnification under Purchase Agreement Section 10.1.176

CenterPoint rejected that demand.177

F. RELATED LITIGATION

On January 23, 2017, Ragnar filed a lawsuit against JBBR in Will County, Illinois

seeking $992,990.40 (the “Illinois Action”).178 Ragnar seeks payment due upon Final

Completion under the Construction Contract.179 JBBR filed a counterclaim against Ragnar for

breach of the Construction Contract.180 On July 23, 2017, JBBR filed a third-party complaint

against Wilson for breach of the MSA.181

169 July 5 Tr. at 38:3-10. 170 JX16. 171 Id. 172 Id.; July 6 Tr. at 89:6-91:3. 173 July 6 Tr. at 93:5-97:23; JX15; JX1294; JX1480. 174 July 6 Tr. at 91:4-97:23. 175 July 6 Tr. at 91:4-92:7. 176 JX1426; JX1428; and JX1481. 177 JX1427; JX1429. 178 Am. Compl. ¶ 49; Def.’s Mot. for Summ. J. at 23. 179 Def.’s Mot. for Summ. J. at 23. 180 Am. Compl. ¶ 49 (noting the filing occurred on April 26, 2017); Def.’s Mot. for Summ. J. at 23 (noting the filing occurred on March 23, 2017). 181 Am. Compl. ¶ 49; Def.’s Mot. for Summ. J. at 23.

23 CenterPoint is not a party to the Illinois Action.182

The Illinois Action is scheduled for trial on September 23, 2024.183

V. APPLICABLE LAW

The Court will be applying the following general legal principles:

A. GOVERNING SUBSTANTIVE LAW

Delaware law applies here. First, the Purchase Agreement is governed by Delaware law.

Purchase Agreement Section 12.10(a) states that “[t]his Agreement shall be governed by and

construed, interpreted and enforced in accordance with the Laws of the State of Delaware….”184

Construction Management Agreement Section 11(h) contains identical language.185

B. BREACH OF CONTRACT

Under Delaware law, to prove a breach of contract claim, a party must show: “(1) a

contractual obligation; (2) a breach of that obligation; and (3) resulting damages.”186 A party

harmed by a breach of contract is entitled to compensation that will place that party in the same

position that the party would have been in if the other party had performed under the contract.187

The standard remedy for breach of contract is based upon the reasonable expectations of

the contracting parties.188 Expectation damages are measured by determining “the amount of

money that would put the promisee in the same position as if the promisor had performed the

contract.”189 “Damages for a breach of contract must be proven with reasonable certainty.

182 JX6 § 11(h); JX20 § 12.10(a). 183 D.I. No. 205. 184 JX20 § 12.10(a). 185 JX6 § 11(h). 186 Interim Healthcare, Inc. v. Spherion Corp., 884 A.2d 513, 548 (Del. Super. 2005). 187 See E.I. DuPont de Nemours and Co. v. Pressman, 679 A.2d 436, 445-46 (Del. 1996). 188 See Duncan v. Theratx, Inc., 775 A.2d 1019, 1022 (Del. 2001). 189 Id.

24 Recovery is not available to the extent that the alleged damages are uncertain, contingent,

conjectural, or speculative.”190

“Delaware adheres to the ‘objective’ theory of contracts, i.e.[,] a contract’s construction

should be that which would be understood by an objective, reasonable third party.”191 “Contract

terms themselves will be controlling when they establish the parties’ common meaning so that a

reasonable person in the position of either party would have no expectations inconsistent with the

contract language.”192 The Court has already held that the Purchase Agreement and the

Construction Management Agreement are unambiguous.193

C. PRINCIPAL-AGENT

Generally, agency is a fiduciary relationship that arises when a principal manifests assent

to another that the agent will act on the principal’s behalf and subject to the principal’s control

and the agent manifests assent or otherwise consents to act as agent.194 The existence of an

agency relationship empowers an agent to act on behalf of the principal.195 When accompanied

by trust that the agent will use the principal’s confidential information to pursue the principal’s

ends, that relationship also imposes fiduciary duties on the principal.196

Agents owe their principals a duty to disclose certain information.197 Agents also owe a

duty to avoid gaining an interest adverse to the principal.198 Under elemental principles of

agency law:

190 Lee-Scott v. Shute, 2017 WL 1201158, at *7 (Del. Com. Pl. Jan. 30, 2017). 191 Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010) (citing NBC Universal v. Paxson Commc’ns, 2005 WL 1038997, at *5 (Del. Ch. Apr. 29, 2005)). 192 Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997). 193 Zenith Energy Terminals Joliet Holdings LLC, 2023 WL 615997, at *9-11. 194 Estate of Eller v. Barton, 31 A.3d 895, 897 (Del. 2011). 195 Id. at 898. 196 Id. (citing to Meinhard v. Salmon, 164 N.E. 545 (N.Y. 1928). 197 Id. 198 Id.

