DL Resources Inc v. FirstEnergy

Opinions of the United

2007 Decisions States Court of Appeals

for the Third Circuit

10-16-2007

DL Resources Inc v. FirstEnergy

Precedential or Non-Precedential: Non-Precedential

Docket No. 05-1855

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

No. 05-1855

____________

DL RESOURCES, INC.

v.

FIRSTENERGY SOLUTIONS CORP.,

Appellant.

____________

On Appeal from the District Court

for the Western District of Pennsylvania

(D.C. Civil No. 03-cv-00200)

District Judge: Hon. Gary L. Lancaster

Argued January 23, 2007

Before: SCIRICA, Chief Judge, FUENTES, and CHAGARES,

Circuit Judges

____________

(Filed: October 16, 2007)

Counsel for Appellant

Richard W. Hosking, Esq. (Argued)

Gerard J. Schirato, Esq.

Melissa J. Tea, Esq.

Kilpatrick & Lockhart Nicholson Graham LLP

Henry W. Oliver Building

535 Smithfield Street

Pittsburgh, PA 15222

Counsel for Appellee

Thomas T. Frampton, Esq. (Argued)

Mandi L. Scott, Esq.

Stacy F. Vernallis, Esq.

Goehring, Rutter & Boehm

1424 Frick Building

437 Grant Street

Pittsburgh, PA 15219

OPINION OF THE COURT

CHAGARES, Circuit Judge.

This dispute arises out of a contract for the purchase of

natural gas. When the seller, appellee DL Resources, Inc. (DL

Resources), was unable to supply the volume of natural gas to the

buyer, appellant FirstEnergy Solutions Corporation (FirstEnergy),

to which FirstEnergy believed it was contractually entitled,

FirstEnergy withheld payments to DL Resources to offset the costs

it incurred by having to purchase natural gas on the open market at

higher prices than it would have paid pursuant to the parties’

contract. FirstEnergy also informed a potential customer of DL

Resources, Mid-American, that it might get involved in litigation

with Mid-American if Mid-American entered a contract with DL

Resources for natural gas because FirstEnergy believed that, by

virtue of its agreement with DL Resources, it was contractually

entitled to the gas Mid-American was contemplating purchasing

from DL Resources. Mid-American promptly ended its

negotiations with DL Resources.

Thereafter, DL Resources initiated this litigation, asserting

both contract and tort-based claims against FirstEnergy. The

parties filed cross-motions for summary judgment, and the District

Court granted summary judgment to DL Resources on several

claims. In this appeal, we conclude that the District Court properly

granted summary judgment to DL Resources on its contract-based

claims. As to DL Resources’ claim for prospective

advantage/tortious interference with a future contractual

relationship, however, we hold that the District Court erred in

granting summary judgment sua sponte without notice.

Accordingly, we will affirm in part and vacate in part the District

2

Court’s decision, and remand for further proceedings consistent

with this opinion.

I.

DL Resources finds, extracts, and markets oil and natural

gas in western Pennsylvania. Prior to and during 2002, DL

Resources acquired leases and/or interests in natural gas deposits

in McKean County, Pennsylvania, and began drilling to recover the

gas. By May 2002, DL Resources had begun extracting and

marketing natural gas from eighty-six wells in McKean County.

On May 15, 2002, DL Resources and FirstEnergy entered

into a contract for the sale of natural gas. Under this contract,

known as the “Base Gas Purchase Agreement,” DL Resources

agreed to sell FirstEnergy a supply of natural gas from its gas wells

in McKean County. The output from these wells was less than the

parties anticipated, and as a result, FirstEnergy had to purchase

natural gas on the open market to compensate for this production

shortfall. Because the open market price was higher than the price

FirstEnergy would have paid for an equivalent amount of natural

gas under the parties’ contract, FirstEnergy reasoned that it was

entitled under the contract to withhold monies from the payments

it owed DL Resources to offset these higher procurement costs.

In the summer or fall of 2002, FirstEnergy learned that Mid-

American, a potential purchaser of natural gas, was engaged in

negotiations with DL Resources to obtain natural gas. Prior to the

execution of this contract, and while negotiations between DL

Resources and Mid-American were ongoing, Eric Wright, an agent

and employee of FirstEnergy, informed Mark Williams, Vice-

President of Gas at Mid-American, that FirstEnergy believed it had

a contractual right to the output DL Resources was attempting to

sell to Mid-American. Wright also informed Williams that

FirstEnergy might get involved in litigation with Mid-American if

it consummated its deal with DL Resources. Shortly thereafter,

Mid-American ended its negotiations with DL Resources.

On February 10, 2003, DL Resources filed the lawsuit

underlying this appeal in federal district court. DL Resources’

amended complaint alleged the following causes of action:

3

declaratory judgment (Count I), breach of contract (Count II),

unjust enrichment (Count III), tortious interference with a

contractual relationship (Count V), and prospective

advantage/tortious interference with a future contractual

relationship (Count VI).1 Counts I-III resulted from FirstEnergy’s

withholding of monies to offset procurement costs it incurred in

having to purchase natural gas on the open market, while Counts

V and VI pertained to FirstEnergy’s interference with DL

Resources’ dealings with Mid-American.

DL Resources and FirstEnergy filed cross-motions for

summary judgment. FirstEnergy moved for summary judgment on

all claims, while DL Resources moved only for summary judgment

on its breach of contract and declaratory judgment claims (Counts

I and II). By a memorandum opinion and order entered February

9, 2005, the District Court granted summary judgment in DL

Resources’ favor with respect to Counts I, II, III, and VI, and

granted summary judgment in FirstEnergy’s favor with respect to

Count V.2 The District Court did not, however, calculate the

damages to which DL Resources would be entitled with respect to

any claim. Notwithstanding this failure, the District Court entered

a final judgment order on February 11, 2005, and marked the case

closed.

