United States District Court, N.D. Alabama, Southern Division
MEMORANDUM OPINION AND ORDER 
G. CORNELIUS U.S. MAGISTRATE JUDGE
matter, which concerns a long-term contract to import coal,
adds a modern twist to the expression "carrying coals to
Newcastle." While the idiom of British origin refers to
the futile act of attempting to bring coal to a market
saturated with the product of local mines, this case presents
additional indicia of futility. Indeed, the complaint
describes the act of carrying coal to a Newcastle governed by
regulations effectively prohibiting the importation of coal.
plaintiff, Drummond Coal Sales, filed its complaint on
February 26, 2016, seeking declaratory relief. (Doc. 1). The
defendant, Kinder Morgan Operating L.P. "C" has
moved to dismiss all of Drummond's claims. (Doc. 10). The
motion is fully briefed and is ripe for adjudication. (Docs.
16, 20, 32). On June 13, 2017, the undersigned conducted a
hearing on the motion. For the reasons that follow, the
motion to dismiss is due to be granted in part and denied in
markets and sells coal directly through its affiliates. (Doc.
1 at 2). Most of the coal is mined in Columbia by a Drummond
affiliate. (Id. at 2). Kinder Morgan owns the
Shipyard River Terminal ("River Terminal") at the
Port of Charleston, South Carolina. (Id. at 3). On
May 13, 2005, Drummond and Kinder Morgan entered into a
long-term contract to handle Drummond coal from Columbia to
end users-primarily coal-fired power plants-via rail.
(Id.). The contract consists of multiple components,
including a Master Service Agreement and associated
schedules. (Id.). One of the schedules addresses
coal imported through the River Terminal, while another
schedule applies to coal delivered to a different Kinder
Morgan facility in Newport News, Virginia. (Id.). At
issue here is the schedule ("Schedule") pertaining
to the River Terminal. (Id.).
initial term of the Schedule ran from May 13, 2006, through
May 13, 2016. (Doc. 1 at 3). The complaint alleges Kinder
Morgan was aware that: (1) the purpose of the Schedule was to
import Columbian Coal through the River Terminal for rail
delivery to power plants; and (2) contemporaneously, Drummond
was negotiating a rail contract with Norfolk Southern Railway
to carry the coal from the River Terminal to various power
plants. (Id.). Indeed, execution of a contract with
Norfolk Southern was a condition for Drummond's
performance of the Schedule. (Id.).
the Schedule, Kinder Morgan agreed to handle up to 4, 000,
000 tons of coal per year, and Drummond agreed to import a
minimum of 3, 111, 111 tons per year. (Doc. 1 at 4). If
Drummond did not deliver the minimum tonnage in a given year,
the Schedule provided for shortfall payments to Kinder
Morgan. (Id.).In the event Drummond could not deliver
the minimum tonnage, Kinder Morgan agreed to handle coal from
third-parties to be credited against the minimum requirement.
several years, Drummond imported coal through the River
Terminal and paid any applicable penalties when it failed to
deliver the minimum tonnage. (Doc. 1 at 4). However, the
Over the last several years  the Environmental Protection
Agency (EPA) and various other government agencies have
proposed and implemented stringent environmental rules and
regulations that greatly impacted the consumption of coal by
power plants and other end users in the United States.
(Id.). The complaint also asserts that, since 2010,
approximately 40% of U.S. coal-fired power plants have been
retired. (Id. at 5). Drummond contends the recent
environmental regulations have been especially harsh on power
plants which would have received coal imported through the
River Terminal. (Id.). In this vein, the complaint
alleges "[m]ore than half of the power plants identified
in the Norfolk Southern contract have either closed
completely or no longer burn coal [and that the] power plants
still in operation have substantially reduced their use of
coal as a fuel source." (Id.).
further states that, due to new environmental regulations,
"the market for imported coal in the relevant area,
which was the entire purpose of the Schedule, has essentially
ceased to exist" and that, since at least 2011,
"Kinder Morgan has not handled a single ton of
coal" at the River Terminal. (Doc. 1 at 5). The Schedule
requires Drummond to provide Kinder Morgan with periodic,
non-binding estimates of the amount of coal it anticipates
delivering to the River Terminal; from 2011 through 2015,
Drummond estimated it would deliver no coal to the River
Terminal. (Id. at 5-6). Accompanying these estimates
were Drummond 's requests that Kinder Morgan would work
"to find additional volumes and tonnage to bring through
the terminal." (Id. at 6).
year, Kinder Morgan sent invoices to Drummond regarding the
shortfall payments for failure to meet the minimum tonnage.
(Doc. 1 at 6). From 2011 through 2014, Kinder Morgan sent
shortfall payment invoices totaling $52, 422, 220.35, which
Drummond paid. (Id. at 6). The complaint alleges
that: (1) from 2011 through 2014, Kinder Morgan handled no
coal at the River Terminal from any source; (2) during 2015,
Kinder Morgan handled no coal at the River Terminal under the
Schedule; and (3) on January 29, 2016, Kinder Morgan sent
Drummond an invoice for the 2015 penalty payment in the
amount of $13, 782, 221.73. (Id. at 7). A subsequent
filing reflects the total outstanding balance is now $23,
464, 407.19. (Doc. 26 at 2). Finally, the complaint alleges
that in 2015, the River Terminal's total annual capacity
was only 2, 500, 000 tons, which is below the minimum tonnage
threshold set forth in the Schedule. (Doc. 1 at 11-12).
on these allegations, Drummond asserts four claims for
declaratory relief: (1) frustration of purpose; (2) force
majeure; (3) impossibility or impracticability of
performance; and (4) excused performance due to Kinder
Morgan's inability to perform. (Doc. 1 at 7-12). On each
of these theories, Drummond seeks a declaration that it is
not required to satisfy the minimum tonnage requirements or
remit the penalty payment for calendar year 2015 or the
remaining term of the Schedule. (Id. at 8, 10-12).
