B. Public Utilities. Sunoco, Inc. (R&M) v. Toledo Edison Co.

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1 B. Public Utilities Sunoco, Inc. (R&M) v. Toledo Edison Co. 129 OHIO ST. 3D 397, 2011-OHIO-2720, 953 N.E.2D 285 DECIDED JUNE 9, 2011 I. INTRODUCTION In Sunoco, Inc. (R&M) v. Toledo Edison Co., 1 the Supreme Court of Ohio addressed the likelihood of a most-favored-nation clause extending the duration of a contract. 2 After addressing each proposition of law Sunoco included in its brief for appeal, the court ruled as long as contract provisions are found to have a clear, unambiguous meaning, the terms will be applied as written. 3 The court reversed the decision of the Public Utilities Commission of Ohio, the controlling body for contracts between a utility company and its customer and ruled in favor of Sunoco. 4 Both dissenting opinions criticized the court s justifications for ruling against the Public Utilities Commission of Ohio. 5 The dissenting opinion by Justice Cupp relayed disappointment in the lack of deference the court showed the Public Utilities Commission of Ohio. 6 Since the court was forced to examine only the written contract terms when a contract appears clear and unambiguous, this ruling was in line with the court s precedent and was a straightforward application of basic contract principles. II. STATEMENT OF FACTS AND PROCEDURAL HISTORY Under section of the Ohio Revised Code, the Public Utilities Commission of Ohio ( PUCO ) may approve a reasonable arrangement, known as a special contract, between a public utility company and its customer. 7 These contracts are usually tailored towards the client s specific Ohio St. 3d 397, 2011-Ohio-2720, 953 N.E.2d 285 (2011). 2. Id. at 397, 2011-Ohio , 953 N.E.2d at See id. at , 2011-Ohio , 953 N.E.2d at See id. at 398, 2011-Ohio , 953 N.E.2d at See generally id. at , 2011-Ohio , 953 N.E.2d at (Lanzinger, J., dissenting) (Cupp, J., dissenting). 6. Sunoco, Inc. (R&M) v. Toledo Edison Co., 129 Ohio St. 3d at 417, 2011-Ohio , 953 N.E.2d at 302 (Cupp, J., dissenting). 7. Id. at 397, 2011-Ohio , 953 N.E.2d at 287 (majority opinion). 1237

2 1238 OHIO NORTHERN UNIVERSITY LAW REVIEW [Vol. 38 needs and normally include different rate schedules than what is used for a standard customer. 8 Sunoco and Toledo Edison entered into a special contract in 1999, which replaced a similar agreement between the companies created in This contract was approved by the PUCO pursuant to section of the Ohio Revised Code. 10 The terms of the 1999 agreement provided Sunoco with pricing rates below standard tariff rates, as was common in special contracts. 11 This agreement was to remain in effect until June The agreement also contained a most-favored-nation ( MFN ) clause, which provided Sunoco the right to use the arrangements, rates, or charges from a Toledo Edison agreement with a comparable facility within a certified territory. 13 The purpose of the clause was to even the playing field of two competing oil refineries so neither had a competitive advantage over the other with regards to electric prices. 14 BP Oil Company ( BP ) had a nearby facility, which was used as the undisputed comparison for the Sunoco agreement s MFN clause. 15 BP entered into an agreement with Toledo Edison similar to Sunoco s agreement in 1996, which was set to terminate in June In 1999, the General Assembly passed section 4928 of the Ohio Revised Code, commonly known as S.B. 3, which allowed retail customers to buy electricity from someone other than their local electric company. 17 Toledo Edison was among a group of electric utility companies involved in cases at the PUCO, which attempted to simplify the implementation of the new regulations. 18 In the first case, the electric-transition-plan case ( ESP ), a stipulation was agreed upon which required Toledo Edison to notify each customer currently in a special contract with Toledo Edison that the customer had a one-time opportunity to continue, cancel, or extend the terms of the contract as long as the customer gave Toledo Edison timely notice. 19 After 8. Id., 2011-Ohio , 953 N.E.2d at Id. at 398, 2011-Ohio , 953 N.E.2d at Id., 2011-Ohio , 953 N.E.2d at Sunoco, 129 Ohio St. 3d at 398, 2011-Ohio , 953 N.E.2d at Id., 2011-Ohio , 953 N.E.2d at Id. at 402, 2011-Ohio , 953 N.E.2d at Id. at 405, 2011-Ohio , 953 N.E.2d at Id. at 398, 2011-Ohio , 953 N.E.2d at Sunoco, 129 Ohio St. 3d at 398, 2011-Ohio , 953 N.E.2d at Id., 2011-Ohio , 953 N.E.2d at Id., 2011-Ohio , 953 N.E.2d at Id. at 399, 2011-Ohio , 953 N.E.2d at 288.