On February 18, 2005, DL Resources filed a motion to

amend the judgment pursuant to Fed. R. Civ. P. 54(c) and 59(e),

asking the District Court to specify the monetary damages to which

DL Resources was entitled as a result of FirstEnergy’s breach of

1

The amended complaint also alleged intentional

misrepresentation (Count IV), but that count was later withdrawn.

2

DL Resources did not appeal the District Court’s grant of

summary judgment to FirstEnergy regarding Count V (DL

Resources’ claim for tortious interference with a contractual

relationship). Accordingly, that aspect of the District Court’s

decision is not before us. Unless otherwise noted, all references to

DL Resources’ claim for tortious interference pertain exclusively

to Count VI (alleging prospective advantage/tortious interference

with a future contractual relationship).

4

the parties’ contract and its tortious interference with DL

Resources’ prospective relationship with Mid-American. On

March 11, 2005, while DL Resources’ motion to amend the

judgment was still pending, FirstEnergy filed a notice of appeal

from the District Court’s order entered February 11, 2005.

The parties stipulated that DL Resources was entitled to

damages in the amount of $2,473,005.35 on its breach of contract

claim, which included interest calculated at 6% through November

21, 2005. However, the parties were not able to agree regarding

the amount of damages to which DL Resources would be entitled

on its tortious interference claim. To determine these damages, the

District Court held a bench trial on November 21, 2005. The

District Court issued an opinion and an amended judgment order

on December 19, 2005 awarding DL Resources $2,384,267.03 on

its tortious interference claim in addition to the agreed-upon

damages of $2,473,005.35 for breach of contract, for a total

damage award of approximately $4.85 million. FirstEnergy did not

file a new or amended notice of appeal.

II.

Our analysis must begin with DL Resources’ contention that

FirstEnergy failed to file a timely notice of appeal. The question

whether FirstEnergy’s notice of appeal was timely is a question of

law over which we exercise plenary review. Lazy Oil Co. v. Witco

Corp., 166 F.3d 581, 585-87 (3d Cir. 1999).

We have appellate jurisdiction only to hear appeals from

final judgments of the district courts and other matters not relevant

here. See 28 U.S.C. § 1291. FirstEnergy filed its notice of appeal

on March 11, 2005 from the District Court’s order entered

February 11, 2005. This order determined FirstEnergy’s liability

but did not fix damages. DL Resources argues that FirstEnergy

failed to perfect its appeal because at the time FirstEnergy filed its

notice of appeal on March 11, 2005, the District Court’s decision

was not final for purposes of appellate review. We have

recognized that “[a] finding of liability that does not also specify

damages is not a final decision.” Marshak v. Treadwell, 240 F.3d

184, 190 (3d Cir. 2001) (citing Liberty Mut. Ins. Co. v. Wetzel,

424 U.S. 737, 744 (1976)); see Gen. Motors Corp. v. New A.C.

5

Chevrolet, Inc., 263 F.3d 296, 311 n.3 (3d Cir. 2001) (“In general

terms, a decision that fixes the parties’ liability but leaves damages

unspecified is not final, and the adjudication of liability is not

immediately appealable.”). Accordingly, DL Resources is correct

that the order expressly appealed from did not constitute a final and

appealable order. This does not end this initial inquiry, however.

We must consider whether FirstEnergy’s premature notice of

appeal “ripened” as a result of events following its filing.

Federal Rule of Appellate Procedure 4(a)(2) provides “[a]

notice of appeal filed after the court announces a decision or order

-- but before the entry of the judgment or order -- is treated as filed

on the date of and after the entry.” The Supreme Court has noted

“Rule 4(a)(2) permits a notice of appeal from a nonfinal decision

to operate as a notice of appeal from the final judgment only when

a district court announces a decision that would be appealable if

immediately followed by the entry of judgment.” FirsTier Mortg.

Co. v. Investors Mortg. Ins. Co., 498 U.S. 269, 276 (1991). This

rule is plainly inapplicable insofar as FirstEnergy appealed from an

order that had been entered and was not final.

After FirstEnergy filed its notice of appeal, DL Resources

filed a motion to amend the judgment pursuant to Fed. R. Civ. P.

54(c) and 59(e), seeking to have the District Court specify the

monetary damages to which it was entitled. Following a stipulation

fixing a portion of the damages and a bench trial to determine the

remainder of the damages, the District Court awarded DL

Resources a total damage award of approximately $4.85 million via

an amended judgment order entered on December 19, 2005.

Because FirstEnergy failed to renew or amend its notice of appeal

following the District Court’s entry of its amended judgment order,

DL Resources argues that FirstEnergy failed to perfect its appeal,

thus depriving us of jurisdiction over this appeal.3

3

It remains an open question whether Rule 4 of the Federal

Rules of Appellate Procedure limits our subject matter jurisdiction,

or whether it is merely a judicially-imposed “inflexible claim

processing rule” that sets out guidelines which, if fractured, will

typically cause us to decline to exercise our jurisdiction. See

United States v. Carelock, 459 F.3d 437, 440 n.6 (3d Cir. 2006).

6

Although some of our case law clearly views Rule 4 as

jurisdictional, see, e.g., Poole v. Family. Ct. of New Castle County,

368 F.3d 263, 264 (3d Cir. 2004) (“The timeliness of an appeal is

a mandatory jurisdictional prerequisite.”); Ragan v. Tri-County

Excavating, Inc., 62 F.3d 501, 505 (3d Cir. 1995) (implicitly

assuming that Rule 4 is jurisdictional, and sua sponte raising

concern that we lacked authority to decide the appeal in light of

party’s failure to comply with Rule 4), recent Supreme Court

decisions cast doubt on the validity of this view. In Eberhart v.

United States, 546 U.S. 12, 126 S. Ct. 403 (2005) (per curiam), the

Supreme Court held that Rule 33 of the Federal Rules of Criminal

Procedure was not jurisdictional, but instead is an “inflexible

claim-processing rule.” Id. at 404 (quotation marks omitted).

