Court Opinion

ID: 4694773
Source: CourtListenerOpinion
Date Created: 2021-06-11 16:04:46.276343+00
Date Added: 2024-06-11T08:05:31.593375
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

SMART SAND, INC.,                 )
                       Plaintiff, )
                                  )
                                  )
    v.                            )             C.A. No. N19C-01-144
                                  )                      PRW CCLD
US WELL SERVICES LLC,             )
                      Defendant. )

                            Submitted: May 7, 2021
                             Decided: June 1, 2021
                             Issued: June 11, 2021*

                          DECISION AFTER TRIAL

Neal J. Levitsky, Esquire, Seth A. Niederman, Esquire, FOX ROTHSCHILD LLP,
Wilmington, Delaware; Steven J. Daroci, Esquire, FOX ROTHSCHILD LLP,
Lawrenceville, New Jersey, Attorneys for Plaintiff Smart Sand, Inc.

Richard P. Rollo, Esquire, Travis S. Hunter, Esquire, Alexandra M. Ewing, Esquire,
RICHARDS LAYTON & FINGER, P.A., Wilmington, Delaware; Stephen H. Lee,
Esquire, Mary Anna H. Rutledge, Esquire, PORTER LEDGES LLP, Houston, Texas,
Attorneys for Defendant US Well Services LLC.

  WALLACE, J.
       In 2019, Plaintiff Smart Sand, Inc., filed its Complaint alleging non-payment

under the parties’ Master Product Purchase Agreement (together with its amendment

executed on May 1, 2016, the “PPA”), and Railcar Usage Agreement (collectively

the “Agreements”).1 Defendant US Well Services LLC, counterclaimed alleging

breach of the implied covenant of good faith and fair dealing, tortious interference

with business customers, breach of contract, and seeking declaratory judgment

related to its termination of the PPA.2

       On Smart Sand’s earlier motion, the Court dismissed US Well’s breach of the

implied covenant and tortious interference claims, leaving US Well’s

breach-of-contract and declaratory judgment counterclaims.3

       Smart Sand then filed its First Amended and Supplemental Complaint, adding

claims for additional amounts due under the PPA.4 When the Agreements expired

in April 2020, Smart Sand filed its Second Amended and Supplemental Complaint,

adding a claim for US Well’s non-payment of Smart Sand’s final invoice.5

* This decision is issued after consideration of the parties’ requests for redaction of certain
non-parties’ confidential information and with the Court’s own necessary corrections.
1
    Compl., Jan. 14, 2019 (D.I. 1).
2
    First Am. Countercls., Apr. 18, 2019 (D.I. 17).
3
    Judicial Action Form, June 19, 2019 (D.I. 39).
4
    First Am. Compl., Aug. 28, 2019 (D.I. 55).
5
    Second Am. Compl., June 10, 2020 (D.I. 200).

                                                 -1-
       After myriad discovery disputes, fact and expert discovery closed in

late 2020.6

       The Court then heard, and subsequently denied, the parties’ Cross Motions for

Summary Judgment and Motions in Limine.7 Finally, in mid-December 2020, a trial

commenced on the remaining factual issues.8

                                       I. THE TRIAL

       The Court heard testimony during a five-day bench trial. Thereafter, the

parties submitted post-trial briefings and motions.            The respective cases were

deemed fully submitted for decision in February 2021.

       During trial, the Court heard from and considered the testimony of the

following witnesses:

       Lee Beckelman                                      Joel Broussard (by deposition)
       William John Young                                 Kyle O’Neill (by deposition)
       Ronald Wheelan                                     Brian Stewart (by deposition)
       Stephen L. Becker                                  Nathan Houston
       Christopher LaBarte (by deposition)                Brian Savisky
       Matthew Bernard (by deposition)                    Dana M. Trexler

6
    The Court greatly appreciates the invaluable service of appointed Special Master Matthew F.
Boyer in deftly addressing the parties’ numerous discovery disagreements during the pendency of
this matter.
7
    Judicial Action Form, Nov. 24, 2020 (D.I. 317).
8
    Trial Worksheet, Jan. 4, 2021 (D.I. 327).
                                                -2-
        The parties also submitted an extensive number of exhibits, most of which

were admitted without objection and are cited herein by their designations as joint

exhibits.

                                  II. FINDINGS OF FACT

        It is difficult at times in the trial of certain actions to fully and cleanly

segregate findings of fact from conclusions of law. To the extent any one of the

Court’s findings of fact here might be more appropriately viewed as a conclusion of

law, that finding of fact may be considered the Court’s conclusion of law on that

point.9

     A. THE PARTIES

        Smart Sand is a Delaware corporation with its principal place of business in

The Woodlands, Texas.10 Smart Sand is a domestic producer and supplier of frac

sand, a mineral product commonly used in the oil and gas industry.11 US Well is a

Delaware limited liability company with its principal place of business in Houston,

9
    See Facchina Constr. Litigs., 2020 WL 6363678, at *2 n.12 (Del. Super. Ct. Oct. 29, 2020)
(collecting authority).
10
     Second Am. and Supp. Compl. ¶ 1.
11
    Compl. ¶ 1; see generally Hobart M. King, What is Frac Sand?, GEOLOGY.COM—GEOSCIENCE
NEWS AND INFORMATION, https://geology.com/articles/frac-sand/ (last visited May 27, 2021)
(“‘Frac sand’ is a high-purity quartz sand with very durable and very round grains. It is a crush-
resistant material produced for use by the petroleum industry. It is used in the hydraulic
fracturing process (known as ‘fracking’) to produce petroleum fluids, such as oil, natural gas, and
natural gas liquids from rock units that lack adequate pore space for these fluids to flow to a well.”).

                                                  -3-
Texas.12 US Well is an oilfield service company that provides hydraulic fracturing

services, including pressure pumping, to oil and gas exploration and production

companies.13

     B. THE AGREEMENTS

         On November 6, 2015, Smart Sand and US Well entered into a Master Product

Purchase Agreement through which Smart Sand supplied frac sand to US Well.14

The PPA required US Well to pay a monthly non-refundable capacity reservation

charge, regardless of whether US Well actually purchased and took any frac sand

for the given month (the “Reservation Charge”).15

         The PPA required US Well to purchase a total of two million tons of sand

over a four-to-seven-year period at prices that fluctuated based on various factors.16

If US Well failed to purchase the required amount of sand in any contract year, it

was required to pay an annual “True Up Payment” equal to $40 multiplied by the

12
     Id. ¶ 2.
13
     First Am. Countercls. ¶ 3.
14
     Compl. ¶¶ 3, 7; First Am. Countercls. ¶ 3.
15
     Compl. ¶ 10.
16
   First Am. Countercls. ¶ 5; Joint Exhibit 1 (“JX”) (PPA §§ 1.1, 1.2, 7.1) (D.I. 338 – letter from
Seth Niederman enclosing the electronic media containing the Joint Trial Exhibits; D.I. 339 – Joint
Exhibits List).