3 2012] SUNOCO INC. (R&M) V. TOLEDO EDISON CO Toledo Edison gave notice to its customers, both BP and Sunoco elected to extend the terms of their agreements with Toledo Edison. 20 In the second case, the rate-stabilization-plan ( RSP ), customers were again permitted to extend their special contracts provided they make a request to Toledo Edison within thirty days of the commission s order issued on October 28, Unlike the ESP stipulation, Toledo Edison was not required to provide its customers with notice of the option to extend, so Toledo Edison did not inform its customers of the option to extend. 22 While BP requested the extension of its 1996 contract, Sunoco did not make the request. 23 In the third and final case, the rate-certainty-plan ( RCP ), the stipulation terminated contracts renewed under the RSP case on December 31, The stipulation also terminated contracts renewed only under the ETP case in February Toledo Edison informed Sunoco the 1999 agreement would be terminating in February 2008 pursuant to the RCP case stipulation since Sunoco only extended its agreement under the ETP case. 26 Sunoco responded by invoking its rights under the 1999 agreement to use the BP arrangement, which, according to Sunoco, included an extension through December 31, Toledo Edison answered Sunoco s claim with a letter notifying Sunoco that the two companies had different interpretations of contract provisions, and Toledo Edison believed Sunoco was unable to extend the term of their agreement past February 2008 pursuant to the RCP case. 28 On December 6, 2007, Sunoco filed a complaint with the commission against Toledo Edison, in accordance with section of the Ohio Revised Code, challenging its refusal to extend the 1999 agreement under the MFN clause. 29 On February 19, 2009, the commission denied Sunoco s complaint reasoning the MFN clause was a price-protection provision limited to rates and changes. 30 The commission denied Sunoco s 20. Id., 2011-Ohio , 953 N.E.2d at Sunoco, 129 Ohio St. 3d at 399, 2011-Ohio , 953 N.E.2d at Id., 2011-Ohio , 953 N.E.2d at Id., 2011-Ohio , 953 N.E.2d at Id., 2011-Ohio , 953 N.E.2d at Id., 2011-Ohio , 953 N.E.2d at Sunoco, 129 Ohio St. 3d at 399, 2011-Ohio , 953 N.E.2d at Id. at 400, 2011-Ohio , 953 N.E.2d at Id., 2011-Ohio , 953 N.E.2d at Id., 2011-Ohio , 953 N.E.2d at Id., 2011-Ohio , 953 N.E.2d at 289.

4 1240 OHIO NORTHERN UNIVERSITY LAW REVIEW [Vol. 38 application for a rehearing, and Sunoco appealed to the Supreme Court of Ohio. 31 III. DECISION AND RATIONALE A. Majority Opinion by Justice McGee Brown 1. Standard of Review The majority opinion, written by Justice McGee Brown and joined by Justice O Connor, Justice Pfeifer, and Justice Lundberg Stratton, first set the basis for the appropriate standard of review. 32 Section of the Ohio Revised Code gives an order delivered by the PUCO extreme deference. 33 As long as the record shows sufficient probative evidence supporting the PUCO s decision, and determination is not so clearly unsupported by the record as to show misapprehension, mistake, or willful disregard of duty, the Supreme Court of Ohio will not reverse or modify the decision. 34 Appellants have the burden of showing the PUCO s decision was unsupported by the record or supported by insufficient evidence. 35 The court has stated it will review all questions of law regarding a PUCO order; however, it may rely on the state agency s expertise when highly specialized issues are involved making the agency s expertise helpful in determining the General Assembly s intent Sunoco s contentions with the PUCO s ruling After establishing the standard of review, the majority addressed Sunoco s four contentions with the lower court s ruling. 37 The first contention the majority addressed was whether the plain language of the MFN clause in the Sunoco agreement supported the PUCO s determination that the MFN clause did not extend the duration of the contract. 38 In determining the meaning of the MFN clause, the PUCO started with the title of the clause. 39 Since the clause heading was Comparable Facility 31. Sunoco, 129 Ohio St. 3d at 400, 2011-Ohio , 953 N.E.2d at Id. at , 2011-Ohio , 953 N.E.2d at See id. at 401, 2011-Ohio , 953 N.E.2d at See Monongahela Power Co. v. Pub. Util. Comm. of Ohio, 104 Ohio St. 3d 571, , 820 N.E.2d 921, 927 (2004) (quoting AT&T Communications of Ohio, Inc. v. Pub. Util. Comm., 88 Ohio St. 3d 549, 555, 728 N.E.2d 371, 377 (2000)). 35. See id. at 578, 820 N.E.2d at See Office of Consumers Couns. v. Pub. Util. Comm., 58 Ohio St. 2d 108, 110, 388 N.E.2d 1370, 1372 (1979). 37. See Sunoco, 129 Ohio St. 3d at , 2011-Ohio , 953 N.E.2d at See id. at 401, 2011-Ohio , 953 N.E.2d at See id., 2011-Ohio , 953 N.E.2d at 290.

5 2012] SUNOCO INC. (R&M) V. TOLEDO EDISON CO Price Protection, the PUCO reasoned the clause only applied to price and not to the termination date of the contract. 40 After quoting section 10.6 of the Sunoco agreement, the majority explained this section forbids titles from being used in the PUCO s determination since they were only added for reference purposes. 41 The PUCO and Toledo Edison argued that Sunoco did not reserve a contention with the PUCO s title consideration for appeal; however, the court found the notice of appeal specifically referred to in Sunoco s title heading argument, thus properly preserving the argument. 42 Next, the PUCO considered the plain language of the MFN clause, section 9.2, and determined the word term in the clause had a different meaning than the words terms and conditions of the arrangement. 43 The PUCO reasoned that in the first sentence of the clause, the word term is used to mean duration so terms and conditions of the arrangement must not include duration. 44 The majority held this reading of the clause was not a reasonable interpretation of the plain language. 45 According to the court, while the phrase during the term of this agreement is limiting, the PUCO misunderstood the manner of limitation. 46 Sunoco could only invoke the clause while the agreement was within its terms and could not invoke the clause after the agreement had expired. 47 Since Sunoco invoked the clause before the agreement expired, the court held the phrase during the term of this agreement was not an issue. 48 Subsequently, the court considered whether the duration of a competitor s contract was included in the meaning of the word arrangement as used in the MFN clause. 49 The majority began by citing basic contract principles, stating they would give effect to the intent of the parties, presume the language reflects the parties intent, and use the plain, 40. See id. at , 2011-Ohio , 953 N.E.2d at See id. at 402, 2011-Ohio , 953 N.E.2d at 290 ( The clause headings appearing in this Agreement have been inserted for the purpose of convenience and ready reference. They do not purport to and shall not be deemed to define, limit or extend the scope or intent of the clauses to which they pertain. ). 42. See Sunoco, 129 Ohio St. 3d at 402, 2011-Ohio , 953 N.E.2d at See id., 2011-Ohio , 953 N.E.2d at 291 ( If the Company provides an arrangement, rates or charges which is or may be in effect at any time during the term of this Agreement, to a Comparable Facility within its certified territory, then the Customer will have the right to utilize that arrangement, rates or charges for its Facility. The Customer must comply with all other terms and conditions of the arrangement including firm and interruptible load characteristics/conditions. ). 44. See id. at 403, 2011-Ohio ,33, 953 N.E.2d at Id., 2011-Ohio , 953 N.E.2d at See id., 2011-Ohio , 953 N.E.2d at See Sunoco, 129 Ohio St. 3d at , 2011-Ohio , 953 N.E.2d at See id. at 404, 2011-Ohio , 953 N.E.2d at Id., 2011-Ohio , 953 N.E.2d at 292.

