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CRS Proppants LLC v. Preferred Resin Holding Co., LLC

Superior Court of Delaware, New Castle

August 17, 2016, Submitted; September 27, 2016, Decided

C.A. No. N15C-08-111 MMJ CCLD

Opinion

JOHNSTON, J.

PROCEDURAL CONTEXT

This dispute is over an admitted breach of contract to buy certain quantities of sand used in the oil and gas industry. On August 27, 2015, Plaintiff CRS Proppants d/b/a Northern White Sand LLC ("CRS") sued Defendant Preferred Resin Holding Company, LLC ("Preferred"). CRS alleged Preferred breached several provisions of the parties' heavily-negotiated Purchase and Sale Agreement ("PSA"). On September 30, 2015, Preferred answered and filed counterclaims, alleging that the PSA's liquidated damages provision is unenforceable, and that there are material questions of fact regarding the parties' proposed dry/wet plant expansion.

On June 10, 2016, [*2]  CRS filed its motion for summary judgment. CRS argues it is entitled to summary judgment because Preferred admitted it did not make two consecutive quarterly purchases. CRS also contends that the liquidated damages provision is unambiguous and enforceable. Finally, CRS asserts that Preferred has no valid defense to its failure to perform pursuant to the PSA.

STATEMENT OF FACTS

CRS is a supplier of northern white sand, which is typically used in the process of hydraulic fracturing. Preferred uses dry sand for its resin-coated products business, and ships dry sand to its customers who are directly involved in hydraulic fracturing.

Preferred entered into the PSA, dated July 3, 2014, to purchase sand from CRS. CRS was acquired by plaintiff Northern White Sand LLC.

In early 2014, CRS informed Preferred that it was preparing to expand its "Plant" in order to increase sand producing capacity. Section 2.1(g) in the PSA allowed for an automatic reduction in the Quarterly Quantities if CRS did not complete its "Plant" expansion by April 1, 2015.

CRS produces two types of sand — dry and wet — that are used in the hydraulic fracturing process. CRS maintains two sand-producing facilities, a Dry Sand Plant ("Dry Plant") and [*3]  a Wet Sand Plant ("Wet Plant"). CRS completed expansion of its dry plant on March 12, 2015. On March 26, 2015, Preferred notified CRS of the completion. CRS did not complete expansion of its wet plant until after June 1, 2015.

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2016 Del. Super. LEXIS 520 *

CRS PROPPANTS LLC d/b/a NORTHERN WHITE SAND LLC, a Delaware limited liability company, Plaintiff and Counterclaim Defendant, v. PREFERRED RESIN HOLDING COMPANY, LLC, a Delaware limited liability corporation, Defendant and Counterclaim Plaintiff.

Notice: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.

Prior History:  [*1] Upon Plaintiff and Counterclaim Defendant's Motion for Summary Judgment.

Disposition: GRANTED IN PART. DENIED IN PART.

CORE TERMS

liquidated, Quantity, Plant, Quarterly, impracticability, dry, termination, ton, negotiated, Default, frustration, calculated, ambiguous, downturn, estimate, proportionate, multiplied, square, foot, oil, unenforceable, calendar, buy

Civil Procedure, Summary Judgment, Entitlement as Matter of Law, Appropriateness, Judgments, Evidentiary Considerations, Burdens of Proof, Nonmovant Persuasion & Proof, Contracts Law, Damages, Types of Damages, Liquidated Damages, Business & Corporate Compliance, Contracts Law, Standards of Performance, Impracticability, Impossibility of Performance, Frustration of Purpose, Defenses, Contract Conditions & Provisions, Contract Conditions & Provisions, Standards of Performance, Contract Interpretation, Ambiguities & Contra Proferentem, Intent, Parol Evidence