Virginia Electric and Power Company v. Bransen Energy, Inc., No. 3:2014cv00538 - Document 71 (E.D. Va. 2015)
Court Description: MEMORANDUM OPINION. Signed by District Judge James R. Spencer on 4/30/2015. (jsmi, )
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Virginia Electric and Power Company v. Bransen Energy, Inc. Doc. 71 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF VIRGINIA RICHMOND DIVISION VIRGINIA ELECTRIC AND POWER COMPANY, d/ b/ a DOMINION VIRGINIA POWER, Plaintiff, v. Action No. 3:14-CV-538 BRANSEN ENERGY, INC., f/ k/ a BRANSEN ENERGY, LLC, Defendant. MEMORAN D U M OPIN ION THIS MATTER is before the Court on a Motion for Partial Sum m ary J udgm ent On Its First Am ended Com plaint and Sum m ary J udgm ent on Defendant’s Am ended Counterclaim (“Dom inion’s Motion”) filed by Plaintiff Virginia Electric and Power Com pany, d/ b/ a Dom inion Virginia Power (“Dom inion”), ECF No. 28, and a Motion for Partial Sum m ary J udgm ent (“Bransen’s Motion”) filed by Defendant Bransen Energy, Inc., (“Bransen”), ECF No. 33. For the reasons stated below, the Court will GRANT Dom inion’s Motion, ECF No. 28 , and, accordingly, DENY Bransen’s Motion, ECF No. 33. I. PROCED U RAL BACKGROU N D On Septem ber 10 , 20 14, Dom inion filed an Am ended Com plaint, alleging that Bransen breached several, written contracts by failing to perform its contractual obligations relating to the delivery and servicing of coal. ECF No. 15. In its Am ended Com plaint, Dom inion seeks relief in the am ount of $ 1,957,325.0 0 , which encom passes the am ount Bransen invoiced Dom inion for the coke breeze and the $ 14,0 0 0 .0 0 in direct dam ages for applications fees stem m ing from the presence of coke breeze in the fuel. On Septem ber 22, 20 14, Bransen filed an am ended counterclaim against Dom inion. ECF No. 16. On March 16, 20 15, Dom inion m oved for partial sum m ary judgm ent on its Am ended Com plaint and sum m ary judgm ent on Bransen’s am ended counterclaim . ECF. No. 28 . 1 Dockets.Justia.com Subsequently, on the sam e day, Bransen m oved for partial sum m ary judgm ent. ECF No. 33. On March 27, 20 15, Dom inion filed its opposition to Bransen’s Motion. ECF No. 39. Likewise, on the sam e day, Bransen filed its sealed response to Dom inon’s Motion. ECF No. 40 . On April 2, 20 15, Bransen filed its reply, ECF No. 41, as did Dom inion, ECF No. 43. II. FACTU AL BACKGROU N D A. The Master Coal Purchase and Sale Agreem ent (“the Master Agreem ent”) Dom inion needed fuels for use during a process known as “perform ance testing” at its newly constructed Virginia City Hybrid Energy Center (“VCHEC”) before that plant’s scheduled com m issioning in J uly of 20 12—i.e., its Com m ercial Operations Date (“COD”). Obtaining a certain kind of fuel for pre-COD use was vital to Dom inion’s ability to properly test VCHEC’s boilers and other equipm ent as part of the com m issioning process. Dom inion was required to adhere to strict param eters in regard to the coal product it could burn as part of the perform ance testing phase of the VCHEC com m issioning process. For exam ple, it had to obtain and com ply with environm ental perm its issued by the Virginia Departm ent of Environm ental Quality (“DEQ”), prescribing the type of coal product that could be burned at VCHEC during perform ance testing. Further, Dom inion was required to burn only perform ance fuel m eeting specific quality specifications during perform ance testing to keep its equipm ent warranties intact at VCHEC. On Novem ber 8 , 20 10 , Dom inion and Bransen (collectively, the “Parties”) executed a Master Coal Purchase and Sale Agreem ent (“the Master Agreem ent”) for the purchase of coal. The Master Agreem ent governed any “Transactions” into which the Parties subsequently entered, as detailed in written “Confirm ations,” which were expressly integrated into the Master Agreem ent. The subject of the Master Agreem ent was specifically defined as “Coal” whose “quality . . . conform s to the Specifications” and does not trigger Dom inion’s rejection rights or is otherwise accepted by Dom inion and that, am ong other criteria, “is substantially free from any extraneous m aterials.” ECF No. 29 (Ex. 1. (“Master Agreem ent”) at Art. 10 ) (defining 2 “Coal”). “Specifications” referred to “the quality characteristics for the Coal subject to a Transaction . . . as specified in . . . the relevant Confirm ation.” Id. (defining “Specifications”). Upon executing the Master Agreem ent, Bransen m ade a num ber of representations and warranties (“R&Ws”) to Dom inion. So, too, did Dom inion to Bransen. In particular, the Parties represented and warranted: [n]o event of Default or Potential Event of Default with respect to it has occurred and is continuing and no such event or circum stances would occur as a result of its entering into or perform ing its obligations under this Master Agreem ent and each Transaction. Id. § 1.3(g). Under the term s of the Master Agreem ent, these R&Ws were continuing and deem ed repeated for each Transaction into which the Parties subsequently entered. Id. B. The Pre-COD Confirm ation, the Land Lease Agreem ent, and the Coal Services Agreem ent Three agreem ents were executed by the Parties on J anuary 26, 20 11. First, the Parties entered into a Confirm ation for perform ance fuel1 (the “Pre-COD Confirm ation”), under which Dom inion expressly assum ed “an obligation to purchase a m inim um of 450 ,0 0 0 Tons” of “Runof-Mine Coal” subject to particular specifications, with an option to purchase 150 ,0 0 0 tons m ore. ECF No. 29 (Ex. 5 (“Pre-COD Confirm ation”)) (explaining the specifications of the “Product” and “Contract Quantity”). The Pre-COD Confirm ation expressly recognized Dom inion’s unique needs and lim itations at VCHEC, including the “stringent environm ental lim its” pertaining to the coal product it could burn. Id. (explaining certain lim itations under which VCHEC could operate). The Pre-COD Confirm ation obligated Bransen to obtain prior written approval from Dom inion for delivery of any m aterial from sources not included on a specific list. Id. (listing the “Sources” that would not require Bransen to obtain Dom inion’s prior authorization). 1 Bransen says that “[n]owhere within the Agreem ents does the term ‘perform ance fuel’ appear.” ECF No. 40 ¶ 4. Bransen is incorrect. The Pre-COD specifications are expressly designated “PERFORMANCE FUEL SPECIFICATIONS.” See ECF No. 29 (Ex. 5 (“Pre-COD Confirm ation”)). 3 Second, the Parties entered into a Coal Services Agreem ent (the “Services Agreem ent”) under which Bransen was required to provide num erous services. Id. (Ex. 9 (“Services Agreem ent”) at Pream ble, § 1(a)-(c), (e)). Bransen warranted to Dom inion that “the Services will be perform ed in a safe, professional and workm anlike m anner,” “in strict accordance” with the Services Agreem ent and the other contracts between the Parties, and “in accordance with generally acceptable professional industry standards.” Id. § 18. Bransen subsequently delegated som e of the required services to another entity, Coal Technology International, LLC (“CTI”), including the obligation of “[m ]aintain[ing] the integrity of any and all piles in which the Coal m ay be stored,” which Bransen supervised and directed. See id. (Ex. 10 (“Subcontractin g Agreem ent”) at § 2(b)); see, e.g., id. (Ex. 11 (“Mullins Dep.”) 34:4-20 )). The Parties agreed that Dom inion could test any “ready pile” prepared by Bransen, see id. (Ex. 5 (“Pre-COD Confirm ation”)), and reject any ready pile that failed to m eet specifications or was otherwise “unsuitable for use” at VCHEC, see id. (Ex. 9 (“Services Agreem ent”)). According to Sections eight (8) and nine (9) of the Services Agreem ent, Dom inion was not obligated to pay for any services unless and until Bransen fully and properly perform ed them all. Id. (Ex. 9 (“Services Agreem ent”)). Third, as part of this transaction, Dom inion entered into a Land Lease Agreem ent (the “Lease Agreem ent”) with CTI for the purpose of leasing property (the “Leased Property”) on which the product that Bransen delivered would be stockpiled and m anaged before later delivery to VCHEC. Id. (Ex. 6 (“Lease Agreem ent”) at Pream ble, Recitals A, C). The Lease Agreem ent was expressly interrelated with the agreem ents between Bransen and Dom inion. Dom inion and CTI therefore agreed that the Lease Agreem ent would autom atically term inate upon the expiration or term ination of any pending Confirm ations and the Services Agreem ent.2 Id. § 2. 