6 1242 OHIO NORTHERN UNIVERSITY LAW REVIEW [Vol. 38 ordinary meaning of the language unless absurdity would result. 50 To determine the plain meaning of arrangement, the majority used a dictionary definition: adjustment, mutual agreement, and understanding. 51 With these meanings, the majority held the word arrangement encompasses non-price terms like duration. 52 If Toledo Edison intended the MFN clause only apply to certain provisions of the agreement, the majority pointed out they could have used more specific terminology rather than a broad term like arrangement. 53 The majority further justified its findings by acknowledging that the purpose of the MFN clause was to level the playing field between competing utility companies; thus the majority s understanding of the clause allowed Sunoco and BP to be on equal footing by obtaining discounted pricing for the duration of their contracts. 54 The majority rejected Toledo Edison s assertion that Eveleth Taconite Co. v. Minnesota Power & Light Co. 55 was persuasive since the clause in Eveleth Taconite Co. did not involve the same language as the case at bar. 56 Also, the majority noted the Eveleth Taconite Co. court considered extrinsic evidence, which would be inappropriate here since the language is unambiguous. 57 The majority quickly discarded Toledo Edison s argument that other jurisdictions have consistently held MFN clauses end on the termination date in the contract. 58 The two cited cases involved plaintiffs who tried to invoke the clause after the contract expired, which was not the case here since Sunoco invoked the clause before the agreement expired. 59 The PUCO also articulated that, should Sunoco be permitted to extend its contract in this instance, Sunoco could take advantage of the MFN clause in every future special contract Toledo Edison may enter into with any oil refinery, thus indefinitely extending Sunoco s contract. 60 The court rejected this argument as being completely speculative since there was no evidence 50. See id. at , 2011-Ohio , 953 N.E.2d at (citing Alexander v. Buckeye Pipe Line Co., 53 Ohio St. 2d 241, , 374 N.E.2d 146, 150 (1978)). 51. Id. at 405, 2011-Ohio , 953 N.E.2d at 293 (citing WEBSTER S THIRD NEW INTERNATIONAL DICTIONARY 120 (1986) (definitions 6(a) and (b)(1))). 52. See Sunoco, 129 Ohio St. 3d at 405, 2011-Ohio , 953 N.E.2d at See id. at 406, 2011-Ohio , 953 N.E.2d at See id. at 405, 2011-Ohio , 953 N.E.2d at Minn. 20, 221 N.W.2d 157 (1974). 56. Sunoco, 129 Ohio St. 3d at 406, 2011-Ohio , 953 N.E.2d at Eveleth Taconite Co. v. Minnesota Power & Light Co., 301 Minn. at 27, 221 N.W.2d at 161; Sunoco, 129 Ohio St. 3d at 406, 2011-Ohio , 953 N.E.2d at See Sunoco, 129 Ohio St. 3d at 407, 2011-Ohio , 953 N.E.2d at See id., 2011-Ohio , 953 N.E.2d at See id., 2011-Ohio , 953 N.E.2d at

7 2012] SUNOCO INC. (R&M) V. TOLEDO EDISON CO that Sunoco took advantage of BP s contract or that Toledo Edison would enter into other comparable contracts. 61 In addition, the PUCO reasoned the arrangement allowing BP to extend its contract was made pursuant to the RSP case, so the extension should not be considered part of BP s agreement with Toledo Edison. 62 Again, the court refused the PUCO s justification by holding the MFN clause would be irrelevant had Sunoco extended its contract pursuant to the RSP case as BP did; thus, the PUCO s reasoning defeated the purpose of the clause which was to allow a beneficiary to avail itself of a contractual arrangement based merely on the fact that another Toledo Edison customer enjoys that arrangement. 63 The second contention the majority addressed was whether the PUCO could rely on extrinsic evidence when considering Sunoco s complaint against Toledo Edison. 64 In making a determination regarding Sunoco s complaint, the PUCO considered Sunoco s status as a sophisticated energy consumer, thereby reasoning it should have known to extend the agreement. 65 The majority held the PUCO s reliance on anything outside of the agreement was unreasonable and unlawful since the PUCO previously determined the language of the agreement was clear and unambiguous. 66 According to the majority, the only instance allowing extrinsic evidence to be used in ruling on a complaint is when the circumstances surrounding the agreement invest the language of the contract with a special meaning. 67 Here, the majority stated the PUCO should not have relied on any of Sunoco s actions or inactions when interpreting the contract since there was no evidence the parties had considered any surrounding circumstances when creating their agreement. 68 The third proposition the majority addressed was the PUCO s assertion that Sunoco was attempting to receive an unfair advantage since they would not bear the market risk other companies who extended contracts under the RSP case bore. 69 The majority dismissed PUCO s assertion, reasoning its 61. See id., 2011-Ohio , 953 N.E.2d at See id. at , 2011-Ohio , 953 N.E.2d at See Sunoco, 129 Ohio St. 3d at 408, 2011-Ohio , 953 N.E.2d at See id. at 409, 2011-Ohio , 953 N.E.2d at See id., 2011-Ohio , 953 N.E.2d at See id., 2011-Ohio , 953 N.E.2d at See id., 2011-Ohio , 953 N.E.2d at 296 (citing Shifrin v. Forest City Ents., Inc., 64 Ohio St. 3d 635, 597 N.E.2d 499 (1992)). 68. See Sunoco, 129 Ohio St. 3d. at 409, 2011-Ohio , 953 N.E.2d at See Brief for Respondent-Appellee at Sunoco, Inc. v. Toledo Edison Co., 129 Ohio St. 3d 397, 2011-Ohio-2720, 953 N.E.2d 285 (2011) (No ) [hereinafter Brief for Respondent- Appellee].

