GSP Merrimack LLC v. Javelin Global Commodities (UK) Ltd.

GSP Merrimack LLC v Javelin Global Commodities

(UK) Ltd.

2024 NY Slip Op 33460(U)

September 26, 2024

Supreme Court, New York County

Docket Number: Index No. 650013/2024

Judge: Margaret A. Chan

Cases posted with a "30000" identifier, i.e., 2013 NY Slip

Op 30001(U), are republished from various New York

State and local government sources, including the New

York State Unified Court System's eCourts Service.

This opinion is uncorrected and not selected for official

publication.

INDEX NO. 650013/2024

NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 09/27/2024

SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 49M

------------·---------X

GSP MERRIMACK LLC INDEX NO. 650013/2024

Plaintiff,

MOTION DATE 02/13/2024

- V -

MOTION SEQ. NO. 003

JAVELIN GLOBAL COMMODITIES (UK) LTD.,

Defendant. DECISION+ ORDER ON

MOTION

----------------------X

HON. MARGARET A CHAN:

The following e-filed documents, listed by NYSCEF document number (Motion 003) 32, 33, 34, 35, 36,

37, 38,39,40,41,42,43,44,45,47,49,58,59,60,61

were read on this motion to/for DISMISSAL

In this breach of contract action involving the purchase and delivery of coaL purchaser GSP

Merrimack LLC alleges that defendant Javelin Global Commodities (UK) Ltd, a coal company,

breached their agreement to provide usable coal in the amount ordered. Thus, plaintiff seeks

damages from defendant's alleged breach of contract claim under the parties' August 2021 agreement

(Count I), and under the parties' July 20, 2022 agreement (Count II); a declaratory judgment that

entitles plaintiff to terminate the parties' Master Sale Purchase Agreement (Count III), and the

Settlement Agreement (Count IV). Defendant now moves to dismiss Counts I, III, and IV of the

complaint; plaintiff opposes defendant's motion. For the reasons below, defendant's motion to dismiss

is denied as to Count I and granted as to Counts III and IV.

BACKGROUND

On February 27, 2019, the parties executed a Master Coal Purchase and Sale

Agreement ("MSA''), which governed the overall relationship between the parties (NYSCEF

# 34, Complaint [Compl], ,i,i 13, 25-30). In general, the MSA provided that Javelin agrees to

deliver coal and GSP agrees to accept and pay for the coal, and that certain actions could

result in "events of default," allowing plaintiff to terminate the MSA (id.). At issue are the

two confirmations, which consist of orders for coal: the August 2021 confirmation (Old

Confirmation) and the July 2022 confirmation (New Confirmation). Critical to the issues

concerning the Old and the New Confirmations is the Settlement Agreement that came

about after defendant failed to perform under the Old Confirmation.

Back in August 2021, the parties executed a confirmation requiring defendant to

deliver 120,000 "short tons" 1 of Northern Appalachian coal to plaintiff by the end of the first

quarter of 2022 ("the Old Confirmation") (id ,i 14; see also NYSCEF # 36, Old Confirmation

1 The complaint does not define "short ton."

650013/2024 GSP MERRIMACK LLC vs. JAVELIN GLOBAL COMMODITIES (UK) LTD. Page 1 of 7

Motion No. 003

[* 1] 1 of 7

INDEX NO. 650013/2024

NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 09/27/2024

dated August 3, 2021). However, at the end of the first quarter, defendant had only

delivered 56,0011.97 tons, resulting in a shortfall of 63,988.03 short tons (Compl ,i 15).

During this time, plaintiff had accommodated multiple requests by defendant for schedule

flexibility, causing plaintiff to incur approximately $370,000 in additional charges to

transport coal (id ,i 16). On April 4, 2022, plaintiff demanded defendant perform its

obligations under the Old Confirmation (id ,i 17). But defendant never performed these

obligations (id.).

Due to plaintiffs desperate need for coal to operate its power plants, plaintiff agreed

to conditionally release its breach of contract claim under the Old Confirmation and the

MSA (id ,i 3). The parties then proceeded in creating the New Confirmation on July 20,

2022. In the New Confirmation, defendant set a higher overall purchase price and placed

additional logistics costs on plaintiff to deliver the coal to its originally contracted

destination (id. ,i 19). The New Confirmation reflected plaintiffs specification for coal

deliveries not to exceed 3.9% sulfur content to meet regulatory, environmental, and

practical limitations and for a delivery date by the end of December 2022 (id ,i,i 22·23;

NYSCEF # 38, New Confirmation ,i,i l · 2).

