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BE&K Engineering Co., LLC v. Rocktenn CP, LLC

Court of Chancery of Delaware

January 15, 2014


Submitted: January 10, 2014

Joseph R. Slights, III, Jason C. Jowers, Elizabeth A. Powers, MORRIS JAMES LLP, Wilmington, Delaware; George A. Smith, Jonathan R. Friedman, Michael C. Paupeck, WEINBERG, WHEELER, HUDGINS, GUNN & DIAL, LLC, Atlanta, Georgia; Attorneys for Plaintiff BE&K Engineering Company, LLC.

John T. Dorsey, Martin S. Lessner, Mary F. Dugan, Emily V. Burton, YOUNG CONAWAY STARGATT & TAYLOR, LLP, Wilmington, Delaware; C. Walker Ingraham, Anna R. Palmer, Rebecca Woods, Sara M. LeClerc, SEYFARTH SHAW LLP, Atlanta, Georgia; Attorneys for Defendants RockTenn CP, LLC and Rock-Tenn Shared Services, LLC.


LASTER, Vice Chancellor.

Plaintiff BE&K Engineering Company, LLC ("BE&K") and defendant RockTenn CP, LLC ("RKT CP") are parties to an agreement that governs the engineering work that BE&K provides on projects at facilities owned by RKT CP. The agreement selects courts in Wilmington, Delaware as the exclusive forum for any disputes. An affiliate of BE&K and defendant Rock-Tenn Shared Services, LLC ("RKT SS") are parties to a second agreement that governs the construction work that the affiliate and any members of its corporate family provide to RKT SS and any members of its corporate family. The second agreement contains a one-way forum selection provision that allows RKT SS to sue anywhere but would require BE&K to sue in a Georgia court. Through this action, BE&K seeks to determine which contract governs its work on a large construction project so that the parties can litigate their disputes in the appropriate court.

BE&K has moved for partial summary judgment declaring that the Delaware agreement governs the engineering work it provided on the project. BE&K also has moved for narrower declarations establishing that the Delaware agreement governs specific work orders. If successful, BE&K asks the court to convert a previously issued preliminary anti-suit injunction into a permanent anti-suit injunction. The motion is granted and the permanent injunction entered.


The facts are drawn from the parties' submissions in connection with the motion for summary judgment. All factual disputes are resolved in favor of the non-movant defendants, who receive the benefit of all reasonable inferences. This procedural principle does not affect the result, which is dictated by judicial admissions and the plain language of the operative agreements.

A. The Strategic Project

RKT CP is a Delaware limited liability company with its principal place of business in Norcross, Georgia. The company manufactures paperboard and paper-based packaging at pulp and paper mills located across the United States. RKT CP formerly was known as Smurfit-Stone Container Corporation, and that entity's predecessor in turn was Stone Container Corporation. Certain agreements in the record were executed by RKT CP's predecessors. For simplicity, this decision refers only to RKT CP.

In August 2010, RKT CP decided to upgrade a 70-year old pulp and paper mill in Hodge, Louisiana (the "Hodge Mill") and convert it to a linerboard-only operation. RKT CP termed the upgrade the "Strategic Project." RKT CP contemplated that the Strategic Project would proceed in phases, starting with design and engineering work and proceeding later to construction.

B. The Engineering Agreement

RKT CP hired BE&K to provide the engineering work and site services for the Strategic Project. BE&K later became known as KBR Engineering Company, LLC. Because BE&K appears in this action under its earlier moniker, this decision refers only to BE&K.

Both RKT CP and BE&K are members of larger corporate groups. RKT CP is a wholly owned subsidiary of non-party Rock-Tenn Company, the ultimate parent of its corporate group. BE&K is a wholly owned subsidiary of non-party KBR, Inc., the ultimate parent of its corporate group. The Rock-Tenn and KBR corporate groups have worked together on a range of projects, and various entities in the two corporate families are parties to a range of agreements.

To govern the engineering work and site services for the Strategic Project, RKT CP and BE&K entered into a new agreement dated December 21, 2010, called the Master Engineering Services Contract. Dkt. 62 Ex. A. Because the agreement governs engineering services, this decision refers to it as the "Engineering Agreement " or "EA." The Engineering Agreement defines RKT CP as the "OWNER" and BE&K as the "ENGINEER." For the reader's convenience, this decision substitutes "BE&K" for "ENGINEER" and "RKT CP" for "OWNER" in quotations from the agreement.

