Getty Petroleum supplier's $230.38 million arbitration award confirmed

By Caroline Salls

Pittsburgh, May 17 - Getty Petroleum Marketing Inc.'s motion to vacate a Bionol Clearfield, LLC supply agreement arbitration award was denied on May 17 by the U.S. Bankruptcy Court for the Southern District of New York.

In denying Getty's motion, Judge Shelley C. Chapman also granted Bionol Clearfield's motion to confirm the arbitration award.

The judge allowed the arbitration award claim in the amount of $234.82 million, which includes a $4.44 million pre-bankruptcy interest component. The arbitration panel awarded Bionol $230.38 million in July 2011.

"Getty has repeatedly refused to voluntarily satisfy the award," Bionol said in its motion to confirm the award.

All efforts by Bionol to collect on its allowed judgment will be stayed in accordance with section 362 of the Bankruptcy Code, according to the order.

However, the judgment will be entitled to the same treatment and distributions to be made to other pre-bankruptcy non-priority unsecured claims under a Getty Petroleum Chapter 11 plan or a Chapter 7 liquidation distribution.

According to Bionol's motion to confirm the award, a 2007 ethanol purchase agreement required Bionol to supply Getty with 108 million gallons of ethanol a year for five years.

Bionol said the agreement specified that "any controversy or claim arising out of or relating to this agreement or the interpretation, performance, or the breach thereof shall be finally settled by binding arbitration."

Bionol said that Getty notified it on June 1, 2010 that it refused to pay the agreed-to contract price for the ethanol going forward.

At the same time, Getty filed a demand for arbitration against Bionol under the agreement, alleging fraudulent inducement, unilateral mistake, mutual mistake, breach of contract, breach of implied covenant of good faith and fair dealing and unjust enrichment.

Bionol subsequently filed a counterclaim against Getty for breach of contract, seeking damages related to breach and repudiation of the agreement.

Getty argument

Meanwhile, in its motion to vacate the award, Getty said the arbitration panel's decision could only be explained by "manifest disregard of black-letter law relating to installment contracts and the Uniform Commercial Code."

"The record here is clear: after Getty supposedly breached the offtake agreement on June 1, 2010, by withholding disputed payment amounts, Bionol never provided Getty with seasonable notice of cancellation, demanded performance as to future ethanol purchases over the course of five months and in fact performed under the agreement," Getty said in its motion.

As a result, even if it breached the agreement as the award concludes, Getty said "Bionol's words and conduct would have reinstated the agreement."

In addition, Getty said Bionol's damages, if any, should have been limited to $22.6 million, representing the amount withheld by Getty for shipments received between June 1, 2010 and Oct. 31, 2010.

Getty said in its motion that the Bionol award claim was the largest unsecured claim filed in its Chapter 11 bankruptcy case.

Getty Petroleum, an East Meadow, N.Y., distributor of motor and heating fuels, filed for bankruptcy on Dec. 5. Its Chapter 11 case number is 11-15606.

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