8 1244 OHIO NORTHERN UNIVERSITY LAW REVIEW [Vol. 38 timeline was incorrect. 70 Since the Sunoco agreement was supposed to expire in February 2008 pursuant to the RCP case, and Sunoco attempted to extend its contract using the MFN clause in November 2007, Sunoco s rights were well within the clause s provision regardless of market considerations. 71 Further, the majority explained there was no evidence Sunoco attempted to obtain an unfair advantage over BP; however, even with evidence of that nature, an unfair advantage to BP would be an improper basis for rejecting Sunoco s complaint. 72 Since the contract was unambiguous, the PUCO was unable to rewrite the terms of the contract to remedy any unfairness to BP. 73 Although the PUCO did have the authority under section of the Ohio Revised Code to modify, supervise, and regulate special contracts, the majority refused to consider that authority as the PUCO did not expressly invoke it, which is required by section of the Ohio Revised Code. 74 Finally, the majority rejected the notion that the PUCO was able to consider the history of the contractual relationship between Sunoco and Toledo Edison when interpreting the Sunoco agreement. 75 Since the evidence being offered was an internal memorandum, it was deemed extrinsic evidence; thus, as previously stated, it could not be considered when attempting to determine the meaning of clear and unambiguous contract language. 76 In a 4-3 split, the court reversed the PUCO s order and rendered judgment in favor of Sunoco. 77 B. Dissenting Opinion by Justice Lanzinger Justice Lanzinger began her dissent by expressing her discontent with the majority allowing Sunoco to take advantage of a contract extension between Toledo Edison and BP. 78 Justice Lanzinger emphasized that Sunoco has the burden of proving the PUCO order was against the manifest weight of evidence or clearly unsupported by the record, which, in her opinion, Sunoco was unable to do See Sunoco, 129 Ohio St. 3d at 410, 2011-Ohio , 953 N.E.2d at See id., 2011-Ohio , 953 N.E.2d at See id., 2011-Ohio , 953 N.E.2d at See id., 2011-Ohio , 953 N.E.2d at See id. at , 2011-Ohio , 953 N.E.2d at See Sunoco, 129 Ohio St. 3d at 411, 2011-Ohio , 953 N.E.2d at See id., 2011-Ohio , 953 N.E.2d at See id., 2011-Ohio , 953 N.E.2d at See id., 2011-Ohio , 953 N.E.2d at 298 (Lanzinger, J., dissenting). 79. See id. at 412, 2011-Ohio , 953 N.E.2d at 298.

9 2012] SUNOCO INC. (R&M) V. TOLEDO EDISON CO Justice Lanzinger reviewed three main points the majority used to justify its holding: (1) the title of the MFN clause should not have been used to understand the meaning of the contract; (2) the first sentence of the MFN clause did not exclude duration; and, (3) arrangement can include the duration of the contract. 80 First, Justice Lanzinger reasoned Sunoco waived its right to argue the title of the clause could not be used in understanding the Sunoco agreement since this argument was not a specific contention in the application for rehearing or the notice of appeal. 81 Justice Lanzinger further explained that since the relevant sections of the agreement do not address duration, but instead only state arrangement, rates or charges, the PUCO s decision should have been upheld as there was sufficient evidence for its finding. 82 Second, Justice Lanzinger believed the majority rewrote the first sentence of the MFN clause to fit the meaning it was attempting to achieve. 83 She believed the PUCO was reasonable in reading the word term in the phrase during the term of this Agreement separately from terms and conditions of the arrangement. 84 Justice Lanzinger further cited section 9.2 of the Sunoco agreement, which separately refered to all other terms and conditions of the arrangement. 85 These two sections together, according to Justice Lanzinger, meant the MFN clause was not intended to extend the duration of the contract. 86 Third, Justice Lanzinger critiqued the majority for its in-depth analysis of the word arrangement, which was not defined in the contract. 87 Section of the Ohio Revised Code, which governs a special contract, contains a definition that does not include duration of the contract or the contract terms. 88 Finally, Justice Lanzinger agreed with Toledo Edison s argument regarding other jurisdictions. 89 In her dissenting opinion, she explained that Eveleth Taconite Co., Baker Car & Truck Rental, Inc. v. Little Rock, 90 and 80. See Sunoco, 129 Ohio St. 3d at , 2011-Ohio , 77, 80-86, 953 N.E.2d at (Lanzinger, J., dissenting). 81. See id. at 412, 2011-Ohio , 953 N.E.2d at See id. at 413, 2011-Ohio , 953 N.E.2d at See id., 2011-Ohio , 953 N.E.2d at See id. at , 2011-Ohio , 953 N.E.2d at See Sunoco, 129 Ohio St. 3d at 414, 2011-Ohio , 953 N.E.2d at 300 (Lanzinger, J., dissenting). 86. See id., 2011-Ohio , 953 N.E.2d at See id. at , 2011-Ohio , 953 N.E.2d at See id. at , 2011-Ohio , 953 N.E.2d at See id. at 415, 2011-Ohio , 953 N.E.2d at Ark. 357, 925 S.W.2d 780 (1996).

