Court reverses order that ABQ pay fuel supplier $4.2M

City was sued after terminating contract

The state Court of Appeals has reversed a 2014 court decision that would have forced the city of Albuquerque to pay $4.2 million to a fuel supplier.

The case centered on whether the city had improperly terminated a contract with MB Oil Ltd. Co.

City attorneys argued that the company wasn’t always able to deliver the kinds of fuel the city wanted.

The company, in turn, argued that the city had “grossly misestimated” how much fuel it would need when soliciting bids, and the bad estimate caused problems for MB Oil.

In December 2014, state District Judge Carl Butkus sided with MB Oil. He found that the city of Albuquerque had “negligently and recklessly” overestimated how much fuel it would need — telling potential bidders, for example, that the city uses more than 10 million gallons a year, even though it never had used that much.

But the state Appeals Court reversed that decision last month. The contract termination was proper, the court said, especially given that the agreement included a clause allowing the city to end the contract at any time for its own convenience.

In a 16-page order, Appeals Court Judge Linda Vanzi said the “convenience” clause in the contract allowed termination without cause, though she noted that the city probably could have shown that termination was appropriate because MB Oil wasn’t always able to meet the city’s demand for unleaded fuel.

And it doesn’t matter whether MB Oil deliberately refused to provide fuel or simply was unable to do so, Vanzi wrote.

“The city’s trucks cannot run on plaintiff’s good intentions and, certainly from the city’s perspective, there is little appreciable difference between plaintiff’s willful refusal to deliver fuel and its frequent inability to timely deliver it,” she said.

Judges James Wechsler and Roderick Kennedy concurred with the opinion.

Gilbert Montaño, chief of staff for Mayor Richard Berry, said the city is pleased with the decision.

“It makes clear that governments have the flexibility to manage public contracts in a way that best protects taxpayer funds,” he said.