Drummond Coal Sales, Inc. v. Norfolk Southern Railway Company, No. 7:2016cv00489 - Document 181 (W.D. Va. 2018)

Court Description: MEMORANDUM OPINION. Signed by Chief Judge Michael F. Urbanski on 8/21/2018. (ck)
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Drummond Coal Sales, Inc. v. Norfolk Southern Railway Company Doc. 181 CLERK' S OFFICE U,S,DISX COURT AT ROANOKE,VA FILED lN 'fl'Y UM TED STATES D ISTRIG COU RT FO R M W ESTERN D ISTRIG OF W RGM RO AN O KE D IVISION D RU Y Ats 22 2218 JUL C.DUDLEY CLERK sv. ON D COAL SALE S,lN C., hDdp Tv CUERK CivilAcion N o.7:16cv00489 Plnindffy V. By: M ichaelF.Urbansld NoltFoLltkolrrl-m ltw ltAll,wAv ChiefUnited StatesDistdctludge co- Av , D efendnnt. M EM OR XN DUM O PEW ON Thisisthe second tim e the cotuthasbeen called upon to resolve adispute between thesetv o pardesarising outofa2006 contractforrailtransportaéon servicesfrom a term inalin Charleston,South Carolinato 23 specified coal-butning powerplantsin the southeastern U nited States.Thepardesresolved theirinitialdisputein 2010,agreeing to am end certain provisionsofthe contractand extend itsterm .PlaintiffD rum m ond Coal Sales,Inc.now seeksa declaradon thatitsperform anceunderthe contract,asam ended, should beexcused. Drum m ond'stheory ofthiscase from the outsethasbeen thatthe m atketfor importedcoalatthemajorityofthe23contracttzally-designateddestinadonshasceasedto exist.A saresult,ithasbeen unableto m eetitsrninim um volum e obligadonsunderthe pltqies'contract.In the course ofdiscovery,D rum m ond'stheory shifted.The cturentthrust ofD rum m ond'sargum entisthatdefendantN orfolk Southern Railw ay Com pany entered into confidentialthitd-party contractswith thedesénation pow erplants,reqlniting the destinadonsto sltip zninim um volum esofcoalundertheircontractsorpay shortfallfees. Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 1 of 33 Pageid#: 7762 Dockets.Justia.com Drum m ond contendsthese third-party contractspreventthe desdnationsfrom taking coal on D rum m ond'sconttactand depriveD rum m ond ofthebenehtofthebatgain itstruck with N otfolk Southern. Foritspart,N orfolk Southern contendstllisissim ply a case ofbuyer'srem orse. N orfolk Southern assertsD rumm ond waswellaware atthe tim e the conttactwasexecuted and lateram ended thatenvironm entalregulationsloorning on thehorizon could affectthe m arketforcoalin the southeastern U nited States.D rum m ond also wasawarethatN orfolk Southern had separate,conhdentialtransportation contractswith thedesdnation utiliées. N orfolk Southern insiststhatD mlm m ond,a soplùsécated party,understood and accepted the risksinherentin thiscontract,requiringitto ship certain volum esofcoalorpay a shortfallfee.A ssuch,D mxm m ond should notbe excused fiom perform ing becausethedeal clid notturn outasithad hoped. Thereisno dispute thatsince 2011,D rum m ond hasslaipped no coalunderthe parées'contract.N oristhere any disputethatD nzm m ond haspaid N orfolk Southern rnillionsofdollarsin annualshortfaE feesasaresult.W hatisin dispute,how ever,isw hy D m m m ond failsto m eetitsrninim um volum e requitem entsyearafteryear.And asto their view son thatissue,thesepardesarelike two tzninspassing in the night. Asdetailed below,the particularfactualcircllm stancesatplayin thiscaselead the courtto conclude thatthebreach ofcontractclnim salleged in CountO nem ustberesolved by afinderoffact.Accordingly,the cotutwillD EN Y the crossm odonsfozsum m aty judgment(ECF N os.122 & 123)astotlaefrstcountoftheam endedcomplaint.Thecourt Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 2 of 33 Pageid#: 7763 alsowillDENY NorfolkSouthern'smotion (ECF No.122)asto CountSLx,alleging rescission,m oclification,orreform ation ofthe contract,to the extentitrelieson CountOne. Therem aining countsofthe am ended com plaintfailasa m atteroflaw.D rum m ond cannotmaintainacauseofactionagainstNorfolkSouthernforunjusterichment(Count Two)giventheexpzess,validconttactgovezningthesubjectmattezatissue.And,as explained below,Dtummond'sdefensesoffotcemajeute(CountThtee),frusttationof purpose(CountFour),orimpossibility/impracdcabilityofperformance(CountFive) cannotsurdvestzmmaryjudgment.Assuch,thecourtwillG NorfolkSouthern's motion (ECF No.122)asto thesefourcounts,aswellasto CountSix totheextentitrelies on CountsTwo through Five. 1. D mpm m ond isin the businessofm arkeéng and selling Colom bian coal.N orfolk Southetn isa freightrnilroad engaged in the transportation ofgoodsand m aterialsin the southeastern,eastern and rrlidwestezn United 'States. A. Onlanuary20,2006,NorfolkSouthern andDrlmmond enteredinto aconttact rfC-9337'')forthetransportadonofcoalandcoalproductsfrom theShipyatdlkiver Terminal(TTSRT7')in Charleston,South Catolinato 23 coal-fredpowerplants(the fr estinations')in thesoutheastern United States.Thiscontractbetweenacoalsupplierand a railcarrierisutaiquein theindustry.C-9337 doesnotguarantee the sale orshipm entofany am ountofcom m odity;tatlaet,D tum m ond istequired to m arketand successfully sellitscoal to theutility D estinations.Theend price ofthatcoal,paid by theutility,consistsoftwo Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 3 of 33 Pageid#: 7764 componentparts- thepriceofthecoalitself(setbyDmmmond,thecoalsupplier)and the costto transportit.Typically,utility custom ersenterinto confidentialtransportation contractswith railcarriers,leaving coalsupplierslikeD rumm ond in the dark asto whatthe utiliées'transportation costsare.By entering into itsown ttansportadon contract,C-9337, Drllm m ond purchased a schedule ofcalculable,guaranteed ratesthatitcould useto price and sellitscoalto theutilitiesin thism arket. To thatend,Aldcle 13 ofC-9337 providesforbasetransportadon ratesforeach net ton ofconnm oditysbipped by D m m m ond from SRT on N orfolk Southern raillinesto the 23 D estinations.These rates,based on the speciik D estination and slnipm entcharactedsdcs, are setforth in detailin AppendicesA -H ofthe parées'contract. Pursuantto Article 27,D rum m ond isrequired to ship am inim um volum eofcoal each yearofthe coneactterm from SRT to one orm ore ofthe 23 D estinadonsoh N orfolk Southern'sraillines.Dspm m ond m ay slzip thisguaranteed volum e pursuantto C-9337 or any tlnird-party contract.Ifitfailsto sl' lip the pzatanteed voltzm ein any given year, Drummond mustpayNorfolkSouthern ashortfallfee.Article27(i)furtherprovidesthatif D rum m ond notx esN ozfolk Southern thatitanticipatesnotbeing able to ship the guaranteed volum efrom SRT to the D esénations,the pattiesshallwozk togethetin good faith to identifyand im plem entsalesand transportalternativesthatwillpermitD rum m ond to satisfyitsguaranteed vollzm e obligations. Also relevantto thisdisputeisAldcle 20,which pzovidesthatN orfolk Southezn m ust pay D zum m ond cettain teftm dsfotthecostofim ptovem entsm ade to railinfrasttuctutein Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 4 of 33 Pageid#: 7765 South Carolina.These refundsare calculated on apernetton basisofcom m odity shipped from SRT by N orfolk Southern,regazdlessofw hetheritisshipped by D rtzm m ond. C-9337also contlinsaforcemajeuteprovision,Article29,wllich providesthat neitherpartyshallbeliable for any delay ornonperform ance caused in whole orin partby any cause notwithin the controlofsaid party,including withoutlim itaéon: any act of G od or of a public enem y or terrorist act, wars, rebellions, labor troubles, strikes, lockoutsj riots, em bargoes, blockades orinterventions or expropriations by govetnm entor governm ental authorities, interference by civil, nlilitary or governm entalauthorities,othez civiluntest,failure ot delay of m anufacttzrers, suppliers or öther tlnird parties to deliver m aclainery orequipm entor otherwise to perform ,or any Force MajetzreEventwith tespectto liinderMorgan ozaConsignee. Theoriginalterm ofC-9337 wasten years,from 2006 to 2016.ln April2006, DmmmonddeclaredaforcemajeureeventpursuanttoArdcle29ofthecontract,citing IG nderM organ'slfailureto expand theportcapacity atSRT.N orfolk Southern sued D rum m ond forbreach ofconttact,which action subsequently wasresolved by theparéesat a settlem entconference conducted by the undersigned,then a United StatesM agisttate Judge.SeeNorfolkSouthernRailwa Com an v.Dmzmmond CoalSales Inc.,CaseNo. 