10 1246 OHIO NORTHERN UNIVERSITY LAW REVIEW [Vol. 38 Waterloo Furniture Components, Ltd. v. Haworth, Inc. 91 should be used as persuasive evidence of MFN clauses ending on the termination date specified in the contract. 92 She found the factual differences the majority used to distinguish these cases unconvincing. 93 Justice Lanzinger concluded her dissenting opinion by expressing an extreme distaste for allowing Sunoco to obtain a longer agreement without having to negotiate or opt to extend its contract, as BP did. 94 C. Dissenting Opinion by Justice Cupp The second dissenting opinion, written by Justice Cupp and joined by Justice O Donnell, addressed two points of contention with the majority s opinion: (1) the word arrangement as used in the Sunoco agreement included duration within its meaning, and (2) the PUCO opinion should have been given more deference. 95 Justice Cupp agreed with Justice Lanzinger that since section of the Ohio Revised Code is the section regulating special contracts, and it includes a definition of arrangement, this is the definition to apply when determining whether duration should be included in the meaning of arrangement. 96 Since duration is not included in section of the Ohio Revised Code, Justice Cupp reasoned the PUCO decision was reasonable. 97 Additionally, Justice Cupp explained that since the PUCO has oversight granted by section of the Ohio Revised Code, the PUCO decision deserved more deference than the majority gave it; thus he would have upheld the PUCO determination. 98 IV. ANALYSIS Although the majority addressed every proposition Sunoco presented in its brief to the court, the greater part of the opinion was spent explaining the court s strong adherence to common contract analysis: if the meaning of the written language is clear and unambiguous, the terms will be applied in a F.3d 641 (7th Cir. 2006). 92. See Sunoco, 129 Ohio St. 3d at 415, 2011-Ohio , 953 N.E.2d at (Lanzinger, J., dissenting). 93. See id. at , 2011-Ohio , 953 N.E.2d at See id. at 416, 2011-Ohio , 953 N.E.2d at See id. at , 2011-Ohio , 94, 953 N.E.2d at 302 (Cupp, J., dissenting). 96. See id., 2011-Ohio , 953 N.E.2d at See Sunoco, 129 Ohio St. 3d at , 2011-Ohio , 953 N.E.2d at 302 (Cupp, J., dissenting). 98. See id. at 417, 2011-Ohio , 953 N.E.2d at 302.

11 2012] SUNOCO INC. (R&M) V. TOLEDO EDISON CO way to give effect to the most plain reading of the contact. 99 Both dissents expressed concern for the lack of deference the majority showed to the PUCO s order; 100 however, as the court explained, precedent requires the contract analysis to be straightforward when the contract language is clear. 101 The main contention in this case, as the majority articulated, was whether Sunoco could invoke the MFN clause to extend the duration of its contract with Toledo Edison to match the duration of BP s contract with Toledo Edison. 102 More simply stated, the issue in this case was how a provision in a contract should be applied. A. Standard of Review The standard of review for cases involving the PUCO s orders requires the court to find the order unlawful or unreasonable. 103 To make a finding against a PUCO order, the appellant must show probative evidence that the PUCO s determination was against the manifest weight of evidence and was clearly unsupported by the record so as to show misapprehension, mistake, or willful disregard of duty. 104 In Office of Consumers Counsel v. Public Utility Commission of Ohio, 105 the court held it will rely on the PUCO s expertise in interpreting law where highly specialized issues are involved, thus making the agency s expertise helpful in determining the General Assembly s intent. 106 In the case at bar, Justice Cupp s dissent noted the majority s lack of deference given to the PUCO s decision, which was required after Office of Consumers Counsel; however, Justice Cupp failed to reconcile the mistaken assumption and misapprehension the majority found when the PUCO s decision was reviewed See id. at , 2011-Ohio , 953 N.E.2d at (majority opinion) See generally id. at , 2011-Ohio , 953 N.E.2d at (Lanzinger, J., dissenting) (Cupp, J., dissenting) See id., 2011-Ohio , 953 N.E.2d at (majority opinion) See Sunoco, 129 Ohio St. 3d at 397, 2011-Ohio , 953 N.E.2d at See id. at 400, 2011-Ohio , 953 N.E.2d at 289 (quoting Constellation NewEnergy, Inc. v. Pub. Util. Comm. of Ohio, 104 Ohio St.3d 530, 540, 820 N.E.2d 885, 894 (2004)) Monongahela Power Co., 104 Ohio St.3d at 578, 820 N.E.2d at Ohio St. 2d 108, 388 N.E.2d 1370 (1979) Office of Consumers Couns. v. Public Util. Comm n of Ohio, 58 Ohio St. 2d at 110, 388 N.E.2d at 1373; see also Sunoco, 129 Ohio St. 3d at 401, 2011-Ohio , 953 N.E.2d at Sunoco, 129 Ohio St. 3d at 417, 2011-Ohio , 953 N.E.2d at 302 (Cupp, J., dissenting).