2 It is for this reason that Dom inion argues that it did not issue a form al, written notice of default to Bransen for m any, m any m onths after confirm ing the stockpiles contained coke breeze because Dom inion feared that it would be deem ed to have “abandoned” the product for which it had already paid. Once Dom inion term inated one contract, all the others, in turn, would be term inated, and Dom inion would be left in a bind regarding securing product to m eet. Dom inion’s argum ent that it 4 In addition, the Lease Agreem ent provided that any product rem aining on the stockpile following the post-term ination rem oval period would be deem ed “abandoned.” Id. § 8. C. The Two Post-COD Confirm ations On October 19, 20 11, after Bransen had been delivering the product to the Leased Property for nearly one year, the Parties executed two m ore Confirm ations (“the Post-COD Confirm ations”) for the purchase by Dom inion and sale by Bransen of up to three (3) m illion tons of “Waste Coal,” with each confirm ation having different quality specifications and price, through Decem ber 31, 20 15. 3 Each of the Post-COD Confirm ations states that Dom inion “shall subm it a weekly order to Seller.” ECF No. 34 (Exs. 8-9 (“Post-COD Confirm ations”)). D. Term ination and Lim itation-of-Liability Provisions The Master Agreem ent provides that “[u]pon the occurrence and during the continuation of an Event of Default,” the non-defaulting party m ay term inate the Master Agreem ent and all Transactions. ECF No. 29 (Ex. 1. (“Master Agreem ent”) § 8.2). As relevant, an “Event[] of Default” occurs if a party fails “to com ply with any m aterial obligation under a Transaction” where “such failure continues uncured for three (3) Business Days after written notice thereof” or if any R&W “shall prove to be untrue or m isleading in any m aterial respect when m ade or when deem ed m ade or repeated,” with no cure period provided. Id. § 8.1(ii), (iv). In relevant part, specifically, Section 8.1 of the Master Agreem ent provides that an event of default shall m ean any of the following: (ii) the failure of the Defaulting Party to com ply with any m aterial obligation under a Transaction covered by this Master Agreem ent (except to the extent constituting a separate Event of Default and except for such Party's obligations to deliver or receive Coal, the exclusive rem edy for which is provided in Section 8.4 and except for Seller's obligations to deliver Coal pursuant to the Specifications contained in a Confirm ation, the exclusive rem edy for which is provided in Sections 5.1, 5.2 and 5.3) proceeded to m itigate dam ages by (1) continuing to negotiate with Bransen for a resolution and (2) incurring $ 14,0 0 0 .0 0 of dam ages in application fees to am end its Virginia Departm ent of Environm ental Quality (“DEQ”) perm its to enable the post-COD attem pted processing of coal m aterial m ixed with coke breeze at VCHEC is persuasive. 3 The Parties dispute the m inim um -purchase requirem ent, or lack thereof, in the Post-COD Confirm ations. 5 and such failure continues uncured for three (3) Business Days after written notice thereof; (iv) any representation or warranty m ade by a Party herein shall prove to be untrue or m isleading in any m aterial respect when m ade or when deem ed m ade or repeated. Id. In the event of term ination, the Master Agreem ent establishes a detailed procedure by which the non-defaulting Party shall calculate an am ount, called a “Term ination Paym ent,” for each term inated Transaction. Id. § 8 .3(a), (b). The Term ination Paym ent “shall be due . . . within two (2) Business Days” of the defaulting party’s “receipt of an invoice.” Id. § 8.3(c). If the defaulting party disputes the calculation, it m ust—again within two business days—provide “a detailed written explanation” and perform ance assurance “in an am ount equal to the Term ination Paym ent.” Id. The Services Agreem ent likewise provides for term ination by the non-defaulting party “[u]pon the occurrence and continuance of an Event of Default.” “Events of Default” are defined to include, as relevant here, “the failure of the Defaulting Party to com ply with any m aterial obligation under this Agreem ent and such failure continues uncured for thirty (30 ) calendar days after written notice thereof.” Id. (Ex. 9 (“Services Agreem ent”) § 11(b)). As to the lim itation of liability provisions, the Master Agreem ent additionally contains a provision that lim its liability—where a rem edy or m easure of dam ages is not expressly provided—to “DIRECT ACTUAL DAMAGES ONLY.” ECF No. 29 (Ex. 1. (“Master Agreem ent”) § 8.8). Specifically, except for “out-of-pocket expenses, including Legal Costs, incurred by the Non-Defaulting Party by reason of the enforcem ent and protection of its rights,” id. § 8.7 “NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY, OR INDIRECT DAMAGES, LOST PROFITS, OR OTHER BUSINESS INTERRUPTION DAMAGES.” The Services Agreem ent contains a nearly identical provision. E. Perform ance Under the Contracts 6 Com m encing in J anuary and February of 20 11, Bransen delivered a product to the Leased Property. During 20 11, Bransen sent Dom inion invoices totaling at least $ 26,724,750 .17 for delivering to the Leased Property just above 599,920 tons of a product described in shipping sum m aries as “COAL.”4 See ECF No. 29 (Ex. 13 (“Bransen Invoices to Dom inion”)). Without disclosing the m aterial to be coke breeze, labelling the product as “COAL,” Bransen included the total tonnage of coke breeze in invoices subm itted to Dom inion for paym ent. (“Bransen Dep.”) 32:18-33:1, 34:18-22, 36:8-15,39:6-10 ). Id. (Ex. 15 Evidence dem onstrates that Dom inion paid these invoices in full. See e.g., id. (Ex. 14 (“Bransen BB&T Statem ents”)). In m id-Decem ber 20 11, Dom inion received an anonym ous tip indicating that Bransen had delivered substantial quantities of “coke breeze” to the Leased Property, had taken deliberate steps to hide the coke breeze from Dom inion, an d had participated with Dom inion personnel in m illions of dollars of kickbacks at the CTI site. ECF No. 40 (Ex. 12 (“Tipster Letter”)). As a result of this letter, Dom inion began investigating whether these allegations were true. Prior to Dom inion receiving the anonym ous tip and prior to Bransen com m encing shipm ents of Run-of-Mine Coal, Bransen chose to use a product called “coke breeze” and obtained approxim ately 43,0 0 0 tons, which was then laid down under approxim ately 60 % of the Coal Stockpile at the Leased Property. ECF No, 40 at 9; see also ECF No. 29 (Ex. 18 (“Peters Interview”)). Bransen delivered at least 43,0 0 0 tons of coke breeze to the Leased Property between February and April 20 11. Id. The coke breeze product can be used as fuel in circulating fluidized bed plants and is substantially m ore porous than other potential products in that it can provide a base layer resulting in substantially better drainage and with m uch less loss of stockpile during storage. ECF No. 29 (Ex. 18 (“Peters Interview”)). Dom inion was prohibited from processing coke breeze—or any product containing coke breeze—at VCHEC under the 4 This am ounts to a weighted-average paym ent of $ 44.54 per ton (rounding down to the nearest fill cent). Reply Mem orandum of Law in Support of Plaintiff’s Motion for Partial Sum m ary J udgm ent on Its First Am ended Com plaint and Sum m ary J udgm ent on Defendant’s Am ended Counterclaim (“ECF No. 43”) at 1. 