                                                  -4-
difference between the Minimum Tons per Year (“MTPY”) amount and the actual

tons purchased.17

           At the same time, the parties also entered into a Railcar Usage Agreement

(“RUA”).18 Under the RUA, US Well “borrowed” railcars from Smart Sand for the

delivery of sand purchased under the PPA in exchange for a monthly fee of $650 per

railcar.19 The RUA’s term continued until the termination or expiration of the PPA.20

           Upon the expiration of the four-to-seven-year term, US Well was required,

under PPA Section 1.5(c), to pay a Cumulative Shortfall Payment (“CSP”) “equal to

$40 multiplied by the difference between the aggregate [MTPY] during the Term

(i.e. 2,000,000 tons)” and the actual tons of sand purchased by US Well during the

term, reduced by the amount of any prior True Up Payments and Unused Reservation

Charges.21

           In the fall of 2018, US Well stopped purchasing sand from Smart Sand, and

ceased meeting its payment obligations.22 In January 2019, US Well purported to

17
     JX-2 (First Am. to PPA § 1.2).
18
     Compl. ¶¶ 3, 7; First Am. Countercls. ¶ 6.
19
     JX-4 (RUA).
20
     Id.
21
     JX-2 (First Am. to PPA § 1.3).
22
   JX-268 (Oct. 24, 2018 email correspondence re: Smart Sand Prepayment), JX-278 (Nov. 1,
2018 email correspondence re: Smart Sand Oct. Railcar Usage Invoice), JX-373 (Final Invoice).

                                                  -5-
terminate the Agreements, retroactively from September 1, 2018, claiming that

Smart Sand breached the PPA.23 The PPA expired on April 30, 2020.24 According

to Smart Sand’s final invoice, US Well purchased 793,176.47 tons of sand, leading

to a reported shortfall of 1,206,823.53 tons.25

           From the time of US Well’s purported termination of the Agreements to the

time Smart Sand calculated the earliest possible PPA expiration, Smart Sand sent

US Well multiple invoices for amounts it deemed due under the PPA.26 On May 4,

2020, Smart Sand sent US Well a final invoice setting forth all amounts Smart Sand

claimed were due and payable under the Agreements.27 The final invoice included

the CSP of $48,272,941.20 and Railway Fees of $5,850,000. According to Smart

Sand, that CSP calculation “represents the total shortfall obligation of [US Well]

under the PPA for the tons it failed to purchase at the $40-per-ton rate and is

inclusive of prior Reservation Charges and shortfall/deferred tonnage invoicing that

[US Well] failed to pay.”28

23
     JX-333 (Jan. 11, 2019 US Well Termination Letter).
24
     Trial Tr., Dec. 14, 2020, at 104 (Lee Beckelman) (D.I. 347).
25
     JX-373 (Final Invoice).
26
   JX-346 (Contract Year 3 True Up Payment Invoice and Deferral Elimination Payment
Invoice).
27
     JX-373 (Final Invoice).
28
     Id.

                                                -6-
     C. CERTAIN KEY TRIAL TESTIMONY

         The trial began on December 14, 2020, with Lee Beckelman, Smart Sand’s

Chief Financial Officer, as the first witness.29 Mr. Beckelman testified to his

business understanding of the frac sand industry, the Agreements between Smart

Sand and US Well, and the cumulative shortfall payment calculation.30

         Mr. Beckelman explained that long-term take-or-pay contracts are used in the

industry to foster stability and consistency in what is an unstable market.31

Mr. Beckelman pointed to the Producer Price Index (“PPI”) and the various bands32

used in the contract as an indication of that instability:

         PPI is basically trying to represent what inflation is and so it represents
         a kind of general inflation number that may be in the economy or related
         to a particular activity. So PPI is a Producer Price Index and so it’s
         activity that basically – what the inflation of increasing in pricing is
         over time and it’s an index that is calculated and published . . .
         periodically.33

         And, Mr. Beckelman testified, between 2010 and 2016, the price of oil—

29
     Trial Tr., Dec. 14, 2020, at 17-18.
30
     Id. at 20-23, 25, 26, 32.
31
   Id. at 51, 64 (“[I]t helps both sides to have consistency of their business over a period of time,
because we both know there is a lot of uncertainty in our business in terms of supply and
demand.”).
32
     The PPI includes “five pricing bands based on WTR.” Id. at 90.
33
     Id. at 91.

                                                -7-
which directly affected the price of frac sand—fluctuated within range of $20/barrel

on the low end to a $100/barrel high.34 As such, Mr. Beckelman explained, Smart

Sand could not reliably project potential profits (or losses) at the time the contract

was signed.35 Additionally, Mr. Beckelman recounted that, in negotiations over the

amended PPA, it was US Well that asked for a $40/ton no-take rate, and Smart Sand

that agreed thereto.36

         Concerning the CSP, Mr. Beckelman told the Court that it represented the

accumulation of the separate shortfall payments, and as such Smart Sand is not

pursuing the previously unpaid invoices “[b]ecause they are not included in the

cumulative final shortfall payment[.]”37 According to Mr. Beckelman, the PPA was

intended to provide US Well with two million tons of sand, and the various

provisions within the PPA simply provided US Well with mechanisms to defer when

that volume’s transfer would be complete.38

         Next, John Young, Smart Sand’s Chief Operating Officer, testified as to how

34
     Id. at 98-99.
35
     Id. at 149-50.
36
   Id. at 154 (“US Well did not ask to reconsider the $40 a ton. Again, in November 2015, they
requested the $40 a ton and we agreed to it.”).
37
     Id. at 45.
38
     Id. at 96.
                                             -8-
the $40/ton shortfall figure was established.39 Specifically, Mr. Young recounted

that US Well’s then Chief Executive Officer Brian Stewart had requested the $40/ton

shortfall during negotiations over the amended PPA, and that Smart Sand accepted

it.40 Additionally, Mr. Young conveyed that when the amended PPA was executed

(which included the reduced shortfall amount) the invoiced price for coarse sand

sent to US Well was $45.03/ton.41

        Ronald Wheelan, Smart Sand’s Executive Vice President of Sales, then

explained how Smart Sand established its pricing. Mr. Wheelan testified that after

US Well stopped taking sand from Smart Sand, the parties attempted to renegotiate

but failed to come to agreement.42

        Then, Smart Sand’s expert witness Stephen Becker, founding partner of

Applied Economics Consulting Group, was called.43 Dr. Becker, as an expert in

damage quantification, testified to the amount and type of sand US Well took under

the PPA, based on the invoices.44 Dr. Becker calculated that a total of 793,205 tons

39
     Trial Tr., Dec. 15, 2020, at 93-94 (John Young) (D.I. 326).
40
     Id. at 98-99 (citing JX-50), 100.
41
     Id. at 105 (citing JX-429).
42
     Trial Tr., Dec. 16, 2020, at 154-55, 159 (Ronald Wheelan) (D.I. 348).
43
     Id. at 179 (Stephen Becker).
44
     Id. at 187-88.
                                                -9-
of sand had actually been delivered to US Well.45

