In February and April 2011 Kentucky Fuel Corp. entered into contracts with Celtic Marine for the transport of coal by barge from terminals in Kentucky and West Virginia to New Orleans and Darrow, La. James C. Justice Cos. guaranteed obligations KFC owed to Celtic Marine.
There were agreements for additional freight and stevedoring, if minimum quantities were not shipped.
On Dec. 7, 2011, Celtic filed suit against Justice for breach of the guarantor’s agreements, alleging KFC failed to fulfill its obligations and Justice, as guarantor, was responsible for past due freight, shortfall, liquidated damages, demurrage, and other costs.
On Feb. 1, 2012, Celtic, KFC, and Justice executed a settlement agreement.
KFC agreed to pay Celtic all continuing demurrage incurred on loaded barges until the cargo was discharged. Justice agreed to guarantee KFC’s payment of this continuing demurrage and to pay Celtic a lump sum of $4,687,215. KFC entered into another service agreement and spot contract with Celtic for the transportation of coal. Justice also guaranteed the “2012 Contract.”
A dispute arose regarding KFC’s compliance with the February settlement agreement and the 2012 Contract.
On May 24, 2012, Celtic moved for an extension of time to enforce the settlement, contending cargo had yet to be unloaded and the demurrage remained unpaid.
The district court granted the motion and extended the deadline to enforce the February settlement agreement until October 2012 when the parties announced a subsequent settlement agreement, and the district court granted Celtic’s motion for an extension of time to enforce settlement.
Justice and KFC agreed to jointly pay Celtic $2.2 million in installments, and Celtic agreed to release Justice and KFC upon “full and irrevocable” payment. If payments were not timely Celtic reserved the right to seek payment in full.
Justice made the payments, but each payment was late. For example, Justice made the first installment payment three weeks late and it was less than agreed.
On Jan. 11, 2013, Celtic moved for summary judgment to enforce the acceleration clause and demand all payments due under the February 2012 agreement. The district court found Celtic could invoke the acceleration clause and granted its motion for summary judgment.
Justice contended that the district court erred, saying that it and Celtic had amended the installment payment deadlines. It said its payments were not late and Celtic had also waived its right to enforce an acceleration clause.
In its decision (Celtic v. James C. Justice Companies. 5th Cir. No. 13-30712. July 29) the appeals court rejected both of Justice’s arguments.
Contrary to Justice’s contention, it said emails between Celtic and Justice executives did not amend the October settlement agreement.
Under Louisiana law, a settlement agreement is a contract and the rules of construction applicable to contracts are used.
The 5th Circuit found there was no evidence that the parties agreed to amend the settlement agreement, and the plain language of the email exchange itself “establishes that the parties did not intend to amend the October Settlement Agreement.”
It also said Celtic did not waive its ability to enforce the acceleration clause.
This column was published in the December 2014 issue of American Shipper.
