Phillips 66 Company v. Marine Petrobulk Ltd.

Background

Phillips 66 Company sued Marine Petrobulk Ltd. over the sale of very low sulfur fuel oil in 37 transactions between August 12, 2020, and April 8, 2021. The parties’ contract used Phillips 66’s General Terms and Conditions and transaction confirmations. The confirmations stated the amount of fuel in metric tons and used a gasoil pricing index that included a 7.45 conversion rate between barrels and metric tons.

Phillips 66 initially invoiced Marine Petrobulk using the 7.45 rate. Phillips 66 later claimed that this rate was incorrect for the fuel sold because very low sulfur fuel oil is heavier than gasoil. Phillips 66 issued revised invoices using a lower conversion factor between 6.38 and 6.73. Marine Petrobulk disputed that it had to pay the revised amounts.

Phillips 66 asserted claims for breach of contract, breach of the implied duty of good faith and fair dealing, and unjust enrichment. Marine Petrobulk moved to dismiss under Rule 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim.

Court’s analysis

The court applied New York law, which the parties’ contract selected. For the breach-of-contract claim, the court concluded that the confirmations governed the contract price. Because the confirmations incorporated the pricing index and its 7.45 conversion factor, the parties agreed to use that factor to calculate the price. The court held that using a different factor in the revised invoices disregarded the agreed contract terms. Because Marine Petrobulk had paid at the contracted rate, Phillips 66 did not adequately allege a breach.

The court also rejected Phillips 66’s argument that the contract’s audit provision allowed it to correct its invoices within two years. The provision gave each party the right to audit the other party’s books and records relating to performance of the transactions. The court held that it did not allow a party to revise its own records and enforce the revised amounts under the contract.

The good-faith-and-fair-dealing claim was dismissed because it relied on the same allegations as the contract claim and was therefore duplicative. The unjust-enrichment claim also failed because it duplicated the contract dispute.

Disposition

Marine Petrobulk’s motion to dismiss was granted. The court directed the Clerk of Court to enter judgment for Marine Petrobulk and close the case.