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VALERO MARKETING & SUPPLY CO. v. GREENI OY & GREENI TRADING OY

June 14, 2005.

VALERO MARKETING & SUPPLY COMPANY Plaintiff,
v.
GREENI OY & GREENI TRADING OY Defendants.



The opinion of the court was delivered by: DICKINSON DEBEVOISE, Senior District Judge

OPINION

This matter is before the Court on Plaintiff's, Valero Marketing & Supply Company ("Valero"), motion for partial summary judgment against Defendants, Greeni Oy and Greeni Trading Oy (together "Greeni"), for breach of contract. Valero is a corporation incorporated in the State of Delaware with its principal place of business in San Antonio, Texas. It is engaged in the business of blending components purchased from third parties into reformulated gasoline. Greeni Trading is a corporation incorporated in Finland with its principal place of business in Helsinki, Finland. It is engaged in the business of buying and selling petroleum products and chartering oceangoing vessels.

  Valero's Complaint alleges that it suffered substantial loss resulting from Greeni's failure to deliver to it, within a certain delivery window, naphtha*fn1 for which it had contracted. Valero contends it is entitled to partial summary judgment on the issue of Greeni's liability. It contends that Greeni is liable for the losses it suffered because it was unable to blend the naphtha with other components into reformulated gasoline for delivery into the cash market before September 30, 2001.

  I. Background

  A. Valero's Relationship with Greeni

  In early August 2001, Ilkka Kokko, a petroleum trader and one of two owners of Greeni Trading, contacted its cargo broker, Cees van der Hout of Starsupply Petroleum Feedstocks, Inc. ("Starsupply"),*fn2 to advise him of the availability of a quantity of naphtha which Greeni owned and was interested in selling. Van der Hout undertook the task of selling Greeni's naphtha. Among the individuals van der Hout contacted was Stuart Burt, the trader responsible for Valero's blending operation in Perth Amboy, New Jersey. On or about August 15, 2001, Valero, as buyer, and Greeni, as seller, entered into a contract, orally through van der Hout (Greeni's standard practice), for the delivery of 25,000 metric tons ("mt") of naphtha to Valero's shore tanks in New York Harbor.*fn3

  B. The Contract Terms

  Greeni agreed to sell and Valero agreed to buy 25,000mt of naphtha to be delivered between September 10-20, 2001. At the time the deal was reached, the naphtha was in stock at Hamburg, Germany and was owned by Greeni. On the same day the oral agreement was reached, van der Hout faxed a written confirmation of the deal to Burt and Kokko. The confirmation detailed the deal in terms of, inter alia, product, quantity, quality, timing of delivery and pricing, the fact that the vessel on which the naphtha would be shipped was subject to inspection and approval by Valero's Transportation Group and that title and risk of loss or damage to the naphtha would remain with Greeni throughout the voyage and until the product passed at the flange connection between the vessel's manifold connection and the shore line at the discharge port, New York Harbor. The confirmation also provided that English law and arbitration would govern the contract, a term to which Valero did not object or affirmatively agree to. On or about August 17, 2001, Valero sent to Greeni a written confirmation. Valero's written confirmation contained similar provisions to Greeni's, but stated that New York law and jurisdiction would apply. Greeni did not object or agree to the terms contained in Valero's confirmation.

  Greeni enlisted its ship brokers to locate a vessel to transport the naphtha and shortly thereafter located the Bear G. On or about August 22, 2001, Kokko fixed the Bear G subject to charterer's approval, a subject that was set to expire on August 29, 2001. Greeni lifted the subjects to the Bear G on August 29, 2001, prior to nominating the vessel to Valero. On or about August 30, 2001, Greeni nominated the Bear G to Valero. The same day, upon receipt of Greeni's nomination, Lawrence Smith, of Valero's Transportation Group, rejected the nomination of the Bear G. Valero's reason for rejecting the Bear G was that it did not meet Valero's criteria for acceptance. Smith's review of the vessel was based on his knowledge of the vessel's history and a review of relevant reports, including a report on the Bear G made available by the Oil Companies International Marine Forum ("ILIMF"). The report stated that on November 16, 2000, the Bear G entered the Port of New York with fuel oil leaking into the ship's ballast tanks. The report also stated that the United States Coast Guard found that oxygen levels in the ballast tanks were not adequate, that a stripping line to the No. 8 cargo tank had failed and that the forward firefighting station was not adequate. Van der Hout relayed Valero's rejection of the Bear G to Kokko. Despite Valero's rejection Greeni decided to use the Bear G to transport the naphtha, noting that Valero had accepted the vessel on a recent transaction with Greeni.*fn4 The Bear G completed loading and sailed from Hamburg, Germany on September 10, 2001 (the first day of the contractual delivery window). On September 14, 2001, a second agreement was reached, under which Valero would accept delivery of the naphtha via barges (from the Bear G to Valero's dock) at Greeni's risk and expense.*fn5 The agreement also stipulated that Valero would accept naphtha delivered to it before September 20, 2001 at the full contract price and that it would accept, at a discounted price, naphtha delivered to it between September 20-24, 2001.

  The Bear G arrived in New York Harbor at 3:30 a.m. on September 22, 2001, 27½ hours after the contractual delivery date of September 20, 2001. Greeni contends the Bear G's voyage was affected by Hurricane Gabrielle in the North Atlantic and the delivery of the naphtha was affected by the September 11, 2001 terrorist attacks in the United States. Upon the Bear G's arrival, Valero refused to permit the Bear G to unload the naphtha cargo directly to its tanks at Stolhaven Terminal.*fn6 Greeni then discharged its cargo to the barges of the other receivers to whom it had sold the naphtha. Greeni did not deliver any naphtha to Valero by September 20, 2001 or by September 24, 2001. II. Discussion

  A. Summary Judgment Standard

  A motion for summary judgment will be granted if after drawing all inferences in favor of the moving party, "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law". Fed.R.Civ.P. 56(c); Apalucci v. Agora Syndicate, Inc., 145 F.3d 630, 631 (3d Cir. 1998) ; Todaro v. Bowman, 872 F.2d 43, 46 (3d Cir. 1989); Davis v. Portline Transportes Maritime Int'l, 16 F.3d 532, 536 n. 3 (3d Cir. 1994); Pollock v. Am. Tel. & Tel. Long Lines, 794 F.2d 860, 864 (3d Cir. 1986).

  At the summary judgment stage, the court's function is not to weigh the evidence and determine the truth of the matter, but rather to determine whether there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). A genuine issue may exist if the record taken as a whole could lead a rational trier of fact to find for the party opposing summary judgment. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

  Under Fed.R.Civ.P. 56(c), the moving party bears the burden of pointing out to the district court an absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). The court will take the nonmoving party's allegations of fact as true. Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir. 1976). If the moving party meets its burden, the opposition bears the burden ...


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