The same day, the parties entered into a Settlement Agreement (SA) that describes

the parties' understanding of the interaction between the Old and New Confirmations

(Compl ,i,i 20·21). Plaintiff alleges that "the Settlement Agreement conditioned the 'Mutual

Release and Discharge' of [plaintiffs] claims against [defendant] 'upon the execution and

full performance of ... the New Confirmation"' (id ,I 21 quoting NYSCEF # 39, SA ,i 1 -

Mutual Release and Discharge - § 1.1). The following provisions in the Settlement

Agreement "as of the Effective Date and subject to and conditional upon the execution

and full performance of (i) this agreement, and (ii) the New Confirmation, by each Party''

(SA ,i 1.1.) - conditioned the release of Old Confirmation claims on defendant's "full

performance" of the New Confirmation (Compl ,i 21).

On December 30, 2022, defendant breached the New Confirmation by providing

plaintiff with 22,000 short tons of coal with a sulfur content that was over the maximum

allowable limit of 3.9% (id. ,i 32). Defendant admitted to this breach in its February 10,

2023 correspondence (id ,I37). Defendant again breached the New Confirmation by its late

delivery of the last load to plaintiff (id ,i 44). This resulted in a third Event of Default

under paragraph 16.2. 7 of the MSA (id ,i 46). Plaintiff accepted the late delivery, but the

business relationship between defendant and plaintiff was damaged (id. ,i 4 7).

On February 3, 2023, plaintiff notified defendant by letter that it was exercising its

right to terminate the MSA and New Confirmation effective February 22, 2023 (id. ,i 50).

This letter also notified defendant that because the delivery of the unusable coal was

outside the quality specified in the New Confirmation, defendant breached the July 20,

2022 Settlement Agreement, which was conditional upon the execution and full

performance of the New Confirmation (id ,i 51). Because defendant breached the New

Confirmation by failing to deliver the coal on time and in an unacceptable quality of the

coal, plaintiff alleges that plaintiff need not release its claims under the Old Confirmation

since defendants failed to meet the condition in the Settlement Agreement that would

trigger the release (id ,i,i 48·49).

650013/2024 GSP MERRIMACK LLC vs. JAVELIN GLOBAL COMMODITIES (UK) LTD. Page 2of7

Motion No. 003

[* 2] 2 of 7

INDEX NO. 650013/2024

NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 09/27/2024

Following the MSA's Termination procedure in paragraphs 16.4 and 16.5, once an

Early Termination Date is set, the Non-Defaulting Party is required to calculate the

contractual Termination Amount (id. ,I 53). On February 9, 2023, plaintiff notified

defendant of the amount calculated as $4,434,857.85 (id. ,i 55). Under the MSA, the

termination amount must be paid within two business days of receipt of invoice or notice of

termination amount and demand from non-defaulting party (id. ,i 61). Plaintiff claims that

defendant has not paid the termination amount, which has accumulated interest at 8% per

annum since February 13, 2023 (id. ,I 62).

Discussimi

This motion centers on the parties' interpretation of the Settlement Agreement -

whether it is an executory accord or a substitute agreement. Plaintiff claims that under the

Settlement Agreement, plaintiff will release defendants' admitted breach of the Old

Confirmation when defendants fully perform on the New Confirmation, therefore it is an

executory accord. Hence, plaintiff seeks damages for the breach of the Old Confirmation.

Defendant argues that because plaintiff cancelled the Old Confirmation and replaced it

with a New Confirmation, plaintiff may not sue under the Old Confirmation, therefore the

Settlement Agreement is a replacement agreement. Hence, defendant moves to dismiss the

plaintiffs claim seeking damages under the Old Confirmation, among related claims.

