# Arm Energy Mgmt. LLC v. Medallion Pipeline Co. Supreme Court of Texas, No. 25-0637 **Arm Energy Mgmt. LLC v. Medallion Pipeline Co., No. 25-0637, is before the Supreme Court of Texas. Key issue: Whether a shipper that prepaid $32.7 million for firm pipeline transportation and terminal loading under related "ship-or-pay" agreements can recover its prepayment when the carrier never provided a terminal capable of loading a million-barrel vessel or transported one of the contract grades of crude, or whether the agreements' vessel limits and nomination requirements defeat the claim.** Practice areas: breach of contract, oil and gas, contract interpretation ## Key issues - Whether a shipper that prepaid $32.7 million for firm pipeline transportation and terminal loading under related "ship-or-pay" agreements can recover its prepayment when the carrier never provided a terminal capable of loading a million-barrel vessel or transported one of the contract grades of crude, or whether the agreements' vessel limits and nomination requirements defeat the claim. - Whether related contracts must be construed together and in harmony, so that an exhibit's loading specifications cannot negate the terminal-service obligations in the Terminal Agreement, and whether the futility doctrine excuses the shipper from nominating a vessel or grade the carrier had not made available. ## Factual History ARM Energy Management LLC contracted with Medallion Pipeline Company, LLC under two related agreements with cross-default provisions. Under the Transportation Agreement, ARM paid Medallion for the right to transport 850,000 barrels of oil per month on EPIC's pipeline from the Permian Basin to EPIC's terminals at the Port of Corpus Christi. Under the Terminal Agreement, ARM paid for the right to load those barrels onto a vessel with enough capacity at either of EPIC's terminals. ARM prepaid and provided credit support totaling $32.7 million. ARM says Medallion never provided a terminal able to service a Suezmax vessel (up to one million barrels) and never provided transportation for one of the two grades of crude, West Texas Light (WTL), so ARM terminated both agreements and sued to recover its prepayments, while Medallion drew on ARM's credit support and counterclaimed (Brief on the Merits (Petitioner), PDF pp. 11, 14). Medallion says it subleased EPIC pipeline and terminal capacity to ARM in exchange for "ship-or-pay" obligations, ARM was speculating that oil prices would rise, and when the COVID pandemic collapsed prices ARM complained for the first time about services it never requested: Exhibit B's vessel parameters did not permit a Suezmax, EPIC never completed a Suezmax-capable terminal, ARM never nominated either service, and ARM lacked sufficient oil to use them (Response to Petition, PDF pp. 7, 9, 11). ## Procedural History After a bench trial in the 68th District Court of Dallas County, Judge Martin Hoffman found that Medallion breached the agreements by failing to provide WTL and Suezmax services, ordered Medallion to return ARM's deposit with interest and fees totaling $39.6 million, and dismissed Medallion's counterclaims (Brief on the Merits (Petitioner), PDF p. 11; Response to Petition, PDF p. 7). The Fifth Court of Appeals (Goldstein, Kennedy and Wright, JJ.; Kennedy, J., authoring) reversed, rendered a take-nothing judgment on ARM's claims on the ground that the agreements' plain language defeated them and that ARM's failure to nominate WTL or a Suezmax precluded any breach claim, and remanded Medallion's counterclaim. It issued a modified opinion after ARM moved for en banc rehearing and denied a second motion. Medallion Pipeline Co. v. ARM Energy Management LLC, No. 05-23-00446-CV, 2025 WL 1436057 (Tex. App.—Dallas May 19, 2025, pet. filed) (mem. op.) (Brief on the Merits (Petitioner), PDF p. 11; Response to Petition, PDF p. 8). ARM petitioned for review on November 24, 2025. Medallion responded April 10, 2026, and ARM replied May 22, 2026. The Court requested briefs on the merits on June 12, 2026; ARM filed its brief September 11, 2026, and Medallion's brief is due November 2, 2026 (Docket). ## Issues Presented 1. Whether the court of appeals' opinion violated fundamental tenets of contract interpretation, conflicted with precedent and erred in holding that Medallion did not breach the Terminal Agreement by failing to provide, each month, a vessel at the terminals capable of loading ARM's prepaid 850,000 barrels. 