25 [A]n agent owes his principal a duty of good faith, loyalty and fair dealing. Encompassed with such general duties of an agent is a duty to disclose information that is relevant to the affairs of the agency entrusted to him. There is also a corollary duty of an agent not to put himself in a position antagonistic to his principal concerning the subject matter of his agency.199

D. BURDEN OF PROOF BY A PREPONDERANCE OF THE EVIDENCE

In a civil case, the burden of proof is by a preponderance of the evidence. Proof by a

preponderance of the evidence means proof that something is more likely than not. This means

that certain evidence, when compared to the evidence opposed to it, has the more convincing

force and makes the Court believe that something is more likely true than not. If the evidence on

any particular point is evenly balanced, the party having the burden of proof has not proved that

point by a preponderance of the evidence, and the Court must find against the party on that

point.200

In deciding whether any fact has been proved by a preponderance of the evidence, the

Court may consider the testimony of all witnesses regardless of who called them, and all exhibits

received into evidence regardless of who produced them.

In this particular case, Zenith carries the burden of proof by a preponderance of the

evidence on its claims under the Purchase Agreement and the Construction Management

Agreement.201

E. EVIDENCE EQUALLY BALANCED

If the evidence tends equally to suggest two inconsistent views, neither has been

established. That is, where the evidence shows that one or two things may have caused the

breach/damages: one for which a party was responsible and one for which a party was not, the

199 Sci. Accessories Corp. v. Summagraphics Corp., 425 A.2d 957, 962 (Del. 1980) 200 Superior Court Civil Pattern Jury Instruction 4.1. 201 See, e.g., Reynolds v. Reynolds, 237 A.2d 708, 711 (Del. 1967) (defining preponderance of the evidence); Oberly v. Howard Hughes Medical Inst., 472 A.2d 366, 390 (Del. Ch, 1984) (same).

26 Court cannot find for the party carrying the burden of proof if it is just as likely that the

breach/damages was caused by one thing as by the other.202

VI. DISCUSSION

A. THE COURT FINDS THAT ZENITH HAS SHOWN, BY A PREPONDERANCE OF THE EVIDENCE, THAT CENTERPOINT BREACHED THE PURCHASE AGREEMENT.

In Count I, Zenith contends that CenterPoint breached the Purchase Agreement because

CenterPoint failed use reasonable best efforts to cause Final Completion. Per the Amended

Complaint and the theories advanced at Trial, Purchase Agreement Section 6.15(a) is especially

relevant. Section 6.15(a) is labeled “Final Completion,” and it states:

After Closing, on and subject to the terms of the Construction Contract [with Ragnar] and the Construction Management Agreement, [CenterPoint] shall use its reasonable best efforts to achieve, and to cause the EPC Contractor [Ragnar] (and any other applicable third party contractors or service providers) to achieve, Final Completion in accordance with the Approved Cost Plan and the Project Schedule and otherwise in accordance with the terms and conditions of the Construction Contract and the Construction Management Agreement in all material respects.203

The Court previously found that Section 6.15(a) is subject to only one reasonable

interpretation—CenterPoint was required to use its “reasonable best efforts” to achieve, and

cause any contractor to achieve, Final Completion.

In the Purchase Agreement, “Final Completion” is defined as “the meaning given in the

Construction Contract.”204 The Construction Contract between JBBR and Ragnar, dated August

[T]hat point in time in the progress of the Work after Mechanical Completion when (a) the Work has been completed and is operational; (b) all testing (including hydrotesting) and coating is complete; (c) all pipe, valves, and Equipment installation and tie-ins are complete; (d) all essential Equipment and lines have been hydrotested and had a geometry tool run through them; (e) the Work is capable of transporting refined products in a safe uninterrupted manner 24 hours per day,

202 Superior Court Civil Pattern Jury Instruction 4.2. 203 Pls.’ Mot. for Summ. J., Ex. N (Purchase Agreement) § 6.15(a). 204 Id. at Annex I.