           The Court also heard, through video depositions, the testimony of Christopher

LaBarte, Matthew Bernard, Joel Broussard, and Kyle O’Neill.46

           In addition, the Court heard both the video deposition and live testimony of

US Well’s former Chief Executive Officer Brian Stewart, US Well’s Rule 30(b)(6)

witness.47

           Mr. Stewart testified that in the original contract, the shortfall payment was

the full purchase price.48 During later negotiations aimed at amending that original

contract, Mr. Stewart admitted that he proposed a reduction of the shortfall to the

$40/ton figure and that was ultimately accepted by both sides.49 Mr. Stewart said

that while he did not know how much money Smart Sand would save by not mining

and delivering the sand to US Well, he knew it was below the full purchase price.50

Further, Mr. Stewart testified that US Well itself performed no analysis of whether

the $40/ton figure was representative of Smart Sand’s potential damages if US Well

45
   Id. at 192-93 (Becker’s calculation is the result of an accumulation of the Cumulative
Purchased Tons totals listed in the first to last invoice rendered by Smart Sand to US Well).
46
   Trial Tr., Dec. 16, 2020, at 202 (Christopher LaBarte), 203 (Joel Broussard), 204 (Matthew
Bernard); Trial Tr., Dec. 17, 2020 AM, at 8 (Kyle O’Neill) (D.I. 349).
47
     Trial Tr., Dec. 17, 2020 AM, at 8 (Brian Stewart).
48
     Id. at 12.
49
     Id. at 13.
50
     Id.
                                               -10-
did not buy the sand, and Smart Sand provided no such analysis.51

         At bottom, Mr. Stewart confirmed that $40/ton shortfall figure was “a

reasonable compromise based on the information that [US Well] had at the time.”52

         Next, Nathan Houston, US Well’s former Chief Operating Officer and Chief

Executive Officer testified about his efforts to renegotiate the amended PPA with

Smart Sand to “lower the sand and the price point [to] where [US Well] could be

competitive with it, reduce volumes, come up with some alternative . . . solutions to

running the sand.”53

         US Well then called its expert Brian Savisky, principal research analyst at IHS

Markit, to present his historic and forecasted market projections for the price of frac

sand.54 Mr. Savisky confirmed that the “average pricing for northern white sand

post-October 2018 [did not] reach $40 per ton[.]”55

         US Well called a second expert witness, Dana Trexler, managing director at

Stout.56 According to Ms. Trexler, Smart Sand’s reasonably foreseeable lost profits

51
     Id. at 15-16.
52
     Id. at 19.
53
     Trial Tr., Dec. 17, 2020 PM, at 9, 24 (Nathan Houston) (D.I. 325).
54
     Id. at 57, 72, 77 (Brian Savisky).
55
     Id. at 78.
56
     Trial Tr., Dec. 18, 2020, at 14 (Dana Trexler) (D.I. 346).
                                                -11-
were estimable at the time of contracting, and the amount Smart Sand claims it is

owed was not a reasonable estimate of those lost profits.57 Ms. Trexler asserted that

Smart Sand “had the necessary components available to them to perform an analysis

which would have allowed them to estimate potential lost profits under the PPA at

any point in time.”58 Ms. Trexler opined that, using certain calculations under her

read of the Agreements, US Well would owe Smart Sand an incomprehensible sum

of $105,295,290.59

         Ms. Trexler testified that Smart Sand’s retained product had value and

calculated the value of that sand at different points in time.60 Additionally, in Ms.

Trexler’s view, the $40/ton “fee does not approximate estimable lost profits at the

time of entering into the contract.”61

         Finally, Dr. Becker was recalled by Smart Sand to rebut Ms. Trexler’s

opinions on “the reasonableness of the contractual liquidated damages under the

PPA, calculating lost profit damages under the PPA and RUA, and/or analysis of

57
     Id. at 19-20.
58
     Id. at 29.
59
     Id. at 35.
60
     Id. at 48.
61
     Id. at 54-55.

                                         -12-
other frac sand market economics.”62

                        III. GENERAL LEGAL PRINCIPLES

        Though the Court sits without a jury, it has applied the same principles of law

in its deliberations and consideration of each individual claim and counterclaim that

it would have more formally instructed a jury to follow. The Court may highlight

here some of those that are most applicable to this particular case. But the fact that

some particular point or concept may be mentioned here should not be regarded as

any indication that the Court did not—during its deliberations—consider all legal

principles applicable to this case and the parties’ claims and counterclaims.

         In reaching its verdict, the Court has examined the joint exhibits submitted

and considered the testimony of all witnesses, both on direct and cross. The Court

has also considered the applicable Delaware case law that has defined the legal

precepts applicable here. The Court has applied the Delaware Rules of Evidence to

the testimony and exhibits and only used for its deliberation that which would be

allowed under those rules—consistent with the Court’s knowledge of those rules and

the specific rulings that may have been made and articulated both pre-trial, during

the trial proceedings, and post-trial. And, of course, the Court has considered each

party’s respective arguments on the weight to be accorded the testimony and

evidence.

62
     Id. at 163-64 (Stephen Becker – Recalled).
                                              -13-
        The Court then reviewed and applied the very instructions that it would give

a jury in these circumstances.63

        In this particular case, Smart Sand carries the burden of proof by a

preponderance of the evidence64 on Counts IV and V of its Complaint.

                             IV. FINDINGS AND VERDICT

        At trial there were three central issues to be resolved: (1) whether PPA Section

1.5’s take-or-pay provision is enforceable, (2) whether Smart Sand is entitled to

damages based on US Well’s breach of the RUA, and (3) whether either party is

entitled to attorneys’ fees or prejudgment interest.65 In its post-trial briefing, US

Well stated that it is no longer pursuing its single remaining counterclaim (Breach

of the PPA confidentiality provision) (Counterclaim I).66

        So the only claims left for the Court to resolve are Smart Sand’s

breach-of-contract claims aimed at US Well’s non-payment of the final invoice and

railcar usage fees (Counts IV and V).

63
    See, e.g., Del. Super. Ct. Civ. Pattern Jury Instr. 4.1 (Burden of Proof by a Preponderance of
the Evidence); id. at 4.2 (Evidence Equally Balanced); id. at 23.1 (Evidence—Direct or
Circumstantial); id. at 23.9 (Credibility of Witnesses—Weighing Conflicting Testimony); id. at
23.10 (Expert Testimony).
64
    See, e.g., Reynolds v. Reynolds, 237 A.2d 708, 711 (Del. 1967) (defining preponderance of the
evidence); Oberly v. Howard Hughes Med. Inst., 472 A.2d 366, 390 (Del. Ch. 1984) (same).
65
     USW Post-Trial Br. at 5-6, Jan. 29, 2021 (D.I. 330).
66
     Id. at 3 n.3; see USW’s Second Am. Countercl. ¶¶ 23-28, Nov. 7, 2019 (D.I. 113).

