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Packgen v. BP Exploration & Production, Inc.

United States Court of Appeals, First Circuit

June 11, 2014

PACKGEN, Plaintiff, Appellant,
v.
BP EXPLORATION & PRODUCTION, INC., and BP AMERICA PRODUCTION COMPANY, Defendants, Appellees

Page 62

APPEAL fro THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAINE. Hon. John A. Woodcock, Jr., U.S. District Judge.

Michael R. Bosse, with whom Travis M. Brennan, George F. Burns, and Bernstein Shur were on brief, for Appellant.

Christina Briesacher, with whom David J. Volkin, Amy Cashore Mariani, Kirkland & Ellis LLP, and Fitzhugh & Mariani LLP were on brief, for Appellees.

Before Thompson, Circuit Judge, Souter,[*] Associate Justice, and Stahl, Circuit Judge.

OPINION

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STAHL, Circuit Judge.

In the aftermath of the Deepwater Horizon oil spill of 2010, Appellant Packgen, a manufacturer of packaging products, sought to sell oil containment boom to Appellees BP Exploration & Production, Inc. and BP America Production Company (collectively, " BP" ). Despite months of negotiations, BP ultimately decided not to purchase any boom from Packgen. Packgen subsequently filed a five-count complaint in the federal district court in Maine, invoking diversity jurisdiction and alleging various state-law tort claims. The district court granted summary judgment in favor of BP. For the following reasons, we affirm.

I. BACKGROUND

The district court's summary judgment order sets forth the facts of this case in meticulous detail. Packgen v. BP Exploration & Prod., Inc., 957 F.Supp.2d 58, 63-82

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(D. Me. 2013). We reiterate them here as necessary to provide context for the issues on appeal, but we note that many of the facts are based solely on Packgen's own testimony. While the district court accepted these facts as true for the purposes of the summary judgment motion, see Tolan v. Cotton, 134 S.Ct. 1861, 1863, 188 L.Ed.2d 895 (2014) (per curiam) ( " [O]n a motion for summary judgment, the evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor." ) (internal quotation marks and alternation omitted), in many instances BP disputed Packgen's version of events. The district court's order thoroughly documents the points of dispute, and clarifies that it accepted Packgen's version of the facts in every instance. Packgen, 957 F.Supp.2d at 64-83 nn.1-81.

On April 20, 2010, an oil drilling rig owned by BP named Deepwater Horizon caught fire and sank off the Gulf Coast of Louisiana, causing a massive oil spill. Part of BP's response involved the deployment of oil containment boom. It had an immediate need for millions of feet of boom, but it encountered problems with availability, production, and interconnectivity.

Packgen is a small business in Maine that designs and manufactures composite packaging materials and containers used in the chemical, oil, and food-processing industries. Prior to the Deepwater Horizon spill, Packgen had never manufactured oil containment boom. Nevertheless, it saw an opportunity to make boom part of its business in the wake of the spill, and it began constructing boom manufacturing equipment no later than April 28, 2010, prior to any discussions with BP.

By early May 2010, Dan Forte, a marketing consultant for Packgen, spoke to Mario Araya, who was procuring boom for BP. Araya made an oral commitment to Forte to purchase all of Packgen's present and future production of boom for $21.75 per square foot, subject to a visit by BP personnel to inspect Packgen's facility and boom capacity. On May 11, 2010, Max Lyoen, a Supplier Quality Control Specialist for BP, inspected Packgen's facility and met with several Packgen representatives, including Forte, John Lapoint, and Don Roberts. Lyoen was impressed by Packgen's production capacity, and he stated that the end connectors used by Packgen would meet BP's requirements.

At that time, the American Society for Testing and Materials (ASTM) standards were the only specifications that BP had for boom. Lyoen told Packgen's representatives that BP would purchase Packgen's full production capacity once an independent third party tested Packgen's boom for compliance with the ASTM standards. After that meeting, Lapoint wrote an email to a colleague stating that " [we] should have a response by tomorrow morning on how much [BP] will commit. . . . [W]e are just waiting on BP to make their decision. . . ."