7 term s of the DEQ perm its that were in place at the tim e. ECF No. 29 at 7-8. Nevertheless, Bransen had begun negotiating to acquire the coke breeze for delivery to the Leased Property no later than early J anuary 20 11, weeks before the Parties executed the Pre-COD Confirm ation on J anuary 26, 20 11. ECF No 29 (Ex. 15 “Bransen’s Request for Adm issions Responses”) at No. 4. Furtherm ore, Bransen purchased the coke breeze with the expectation that it was, in fact, coke breeze—as opposed to som e other product, including coal. Id. at No. 65. Following Dom inion’s receipt of the tipster letter, on February 15, 20 12, Bransen’s owner and president, Michael Peters (“Peters”), participated in an interview with Dom inion personnel. ECF No. 29 (Ex. 18 (“Peters Interview”)). During the interview, he acknowledged having delivered at least 43,0 0 0 tons of coke breeze to the stockpile on the Leased Property during the first few m onths of 20 11—shortly after the execution of the Pre-COD Confirm ation, but m any m onths before the Post-COD Confirm ations were executed. Id. Peters signed a sum m ary of this interview and verified that the statem ents therein were “accurate” and “true and correct to the best of [his] knowledge.” Id. Peters stated that the coke breeze had been put down on at least sixty percent of the stockpile, expressed “em barrass[m ent]” for what he had done, “accept[ed] full responsibility for having im properly charged Dom inion for the coke breeze,” conceded that “[h]e did not request nor receive perm ission from Dom inion to purchase and bill Dom inion for the purchase of the coke breeze under the term s of the agreem ent,” and stated that “[n]o one from Dom inion cam e to the [Leased Property]” during the tim e when the coke breeze was being delivered. Id. F. Events After The Early 20 12 Confirm ation of the Delivery of Coke Breeze Upon confirm ing in early 20 12 that Bransen had delivered coke breeze, Dom inion arranged for independent, third-party laboratory analyses of all ready piles that Bransen prepared. ECF No. 29. In other words, Dom inion tested three ready piles for delivery for the presence or absence of coke breeze. These analyses revealed the presence of coke breeze; as 8 such, none were ever delivered to VCHEC . Id. (Ex. 15(“Bransen Dep.”) 40 :19-41:6). Bransen never identified any m ethod of separating the coke breeze from the coal. See id. ¶ 24. G. Events of Default and Term ination Over the course of 20 12, a Dom inion decision at the executive level was m ade that Dom inion would do no further business with Bransen.5 Bransen concededly becam e aware that the relationship between the Parties was a “real uphill battle” and failing as of early 20 12. The parties attem pted to reach an am icable resolution for over two years. On J une 22, 20 13, durin g this tim e of negotiations to com e to a resolution between counsel for Dom inion and Bransen, Dom inion issued to Bransen a cease and desist letter dem anding that Bransen not reenter the Leased Property Dom inion claim s it reserved all rights to term inate the contracts between the Parties if settlem ent negotiations failed. At various points, Bransen offered to replace or buy back som e or all of the product on the stockpile, subject to m ultiple contingencies an d conditions. ECF No. 29 at 12; ECF No. 40 at 25-26. Dom inion declined these proposals as com m ercially infeasible. Id. In a letter dated J une 15, 20 14, Bransen m ade a dem and that Dom inion perform . Dom inion, via a J uly 21, 20 14 letter, form ally declared the occurrence of Events of Default and m aterial breaches under the Master Agreem ent, the Pre-COD Confirm ation, the Post-COD Confirm ations, and the Services Agreem ent on J uly 21, 20 14, pursuant to the default and notice requirem ents under Sections 8.1 and 9.3 of the Master Agreem ent, and Sections 11 and 30 of the Services Agreem ent. ECF No. 29 (Ex. 24 (“Letter from Dom inion to Bransen”)). To recall, the Master Agreem ent provides that “[u]pon the occurrence and during the continuation of an Event of Default,” the non-defaulting Party m ay term inate the Master 5 Bransen claim s it was never inform ed of this decision. ECF No. 40 at 13, 18. Dom inion claim s, “Over the course of 20 12, Dom inion inform ed Bransen that Bransen’s coke-breeze-related m isconduct had irreparably dam aged their relationship.” ECF No. 29 at 12 (citing Workm an Decl. ¶ 9; Ex. 15 (“Bransen Dep.”) 58:9-59:12). Further, Dom inion claim s it indicated that” it would not subm it any orders under the Post-COD Confirm ations, and Bransen concededly becam e aware that the relationship between the Parties was a ‘real uphill battle’ and failing as of early 20 12.” Id. (citing Ex. 15 (“Bransen Dep.”) 58:9-59:12; id. at 99:4-11.) 9 Agreem ent and all Transactions. As relevant, an “Event[] of Default” occurs if a Party fails “to com ply with any m aterial obligation under a Transaction” where “such failure continues uncured for three (3) Business Days after written notice thereof” or if any R&W “shall prove to be untrue or m isleading in any m aterial respect when m ade or when deem ed m ade or repeated,” with no cure period provided. As such, after three (3) business days had elapsed with no response by Bransen to Dom inion’s J uly 21, 20 14 notice of default, Dom inion form ally term inated the Master Agreem ent, the Pre-COD Confirm ation, and the Post-COD Confirm ations on J uly 25, 20 14. ECF No. 29 (Ex. 25 (“Second J uly Letter from Dom inion to Bransen”)). In that notice, Dom inion also requested a Term ination Paym ent. The Services Agreem ent likewise provides for term ination by the non-defaulting Party “[u]pon the occurrence and continuance of an Event of Default.” “Events of Default” are defined to include, as relevant here, “the failure of the Defaulting Party to com ply with any m aterial obligation under this Agreem ent and such failure continues uncured for thirty (30 ) calendar days after written notice thereof.” After Bransen did not cure any breaches under the Services Agreem ent 6 within thirty (30 ) calendar days after Dom inion’s notice of default dated J uly 21, 20 14, Dom inion, by written notice dated Septem ber 5, 20 14, form ally term inated the Services Agreem ent. Id. (Ex 26 (“Septem ber Letter from Dom inion to Bransen”)). Subsequently, Dom inion am ended its DEQ perm its to enable the eventual (i.e., postCOD) attem pted processing of coal m aterial m ixed with coke breeze at VCHEC. Bisha Decl. ¶¶ 6 Bransen adm its that it received correspondence from Dom inion dated J uly 25, 20 14 but argues that it was not afforded access by Dom inion to the stockpile. Dom inion asserts that Bransen’s m aterial breaches under the Services Agreem ent were not curable by their nature, given Bransen’s fraudulent and deceptive conduct and the widespread presence of coke breeze in a stockpile containing hundreds of thousands of tons of m aterial. Nevertheless, and without waiving any rights, Dom inion further