7:08cv00340.The partiesentered into a settlem entagreem entand executed am ut'ualrelease. The settlem entagreem entcontem plated an am endm entto C-9337,which extended the contractterm through 2019 butzeduced theguaranteed vobam e reqe em entsetforth in Article27 andadjustedthetermsoftheinfrastnzctuterefund setfort .h in Aldcle20.2All otherprovisionsof(2-9337 wereto rem nin in fullforce and effect.Am endm entN llm ber1 1KinderM organ ownstheSlzipyard W verTerminalin Charleston,South Carolina. 2The am endmentto (2-9337 ftutherprovided thatfailure to expand the physicalsize and throughputcapacity ofSRT, regardlessofthereasonforsuchfaillzre,shallnotconsdtuteafozcemajeureeventundertlzecontzactpursuanttoArdcle 29. Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 5 of 33 Pageid#: 7766 to C-9337wasexecuted onlanuary 12,2010.Oneweeklatez,CaseNo.7:08cv00340was clisnaissed from the docketofthiscourt. B. InJanuary2016,Dnzmmondbroughtjtziton theconttact,asamended,in the N ozthern DisttictofAlabam a.N ozfolk Southern flled a m oéon to transfervenue to the W estetn DisttictofVitginiain theAlabam a case,and sim kztaneously flled am otion to teopen thecase,assign the m atterto theundersigned,and enforce the settlem entagreem ent and m utazalreleasein tlnisdistrict'sCase N o.7:08cv00340.ln an opinion entered August29, 2016 in CaseN o.7:08cv000340,the courtheld thatCountsOne and Two ofD rum m ond's Alabam acom plaintw erebarred by theparées'm ut'ualreleasebutCountsTllreethrough Seven were not.Therem aining countsofDm m m ond'sA labam a com plaintthereafterw ere transfetred to thisdistrict.Drum m ond subsequently am ended itscom plaintto allege the following six clnim s: * CountO ne: D eclaratory Rehef- Excused Perform anceD ueto N orfolk Southetn'sBreach * CountTwo:M oneyHad andReceived and/orUnjustEnrichment * CountThree:DeclaratoryRelief- ForceMajeure / @ CountFour: D eclaratoryRelief- Flazstzation ofPurpose * CountFive:Impossibility/lmpracdcabilityofPerform ance * CountSix:Rescission,M odihcation orReform adon C. Two factualnarradvescom etogetherto form the basisforD rum m ond'sam ended complaint.Setting thesceneforthemajorityofDrummond'sclqims,CountsThreethrough Five,isthectzrrentstateofthe coalm arketin thezelevantazea.D fnam m ond contendsthat since the contractwasam ended in 2010,thedem and forcoalatthe23 contracttzally- Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 6 of 33 Pageid#: 7767 designated D estinatonshasdeclined dzam atically.SeeSchwattzExpeztRepott,ECF N o. 128-2,at3.Specifically,12 ofthe 23 D esénadonsidentified in C-9337 retired between 2012 and 2015 dueto theMetcuryand AitToxicsStandard (fK51ATS''),wlnichwentinto effectin 2012.J-Q at4-5.Theremaining11D estinationscone ueto burn coal,butmuch lessofit, dueto the incteased availabilityand lowezpziceofnatkualgas.Id.at6.Additionally,these D esdnationshavebegun to soutcehigh-sulfur,lowet-costcoalfrom the N ottlaetn A ppalachian region and the IllinoisBasin,ratherthan the low-sulfurcoalD mlm m ond im portsfrom Colom bia.3Id.at11. N otfolk Southern genetally doesnotdisagteewith these facts.ltaclm owledgestlae dem and forcoalam ong theD estinadonshasdecreased.Butitm aintainsthatD mlm m ond w asaw ate ofthechanging m azketatthetim e thepazdesexecuted theam ended conttactin zolo- specifically,theshiftaw ay from low-sulfurcoal,thedeclining costofnam ralgas,and the environm entalreguladonson thehorizon.See SteulD ep.,ECF N o.132-2,at83-85,89- 96,98,118-120,122,1249DszmmondR.30q$(6)Dep.,ECF No.132-6,at120,130-40. A dditionally,N orfolk Southern offersevidence thatthe rem aining coal-flred powerplants continueto solicitbidsforcoaldelivery,and thatthedem and fozcoalattheseutilitiessince 2010 farexceedsD rumm ond'sannualguaranteed volmnerequirem ents.SeeECF N o.132- 17.According to N orfolk Southern,thereason theseplantsdo notbuy coalfrom D rum m ond issim ply am atter ofecononaics- thepdceischeapetelsewhere.SeeSteulD ep., 3' FheadventofM ATS required coal-fired powerplantsto have som e type ofscrubbing technologyto zeducehydrogen chlozide em issions,N ewer,largerplantsalready had scrubbersin place to rem ove sulfur clioxidein orderto comply M' itlz earlier environm entalreguladons.Older,sm allerplantstlzatdid nothavescrtzbbershad been puzchasinglow-sulftzrcoal to sadsfy theseemissionsstandardspre-bfztTs.Becausethe costofretroftting an existing coal-flred plantwitlla scrubberwashigh,theplantswithoutscrubbersdeclined to make such capitalim provem entsand instead tedred in response to M ATS.The remnining plants,which had scm bbers,now havelessofa need fotlow-sulfurcoalto com ply with environm entalreguladons.Schwartz ExpertReporq ECF N o.128-2,at4-5. Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 7 of 33 Pageid#: 7768 ECF No.132-2,at166-679DrummondR.309$(6)Dep.,ECF No.132-6,at54-55,120, 142-43. N evertheless,D rtzmm ond positsthatitwasa basic assllm péon ofthecontractthat m orethan halfofthe23 D esénaéonsw ould notclose or stop burning coalduting the contractualpetiod.D m m m ond allegesthtee zelated butlegally distinctconcepts- force majeute(CountThtee),frusttationofpupose(CountFout),andimpossibility/ impracticabilityofperformance(CountFivel- inanefforttoexcuseitsperformancebased on thesem arketchanges. Butthere ism ore.N otonly did halfofthe 23 D esdnationsstop burning coalorclose after2010--ofthetem nining 11D esdnaéonsthatstillburn coal,8 have separate, conûdentialtransportation contractswif.h N orfolk Southern thatpreclude them fzom taking coalon C-9337 withoutincurring liqtzidated dam ages.4Transportation contractsbetween utiv esand railcarriersare com m on in theindustry.See SteulD ep.,ECF N o.132-2,at8283.Sim ilarto C-9337,thesethitd-party contractssettransportadon ratesforcoalsllipped to utititiesfrom certain origins.sAlso likeC-9337,theseconttactscontain guaranteed vollxm e requitem entsand provide forliquidated dam agesshould thevolum e com m itm entsnotbe m et.Som evolum erequitem entsareashigh as9584- m eaning a utilitywotlld haveto ship 95% ofthe coalitreceivespursuantto thatutility'stransportadon contractwit. h N orfolk 4Itshould benoted thatitisnotonly theseeightD estinationsthathave separate,confidentialtransportation contracts witlzN orfolk Southern. 5The thl .rd-party contractsbetween'the D estinadonsand N ozfolk Southern were executed atvariouspointsin tim e,and som ehavebeen am ended during therelevantperiod.M ofthese tlzird-party contracts overlap therelevantte= ofC9337itzsom erespect. Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 8 of 33 Pageid#: 7769 Southetn.6Accozding to D m m m ond,thistendetsthetatesin itsown ttansportation contract,C-9337,worthless. A 11ofthese third-partyut' tlity contractscontain confidentiality provisions.Thus,while D tnlm m ond m ay havebeen awareoftheirexistence atthe tim eitexecuted and am ended C- 9337,itwasnotawaze ofthei. rterms.SeeM cclellan D ep.,ECF N o.132-8,at47;StetzlD ep., ECF No.132-2,at82;DrummondR.30$)(6)Dep.,ECF No.132-6,at93-94. SRT isadesignatedorigininsome(butnotal1)ofthethitd-partycontracts.As N orfolk Southern pointsout,C-9337 expressly allow sD m m m ond to m eetitsrninim um voltzmerequirementsby shipping fzom SRT totheDesdnadonspursuantto C-9337 ffand/or anyThirdPartyContracttsl.''Thus,conceivably,Dmmmond could meetitsguaranteed volum e com m i% entsby shipping coalfrom SRT on theutilities'ttansportation contracts. H owever,D rllm m ond alw ayswasable to ship coalon theutilities'contracts.The entire pum ose ofentering into itsow n transportation conttactwith N orfolk Southern,C9337,wasto guatantee a scheduleofratesfora duration oftim ethatD nzm m ond could use tosellandshipcoaltotheDestinations.NorfolkSoutheznR.30q$(6)Dep.,ECFNo.1101,at78-79;seealsoHamiltonDep.,ECF No.132-9,at47-48rfFrom the'begitlning...the statem entswere thatD zum m ond would help N S,N S would help D rum m ond,D rllm m ond would help usgetinto m arketswherewehadn'tserved beforeand,likewise,wewould help them getinto mazketswheretheyhadn'tserv'ed before.').Necessarilyimpliedin that contractisDrum m ond'sability to actually use thoserates.D m m m ond bargained foran 6WhileonemkhtarguethatDrllmmondcouldsatisfyitsguaranteedvollxmezequizementstmder(79337bysllipping fhe 5% difference to these Destirmdons,D rum m ond insiststhisisimpracdcal,asutilidesdo notbuy coalitzpiecem eal. AccordingtoDl nlmmond,95% mkhtaswellbe1000/0.Tr.ofApr.13,2018Hrp,ECFNo.173,at36-389seealso ZehsingerD ep.,ECF N o.128-6,ut114. Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 9 of 33 Pageid#: 7770 opportunityto use thesespecificratesto try to sellinto thism azket.D m m m ond allegesthis oppozttznitywasforeclosed by N orfolk Southern'sdouble dealing. Thus,notonly clid halfofthe23 D esdnaéonsidenéfied in C-9337 stop burning coal orclose aftet2010,butthe rem aining coal-flred plantshad theirown minim lAm volum e obligationsto N orfolk Southern,decim ating thevalueofC-9337 to D rum m ond.Thisform s thebasisforCountO neofD m m m ond'sam ended com plaint,allegitag excused perform ance due to N orfolk Southern'spriorm aterialbreach ofcontract.7 D. Thepao eshaveftledcrossmodonsfors'pmmaryjudgment.Norfolk Southern movesfozjudgmentinitsfavorastoallsix claims.Drlammond movesforslzmmary judgmentastoCountOneonly- specifically,itsallegadon thatNorfolk Southern breached C-9337 by entering into separate,confidentialtlnird-party contractsthatdeprived D rum m ond ofthebenehtofitsbatgain.Theissueshave been fullybriefed and argued,and thismatterisripeforadjudication. I1. Putsuantto FederalRuleofCivilProcedure56(a),thecouztmustffgzantsummary judgmentifthemovantshowsthatthereisnogenuinedisputeasto anymatedalfactand themovantisendtledtojudgmentasamatteroflam ''Fed.R.Civ.P.56(a);seeCelotex Co .v.Catrett,477U.S.317,322 (1986);Glnnv.EDO Co .,710F.3d209,213 (4th Cir. 2013).W henm aking thisdetev ination,thecourtshould considezffthepleadings, depositions,answerstointerrogatories,and admissionson fie,togetherwith ...(any) 7Cotm tO ne also allegesN orfolk Southem bzeached the contractby foiling to work with D tnxmm ond in good faith to m eetannualm inimllm voblme requirem entspursuantto Ardcle 27,and by fniling to pay infzastgucm re refllndsdue D nlmm ond in a tim ely fashion,asrequired byAo cle 20. Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 10 of 33 Pageid#: 7771 affidavits''filed by the pardes.Celotex,477 U .S.at322.W hethera factism atetialdepends on therelevantsubstantivelaw.Andezsonv.Liber Lobb lnc.,477U.S.242,248(1986). ffo nly disputesoverfactsthatmightaffectthe outcom e ofthe suitundetthe governing law willproperlyprecludetheentryofsummatyjudgment.Factualdisputesthatareirrelevantor unnecessarywillnotbecounted.''1d.(citadononaitted).Themovingpartybeatstheiniéal btuden ofdem onsttating theabsenceofa genuineissue ofm atetialfact.See Celotex,477 U .S.at323.Ifthatburden hasbeen m et,thenon-m oving partym ustthen com eforward and establish thespecilk materialfactsin disputeto survivesummaryjudgment.M atsushitaElec. Indus.Co.v.Zerlit.hRadioCo .,475U.S.574,586-87(1986). In determiningw hetheragenuineissue ofm aterialfactexists,the couttviewsthe . factsand draw sallreasonableinferencesin thelightm ostfavorable to the non-m oving party.. cztptm ,710F.3d at213 (citingBondsv.Leavitq629F.3d369,380 (4th Cir.2011)). Indeed,ffgiltisanfaxiom thatinrulingonamodon forsummaryjudgment,theevidenceof thenonmovantisto bebelieved,and alljustifiableinferencesareto bedrawn in hisfavor.''' McAirlaids Inc.v.Iiimberl-clarkCo .No.13-2044,2014W L 2871492,at*1 (4t. h Cit. June25,2014)(internalalterationornitted)(citingTolanv'.Cotton,134S.Ct.1861,1863 (2014)(percuriaml).M oreover,Tfgclredibilitydete= inations,theweiglting oftheevidence, and thedrawingoflegiémateinferencesfrom thefactsarejuryfunctions,notthoseofa judge....''Anderson,477U.S.at255.However,thenon-movingpartyTfmustsetforth specifk factsthatgo beyond the fm ereexistenceofa scintilla ofevidence.'''G lnn,710 F.3d at213(quotingAnderson,477U.S.at252).Instead,thenon-movingpaztymustshow that Tftheteissufficientevidencefavodng thenonmovingpartyforajurytoteturn avetdictfor Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 11 of 33 Pageid#: 7772 thatparty.'?Res.BanksharesCo .v.St.PaulM erc lns.Co.,407 F.3d 631,635(4t. h Cir. , ' 2005)(quotingAnderson,477U.S.at249).ffln otlaerwords,tograntsummaryjudgmentthe gcjourtmustdetet-minethatnoreasonablejurycouldfindfozthenonmovingpartyonthe evidencebeforeit.':Mossv.ParksCor .,985F.2d736,738(4t. hCir.1993)(citingPerini Co .v.PeriniConst.Inc.,915F.2d121,124(4thCir.1990)). 111. Thepartieshavefiled crossmodonsforsummaryjudgmentasto CountOne, alleging excused perfozm ancedue to N orfolk Southern'spriorm aterialbreach ofcontract. <fG enerally,apartywho com m itsthe flzstbreach ofa conttactisnotendtled to enforcethe contract.''Hortonv.Horton,254Va.111,115-16,487 S.E.2d 200,203-04 (1997)(citadons orrlittedl.8Such breach,ifmaterial,excusesthenon-breaclaingpartyfrom perfot-mance.Id.at 116,487 S.E.2d at204.<f A m aterialbreach isa failure to do som ething thatisso ftm dam entalto thecontractthatthe failuze to perform thatobligation defeatsan e'ssendal ptuposeofthecontract.''Id.at115,487S.E.2dat204(citaéonsomitted).G easpecifk am ountofm onetarydam agesflowing ftom thebreach can serveasevidence ofam aterial breach,proofofdam agesisnotessentialffwhen the evidenceestablishesthatthe breach w as so centralto the parties'agreem entthatitdefeated an essendalpurpose ofthe contract.7'Id. at116,487S.E.2dat204(citationsonaitted). Thereare three aspectsto Dm m m ond'sm aterialbreach ofcontractclnim .First, DrummondallegesthatNorfolkSouthernbreachedAtticle13of(2-9337and / ortheduty ofgood faith and faitdealing by actively im pairing D ram m ond'sability to useitsbargained- 8A rdcle 5 of(2-9337 providesthattheintem retadon and performanceofthe contractshallbe govem ed by Virginialaw . 