2. Whether the court of appeals erred in holding that Medallion did not breach the agreements by failing to provide transportation and delivery of WTL. 3. Whether the futility doctrine excuses ARM from nominating an appropriate vessel or WTL transportation when Medallion did not make either service available as promised and instructed ARM not to nominate (Brief on the Merits (Petitioner), PDF p. 14). Medallion's response frames the issues as whether it breached by failing to provide Suezmax service when ARM conceded a Suezmax would not meet the Terminal Agreement's vessel parameters, no Suezmax-capable terminal was ever built, and ARM never requested or needed one, and whether the narrow futility doctrine excuses ARM's failure to nominate; it treats the WTL issue as unbriefed (Response to Petition, PDF p. 11). ## Legal Arguments **Petitioner (ARM Energy Management LLC):** The opinion lets Medallion keep ARM's $32.7 million prepayment although Medallion never made the promised firm services available. ARM argues it had an express firm right each month to nominate a vessel of up to one million barrels at either EPIC terminal, that the two agreements must be construed together and in harmony, that the court of appeals violated interpretation principles by holding Exhibit B's loading specifications negate Medallion's terminal obligations, and that Medallion bore the risk of EPIC's failure to provide the required terminal services. Under the cross-default provisions, breach of either agreement is a breach of both, letting ARM terminate and recoup its prepayments; Medallion also independently breached the Transportation Agreement by never providing WTL transportation, which both tariffs listed as a product specification. ARM contends the court of appeals wrongly treated nominating a sufficient vessel or WTL as conditions precedent, that unchallenged trial court findings must be taken as true, and that the law does not require the futile act of nominating a service that was not available; because Medallion breached both agreements, its counterclaim fails (Brief on the Merits (Petitioner), PDF pp. 4-5, 14-16; Reply to Response to Petition, PDF pp. 2, 16). **Respondent (Medallion Pipeline Company, LLC):** ARM had no unconditional right to Suezmax service, and multiple contractual limitations precluded it. Medallion did not fail to provide any bargained-for terminal service, because there was no mismatch between ARM's nominated volumes and the contractually permitted vessel size, and ARM's admitted failure to nominate a Suezmax defeats its breach claim. It says ARM's interpretation renders multiple terms meaningless and rests on inadmissible parol evidence, the futility doctrine is narrow and does not apply because ARM brought claims of actual rather than anticipatory breach and ignored Medallion's offer to ship WTL and load ARM's full volume, and there are no splits of authority (Response to Petition, PDF pp. 2-3, 9-11). ## Stated Reasons the Court Should Take the Case ARM argues the errors are grave, conflict with other courts of appeals and established Texas law, and harm the oil-and-gas industry, where ship-or-pay and load-or-pay arrangements are common, by suggesting a shipper must pay for services the carrier never made available. It says review is needed for predictable application of contract-construction principles to related contracts and for the proper standard of appellate review of trial court fact findings, and it cites a recent Texas Business Court case involving similar related ship-or-pay agreements as evidence the issue will recur (Brief on the Merits (Petitioner), PDF pp. 12-13, 16). Medallion responds that this is a fact-specific contract dispute applying settled rules (Response to Petition, PDF pp. 9-10). ## Practice Area Tags breach-of-contract, oil-and-gas, contract-interpretation ## Procedural Posture/Vehicle Petition for review from the Fifth Court of Appeals, which reversed a bench-trial judgment of about $39.6 million for the shipper, rendered a take-nothing judgment on its claims, and remanded the carrier's counterclaim. The Court requested briefs on the merits on June 12, 2026; the petitioner's brief is on file and the respondent's brief is due November 2, 2026. The Court has not yet granted the petition. ## Amicus Involvement None --- Source: The SCOTX Report, https://scotxreport.com/cases/25-0637. AI-generated summary of the Court's opinion, orders and the parties' briefs, with pin cites to the page of each document; verify against the Court's own documents at search.txcourts.gov.