argues that it allowed Bransen three (3) days, under the Master Agreem ent, and m ore than thirty (30 ) calendar days, consistent with Section 11 of the Services Agreem ent, to attem pt to cure its m aterial breaches and that Bransen failed to do so. Bransen denies any such brazen behavior and disputes the aforem entioned assertions by Dom inion, arguing the following: (1) Dom inion refused Bransen any opportunity to cure—i.e. replace the 60 0 ,0 0 0 tons—and (2) replaced CTI as the operator on the Lease Property as of J une 1, 20 13. Bransen , specifically, argues that the current operator is Harold Keene Surface Co., LLC and the current controller is Om ega Holdings, LLC—both of which assum ed operator and controller status on J une 1, 20 13. Accordingly, Dom inion havin g replaced CTI as the Controller, Bransen argues it was an im possible for Bransen or its subcontractor, CTI, to reenter the Leased Property to com m ence perform ance under the Service Agreem ent. 10 9-10 (attaching proof of paym ent of $ 14,0 0 0 .0 0 in application fees). To com plete the VCHEC com m issioning process without delay, Dom inion purchased additional coal product from alternative sources. Baughan Decl. ¶ 13. III. LEGAL STAN D ARD When considering cross-m otions for sum m ary judgm ent, the Court applies the sam e standard as that applied to individual m otions. Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 20 0 3). Sum m ary judgm ent is appropriate where “there is no genuine dispute as to any m aterial fact.” Fed. R. Civ. P. 56(a). Although the facts m ust be viewed in the light m ost favorable to the non-m oving party, Anderson v. Liberty Lobby , 477 U.S. 252, 255 (1984), where a m otion has been properly supported, the non-m oving party has the burden of showing that a genuine dispute exists, Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986). The “m ere existence of som e alleged factual dispute between the Parties will not defeat an otherwise properly supported m otion for sum m ary judgm ent; the requirem ent is that there be no genuine issue of m aterial fact.” Anderson, 477 U.S. at 247-48 (em phases in original). The non-m oving party m ust “rely on m ore than conclusory allegations, m ere speculation, the building of one inference upon another, the m ere existence of a scintilla of evidence, or the appearance of som e m etaphysical doubt concerning a m aterial fact.” Lew is v. City of Va. Beach Sheriff’s Office, 40 9 F. Supp. 2d 696, 70 4 (E.D. Va. 20 0 6) (internal quotation m arks om itted). IV. PARTIES’ ARGU MEN TS a. Dom inion’s Motion for Partial Sum m ary J udgm ent For prim arily two reasons,7 Dom inion alleges that there is no genuine issue of m aterial fact as to Bransen’s liability for the unauthorized and im proper delivery of at least 43,631 tons of coke breeze. 7 Dom inion includes a brief argum ent that Bransen violated the im plied duty of good faith, defined in the UCC as “honesty in fact and the observance of reasonable com m ercial standards of fair dealing in the trade,” Va. Code Ann. § 8.2-10 3(1)(b), by intentionally engaging in m isdeeds and m isrepresentations—i.e., by deliberately blending and concealing the coke breeze, presenting 11 First, Dom inion argues that Bransen m aterially breached the substantive obligations of the: (1) Master Agreem ent; (2) Pre-COD Confirm ation; and (3) Services Agreem ent by delivering coke breeze to the Leased Property and then deliberately concealing it from Dom inion. “A m aterial breach is a failure to do som ething that is so fundam ental to the contract that the failure to perform that obligation defeats an essential purpose of the contract.” Horton v. Horton, 487 S.E.2d 20 0 , 20 4 (Va. 1997). In particular, Dom inion claim s that, under the Master Agreem ent and the Pre-COD Confirm ation, Bransen’s obligations included: a. delivering Run-of-Mine Coal to the Leased Property in the quantity requested by Dom inion, and m eeting the specifications set forth in the Pre-COD Confirm ation; b. obtaining Dom inion’s prior written approval before delivering any m aterial originating from a source other than one authorized in the Pre-COD Confirm ation; c. providing Dom inion with accurate origin sam pling data; d. providing Dom inion with accurate product inform ation on its shipping notices and invoices; and e. fulfilling its im plied duty of good faith an d fair dealing by conducting itself with honesty and sincerity, and without deceit, in carrying out its obligations owed to Dom inion. Say Dom inion, “the essential purpose of the Parties’ agreem ents was the procurem ent and m aintenance of a specific quantity (60 0 ,0 0 0 tons) of a specific product (Run-of-Mine Coal) at a specific tim e (pre-COD) and for a specific function (pre-COD perform ance testing at VCHEC). See ECF No. 43 at 14 (citing Ex. 2 (“Nov. 30 , 20 10 Bransen Energy, LLC Term Sheet”)) (term sheet signed by Peters stating in “Term ” section that “[d]eliveries of Perform ance Fuel to VCHEC would be m ade as requested by [Dom inion] in order to support testing of the generating unit and supporting equipm ent, and potentially through initial com m ercial operations of the plant”)); ECF No. 29 (Ex. 7 (“Sutherland Dep.”) 26:16-27:10 ) (stating, as a Bransen em ployee, that Peters or his stepfather m entioned that the Parties’ initial agreem ents concerned product “specifically for use as part of the perform ance testing process to get [VCHECH] com m issioned”). Yet Bransen concedes that between February and April 20 11, it delivered to the Leased Property an enorm ous quantity of coke breeze from a non-approved source, which it Dom inion with m isleading docum entation, and refusing to acknowledge the presence of coke breeze until pressed during a subsequent investigation. 12 represented and billed to Dom inion as ‘COAL.’” Therefore, Dom inion argues that Bransen m aterially breached each of these obligations by delivering a m inim um of 43,0 0 0 tons of coke breeze to the Leased Property in early 20 11.8 Critically, Dom inion persuasively argues that coke breeze is not coal at all—let alone “Run-of-Mine Coal.” Dom inion asserts that coke breeze was never acceptable since Dom inion could not process coke breeze at VCHEC under the term s of its DEQ perm its then in place. In sum , Dom inion argues that Bransen’s breaches were all m aterial because they went to the very essence of the Parties’ agreem ent and defeated the essential purpose of the parties’ agreem ent—i.e., the delivery and purchase of the perform ance fuel Dom inion needed, when Dom inion needed it, and for its intended use as an integral part of the VCHEC com m issioning process. Second, Dom inion asserts that Bransen also m ade representations and warranties to Dom inion in connection with the execution of the Master Agreem ent, which Bransen repeated in subsequent transactions. Dom inion argues that Bransen breached m ultiple R&Ws for several reasons. Indeed, Bransen m ade a continuing R&W in the Master Agreem ent (and under the 8 Dom inion specifically argues that Bransen m aterially breached each of the contracts no later than the following: The Master Agreem ent: upon executing the Pre-COD Confirm ation on J anuary 26, 20 11, when Bransen was deem ed to have m ade and repeated the m aterially untrue and m isleading R&W that no default had occurred or would occur, given that Bransen had already begun negotiating for the delivery of coke breeze to the Leased Property—or, at the very least, when Bransen first began im properly delivering coke breeze to the Leased Property in February 20 11 and billing Dom inion for the sam e; The Pre-COD Confirm ation: sam e; The Services Agreem ent: upon execution on J anuary 26, 20 11, when Bransen warranted that all services would be perform ed “in strict accordance” with the contracts between the Parties, as well as “in accordance with generally acceptable professional industry standards” (SA § 18)—or, at the very least, when Bransen accepted delivery of coke breeze and began deliberately interm ingling it with the other product on the stockpile between February and April 20 11, such that the stockpile was not m anaged and handled so that the product ultim ately transported to VCHEC would m eet the required specifications (id. § 1(b)); and The Post-COD Confirm ations: upon execution on October 19, 20 11, when Bransen was deem ed to have m ade and repeated the m aterially untrue and m isleading R&W that no default had occurred or would occur, given that Bransen had already breached the Master Agreem ent and Pre-COD Confirm ations for the reasons described above. ECF No. 29. at 22. 