The Engineering Agreement is a master agreement in the sense that its use is not limited to the Strategic Project at the Hodge Mill. Rather, the parties can use it to govern engineering work and site services that BE&K might provide on projects at any of RKT CP's facilities. Section 1.2 of the Engineering Agreement describes the scope of the Engineering Agreement as follows:

During the Term of this Agreement, [BE&K] will provide engineering services ("Services") to [RKT CP] in accordance with written work orders ("Work Order(s)") issued by [RKT CP] and approved and accepted by [BE&K] for individual projects relating to [RKT CP's] facilities ("Project(s)") where the total installed per-project cost for any construction arising from the Services will be less than Five Million Dollars ($5, 000, 000). The terms and conditions of this Agreement shall govern each Work Order and the liability of the parties arising from each Work Order. Each Work Order shall contain the information specified in Exhibit A, including [BE&K's] Scope of Services . . . . For its own internal accounting purposes, [RKT CP] may issue a purchase order related to each Work Order; provided, however, that the terms and conditions of this Agreement will apply and the terms and conditions of the purchase orders (including but not limited to the standard terms and conditions on the back of a purchase order) will not apply.

EA § 1.2.

Section 1.4 of the Engineering Agreement elaborates on the types of services that BE&K might provide that will be governed by the contract. It states:

[BE&K] shall perform the Services specified in each Work Order, which may include but [are] not limited to: studies, conceptual designs, preliminary designs, and detail designs; including, but not limited to, calculations, designs, equipment and material sizing, specifications, procurements, plans, construction drawings, estimates, schedules, and other ancillary engineering and procurement activities as required by the Contract Documents to complete the Project.

Id. § 1.4.

Section 2.1 of the Engineering Agreement defines the "Contract Documents" for each Project, stating that "[t]he following Enumerated [sic] documents are incorporated herein by reference . . . [and] such documents, together with this Agreement, constitute the Contract Documents and set forth the Contract." Id. § 2.1. Section 2.1 lists three documents: (i) "Exhibit A " Scope of Project/Work Order Form, " (ii) "Exhibit B "Sworn Statement & Waiver of Lien Form, " and (iii) "Exhibit C " Basis of Compensation." Id

The parties selected Delaware law to govern the Engineering Agreement. Id. § 20.3. In the event of disputes, the parties conferred exclusive jurisdiction on the state and federal courts located in Wilmington, Delaware for any dispute that "arises out of or relates to this Contract, any Work Order(s), or the breach thereof." Id. § 17.1 (the "Delaware Forum Clause"). The parties agreed on a range of other provisions to limit their contractual and extra-contractual liability and to regulate the dispute resolution process. See, e.g., id. § 17.1 (waiving the right to jury trial).

C. The Construction Agreement

In November 2011, RKT CP interviewed companies to undertake the next phase of the Strategic Project, which was the construction work at the Hodge Mill. RKT CP decided to hire non-party SW&B Construction Company, LLC ("SW&B"). SW&B is an affiliate of BE&K and a wholly owned subsidiary of non-party Kellogg Brown & Root, LLC ("Kellogg"), which in turn is a wholly owned subsidiary of KBR.

For the construction phase, RKT CP and SW&B did not contract directly with each other. Instead, the Rock-Tenn corporate family used as its counterparty RKT SS, a Georgia limited liability company with its principal place of business in Norcross, Georgia. RKT SS is a sister subsidiary of RKT CP that provides administrative and management services to Rock-Tenn Company and its affiliates. The KBR corporate family used Kellogg as its counterparty.

As with the Engineering Agreement, the parties did not enter into a contract relating exclusively to the Strategic Project at Hodge Mill. Instead, they prepared a Master Purchase Agreement for Equipment, Parts, Services, which became effective as of December 5, 2011. Dkt. 27 Ex. 7. Because the agreement governs construction services, this decision refers to it as the "Construction Agreement " or "CA." Like the Engineering Agreement, the Construction Agreement is a master agreement that can be used for goods and services that entities in the KBR corporate family might provide for projects identified by entities in the Rock-Tenn corporate family, whether at the Hodge Mill or at other facilities.

To this end, the Construction Agreement defines RKT SS as the "Buyer, " but it specifically contemplates that Rock-Tenn Company and its affiliates, defined collectively in the agreement as the "Rock-Tenn Affiliates, " can make purchases under the agreement. CA at 1 ("each of [the Rock-Tenn Affiliates] may be a purchaser hereunder"). The Construction Agreement defines Kellogg as the "Seller, " but it specifically contemplates that the agreement can be "employed for Purchase Orders with other [Kellogg] entities or affiliates, as agreed to between the Parties, including but not limited to KBR USA LLC, SW&B Construction Company, LLC, and BE&K Construction Company, LLC." Id.