Legal Standard

Under CPLR 321l(a)(7), courts must accept the facts as alleged in the complaint as

true, accord plaintiff the benefit of every possible favorable interreference, and determine

only whether the facts as alleged fit within any cognizable legal theory (Leon v Martinez, 84

NY2d 83, 87-88 [1994] [a court must "accept the facts as alleged in the complaint as true,

accord plaintiff Dthe benefit of every possible favorable inference, and a determine only

whether the facts as alleged fir within any cognizable legal theory"]). "Factual allegations

that do not state a viable cause of action, that consist of bare legal conclusions, or that are

inherently incredible or clearly contradicted by documentary evidence are not entitled to

such consideration" (Skillgames, LLC v Brody, 1 AD3d 247, 250 [1st Dept 2003]).

Count J: Breach of Contract for 2022 Shortfall Under Old Confll'mation

Plaintiffs claim under Count I is defendant's breach of contract under the Old

Confirmation by failing to deliver the amount of coal as ordered leaving a shortfall of

63,988.03 short tons (Compl if 15). The defendant breached the New Confirmation when the

delivery of Barge No. 4 loaded 22,000 short tons of coal had a sulfur concentration of 4.13%

and a dry sulfur concentration of 4.44% above the 3.9% sulfur concentration maximum (id.

,i 33). Defendant breached again when loading Barge No.5A had an even higher sulfur

concentration and plaintiff canceled the delivery of Barge No. 5A (id. ,i,i 39-42).

Plaintiff asserts that they are "entitled to damages under the Old Confirmation

because [defendant] allegedly breached the New Confirmation" (NYSCEF # 47, Pltfs MOL

at 9). Defendant argues that plaintiff cannot sue under the Old Confirmation because,

under the Settlement Agreement, the New Confirmation is a substitute agreement and that

they agreed to "cancel;" and "replace" the Old Confirmation with the New Confirmation and

all obligations thereunder permanently ceased to exist under New York law (NYSCEF # 44,

650013/2024 GSP MERRIMACK LLC vs. JAVELIN GLOBAL COMMODITIES (UK) LTD. Page 3 of 7

Motion No. 003

[* 3] 3 of 7

INDEX NO. 650013/2024

NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 09/27/2024

Deft's MOL at 11). Plaintiff responds that the Settlement Agreement is actually an

"executory accord" pursuant to which plaintiff agreed to drop all Old Confirmation claims

only upon full performance of the New Confirmation (Pltfs MOL at 10). Thus, the parties

dispute centers over whether the Settlement Agreement (and/or New Confirmation) is an

executory accord or a substitute agreement.

As plaintiff explains, an "'executory accord means an agreement embodying a

promise express or implied to accept at some future time a stipulated performance in

satisfaction or discharge in whole or in part of any present claim, cause of action, contract

or obligation'" (Pltfs MOL at 10 quoting NY Gen Oblig Law § 15·501). In other words, it is

an agreement "to accept a future performance in satisfaction of defendant's prior

obligations" (Board ofManagers ofAlexandria Condominium v Broadway/72nd Associates,

285 AD2d 422, 424 [1st Dept 2001]).

A substitute agreement is when "the parties have clearly expressed or manifested

their intention ... [to] substitute for an old agreement." (Northville Indus. Corp. v Fort Neck

Oil Terms. Corp., 100 AD2d 865,867 [2d Dept 1984]). The result of a substitute agreement

"extinguishes the old one and the remedy for any breach thereof is to sue on the

superseding agreement" (id at 278). For example, the court in Napster, LLC v Rounder

Records Corp. found that because the new agreement stated "WHEREAS, Company and

N apster have previously entered into a certain Content Agreement ... which the parties

wish to hereby terminate and supersede" did not show an express and explicit reservation

of the right to sue under the prior agreement (761 F Supp 2d 200, 207 [SDNY 2011]). The

Whereas clause expressly states the intention to "terminate and supersede" the prior

contract (id). The contract in Na.psteralso did not show party's intention to sue under the

prior agreement because there was no other language in the contract that indicated an

intention to reserve the claims that arose under the old contract (id ["[n]othing in the 2006

Agreement indicates the parties' intent to reserve claims based on the 'terminated and

superseded' 2001 Agreement"]).

Here the Settlement Agreement is an executory accord because of this language:

"[a]s of the Effective Date and subject to and conditional upon the execution and full

performance of (i) this agreement, and (ii) the New Confirmation, by each Party" (SA at 3).

