## Facts

- Koch Materials Company supplied a specialized asphalt product; Shore Slurry Seal, Inc. used the product in its construction work.
- Koch and Shore entered a long-term exclusive requirements arrangement under which Shore agreed to purchase all of its requirements for the product from Koch for a seven-year term.
- Midway through the term, Shore informed Koch that it planned to sell most or all of its assets to Asphalt Paving Systems, Inc., a company in the same business.
- Shore’s communications about the contemplated transaction were uncertain and left unclear which entity would perform Shore’s ongoing requirements obligations.
- Koch, through counsel, demanded adequate assurances that the requirements contract would be performed, including assurances that any successor would be willing and able to continue the arrangement.
- Shore, objecting to dealing through attorneys, refused to provide meaningful information about the asset sale or how contract performance would be secured.
- Koch treated Shore’s failure to provide assurances as anticipatory repudiation and sued Shore for breach/repudiation and Asphalt under theories including successor liability and tortious interference; Shore asserted counterclaims.

## Issues

1. Whether Koch had reasonable grounds for insecurity under the exclusive requirements contract, entitling it to demand adequate assurances.
2. Whether Shore’s failure to provide adequate assurances constituted anticipatory repudiation as a matter of law.
3. Whether claims predicated on anticipatory repudiation were ripe despite the contract’s remaining term and the evolving status of the asset sale.
4. Whether triable issues existed on claims sounding in bad faith or breach of the implied covenant of good faith and fair dealing.
5. Whether Asphalt could face liability under successor-liability or related theories, and whether veil-piercing/alter-ego liability was supported by the record.

## Decision

- Granted Koch’s motion for partial summary judgment, holding that Shore repudiated the exclusive requirements agreement by failing to provide adequate assurances after a justified demand.
- Authorized Koch to treat Shore’s silence and evasive responses as anticipatory repudiation and to terminate the contract.
- Denied summary judgment on Koch’s bad-faith/implied-covenant theories to the extent they turned on disputed facts about Shore’s motives and conduct surrounding the transaction.
- Denied, in part, Asphalt’s summary-judgment motion on successor-liability-related claims, finding factual issues about the nature and effect of the asset acquisition and business continuation.
- Granted Asphalt summary judgment on veil-piercing/alter-ego, finding the evidence insufficient to disregard Asphalt’s separate corporate existence.

## Legal Principles

- A party with reasonable grounds for insecurity about the other party’s future performance may demand adequate assurances of due performance.
- Failure to provide adequate assurances after a justified demand can constitute anticipatory repudiation, permitting the insecure party to treat the contract as terminated before performance is due.
- In an exclusive requirements contract, the identity and reliability of the obligated party can be material to the bargain; a major asset sale creating uncertainty about who will perform may justify insecurity and a demand for assurances.
- Summary judgment is inappropriate where intent, motive, and surrounding circumstances (including alleged bad faith) present genuine disputes of material fact.
- Veil-piercing/alter-ego requires evidence sufficient to disregard the corporate form; absent such proof, related claims fail as a matter of law even if other transactional-liability theories remain.

## Conclusion

The court held that Koch was entitled to demand assurances when Shore’s contemplated asset sale created reasonable insecurity about continued performance, and that Shore’s refusal to provide meaningful assurances amounted to anticipatory repudiation of the exclusive requirements contract; the court left disputed bad-faith and successor-liability questions for further proceedings while rejecting veil-piercing against Asphalt.


Koch Materials Co. v. Shore Slurry Seal, Inc., 205 F. Supp. 2d 324 (D.N.J. 2002)