12 1248 OHIO NORTHERN UNIVERSITY LAW REVIEW [Vol. 38 B. Contract analysis by the Supreme Court of Ohio After establishing the standard of review the court will apply, many courts clarify that a contract analysis should always begin with the plain and ordinary meaning of the contract language. 108 The Supreme Court of Ohio has held that when the meaning of the contract language is clear it will look no further to determine the intent of the parties. 109 According to section 1.42 of the Ohio Revised Code, [w]ords and phrases shall be read in context and construed according to the rules of grammar and common usage. Words and phrases that have acquired a technical or particular meaning, whether by legislative definition or otherwise, shall be construed accordingly. 110 While Toledo Edison urged the majority to consider the maxium of noscitur a sociis, it is known from its associates, the majority correctly discarded this notion, as it determined that the meaning of the contract terms were not ambiguous. 111 Further, the majority appropriately rationalized that it would not rewrite the terms of the contract. 112 Toledo Edison could have made the terms of the MFN clause more specific rather than using broad terms, like arrangement, if Toledo Edison wanted to limit the clause. Additionally, according to the court s previous rulings, the contract analysis should exclude extrinsic evidence if the meaning of the contract can be determined from the plain language. 113 While the PUCO used extrinsic evidence, such as Sunoco s status as a sophisticated energy consumer, the court did not allow this evidence to influence its analysis of the MFN clause s meaning since the majority found the contract unambiguous See Cincinnati Indemn. Co. v. Martin, 85 Ohio St. 3d 604, 607, 710 N.E.2d 677, 679 (1999); Hybud Equip. Corp. v. Sphere Drake Ins. Co., Ltd., 64 Ohio St.3d 657, 665, 597 N.E.2d 1096, 1102 (1992); Mercer v. 3M Precision Optics, Inc., 181 Ohio App. 3d 307, 310, 908 N.E.2d 1016, 1018 (12th Dist. 2009); Haley v. Hunter, Case No , 2006 WL (Ohio Ct. App. 9th Dist. 2006); Schaffer v. First Merit Bank, N.A., 186 Ohio App. 3d 173, 180, 927 N.E.2d 15, 20 (Ohio Ct. App. 9th Dist. 2009) Westfield Ins. Co. v. Galatis, 100 Ohio St. 3d 216, 219, 797 N.E.2d 1256, 1261 (2003) OHIO REV. CODE ANN (West 2010) See Sunoco, 129 Ohio St. 3d at , 2011-Ohio , 43, 953 N.E.2d at (majority opinion). See also Ashland Chem. Co. v. Jones, 92 Ohio St.3d 234, , 749 N.E.2d 744, 746 (2001) See Sunoco, 129 Ohio St. 3d at 406, 2011-Ohio , 953 N.E.2d at See Shifrin, 64 Ohio St. 3d at 638, 597 N.E.2d at 501 (citing Kelly v. Med Life Ins. Co., 31 Ohio St. 3d 130, 132, 509 N.E.2d 411, 413 (1987); Alexander v. Buckeye Pipe Line Co., 53 Ohio St. 2d 241, 246, 374 N.E.2d 146, 150 (1978)) See Sunoco, 129 Ohio St. 3d at 406, 409, 2011-Ohio , 58, 953 N.E.2d at 294, 296.

13 2012] SUNOCO INC. (R&M) V. TOLEDO EDISON CO C. Supreme Court of Ohio addressed Sunoco s propositions While Sunoco proposed four issues with the PUCO s decision, the majority focused most of its analysis on one: the plain meaning of the Sunoco agreement, specifically the MFN clause. 115 The plain meaning discussion split into two different sections: the influence of titles in the contract and the meaning of term and arrangement as used in the MFN clause. 116 The majority began by addressing the weight of titles in the Sunoco agreement. 117 Since section 10.6 of the Sunoco agreement stated the clause headings were included for the purpose of convenience and ready reference and should not be used to define, limit, or extend the scope or intent of the clauses[,] any reference to the clause headings having a limiting effect was misplaced. 118 This is an uncomplicated example of the court reading the contract provision and attempting to give the language its most plain meaning. Justice Lanzinger challenged this portion of the majority s analysis by claiming both parties used terms like price protection provision and most-favored-nation clause, which were not included in the contract, thereby arguing the PUCO reasonably assumed these titles were applicable since they were commonly used between the parties. 119 This reasoning unnecessarily complicated the reading of section 10.6 of the Sunoco agreement and ignored the majority s rationale regarding plain meanings. Toledo Edison also claimed Sunoco was unable to challenge the PUCO s use of titles in its determination since Sunoco did not explicitly state they were making the challenge in its application for rehearing or notice of appeal. 120 The majority again found this claim to be unpersuasive since Sunoco did include a section in its notice of appeal speaking to the misuse of the title of the MFN clause. 121 Both, Justice Lanzinger and Toledo Edison s attempt to create a requirement necessitating an application for rehearing and notice of appeal to contain certain phrases is completely unsupported by precedent See generally id. at , 2011-Ohio , 953 N.E.2d at See generally id. at , 2011-Ohio , 953 N.E.2d at See id. at 401, 2011-Ohio , 953 N.E.2d at See id. at 402, 2011-Ohio , 953 N.E.2d at See Sunoco, 129 Ohio St. 3d at , 2011-Ohio , 953 N.E.2d at 299 (Lanzinger, J., dissenting) See id. at 402, 2011-Ohio , 953 N.E.2d at 290 (majority opinion) See id., 2011-Ohio , 953 N.E.2d at