13 term s of the Master Agreem ent, in the Pre-COD and Post-COD) that no default “ha[d] occurred” or “would occur” in the course of its perform ance. Sim ilarly, Bransen warranted that all services would be perform ed “in strict accordance” with the Services Agreem ent and the Parties’ other contracts, as well as “in accordance with generally acceptable professional industry standards.” Dom inion argues that Bransen begun negotiating to purchase coke breeze for delivery to the Leased Property no later than early J anuary 20 11, several weeks before executing the Pre-COD Confirm ation on J anuary 26, 20 11. Dom inion underscores that Bransen had already m ade arrangem ents to breach the contracts before it entered into a single confirm ation. Dom inion argues there is thus no genuine issue of m aterial fact that Bransen m ade and repeated a m aterially “untrue or m isleading” R&W—and thereby precipitated an “Event of Default” as defined in the Master Agreem ent—in connection with (1) executing the Pre-COD Confirm ation, (2) delivering and billing Dom inion for an enorm ous quantity of coke breeze m ischaracterized as “COAL,” and (3) executing the Post-COD Confirm ations. Likewise, Dom inion asserts there is no genuine issue of m aterial fact that Bransen’s false warranty under the Services Agreem ent constituted a “failure . . . to com ply with a[] m aterial obligation under [the Services Agreem ent]” that “continue[d] uncured for thirty (30 ) calendar days after written notice thereof”—and thereby precipitated an “Event of Default” as defined therein. Next, Dom inion argues that there is no genuine issue of m aterial fact as to the direct dam ages to which Dom inion is entitled for Bransen’s coke-breeze-related breaches. In total, Dom inion seeks direct dam ages in the am ount of $ 1,957,325.0 0 . Finally, as for any contention that Dom inion im properly rejected Bransen’s attem pts to replace the entire stockpile, or any further cure efforts, Dom inion argues that no m aterial fact suggests that its conduct in this regard was anything but com m ercially reasonable. Dom inion argues that Bransen’s purported replacem ent offers cam e far too late to serve the original purpose of the Parties’ contracts, and they all involved unacceptable contingencies or 14 contem plated a continuing business relationship between the Parties, thus effectively renderin g the offers m eaningless. In response, Bransen first argues that “coke breeze had the quality characteristics consistent with the quality specifications set forth in the Pre-COD Confirm ation.” ECF No. 40 at 9 (citing Exs. 8, 26) (setting forth the coke breeze average quality specifications). According to Bransen, “using coke breeze as a base layer is not an attem pt to hide it.” Id. at 9. Additionally, Bransen argues that Dom inion dem anded that Bransen act illegally. Bransen argues that any efforts to start perform ing under the contracts were im peded by Dom inion’s issuance of a cease and desist letter, which Bransen argues dem anded it no longer access the coal on the Leased Property for any reason. ECF No. 40 at 19. Subsequently, Bransen was placed upon a three day cure period. Id. Therefore, Bransen essentially argues that it was stuck—that is, Bransen argues that it could not have possibly cured any alleged defaults—or rather, accessed the Leased Property should it wished to have cured the defects—because Dom inion sim ultaneously refused Bransen access. Id. Therefore, Bransen argues com pliance was im possible. Likewise, after receiving the dem and notice by Dom inion regarding the Services Agreem ent and requirem ent to cure within thirty days or face term ination, Bransen argues that it was im possible for it to perform . Id. On sim ilar note, Bransen argues that, because Dom inion entered into a service agreem ent with Om ega Holdings, a third-party, in J une of 20 13, see id. at 19 (citing (Ex. 16 “Om ega Service Agreem ent”)), Dom inion knew or should have known that dem anding Bransen to reenter the Leased Property, pursuant to Dom inion’s J uly 21, 20 14 notice letter, consitututed illegal acts on behalf of Bransen. As to any assertions that it breached any R&Ws by delivering coke breeze, Bransen flatly disagrees with Dom inion. Bransen argues that the opposite is in fact true pursuant to the plain language of the Master Agreem ent. For support, Bransen turns to section 9.2 of the Master 15 Agreem ent to bolster its argum ent that it “excluded” any such R&Ws claim ed to have been breached. Section 9.2 expressly provides the following: OTHER THAN THOSE EXPRESSLY PROVIDED HEREIN OR IN A CONFIRMATION SELLER MAKES NO OTHER REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, EXPRESS OR IMPLIED, IN CONNECTION WITH THE SALE AND PURCHASE OF COAL HEREUNDER. ALL WARRANTIES OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE OR ARISING FROM A COURSE OF DEALING OR USAGE OF TRADE ARE SPECIFICALLY EXCLUDED. SELLER MAKES NO WARRANTY CONCERNING THE SUITABILITY OF COAL DELIVERED HEREUNDER FOR USE IN ANY FACILITIES.9 ECF No. 40 at 21 (citing Ex. 4) § 9.2). Bransen contends that it “specifically and in all capital letters” excluded such warranties and specifically excluded any warranty for a particular purpose and suitability for use in any facilities within the Master Agreem ent. Alternatively, Bransen argues that Dom inion accepted the product it delivered and failed to revoke. Bransen claim s that only after three non-conform ing shipm ents and seller failing to provide acceptable assurances does Dom inion have the right to declare an Early Term ination Date and Event of Default.” Id. § 5.3. In sum , therefore, Bransen argues that Dom inion does not dem onstrate the required, aforem entioned condition precedents to exercising any early term ination rights or event of default. Sim ilarly, Bransen argues that Dom inion has not denied that it continues to use the product delivered to it. Therefore, even if non-conform ing, Bransen underscores that Dom inion cannot recover under any contract since it continues to utilize the product. Finally, 9 Based on this language, Bransen’s proffered assertions that, in the Master Agreem ent, it specifically m ade no warranty to Dom inion concerning the suitability of coal delivered for use in any facilities and that it disclaim ed all R&Ws are wrong for a few reasons. Bransen ignores the language stating, “OTHER THAN THOSE EXPRESSLY PROVIDED HEREIN OR IN A CONFIRMATION . . . .” ECF No. 40 at 21 (citing Ex. 4) § 9.2)). The R&Ws that Dom inon claim s Bransen breached are expressly enum erated in the Master Agreem ent as are the warranties in the Services Agreem ent. As Dom inion correctly sets forth, “[th]at Bransen’s coke-breeze-related conduct rendered its product unsuitable for use as perform ance fuel at VCHEC does not negate the fact that the sam e conduct also violated Bransen’s express prom ises—to wit, that ‘[n]o Event of Default or Potential Event of Default . . . ha[d] occurred’ or ‘would occur’ . . . [pursuant to 1.3(g) of the Master Agreem ent] and that all services would be perform ed ‘in a safe, professional and workm anlike m anner,’ ‘in strict accordance’ with the Parties’ contracts, and ‘in accordance with generally acceptable professional industry standards’ . . . [pursuant to § 18 of the Services Agreem ent].” Therefore, Bransen’s argum ent is based on both an unreasonable application of the contractual language and the facts clearly show otherwise. 