12 Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 12 of 33 Pageid#: 7773 fotrates.Second,DrummondcontendsthatNotfolkSouthetnbzeachedArdcle27(i)ofthe contractby failing to work in good fait.h with D tnpm m ond to idendfy alternativesthatw ould allow D m m m ond to m eetitsnainim um volum erequitem ents.Thitd,D rum m ond clnim sthat NorfolkSouthernbzeachedArdcle20$)byfailingtopayinadmelymannerinfrastructare refundsdue to D rum m ond.A sdetailed below,theunique factualcircum stancespresented in thiscase lead thecottttto concludeallthree aspectsofCountO netaise queséonsoffact thatmustberesolvedby ajury. A. Atticle 13 In C-9337,D rllmm ond purchased an opporttznity to use a schedlzleofcalculable, guaranteed tatesto sellcoalto 23 D esénaéonsin theSoutheast.H alfoftheseD esdnadons havebeen elim inated due to a declinein m arketconditions.W hilethism atketdeclinedoes notgiveriseclitectly to D rtzm m ond'sbreach ofconttactclnim ,itcannotbeignored in the broadercontextofthiscase.D rum m ond'sallegaéonsthatN orfolk Southern actively impaired itsabilityto use theratessetforth in Ardcle 13 ofC-9337 m ustbeview ed against tl' tisfacm albackdtop. Ofthe11contracmally-designated Destinationsstillbtzrningcoal,threehave(ozhad) transportation contractswith N orfolk Southezn during therelevantperiod thatdo notlist SRT asan origin:AshevitleStation (C-9290),CloverStation (C-7545)9andW atereeStation (C-9623).Allthreeofthesecontzactshaverninimum volumerequirements.Thus,these uélitiescouldnottakecoalonC-9337withoutinctzrringlklzidateddamages.Norcould D rum m ond sllip coalfrom SRT on theseutility contracts. 9Thepartiesdisputewhether'TN &W O rigins''in C-7545itlcludesSRT.Evenifitdoes,itdoesnotchangethecourt's analysisgiven tlze minim um volum ezequizementin thiscontract. Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 13 of 33 Pageid#: 7774 One ofthesecontractsisworthy offurtherm ention.C-9623,N orfolk Southern's contractwith W atetee Stadon,clid notlistSRT asan origin.Thecontract,asam ended,had a temnofAugust9,2012AbroughMarch31,2015.Oneyearlater- //prtheinstantlawsuitwas filed- N orfolk Southern entered into a new contractwith W ateree Station,C-9815,which hadaterm beginrlingMarch 1,2016thatwasextendedbyamendmenttoJune30,2018. Tellingly,thisnew contractexpressly providesthatsllipm entsunderC-9337 counttowards W atetee Station'sminim um volum e requitem ents. Six ofthe D estinationsthatstillbtzrn coalhave contractswith N orfolk Southern that do includeSRT asan origin:Belew sCreek,Allen Stadon,M arshallStation,Roxbozo Staéon, M ayo Station,and M clntosh Station.H owevet,allofthesecontractscontain m inim tzm volum eobligaéonsthatpreclude the D estinationsfrom taking coalon (2-9337 without incurring liquidated dam ages.lo Theoreécally,D rtzm m ond could havereceived creditunderC-9337 towardsits nninimum volumetequirements(andperhapsavoidedshortfallfees)bysllippingitscoal from SRT to these six D estinationson the utilities'transportation contracts,using thei. rrates. SeeC-9337j27(providingforcredittowardsnlinimum vobxmerequitementsforshipments 10C-9569,coveringBelewsCreek,AllenStadon,andMarshallStadon,hadute= ofluly1,2010tluoughAugust31, 2010.ItrequiredBelewsCreekandAllen Stadon toship 95% ofthecoaltheyreceive,and25% ofthecoalM azshall Staûon receives,pursuantto C-9569.A. secondcontractcovering theseD esdnaùonsfrom Septem ber1,2010through June30,2018,C-9545,asamended,requiredallthreeDestinadonstoship95% ofthecoaltheyreceivepursuanttoC9545. (79290,covetingRoxboroStadon,MayoStadon,andAshevilleStadon,hasaterm ofJuly1,2010throughltme20, 2020.ItrequiresRoxboro Stadon and M ayo Stadon to sllip 95% ofthecoalthey receive,and 85% ofthe coalA sheville Station receives,pursuantto C-9290.W hile SRT islisted asan origin witlzzespectto Roxboro Station nd M ayo Stadon, itisnotan origin with respectto Asheville Stadon. C-9517,covedngMclntoshStadon,hadate= ofJanuary1,2010throughDecember31,2010,butwasamendedto extendthete= tofTthelaterof(i)April30,2016or$)thedatebywllichShipperhasslûpped 125,000tonsafterMay1, 2015 pursuanthereto.''M inim um voblm e comm itm entsinczeased by am endm entfrom 60% to 95% atvarioustim esin thelife ofthecontract. Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 14 of 33 Pageid#: 7775 from SRT toDesdnationsputsuanttofftltisContractand/oranyThirdPartyContracttsl'). ButthisisnotwhatD rum m ond bargained forby entering into C-93379itbargained forits own scheduleoftates,which Aatesare diffetentthan those setforth in theutilityconttacts. D m m m ond,a coalsupplier,alwayshad the opporm rlity to ship coalto theutilities using theutiliées'transportaéon rates.Thoserateswerepreviously unknown to D rllm m ond, so D nzm m ond purchased from N orfolk Southern itsown flxed setofrates- tatesthat,asit turnsout,aregoodforonlythreeofthe23DesénaéonslistedinC-9337:11W ateree(asof M arch 1,2016,plzrsuantto C-9815),W ansleyStationand HammondStadon. N orfolk Southetn enteted into two conttacts- onewith D rum m ond,the coal supplier,and onewit.h the utilityitself- forthe transpoztation ofcoalto the sam e utility D esdnation.A reasonabletrieroffactcould find thatN orfolk Southern'salleged double dealing so deprived D rum m ond ofthebenefititexpected from the base ratessetforth itl A rticle 13 of(2-9337 thatitdefeatsan essentialpum ose ofthe conttactand consdtm esa materialbreach.Atthesamedme,ateasonablejutorcould :ndthatDrummond simply struck a bad bargain by entering into thisunique transportation contractasacoalsupplier, and thatN otfolk Southern did notm aterially breach (2-9337 by entering into separate contractswith theutilities.AsNorfolkSoutherntestifiedinitsRule309$(6)deposidon,C9337 istheonly contractofitstype- itdoesnothave any other transportation contracts wit.h coalsuppliers,onlywit.h utilities.NorfolkSouthernR.30q$(6)Dep.,ECF No.110-1,at 83-84. 11Ofcourse,D rum mond hasnotslzipped any coaltm der(2-9337 during the relevantcontracm alterm ,noteven to these three D esdnadons. 15 Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 15 of 33 Pageid#: 7776 Q To be sure,C-9337 doesnotcontain a <tm ostfavored nadons''clause.Butthe fact thatD rum m ond boughtaschedule ofratesto useto ship coalto 23 D esénationsand,in reality,only had the opport-unity to usethose ratesto sllip to three D estinaéons,cannotbe ignored.On top ofthat,D tqlm m ond subrnitsevidence thatN orfolk Southern actually incentivized theutiliéesto sotzrce coalfrom N orthern Appalachiaand the IllinoisBasin zegion.SeeLaw son D ep.,ECF N o.156-6,at82-859ECF N o.92-19ECF N o.92-17;see e. ., C-9545,atjj18.5,19.3.A reasonablejurorcould findon thisrecord thatNorfolkSouthern acévely worked againstD rtzm m ond and m atezially breached C-9337 in theprocess. N orfolk Southern'salleged breach can take one oftwo form s.Im plicitin theratesset forth in Article 13 and AppendicesA -H ofC-9337 isD tnlm m ond'sability to usethosetates. SeeSchmidtv.Bartech G .Inc.,119F.Supp.3d374,383(E.D.Va.201$,aff'd,620F. App'x153(4thCir.2015)rfgN hatisnecessarilyimpliedisasmuchapat'toftheinsttnlment asifplainlyexpressed,andwillbeenfozced assuch.7')(ciéngPelle rinv.Pelle in,31Va. App.753,525S.E.2d 611,614 (2000))9Southern R .Co.v.Franklin& P.R.Co.,96Va.693, 32S.E.485,487(1899)(<fItaddsnothingtothewrittenconttacttoinfetanobligationtodo w hatwasacttzally intended by the pardesand whatisessenéalto giveeffectand vitality to it.7).Thus,thereisaquesdon offactastowhetherNorfolkSouthern'ssimultaneous contractualdealingsm aterially breached Arécle 13 ofC-9337.Itisforthe Enderoffactto determinewhetherN orfolk Southern acdvelyw orked to preventD lnlm m ond from sh pping coalusing theratessetforth in (2-9337,which N orfolk Southern acknowledgeswasan essentialpurposeofthisagreem ent,and whetherthe alleged double dealing worked a m atetialbzeach ofthe conttact.United Statesex zel.Vit iniaBeach M ech.Servs.Inc.v. Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 16 of 33 Pageid#: 7777 SAMCO Const.Co.,39F.Supp.2d661,670(E.D.Va.1999)(<fA material,asopposedtoa nninor,breach occurswhen the nonbreaching party did notreceive the substandalbenehtof itsbargain.>);g. i Va.Elec.