Minnesota Court Allows C.H. Robinson Breach of Contract Lawsuit to Move Forward
A federal District Court in Minnesota will allow a breach of contract lawsuit from C.H. Robinson to go forward, denying on Jan. 8 a motion to dismiss the case. The third-party logistics provider says U.S. Sand and its owners failed to pay for the transportation of 8,500 tons of ceramic proppant and sand from China and Wisconsin to the oil fields of North Dakota.
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The dispute revolves around two shipments under two separate contracts with U.S. Sand. Under the first agreement, C.H. Robinson arranged for the ocean shipment of 5,500 tons of ceramic proppant from China to Olympia, Wash, and then for the rail transportation of 3,000 tons of the Chinese ceramic proppant to Halliburton Energy Services in North Dakota. The other 2,500 tons were stored in Washington by C.H. Robinson. Halliburton purportedly paid U.S. Sand over $2 million for the shipment, but U.S. Sand failed to pay C.H. Robinson to ship it. Under the second agreement, C.H. Robinson transported 1,000 tons of silica sand from Wisconsin to Williston, North Dakota at $62 per ton. U.S. Sand didn’t pay for that shipment either.
Both contracts required payment “net 60 days upon issue date of invoice.” They “required the implementation of an Escrow Account where Halliburton deposits funds and CHR can draw against its share as per this agreement.” Both contracts also incorporated the National Customs Brokers & Forwarders Association of America (NCBFAA) terms and conditions, which provide for the 3PL’s right to sell a customer’s property if it’s in the 3PL’s possession and payment is past due.
U.S. Sand said C.H. Robinson’s lawsuit should be dismissed. First, C.H. Robinson was required to create an escrow account before payment was made, and it failed to do so. Second, the contract terms don’t require payment directly from U.S. Sand to C.H. Robinson.
The Minnesota U.S. District Court found the contract terms to be at best ambiguous, and decided to allow the suit to go forward. The contract terms only required the creation of an escrow account, and did not say C.H. Robinson had to create it. Also, the requirement for payment “net 60 days” could plausibly be interpreted to mean U.S. Sand must ensure payment.
The court decided not to dismiss C.H. Robinson’s unjust enrichment claim, because U.S. Sand’s failure to pay could be considered unjust or morally wrong, and declined to dismiss the individual defendants and owners of U.S. Sand from the lawsuit. Although stakeholders are usually not subject to be liable for corporate obligations, C.H. Robinson’s arguments that Jose Alberto Gonzalez and Mervin Packineau only used U.S. Sand as a corporate façade to siphon funds for personal use is a good enough reason to “pierce the corporate veil.” Finally, C.H. Robinson could also go forward with its attempt to sell the 2,500 tons of ceramic proppant currently from China being held in a warehouse in Washington. Although C.H. Robinson’s filings at the court didn’t specify that the ceramic proppant is the properly of U.S. Sand, and didn’t say it gave 30 days notice as required by the NCBFAA terms, those issues are only minor technicalities, the court said. “CHR does not need to plead every single condition or requirement of the entire lien section of the NCBFAA terms in order to state a claim for declaratory judgment at this stage,” said the District Court.
Email ITTNews@warren-news.com for a copy of the ruling.
(C.H. Robinson Worldwide, Inc. v. U.S. Sand, LLC; D. Minn. 13-1274, dated 01/08/14)