27 seven days per week without further anticipated shutdowns, except for preventative maintenance; (f) and all other requirements of this [Construction Contract] with respect to Final Completion ([including those set forth in Construction Contract Exhibit A]) have been satisfied.205

Exhibit A of the Construction Contract sets out the “Minimum Requirements for Final

(a) Final Completion includes, at a minimum, the following: (i) any liquidated damages payable by [Ragnar] to [JBBR] pursuant to th[is Construction Contract] have been paid and/or satisfied; (ii) [Ragnar] has completed all the Work required by this [Construction Contract]; (iii) [Ragnar] has executed and delivered to [JBBR] and [JBBR] has accepted the lien waiver . . .; (iv) [Ragnar] has provided the final close-out report to [JBBR]; (v) there are no outstanding claims or disputes as between [Ragnar and JBBR];….206

Exhibit A additionally required that “any liquidated damages payable by Contractor to

Company pursuant to the Agreement have been paid and/or satisfied” and that “there are no

outstanding claims or disputes between the Parties.”207

Two factual issues had to be decided at Trial. First, the Court had to determine whether

Final Completion had been achieved. Second, the Court needed to determine whether

CenterPoint used “reasonable best efforts” to achieve, and to cause Ragnar to achieve, Final

Completion in accordance with the Approved Cost Plan and the Project Schedule. The Court

finds that Final Completion was not achieved during the relevant time period. The Court also

finds that CenterPoint did not use reasonable best efforts.

Initially, the record demonstrates that Ragnar has not paid any liquidated damages to

JBBR or Zenith. The Court does not find that surprising as that issue is contested in the pending

205 Am. Compl., JX1 § 1.1; see also id. (“’Work’ shall mean all of [Ragnar’s] obligations, duties and responsibilities under this [Construction Contract], including the design, engineering, procurement, manufacturing, supply, installation, erection, construction, commissioning, and testing of the Facilities, all work and services described in Exhibit A and all Warranty Work.”) (underlining in original). 206 Id. at Ex. A. 207 Id.

28 Illinois Action. Moreover, the Illinois Action demonstrates that there are still “outstanding

claims or disputes between” Ragnar and JBBR and Zenith.

The Court finds that the defined term “Work” is relevant to the ultimate finding that Final

Completion did not happen. The record shows that Mechanical Completion had happened.

However, the record also shows that Ragnar did not complete all the Work required by the

Construction Contract. The Construction Contract defines “Work” to

[M]ean all of [Ragnar’s] obligations, duties and responsibilities under this [Construction Contract], including the design, engineering, procurement, manufacturing, supply, installation, erection, construction, commissioning, and testing of the Facilities, all work and services described in Exhibit A and all Warranty Work.”208

The evidence demonstrates that the Terminal had not been properly commissioned or

tested.209 On October 9, 2015, Ragnar admitted this when asking for an extension of the “Date

for Final Completion from by July 1, 2015 to October 16, 2015.210 Wilson, on October 27,

2015, stated that “steam needs to be commissioned under load.”211 The steam condensate system

and commissioning issues continued into 2016. On February 10, 2016, Mr. Haduch noted that

uploading rates were poor because of difficulties getting crude oil uploaded from the railcars.212

In addition, the factual record does not support a finding that the “Work” done by Ragnar

was “capable of transporting refined products in a safe uninterrupted manner 24 hours per day,

seven days per week without further anticipated shutdowns, except for preventative

maintenance.”213 During all times relevant, the Terminal was unable to meet this standard.

CenterPoint knew this to be true. Mr. Sheehan, in an e-mail, stated:

208 Id. § 1.1 (underlining in original) (emphasis added). 209 CenterPoint contends that Final Completion does not include commissioning. The defined term “Work” is used in the Construction Agreement and includes commissioning. 210 JX1408. 211 JX1180. 212 JX1421. 213 Am. Compl., JX1 § 1.1.

29 Thank you for the update on the upcoming train schedule, and thank you in advance for passing along any additional updates that you may receive. CenterPoint will continue to use reasonable best efforts to cause Ragnar Benson to achieve Final Completion as agreed upon by all the parties, notwithstanding the ongoing disagreement between [Zenith] and Ragnar with respect to the inbound pumping system and the occurrence of Final Completion. It is my understanding that Ragnar will to cause certain subcontractors and subconsultants to be present for the train scheduled to arrive on 2/19/16. That sounds like good news from my perspective.214

Wilson, Zenith and others continued to work on the steam issues and tried to arrive at

solutions. There was a train steaming failure on March 8, 2016.215 On March 28, 2016, Mr.

