Opinion ID: 1456676
Heading Depth: 2
Heading Rank: 2

Heading: Cherne's Position as to Post-July 23, 2004 Contract Terms

Text: In its opinion, the district court stated in a footnote that several statements and communications cited by Cherne as support for a contract with a greater scope of work did not establish the necessary offer evidencing Marathon's willingness to be bound by such a term or acceptance of such a term by Cherne. On appeal, Cherne relies upon these several statements as well as deposition testimony from three Marathon employees to support its position. We address below the terms of the contract Cherne asks us to find as well as those elements of the record that Cherne cites as support for its position. At oral argument, Cherne clarified what it alleged to be the terms of a new, post-July 23 agreement with Marathon. Cherne identified only three terms: (1) commercial terms covering a reimbursement mark-up rate for time and materials; (2) a completion date; and (3) a scope of work including all pre-turnaround and turnaround work for the project. As noted above, the parties' conduct belies Cherne's assertion that these three terms alone governed the parties' relationship because Cherne expressly referenced the written materials-return provisions in its September 24 letter and because no such detailed terms would exist under Cherne's theory of a three-point, unwritten contract. Regarding a reimbursement rate for time and materials, Cherne points to the commercial terms of the April 29 Proposal. The Letter of Intent, however, incorporated these terms by reference. As such, Cherne's assertion in no manner distinguishes between continued applicability of the Letter of Intent and applicability of a different agreement. Accordingly, identification of these terms does not distinguish or elevate Cherne's purported three-issue agreement relative to the terms of the Letter of Intent. Regarding completion date and scope of work, these terms are, in reality, merely separate labels for one concept. Cherne's theory of the case is that Marathon guaranteed an award of all project work to Chernepre-turnaround as well as turnaround work, with pre-turnaround work to be completed prior to the refinery turnaround and with turnaround work to be completed by the end of the refinery turnaround. To argue that Marathon had awarded Cherne the turnaround work is, by the parties' definition of turnaround, the same as arguing the parties had agreed that Cherne would complete work by the end of the turnaround period. Cherne's alleged three-point, unwritten contract, then, in reality contained only two terms, a scope of work and a reimbursement rate. The evidence Cherne points to in support of its alleged scope of work and corresponding completion date includes several passages from deposition testimony and several communications between the parties or internal memoranda in which the parties referred to Cherne as the contractor for the project, discussed pre-turnaround and turnaround work, or referenced the award of a contract to Cherne. These items of evidence fall into three general categories: statements before, during, and after the May 14 to July 23 window of time during which the Letter of Intent undisputedly governed the parties' relationship. The statements and documents predating the Letter of Intent or its addenda cannot create a triable question of fact regarding the parties' intent to the extent they are inconsistent with the parties' clear expressions of intent in the Letter of Intent and its addenda regarding termination without cause and regarding the undefined nature of the overall scope of work. The Letter of Intent unambiguously shows that Marathon and Cherne understood that Marathon was allowing Cherne to commence work on site on a reimbursable basis with an overall scope of work and overall project cost estimate yet to be determined. Cherne reaffirmed the unsettled nature of the scope of work in the addenda that again referred to the scope of work as unsettled. As per the Letter of Intent, these items were both contingencies that the parties had to agree upon before entering into a final contract. Cherne, therefore, cannot now successfully argue that the parties had agreed to a complete scope of work or cost estimate prior to the dates on which the parties signed the Letter of Intent and its addenda stating that these points remained unresolved. That is not to say that the parties had not communicated about the potential, overall project scope or the possibility of employing Cherne to perform turnaround as well as pre-turnaround work. The Letter of Intent and its addenda simply show that Marathon had not agreed to bind itself to guarantee such work for Cherne. Throughout negotiations, the parties continued to communicate planning efforts, exchange scheduling and manpower requirements, and share other information as necessary to lay the groundwork for Cherne to perform work for Marathon. As explained below, statements that Cherne cites from the period of time after July 23 address these issues and merit greater attention. When viewed in context, however, all of the post-July 23 statements that Cherne cites simply illustrate the fact that the parties were working towards the employment of Cherne as the contractor for the project. The Letter of Intent itself anticipated these communications, and