16 Bransen argues that it offered adequate assurances to Dom inion that it would perform in the future. Those said assurances include, but are not lim ited to, the following: “(i) buy back the entire coal stockpile for a purchase price of $ 27,0 0 0 ,0 0 0 ; (ii) replace the entire 60 0 ,0 0 0 ton stockpile with coal again m eeting the specifications using independent test[ing] as provided in the agreem ents and sources approved by Dom inion;” and (iii) be allowed to perform under the Services Agreem ent, at Dom inion’s direction. ECF No. 26. Bransen argues that its assurances m et all the com m ercial standards requirem ents under Va. Code § 8.2-60 9(3). b. Bransen’s Motion for Partial Sum m ary J udgm ent Bransen begins its legal argum ent by asserting that it is entitled to sum m ary judgm ent on its claim s for three reasons: that Dom inion (1) accepted Bransen’s product; (2) did not reject Bransen’s product in a tim ely m anner; and (3) failed to provide Bransen with adequate assurance of perform ance. ECF No. 34 at 11. Bransen addresses the first two of these argum ents but fails to address the third, instead arguing that Bransen provided Dom inion with such assurance. Briefly, Bransen concludes by arguing that Dom inion failed to com ply with an alleged m inim um -purchase obligation in the Post-COD Confirm ations. As to the first and second argum ents Bransen sets forth, Bransen relies on the UCC to argue that Dom inion accepted Bransen’s product, entirely om itting any discussion of the rejection provisions expressly included in the contracts between the Parties. Id. at 11-12 (citing Va. Code § 8 .2-60 2 and -60 6). Specifically, Bransen relies on the principle that “[a]cceptance of goods occurs when the buyer . . . fails to m ake an effective rejection, but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them . Bransen argues that Dom inion took the coal delivered by Bransen and – despite having m ore than two and one half years to inspect the goods, after delivery and taking title and ownership – put the coal to use in its operations. Say Bransen, this can be considered nothing but acceptance under the UCC. Id. at 12 (citing Xpander Pak, Inc. v. Bostroem U.S.A., Inc., 1997 U.S. Dist. LEXIS 22536 at *31-32 (E.D. Va. J ul. 31, 1997)); United States ex rel. W hitaker’s, Inc. v. C.B.C. Enterprises, Inc., 820 F. 17 Supp. 242 (E.D. Va. 1993) (“By taking possession of the cabinets, cutting them to fit over pipes and installing the units, [defendant] accepted the cabinets within the m eaning of the UCC.”). Bransen underscores, “Not until J une 30 , 20 14, did DVP [Dom inion] even attem pt to declare a default under the various agreem ents including the Pre-COD Confirm ation. Such an untim ely attem pt can in no way be considered ‘reasonable’ within the contem plation of Virginia law and the UCC.” Id. at 12. Next, in arguing that Bransen provided Dom inion adequate assurance of perform ance, Bransen relies exclusively on Va. Code § 8.2-60 9. See id. 12-13. Here, Bransen claim s that it provided adequate assurance (1) as to the Pre-COD Confirm ation, by offering to buy back or replace the entire stockpile; (2) as to the Services Agreem ent, by offering to perform under Dom inion’s direction; and (3) as to the Post-COD Confirm ations, by offering to deliver one (1) m illion tons of coal in 20 13. Id. at 12. As to the final argum ent, Bransen argues that it had an obligation to deliver, and Dom inion had a duty to order, three m illion tons of waste coal under the two Post-COD Confirm ations. Bransen devotes one short paragraph to claim ing that Dom inion “had a duty to order . . . three m illion tons of waste coal under the two Post-COD Confirm ations.” In support, Bransen points solely to the statem ent in those contracts that “DVP [Dom inion] shall subm it weekly order to Seller [Bransen].” ECF No. 34 at 13. In response, Dom inion begins its argum ent by claim ing there is no genuine dispute that it properly rejected Bransen’s product. To support its position, Dom inion turns to Va. Code § 8.1A-30 2, which establishes a foundational principle of Virginia contract law—that is, “the effect of provisions of the [UCC] m ay be varied by agreem ent.” ECF No. 39 at 20 . Dom inion argues that the Parties varied the UCC’s acceptance and rejection provision by agreeing that Dom inion could arrange to test any ready pile prepared for delivery to VCHEC, per the Pre-COD Confirm ation, and reject any ready pile that failed to m eet specifications or was otherwise unsuitable for use at VCHEC, per the Services Agreem ent. Say Dom inion, it did indeed reject 18 Bransen’s proffered ready piles following independent laboratory analysis, which revealed the presence of coke breeze. Id. at 21. In any event, Dom inion asserts, Bransen intentionally prevented Dom inion from “ha[ving] a reasonable opportunity to inspect [the goods]” by interm ingling the coke breeze with coal on the stock. Dom inion argues that once it “finally learned of the possibility that coke breeze was present in the stockpile, it quickly alerted Bransen to the issue, diligently investigated the allegations, and, upon confirm ing that Bransen could not create coke-breeze-free ready piles, im m ediately rejected all the ready piles as nonconform ing piles.” Id. Additionally, Dom inion argues that it is irrelevant whether or not Bransen provided Dom inion adequate assurance of perform ance. Id. at 22. Because Bransen fails to point to any facts dem onstrating that Dom inion dem anded assurance, Dom inion argues it is legally irrelevant whether Bransen provided such assurance. Furtherm ore, Dom inion argues that Bransen com m itted num erous m aterial breaches long before Bransen offered any of the alleged assurance to which it now points. Id. at 23. As such, Dom inion argues that it acted well within its rights by term inating the contracts. In any event, Dom inion argues, Bransen failed to provide any adequate, com m ercially reasonable assurance of perform ance. According to Dom inion, any offers m ade by Bransen contem plated transactions after VCHEC’s J uly 20 12 COD and thus could not have served as assurance of perform ance under the Pre-COD Confirm ation, the whole purpose of which, Dom inion argues, was for Dom inion to attain perform ance fuel for pre-COD perform ance testing. Id. at 24. Likewise, Dom inion then argues that Bransen fails to assert that its offers of perform ance were adequate or tim ely with respect to the Services Agreem ent or Post-COD Confirm ations. Dom inion then argues that the Post-Confirm ations im posed no m inim um purchase or weekly order obligation. Dom inion claim s that the express m inim um -purchase obligation that is present in the Pre-COD Confirm ation was intentionally om itted from the Post-COD Confirm ations because of the possibility that experiences during perform ance testing could 19 inform Dom inion’s evolving