Didier identified continuing problems with steam levels while unloading railcars.216 E-mail

correspondence among Wilson, Ragnar, CenterPoint and Zenith indicates that, as of March 30,

2016, Wilson was addressing design issues and coming up with new recommendations.217

Under Delaware law, “reasonable best efforts” means a party is “obligat[ed] to take all

reasonable steps to solve problems and consummate the transaction.”218 However, “it cannot

mean everything possible under the sun.”219 In the context of merger agreements, the Court of

Chancery has “looked to whether the party subject to the clause (i) had reasonable grounds to

take the action it did and (ii) sought to address problems with its counterparty” in determining

whether the “reasonable best efforts” standard was met.220 “Determining whether a party used

reasonable best efforts is an inherently factual inquiry.”221

214 JX1417. 215 July Tr. at 69:2-4; JX1187. 216 JX1418. 217 Id. 218 Williams Cos., Inc. v. Energy Transfer Equity, L.P., 159 A.3d 264, 272 (Del. 2017) (citing Hexion Specialty Chems., Inc. v. Huntsman Corp, 965 A.2d 715, 755-56 (Del. Ch. 2008)). 219 AB Stable VIII LLC v. Maps Hotels & Resorts One LLC, 2020 WL 7024929, at *91 (Del. Ch. Nov. 30, 2020) (citing Alliance Data Sys. Corp. v. Blackstone Cap. P’rs V L.P., 963 A.2d 746, 763 n.60 (Del. Ch. 2009)). 220 Menn v. ConMed Corp., 2022 WL 2387802, at *35 (Del. Ch. June 30, 2022) (citing Akron, Inc. v. Fresenius Kabi AG, 2018 WL 4719347, at *91 (Del. Ch. Oct. 1, 2018)). 221 In re WeWork Litig., 2020 WL 6375438, at *9 (Del. Ch. Oct. 30, 2020). The Chancery Court stated this rule in the context of a motion to dismiss, noting that whether a party used reasonable best efforts is an inquiry “not readily amenable to resolution at the pleadings stage.” Id. Nonetheless, the inquiry is still “inherently factual.” See id.

30 As discussed in the Findings of Fact, CenterPoint did not use “reasonable best efforts” to

cause Final Completion. CenterPoint is JBBR’s agent. As such, CenterPoint owed duties to

JBBR. CenterPoint violated theses duties. Mr. Sheehan, who did not testify, seemed to be

working with Ragnar and Wilson and against the interests of JBBR and Zenith. This conduct

demonstrates a breach of an agent’s duty of loyalty. Mr. Sheehan knew of issues in 2015 and

2016 and did not convey his knowledge to JBBR or Zenith. One of the many examples of this is

that Wilson advised Mr. Sheehan and others that the steam condensate system was not

operational or commissioned on February 25, 2016.222 Wilson again noted issues with the

system on March 2, 2016.223 The record does not show that Mr. Sheehan properly informed

JBBR of this. This conduct demonstrates a breach of an agent’s duty to disclose information that

is relevant to the affairs of the agency entrusted to CenterPoint.

The record is virtually devoid of actions taken by CenterPoint, on behalf of JBBR or

Zenith, in a manner that would have caused Ragnar to achieve Final Completion. CenterPoint

may have been able to rebut these points through Mr. Sheehan or others but failed to do so at the

Trial.

Eventually, Zenith went outside of CenterPoint and Ragnar and retained Ambitech to

address issues at the terminal.224

B. THE COURT FINDS THAT ZENITH HAS SHOWN, BY A PREPONDERANCE OF THE EVIDENCE, THAT CENTERPOINT BREACHED THE CONSTRUCTION MANAGEMENT AGREEMENT.

Construction Management Agreement Section 2(b), titled “Construction Management

Services,” states:

[CenterPoint] shall perform the Services with substantially the same standard of care (including quality) as the Services were performed by or on behalf of [JBBR]

222 JX1421. 223 JX1185. 224 July Tr. at 38:3-10.

31 prior to the Effective Date, including, without limitation, by performing the Services, at all times, as would a reasonably prudent construction manager in the construction management industry.225

Construction Management Agreement Section 2(h) limits Section 2, and it provides that

“except as expressly set forth in Section 2, no representations, warranties or guaranties of any

kind, express or implied . . . are made by [CenterPoint] with respect to the services provided

under [the Construction Management Agreement],” and that all representations and warranties

are waived and disclaimed to the fullest extent of the law.226

On Count II, the Court notes that the issue for each party is whether CenterPoint

performed its services “as would a reasonably prudent construction manager in the construction

management industry.”227 The issue regarding the Construction Management Agreement is the