                                               -14-
     A. THE PPA’S TAKE-OR-PAY PROVISION SETS OUT VALID LIQUIDATED
        DAMAGES AND IS, THEREFORE, ENFORCEABLE.

PPA Section 1.5(c) states:

        Buyer shall pay to Smart Sand on or before the date that is thirty (30)
        days following the end of the Term an amount (the “Cumulative
        Shortfall Payment”') equal to $40 multiplied by the difference
        between the aggregate Minimum Tons per Year during the Term (i.e.
        2,000,000 tons) and the actual tons of Products (including any tonnages
        of substituted 60/ 140 (aka 100 mesh) at the ratio and proportion set
        forth in Section 1.1 and Appendix B) purchased by the Buyer during
        the Term (“Cumulative Purchased Tons”) plus tons of Replacement
        Products (the resulting amount, the “Cumulative Net Tons”) minus
        any True Up Payment paid during the Term minus any Unused
        Reservation Charge for the final Contract Year of the Terns (i.e. (i)
        Cumulative Net Tons = 2,000,000 - (Cumulative Purchased Tons + tons
        of Replacement Products), and (ii) Cumulative Shortfall Payment =
        (Cumulative Net Tons * $40) - prior True Up Payments - Unused
        Reservation Charge for the final Contract Year of the Term. If the
        Cumulative Net Tons is equal to or less than 0, then the Cumulative
        Shortfall Payment shall be $0.67

        US Well says that PPA Section 1.5(c)’s take-or-pay provision is not a (valid)

liquidated damages clause, but instead simply constitutes choices of alternative

performance—or, ultimately, an unenforceable penalty.68 Smart Sand maintains that

Section 1.5(c) is a valid liquidated damages clause.69

        US Well carries the burden of demonstrating that this questioned provision is

67
     JX-3 (emphasis in original) (composite of Amended and Restated PPA and First Am. PPA).
68
     USW Post-Trial Br. at 11.
69
     SSI Post-Trial Br. at 1, Jan. 29, 2021 (D.I. 332).

                                                 -15-
not a valid liquidated damages clause supporting the sum Smart Sand claims is now

due thereunder.70

        First, US Well turns to section 8:32 of White & Summers’s Treatise on the

Uniform Commercial Code’s discussion of take-or-pay contracts to the effect that a

majority of courts have found the “pay” provision in take-or-pay contracts to be only

a form of alternative performance a party might choose.71 Yet White & Summers

continue that “it is often difficult to distinguish between a provision for alternative

performance and an agreed remedy.”72

        So, US Well cites to S.H. Deliveries, Inc. v. TriState Courier & Carriage,

Inc.73 and Brazen v. Bell Atlantic Corp.,74 to propose that for a provision to constitute

liquidated damages, it must be specifically stated.75 And US Well suggests the

70
    See S.H. Deliveries, Inc. v. TriState Courier & Carriage, Inc., 1997 WL 817883, at *3 (Del.
Super. Ct. May 21, 1997) (“[T]he Court first notes that the presumption is in favor of the validity
of a liquidated damages provision . . . . It is up to the party opposing the liquidated damages clause
to demonstrate that it is invalid and unenforceable.” (citations omitted)); see also Princess Hotels,
Int’l Inc. v. Del. State Bar Ass’n, 1997 WL 817853, at *3 (Del. Oct. 29, 1997) (“Without defendant
putting forth anything to attack the liquidation clause, the presumption in favor of the liquidated
damages provision prevails.”).
71
    1 WHITE, SUMMERS & HILLMAN, UNIFORM COMMERCIAL CODE § 8.32 n.16 (6th ed. 2020)
(hereinafter, “WHITE & SUMMERS”) (collecting cases); see also USW Post-Trial Br. at 12.
72
     WHITE & SUMMERS § 8:32.
73
     1997 WL 817883 (Del. Super. Ct. May 21, 1997).
74
     695 A.2d 43 (Del. 1997).
75
     USW Post-Trial Br. at 13-14.
                                                -16-
absence of words like “breach,” “remedy,” or “damages” means that Section 1.5(c)

is not a liquidated damages provision but instead merely defines an alternative

performance.76 But, as Smart Sand rightly contends, no set incantation is needed to

define whether a contract’s language constitutes a liquidated damages clause.77

        US     Well     also    cites    White      &    Summers        to    suggest     that    a

material-breach-remedy provision elsewhere in a contract suggests that a

take-or-pay provision is not a recognizable liquidated damages clause.78 US Well

points to PPA Section 7.4 as the remedy for a material breach, but to little avail.79

        Both parties turn to other courts to support their preferred interpretation of the

PPA’s take-or-pay clause. US Well cites Roye Realty & Developing, Inc. v. Arkla,

Inc., where the Oklahoma Supreme Court found that a contested take-or-pay contract

76
     USW Post-Trial Br. at 15-16.
77
    SSI Post-Trial Ans. Br. at 7, Feb. 12, 2021 (D.I. 340) (citing W & G Seaford Assocs., L.P. v.
E. Shore Mkts., Inc., 714 F. Supp. 1336, 1343 (D. Del. 1989)). For instance, in Delaware Bay
Surgical Services, P.C. v. Swier, the Delaware Supreme Court upheld the finding of a liquidated
damages provision that explicitly used the word “penalty.” 900 A.2d 646, 650-51 (Del. 2006).
78
    USW cites to cases listed in WHITE & SUMMERS § 8:32 to show that courts have interpreted
“take-or-pay” to mean alternative performance. Conclusive in that listing is whether remedies for
breach are addressed elsewhere in the contract. And here, USW says they are addressed in PPA
Sections 7.2, 7.3, and 7.4. USW Post-Trial Br. at 12.
79
    Id. at 15 (citing PPA § 7.4). Of particular relevance, PPA Section 7.4 states that “in the event
Buyer terminates this Agreement pursuant to Section 7.2, Buyer shall pay, within thirty (30) days
of the effective date of termination, all amounts due and owing to Smart Sand for Products
delivered by Smart Sand prior to the effective date of termination, payment for any Outstanding
Deferred Tons at the rate of $40 per ton, and all other amounts payable by Buyer hereunder that
have accrued but remain unpaid at the effective date of termination. . . .”
                                               -17-
didn’t provide a proper measure of damages.80 Smart Sand counters that Roye Realty