the statements do not establish that the parties actually reached a final agreement. Further, none of these statements suggest any departure from the clearly expressed intent in the Letter of Intent (and incorporated provisions from the draft agreement) to permit termination without cause. See, e.g., House, 371 N.W.2d at 30 (Even without an implied extension of the written agreement, the prior written agreement is evidence of intent of the [parties] that termination was to be without cause.). Cherne points to the following sources of support for its position: (1) July 29 internal emails between Marathon's Project Execution Manager Patrick Lysaght and Marathon's Project Manager John Stefko purportedly identifying Cherne as project manager for turnaround phase work; (2) an August 9 document entitled updated Contracting Strategy in which Marathon stated, Cherne will complete the mechanical pre-turnaround and turnaround scope in Complex I; (3) an August 23, 2004 Subcontracting Control Plan identifying Cherne as the Crude/VAC, Mechanical, Electrical, Instrumentation, and Insulation Pre-Turnaround and Turnaround 2004 Contractor; (4) a Milestone Schedule prepared by Marathon identifying a delayed Turnaround Completion Date of March 18, 2005 and a Contract Award date of May 10, 2004; (5) a Cherne email dated August 6 discussing planning for turnaround activities; (6) deposition testimony of Marathon Project Contracts Administrator Robert Guilmette, Patrick Lysaght, and John Stefko. The first five of these documents (not all of which were communicated to Cherne prior to discovery in this case) verify the undisputed facts that Marathon and Cherne commenced their relationship anticipating that Cherne might be able to provide extensive pre-turnaround and turnaround project services to Marathon and that Marathon and Cherne negotiated, communicated, and planned schedules in order to keep this possibility open. None of these documents demonstrate the existence of a contract under which Marathon agreed to bind itself to Cherne subject to termination only for cause. In fact, several support Marathon's current position that the parties were still attempting to agree upon a cost estimate and overall scope of work after July 23. The July 29 email simply demonstrates that, as late as July 29, Marathon was still trying to establish cost estimates for the project. The only references to Cherne in this document are the name Cherne in parentheses under the header Crude Shutdown and the statement, We should use these total hour values to split the Cherne and [other contractor] costs. Similarly, the August 9 and August 23 documents list several projects and contractors Marathon considered to be assigned to those projects. Nothing about these or the remaining documents, however, suggests that Marathon had, in fact, guaranteed work for Cherne or any of the other contractors or entered into unwritten contracts precluding termination without cause. The failure of these documents to support Cherne's current position is illustrated most fully by the fact that one of these documents, a Milestone Schedule, refers to May 10, 2004, as a Contract Award date. May 10, 2004, in fact, was the day a Marathon representative signed the Letter of Intent (which a Cherne representative subsequently signed on May 14). A Marathon document listing May 10, 2004, as a Contract Award date, then, simply cannot support Cherne's current position that the parties, on May 10, had entered into a final agreement with terms different from the Letter of Intent. Finally, the last-referenced document is an email merely showing that Marathon was moving and shortening the dates for the refinery turnaround and checking with Cherne about the feasibility of such a move. While this document shows that Marathon anticipated Cherne would be performing further pre-turnaround work and turnaround work, it does not show that Marathon had agreed to any terms contrary to those within the Letter of Intent. At oral argument, Cherne characterized the deposition testimony of Marathon's personnel as unequivocally establishing that the parties had entered into a verbal agreement after July 23, 2004, guaranteeing all project work for Cherne subject only to termination for cause. The deposition testimony cannot reasonably be understood as supporting Cherne's characterization. Marathon employees Guilmette, Lysaght, and Stefko all testified that Marathon's generally preferred approach is to use one contractor for pre-turnaround and turnaround work. They also stated that Marathon and Cherne talked about having Cherne perform pre-turnaround and turnaround work. None of them, however, testified that Marathon had ever entered an agreement guaranteeing such work for Cherne. In fact, in the passages Cherne cites in its brief as support for the existence of a verbal agreement, the only statement that might be interpreted as a verbal agreement of any kind is found in a recitation of hearsay by Guilmette. Guilmette claimed that Marathon's project manager Stefko had agreed with Cherne's president that the pre-turnaround work would be an audition for a possible award of turnaround work. To the extent, then, that Cherne relies upon the Marathon employees' characterization of the relationship to prove a contract with terms different than the Letter of Intent, Cherne's efforts fail.