Similarly, in Kontrick v. Ryan, 540 U.S. 443, 456 (2004), the

Supreme Court held that Rules 4004 and 9006 of the Federal Rules

of Bankruptcy Procedure were “claim-processing rules,” rejecting

the argument they were jurisdictional. But cf. Carelock, 459 F.3d

at 440 n.6 (suggesting in dicta, post-Kontrick and Eberhart, that

“the language and commentary of the rules, along with their prior

treatment by the Supreme Court and this Court, strongly support

the conclusion that Rules 3 and 4 [of the Federal Rules of

Appellate Procedure] govern subject-matter jurisdiction”).

The Supreme Court’s decision last term in Bowles v.

Russell, 127 S. Ct. 2360 (2007), similarly leaves this question

open. In Bowles, the Supreme Court determined that the time for

filing a notice of appeal pursuant to Federal Rule of Appellate

Procedure 4(a)(6) was jurisdictional and therefore not subject to

waiver or judicial modification. Central to this determination was

that the limitations in Rule 4(a)(6) “carrie[d] into practice [28

U.S.C. § 2107(c)],” which itself expressly limited district courts’

ability to extend the time for filing a notice of appeal. See id. at

2366 (“Because Congress specifically limited the amount of time

by which district courts can extend the notice-of-appeal period in

[§ 2107(c)], that limitation is more than a simple claim-processing

rule. As we have long held, when an appeal has not been

prosecuted in the manner directed, within the time limited by the

acts of Congress, it must be dismissed for want of jurisdiction.

Bowles’ failure to file his notice of appeal in accordance with the

statute therefore deprived the Court of Appeals of jurisdiction.

7

Federal Rule of Appellate Procedure 4, inter alia, grapples

with the effect that certain post-judgment motions have on a notice

of appeal. Rule 4(a)(4)(A) states, in pertinent part:

If a party timely files in the district court any of the

following motions under the Federal Rules of Civil

Procedure, the time to file an appeal runs for all

parties from the entry of the order disposing of the

last such remaining motion:

***

(iv) to alter or amend the judgment under Rule 59 .

...

Rule 4(a)(4)(B) discusses the proper procedure when a party files

a notice of appeal while a Rule 59 motion (or motion pursuant to

another rule listed in Rule 4(a)(4)(A)) is still pending. Rule

4(a)(4)(B)(ii) states:

And because Bowles’ error is one of jurisdictional magnitude, he

cannot rely on forfeiture or waiver to excuse his lack of compliance

with the statute’s time limitations.”) (quotation marks and citations

omitted). By contrast, Congress imposed no such analogous

limitation on appeals governed by Rule 4(a)(4)(B); accordingly,

Bowles does not control the jurisdictional question presented in

this case.

Following Kontrick and Eberhart (but prior to Bowles), at

least one court has construed Rule 4(a)(4)(A)(vi) to be a mere

claim-processing rule. See Wilburn v. Robinson, 480 F.3d 1140,

1145-46 (D.C. Cir. 2007) (rejecting argument that a specific

provision of Rule 4 is jurisdictional). It is unnecessary for us to

reach or decide whether the provision of Rule 4 in issue here is

jurisdictional, because it is undisputed that DL Resources raised a

timely objection to FirstEnergy’s appeal. In other words, even

assuming that Rule 4(a)(4)(B)(ii) is a mere claim-processing rule --

and therefore subject to waiver if not raised -- DL Resources

preserved the issue.

8

A party intending to challenge an order disposing of

any motion listed in Rule 4(a)(4)(A), or a judgment

altered or amended upon such a motion, must file a

notice of appeal, or an amended notice of appeal --

in compliance with Rule 3(c) -- within the time

prescribed by this Rule measured from the entry of

the order disposing of the last such remaining

motion.

Fed. R. Civ. P. 4(a)(4)(B)(ii) (emphasis added). Insofar as

FirstEnergy failed to renew or amend its notice of appeal following

the District Court’s entry of its amended judgment order on DL

Resources’ Rule 59 motion, Rule 4(a)(4)(B)(ii) does not aid

FirstEnergy’s argument that jurisdiction exists.

FirstEnergy essentially ignores the text of Rule

4(a)(4)(B)(ii), and instead relies heavily on a line of our cases

beginning with Cape May Greene, Inc. v. Warren, 698 F.2d 179

(3d Cir. 1983). The so-called Cape May Greene doctrine dictates

that, absent a showing of prejudice not present (or even alleged)

here, “a premature notice of appeal, filed after disposition of some

of the claims before a district court, but before entry of final

judgment, will ripen upon the court’s disposal of the remaining

claims.” Lazy Oil, 166 F.3d at 585 (citing Cape May Greene, 698

F.2d at 184-85). This doctrine clearly represents an “expansive

view of appellate jurisdiction.” ADAPT of Phila. v. Phila. Housing

Auth., 433 F.3d 353, 362 (3d Cir. 2006). Notwithstanding the

tension between our interpretation of Rule 4 and the text of the

rule, we have justified our interpretation based upon the view that

Rule 4 does not exclusively govern every “situation in which a

premature notice of appeal will ripen at a later date.” Lazy Oil, 166

F.3d at 587.4 The Court is bound by our prior interpretation

4

Several other circuits have either declined to adopt or

repudiated the sort of ripening analysis we first sanctioned in Cape

May Greene. See, e.g., Outlaw v. Airtech Air Conditioning &

Heating, Inc., 412 F.3d 156, 160 n.2 (D.C. Cir. 2005) (Roberts, J.)

(rejecting the interpretation of Rule 4(a)(4) we articulated in Lazy

Oil, and observing that “[t]he fact that there is a rule governing

pre-judgment premature notices of appeal and another rule

9

regarding the scope and effect of Rule 4 unless and until we revisit

that determination en banc. See Mariana v. Fisher, 338 F.3d 189,

201 (3d Cir. 2003) (“‘[N]o subsequent panel overrules the holding

in a precedential opinion of a previous panel. Court en banc

consideration is required to do so.’”) (quoting Third Circuit

Internal Operating Procedure 9.1).