is of no use because the court there decided the narrow issue of the measure of

damages for anticipatory repudiation—and here there was no anticipatory

repudiation because the PPA had expired by its own terms.81 To this, Smart Sand

adds Jeddo Coal Co. v. Rio Tinto Procurement (Singapore) Ptd Ltd., where the

federal district court found that a take-or-pay clause was indeed an enforceable

liquidated damages provision.82

        1. PPA Section 1.5 is a Valid Liquidated Damages Provision.

        US Well insists that PPA Section 1.5(c) is not a valid liquidated damages

provision.83 Smart Sand says it is.84 Again, as liquidated damages are presumed

valid, US Well, the party contesting the provision, has the burden of proof.85

        “[L]iquidated damages, by definition, are damages paid in the event of a

80
    Id. at 17 (citing Roye Realty & Dev’g, Inc. v. Arkla, Inc., 863 P.2d 1150, 1154 (Okla. 1993)
(holding that “[b]ecause the provisions of the UCC apply to gas purchase contracts . . . the measure
of damages for anticipatory repudiation of both the take and the pay obligations in a take-or-pay
gas purchase contract is the difference between the market price at the time when the aggrieved
party learned of the repudiation and the unpaid contract price.” (citations omitted))).
81
     SSI Post-Trial Ans. Br. at 11-13.
82
   Id. at 10 (citing Jeddo Coal Co. v. Rio Tinto Procurement (Singapore) Ptd Ltd., 2020 WL
3474078 (M.D. Pa. Feb. 10, 2020)).
83
     USW Post-Trial Ans. Br. at 2, Feb. 12, 2021 (D.I. 336).
84
     SSI Post-Trial Br. at 1.
85
     See supra note 70 & accompanying text.
                                               -18-
breach of contract.”86         Delaware Courts routinely enforce liquidated damages

provisions when damages are uncertain at the time of contracting and when the

liquidated damages due are reasonable.87 The role of liquidated damages is to

compensate, not to punish; if such a provision is aimed at “punish[ing] the breaching

party or ensur[ing] performance, the provision is void as a penalty.”88 As a part of

its liquidated-damages-vs.-penalty analysis, a court should figure out the parties’

intent when contracting.89

        Delaware courts engage a two-step examination to determine whether a

liquidated damages provision is valid, or whether it represents a penalty and is thus

void.90 The first inquiry is whether “damages were uncertain” at the time of

86
    Brazen, 695 A.2d at 47 (citations omitted); S.H. Deliveries, 1997 WL 817883, at *2
(“Liquidated damages are a sum to which the parties to a contract have agreed, at the time of
entering into the contract, as being payable to satisfy any loss or injury flowing from a breach of
their contract. It is, in effect, the parties’ best guess of the amount of injury that would be sustained
in a contractual breach, a way of rendering certain and definite damages which would otherwise
be uncertain or not easily susceptible of proof.” (citation omitted)); see generally Unbound
Partners Ltd. P’ship v. Invoy Holdings Inc., 2021 WL 1016442, at *9-11 (Del. Super. Ct. Mar. 17,
2021) (summarizing applicable standards).
87
   E.g., Donegal Mut. Ins. Co. v. Tri-Plex Sec. Alarm Sys., 622 A.2d 1086, 1089 (Del. Super. Ct.
1992); Lee Builders, Inc. v. Wells, 103 A.2d 918, 919 (Del. Ch. 1954).
88
     W & G Seaford, 714 F. Supp. at 1347 (citation omitted).
89
    Swier, 900 A.2d at 650 (“The validity of a liquidated damages provision involves a review of
the intent of the parties to the contract.”).
90
   CRS Proppants LLC v. Preferred Resin Holding Co., LLC, 2016 WL 6094167, at *3 (Del.
Super. Ct. Sept. 27, 2016); Dow Chem. Canada Inc. v. HRD Corp., 909 F. Supp. 2d 350, 356 (D.
Del. 2012).
                                                 -19-
contracting.91 The second discerns whether the liquidated damages sought are

reasonable.92     “To fail the second prong . . . the amount at issue must be

unconscionable or not rationally related to any measure of damages a party might

conceivably sustain.”93

       If the contract-defined liquidated damages are found to be valid, the party

enforcing the liquidated damages provision need not establish its actual damages.94

And contrary to what US Well may think, any liquidated damages Smart Sand is

entitled to under the contract need not be offset by any potential value of any retained

sand.95

91
    Dow Chem. Canada, 909 F. Supp. 2d at 356; CRS Proppants, 2016 WL 6094167, at *3 (“First,
are the reasonably-anticipated damages difficult to ascertain at the time of contracting because of
indefiniteness or uncertainty?” (citation omitted)).
92
    Dow Chem. Canada, 909 F. Supp. 2d at 356; CRS Proppants, 2016 WL 6094167, at *3
(“Second, is the amount stipulated either a reasonable estimate of the future damages, or
reasonably proportionate to the damages that actually have been caused by the breach?” (citation
omitted)).
93
   Dow Chem. Canada, 909 F. Supp. 2d at 358 (internal quotation marks and bracket omitted)
(quoting Brazen, 695 A.2d at 48).
94
    W & G Seaford, 714 F. Supp. at 1348-49; S.H. Deliveries, 1997 WL 817883, at *2 (“It matters
not whether actual damages are proven, or that the liquidated damages are substantially larger than
the actual damages, so long as the liquidated damages were a reasonable estimate of the damages
which would be caused.” (citations omitted)).
95
    Contra USW states that any liquidated damages provision that gives a “windfall” to the
non-breaching party is void. USW Post-Trial Br. at 19 (“When a purported liquidated damages
provision would leave the non-breaching party with a windfall, it is void as penalty.”). To avoid
a windfall, USW suggests, the value of the retained product—the unmined sand—must be
calculated into the damages equation. Id. at 20. Not so. See Princess Hotels, 1997 WL 817853,
at *3 (“[T]he duty to mitigate does not arise where liquidated damages exist.”).
                                               -20-
          a. Reasonably expected damages were difficult to ascertain at the time
             of the parties’ contracting because of indefiniteness or uncertainty.

          US Well says that potential damages occasioned by any breach could be

reasonably determined at the time the PPA was signed.96

          Smart Sand disagrees97 and points to the PPI table in Appendix C, Section 2

of the PPA to show that the quarterly pricing of frac sand was dependent on the price

of oil, which itself is volatile.98 Additionally, because US Well could choose the

sand grades and make substitutions, there were more variables to consider, and thus

greater uncertainty.99 According to Smart Sand, oil prices and PPI could never be

predicted with requisite certainty.100

          Smart Sand cites to CRS Proppants LLC v. Preferred Resin Holding Company

LLC, where this Court found a valid liquidated damages clause, in part, because the

damages there were so difficult to ascertain.101 In CRS Proppants, the Court found

96
      USW Post-Trial Br. at 27.
97
    SSI Post-Trial Br. at 24 (“[P]otential damages under the PPA were impossible to ascertain at
the time of contracting.”).
98
      Id. at 7, 25.
99
      Id. at 27.
100
    SSI Post-Trial Ans. Br. at 25, 27 (“[T]he evidence at trial established that future oil prices, PPI
table, product mix, term length, and SSI’s future product costs were all unknowns at the time of
contracting and could dramatically impact actual damages over time.” (emphasis in original)).
101
      2016 WL 6094167, at *3-4 (Del. Super. Ct. Sept. 27, 2016).

                                                 -21-
that even though there was some explicit pricing in the contract for a certain segment

of the contract period, damages were still uncertain;102 here, Smart Sand argues, the

PPA lays out no explicit pricing and is thus more uncertain than that in CRS

Proppants.103 Distinguishing CRS Proppants, US Well points out that there this

Court, in part, found the damages difficult to calculate at the time of contracting after

the sophisticated parties’ negotiated heavily; and here, in US Well’s view, there was

no negotiating between the parties.104

            US Well relies on this Court’s earlier decision in First State Homes, Inc. v.