14 1250 OHIO NORTHERN UNIVERSITY LAW REVIEW [Vol. 38 Next, the majority addressed the meaning of the words term and arrangement in the MFN clause. 122 Specifically, the clause lists the phrase during the term of this Agreement separate from the customer having the right to use arrangement, rates or charges from a comparable facility. 123 Since both parties stipulated BP and Sunoco were comparable facilities, the majority s analysis did not address this aspect. 124 The main contention was whether the term or duration of the agreement was included within the meaning of arrangement since the words were used separately in the MFN clause. 125 The majority held arrangement could include nonprice terms. 126 Although the majority did not expressly state its justification, the opinion quoted Webster s Third New International Dictionary to establish the common usage of arrangement, thus likely using section 1.42 of the Ohio Revised Code, which requires words having a common usage to be defined as such. 127 However, the majority unnecessarily justified reading arrangement differently than rates or charges, which resulted in Justice McGee Brown contradicting herself. The majority refused to exclude the word term from the broad word arrangement even though the words were used separately in the MFN clause; but the majority did exclude rates or charges from arrangement since the words are used separately. 128 The majority was able to justify its reasoning simply by focusing on the plain meaning of the words used in the contract; thus, this contradiction was an example of the court going one step too far. Since the court s precedent identified the importance of looking at the plain meaning, the majority s approach to defining arrangement fit within its prior standards. 129 Additionally, the majority held the phrase during the term of this arrangement simply required Sunoco to invoke the clause before the contract expired, which Sunoco did. 130 Justice Lanzinger s dissent criticized this interpretation as rewriting the language of the contract. 131 Justice Lanzinger again attempted to complicate the majority s reading of the Sunoco agreement by countering that since the terms and conditions of 122. See id. at 403, 2011-Ohio , 953 N.E.2d at See id., 2011-Ohio , 953 N.E.2d at See Sunoco, 129 Ohio St. 3d at 398, 2011-Ohio , 953 N.E.2d at See id. at 403, 2011-Ohio , 953 N.E.2d at See id. at 405, 2011-Ohio , 953 N.E.2d at See OHIO REV. CODE ANN. 1.42; Sunoco, 129 Ohio St. 3d at 405, 2011-Ohio , 953 N.E.2d at Sunoco, 129 Ohio St. 3d at 403, 405, 2011-Ohio , 40, 953 N.E.2d at 291, See, e.g., Westfield Ins. Co., 100 Ohio St. 3d at 219, 797 N.E.2d at See Sunoco, 129 Ohio St. 3d at , 2011-Ohio , 953 N.E.2d at See id. at 413, 2011-Ohio , 953 N.E.2d at 300 (Lanzinger, J., dissenting).

15 2012] SUNOCO INC. (R&M) V. TOLEDO EDISON CO the arrangement from the MFN clause were listed separately from the duration or term of the contract, the MFN clause was not meant to apply to the duration. 132 This reading, as the majority pointed out, went against the purpose of the clause itself: to level the playing field between two competitors served by the same electric utility. 133 When the plain language allows the court to determine the intentions of the parties, the court must give the contract its plain meaning. 134 Here, the parties were attempting to allow comparable facilities to utilize each other s arrangements with Toledo Edison, which is the meaning the majority gave to the contract. 135 The majority classified Toledo Edison s use of other jurisdiction s decisions as unpersuasive, which Justice Lanzinger s dissent criticized. 136 Toledo Edison addressed three prior cases, which Justice Lanzinger believed were persuasive in this case: Eveleth Taconight Co., Baker Car & Truck Rental, Inc., and Waterloo Furniture Components, Ltd. 137 Eveleth Taconight Co. concerned two contracts between a mining company and a power company to provide power to a mine and processing plant. 138 Within these contracts was a MFN clause allowing the mining company to use third party s terms and conditions. 139 The Supreme Court of Minnesota held the MFN clause in that instance did not apply to duration since that application could potentially extend the contract indefinitely. 140 Since the analysis of the Sunoco agreement was dependent on the specific language used in the contract and the Eveleth Taconight Co. contract did not contain the same language, the majority held this case was unpersuasive. 141 Further, the majority reasoned that since the Eveleth Taconight Co. court examined the pre-contract negotiations (extrinsic evidence) between the parties to make their determination, the case was distinguishable from the case at bar. 142 The Supreme Court of Ohio has held extrinsic evidence is not permitted when the plain language of the contract is unambiguous, which was the circumstance here. 143 While Justice 132. See id. at 414, 2011-Ohio , 953 N.E.2d at See id. at 405, 2011-Ohio , 953 N.E.2d at 293 (majority opinion) See Westfield Ins. Co., 100 Ohio St. 3d at 219, 797 N.E.2d at See Sunoco, 129 Ohio St. 3d at 402, 2011-Ohio , 953 N.E.2d at See id. at , 2011-Ohio , 953 N.E.2d at 301 (Lanzinger, J., dissenting) See id., 2011-Ohio , 953 N.E.2d at See Eveleth Taconight Co., 301 Minn. at 21, 211 N.W.2d at See id. at 22, 211 N.E.2d at See id. at 27, 211 N.E.2d at See Sunoco, 129 Ohio St. 3d at 406, 2011-Ohio , 953 N.E.2d at 294 (majority opinion) See id., 2011-Ohio , 953 N.E.2d at Id., 2011-Ohio , 953 N.E.2d at 294 (citing Shifrin, 64 Ohio St. 3d at 638, 597 N.E.2d at 501 (syllabus)).