On May 12, 2010, Forte and Araya spoke by phone, and Araya stated " I'm placing an order. We'll take it all." The next day, Araya negotiated the price down to $18.75 per square foot and told Forte that BP would not pay up front. In response, Forte sent Araya an email thanking him for " discussing the details of a possible transaction." He stated that the companies " may be able to address the issues concerning payment terms and pricing. What remains is the issue concerning the acceptability [of] our design and the requirements you have stated. . . . All that we require is a letter from Max Lyoen stating that the design meets your requirements."

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On May 13, 2010, Packgen informed BP that it was " moving forward" with the sale and delivery. At that point, it began gearing up its operations to produce 40,000 linear feet of boom per day. On May 18, 2010, Forte sent an email to Matt Pavlas, BP's boom sourcing lead, stating that Packgen was " attempting sales to BP and Oil Cleanup companies." He informed Pavlas that Lyoen had visited Packgen's facilities and written a report for BP; he asked Pavlas to " provide indications if this report meets BP requirements." Pavlas provided Packgen with a copy of Lyoen's report, which described Packgen's product as " experimental."

Packgen hired Dr. Ian Durham to conduct third-party testing. On May 20, 2010, Dr. Durham reported that Packgen's boom met ASTM standards. Packgen provided Lyoen and two BP procurement managers with the test results. On May 22, 2010, Don Roberts of Packgen sent Pavlas an email expressing his " hope [that] the information from the third party review helps in the decision making process." Pavlas contacted Roberts by phone and stated that BP intended to purchase Packgen's entire stock of boom. Roberts followed up in an email on May 24, 2010, asking Pavlas for a conference call " to discuss [our] possible working relationship." Pavlas responded that " first I would like to receive the information requested yesterday such as [quantity] in inventory, etc."

On May 26, 2010, Deenan Arcot of BP emailed Roberts requesting the specifications for Packgen's boom, which he said BP would have to approve prior to placing an order. After receiving the specifications, Arcot expressed reservations about the construction of the boom in an email to Roberts, observing that it was " [v]ery different . . . from others being used." In a follow-up email, Arcot wrote " I want to check the possibility that you can modify these booms to our standard requirement." Roberts later testified that this was the first time BP ever expressed having any standard requirement for boom other than the ASTM standards.

On May 26, 2010, BP noted potential problems with the connector plates and end connectors on Packgen's boom and informed Packgen that it could not use the product at that time. Lapoint and Roberts spoke to BP's Charles Bigi about the connector issue, and Bigi promised that BP would approve and buy Packgen's boom if Packgen obtained new universal connectors. On May 29, Bigi sent two colleagues at BP an email summarizing his discussions with Packgen and including the statement " I do not understand why we keep placing orders with suppliers like this[.]"

In late May or early June, Packgen secured universal slide connectors. On June 11, 2010, BP sent Luis Suarez, a Supplier Quality Control Specialist, to conduct an assessment of Packgen's manufacturing process. Following his visit, Suarez told Lapoint and Roberts that BP would purchase Packgen's full capacity. On June 15, 2010, Suarez requested that Packgen send 500-600 feet of boom for evaluation by BP. He issued a report the following day in which he proposed three new modifications that he had not previously discussed with Packgen.

Meanwhile, BP's demand for boom continued to increase. It began to institute a new approval process for boom manufacturers and hired technical authorities on boom. As of June 18, 2010, BP had completed a written specification for 18" boom. Thereafter, it began requesting that boom manufacturers complete a deviation form if their boom differed from the specification. Packgen's boom design was so different from BP's specification that Packgen agreed to submit a drawing of its boom

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instead of the deviation form. Between June 16 to June 25, 2010, BP requested numerous changes from Packgen, none of which were required by the ASTM standards. Packgen worked at BP's direction to make the necessary changes.

On June 21, 2010, Suarez reiterated his request for a sample of boom to conduct field tests. BP conducted its first field test on June 30, 2010, at a BP site near Mobile, Alabama. Packgen's boom did not perform well. At that time, BP raised two new concerns about Packgen's boom -- first, it was constructed with material that filled with water as it was towed, and second, it failed to meet certain decontamination standards. Packgen worked to address the two new concerns.

While they were in Alabama, Bigi informed Roberts that BP needed 24" boom and suggested that Packgen could be BP's supplier for that product if it could adapt its manufacturing process. On July 7, 2010, Suarez forwarded the latest specification for 24" boom to Packgen. BP's John McFadden asked Packgen to " work on getting the material to make 24" boom." At BP's direction, Packgen ...


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