McCann, to suggest that “only a reasonable estimate or forecast [of anticipatable

damages] is required” to find a liquidated damages clause invalid.105 US Well then

suggests that Dr. Becker and Dr. Trexler’s testimony that a “reasonable estimation”

of damages at the time of contracting was possible.106

            But US Well, as it must, heavily stresses the wording “reasonable estimate”

while largely ignoring the specifics of McCann (or other cases) in which that phrase

102
      Id.
103
      SSI Post-Trial Br. at 28.
104
      USW Post-Trial Br. at 29.
105
    Id. at 27-28 (citing First State Homes, Inc. v. McCann, 1999 WL 742974, at *2 (Del. Super.
Ct. May 28, 1999)).
106
   Id. at 34 n.155 (“Becker (SSI) admitted it was possible, in May 2016, to reasonably estimate
SSI’s damages from a USW PPA breach and Trexler agreed.”).

                                             -22-
is coined. McCann looked at damages flowing from the breach of a general

contractor’s agreement to finish up six already substantially completed townhomes,

something far easier to forecast107 than the long-term pricing of a specialty product

like frac sand108 that is dependent on myriad domestic and international market

factors—including, for one, the seemingly daily fluctuation in oil prices.

         The purpose of the four-to-seven-year PPA was to create certainty in what

was an emergent and booming frac sand market.109                   But even with the limited

certainty that long-term contract might foster, both parties acknowledged the sundry

variables and global pieces that affected the price and utility of this specialty product.

In doing so, they created a PPI table that was, in part, reliant on oil prices. As such,

the parties mitigated uncertainty as best they could, but the very existence of the PPI

107
     McCann, 1999 WL 742974, at *2 (At the time of the contested agreement—that was to last
just a few weeks—the construction project was substantially complete and so any damages arising
from the builder’s subsequent failure to complete the project “were, in the Court’s view, damages
which were not particularly difficult to estimate or forecast.”).
108
      See infra note 109.
109
    See generally MARY ELLEN BENSON & ANNA B. WILSON, U.S. DEP’T OF INTERIOR & U.S.
GEOLOGICAL SURV., FRAC SAND IN THE UNITED STATES—A GEOLOGICAL & INDUSTRY OVERVIEW
1, available at https://pubs.usgs.gov/pdf/ofr20151107.pdf (last visited May 28, 2021) (observing
that a “new mineral rush [wa]s underway” in 2015 “for deposits of high-quality frac sand . . . a
specialized type of sand . . . injected into unconventional oil and gas wells during hydraulic
fracturing (fracking or hydrofracking) . . . [to] enhance[] petroleum extraction from tight (low
permeability) reservoirs” and noting that “[f]rac sand consists of natural sand grains with strict
mineralogical and textural specifications that act as a proppant” and “is a high-purity quartz sand
with very durable and very round grains.”).

                                               -23-
table shows the uncertainty inherent in this specific industry and contract.110

       b. The damages required by PPA Section 1.5(c) are reasonable.

       When addressing the second consideration—reasonableness—that informs

whether a contracted-for sum is a penalty or allowable liquidated damages, the Court

evaluates whether the subject damages are (i) unconscionable, or (ii) not rationally

related to a measure of damages.111

           i. The Cumulative Shortfall Payment isn’t unconscionable.

       Both Smart Sand and US Well agree that the language of Section 1.5(c) is

unambiguous.112      Each, however, urges a different interpretation of that same

language. Not unusual. And the Court need not suspect that contract language might

indeed be ambiguous merely because the parties dispute what it means.113

       US Well suggests that “the only reasonable interpretation of [Section 1.5(c)]

110
    See Dow Chem. Canada, 909 F. Supp. 2d at 357 (“It is hard to understand how damages for
the termination of a complex collaborative engineering project could be estimated with certainty
years before the details of the project itself were finalized.”).
111
    Brazen, 695 A.2d at 48 (“[T]o fail the second prong . . . the amount at issue must be
unconscionable or not rationally related to any measure of damages a party might conceivably
sustain.”)
112
   USW Post-Trial Br. at 21 (“Everyone agrees Section 1.5(c) is unambiguous. . . .”); SSI
Post-Trial Ans. Br. at 23.
113
    E.g., Miramar Police Officers’ Ret. Plan v. Murdoch, 2015 WL 1593745, at *8 (Del. Ch. Apr.
7, 2015) (“That the parties dispute how to interpret a term does not render
the contract ambiguous.”). Indeed, ambiguity exists only when disputed provisions are “fairly or
reasonably susceptible to more than one meaning.” Alta Berkeley IV C.V. v. Omneon, Inc., 41 A.3d
381, 385 (Del. 2012) (citations omitted).

                                             -24-
is that the PPA obligates USW to pay all Prior Unpaid Invoices and the Final

invoice.”114 The main thrust of US Well’s argument is that the PPA includes no

express wording that would allow reduction of the CSP by sums included in previous

unpaid invoices.115 Thus, to US Well, the only way to read the PPA is that the unpaid

invoices and the CSP are both separately due—totaling approximately $105

million116—something both parties seem to agree is unreasonable.

            Smart Sand argues that while not defined in the PPA, the ordinary meaning of

“cumulative” is such that the CSP would accumulate unpaid invoices for required

sand purchases into a single sum, not add some additional cumulative sum to those

previously unpaid invoices.117 Too, says Smart Sand, because the “cumulative”

nature of the CSP incorporates the unpaid invoices for all shortfall-related

obligations, it follows that the “paid invoices for shortfall-related obligations are

expressly deducted by the CSP.”118

114
      USW Post-Trial Br. at 21 (emphasis in original).
115
      Id.
116
      Id.
117
    SSI Post-Trial Ans. Br. at 17-18 (internal quotation marks omitted) (quoting Cumulative,
BLACK’S LAW DICTIONARY (11th ed. 2019)) (“When an amount is cumulative, that means it is
including all amounts previously added. . . . [F]or that reason, the CSP does precisely as its name
requires: it includes all the amounts set forth in prior unpaid invoices and combines them into the
CSP.”).
118
      SSI Post-Trial Ans. Br. at 16 (emphasis in original).

                                                 -25-
       Section 1.5(c) provides an example of how the Cumulative Shortfall Payment

might be applied:

       (i) Cumulative Net Tons = 2,000,000 - (Cumulative Purchased Tons +
       tons of Replacement Products), and (ii) Cumulative Shortfall Payment
       = (Cumulative Net Tons * $40) - prior True Up Payments - Unused
       Reservation Charge for the final Contract Year of the Term. If the
       Cumulative Net Tons is equal to or less than 0, then the Cumulative
       Shortfall Payment shall be $0.

       Read Smart Sand’s way, the Section 1.5(c) damages aren’t unconscionable;

given US Well’s read—with double-billing for reserved tons that were both untaken

and unpaid-for—the Section 1.5(c) damages are.