understanding of its post-COD needs. Id. at 26. In any case, Dom inion argues that Bransen’s claim s are precluded by the first-m aterial breach doctrine. Dom inion claim s that Bransen does not and cannot allege that Dom inion ran afoul of any contract before Bransen itself com m itted m ultiple breaches. Id. at 26. Therefore, Dom inion argues, the first-m aterial breach doctrine long excused Dom inion from any alleged contractual obligations that Bransen claim s Dom inion failed to perform . Id. at 28-29. Finally, Dom inion argues that Bransen’s claim s are precluded by its failure to allege any recoverable dam ages and its failure to m itigate dam ages. Id. at 29. According to Dom inion, Bransen com pletely fails to proffer evidence that it has suffered any recoverable dam ages under the term s of the Parties’ contracts or m itigated any claim ed dam ages, even if those dam ages were recoverable. Id. V. AN ALYSIS a. W h e th e r Bran s e n ’s D e live ry o f Co ke Bre e ze W as An tith e tical to Its Co n tractu al Obligatio n s At issue is whether there is a genuine dispute of m aterial fact regarding whether the delivery of coke breeze by Bransen 10 to the Leased Property was im proper and thus a breach of contract. Although it adm its that it delivered “approxim ately 43,0 0 0 tons” of coke breeze to the stockpile for which Dom inion paid, see ECF No. 34 ¶ 12; see id. at 12, Bransen repeatedly asserts that the coke breeze “m et the requisite quality specifications as set forth in the Pre-COD Confirm ation,” id. ¶ 17; see also id. ¶¶ 10 , 20 . As a prelim inary m atter, within the Pre-COD Confirm ation, “Run-of-Mine Coal” is m arked with an “X,” indicating that that is the product to be delivered; further, attached after “Run-of-Mine Coal” are certain specifications. Bransen’s 10 The Parties set forth lengthy argum ents concerning whether Bransen used the coke breeze m erely as a base layer or, alternatively, m ixed it with coal to deceive Dom inion. Whether the coke breeze was used as a base layer (or for any other purpose) is im m aterial, here, because Bransen’s acts of sim ply delivering and charging Dom inion for that product breached the Parties’ agreem ents. Further, the coke breeze that Bransen delivered was produced at an industrial facility owned by J ewell Coal and Coke Co. which, as Bransen has conceded, was not an approved source under the Pre-COD Confirm ation. See ECF No. 29 (Ex. 18 “Peters Interview”); id. Ex. 15 (“Bransen Dep.”) 121:9-18). A com plete review of the Pre-COD Confirm ation leaves no doubt that all product was required to com e from an approved source. Id. (Ex. 5 (“Pre-COD Confirm ation”)). 20 assertions are belied by the evidence set forth in the instant m atter. In fact, Bransen’s owner and president, would not have previously said—after the coke breeze had been delivered and invoiced to Dom inion—that he was “a lil [sic] nervous about Dom inion not approving.” ECF No. 29 (Ex. 19 (“Em ail From Peters to Brown (May 5, 20 11,))). Nor would he have said that he was “em barrassed” about what had happened, that he “did not request nor receive perm ission from Dom inion to purchase and bill Dom inion for the purchase of the coke breeze under the term s of the agreem ent,” that he “accept[ed] full responsibility for having im properly charged Dom inion for the coke breeze,” and that he “realize[d]” that he would “not be able to m eet the delivery requirem ents without purchasing additional coal at his cost.” ECF No. 29 (Ex. 18 “Peters Interview”). Further, Peters lam ented: It has always been [m y] intention to deliver to Dom inion the quantity of coal called for under the contract at the contract specifications, which he has always known would require the purchase of additional coal for which Dom inion would not pay him . Id. From this adm ission, one can reasonably conclude that coke breeze did not fit the contractual specifications and, thus, fell outside the bounds of the contractual specifications. In other words, one can deduce that what was delivered—coke breeze—was not what was expected—“Run-of Mine Coal,” the product to which the Pre-COD Confirm ation’s specified. Sim ilarly, Peters described coke breeze as an alternative to “gravel” and as “m ore porous,” id., than Run-of-Mine Coal, thus im parting it “superior drainage capabilities,” id. (Ex. 17 (“Peters Affidavit”) ¶ 17). Bransen prim arily relies on the affidavit of Peters for the proposition that coke breeze “m et the perform ance fuel specifications.” Id. Such an allegation is conclusory and, in any case, the statem ents contained in his affidavit are underm ined by his adm issions contained elsewhere. Thus, coke breeze is not Run-of-Mine Coal and therefore could not have m et the specifications in the Pre-COD Confirm ation. It is very clear to this Court that there is no genuine issue of m aterial fact regarding whether coke breeze was im properly delivered and thus placed Bransen in breach of contract. 21 b. W h e th e r D o m in io n Acce p te d o r Re je cte d Bran s e n ’s Pro d u ct As a prelim inary m atter, all of Bransen’s counterclaim s are barred by the first-m aterialbreach doctrine, which provides that where one party has “com m itted a m aterial breach[] . . . that party cannot enforce the contract,” such that the other “is excused from perform ing his contractual obligations.” Horton v. Horton, 48 7 S.E.2d 20 0 , 20 4 (Va. 1997); see also id. (“A m aterial breach is a failure to do som ething that is so fundam ental to the contract that the failure to perform that obligation defeats an essential purpose of the contract.”). Bransen cannot allege that Dom inion ran afoul of any contract before Bransen itself com m itted a m aterial breach—that being, the unauthorized delivery of coke breeze. Nevertheless, the Court will still engage in an analysis of Bransen’s argum ents. Bransen argues that Dom inion failed to properly and tim ely reject the shipm ents that Dom inion claim s were unsuitable. Bransen argues that pursuant to Va. Code § 8.2-60 6, Dom inion is deem ed to have accepted the product shipm ents if it either fails to m ake an effective rejection after a reasonable opportunity to inspect, or if it does any act inconsistent with Bransen’s ownership. ECF No. 34 at 11 (citing Va. Code § 8.2-60 6(b) and (c)). This Court disagrees. There is no genuine issue of m aterial fact regarding whether Dom inion properly rejected Bransen’s unauthorized shipm ents of coke breeze. Virginia law is clear that “the effect of provisions of the [UCC] m ay be varied by agreem ent.” Va. Code Ann. § 8.1A-30 2(a). As this Court has explained, § 8.1A-30 2 “affirm atively establishes that ‘freedom of contract is a principle of the [UCC].’” Barnette v. Brook Rd., Inc., 457 F. Supp. 2d 647, 658 (E.D. Va. 20 0 6) (quoting § 8.1A-30 2, cm t. 1). This freedom applies to the acceptance and rejection of goods and any resulting waiver under § 8.260 5. See Hanw ha Azdel, Inc. v. C & D Zodiac, Inc., Civ. A. No. 6:12-CV-0 0 0 23, 20 14 WL 2452892, at *5 (W.D. Va. J une 2, 20 14). As to what constitutes an acceptance of goods, “acceptance of goods occurs when the buyer . . . fails to m ake an effective rejection [subsection 22 (1) of § 8.2-60 2], but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them .” Va. Code § 8 .2-60 6(1)(b). Here, the Parties varied the UCC’s acceptance and rejection provisions by agreeing to a specific fram ework for rejections rights. Specifically, they agreed that Dom inion could arrange to test any ready pile prepared for delivery to VCHEC, ECF No. 29 (Ex. 5 (“Pre-COD Confirm ation”)) at Attachm ent 2 § II.A) and reject any ready pile that failed to m eet