We applied the Cape May Greene doctrine in somewhat

analogous circumstances in Ragan. 62 F.3d at 505-06. There, the

appellant filed a notice of appeal after the District Court

determined liability against it, but before it fixed damages. The

District Court later entered an order awarding damages. This

Court, in examining whether it had jurisdiction, determined that the

order appealed from was not a final order for purposes of appeal.

Id. at 505. Nonetheless, the Court found that “[t]his defect was not

fatal to [appellant’s] appeal.” Id. The Court acknowledged the

Cape May Greene doctrine, explaining that “this Court may

entertain an appeal from a nonfinal order if an order which is final

is subsequently entered before our adjudication on the merits.” Id.

at 506. Applying the Cape May Greene doctrine, the Court held

“[e]ven though the [liability] order was not final when entered, it

became final upon entry of the [] order fixing [damages].” Id. at

505-06. As a result, the Court found it had jurisdiction under 28

U.S.C. § 1291. Id. at 506.

We hold that FirstEnergy’s premature notice of appeal

ripened on December 19, 2005, when the District Court entered the

governing post-judgment premature notices of appeal hardly means

that courts are at liberty to fashion additional doctrines saving

premature notices of appeal that are not saved under the rules, as

construed by the Supreme Court”); United States v. Cooper, 135

F.3d 960, 963 (5th Cir. 1998) (repudiating its prior “expansive

view of appellate jurisdiction” regarding premature notices of

appeal); United States v. Hansen, 795 F.2d 35, 37, 38 (7th Cir.

1986) (expressly rejecting Cape May Greene doctrine); Gen.

Television Arts, Inc. v. Southern Ry., 725 F.2d 1327, 1330-31

(11th Cir. 1984) (“[A] final judgment does not retroactively

validate the premature notice of appeal.”) (quotation marks

omitted).

10

amended judgment order quantifying the damage award. We also

hold that we have jurisdiction to hear FirstEnergy’s appeal under

28 U.S.C. § 1291.

III.

On the merits, we exercise plenary review over the District

Court’s grant of summary judgment. Summary judgment is

appropriate if there are no genuine issues of material fact presented

and the moving party is entitled to judgment as a matter of law.

Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). We resolve

all factual doubts and draw all reasonable inferences in favor of

FirstEnergy, the nonmoving party. Hugh v. Butler County Family

YMCA, 418 F.3d 265, 267 (3d Cir. 2005), cert. denied, 126 S. Ct.

1065 (2006).

As this is a diversity case, we must apply the choice of law

principles of Pennsylvania, the forum state, to determine what law

governs this dispute. See Klaxon Co. v. Stentor Elec. Mfg. Co.,

313 U.S. 487, 496-97 (1941); On Air Entertainment Corp. v. Nat’l

Indem. Co., 210 F.3d 146, 149 (3d Cir. 2000). Accordingly, using

Pennsylvania choice of law rules, we must determine which state

law applies to the causes of action in issue here. With respect to

the contract-based claims, the parties’ contract contains a choice of

law provision specifying that the contract shall be interpreted

according to Ohio law. Moreover, the parties agree that Ohio law

governs the contractual claims in issue. We see no reason to depart

from the general rule that choice of law provisions shall be

honored. See Nationwide Mut. Ins. Co. v. West, 807 A.2d 916,

920 (Pa. Super. Ct. 2002) (“In contract disputes, Pennsylvania

courts generally honor the parties’ choice of law provisions.”), and

will therefore apply Ohio law to the parties’ contract based-claims.5

A.

5

Although this case contains both contract and tort-based

causes of action, each of which requires a separate choice of law

analysis, our decision renders it unnecessary for us to determine

what law governs DL Resources’ tort-based claim.

11

Under Ohio law, the construction of a written contract is a

matter of law that we review de novo. Saunders v. Mortensen, 801

N.E.2d 452, 454 (Ohio 2004). The role of a court is to give effect

to the intent of the parties to the agreement. To accomplish this,

we must examine the contract as a whole and presume that the

intent of the parties is reflected in the language used in the policy.

Westfield Ins. Co. v. Galatis, 797 N.E.2d 1256, 1261 (Ohio 2003).

We look to the plain and ordinary meaning of the language used in

the policy unless another meaning is clearly apparent from the

contents of the policy. When the language of a written contract is

clear, a court may look no further than the writing itself to

determine the intent of the parties. Id.

However, “where a contract is ambiguous, a court may

consider extrinsic evidence to ascertain the parties’ intent.” Id.

Contractual ambiguities will be construed against the drafter. Id.

at 1262. A court, nonetheless, may not “alter a lawful contract by

imputing an intent contrary to that expressed.” Id. at 1261-62.

Under Ohio law, then, analysis properly begins with an

examination of the relevant contractual language. If the contract

language is unambiguous, then the analysis ends there.

Although both parties agree that the contract is

unambiguous, they nonetheless disagree sharply regarding the

nature of their contract. For its part, DL Resources maintains that,

by its plain terms, the parties’ contract is an output contract which

calls for DL Resources to supply FirstEnergy with all of the natural

gas produced at each of the eighty-six wells in issue, subject to

certain minor exceptions not at issue here. By contrast,

FirstEnergy apparently6 argues that the parties’ contract is a

6

We say apparently because FirstEnergy makes conflicting

statements in its brief regarding its conception of the parties’

contract. At certain points, FirstEnergy suggests that the parties

reached an output contract with a volume minimum, while at other

points it intimates that the parties reached a purely volume-based

agreement. Compare FirstEnergy Br. at 9-10 (stating that parties

reached an output contract with a volume minimum) with

FirstEnergy Br. at 20 (“[B]ecause the Agreement required the

delivery of fixed minimum volumes, the identity of the wells to be

12

volume contract that required DL Resources to supply a minimum

daily volume of natural gas to FirstEnergy, and specified the per

unit price that FirstEnergy would be obligated to pay at various

output levels above that minimum. In essence, then, FirstEnergy

argues that the parties entered an output contract with a volume

minimum.