& PowerCo.v.Bransen Ener Inc.,850F.3d 645,655 (4th Cir. 2017)(Bransen'sdeliveryofcokebreezeand subparcoalwasfltstmaterialbreach,as essentialpurpose ofpazties'agreem entswasto provideD om inion with coalthatw ould be acceptable petfotm ance fuelto testthePlant'sopetadng capacity and com plywith environmentalregulations). Alternatively,D rum m ond arguesN orfolk Southern breached the im plied duty of good faith and fairdealing.SeeTandber Inc.v.Advanced M ediaD esi Inc.,N o. 1:09cv863,2010WL 11569540,at*3(E.D.Va.Jan.26,2010)(<fgAlnimpliedcovenantof good faith and fai. rdealing arisesonly outofspecificcontracm alprovisions;itdoesnotbind thepartieswherenocontracmaldutyisimposed.').fNiolation ofthedutyofgood faith and fai. rdealingconsutaztesabreach ofcontract.''23Wo ston on Contractsj63:22 (4th ed.). gq ourtshaveviewed ffevasion ofthespititofthe bargain,lack of cliligence and slacking off, willf'ul rendering of im perfect perform ance, abuse of a pow et to specify term s, and interference with or failure to cooperate in the other party's performance''asbad faith.glkestatement(Second)ofContracts j 205) cmt.d.Taken together,these examples sensibly reflect the fundam ental principle that a contracting party cannot arbittarily oz unreasonably deprive the other contracting party ofthe benefh ofthe parties'conttacm albargain.See 23 ( Richatd A. Lord, W illiston on Contracts j 63:22 (4th ed. 1990) rfX eitherparty shalldo anything to injure ordesttoy theright oftheotherpartyto receivethebenefitsoftheagreem ent.').In the com m ercial context, and where a covenant of good faitla and fair dealing is im plied, this general principle prevents a conttacting partyfzom T<actging)in a commetciallyunteasonable m anner while exercising som e discretionary pöwer under the conttact.''Lda;seealso U.C.C.j2-103$)(2004)(defizling good Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 17 of 33 Pageid#: 7778 faith as ffhonesty in fact and the observance of reasonable commercialstandardsoffaitdealingin thetrade'). Tandber ,2010 W L 11569540,at*3;seeVa.Vetm iculite,Ltd.v.W .R.G race & Co.-Conn., 156F.3d535,542(4thCir.1998)tffI ) 1jtisabasicprincipleofconttact1aw inVirginia,as elsewhete,thatalthough the duty ofgood faith doesnotpreventa party from exercising its explicitcontracm alrights,a partym ay notexercise contracttzaldiscretion in bad faith,even when such discretionisvested solelyin thatpartp'l;seealso E.ShoèeM arkets,Inc.v.J.D. Assocs.Ltd.P'shi,213F.3d 175,184 (4t.h Cir.2000)rfmlnderthecovenantofgood faith and faitdealing,apatty im pliedly prom isesto refrain from doing anything thatwillhave the effectofinjuringorfrustraéngtherightoftheotherpartytoreceivethefrlxitsofthe contractbetween them.''(applyingMaryland law)).Thereisaquesdon offactastowhether N orfolk Southern acted in bad faith ora ffcom m ercially unreasonablem anner,''Tandber , 2010W i 11569540,at*3,byactivelyimpaitingDrummond'sabilitytoutilimetheratesit bargained forin (79337.W illiston,tt -lp-m,atj63:22 rfThus,whetherparticulatconduct . violatesorisconsistentwith thedutyofgood faith and fairdealing necessnrily dependsupon the factsofthepardcularcaseand isordinntily a queséon offactto be dete= ined by the juryorothezfinderoffact.7). B . A rticle 27 Thereisalso a quesdon offactasto w hetherD rum m ond'sperform anceisexcused byN orfolkSouthern'sbreach oftheexpresspzovision ofArdcle27(i),which provides: If for any calendar year or St'ub Year, as the case m ay be, Shipper (Drtzmmond)notifiesN S thatitanticipatesnotbeing able to sllip the Guaranteed V olum e from O rigin to the D estinations, the parties shallw ork together in good faith to 18 Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 18 of 33 Pageid#: 7779 idendfy and im plem entsalesand ttansportalternatives thatwill pe= itShipperto satisfyitsG uaranteed Volum e obligations. Thisprovision is found in the sam eAtticle ofthe contractthatsetsforth theguaranteed voltzmesand requited shortfallfees.Ardcle27(i)appears,to someextent,to amelioratethe harshnessofthisTftake-or-pay''provision ofthe contract,see Int'lM inerals& Chem .Co . v.Llano,Inc.,770F.2d 879,882-83,885(10th Cir.1985),which isafundnmentalpumoseof the parties'agreem ent. DrummondclnimsNorfolkSouthernbreacheditscontractualoblkationtowork with D rtzm m ond in good faith to find alternativesthatw ould allow D rum m ond to m eetits nainim um voltune com naitm ents.Instead,N orfolk Southerh accepted m illionsofdollats fzom D zum m ond each yearin shortfallfees,despitetransporting no coalon (2-9337. N orfolk Southern arguestlaisprecatorylanguageim posesno legalduty- and even if itdid,Azticle27(i)imposesazzzi///dl/obligation on thepartiesto cooperatein identifying alteznativesthatw ould allow D rlmm ond to satisfy itsguatanteed volum ezequitem ents. N orfolk Southern positsthatD rllm m ond neverexpresslyinvoked the provision ofA rdcle 27(i);rather,itsentperfunctorylettersadvisingitanécipatedshippingnocoalunderthe contractand paid thecozzesponding shortfallfeeinvoicewithoutprotest. These perfunctoryletters,however,plainly putN orfolk Southern on notice that D m m m ond clid notanécipatem eeting itsguazanteed volum eobligationsylzand between 2011and 2015,N orfolkSouthern accepted paymentsofmorethan $35million in shortfall fees from D zum m ond despite the factthatitshipped no coalwhatsoeverunderthecontract. 12N orfolk Southem waswellaw are ofthestate ofthe coalm arket.Itscoalgroup m ettwice perm onth to discussplant closttresand traffc flows.Sm ith D ep.,ECF N o.154-3,at97-108. 19 Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 19 of 33 Pageid#: 7780 DslmmondoffersevidencethatitapproachedNorfolkSouthernwit. hwaystornitkateits liquidated dam agesunderthe contract,butitseffortsw eretebuffed.See Ex.27 to Steul Dep.,ECFNo.132-29DrummondR.30q$(6)Dep.,ECFNo.132-6,at57-76.Drummond furthercitesevidence thatN orfolk Southern knew aboutpotendalopportunidesthrough w lnich D rum m ond could ship coaland avoid shortfallfees,butfailed to shate that informationwithDrummond.NorfolkSouthernR.309$(6)Dep.,ECFNo.110-1,at23644;ECF N o.156-3. Article27(i)providesthatonceDrummond notifiesNorfolk Southern thatit anécipatesnotbeingabletoshiptheguaranteedvoltzme(whichDrummondplainlydidl,the paréesffshallwork in good fait .h to idendfy and im plem entsalesand transport alternatives....,'The term ffshall''ism andatoryin nanzre.Trum ballInvestm ents,Ltd.Iv. W achoviaBank,N.A.,436F.3d443,447(4thCir.2006).W hetherNorfolkSouthezn's effortsconsétutegood fait.hwithinthemeaning ofArdcle27(i),andwhetherNorfolk Southetn'sacdonsconstim tea m aterialbreach ofcontract,arequestionsoffact. C.Article 20 Thethird aspectofD rum m ond'sclnim in CountO neisthatN orfolk Southern breachedAldcle20$)byfailingtopaytheagreed-uponinfrastructurerefundwhen shipping coalfrom theChatleston terminal.N orfolk Southern acknowledgesthattwo ofits shpm entsfrom SlkT- onein 2010 and one in 2016- qua1iûed forthisrefund,butinsistsits initialfailure to creditD rtzm m ond wit. h theserefundswassim ply an ffovetsight.''See Ex.1 to ZehringerDecl.,ECF N o.132-239Def.Summ.J.Br.,ECF N o.132,at!(49.Norfolk Southezn maintainsthatitsaésfieditscontractualoblkadon by adjustingDmmmond's Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 20 of 33 Pageid#: 7781 shortfallfeeto accountforthezefunds,once the oversightwasbroughtto N orfolk Southern'sattendon.See SewellD ep.,ECF N o.132-13,at107-099Ex.1 to Srnit.h D ecl., ECF N o.132-24.ButD rum m ond isquick to pointoutthattheseerrorswere corrected only afterDrummondnotifiedNorfolkSouthern.SeeNorfolkSouthern309$(6)Dep.,ECFNo. 