To regulate when the Construction Agreement applies, the Construction Agreement establishes different default rules for purchase orders issued to Kellogg itself, as opposed to purchase orders issued to Kellogg affiliates. Section 6(a) makes the Construction Agreement apply by default to any Purchase Order issued by a Rock-Tenn Affiliate to Kellogg:

The terms and conditions of this Agreement shall govern all of the transactions between the Rock-Tenn Affiliates and Seller during the Term of this Agreement with respect to the purchase of Goods and Services, regardless of whether the Transaction Documents refer to this Agreement, unless the Transaction Documents for a particular Transaction (i) specifically provide otherwise and (ii) are signed by authorized representatives of the Rock-Tenn Affiliate placing the Purchase Order and Seller, in which event the other terms and conditions agreed to . . . with respect to such transaction shall apply to that particular transaction only.

Id. § 6(a). By contrast, the Construction Agreement does not apply by default to any

Purchase Order issued by a Rock-Tenn Affiliate to a Kellogg affiliate. "In such situations, all such Purchase Orders must specifically reference the terms of [the Construction] Agreement." Id. at 1.

The Construction Agreement contemplates that a package of "Transaction Documents" will govern each particular "Transaction" under the agreement. Section 1 of the Construction Agreement explains generally that

Seller shall deliver products, and/or equipment and/or perform applicable services ("Goods and Services") to be determined by Buyer's mill location on a "Transaction" basis during the term of this Agreement, all in accordance with the terms and conditions hereof and in accordance with the specifications set out in the applicable Statement of Work and/or Order Form and/or Purchase Order (collectively the "Transaction Documents"). SOWs will be numbered consecutively starting with E-1, E-2, E-3, and so on.

Id. § 1.

Other sections define elements of the Transaction Documents in greater detail. Section 6(c) of the Construction Agreement does so for the term "Purchase Order":

The term "Purchase Order" means a purchase order for Products, Equipment and/or services submitted to Seller by the Rock-Tenn Affiliates. Each of the Rock-Tenn Affiliates desiring to order Products, Equipment or Services under this Agreement shall issue a Purchase Order to Seller containing the basic business terms of the desired Transaction, including, but not necessarily limited to, a description of the Products, Equipment and/or Service(s) ordered . . . and the address of Buyer's Location receiving the Products, along with a Statement of Work . . . . In the event this Agreement contemplates performance by Seller of any services . . ., such Services shall be set forth on one or more statements of work executed and agreed to by Buyer and Seller, in a form of which is attached hereto as Attachment E, and incorporated herein (the "Statement of Work").

Id. § 6(c). Section 2 of the Construction Agreement lists six additional documents that can be incorporated "if required under a specific Transaction Document." Id. § 2. They are:

(a) One (1) copy of the document entitled "Product Prices" hereinafter Attachment A.
(b) One (1) copy of the document entitled "Contractor Rate Sheet" hereinafter Attachment B.
(c) One (1) copy of the document entitled "Certificate of Insurance" hereinafter Attachment C.
(d) One (1) copy of the document entitled "Locations" hereinafter Attachment D.
(e)One (1) copy of the document entitled "Statement of Work" hereinafter Attachment E.
(f) One (1) copy of the document entitled "Equipment Order Form" hereinafter Attachment F.

Id. The designated attachments provide templates and identify the additional information they should contain.

The parties selected Georgia law to govern the Construction Agreement. Id. § 36. For dispute resolution, the Rock-Tenn Affiliates did not bind themselves to any particular forum. Rather, the Construction Agreement contains a one-sided forum selection provision under which "Seller consents, exclusively, to the adjudication of any dispute arising out of this Agreement by any federal or state court of competent jurisdiction sitting in the State of Georgia." Id.

D. The Georgia Action

On June 7, 2013, SW&B filed an action against RKT CP in the State Court for Gwinnett County, Georgia (respectively, the "Georgia Action" and the "Georgia Court"). SW&B alleged it had not been paid for certain work performed on purchase orders issued under the Construction Agreement and sought to recover approximately $30 million. Although RKT SS was the contractual counterparty under the Construction Agreement, SW&B sued RKT CP because it was the entity that issued the purchase orders. See CA § 36.