It is undisputed (i) that DL Resources sold FirstEnergy all

the natural gas produced by the eighty-six wells at all relevant

points in time; and (ii) that this output was substantially less than

what the parties had anticipated the wells would generate, and, at

some points in time, less than the minimum volumes FirstEnergy

maintains DL Resources was contractually obligated to provide.

Because the parties agree that DL Resources furnished FirstEnergy

all of the natural gas produced by the wells in issue, summary

judgment is appropriate on the parties’ contract-based claims if we

determine that the parties did in fact enter a purely output contract.

Therefore, how we characterize the parties’ contract is central to

our resolution of the contract-based claims in issue.

For several reasons, it is clear that the parties’ agreement is

purely an output contract that calls for DL Resources to supply to

FirstEnergy all of the output produced by the eighty-six

Pennsylvania natural gas wells in which DL Resources had an

interest in May 2002, the time when the contract was formed. To

begin with, the contract makes clear in several places that the

parties entered an output-based contract, not a volume-based one.

The contract states in pertinent part that:

listed on Exhibit A-1 is irrelevant. In other words, DL Resources

had an obligation to deliver a specific volume of gas to

FirstEnergy, regardless of the origin of that gas.”); FirstEnergy Br.

at 10 (“Despite the reference to wells listed on Exhibit A-1, Exhibit

A-1 was blank. From FirstEnergy’s standpoint, this made sense:

because it was purchasing a minimum fixed quantity of gas at fixed

prices, it did not matter from which wells that gas came.”)

(quotation marks and citations omitted). In any event, for the

reasons stated infra, this confusion is ultimately immaterial, as the

contract is clear on its face that it is purely an output agreement

(with no minimum volume).

13

1. AGREEMENT. Subject to the terms and

conditions herein contained, [FirstEnergy] shall buy

the gas delivered to it by [DL Resources] at the

Delivery Point(s). [DL Resources] shall deliver and

sell to Buyer all the gas owned, produced or

purchased by [DL Resources] from the Wells,

excepting only such quantity as [DL Resources] may

require for drilling or pumping operations on said

premises and such quantity as may be reserved to the

landowners by their oil and gas leases.

Appendix (App.) 31 (emphasis added). This provision mentions

nothing about a volume minimum. Short of labeling the contract

as an “output contract,” it is hard to imagine how the parties could

have been any more clear regarding the nature of their agreement.

The contractual provision about the price of the natural gas

also indicates that the parties reached an output contract. In this

regard, the contract states that:

5. PRICE. [FirstEnergy] shall pay [DL Resources]

for all gas delivered and measured at the Delivery

Point(s). The price to be paid by [FirstEnergy] to

[DL Resources] for gas delivered to [FirstEnergy] at

the Delivery Point(s) shall be identified on Exhibit

“B-” attached to and made a part of this Agreement

....

App. 32 (emphasis added). The express requirement that

FirstEnergy pay for “all gas delivered” further indicates that the

parties reached an output contract without a volume minimum.

The preamble to the contract further supports this

interpretation. The preamble to the contract states as follows:

WHEREAS, [DL Resources] has developed a

supply of natural gas (“gas”) from gas wells

enumerated and described on Exhibit “A-”

attached hereto, and which may be amended from

time to time by mutual agreement between the

parties; and

14

WHEREAS, [DL Resources] is the owner of such

gas or is the authorized agent for the owner or

owners of such gas and therefore has the authority to

contract for the sale of such gas; and

WHEREAS, [DL Resources] desires to sell and

agrees to sell, for itself and those owners for which

it is the authorized selling agent, and to deliver to

[FirstEnergy], at the Delivery Point(s) hereinafter

specified, natural gas produced from the well or

wells described on Exhibit “A-”, hereinafter referred

to as “the Wells”; and

WHEREAS, [FirstEnergy] is willing to purchase

from [DL Resources] the gas produced from the

wells [sic] at the rates and subject to the terms,

conditions, and limitations herein provided.

App. 31 (emphasis added).

Insofar as FirstEnergy argues that the contract calls for

delivery of a fixed volume only (as opposed to an output contract

with a volume minimum), this cannot be squared with the preamble

to the contract, which only makes sense if the contract was output-

based. Indeed, if FirstEnergy is correct, and the parties’ agreement

is a volume contract rather than an output contract, it is not at all

clear what purpose the preamble would serve, as it would not

matter where DL Resources procured the natural gas that it was

contractually obligated to sell to FirstEnergy; all that would matter

is that DL Resources obtained the requisite amount of natural gas.

Cf. FirstEnergy Br. at 20 (“[B]ecause the Agreement required the

delivery of fixed minimum volumes, the identity of the wells to be

listed on Exhibit A-1 is irrelevant.”). Moreover, under this

interpretation, the preamble is all the more bizarre when one

considers that FirstEnergy -- not DL Resources -- drafted the

contract.7 Thus, FirstEnergy would have us believe that it included

7

At oral argument, counsel for FirstEnergy maintained that

DL Resources -- not FirstEnergy -- drafted Exhibit B-1 to the

parties’ contract. At no point, however, did FirstEnergy dispute

15

language in the contract that was not merely irrelevant (as it now

contends), but that affirmatively supports an interpretation that

FirstEnergy claims it never intended. We can think of no reason

(nor does FirstEnergy offer any) sufficient to explain why we

should adopt such a strained interpretation of the parties’ contract.

