United States District Court, W.D. Arkansas, El Dorado Division
BAE SYSTEMS ORDNANCE SYSTEMS, INC. and XL INSURANCE AMERICA, INC., as Subrogee of BAE Systems Ordinance Systems, Inc. PLAINTIFFS
EL DORADO CHEMICAL COMPANY DEFENDANT
O. HICKEY UNITED STATES DISTRICT JUDGE
the Court is El Dorado Chemical Company's
(“Defendant”) Amended and Substituted Motion for
Summary Judgment or Partial Summary Judgment. ECF No. 72. BAE
Systems Ordinance Systems, Inc. and XL Insurance America,
Inc. (collectively “Plaintiffs”) have filed a
response in opposition to Defendant's motion. ECF No. 70.
Defendant has filed a reply. ECF No. 84.
pending before the Court is Plaintiffs' Motion for
Summary Judgment on Count I. ECF No. 83. Defendant has filed
a response in opposition to the motion. ECF No. 89.
Plaintiffs have filed a reply (ECF No.100), and Defendant has
filed a sur-reply. ECF No. 101.
Court finds this matter fully briefed and ripe for its
consideration. For the reasons set out below, Defendant's
motion is granted. Accordingly, Plaintiffs' motion is
denied and their Complaint is dismissed with prejudice.
following facts are deemed uncontroverted and are viewed in
the light most favorable to the non-moving party.
a breach of contract case. Plaintiff BAE Systems Ordinance
Systems, Inc., (“BAE”) is a Delaware corporation
that is engaged in the business of manufacturing military
grade energetics for munitions systems. Defendant is an
Oklahoma corporation that is primarily engaged in the
business of manufacturing, selling, and supplying nitric
acid, ammonium nitrate, and mixed acids from its chemical
manufacturing facility in El Dorado, Arkansas.
of its business activities, BAE operated the Holston Army
Ammunition Plant (“Holston Plant”) in Kingsport,
Tennessee, where it produced explosives for the United States
military. In January 2009, Defendant and BAE entered into an
agreement whereby Defendant agreed to sell 10.5 million
pounds of 98% Nitric Acid to BAE for its use at the Holston
Plant (hereinafter “the Holston Agreement”). ECF
No. 65-2, p. 2. The Holston Agreement also included an
automatic renewal clause (hereinafter “the Evergreen
Clause”), which stated as follows: “This
agreement shall cover the one (1) year period January 1,
2009, through December 31, 2009, and shall continue
thereafter in full force and effect unless terminated by
either party without cause upon six (6) months written
notice.” Id. at 4.
January 30, 2010, the parties modified the Holston Agreement
(hereinafter the “2010 Revision”). ECF No. 85-3,
p. 28. The 2010 Revision provided, in relevant part, as
“This Purchase Contract dated the 24th June
2010, is hereby revised to extend the current contract thru
December 31, 2011 for Nitric Acid. Approximately seventy two
(72) railcars to be released in CY10 & CY11. Pricing will
still be determined monthly based on the raw materials
increase and fuel cost.”
Id. The 2010 Revision also required Defendant to
deliver an increased quantity of Nitric Acid to the Holston
Plant. Id. Notably, the modification also included
language stating that “[a]ll other terms and conditions
remain unchanged.” Id.
appears to be undisputed that Defendant made multiple
deliveries of 98% Nitric Acid to the Holston Plant after
December 31, 2011. However, as discussed in greater detail
below, the parties strongly dispute whether the deliveries
were made pursuant to the Holston Agreement- as modified by
the 2010 Revision-or on a case-by-case basis as requested by
addition to the Holston Plant, BAE began operating the
Radford Army Ammunition Plant in Radford, Virginia
(“Radford Plant”) on July 1, 2012. Prior to BAE
becoming the operator of the Radford Plant, Defendant
supplied nitroglycerin mixed acid (“NGMA”) to the
facility for a number of years pursuant to an agreement it
had with Alliant Techsystems, Inc. (“ATK”), the
previous operator of the Radford Plant. After BAE replaced
ATK as the operator of the Radford Plant, it began
manufacturing propellants at the facility for use in
Department of Defense munitions systems.
is a critical ingredient to the majority of the propellants
manufactured at the Radford Plant, and BAE uses NGMA to
produce nitroglycerin at the facility. A major point of
contention between the parties is whether Defendant agreed to
continue supplying NGMA to the Radford Plant after BAE
assumed control of the facility. BAE takes the position that
the parties had a “handshake understanding and
agreement” whereby Defendant would supply NGMA to BAE
for use at the Radford Plant based on the same supply
arrangement that Defendant had with ATK. According to BAE,
Defendant agreed to begin supplying NGMA to the Radford Plant
based on the aforementioned terms beginning on July 1, 2012.
Defendant disputes the existence of such an agreement,
stating that one of its representatives only sent a
“draft quote” to BAE as part of initial
discussions related to NGMA.
15, 2012, an explosion occurred at Defendant's
manufacturing facility in El Dorado, Arkansas. The parties
sharply disagree as to the cause of the explosion and whether
Defendant was ultimately at fault for the incident.
Regardless of its origin or Defendant's alleged
culpability, the explosion resulted in the destruction of
Defendant's direct strong nitric acid production plant
and a complete loss of Defendant's 98% Nitric Acid
manufacturing capacity. The explosion also resulted in
Defendant being unable to produce NGMA using self-produced
98% Nitric Acid.
14, 2015, Plaintiffs filed the instant action seeking damages
for Defendant's alleged breach of the Holston Agreement.
ECF No. 1. Plaintiffs also claim that the course of dealing
between BAE and Defendant gave rise to an implied contract
for the supply of NGMA to the Radford Plant, which Defendant
allegedly breached after the explosion at the El Dorado
facility. Id. On July 13, 2017, Defendant filed a
motion for summary judgment, arguing that it is entitled to
judgment in its favor because both of Plaintiffs' breach
of contract claims fail as a matter of law. ECF No. 65.
Defendant later filed an amended motion for summary judgment
on August 8, 2017. ECF No. 72. On November 28, 2017,
Plaintiffs filed their own motion for summary judgment,
arguing that they are entitled to summary judgment as a
matter of law as to the first count of the Complaint. ECF No.
83. With this background in mind, the Court will proceed to
the merits of the parties' motions.
party moves for summary judgment, “[t]he court shall
grant summary judgment if the movant shows that there is no
genuine dispute as to any material fact, and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a); Krenik v. Cnty. of LeSueur, 47 F.3d 953, 957
(8th Cir. 1995). This is a “threshold inquiry of . . .
whether there is a need for trial - whether, in other words,
there are genuine factual issues that properly can be
resolved only by a finder of fact because they may reasonably
be resolved in favor of either party.” Anderson v.
Liberty Lobby,Inc., 477 U.S. 242, 250 (1986);
see also Agristor Leasing v. Farrow, 826 F.2d 732,
734 (8th Cir. 1987). A fact is material only when its