This expressive language shows the intention of plaintiff to release claims under the Old

Confirmation only if the defendant completes the New Confirmation in full. The language

makes the Settlement Agreement an executory accord due to the intent to release the

previous claims only when the New Confirmation is executed with full performance from

the defendant (see Broadway/72nd Associates, 285 AD2d at 424 [finding that the wording of

the settlement agreement that releases were to be delivered when the repair work was done

by a specific tine and no further repairs were needed for an additional period of time to

constitute an executory accord]; see also Albee Truck, Inc. v Halpin Fire Equip., Inc., 206

AD2d 789, 790 [3d Dept 1994] ["the parties had a dispute on whether the settlement

agreement was an executory accord or a substitute agreement, the court found that the

agreement constituted an accord because the parties did not intend to 'discharge the

existing claim merely upon the making of the accord"').

Defendant focuses on the WHEREAS clause in the Settlement Agreement that state

(Deft's MOL at 11): "the parties wish to cancel all outstanding obligations in respect of the

Contract and replace the contract with a new purchase and sale confirmation to

650013/2024 GSP MERRIMACK LLC vs. JAVELIN GLOBAL COMMODITIES (UK) LTD. Page4of7

Motion No. 003

[* 4] 4 of 7

INDEX NO. 650013/2024

NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 09/27/2024

memorialize the mutually agreed terms to govern a transaction for the sale and purchase of

coal (the New Confirmation)" (SA at 3) and "in consideration of (i) the release and discharge

of GSP Merrimack's outstanding obligations under the Contract; (ii) the release and

discharge of Javelin's outstanding obligations under the Contract; and (iii) the execution of

the New Confirmation, each party has agreed to release and discharge the other party from

its outstanding obligations arising out of or in connection with the contract subject to the

terms of this agreement" (id).

Defendant argues that the court in Napster, stated that under New York law, only

an express and explicit reservation of the right to sue under the prior agreement can allow

a party to reach back to the terms of the replaced contract (Deft's MOL ,r 12). Defendant's

argument is unpersuasive due to three major flaws. The Whereas clauses here are made in

consideration of whether the New Confirmation and Settlement Agreement are executed in

full. The Whereas clause on which defendant focuses is not an operative clause of the

contract. And the court in Napsterdid not rule solely on the Whereas clauses but also the

party's express intent to preserve the original claims (see Napster, 761 F Supp 2d at 207). It

is clear that the operative clause that releases the Old Confirmation claims is tied to the

"full performance" of the Settlement Agreement and the New Confirmation. Further, the

final Whereas clause states "each Party has agreed to release and discharge the other party

from its outstanding obligations ... subject to the terms of this Agreement," which makes the

Whereas clauses operative only to the terms the agreement, and the agreement states the

discharge is in relation with the performance.

As such, defendant's motion to dismiss plaintiffs Count I for breach of contract

under the Old Confirmation is denied.

Count III and JV.· Declaratory Judgment

Plaintiff seeks a declaratory judgment for breach of the New Confirmation to

terminate the MSA (Count III) and judgment seeking a determination on the release and

discharge of claims specified in the Settlement Agreement and whether defendant breached

the Settlement Agreement.

To Count III, defendant argues that declaratory judgment is incorrect for two

reasons: (1) plaintiff is asking to justify past actions given that plaintiffs have already

terminated the MSA; and (2) the declaratory judgment claim is duplicative of Count II,

which sues for breach of the New Confirmation. Plaintiff counters that a declaration from

the court to set out the respective rights and interest under the MSA will serve to clarify

the legal issues disputed.