STANDARD OF REVIEW
survive a motion to dismiss for failure to state a claim on
which relief may be granted pursuant to Rule 12(b)(6),
"a complaint must contain sufficient factual matter,
accepted as true, to 'state a claim to relief that is
plausible on its face.'" Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). "A claim has
facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged."
Id. (citing Twombly, 550 U.S. at 556).
"The plausibility standard is not akin to a
'probability requirement, ' but it asks for more than
a sheer possibility that a defendant has acted
unlawfully." Id. "Where a complaint pleads
facts that are 'merely consistent with' a
defendant's liability, it 'stops short of the line
between possibility and plausibility of 'entitlement to
relief.'" Id. (quoting Twombly,
550 U.S. at 557).
Rule of Civil Procedure 8(a)(2) requires only 'a short
and plain statement of the claim showing that the pleader is
entitled to relief, ' in order to 'give the defendant
fair notice of what the … claim is and the grounds
upon which it rests.'" Twombly, 550 U.S. at
555 (quoting Conley v. Gibson, 355 U.S. 41, 47
(1957)). Rule 8 "does not require 'detailed factual
allegations, ' but it demands more than an unadorned, the
defendant-unlawfully-harmed me accusation."
Iqbal, 556 U.S. at 678 (quoting Twombly,
550 U.S. at 555). "[L]abels and conclusions, "
"a formulaic recitation of the elements of a cause of
action, " and "naked assertion[s] devoid of further
factual enhancement" are insufficient. Id.
(quoting Twombly, 550 U.S. at 555, 557) (internal
quotation marks omitted).
Master Service Agreement includes a choice of law provision
for New York law. (Doc. 10-1 at 12). Accordingly, New York
law will govern the substantive arguments presented here.
Before reaching the merits of the parties' arguments, the
court will address Drummond's contention that Kinder
Morgan's arguments are inappropriately raised on a Rule
Propriety of Addressing Arguments on a Motion to
claims for impossibility and frustration of purpose share the
common requirement of pleading that the parties' contract
expectations were frustrated or destroyed by unforeseeable
events. Drummond contends the question of foreseeability is a
fact-intensive inquiry which is inappropriate on a motion to
dismiss. (See Doc. 16 at 9-11). In a similar vein,
the response to the motion to dismiss attacks Kinder
Morgan's characterization of Drummond's claims as
seeking to avoid contract terms simply because they are no
longer profitable. (Id. at 13). Drummond contends
acceptance of this argument regarding economic viability
would require the court to make inferences in favor of Kinder
Morgan; Drummond argues such inferences are impermissible on
a motion to dismiss because economic considerations are not
pled in the complaint. (Id.).
worth noting that the complaint repeatedly alleges
environmental regulations have negatively impacted the market
for coal. (Doc. 1 at 4) (environmental regulations have
"greatly impacted the consumption of coal");
(id. at 5) ("due to these environmental
regulations, the market for imported coal in the relevant
area . . . has essentially ceased to exist");
(id at 6) (citing "decimation of the import
coal market"). Moreover, two of Drummond's claims
explicitly rest, at least in part, on financial arguments
concerning the market for imported coal. (See Id. at
7) (in support of frustration of purpose, alleging the
Schedule has "become virtually worthless" to
Drummond); (id at 10) (in support of impossibility,
alleging it "has become commercially impracticable for
[Drummond] to meet its minimum tonnage requirements").
Accordingly, accepting the facts alleged in the complaint as
true, Drummond's claims are at least partially based on
financial considerations due to shifts in the coal market.
As to a
determination of foreseeability at the motion to dismiss
stage of litigation, Drummond quotes Lowenschuss v.
Kane, 520 F.2d 255, 265-66 (2d Cir. 1975), holding that:
Resolution of the defense of impossibility requires an
examination into the conduct of the party pleading the
defense in order to determine the presence or absence of such
fault. In all but the clearest cases this will involve issues
of fact that must be resolved by the district court only
after the parties have had adequate opportunity to
investigate and present their evidence.
(Doc. 16 at 12) (emphasis omitted). At issue in
Lowenschuss was whether the party pleading
impossibility was at fault in bringing about the events
alleged to have made performance impossible. Here, Kinder
Morgan's motion to dismiss is not premised on an argument
that Drummond's actions caused the bottom to drop out of
the market for imported coal. It is undisputed that the
parties are faultless in this regard. Instead, Kinder Morgan
contends Drummond's claims fail as a matter of law.
Drummond cites no law excusing a plaintiff from pleading the
essential elements of its claims; the undersigned is unaware
of any such authority.
as noted by Kinder Morgan, other courts applying New York law
have dismissed similar claims on Rule 12(b) motions. (Doc. 20
at 20) (citing GanderMountain Co. v. Islip
U-Slip, LLC, 923 F.Supp.2d 351 (N.D.N.Y. 2013),
aff'd, 561 F.App'x 48 (2d Cir. 2014)
(granting 12(b)(6) motion regarding claim for frustration of
purpose where plaintiff failed to plead unforeseeability);
Burke v. Steinmann, No. 03-1390, 2004 WL 1117891 at
*9 (S.D.N.Y. May 18, 2004) (dismissing counterclaims for