By Rose Krebs

Law360 (April 6, 2020, 10:11 PM EDT ) The operator of the port of Wilmington was sued in Delaware Chancery Court on Monday by a fuel storage tank owner that claims the operator has disrupted the fuel supply chain amid the COVID-19 pandemic by blocking access to tanks over a fee dispute.

Fuel distributor Buckeye Partners LP asserts that GT USA Wilmington LLC, which operates the port of Wilmington, has blocked access to its tanks adjacent to the port "in an attempt to extract price concessions to which it is not entitled."

In its suit, Buckeye said it purchased the tanks at the Wilmington location on March 20 from a Magellan Midstream Partners LP unit.

"GT, which manages the port on behalf of Diamond State Port Corporation, made the same extortion attempt against Magellan over Labor Day weekend in August 2019 — threatening to barricade Magellan and its customers' access to the tanks unless Magellan capitulated to GT's demands for payment of additional dock-usage fees that GT was attempting to unilaterally impose outside of the lease, the same purported fees GT now claims Buckeye owes," the suit asserts.

However, this time, the threat to lock Buckeye's employees out of the site comes amid the global COVID-19 pandemic and impacts tanks that service "essential" businesses during the public health crisis, the suit contends. Among Buckeye's customers blocked from accessing tanks is Wawa Wholesale Fuels LLC, which distributes gas to Wawa gas stations in Pennsylvania, New Jersey, Delaware, Maryland and Virginia, the suit said.

Buckeye asserts this disruption to the fuel supply chain leaves it "immediately and irreparably harmed: the core service it provides to its customers — access to the gas which the customers own and which Buckeye stores for them in the tanks — is effectively blocked, threatening Buckeye's customer relationships, goodwill, and commercial reputation."

The suit also warns that GT's threats to block Buckeye employees from the site, which holds 1.6 million barrels of hazardous materials, presents environmental and safety hazards.

"More disturbing — and likely the reason GT has pointed a proverbial gun at Buckeye's head at this time — is the harm to the public interest if essential fuel supply chains for approximately 200 gas stations are disrupted during the throes of a global pandemic," Buckeye contends.

In court filings, Buckeye said it knew of the unresolved fee dispute with Magellan dating back to 2019, and that it reached out to GT to resolve the matter when it entered into the agreement earlier this year to purchase Magellan. GT never indicated it would block access to the tanks unless certain dock-usage fees were paid, Buckeye claims.

On April 1, just 13 days after Buckeye purchased the tanks, GT said it would block access to the tanks starting Monday "due to the purported unpaid fees totaling nearly $1,000,000," the suit said.

"GT then took it upon itself to communicate the same message to Buckeye's customers, with whom GT has no contractual relationship," Buckeye said. On Monday, GT barred Wawa Fuels' trucks from entering the port, the suit said.

Buckeye contends it was "blindsided" by GT's action as it had believed from prior communications "that the parties would engage in discussions about the fees, yet none had occurred."

"Having closed on its acquisition less than two weeks prior, contemporaneous with the escalating disruption of COVID-19 and Buckeye's need to provide uninterrupted fuel supply, there was hardly time to have conducted such negotiations," the suit asserts. "GT had not reached out to have a discussion, nor did GT hint that it was planning to wall off Buckeye and its customers from the property it had owned for only thirteen days."

Buckeye also contends that GT has "no legal interest" in the property where the tanks are located and that the road to them is private. Buckeye's "deed to its landlocked property unsurprisingly grants to the owner 'the right to use the private lanes from said lot to a public road,'" the suit asserts.

"Even if GT had, in the abstract, the right to block access to the port, nothing gives it the right to interfere with a commercial property owner's deeded rights to pass through that port from a public way," Buckeye contends.

GT has improperly tried to use a "compilation of regulations concerning the port" to bar access to the tanks, the suit said. Buckeye contends that a lease it holds "grants it rights to a shipping dock and pipeline easements which are connected to the tanks," according to court filings. The lease overrides regulations GT has invoked to block access to tanks due to a purported nonpayment of fees, Buckeye argues.

Buckeye is seeking injunctive relief from the court on an expedited basis to bar GT "from threatening to or blocking access to the port and Buckeye's tanks" and "demanding payment of terminal usage fees under the threat of future restriction on access to the port and/or the tanks, and making statements to Buckeye's customers."

The suit also seeks damages for breach of contract, tortious interference with contractual relations, and other claims.

"Buckeye Partners is committed to maintaining reliable fuel distribution for consumers and safe operations at our Wilmington terminal, especially during this time of national medical emergency," a Buckeye representative told Law360 on Monday. "We remain hopeful that the Port of Wilmington's management company agrees to a quick resolution to this matter to enable refueling of local service stations."

Representatives for GT did not immediately respond to a request for comment Monday.

Buckeye is represented by Jody C. Barillare, Amy M. Dudash, Michael D. Blanchard, Julie S. Goldemberg and Lee M. Begelman of Morgan Lewis & Bockius LLP.

Counsel information for GT was not available on Monday.

The case is Buckeye Partners LP and Buckeye PT Terminals LP v. GT Wilmington USA LLC, case number 2020-0255, in the Court of Chancery of the State of Delaware.

--Editing by Emily Kokoll.

Correction: An earlier version of this story incorrectly identified the prior owner of the fuel storage tanks.

For a reprint of this article, please contact reprints@law360.com.