specifications or was otherwise “unsuitable for use” at VCHEC, id. (Ex. 9 (“Services Agreem ent”) at § 3(b), (d)). After receiving the anonym ous tip letter in m id-Decem ber indicating that Bransen had delivered substantial quantities of coke breeze to the stockpile on the Leased Property and had taken steps to hide that product from sight, Dom inion investigated the allegations, see id. (Ex. 16 (“Workm an Dep.”) 29:8-40 :15), and, as confirm ed by Peters in a signed and verified sum m ary of the February 15, 20 12 interview, Dom inion determ ined that the tip was accurate in this respect, id. (Ex. 18 “Peters Interview”) (indicating, am ong other things, that “[n]o one from Dom inion cam e to the [stockpile site]” during the delivery of coke breeze). Pursuant to the language of the contract, Dom inion rejected Bransen’s proffered ready piles following independent laboratory analyses 11 revealing the presence of coke breeze. Regardless of whether the coke breeze served as a base layer or was interm ingled with the coal in the stockpile, Dom inion could not have had a reasonable opportunity to inspect the product.12 Indeed, on ce Dom inion learned of the possibility of a breach—i.e., the possibility that coke breeze was (im properly) present in the stockpile—Dom inion alerted Bransen to the issue, investigated the allegations stem m ing from the tip letter, and, upon confirm ing that Bransen could not create coke-breeze free ready piles, im m ediately rejected all the ready piles as nonconform ing. 11 Although the Parties do not fully explain this issue, one can reasonably conclude that if testing had to be done, one could not distinguish the physical appearance of coke breeze from coal with the naked eye. 12 Even if the Court were to conclude that Dom inion accepted the product, which it does not, Dom inion properly notified Bransen of the nonconform ity of the goods within a reasonable tim e after Dom inion discovered or should have discovered the defects. See Va. Code Ann. § 8.2-60 7(2). 23 c. Ad e qu ate As s u ran ce an d Cu re Bransen alleges a several reasons why “[Dom inion’s] purported events of default are the result of [its] own actions,” including that Bransen “m ade num erous attem pts to obtain assurances of adequate perform ance,”13 and that Dom inion “refused Bransen access to the stockpile.” Bransen argues that it voluntarily provided adequate assurance—or tried to cure any alleged defects—(1) as to the Pre-COD Confirm ation, by offering to buy back or replace the entire stockpile; (2) as to the Services Agreem ent, by offering to perform under Dom inion’s direction; and (3) as to the Post-COD Confirm ations, by offering to deliver one m illion tons of coal in 20 13. ECF No. 34 at 12. Specifically, Bransen asserts that although it offered to replace or buy back the stockpile, Dom inion “steadfastly refused” the offers. Id. ¶¶ 31-33. Bransen also claim s that “it had financing in place for this tran saction with the intent to sell the coal as house coal in Europe.” Id. (citing id. Ex. 17 (“Peters Affidavit”) ¶ 17). These assurances by Bransen were not com m ercially reasonable and could never save the im proper delivery of the coke breeze. Bransen’s assertion that it secured financing is contradictory to Peters’ own testim ony, as is the suggestion that European buyers had been secured. ECF No. 39 at 16 (citing ECF No. 29 (Ex. 15 (“Bransen Dep.”) 52:16-58:19 (describing potential, but uncom m itted, buyers in Ireland and an unfunded potential investor)); see ECF No. 29 (Ex. 15 (“Bransen Dep.”) 52:16-58:19) (describing an uncom m itted but potential investor)); see also ECF No. 29 at 12 (citing Ex. 16 (“Workm an Dep.”) 44:22-45;7; Workm an Decl. ¶¶ 9-10 )). After approxim ately two years of good-faith efforts by the Parties to resolve the instant m atter without litigation, Dom inion, via a J uly 21, 20 14 written letter, form ally declared the occurrence of Events of Default and m aterial breaches under the Master Agreem ent, the PreCOD Confirm ation, the Post-COD Confirm ations, and the Services Agreem ent, pursuant to the 13 As for any claim by Bransen that it sought to obtain perform ance assurance from Dom inion, the Master Agreem ent explicitly states that “[Dom inion] shall not be required to provide Perform ance Assurance to the extent that an Event of Default or Potential Event of Default has occurred and is continuing with respect to [Bransen].” ECF No. 29 (Ex. 1. (“Master Agreem ent”)). 24 default and notice requirem ents under Sections 8.1 and 9.3 of the Master Agreem ent, and Sections 11 and 30 of the Services Agreem ent. ECF No. 29 (Ex. 24 (“Letter from Dom inion to Bransen”)). Bransen failed to respond in any form to the J uly 21, 20 14 letter. As such, Dom inion form ally term inated the Master Agreem ent, the Pre-COD Confirm ation, and the PostCOD Confirm ations on J uly 25, 20 14. ECF No. 29 (Ex. 25 (“Second J uly Letter from Dom inion to Bransen”)). Likewise, after Bransen did not cure any breaches—or respond in any way— under the Services Agreem ent within thirty (30 ) calendar days, Dom inion, by written letter dated Septem ber 5, 20 14, form ally term inated the contract. Id. (Ex 26 (“Septem ber Letter from Dom inion to Bransen”)). Bransen argues that it was not afforded a vital opportunity to cure because the J une 22, 20 13 cease and desist letter, issued by Dom inion, prohibited Bransen from accessing the Leased Property and perform ing any alleged cure attem pts. ECF No. 34 ¶ 38 ; see ECF No. 29 (Ex. 27 (“Cease and Desist Letter”)). Further, Bransen argues that it was in fact illegal for it to enter the Leased Property because, as of J une 30 , 20 14, neither Bransen nor CTI were operators or controllers on the Leased Property, with Dom inion having entered into a services agreem ent with Om ega Holdings on J une 24, 20 13. ECF No. 40 at 8-9 (citing Ex. 16 “Om ega Services Agreem ent”). But the fact rem ains that Dom inion com plied with the tim ing requirem ents of all applicable notice, term ination, and cure provisions in 20 14 when it notified Bransen of defaults and m aterial breaches under the Master Agreem ent, the Pre-COD Confirm ation, the Services Agreem ent, and the Post-COD Confirm ations, and dem anded a term ination paym ent. And, the fact rem ains that Bransen never responded—regardless of whether it, in fact, was able to cure. Certainly, there m ay be a kerfuffle over Bransen’s actual ability to cure (i.e., whether it did secure financing, whether it could have accessed the Leased Property to cure the stockpile). But it cannot be disputed that Bransen m ade no attem pt to cure during the tim e it was contractually allotted subsequent to Dom inion issuing the J uly 21, 20 14 written letter. Whether Dom inion’s 25 J une 22, 20 13 cease and desist letter im peded Bransen’s opportunity to cure does not alter this conclusion. Therefore, there is no genuine dispute as to a m aterial fact in the context of cure attem pts m ade after the delivery of coke breeze and the resulting breach of contract. VI. CON CLU SION For the aforem entioned reasons, this Court will GRANT Dom inion’s Motion, ECF No. 28. The direct dam ages that flow from the breach of the im proper delivery of coke breeze are supportable in the am ount of $ 1,957,325.0 0 . Accordingly, the Court will DENY Bransen’s Motion, ECF No. 33 and any am ount of dam ages requested therein. Let the Clerk send a copy of this Mem orandum Order to all counsel of record. It is SO ORDERED. ____________________/s/________________ James R. Spencer Senior U. S. District Judge ENTERED this 30 th day of April 20 15. 26
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