To Count IV, defendant argues that declaratory judgment in Count IV breach of

the Settlement Agreement- is incorrect for similar reasons as in Count III: (1) plaintiff is

asking for a declaration based on defendant's past actions, (2) the declaratory judgment is

duplicative of Count I, which sues for breach of the Old Confirmation, and (3) the claim fails

because the rights under the Old Confirmation cease to exist. Relatedly, defendant argues

that this claim is duplicative of the plaintiffs breach of the New Confirmation claim in

count II. Plaintiff argues that a declaratory judgment determination is necessary to set out

the parties' rights and settle controversy over the Termination Amount. Plaintiff further

states that defendant has claimed "full performance" under the New Confirmation, and a

650013/2024 GSP MERRIMACK LLC vs. JAVELIN GLOBAL COMMODITIES (UK) LTD. Page 5of7

Motion No. 003

[* 5] 5 of 7

INDEX NO. 650013/2024

NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 09/27/2024

declaratory judgment would settle whether defendant breached the agreements and

whether such breach entitles plaintiff to terminate the MSA (Pltf s MOL at 14). Plaintiff

contends that past damages and future obligations are not duplicative claims and presents

a question that is independent of whether those damages can be recovered under the terms

of the MSA. Plaintiff adds that Count III functions independently of the breach of contract

claim because it is independent of whether defendant is still bound to perform under the

MSA and New Confirmation.

The purpose of a declaratory judgment is "to declare the respective legal rights of the

parties based on a given set of facts, not to declare findings of fact" ( Touro College v Novus

University Corp., 146 AD3d 679, 679 [1st Dept 2017] quoting Thome v Alexander & Louisa

Calder Found, 70 AD3d 88 [1st Dept 2009]). Here, based on their own documents and

pleadings, plaintiff has already started the procedure for Termination of the MSA. For

example, the complaint includes an entire section under the subheading "GSP Terminates

the MSA" (Compl ,r 50). That section implies that plaintiff sent a termination notice on

February 2, 2023-almost eleven months to the day before this case was filed (id ,r 51).

Moreover, plaintiff even attached as exhibits to the complaint the termination notices and

an email from plaintiff to defendant discussing the termination amount, both dated

February 2023 (NYSCEF # 42, Termination Notice; NYSCEF # 43, Correspondence re

Termination amount).

The only future damages plaintiff refers to is the termination amount but fails to

explain why it requires a declaratory judgment rather than just suing for the termination

amount under breach of contract. A suit for declaratory judgment can be duplicative when

there is an adequate, alternative remedy in breach of contract (see Moghtaderi v Apis

Capital Partners, 205 AD3d 504, 506 [1st Dept 2022] [dismissing plaintiffs declaratory

judgment claim as duplicative of its breach of contract claim]).

As for whether Count IV is duplicative of Count I's breach of the Old Confirmation

claim, defendant is correct that the breach of the Old Confirmation claim necessarily

entails a ruling that defendant breached the Settlement Agreement, in that plaintiff cannot

sue under the Old Confirmation unless the Settlement Agreement allows it. Plaintiff still

has a claim to rights under the Old Confirmation as it was not released by the Settlement

Agreement. Given that the Settlement Agreement does allow it, plaintiffs claim is

duplicative.

Plaintiffs claims for declaratory judgment is therefore improperly trying to justify

their past choice to terminate the MSA rather than receive guidance for a future plan to

terminate the MSA. Thus, neither Counts III nor IV are valid for a declaratory judgment

claim.

Qmclusion

For the foregoing reasons, it is hereby

ORDERED that the branch of defendant Javelin Global Commodities (UK) Ltd's

motion to dismiss plaintiffGSPMerrimack LLC 's first cause of action for breach of contract

is denied; and it is further

650013/2024 GSP MERRIMACK LLC vs. JAVELIN GLOBAL COMMODITIES (UK) LTD. Page6 of7

Motion No. 003

[* 6] 6 of 7

INDEX NO. 650013/2024

NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 09/27/2024

ORDERED that the branches of defendant Javelin Global Commodities (UK) Ltd's

motion to dismiss plaintiff GSP Merrimack LLC 's third and fourth causes of action for a

declaratory judgment are granted; and it is further

ORDERED that defendant is to serve a copy of this order with notice of entry on

plaintiff and the Clerk of the Court within ten days of this order.

This constitutes the Decision and Order of the court.

9/26/2024

DATE

~

CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION

GRANTED □ DENIED GRANTED IN PART □ OTHER

APPLICATION: SETTLE ORDER SUBMIT ORDER

CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT □ REFERENCE

650013/2024 GSP MERRIMACK LLC vs. JAVELIN GLOBAL COMMODITIES (UK) LTD. Page 7 of7

Motion No. 003

[* 7] 7 of 7