110-1,at313-199Ex.1 to Snnith D ecl.,ECF N o.132-24.Viewed in lightofthebroader factualcircllm stancespresented in tlniscase- specihcally,N orfolk Southern'sconductasa whole- thereaze questionsoffactasto whetherN orfolk Southern'sfailure to pay D tum m ond theinfrastructurerefundsitwasdueunderthe pàrties'contractconséttztesa m aterialbreach. Forthesereasons,thecrossmodonsforsummaryjudgmentwillbeDENIED asto CountOne. IV. Becauseitisprernised on thebreach ofcontractalleged in CountO ne,CountTwo, allegm 'gunjustetlrichment,failsasamatteroflaw.fTheexistenceofan expresscontract coveringthesamesubjectmatteroftheparties'disputeprecludesacbim forunjust enrichment.''CGIFed.Inc.v.FCiFed.,lnc.,814S.E.2d 183,190 (Vk.2018)(citing SouthernBiscuitCo.v.L1o d,174Va.299,311,6S.E.2d601,606(1940)rTgAqnexpress contractdeûning therightsofthepatéesnecessarily precludesthe existence ofan im plied contractofadifferentnatuzecontai/ng thesamesubjectmatter.7l).Accordingly,Norfolk Southern'smoéon forsummaryjudgmentw111beGRANTED asto CountTwo. V. In CountThree,D lnlm m ond seeksrelieffrom itscontractualobhgaéonsby way of Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 21 of 33 Pageid#: 7782 theforcemajeuteprovisioninArticle29.NorfolkSouthetnatguesthatenvitonmental regtzlaéonsdonotfallwithinthelanguageoftheforcemajeureclause.Iturgesthecourtto apply iulesofstatutory construction- specifically,e'usdem enerisand noscitarA sociis- to find asamatterof1aw thatno forcemajeure'event,asthattetm isdefinedin Article29,has occutred. Therule ofe'usdem enerisappliesffwhen apardcularclassofpersonsorthingsis spoken ofin astamteandgeneralwozdsfollow.''Rocldngham Co-op.Fnt'm Btlreauv.C# ofHarrisonbur ,171Va.339,344,198S.E.908,911(1938).fTcWheregeneralwordsfollow specificwordsin astatm oryenumetation,thegeneralwordsaregusually)construed to embraceonlyobjectssimilarin natureto thoseobjectsenumerated bytheprecedingspecific words.''?Yatesv.UnitedStates,135S.Ct.1074,1086(2015)(quotingW ashin ton State D e 'tofSocial& H ealth Selvs.v.Guardianshi Estate ofKeffeler,537 U .S.371,384 (2003)).However,thelanguageinArdcle29doesnotcontainalistofspecificwords followedbygeneralwords.Justtheoppositeistrtze,in fact-Ao cle29refersgenerallyto ffany causenotwithin the controlofsaid pary ''and then setsforth the following nonexclusivelistofexam ples: gAjny actofGod or ofa public enemy or terroristact,wars, rebellions, labor troubles, sttikes, lockouts, riotq, em bargoes, blockades or interventions orexpropriaéonsby govetnm entor governm ental authoriées, interference by civil, m ilitary or governm entalauthorities,other civilunrest,failute or delay.of m anufacttzrers, suppliers or other thitd pardes deliver m acllinery or equipm entorotherwise to perform ,or any Force M ajeureEventwith respecttoliinderM organ oraConsignee. O fthetv o ptinciplesofstataztoryconstrucdon,tloscitura sociis- fdaword isknown by thecom panyitkeeps''- isthe m ore applicablehere.Y ates,135 S.Ct.at1085.Courtsrely Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 22 of 33 Pageid#: 7783 on thisprinciple to fTfavoid ascribing to onew ord a m eaning so broad thatitisinconsistent wit.h itsaccompanyingwords.'''ld.(citingGustafsonv.Allo dCo.,513 U.S.561,575 (1995)). The m axim of noscitur g sociis provides that the m eaning of doubtfulw ords in a stattzte m ay be determ ined by reference to theirassociadon with telated wozds and phzases.W hen general words and specific words are grouped together, the general wordsare lim ited and qualified by the specifc wordsand willbe construed to embrace only objectssinailarin nature to those objectsidenéfied bythespecifk words. Cuccinelliv.Rector VisitorsofU niv.ofVir inia,283V a.420,432,722 S.E.2d 626,633 (2012).Applyingtlnistenetofstataztoryconsttnlcdon,the.specifcexamplesofforcemajeure eventssetforth in Article29 of(79337 lend m eaning to thegeneralwordsffany cause not within the conttolofsaid party.':N oneoftheeventsdescribed itlthisentunetadon can be read to encom passthe alleged cause ofnonperfotm ancehere- m arketconditionsreslaldng from governm entalregulaéon.EnvironmentalregulaéonsarenotTfactgs)ofGod''orthe resultofwars,strikes,civilurttest,ozfailtzre ofathizd party to perfotm .Changesin m arket conditionsstem nning from envitonm entalregalationsdo notfallwithin theprotecdon ofthe forcemajeureclauseforTfinterventionsy''fTexpropriationsy''orffinterferencebycivil,militaty orgovernm entalauthorities.''N orare they eventsofthe sam etype asthose exam plesset forth in Article29.SeeSwift& Co.v.ColumbiaR .Gas& Elec.Co.,17 F.2d 46,48(4th Cir.1927)(applyingejusdem enerisandholcling ffgclrop shortageisnotincludedam ongthe causesspecifkallym entioned,norisitofthesam egeneralclass');W heelin Valle Coal Co .v.Mead,186F.2d219,222 (4th Cit.1950)rfunderfamiliarprinciplesof interpretation,thegeneralexpressionsTactsofthe governm ent'and fcausesbeyond the Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 23 of 33 Pageid#: 7784 controlofthe lessee'arelim ited to thingsofthe sam egeneralsortasthose specifically set forthin thesameconnection....'');cf.KansasCi Power& LihtCo.v.Pittsbur & Midwa CoalMinin Co '.,No.88-2224 S.,1989WL 151919,at*2-4 (9.Kan.Nov.17,1989) (findingmaterialqueséonsoffactastowhethernonperformanceexcusedbyforcemajeure event,whereagreementdefinedTfforcemajeure''asincludingtfactsorordersofanycourt,. regulatoryagencyoradmirlistrativebodyhavingjutiscliction'). A dditionally,Arécle29 addresseseventsthatdirectly affectthepardes'abilidesto perform thecontract.SeeC-9337,j29(a)(excusing ffdelayornonpetfbrmancen'thatisTfcaused inwholeorinpatt''byaforcemajeuzeevent(emphasisaddedl);seealsoid.aatj29$)rfln theeventapartyisunable>J:#' 4P?ZitsobligadonsunderthisContractbecauseofaForce MajeureEvent....''(emphasisaddedl).lnthiscase,Dtnlmmondoffersnoevidencethat environm entalregulationsrenderitunable to perfot' m underthiscontract. On thispoint,SabineCo .v.ONG W estern Inc.,725F.Supp.1157 (W .D.Okla. 1989),isinstructive.In Sabine,agassellerbroughtstlitagainstabuyerforbreach ofatakeor-pay contract.D efendantO N G W estern,Inc.asserted itstake-or-pay obligaéon underthe contractwasmodihed orexcused byaforcemajeureclause.Theclausein questionprovided thattheparty'scontractualobligationswould besuspended TfgilfeitherBuyerorSelleris renderedunable,whollyorinpart,byforcemajeureorothercauseofanykindnot reasonably witlnin itscontrol,to perfot'm orcom plywith any obligationsor conditionsof thiscontract....''725F.Supp.at1166.Thecontractdefined ffforcemajetzre''toinclude acts ofG od and ofthe public enem y,the elem ents,freezing of w ellsorlines ofpipe,repoiring oraltering m achinery orlinesof pipe, ftres, accidents,breakdowns,strikes,labor disputes, and any other industrial, civil or public disilzrbance, inability to Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 24 of 33 Pageid#: 7785 obtain m aterials, supplies, rights-of-way on custom ary term s, pe- its,orlabor,any actot onnission by parties notcontrolled bythepartyhavingthedifficulty,anyactorornission (including failure to take gas)ofa purchaserofgas from Buyerwhich is excused by any event or occurrence of the character herein dehned asconstittzting forcemajeure,failure ofgassupply,and any law s,orders,rules,regulaéons,acts,or restrnints,of any o governm entalbody or authority,civil or m llitary,or any other causesbeyond theconttolofthepazdeshezeto. ' J-1. L ONG aEeged anumberofevents,including regulatorychanges,which,individuallyorin com binadon,resulted in a substantialdisappearancein them arketfornaturalgas.ld.at 1166-67.An afEdavitsubmitted by ON G in opposidon