The sole evidence FirstEnergy offers in support of its claim

that the parties reached a minimum volume arrangement is an

addendum to the contract titled Exhibit B-1. To understand the

significance of this addendum, it is both necessary and appropriate

to consider it in the context of the contract as a whole. The original

contract states that the parties will specify the price per unit of

natural gas in an addendum. In keeping with this agreement, the

parties crafted Exhibit B-1, which states in pertinent part as

follows:

DELIVERY

PERIOD: 06/01/02 - 03/31/04

VOLUME: 5,000 Dth/Day @ $3.04 J u n e

2002 thru

March

2004

30,000 Dth/Month @

$3.565 N o v .

2002 thru

Oct. 2003

Balance @ NYMEX

+ $0.105 J u n e

2002 thru

March

2004

Less any gathering charges.

(100% of the production from wells

that it alone drafted the remainder of the contract, including the

preamble.

16

listed on Exhibit A-1)

RECEIPT POINT: NFGS

App. 38 (emphasis added).8

Based on Exhibit B-1, FirstEnergy argues that the pricing

chart shows the parties intended that DL Resources would supply

a minimum of 5,000 dekatherms of natural gas per day, and that

any additional output above that minimum level would be

purchased according to the pricing structures established by the

parties. FirstEnergy is only half right. Exhibit B-1 does set out

graduated pricing structures at various levels of output, but it does

not set any sort of a per-day volume floor. From June 2002 to

March 2004, the addendum established one price for daily volumes

of natural gas up to 5,000 dekatherms, and a second price for any

level of daily output above 5,000 dekatherms. The parties

modified this pricing schedule somewhat for the time period

between November 2002 and October 2003. For this period, there

would be one price for monthly volumes of natural gas up to

30,000 dekatherms, and a second price for any level of monthly

output above 30,000 dekatherms.

Moreover, as stated previously, paragraph five of the

parties’ contract explicitly contemplated the execution of an

“Exhibit B” to establish the per dekatherm price of natural gas. It

is simply not plausible that, by adding this anticipated Exhibit B --

which was called for by a provision of the contract titled “PRICE”

-- the parties intended to overhaul their arrangement on volume.

Such a reading would override the contract’s numerous references

8

In its opinion, the District Court mistakenly transcribed

Exhibit B-1, omitting the section header “Volume” and rearranging

some of the information listed therein. Compare App. 13 (District

Court’s transcription of Exhibit B-1) with App. 38 (actual copy of

Exhibit B-1). While FirstEnergy makes much of this error, see

FirstEnergy Br. at 18-19, it is ultimately immaterial, as no portion

of the District Court’s opinion hinged on this error. Moreover, the

plenary scope of our review ensures that FirstEnergy will suffer no

prejudice as a result of this mix-up.

17

to an output-based agreement sub silencio, which would be

particularly questionable given that Exhibit B-1 itself explicitly

reaffirms FirstEnergy’s obligation to purchase “100% of the

production from the wells listed on Exhibit A-1.” See id. Viewed

in the context of the contract as a whole, we cannot agree that

Exhibit B-1 required DL Resources to provide a minimum daily

volume of natural gas. Rather, the plain terms of the contract make

clear that the parties entered an output arrangement. Because it is

undisputed that DL Resources furnished FirstEnergy all of the

output by the wells governed by this contract, the District Court

properly granted DL Resources’ motion for summary judgment on

its contract-based claims.

B.

Quite apart from whether the parties’ contract is ambiguous,

FirstEnergy argues that the District Court committed several errors

that merit reversal of its grant of summary judgment on the

contract-based claims. First, FirstEnergy maintains that the District

Court was unjustified in assuming that the wells to which the

contract refers were the eighty-six wells in western Pennsylvania

in existence at the time the parties reached their contract. In this

regard, the parties’ contract states that the natural gas in issue

would be drawn from wells the parties would specify in Exhibit A-

1. As the District Court noted, however, the parties failed to

specify any wells in Exhibit A-1. The District Court determined

that this oversight was inadvertent, and determined that the parties

intended to list the eighty-six Pennsylvania wells developed at the

time the contract was executed in May 2002. While FirstEnergy

argues that the District Court’s determination was improper, it is

not clear why. Nowhere in its briefs does FirstEnergy actually

dispute that the parties intended to list the eighty-six wells (and

only those wells) on Exhibit A-1.9 The parties’ failure to list these

9

Moreover, under FirstEnergy’s interpretation of the

contract, it is difficult to see why this finding would be material,

given FirstEnergy’s position that the contract called for DL

Resources to produce a fixed amount of natural gas. Indeed,

FirstEnergy candidly admits that it views this finding as

immaterial. See FirstEnergy Br. at 10 (“Despite the reference to

18

wells therefore presents no impediment to summary judgment.

FirstEnergy’s second argument is that the District Court’s

conclusion that Exhibit B-1 was a fee schedule rather than a

minimum volume commitment cannot be reconciled with certain

provisions of the contract, namely the provision titled “Trigger

Rights.” This provision states in pertinent part that:

[DL Resources] may, at any time prior to Noon on

the day of the applicable NYMEX Contract closing

day, notify an authorized representative of

[FirstEnergy] by telephone to trigger the NYMEX

futures price currently traded for that month on a

specified volume (Contract Trigger Volume).

Contract Trigger Volume shall be defined as any

portion (in 10,000 Dth increments) of the volumes

which [DL Resources] is obligated to deliver during

any forward month. Upon [FirstEnergy’s]

execution of said Contract Trigger(s), [FirstEnergy]

will send a confirmation notice to [DL Resources]

outlining the price, volume and delivery month for

each Contract Trigger transaction. If [DL

Resources] delivers less than One Hundred (100)

Percent of the Contract Trigger Volumes in a given

month, and the Contract Trigger Price is lower than

the NYMEX Contract Settlement Price for that

month, [DL Resources] shall be assessed a Market

Differential Cost (Contract Trigger Price minus

NYMEX Contract Settlement Price) on the

unutilized Contract Trigger Volumes. If [DL

Resources] elects not to trigger a price prior to the

time as specified above, the price shall default to the

wells listed on Exhibit A-1, Exhibit A-1 was blank. From

FirstEnergy’s standpoint, this made sense: because it was

purchasing a minimum fixed quantity of gas at fixed prices, it did

not matter from which wells that gas came.”) (quotation marks and

citations omitted); FirstEnergy Br. at 20 (“[B]ecause the

Agreement required the delivery of fixed minimum volumes, the

identity of the wells to be listed on Exhibit A-1 is irrelevant.”).