       Under Delaware law, “[t]he proper construction of any contract is purely a

question of law.”119 “The objective [of interpretation] is to give full effect to the

parties’ mutual intent at the time of contracting.”120 In respecting that mutual intent,

the Court “read[s] a contract as a whole and . . . give[s] each provision and term

[purpose], so as not to render any part of the contract” superfluous.121 And “[w]hen

the contract is clear and unambiguous,” the Court “give[s] full effect to the

119
    Exelon Generation Acquisitions, LLC v. Deere & Co., 176 A.3d 1262, 1266-67 (Del. 2017)
(internal quotation marks and ellipses omitted).
120
   Bobcat N. Am., LLC v. Inland Waste Holdings, LLC, 2019 WL 1877400, at *5 (Del. Super. Ct.
Apr. 26, 2019) (second citation omitted) (citing Exelon, 176 A.3d at 1263); accord Salamone v.
Gorman, 106 A.3d 354, 367-68 (Del. 2014).
121
   Kuhn Constr., Inc. v. Diamond State Port Corp., 990 A.2d 393, 396-97 (Del. 2010) (citation
omitted).

                                            -26-
plain-meaning of the contract’s . . . provisions.”122 “An unreasonable interpretation

produces an absurd result or one that no reasonable person would have accepted

when entering the contract.”123 As between two alternative interpretations—one

reasonable, one absurd—the Court is bound to follow the former.124

         Of course, there is good reason for US Well to now press its extreme reading

of Section 1.5(c) with duplicate counting of shortfalls and a resulting nine-figure

damage total—the Court might be far more likely to find that unconscionable and

just relieve US Well of any shortfall obligation. But it is simply beyond belief that

that these sophisticated parties would consent to such a severe consequence.

         The Court finds that the Cumulative Shortfall Payment is unambiguous: it

constitutes the accrued shortfall payments due during the life of the contract. So it

is not unconscionable.

             ii. The damages are rationally related to a measure of damages.

         US Well’s main contention here is that the parties never tried to “estimate

SSI’s damages from a USW Breach[,]” and that the $40/ton figure wasn’t resultant

122
   Hallisey v. Artic Intermediate, LLC, 2020 WL 6438990, at *3 (Del. Ch. Oct. 29, 2020) (internal
quotation marks and citation omitted).
123
      Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1160 (Del. 2010) (citations omitted).
124
     E.g., Capella Holdings, LLC v. Anderson, 2017 WL 5900077, at *5 (Del. Ch. Nov. 29, 2017)
(citing Osborn ex rel. Osborn, 991 A.2d at 1160)).

                                               -27-
of informed negotiations between the parties.125

            The credible evidence is that US Well’s then-CEO Brian Stewart offered the

$40/ton shortfall payment in a November 2015 email during negotiations aimed at

amending the parties’ Master Product Purchase Agreement, and that Smart Sand

eventually accepted it.126 The fact that Smart Sand did not counter that shortfall

payment offer, “did not consider whether the amount was enforceable[,]” and

reportedly “never rejected a proposed [ ] make-whole fee as too high” is of little

moment.127 At bottom, US Well made an offer, Smart Sand accepted that offer, and

consideration to both parties supported their respective obligations thereunder.

            Mr. Stewart did tell the Court that “he was simply trying to lower US Well’s

exposure from full purchase price to some less number, and he had no insight into

Smart Sand’s internal costs and never performed any analysis of what Smart Sand’s

actual damages might be in the event of breach.”128 But according to Mr. Stewart’s

own email, he knew the $40/ton shortfall rate would appease his Board.129 And

whatever his reason for landing on that figure, Mr. Stewart’s post hoc claim of

125
      USW Post-Trial Br. at 30.
126
      USW Post-Trial Ans. Br. at 14.
127
      Id.
128
      Id. at 32.
129
      JX-50.

                                            -28-
ignorance after the price of sand dropped adds nothing to US Well’s claim.

            US Well points to contemporaneous contracts (Weatherford,               /ton; Rice,

      /ton; Liberty,         /ton), to suggest that the $40/ton number was irrationally

high.130 US Well says that “variability alone (with zero explanation from SSI) shows

$40-per-ton is unreasonable.”131 But again, Mr. Stewart proposed it—a number that,

if nothing else, appeased US Well’s board—and Smart Sand accepted it.

            One final point, that $40/ton shortfall price was almost smack in the middle

of the pricing grid the parties used for sand products under the PPA.132

            All in all, the estimate of damages at the time of contracting could be seen to

derive from a number of reliable sources: (1) Purchaser US Well’s own assessment

of worth as evidenced by the fact that value was first proposed by its then-CEO;

(2) the fact that it represented a cost below the approximately $45/ton price for

delivered sand that was being invoiced to US Well when the amended PPA was

executed;133 and (3) the fact that $40 falls roughly in the mid-range of all potential

per-ton pricing applicable to the May 2016 agreement.134 Hence, the $40 charge per

130
      USW Post-Trial Br. at 33.
131
      Id.
132
    See Trial Tr., Dec. 14, 2020, at 97-99 (Mr. Beckleman explaining the PPA’s pricing grid); id.
at 99 (“So, again, it could be at 25 to 30 on the low end and again on high end depending on the
product, you get up to $66 a ton.”).
133
      Trial Tr., Dec. 15, 2020, at 105.

                                              -29-
shortfall ton bears a rational relationship to a measure of damages the parties could

have estimated Smart Sand might conceivably sustain if US Well did not follow

through with its sand purchase obligations.

      B. US WELL IS LIABLE FOR THE DAMAGES BARGAINED-FOR AND REQUIRED
         UNDER PPA SECTION 1.5.

         No doubt, US Well came to regret its agreement to certain PPA pricing terms.

But the Court “will not disturb a bargain because, in retrospect, it appears to have

been a poor one.”135 “Parties have a right to enter into good and bad contracts, the

law enforces both.”136 And when it comes to liquidated damages, there is a

summer’s afternoon of daylight between bad and unconscionable.

         In determining whether Section 1.5 of the PPA constitutes a valid liquidated

damages provision, the Court has considered whether potential damages were

uncertain at the time of contracting, and whether the liquidated damages were

rationally related to any reasonable measure of damages or were unconscionable.

Having found that the fluctuating price of sand made damages uncertain to determine

at the time of contracting, and that the liquidated damages reflect a

134
      See Trial Tr., Dec. 14, 2020, at 97-99.
135
   W. Willow-Bay Ct., LLC v. Robino-Bay Ct. Plaza, LLC, 2007 WL 3317551, at *9 (Del. Ch.
Nov. 2, 2007) (citation omitted), aff’d, 2009 WL 4154356 (Del. Nov. 24, 2009).
136
   Nemec v. Shrader, 991 A.2d 1120, 1126 (Del. 2010); Murdoch, 2015 WL 1593745, at *9
(“Parties to contracts governed by Delaware law are free to make bad bargains. . . .” (internal
quotation marks and citations omitted)).

