Taylor Corporation v. Georgia-Pacific Consumer Products LP

Background

Taylor Corporation sued Georgia-Pacific Consumer Products, LP, for breach of a paper-supply agreement. Taylor was the successor in interest to the entities that originally entered into and later amended the agreement with Georgia-Pacific.

The original 2013 agreement required Georgia-Pacific to supply specified paper products and required Taylor to purchase at least 2,000 tons per month. It also required Georgia-Pacific to give Taylor at least six months’ written notice before discontinuing manufacture of specified products. The agreement further stated that Taylor’s purchase obligations were nonexclusive, required Taylor to use commercially reasonable efforts to purchase products from Georgia-Pacific, and required Taylor to maintain consignment stock.

The parties extended and amended the agreement several times. In 2015, they removed the 2,000-ton monthly minimum-purchase requirement and extended the agreement through October 31, 2018. In 2018, they extended it again through October 31, 2021. The notice, preferred-supplier, and consignment provisions remained in the amended versions.

In early 2019, Georgia-Pacific told Taylor that it could not commit to making future deliveries and then failed to deliver the products. Taylor alleged that Georgia-Pacific breached the notice provision by failing to give six months’ notice and sought damages for purchasing paper from other suppliers during that period.

Motion to Dismiss

Georgia-Pacific moved to dismiss the breach-of-contract claim under Rule 12(b)(6), which tests whether a complaint alleges enough facts to state a legally plausible claim. Georgia-Pacific argued that removing the minimum-purchase requirement made the amended agreement unenforceable under the Uniform Commercial Code (UCC). It contended that the agreement did not specify a quantity of goods or provide a formula for determining quantity, and that it was neither a minimum-quantity contract nor a requirements contract.

Taylor argued that the preferred-supplier provision and the consignment provision supplied enough information about quantity to satisfy the UCC’s requirements. Taylor maintained that the preferred-supplier provision was an enforceable requirements contract and showed an intent that Taylor purchase as much of its annual paper needs from Georgia-Pacific as Georgia-Pacific could supply. Taylor also argued that, at minimum, the agreement was ambiguous and therefore could not be resolved on a motion to dismiss.

Court’s Analysis

The court applied Delaware law because the parties agreed that Delaware law governed the amended agreement. It explained that a breach-of-contract claim requires allegations of a contract, a breach of a contractual obligation, and damages.

The court concluded that the amended agreement was ambiguous on whether the preferred-supplier provision created a requirements contract. Georgia-Pacific had a reasonable interpretation based on the removal of the minimum-purchase requirement. Taylor also had a reasonable interpretation based on the preferred-supplier and consignment provisions and the agreement’s overall purpose. Because the agreement had two reasonable interpretations, the court held that the contract-interpretation issue could not be resolved at the motion-to-dismiss stage.

Disposition

Judge Donovan W. Frank denied Georgia-Pacific’s Motion to Dismiss. The opinion states that the contract-interpretation issue must be considered at a later stage.