19

basis settlement agreement as stated in Exhibit B-1.

App. 32 (emphasis added).10

Essentially, then, this provision gives DL Resources the

option to fix -- or, to use the language of the contract, “trigger” --

an obligation to deliver a set volume of gas at a set price. In other

words, this provision permits (but does not require) DL Resources

to convert its commitment for a given month from an output

contract to a fixed-volume contract. This provision further

provides that if DL Resources exercised this option to convert its

obligation to a fixed volume agreement but failed to deliver to

FirstEnergy the volume of natural gas it promised, and if

FirstEnergy had to purchase the balance of the promised volume on

the open market at a higher price, FirstEnergy would be entitled to

recoup the incremental costs it incurred as a result of DL

Resources’ failure to deliver the promised volume. Given the non-

mandatory nature of this provision, we cannot say that it is

inconsistent with the District Court’s interpretation of the parties’

agreement as an output contract.

There is the further question whether DL Resources ever

exercised this triggering option. While DL Resources argues that

it never did so, FirstEnergy argues that DL Resources did so on

two occasions. Specifically, FirstEnergy notes (i) that on January

16,

2001, DL Resources triggered an obligation to supply 5,000

decatherms per day for June 1, 2002 until March 31, 2004 at the

price of $3.04 per decatherm; and (ii) that on March 11, 2002, DL

Resources again exercised its option to lock in a monthly volume

of 30,000 decatherms for the period between November 1, 2002

and October 31, 2003 at a price of $3.565 per decatherm. But even

assuming (as we must, given the procedural posture of this case)

10

This provision also lends further support to the notion that

Exhibit B-1 established the pricing component -- not volume -- of

the parties’ arrangement. See App. 32 (noting that if DL Resources

“elects not to trigger a price prior to the time as specified above,

the price shall default to the basis settlement agreement as stated in

Exhibit B-1”).

20

the validity of both of these triggering agreements, both agreements

preceded the parties’ execution of the contract in May 2002, and

are therefore barred by the parol evidence rule. Galmish v.

Cicchini, 734 N.E.2d 782, 788 (Ohio 2000) (“The parol evidence

rule states that absent fraud, mistake or other invalidating cause,

the parties’ final written integration of their agreement may not be

varied, contradicted or supplemented by evidence of prior or

contemporaneous oral agreements, or prior written agreements.”)

(quotation marks omitted). And, by its own terms, it is clear that

the contract represented the “final written integration” of the

parties’ dealings.11 Because there is no evidence that DL

Resources exercised this option at any point after the parties’

execution of the contract, we find unpersuasive FirstEnergy’s

argument based on the “Trigger Rights” provision of the contract.

Third, FirstEnergy argues that the District Court’s

interpretation renders the contract’s “force majeure” provision

superfluous. See App. 34, ¶ 17 (immunizing both parties from

liability for failure to perform due to acts of God or other events

beyond the parties’ control). The force majeure provision is not

applicable in this context, FirstEnergy argues, because DL

Resources is obliged only to supply its output, nothing more. Thus,

if DL Resources’ production had been hampered or even

extinguished for a period of time, it would have had no contractual

liability to FirstEnergy as long as it furnished FirstEnergy with

whatever output it did produce, even if that output were nothing.

To begin with, FirstEnergy cites no authority whatsoever for the

11

The contract’s integration clause reads as follows:

Entire Agreement. This Agreement sets forth all

understandings between the parties respecting the

subject matter of this transaction and all prior

agreements, understandings, and representations,

whether superceded by this Agreement. No

modification or amendment of the Agreement shall

be binding on either party unless in writing and

agreed to by both parties . . . .

App. 36.

21

proposition that force majeure provisions are superfluous in output

contracts. This absence of authority is unsurprising, as

FirstEnergy’s argument rests on the mistaken assumption that, at

least from a supplier’s perspective, there is no reason to have a

force majeure provision when the parties have entered into a output

contract. In fact, there are valid reasons why DL Resources might

have desired the force majeure provision notwithstanding the fact

that the parties entered an output contract. For instance, DL

Resources may have wanted to protect itself from liability if it

triggered a fixed volume obligation pursuant to the contract, but

was then unable to deliver to FirstEnergy the required volume due

to an event contemplated by the force majeure provision.

Accordingly, we are unpersuaded that the District Court’s

interpretation of the contract renders the force majeure provision

irrelevant. Thus, FirstEnergy’s objections do not, either

individually or collectively, convince us that the District Court

erred by granting summary judgment to DL Resources on its

contract-based claims.12

C.

We turn to the District Court’s grant of summary judgment

as to DL Resources’ claim for tortious interference with a

prospective contractual relationship. As noted previously, DL

Resources did not move for summary judgment on this claim;

rather, the District Court entered summary judgment sua sponte.

FirstEnergy argues that the District Court’s unprompted entry of

12

FirstEnergy also argues that the District Court’s grant of

summary judgment to DL Resources on its unjust enrichment claim

(Count III) was legally unfounded, or, alternatively, premature.

See FirstEnergy Br. at 24-25. In view of our conclusion that the

District Court properly granted summary judgment on the breach

of contract claim, we need not address these arguments, as it is

undisputed (i) that FirstEnergy would be liable for at least the same

amount of damages under DL Resources’ breach of contract claim

as its unjust enrichment claim; and (ii) that the District Court’s

damage award does not double count DL Resources’ contract-

based damages. Put another way, then, even assuming that the

District Court erred by granting DL Resources’ summary judgment

on its unjust enrichment claim, that error was harmless.

