United States District Court, E.D. Virginia, Alexandria Division
Ellis, III United States District Judge.
diversity breach of contract action arises from a dispute
concerning two contracts regarding the sale of a New Jersey
service station. The two named defendants did not file an
answer to the complaint or otherwise respond or appear in
this action, and thus the matter was referred to the
Magistrate Judge for a Report and Recommendation
(“R&R”) pursuant to 28 U.S.C. § 636(b).
The Magistrate Judge's R&R concluded:
(i) that default judgment should be entered for plaintiff
against only one of the named defendants;
(ii) that plaintiff was not the intended beneficiary of the
contract between the co-defendants, and thus could not sue
for breach of that contract's provisions; and
(iii) that plaintiff was entitled neither to pre-judgment
interest, nor post-judgment interest.
filed timely objections to these recommendations, which are
now ripe for disposition. For the reasons that follow,
(i) the objection to the Magistrate Judge's conclusion
that plaintiff is not an intended third party beneficiary of
the co-defendants' contract is sustained;
(ii) the objection to the recommendation against the award of
pre-judgment interest is overruled; and
(iii) the objection to the recommendation against the award
of post-judgment interest is sustained.
the record warrants the entry of judgment against both
defendants, jointly and severally, for the amount of
contractually-required liquidated damages, plus post-judgment
interest at the statutory rate.
ExxonMobil Oil Corporation (“Exxon”) is a New
York corporation with its principal place of business in
Texas. Exxon is in the business of, inter alia,
owning and leasing roadside service stations in the United
States. Defendant Black Stone Petroleum, Inc. (“Black
Stone”) is both incorporated and headquartered in New
Jersey, and was lessee on one of Exxon's New Jersey
service station properties. Defendant FDD Realty, LLC
(“FDD Realty”) is a New Jersey limited liability
company operating in New Jersey.
January 27, 2012, Exxon and Black Stone executed a contract
(the “Exxon Agreement”) in which Black Stone
exercised its right of first refusal to purchase the New
Jersey station that Black Stone had previously leased from
Exxon. The Exxon Agreement includes the following pertinent
• Black Stone would pay Exxon a purchase price of $1,
274, 831 for the service station.
• Exxon would pay $350, 000 toward the cost of replacing
the underground fuel storage tanks at the station.
• Black Stone would sell Exxon-branded fuel exclusively
from the service station's gas pumps for a period of 15
years following the closing date of the Exxon Agreement.
• In the event Black Stone would fail to sell only
Exxon-branded fuel during the 15-year period, Black Stone
would be liable to Exxon for liquidated damages as calculated
by a formula listed in the Exxon Agreement.
• The liquidated damages formula provides that Black
Stone would pay two cents per gallon of fuel multiplied by
(i) Black Stone's base volume of fuel sales,
(ii) the amount of time left in the 15-year window.
Specifically, the formula is: “($0.02 per gallon) x
([Black Stone]'s Base Volume) x (15 [minus] the number of
years (including any partial year) since the Closing
Date).” Am. Compl. Ex. 1 § 4.1.2.
• The Exxon Agreement also includes a choice of law
clause, providing that the Exxon Agreement is to be
“governed by and construed in accordance with the laws
of the Commonwealth of Virginia.” Id. Ex. 1
• The Exxon Agreement further provides that the
exclusive forum for resolving disputes arising from the Exxon
Agreement is the Eastern District of Virginia, Alexandria
Division or, if federal jurisdiction is unavailable, the
Fairfax County, Virginia circuit court.
• Related to the choice of law provision, the Exxon
Agreement also requires Exxon and Black Stone
“irrevocably [to] submit . . . to the personal
jurisdiction of the federal court for the Eastern District of
Virginia in Alexandria, Virginia, or, if federal jurisdiction
is not available, to the jurisdiction of the Fairfax County
Circuit Courts, ” and “not [to] attempt to deny
or defeat such personal jurisdiction.” Id.
days before entering the Exxon Agreement, Black Stone,
unbeknownst to Exxon, executed a separate agreement with FDD
Realty (the “FDD Agreement”) in which Black Stone
contracted to convey its interest in the New Jersey service
station to FDD Realty. The FDD Agreement includes the
following pertinent terms:
• FDD Realty would advance to Black Stone $1, 274, 831,
which was the purchase price for the station as specified in
the Exxon Agreement.
• FDD Realty would also pay an additional sum to Black
• Immediately after the closing date specified in the
Exxon Agreement, Black Stone would execute a deed to transfer
ownership of the service station to FDD Realty.
• Following transfer of title to the service station to
FDD Realty, Black Stone would “vacate the [station] no
later than the date the underground storage tank upgrade work
[contemplated in the Exxon Agreement] was completed and the
upgrade vendor was paid.” Am. Compl. Ex. 2 at 4, §
• FDD Realty would “assume each and every
obligation and responsibility of [Black Stone] under the
Exxon Sale Agreement and Supply Agreement and . . . indemnify
and hold [Black Stone] harmless from and against any and all
liability, damage, loss, or expenses . . . arising from or
related to [FDD Realty's] breach of said
agreement.” Id. Ex. 2 at 5, § 5(o).
• New Jersey law would govern the construction and
interpretation of the FDD Agreement.
• FDD Realty's attorney was authorized to
“supervise and manage all work required to
finalize” the Exxon Agreement. Id. Ex. 2 at 2.
closing date of the Exxon Agreement was April 23, 2012.
Thereafter, on July 22, 2013, Exxon made the agreed payment
of $350, 000 toward the cost of replacing the underground
storage tanks at the service station. On October 18, 2013,
shortly after the storage tanks were replaced, Black Stone
rebranded the station as a “Raceway” service
station and ceased selling Exxon-branded fuel, in violation
of the Exxon Agreement. In response, Exxon demanded that Black
Stone pay liquidated damages pursuant to the Exxon Agreement.
Black Stone rejected this demand, and instead directed Exxon
to collect any liquidated damages due from FDD Realty, which
also rejected Exxon's demand.
February 12, 2016, Exxon filed the instant action against
Black Stone, alleging breach of the Exxon Agreement arising
from Black Stone's failures (i) to sell Exxon-branded
fuel, and (ii) to pay the contractually-required liquidated
damages. A month later, on March 14, 2016, Exxon filed an
amended complaint, adding FDD Realty as a defendant and
asserting damages arising from FDD Realty's breach of the
FDD Agreement. Specifically, Exxon averred that FDD Realty,
by signing the FDD Agreement, assumed Black Stone's
obligation to pay the contractually-required liquidated
damages to Exxon in the event of a breach of the Exxon
Agreement. Exxon alleged that FDD Realty's assumption of
that obligation created an enforceable legal right in Exxon
as an intended beneficiary of the FDD Agreement. Accordingly,
because neither Black Stone nor FDD ...