Maryland Court Rejects Customer Claim of Reduced Pricing ‘in Perpetuity’

Customer disputes are rare in the propane industry, but when they do happen, a strong written agreement with the customer is a valuable asset for any retail distributor. This was recently illustrated in a Maryland court decision. On Sept. 12, a Maryland federal court held that an AmeriGas customer was not entitled to discounted pricing in perpetuity and was not entitled to continued propane delivery when his account was in arrears. The case is Ezzat v. AmeriGas.

‘Cut-Rate Pricing’

Mautaz Ezzat, a builder who lived in Ellicott City, Maryland, was a retail propane customer of AmeriGas. He first purchased propane for his newly built residence in 1993 from Petrolane, a predecessor company of AmeriGas. He had a written agreement with Petrolane that was renewed every year, and he received standard pricing. This process continued after Petrolane was acquired by AmeriGas.

However, this changed in about 1998 when, according to Ezzat, he reached an oral agreement with AmeriGas that when he was building a home that was not serviced by a gas company, he would refer the client to AmeriGas in exchange for “cut-rate pricing” on the supply of propane to Ezzat at both his residence and his vacation home at Deep Creek Lake, Maryland.

Written Agreement

Beginning in 2000, Ezzat signed an AmeriGas Propane Supply Agreement and Equipment Lease for his residence and vacation home. This written agreement included special pricing provisions but made no mention of referral of customers to AmeriGas in exchange for pricing considerations.

Ezzat testified that they had to “redo” the paperwork every year, “kind of like re-consummating the agreement every single year,” because AmeriGas did not “have the ability to … keep it in the system indefinitely.” Therefore, “right around Thanksgiving of every year, [Ezzat] would reach out to AmeriGas and say, ‘It’s time to renew.’”

Ezzat testified that these annual “renewals” did not alter the parties’ pricing agreement, which was set out in the Propane Supply Agreement and Equipment Lease.

‘Problems’ Arise

All apparently went well for the next 20 years, but problems arose in 2020. Ezzat complained that he was being “grossly over-billed,” while AmeriGas countered that his account was past due. In January 2021, Ezzat ran out of propane at his home, and he was advised that no additional propane could be delivered until the account was brought current.

Eventually, AmeriGas provided additional propane to Ezzat, and the Propane Supply Agreement and Equipment Lease was renewed for another year. However, Ezzat did not bring his account with AmeriGas current, and in November 2021 AmeriGas cancelled the Propane Supply Agreement and Equipment Lease and ceased the delivery of propane to Ezzat. In response, Ezzat filed suit.

Pricing Forever

Ezzat claimed that he and AmeriGas agreed that his reduced pricing “shall continue each year in perpetuity,” and that AmeriGas breached its contractual duty by canceling his propane delivery and unilaterally terminating the reduced-price agreement. AmeriGas denied this claim and filed a motion for summary judgment, asking the court to dismiss the lawsuit.

The court found that the Propane Supply Agreement and Equipment Lease was the full agreement between the parties, and that it did not provide for reduced pricing forever:

“With respect to the duration of the agreement, there is no language in the contract documents that reflects an agreement that the reduced pricing AmeriGas offered Mr. Ezzat would continue in perpetuity. To the contrary, the plain language of the documents limits the parties’ agreement to a specified period of time. Paragraph five of the Propane Supply Agreement and Equipment Lease, entitled “TERM,” states, in pertinent part: ‘The initial term of this agreement shall be five (5) year(s).’ Attachment E to this agreement also reflects a five-year term. (‘At the conclusion of the five year contract, the customer may purchase the tank at the market value, remove the tank or renew the contract.’) The annually executed attachment to the agreement that set out the price per gallon of propane had an even shorter duration. For example, the Attachment A executed by the parties on Dec. 19, 2019, provides that the term for the propane gas pricing was less than one year (Dec. 9, 2019, to Nov. 30, 2020).”

The court added that the written agreement specifically provided that “AmeriGas could change the amount it charged Mr. Ezzat for the supply of propane gas.” The clear language of the agreement prevails, it said, “regardless of Mr. Ezzat’s subjective understanding or intent.”

Termination Clause

The court then turned to Ezzat’s claim that AmeriGas improperly suspended propane delivery to him. Again, the court looked to the language of the agreement, this time citing the termination provision:

“Either Party may terminate this agreement at the expiration of the initial term, or at any time thereafter by giving the other party thirty (30) days prior written notice. AmeriGas may terminate this agreement at any time without prior notice if Customer fails to satisfy the terms and conditions of Customer’s agreement.”

The court found this language “clear and unambiguous,” and concluded that a reasonable person in the position of the parties involved would understand that AmeriGas reserved the right to terminate the agreement, either by giving 30 days prior notice or without any prior notice if Ezzat failed to satisfy the terms and conditions of the agreement, which include prompt payment.

‘Straining Credulity’

Ezzat admitted that his account with AmeriGas was delinquent, but claimed that he was disputing the amount of his bill and had trouble reaching someone at AmeriGas with whom to negotiate his dispute. But those facts, even if he could prove them to a jury, would not negate the fact that the contract terms allowed AmeriGas to unilaterally terminate the agreement if Ezzat did not satisfy the specified terms and conditions, which included prompt payment:

“… It strains credulity to suggest that failure to make timely payment does not constitute a failure to satisfy the terms and conditions of the agreement, particularly when the customer’s obligation to promptly pay invoices appears in two separate places in the contract.”

The court granted the AmeriGas motion for summary judgment and dismissed the lawsuit.