On August 12, 2013, RKT CP filed a third party complaint against BE&K claiming breach of the Engineering Agreement and asserting other theories that necessarily implicated the Engineering Agreement. See Transmittal Affidavit of Elizabeth A. Powers dated November 18, 2013 (the "Powers Aff.") Ex. E (the "RKT CP Georgia Complaint"). The RKT CP Georgia Complaint asserted seven substantive counts plus an eighth count to recover attorneys' fees and costs. Only one count, Count VII, rested on the Construction Agreement. Every other count expressly invoked the Engineering Agreement or inherently depended on provisions within the Engineering Agreement, thereby implicating the Delaware Forum Clause.

Also on August 12, 2013, RKT SS moved to intervene in the Georgia Action and filed a proposed third party complaint in intervention. See Powers Aff. Ex. F (the "RKT SS Georgia Complaint"). Like RKT CP, RKT SS named BE&K as a defendant, claimed that BE&K breached the Engineering Agreement, and asserted other theories that implicated the Engineering Agreement and thus the Delaware Forum Clause.

E. The Delaware Actions

On August 12, 2013, the same day that RKT CP filed third party claims and RKT SS moved for leave to file its complaint in the Georgia Action, BE&K brought suit against RKT CP in Delaware Superior Court for breach of the Engineering Agreement. BE&K seeks to recover $3, 765, 108.45 that RKT CP allegedly still owes BE&K for services performed under the Engineering Agreement.

On August 23, 2013, BE&K filed suit in this court against RKT CP and RKT SS (jointly, the "Rock-Tenn Defendants") seeking an injunction preventing them from asserting claims arising under the Engineering Agreement outside of Delaware in violation of the Delaware Forum Clause. BE&K moved for a preliminary anti-suit injunction, the parties briefed the issue, and the court heard oral argument on September 27.

As plaintiffs in the Georgia Action, the Rock-Tenn Defendants alleged that the Engineering Agreement governed BE&K's services on the Strategic Project and that BE&K breached the Engineering Agreement. During the hearing on the preliminary injunction, in sharp contrast to their positions in the Georgia Action, the Rock-Tenn Defendants alleged that there could be multiple contracts potentially governing BE&K's work on the Strategic Project. The Rock-Tenn Defendants argued that the issuance of any form of injunction would be premature because of the factual "murk" and "complexity" of the dispute. BE&K Eng'g Co. v. RockTenn CP, LLC, C.A. No. 8837-VCL, at 56, 106 (Del. Ch. Sept. 27, 2013) (TRANSCRIPT).

After hearing argument, the court issued a preliminary anti-suit injunction barring RKT CP from litigating Counts I-VI and VIII of its complaint in Georgia Action to the extent those counts arose out of or related to the Engineering Agreement. The preliminary anti-suit injunction barred RKT SS from litigating Counts I-V and VII-X of its proposed third party complaint in the Georgia Action to the extent those counts arose out of or related to the Engineering Agreement. Given the Rock-Tenn Defendants' arguments about factual ambiguity and multiple contracts, the obvious question to be litigated was the degree to which the counts arose out of or related to the Engineering Agreement.

BE&K has now moved for partial summary judgment. BE&K seeks a declaration that the Engineering Agreement governs BE&K's work and services on the Strategic Project. BE&K also seeks a series of narrower declarations that the Engineering Agreement governs the services called for by fourteen specific work orders.


Under Court of Chancery Rule 56, summary judgment "shall be rendered forthwith" if "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Ct. Ch. R. 56(c). The initial burden is on the moving party to demonstrate the absence of a material issue of fact, with the evidence construed in the light most favorable to the non-moving party. Brown v. Ocean Drilling & Exploration Co., 403 A.2d 1114, 1115 (Del. 1979). The burden then shifts to the non-moving party "to adduce some evidence of a dispute of material fact." Metcap Sec. LLC v. Pearl Senior Care, Inc., 2009 WL 513756, at *3 (Del. Ch. Feb. 27, 2009), affd, 977 A.2d 899 (Del. 2009) (TABLE); accord Brzoska v. Olson, 668 A.2d 1355, 1364 (Del. 1995).

"Summary judgment is the proper framework for enforcing unambiguous contracts because there is no need to resolve material disputes of fact." HIFN, Inc. v. Intel Corp., 2007 WL 1309376, at *9 (Del. Ch. May 2, 2007). The Delaware Supreme Court "has long upheld awards of summary judgment in contract disputes where the language at issue is clear and unambiguous." GMG Capital Invs., LLC v. Athenian Venture P 'rs I, LP., 36 A.3d 776, 783 (Del. 2012) (footnote omitted).