to plaindff'sm odon forpartial summaryjudgmentdetailed thoseeventsand subnaitted thatfftllepriceofgasunderONG'S conttactwith Sabinezem ained atthe highestpricepaid in the atea,whilethem atketprice declinedsubstandally.''Id.at1168.Thispricedifferendaleliminatedamajorportionof ON G'Ssalesofnaturalgas.J. I. LThedisttictcourtheld,however,thatONG Tffailed to subrnit anyevidenceshowing thatanyoral1ofthesealleged forcemajeureeventsrendered ONG unableto takegaswithin themeaningoftheforcemajeureclause.''Id.at1171. ON G cited Rule 1-305 ofthe 011and GasRulesofthe O klahom aCorporation Com m ission,aruleofa governm entalbody thatarguably fallswithin thecontractual definitionofforcemajeure.Seeidxat1166(definingforcemajeuretoincludeffanylaws, orders,rules,regulations,acts,orrestraints,ofanygovernmentalbody....77).Thecourtheld thatRule 1-305 did notrenderO N G unable to perform ,however.Ld. aat1170.The court reasoned: At best, O N G 'S evidence dem onstrates that the effect of the variousalleged eventsofforcemajetuewasa declinein market dem and and a disparity between O N G 'S contractprice and the m arketprice or value ofgas,with the resultthatif ON G were Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 25 of 33 Pageid#: 7786 to have taken the gas,itw ould have had to resellit at a loss. Such a loss of m azket dem and which,as opposed to absolute dem and,isa function ofprice,and the inability to resellgasata Profit,doesnotzendera patty f<unable''to takegas. Id.at1171(internalcitaéonsomitted). H ere,envitonm entalreguladonsim pacted m atketcondidons.Butthese events cannottçreasonably be said to have been am ong the contingenciescontem plated by the absolving clause.''W heelin Valle CoalCo .,186 F.2d at223.A nd,asin Sabine,there is no evidencein thisrecord establislning theseregulaéonspzevented D m m m ond from ' acttzally perfo- ing underthistake-or-pay conttact.To besute,them arketforcoalislessfavozable to D rum m ond than itwasatthe tim ethe conttactw asexecuted,and the num berof Desénaéonsbtlrninglow-sulflltcoalhasdecreased.Cf.Sabine,725F.Supp.at1179rV hile D efendanthassubrnitted evidencethatithaslostsom e ofitscustom ersand thatits custom erbaseissm aller,itisim plicitin affidavitssubm itted byD efendantand in D efendant'sargtzm entsthatD efendanthascustom erswho stillneed asupply ofgasand that itsparent'sdivision,asa publicutility,isstillobligated to supply custom erswit. h gas.'' (citation ornittedl).But,asNorfolk Southern pointsout,thereissomepriceatwhich D rum m ond could selland ship itscoalto thetem aining D esénations.See Sabine,725F. Supp.at1171rfsuchalossofmarketdemandwhich,asopposedtoabsolutedemand,isa function ofprice,and theinability to resellgasataprofit,doesnotrenderapartyçunable'to takegas.');seealso N.lnd.Pub.Serv'.Co.v.Carbon Cty.CoalCo.,799F.2d 265,275 (7t.h Cir.1986)(holdingIndianaPublicServiceComrnission'sffeconomypurchaseordezs''did notpzeventNIPSCO from usingthecoalitagreed tobuy). Thezeisalso anotherm ethod ofperform ance undertllistake-or-pay contzact- Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 26 of 33 Pageid#: 7787 paym entofshortfallfees.D m m m ond offersno evidenceto suggestthatitisunableto perform bypaym ent.lndeed,ithasbeen paying shortfallfeesto N or 'folk Southern each year since thecontract'sinception. Becausethereisno evidenceofaforcemajeureeventasdehnedinArécle29,noris t. hereevidence thatan' y eventw ould renderD rtzmm ond unableto perform underthistake- or-paycontract,thecourtwillgrantNorfolkSouthern'smotionforsummaryjudgmentasto CountThree. W . CountsFou. rand Fiveallegerelated butlegally distinctdefensesoffrtzsttation of purposeandcomm ercialimpossibility/impracticability.Theelementsofthesetwo doctrinesareessentially thesame.To sutvivesummaryjudgment,Dmmmondmustoffer evidenceto show thecontract'sprincipalptuposehasbeen substantiallyfrtzstrated and/orits performancemadeimpracticableffwithoutp rumm ond'sjfakzltbytheoccurrenceofan eventthenon-occurrenceofwhich w asthe basicassum ption on which the contzactwas made.''Restatement(Second)ofConttactsjj261,265;seealsoLQ atj266.13 TheFourth Circuithad occasion to considerthedefenseofimpossibility/ im practicability in the caseofO eraCo.ofBoston v.W olfTra Foundaéon forthe Perfot-min Arts,817F.2d 1094 (4th Cit.1987).O eraCom an aroseoutofacontract, pursuantto which the plaindffagreed to give foutstaged operaticperform ancesattheFilene Center,an outdoorvenuewitlnin a nationalpark,sponsored by defendantW olfTrap 13Thecout'titlKansas City Power& LightCo.v.Pittsburg & M idway CoalM ining Co.,Civ.A.N o.88-2224 S.,1989 WL 151919(D.Kan.Nov.17,1989),describedthedistinctionbetweenthesetworelateddoctrinesasfollows.fsgulnder the docttineoffrustraéon,perform ance rem ninspossiblebutisexcused becausea fortuitouseventsupervenesto cause a failureofthe consideradon or atotaldestnzcdon ofthe expected valueofthe pezform ance ofthecontract.''1d.at*6. 27 Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 27 of 33 Pageid#: 7788 Foundation forthePetfot-ming Arts.W olfTtap,in turn,agreed to m ake pqym entto plaindff and furnish theplace ofperform ance,to includelighting equipm ent.817 F.2d at1095.On the date ofthefinalperform ance,a severethundezstorm caused apoweroutage.W olfTrap, in agreem entwith theN ationalPark Serdce,cancelled the perform ance outofconcern for the safety oftheperfozm ersand attendees.Dueto tlliscancelladon,W olfTrap failed to makethefinalpaymentundertheconttact.Ldaat1095-96.TheOperaCompanyfiledsuit. W olfTrap defended on theground thatperform ance ofitsobligaion w asexcused underthe doctrine ofim possibility ofpetform ance.ld. TheFourth Circuitadoptedthemodern doctzineofimpossibility/impracécability, wlnichrequiresproofofthreeelem ents:1)theunexpected occurrenceofan interverzingact; 2)thatsuch occturencewasofacharacterthatitsnon-occurrencewasabasicassumption of theagreem entoftheparties;and 3)thatoccturencemadeperfotmanceimptacticable.J.. i at 1102.The ftzstfactto beestablished isthe existence ofan occurrence ofan event,thenon- occurrence ofwhich wasabasicassum pdon on wllich the contractwasm ade. And, in determining the existence of such occurrence, it is necessary to have in m ind the Restatem ent's definition of an ffoccurrence'' in this context as that which, because of the fTdesttuction, oz such 'deteriotation'' of a ffspecilk thing necessary for the perfot-mance'; of the contract frm akes Perfo= ance im practicable.'' J-I. L at1100.Thisoccurrencemustbeunexpected butdoesnotnecessarilyhaveto be unforeseeable.Id.(citingTzansatlandcFinancin Co .v.United States,363F.2d 312,315 O .C.Cir.1966)).Thequesdonisoneofdegree- how unexpected atthetimethecontract wasmadewastheeventthatprevented performance?Ld.aat1101 (quodngCom anlniaDe Nave acaoL1o d Brasileitov.C.G.BlakeCo.,34F.2d 616,619 (2d Cir.1929)). 