16 1252 OHIO NORTHERN UNIVERSITY LAW REVIEW [Vol. 38 Lanzinger believed distinguishing Eveleth Taconight Co. from the case at bar on the basis of language was not appropriate, the Ohio Revised Code requires the court to consider the plain language of the contract first which is where the majority began its analysis. 144 Justice Lanzinger and Toledo Edison argued the court should have relied on Baker Car & Truck Rental, Inc. and Waterloo Furniture Components, Ltd, in which both courts held the MFN clause did not extend the duration of a contract. 145 As the majority indicated, in both of these cases, the plaintiffs did not attempt to invoke the MFN clause until after the agreements had expired. 146 These facts are distinguishable from this case since Sunoco invoked the clause before the contract expired; thus the majority correctly held both cases were unpersuasive. 147 Both Justice Lanzinger and Justice Cupp s dissents addressed a potential problem with the majority s reasoning which the majority failed to mention: section of the Ohio Revised Code, which regulates the creation of special contracts between public utility companies and their customers, has a detailed list of what should be considered arrangements. 148 This list does not include duration or any indication a contract may be extended using a special contract arrangement. 149 Since the majority focused its analysis on the plain meaning of the terms used in the contract, the likely explanation for the lack of response to this contention is that the plain language was clear without the use of statutory provisions. Another contention with the PUCO s order, which Sunoco indicated in its appeal, was that the PUCO should not have relied on equitable considerations and other factors outside the plain language of the contract. 150 When the PUCO considered the agreement between Sunoco and Toledo Edison, its determination should have been focused on the matters within the written agreement itself. 151 The PUCO classified Sunoco as a sophisticated energy consumer, thereby reasoning Sunoco could have 144. See OHIO REV. CODE ANN See Sunoco, 129 Ohio St. 3d at 415, 2011-Ohio , 953 N.E.2d at (Lanzinger, J., dissenting); Brief for Respondent-Appellee, supra note 69, at See Sunoco, 129 Ohio St. 3d at 407, 2011-Ohio , 953 N.E.2d at 294 (majority opinion) See id., 2011-Ohio , 953 N.E.2d at See id. at 414, , 2011-Ohio , 94, 953 N.E.2d at 300, 302 (Lanzinger, J., dissenting) (Cupp, J., dissenting) See OHIO REV. CODE ANN (West 2010) See Sunoco, 129 Ohio St. 3d at 409, 2011-Ohio , 953 N.E.2d at 296 (majority opinion) See id., 2011-Ohio , 953 N.E.2d at 296; see also Shifrin, 64 Ohio St.3d at 638, 597 N.E.2d at 501.

17 2012] SUNOCO INC. (R&M) V. TOLEDO EDISON CO extended its contract in the RSP case like BP did. 152 Neither dissent addressed this issue, as the majority logically held that considering what Sunoco did or did not do outside of the contract had no bearing on the meaning of the contract terms. 153 A third contention Sunoco raised with regard to the PUCO s order, was that the PUCO believed the complaint was a collateral[ ] attack [on the commission s] decisions in the RSP and RCP cases[,] which would provide Sunoco an unfair advantage over BP since BP took the risk to extend its contract at a time when the market rates were unknown. 154 Again, neither dissent addresses this issue as the majority clearly discarded this line of the PUCO s reasoning. The majority held that Sunoco s mention of the RSP and RCP cases in its complaint was merely an attempt to explain why BP was able to extend its contract. 155 Further, the majority reasoned, there was no evidence to support the notion that Sunoco attempted to obtain an advantage by failing to extend its contract. 156 While the majority did acknowledge the PUCO had authority under section of the Ohio Revised Code to regulate, supervise, and modify special contracts, the majority also noted that the PUCO would have had to invoke its authority under this statutory provision in its ruling, which they did not, therefore making this argument invalid. 157 Sunoco s final contention with the PUCO s ruling was that the PUCO failed to take into consideration the history between the parties to the contract. 158 The court quickly disregarded this contention considering its prior explanation that extrinsic evidence cannot be used when a contract is clear and unambiguous. 159 Finally, Justice Cupp s dissent expressed extreme concern for the lack of deference the majority s opinion gave to the PUCO s order. 160 He understandably reasoned that since the PUCO has to approve special contracts like the one at issue, they have a specialized expertise in matters such as this one. 161 The majority does seem to regard the PUCO s ruling as more of a suggestion than a compelling opinion since they were willing to 152. See Sunoco, 129 Ohio St. 3d at 409, 2011-Ohio , 953 N.E.2d at See id., 2011-Ohio , 953 N.E.2d at See id. at , 2011-Ohio , 953 N.E.2d at (alterations in original) Id. at 410, 2011-Ohio , 953 N.E.2d at See id., 2011-Ohio , 953 N.E.2d at See Sunoco, 129 Ohio St. 3d at , 2011-Ohio , 953 N.E.2d at See id. at 411, 2011-Ohio , 953 N.E.2d at See id., 2011-Ohio , 953 N.E.2d at Id. at 417, 2011-Ohio , 953 N.E.2d at 302 (Cupp, J., dissenting) See id., 2011-Ohio , 953 N.E.2d at 302.

18 1254 OHIO NORTHERN UNIVERSITY LAW REVIEW [Vol. 38 replace PUCO s understanding of the contract terms with the majority s own understandings of the contract s terms. V. CONCLUSION In an unwavering desire to determine the intent of the parties by looking at the plain meaning of the language in the written contract, the majority opinion seems to go too far in justifying its decision to overturn the PUCO s order. Justice McGee Brown contradicts herself when attempting to explain that language in one section of the contract excludes language other sections of the contract in one instance and then making the language from different sections inclusive in the next instance. Even with this oversight, the majority opinion is strongly based on basic contract principles the court has established through precedent: when the language of the contract is clear and unambiguous, the court will use the plain meaning of the contract terms to determine the intent of the parties. 162 Even though both dissenting opinions believed the majority owed the PUCO opinion more deference, the court is charged with the duty of interpreting the evidence to determine if the PUCO s decision was unsupported by the record. Here, the court could not give the PUCO opinion extreme deference as the PUCO s decision was unsupported by the evidence. JESSICA L. BILIUS 162. See Sunoco, 129 Ohio St. 3d at , 2011-Ohio , 953 N.E.2d at (majority opinion).