                                                -30-
US Well-recommended sum that is rationally related to a measure of damages and

not unconscionable, the Court finds that Section 1.5 of the PPA is a valid liquidated

damages provision.

         As such, US Well is liable to Smart Sand for the cost of the 1,206,795 tons of

frac sand US Well did not purchase and take from Smart Sand under the PPA.137

      C. SMART SAND IS NOT ENTITLED TO DAMAGES BASED ON US WELL’S BREACH
         OF THE RUA.

         Both Smart Sand and US Well have spent little time discussing the RUA. In

the meager effort devoted to it, Smart Sand claims that, because of US Well’s breach,

the total amount of the contract ($5.8 Million) is due.138 Specifically, Smart Sand

states that the damages should reflect the ‘expected’ payment to Smart Sand had the

contract been fulfilled.139

         In Delaware, when awarding expectation damages, lost profits must be

calculated with reasonable certainty.140 And a Delaware court “may not set damages

based on mere speculation or conjecture where a plaintiff fails adequately to prove

damages.”141

137
    The Court finds that Dr. Becker’s calculations accurately reflect the sums of purchased and
retained sand. See Trial Tr., Dec. 16, 2020, at 193 (Stephen Becker).
138
      SSI Post-Trial Br. at 36-37 (setting forth Smart Sand’s single paragraph RUA argument).
139
      SSI Post-Trial Ans. Br. at 35.
140
      E.g., SIGA Techs., Inc. v. PharmAthene, Inc., 132 A.3d 1108, 1138 (Del. 2015).

                                               -31-
         So, has Smart Sand properly proven damages suffered under the RUA? In its

post-trial brief, Smart Sand dedicates just a few lines to the issue and simply says

that “USW stopped paying its bills as of September 1, 2018 and therefore breached

the RUA. USW is liable to SSI for $5,850,000 for monthly Railcar Payments of

$292,500 for the 20 months between September 2018 and April 2020.”142 There was

scant testimony on the RUA and no explanation of its implementation or actual

execution during the Smart Sand-US Well business relationship. And nowhere does

Smart Sand provide a comprehensible explanation of how its calculation matches

any actual or expectation losses caused by the breach it alleges.

         Not surprisingly, US Well contends that Smart Sand has not proven either a

breach or damages due under the RUA, and so Smart Sand is entitled no damage

award on this claim.143 The Court agrees.

         At the very least, Smart Sand’s failure to prove damages resulting from the

alleged RUA breach is fatal to its claim, and thus Smart Sand is not entitled to

monetary damages on this claim.144

141
    eCom. Indus., Inc. v. MWA Intel., Inc., 2013 WL 5621678, at *42 (Del. Ch. Sept. 30, 2013)
(internal quotation marks and citations omitted).
142
      SSI Post-Trial Br. at 36-37 (internal citations omitted).
143
      USW Post-Trial Br. at 39-40.
144
    Beard Rsch., Inc. v. Kates, 8 A.3d 573, 613 (Del. Ch. 2010) (“Nevertheless, when acting as the
fact finder, this Court may not set damages based on mere ‘speculation or conjecture’ where a
plaintiff fails to adequately prove damages.” (first quoting Medek v. Medek, 2009 WL 2005365, at
                                                  -32-
      D. SMART SAND IS            ENTITLED TO          PREJUDGMENT INTEREST,            BUT NOT
        ATTORNEY’S FEES.

         Smart Sand asks for attorneys’ fees and prejudgment interest citing Section 2

of the PPA.145 But Smart Sand fails to identify the specific PPA language requiring

the payment of either attorneys’ fees or prejudgment interest. US Well opposes

Smart Sand’s demand contending that Smart Sand has neither cited the contractual

language nor offered support for awarding those fees and interest.146

         As Smart Sand points to no specific PPA language calling for an award of

attorneys’ fees, the Court will not deviate from the American rule.147 Concerning

prejudgment interest, a non-breaching party is entitled to prejudgment interest as a

matter of right, and that balance will not be disturbed.148

*12 n.78 (Del. Ch. July 1, 2009); then citing Henne v. Balick, 146 A.2d 369, 396 (Del. 1958))).
145
      SSI Post-Trial Br. at 40 n.173.
146
      USW Post-Trial Br. at 38.
147
    E.g., Mahani v. Edix Media Grp., Inc., 935 A.2d 242, 245 (Del. 2007); see Sternberg v.
Nanticoke Mem’l Hosp., Inc., 62 A.3d 1212, 1218 (Del. 2013) (“It has been long practice of
American courts to enforce the so-called ‘American Rule’—which requires each party to pay his
or her own legal costs, even the prevailing party.” (citations omitted)); see also Mrs. Fields Brand,
Inc. v. Interbake Foods LLC, 2018 WL 300454, at *2 (Del. Ch. Jan. 5, 2018) (noting the Court of
Chancery has applied the “predominance in the litigation” standard to prevailing-party contract
provisions; that “[t]o achieve predominance, a litigant should prevail on the case’s chief issue”;
and, that there are occasions where “no party may be regarded as having prevailed.” (internal
quotation marks and citations omitted)).
148
    Brandywine Smyrna, Inc. v. Millennium Builders, LLC, 34 A.3d 482, 486 (Del. 2011) (“[I]n
addition to the principle that prejudgment interest in Delaware cases is awarded as a matter of
right, the general rule is that interest accumulates from the date payment was due the plaintiff,
because full compensation requires an allowance for the detention of the compensation awarded
                                                -33-
       Thus, the Court awards Smart Sand prejudgment interest on Count IV (breach

of the PPA), and both parties will pay their own attorneys’ fees.

                                        V. CONCLUSION

       While this judgment results in a substantial payment to Smart Sand, that is

what the parties bargained for via the PPA. In the best of times, the deal could have

resulted in a substantial profit for US Well as it used the product for its customers

energy ventures. But the worst of times came, resulting in a substantial downturn in

sand prices, and now, US Well’s substantial loss under the PPA. These were

sophisticated (and represented) parties that realized the risks associated with such a

purchase contract, yet still pursued it. The Court can’t now rescue one of those

parties from the deal it penned when it foresaw significant gain simply because its

hopes evaporated due to world and market forces.

and interest is used as a basis for measuring that allowance.” (internal quotation marks and citation
omitted)).
                                                -34-
                            VERDICT AND JUDGMENT

      - Count IV (Breach of Contract for Non-Payment of the Final Invoice):
        For Smart Sand

      - Count V (Breach of Contract for Non-Payment of the RUA Invoice):
        For US Well

      Additionally, Smart Sand is entitled to prejudgment interest on Count IV, but

is not entitled to Attorneys’ Fees.

      The parties shall confer and, within 15 days, submit to the Court a proposed

form of Order of Final Judgment consistent with these findings and verdicts.

   IT IS SO ORDERED.

                                                   _
                                                   Paul R. Wallace, Judge
Original to Prothonotary
cc: All counsel via File & Serve

                                       -35-