28 Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 28 of 33 Pageid#: 7789 In O era Com an ,the courtheld thatfftheexistenceofelectricpow erwas necessary forthe satisfactoryperform anceby the Opera Com pany''on thenightin quesdon. ida.at1102.TheFoutth Citcuittem anded the case to the distdctcourt,however,forfm dings asto ffwhetherthepossible foreseeability ofthe powerfailurein thiscasewasofthatdegree ofreasonable likelihood asto m akeim properthe assertion by W olfTrap ofthe defense of im possibility ofperfo= ance.''ld.at1103.The courtexplained: Foreseeability, as we have said, is at best but one fact to be considered in resolving fust how likely the occurrence of the event in question was and, second, whethez its occurrence, based on pastexpetience was ofsuch reasonablelikelihood that the obligor should not m erely foresee the risk but,because of the degree of its likelihood, the obligor should have guarded agninstitoz provided for non-liability againstthe zisk.Thisis a questiontoberesolvedbythetrialjudgeafteracarefulscrudny ofallthe factsin thecase. Id.at1102-03. In theinstantcase,D rum m ond invokesthedefensesofim pracdcability and frustration ofpurposebased on the unexpected closure orsubstantialzeducdon or elim ination ofim ported coalat12 ofthe 23 D estinations,asaresultofenvironm ental reguladons.ffgGjovernmentalregulaéon isforeseeableasamatteroflawy''however,sothese defensesm ustfail.Sabine,725 F.Supp.at1177;see N .lnd.Pub.Serv'.Co.v.Carbon Cty. CoalCo.,799F.2d265,278(7thCir.1986)Soldingimpossibilityandrelateddocttineshave no placewhen a flxed-priceconttactexplicitly assignsaparticulartisk to one party ozthe other;Tfgijtdoesnotmattezthatitisan actofgovernmentthatm ayhavemadethecontract lessadvantageousto onepartf). 29 Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 29 of 33 Pageid#: 7790 W hatism oze,the evidencein thiscase suggeststhatD m m m ond w asawateof envitonm entalconditionsthatrnightaffectthem atketfozcoalatthe tim ethe contzactw as am ended in 2010.See SteulD ep.,ECF N o.132-2,at83-85,89-96,98,118-20,122; DtummondR.30$$(6)Dep.,ECFNo.132-6,at120,129-40.ft 'Whileitmaybetluethatthe extentoftheensuingtegulatonscouldnothavebeen foreseenbyp rummondin20101,itis equallytruethatthewindsofchangeweteblowingand thatp rummondlwasawateofthat fact''Cookv.DeltonaCosp.,753F.2d 1552,1558 (11th Cit.1985).14 ffef'he norm altisk ofa fixed-pziceconttactisthatthem atketpsice willchange.''N. Ind.Pub.Serv.Co.,799 F.2d at275.dtlf,asisalso the case here,the buyerforecaststhe m arketincorrectly and therefore findshim selflocked into a disadvantageouscontract,he has only Aim selfto blam e and so cannotshiftthel'isk back to the sellerby involdng im possibility orrelated doctlines.''1d.at278.(2-9337,asam ended,wasnegodated atnt-m'slength by two sop/ sticated parties.D rum m ond took a risk in entering into atransportation conttactwit.h N orfolk Southern- indeed,thisistheonly contractofitskind the railcarrierhas- and lost. Thenon-occurrence ofM ATS,orany sim ilarenvitonm entalregulations,w asnotabasic assum péon ofthiscontract. Beyond that,D rum m ond cannotm eetthethird elem entoftheim practicability defense.To be stzre,halfoftheconttactually-designated D estinationshave substanéally reduced orelim inated coalconsum ption- orclosed altogether.Buteleven are stilltaking coal.Even though N orfolk Southern'sthird-party utility contractsarguably deterthe 14Indeed, D rumm ond wasinterested in the southeastern m arketto begin with because oftheeffectofenvironm entaj reguladons- D rum m ond could offezlow-sulfurcoalto D estinadonsthatclid pothave scm bbing technology. DrnmmondR.30(1 $(6)Dep.,ECFNo.132-6,at113,1429ECFNo.156-5. Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 30 of 33 Pageid#: 7791 majorityoftheseDestinationsfrom takingcoalpursuantto(2-9337,f'gpjerformancethathas becomemerelymorediffkultorunprohtableisnotenoughtoestablishobjective im practicability.''K ansasCityPower& LightCo.v.Pittsburg & M idw ay CoalM ining Co., No.88-2224S.,1989WL 151919,at*5 (D.Kan.Nov.17,1989)9seealsoBallouv.Basic Constt.Co.,407F.2d1137,1141(4thCir.1969)(rçjectingdefenseofimpossibility,holding ffgtlhemanufactareoft'wohundred acceptablecolum nsmighthavebeen éxtremelydifhcult orso expensive asto consum e any profh the contractorm ay have contem plated,butneither factorexcusesPresttessed'sfailuretom eetitscontractualobligation').Dtnlm mond has failed to establish asam atteroflaw itsabilityto transpoztcoalunderC-9337 iscomm ercially im practical. Adclitionally,T'gtqo show thatperfot-manceofthetake-or-pay contractby paymentis im practicable,even assum ing thatthe otherelem entsofcom m ercialim pzacdcability are satisûed,p rummondqhastheburden ofsubnnittingevidencefrom wllich ajurycould concludethatIp rum mond'slperformanceofthecontractbypaym entwouldrequire unreasonableexpense.''Sabine,725 F.Supp.at1175.D rum m ond offersno evidence thatits generalfinancialhealth isthreatened by thisçontractorotherexttem e financialhazdship.1d.; seealsoid.sat1176rV hetherCgiaveinjustice'wouldresultfrom failuretoexcuse perform ance ism erely an inquiryused to assesswhetherthecostto the conttacdng party of perfo= ing the contractisso excessiveand unzeasonableasto warrantthe conclusion that perfotmancehasbecomeimpracticable.'''(emphasisonlittedl).lndeed,itwould undermine theentirepurposeofatake-or-paycontractto hold thatD zum m ond'sperform anceis excused asazesultofthese m arketchanges.Thepazdes'basic agreem entwasthat 31 Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 31 of 33 Pageid#: 7792 D mzm m ond would slkip a cettain quanéty ofcoalon N orfolk Southetn taillinesto the D esM adonsand,ifitfailed to do so,itwould pay ashottfallfee.M atketchangesdo not affectD m m m ond'sperfotm anceby paym ent. The defense offrusttation ofptupose failsforthe sam e reasons.It,too,requires proofofthreeelements:1)frtzstradon oftheprincipalpurposeofthecontract;2)thatthe ftusttation issubstantial;and 3)thatthenon-occuttenceoftllefm sttadngeventot occurrencewasa basicassum péon on wllich the contractwasm ade.Jdsat1178.As . previously discussed,D rum m ond hasfailed to show thatthe non-occutrence of governm entalregulationswasabasicassum ption on w hich theparties'contractwasm ade. Also,fotreasonsdiscussed supra,D m m m ond cannotshow thatany frustradon ofthe principalpurposeofthecontractissubstandal.Tfgfjn orderforfrusttaéon oftheprincipal purpose ofacontractto besubstantial,itfm ustbe so severethatitisnotfairly to be regarded aswithin therisks...assum ed undezthe contract.'''Sabine,725 F.Supp.at1179 (ciéngRestatement(Second)ofContractsj265(cmt(a))).tfltisnotenough thatthe transaction hasbecom e lessproikable forthe affected party oreven thathewillsustnin a loss.''Sabineat1179(citingRestatement(Second)ofContractsj265(comment(a))). Forthesereasons,thecouttwillgrantsummaryjudgmentin NorfolkSouthern's favoron CountsFotlr and Five. W I. CountSLx,seeldng rescission,m odificaéon orrefotm aéon ofthecontract,is prenaised on the causesofaction setforth above.Assuch,N orfolk Southetn'sm otion for summazyjudgmentwillbederziedasto CountSix,to theextentitrelieson CountOne,and 32 Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 32 of 33 Pageid#: 7793 granted to theextentitrelieson CountsTwo,Thtee,Folzrand Five,forthereasons previously stated. W II. In thiscase,D rum m ond raisesm uléple clnim sin an effortto excuseitsperfo= ance underC-9337.G iven theunique facm alcircum stancesatplay,CountO ne,alleging prior materialbreach ofcontract,raisesquestionsoffactthatmustbezesolved byajuty.Assuch, thecotzrtwillDENY Dmmmond'smoéon fotslxmmaryjudgment(ECFNo.123)and DENY NorfolkSouthern'smotionforslpmmaryjudgment(ECF No.122)astoCountOne. Because CountTw o failsasa m atteroflaw ,and because no reasonable factfindercould find in D tnpm m ond'sfavozon CountsThree,Fotzr,and Five,N orfolk Southern'sm otion for summaryjudgment(ECFNo.122)willbeGRANTED astothesecl/ims.Norfolk Southern'sm odon willbeD EN IED asto CountSix,to the extentitrelieson CountO ne, butGRAN TED asto CountSix,to theextentitrelieson CountsTw o through Five. An appropriateorderwillbe entered. Enteted: >S#- A /z z o/A /w/, u' rior4 . M ichaelF #--ri-. tbanski ChiefUnited StatesDistrictludge . ...--v, Case 7:16-cv-00489-MFU Document 181 Filed 08/22/18 Page 33 of 33 Pageid#: 7794