Taylor Corporation v. Georgia-Pacific Consumer Products LP

Background

Taylor Corporation sued Georgia-Pacific Consumer Products, LP over an agreement governing Georgia-Pacific’s supply of roll and cut-sheet paper products. Taylor was the successor in interest to the entities that originally entered into the agreement. The agreement included a notice provision requiring six months’ written notice if Georgia-Pacific discontinued a primary basis weight of a core grade. It also required Taylor to use commercially reasonable efforts to purchase products from Georgia-Pacific, subject to stated limitations, and included a consignment-stock provision.

The parties later amended the agreement. The Third Amendment removed the provisions requiring a minimum purchase and minimum supply of 2,000 tons per month, assigned the agreement to Taylor, and extended its term. A later amendment extended the term to October 31, 2021. The notice, preferred-supplier, and consignment provisions remained.

In late December 2018, Georgia-Pacific notified Taylor that it would no longer manufacture the roll paper products Taylor had been buying. Georgia-Pacific later decided to leave the communication-papers business. Its final direct shipment to Taylor occurred in February 2019, although Taylor continued withdrawing products from inventory until April 2019.

Taylor alleged that Georgia-Pacific breached the notice provision by ending supply without six months’ notice. Taylor sought cover damages— the additional cost of buying replacement paper from other suppliers—estimated at up to $3,520,000. Taylor also sought $2,530,000 in lost profits allegedly resulting from the termination of its resale arrangement with Citibank. Taylor separately asserted promissory estoppel. Georgia-Pacific sought judgment on Taylor’s claims and on its counterclaim for $362,295.89. Taylor conceded that it owed that amount on the counterclaim.

Contract and Summary-Judgment Analysis

The court applied Delaware law and the Uniform Commercial Code because the agreement concerned the sale of goods. On summary judgment, the court could enter judgment only if there was no genuine dispute about a material fact and the moving party was entitled to judgment as a matter of law.

The court rejected Georgia-Pacific’s argument that removing the minimum-quantity provisions converted the agreement into only a framework for future sales. The court interpreted the preferred-supplier provision as requiring Taylor to purchase from Georgia-Pacific in all but two limited situations: when Georgia-Pacific could not meet Taylor’s quality and delivery requirements or when Taylor’s customers imposed limitations. Taylor therefore did not have an unrestricted right to buy from other suppliers. The court held that this limited nonexclusivity was consistent with an enforceable requirements contract.

The court also relied on the parties’ course of dealing. Taylor had bought substantial quantities from other suppliers, but the record supported Taylor’s position that Georgia-Pacific could not supply all of Taylor’s requirements. The court found that Taylor’s purchases from other suppliers were consistent with the agreement’s limited exceptions and that the agreement remained a requirements contract after the Third Amendment.

The court rejected Georgia-Pacific’s proposed interpretation that the six-month notice provision applied only to discontinuing a particular basis weight and not to Georgia-Pacific’s complete exit from the communication-papers business. The court held that reading the agreement to require notice for a product discontinuation but no notice for a complete shutdown would be an unreasonable interpretation. It therefore found that Georgia-Pacific breached the notice provision.

Damages

For cover damages, the court held that Taylor did not need to establish the damages amount with precise certainty at this stage because Taylor had shown injury from paying more for paper it would have obtained from Georgia-Pacific. The court ruled that cover damages were properly measured by the volume of Taylor’s unfilled requirements during the six-month period following the breach. It encouraged the parties to determine the exact amount jointly; otherwise, the issue would be reserved for trial.

Taylor’s claimed Citibank lost profits presented a different issue. The agreement excluded special, indirect, incidental, exemplary, punitive, and consequential damages. The parties disputed whether profits from Taylor’s separate resale arrangement with Citibank were direct damages or consequential damages. The court found that the record did not establish the extent of Georgia-Pacific’s knowledge of, or role in, the Citibank pricing arrangement. It held that a jury would decide whether the lost profits were direct or consequential damages. If the jury found them to be direct damages, the court ruled that any award would be limited to six months because that was the remaining period covered by the notice obligation.

Promissory Estoppel and Counterclaim

The court dismissed Count Two, Taylor’s promissory-estoppel claim, because promissory estoppel is used to enforce an otherwise unenforceable promise based on detrimental reliance, and the alleged promise here was part of an enforceable contract.

Because Taylor conceded the amount owed, the court granted Georgia-Pacific’s counterclaim for $362,295.89, before any award of prejudgment interest, costs, and attorney fees.

Disposition

The court ordered that Taylor’s Motion for Partial Summary Judgment and Georgia-Pacific’s Motion for Summary Judgment were both granted in part and denied in part. The court found that Taylor established each element of its breach-of-contract claim, held that the agreement was an enforceable requirements contract, found that Georgia-Pacific breached the agreement, and ruled on the proper measurement and potential limitation of damages as described above. Count Two was dismissed, and Georgia-Pacific’s counterclaim was granted for $362,295.89 before possible prejudgment interest, costs, and attorney fees.