"Delaware adheres to the 'objective' theory of contracts, i.e. a contract's construction should be that which would be understood by an objective, reasonable third party." Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010) (footnote omitted). When interpreting a contract, the court "will give priority to the parties' intentions as reflected in the four corners of the agreement, " construing the agreement as a whole and giving effect to all its provisions. GMG Capital, 36 A.3d at 779. "Contract terms themselves will be controlling when they establish the parties' common meaning so that a reasonable person in the position of either party would have no expectations inconsistent with the contract language." Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997) (footnote omitted).

A. The Engineering Agreement Governs BE&K's Work On The Strategic Project.

BE&K seeks a declaration that the Engineering Agreement governs the work and services that BE&K provided to RKT CP on the Strategic Project. Given their averments in the Georgia Action, one might think the Rock-Tenn Defendants would concede this point. But they have not. Instead, they contend before this court (but not in Georgia), that the Engineering Agreement does not apply because (i) "it was designed to apply to projects for which the total installed construction cost was below $5 million" and (ii) the Strategic Project "was massive and far exceeded a total installed construction cost of $5 million." Defs.' Ans. Br. at 1. The Rock-Tenn Defendants' re-interpretation conflicts with their representations to the Georgia Court and this court, and it has no support in the language of the Engineering Agreement.

1. The Rock-Tenn Defendants Are Bound By Their Admissions.

The Rock-Tenn Defendants have represented clearly, directly, and repeatedly to the Georgia Court that the Engineering Agreement governs the work and services that BE&K provided to RKT CP on the Strategic Project. Before BE&K moved for summary judgment, the Rock-Tenn Defendants similarly represented to this court that the Engineering Agreement governs the work and services that BE&K provided to RKT CP on the Strategic Project. The Rock-Tenn Defendants' admissions are numerous, pervasive, and binding, and they warrant entry of summary judgment on this issue.

a. The Doctrine of Judicial Admissions

Judicial admissions are "[v]oluntary and knowing concessions of fact made by a party during judicial proceedings (e.g., statements contained in pleadings, stipulations, depositions, or testimony; responses to requests for admissions; counsel's statements to the court)." Merritt v. United Parcel Serv., 956 A.2d 1196, 1201 (Del. 2008). They "are limited to factual matters in issue and not to statements of legal theories or conceptions." Levinson v. Del. Comp. Rating Bureau, Inc., 616 A.2d 1182, 1186 (Del. 1992) (citation omitted). That is, "[t]he scope of a judicial admission by counsel is restricted to unequivocal statements as to matters of fact which otherwise would . . . require evidentiary proof; it does not extend to counsel's statement of his conception of the legal theory of a case, i.e., legal opinion or conclusion." AT&T Corp. v. Lillis, 953 A.2d 241, 257 (Del. 2008) (footnote omitted).

Judicial admissions "are traditionally considered conclusive and binding both upon the party against whom they operate, and upon the court." Merritt, 956 A.2d at 1201-02 (footnote omitted). Such a statement is '"not merely another layer of evidence, upon which the . . . court can superimpose its own assessment of weight and validity. It is, to the contrary, an unassailable statement of fact that narrows the triable issues in the case.'" Id. at 1202 n.18 (quoting Airco Indus. Gases, Inc. Div. of the BOC Gp., Inc. v. Teamsters Health & Welfare Pension Fund of Phila. & Vicinity, 850 F.2d 1028, 1037 (3d Cir. 1988)); see also Ervin v. Vesnaver, 2000 WL 1211201, at *2 (Del. Super. June 20, 2000) ("Judicial admissions are not a means of evidence but a waiver of all controversy and therefore are a limitation on the issues.").

b. The Rock-Tenn Defendants' Admissions

In the Georgia Action, the Rock-Tenn Defendants have consistently maintained that the Engineering Agreement governs BE&K's work during the Strategic Project. Most prominently, RKT CP's Georgia Complaint contains the following allegations about BE&K's contractual obligations as "ENGINEER" under the Engineering Agreement and its alleged breach of those obligations:

• "On or about December 21, 2010, RKT CP (then, Smurfit-Stone) as 'Owner' and BE&K as 'Engineer' entered into a Master Engineering Services Contract (the 'Master Contract' [i.e., the Engineering Agreement[1]]) for BE&K to design and manage the Strategic Project." RKT CP Georgia Complaint ¶ 16.
• "The [Engineering Agreement] could be employed for written work orders with BE&K." Id. ΒΆ 17 ...

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