22

summary judgment on this claim deprived FirstEnergy of sufficient

notice to oppose summary judgment.

Federal Rule of Civil Procedure 56 sets forth the procedures

and standard for the grant of summary judgment. Rule 56(c)

requires a minimum of ten days notice to the nonmoving party to

afford that party an opportunity to oppose the entry of summary

judgment. Our Court has “insisted on strict compliance with the

procedural requirements of Rule 56(c).” Brooks v. Hussman Corp.,

878 F.2d 115, 116-17 (3d Cir. 1989).

District courts may grant summary judgment sua sponte in

appropriate circumstances. However, a district court may not

generally grant summary judgment sua sponte unless it gives prior

notice and an opportunity to oppose summary judgment. Celotex

Corp. v. Catrett, 477 U.S. 317, 326 (1986) (“[D]istrict courts are

widely acknowledged to possess the power to enter summary

judgments sua sponte, so long as the losing party was on notice

that she had to come forward with all of her evidence.”)

(emphasis added); Prusky v. Reliastar Life Ins. Co., 445 F.3d 695,

699 n.6 (3d Cir. 2006) (“A district court may not grant summary

judgment sua sponte unless the court gives notice and an

opportunity to oppose summary judgment.”) (quotation marks and

citations omitted); Chambers Dev. Co. v. Passaic County Util.

Auth., 62 F.3d 582, 584 n.5 (3d Cir. 1995) (“[A] judgment cannot

be entered without first placing the adversarial party on notice that

the court is considering a sua sponte summary judgment motion.

The court must also provide the party with an opportunity to

present relevant evidence in opposition to that motion.”).

It is undisputed that neither party had notice that the District

Court was considering granting summary judgment to DL

Resources on its tort-based claim.13 Nonetheless, citing Gibson v.

Mayor & Council of City of Wilmington, 355 F.3d 215, 223-24 (3d

Cir. 2004), DL Resources argues that FirstEnergy had “a fair

13

Indeed, at oral argument, DL Resources’ counsel stated

candidly that he was “surprised” when the District Court granted

summary judgment in DL Resources’ favor on claims on which DL

Resources had not sought summary judgment.

23

opportunity to put its best foot forward” on the tort-based claim

insofar as FirstEnergy had filed its own summary judgment motion

on those claims, and, therefore, the District Court did not err in

granting summary judgment sua sponte. Id. at 223 (quotation

marks omitted). We disagree.

In Gibson, a disgruntled former police officer, Christopher

Gibson, brought a lawsuit under 42 U.S.C. § 1983 against various

city officials, alleging that he was terminated pursuant to an

unconstitutionally vague and overbroad police department

directive, which Gibson claimed infringed on his First Amendment

right to free speech, and that his right to procedural due process

was violated. 355 F.3d at 221. Gibson moved for summary

judgment on all of his claims and the District Court denied the

motion. At the start of trial, the District Court informed the parties

that it was entering summary judgment sua sponte against Gibson

on his claims of vagueness and overbreadth. Gibson appealed,

arguing that the lack of notice was fatal to the District Court’s sua

sponte grant of summary judgment. Although we noted that “the

notice requirement applies to sua sponte grants of summary

judgment,” we affirmed the grant of summary judgment in that

case. Id. at 223. We recognized that an exception to the notice

requirement in such cases was subject to meeting the following

three conditions: “(1) the point at issue is purely legal; (2) the

record was fully developed[;] and (3) the failure to give notice does

not prejudice the party.” Id. at 219. In that case, we found that all

three conditions had been met. Id. at 219, 224.14

None of these conditions are present in this case. To begin

with, the tortious interference claim at issue here was not an

abstract question of law; rather, it was, by definition, a fact-bound

determination that required the District Court to weigh various

14

The Court in Gibson did not express an opinion regarding

whether a sua sponte grant of summary judgment would be

appropriate where some but not all of these conditions were

present. Id. at 224. We have the converse situation here, as none

of the three conditions present in Gibson is satisfied in this case.

Accordingly, we too have no occasion to express an opinion on this

question.

24

competing considerations. Regarding the completeness of the

record, though FirstEnergy did move for summary judgment, it was

DL Resources that bore the ultimate burden of persuasion, so

FirstEnergy was under no obligation to come forward with all of its

evidence to obtain summary judgment; it merely needed to

demonstrate that DL Resources could not satisfy one of the

elements of its tortious interference claim. Moreover,

FirstEnergy’s counsel represented at oral argument that had

FirstEnergy known the District Court was inclined to grant

summary judgment to DL Resources on its tortious interference

claim, it would have offered testimony or affidavits from Williams

and Wright (i) clarifying the nature of their conversation; (ii)

justifying why FirstEnergy took the course of action that it did; and

(iii) explaining why its course of action was privileged. The failure

to have this opportunity, FirstEnergy claims, caused it to suffer

prejudice. We agree. Given the lack of notice and the fact that

none of the conditions set forth in Gibson militates in favor of an

exception to the notice requirement in this case, we will vacate and

remand the District Court’s sua sponte grant of summary judgment.

We hasten to add, however, that in reaching this conclusion

we express no opinion on the District Court’s ultimate

determination that DL Resources was entitled to summary

judgment on its claim of tortious interference. On remand, the

District Court may well reach the same conclusion, or it may

decide the issue differently following any evidentiary submissions

the parties may make. For present purposes, it is sufficient to say

that the District Court should have given the parties notice and the

opportunity to make such submissions before granting summary

judgment sua sponte on DL Resources’ tort-based claim.

III.

For the foregoing reasons, we will affirm the judgment of

the District Court in part, vacate in part, and remand for further

proceedings consistent with this opinion.

25