“reasonably prudent construction manager” language in Section 2(b). The “reasonably prudent

person” standard “is an objective standard” and a “fact-intensive inquiry.”228

The Court’s findings regarding CenterPoint’s conduct relating to Final Completion and

breach of its duties as agent are enough to demonstrate a breach here. In addition, the Court

heard from Mr. Vinson229 and Mr. Hanan230 on what a reasonably prudent construction manager

in the construction management industry must do when providing construction management

services. The Court does find each opinion credible; however, Mr. Hanan’s opinion that

CenterPoint did not perform its duties as a reasonable prudent construction manager is stronger

given the actual facts of this case. Mr. Vinson testified generally on what a reasonably prudent

225 Pls.’ Mot. for Summ. J., Ex. O § 2(b). 226 Id., Ex. O § 2(h). 227 See id., Ex. O § 2(b). 228 CMS Inv. Hldgs., LLC v. Castle, 2015 WL 3894021, at *11 (Del. Ch. June 23, 2015). 229 Aug. 21 Tr. 119:23-120:13; Aug. 21 Tr. 121:2-131:6. 230 July 5 Tr. at 162:20-163:4; July 5 Tr. at 167:1-8; July 5 Tr. at 168:21-170:12.

32 construction manager would do; however, Mr. Vinson did not have an opinion as to

CenterPoint’s role under the applicable agreements.231

C. DAMAGES

The Court finds that Zenith has demonstrated damages proximately caused by

CenterPoint’s breach of the Purchase Agreement and the Construction Management Agreement.

Zenith had to engage in remediation work to complete the Terminal. Zenith proved by a

preponderance of the evidence that it suffered $3,091,157.64 in Phase I remediation work.232 In

addition, Zenith has been engaged in the Illinois Action and has a right to be indemnified for

losses in connection with that litigation under Construction Management Agreement Section 8(d)

and Purchase Agreement Section 10.1(b). At this point, the indemnification damages cannot be

quantified.

The Court does not find that Zenith is entitled to “Liquidated Damages.” Zenith

presented this damage theory only at the end of the litigation. Zenith has not asked the Court to

amend its Amended Complaint to add this damage claim. Instead, Zenith began raising the issue

in its pretrial brief and in post-Trial briefing. The Court denied a motion to strike Zenith’s claim

for Liquidated Damages but that was so the Court could review the entire record for support for

this damage claim.

The Court will allow Zenith to offset any earn out payments due to CenterPoint under

Purchase Agreement Section 10.8. However, the Court will not hold that such obligations are

“terminated” due to CenterPoint’s breaches of the Purchase Agreement and the Construction

231 Aug. 21 Tr. at 183:9-20. 232 See, e.g., JX15; JX1294; JX1480.

33 Management Agreement. Zenith has not asked for such relief. In fact, the Amended Complaint

only asks for a “setoff” of earn out payments and not a termination.233

The Court also finds that Zenith’s requests for Liquidated Damages and termination of

the earn out payments are over-reaching under the circumstances. As set out above, Exxon

owned and operated an oil refinery near the Terminal.234 JBBR and Exxon entered into the

TSA.235 The TSA was a “take or pay” contract, meaning Exxon was required to make regular

minimum payments even if Exxon did not need a specified number of trains unloaded for the

requisite period.236 TSA Section 7.5 provides: “[Exxon] shall be obligated to pay the Monthly

Committed Payment…regardless of whether [Exxon] in fact delivers all or any of the Committed

Volume….”237 One of the interesting facts of this case is that Exxon performed fully under the

TSA. As such, even with all of the problems relating to Final Completion and remediation,

JBBR received the full benefit of the TSA. Zenith did not demonstrate that any damages were

suffered by third parties like Exxon.

233 Am. Compl. at 21 (subsection D in prayer for relief). 234 Id. 235 JX25. 236 Id. §7 (“Volume and Fees”) and §7.5. 237 Id. § 7.5.

34 VII. CONCLUSION

The Court holds that Zenith has properly proved that CenterPoint breached the Purchase

Agreement and the Construction Management Agreement. Judgment shall be entered in favor of

Zenith on Count I and Count II of the Amended Complaint. Damages are initially set at

$3,091,157.64 with the right of Zenith to submit additional evidence on its indemnification

claims.

IT IS SO ORDERED

Dated: July 29, 2024 Wilmington, Delaware

/s/ Eric M. Davis Eric M. Davis, Judge

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