Retroactive BIS Export Licensing Can Cure a “Maintain Licenses” Breach; No Per Se Incurable or Material Breach Rule Under Texas Law for EAR-Related Violations

Introduction

Cyanco International, L.L.C. v. Minerales de Occidente, S.A. de C.V. is a Fifth Circuit contract decision applying Texas law (by choice-of-law clause) to a commercial supply agreement for sodium cyanide used in mining. Cyanco (the seller/exporter) had obtained a U.S. Bureau of Industry and Security (“BIS”) export license authorizing exports up to a stated quantity. Minosa (the buyer/importer) accused Cyanco of breaching contractual “maintain” licensing covenants by shipping quantities exceeding the license’s allotment.

The case presented three recurring issues in commercial contracting where regulatory compliance is embedded into private agreements: (1) what it means to “maintain” required licenses when the license remains valid but the party’s conduct exceeds its scope; (2) whether such a breach is incurable as a matter of law notwithstanding a contractual cure clause; and (3) whether an export-control violation makes the breach material as a matter of law (especially where a regulator later provides retroactive coverage).

Procedurally, the district court initially denied summary judgment, then—about ten days before trial—reconsidered sua sponte and granted summary judgment to Minosa. The Fifth Circuit reversed and remanded.

Summary of the Opinion

  • Breach: The Fifth Circuit held there was no genuine dispute that Cyanco breached the contract by exporting sodium cyanide in excess of its BIS license quantity. Even if the license remained “valid” in a formal sense, Cyanco did not “maintain all licenses … required to be held” as to the excess exports.
  • Cure: The court rejected the district court’s effectively per se “incurable breach” approach (derived from non-Texas authorities). Because Cyanco obtained a new BIS license that (per the BIS Warning Letter) covered “excess exports as well as future exports,” Cyanco raised a genuine dispute of material fact on cure under the contract’s 30-day cure provision.
  • Materiality: The court held Cyanco’s breach was not material as a matter of law. Texas materiality is generally for the factfinder under Restatement factors, and neither Texas law nor the cited federal regulation (15 C.F.R. § 764.2(e)) compelled a per se conclusion that Minosa could never continue purchasing from Cyanco.
  • Result: REVERSED and REMANDED for factfinding on cure and materiality.

Analysis

Precedents Cited

1) Contract interpretation and ambiguity under Texas law

  • Coker v. Coker, 650 S.W.2d 391 (Tex. 1983): The opinion relies on Coker for core interpretive rules: ambiguity defeats summary judgment; courts harmonize provisions and read the contract as a whole; intent is derived from the instrument. The Fifth Circuit invokes Coker both to frame the ambiguity inquiry and later to reason that a general cure provision suggests parties did not plainly adopt a broad category of “incurable” breaches absent clearer drafting.
  • R & P Enters. v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517 (Tex. 1980): Cited for the proposition that whether a contract is ambiguous is a question of law.
  • In re Davenport, 522 S.W.3d 452 (Tex. 2017) and Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118 (Tex. 1996): Used to emphasize “plain, ordinary” meaning and the permissible use of dictionaries when a term is undefined.
  • RSUI Indem. Co. v. The Lynd Co., 466 S.W.3d 113 (Tex. 2015): Cited for the idea that ambiguity exists only when interpretive rules leave genuine uncertainty among competing meanings.

2) Defining “maintain”

  • Big Three Welding Equipment Co. v. Cruther, Rolfs, Cummings, Inc., 229 S.W.2d 600 (Tex. 1950): Both sides drew definitions of “maintain” from Big Three and its reference to Black’s Law Dictionary. The Fifth Circuit’s key move is not to pick one definition over another, but to hold that under either definition, Cyanco failed to “maintain all licenses … required” because the excess exports were not licensed.

3) Limits on “Erie guesses” and overreliance on non-Texas authority

  • Weatherly v. Pershing, L.L.C., 945 F.3d 915 (5th Cir. 2019): The Fifth Circuit uses Weatherly to criticize the district court’s approach. An Erie guess should apply state law “as it currently exists,” not adopt innovative per se rules stitched together from other jurisdictions.
  • Federal Engineers & Contractors v. Relyant Global, Ag Tech Scientific v. Blue Circle Development, D&D Realty Trust v. Borgeson, Kyung Sik Kim v. Idylwood, N.Y., LLC, Las Americas, Inc. v. American Indian Neighborhood Development Corp.: These are the district court’s relied-upon authorities for “incurable breach” in other contexts (instant termination clauses, late cure, insurance gaps, and contracts without clear cure provisions). The Fifth Circuit distinguishes them as (i) not Texas law, and (ii) not factually analogous—especially given BIS’s retroactive coverage language here.

4) Material breach under Texas law

  • Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195 (Tex. 2004): Cited for Texas’s adoption/use of Restatement (Second) of Contracts factors to assess materiality.
  • Restatement (Second) of Contracts § 241 (A.L.I. 1981): The opinion lists the five-factor test and treats it as the governing framework.
  • Bartush-Schnitzius Foods Co. v. Cimco Refrig., Inc., 518 S.W.3d 432 (Tex. 2017): Anchors the proposition that materiality is generally for the trier of fact; it becomes a question of law only when reasonable jurors could reach only one verdict.
  • Bartlett v. Bartlett, 465 S.W.3d 745 (Tex. App.—Houston [14th Dist.] 2015, no pet.) (Frost, C.J., concurring): Minosa cited this concurrence to argue “maintain” requires an uninterrupted condition. The Fifth Circuit treats it as insufficient to impose an “uninterrupted” meaning as a matter of law in this contract and posture.

Legal Reasoning

1) “Maintain all licenses required” reaches license sufficiency, not mere facial validity

The court accepted that “maintain” can mean keeping a license valid, but it held that point ultimately did not help Cyanco. The contract did not merely require “a license” to exist; it required Cyanco to “maintain all licenses … required … under applicable Laws” and separately that the “Seller agrees to maintain export licenses for the Mine Site.”

Once Cyanco exported beyond the license’s quantitative authorization, those excess shipments were unlicensed exports. Therefore, as to the excess tonnage, Cyanco lacked the “required” license coverage and thus breached the contractual licensing covenants. The later issuance of a new license underscored the regulatory structure: exports must be associated with adequate license authority.

2) Cure: the contract’s 30-day cure clause matters, and retroactive regulatory coverage can create a fact issue

The termination clause allowed termination only if the breaching party “fails to remedy such breach within thirty (30) days” after notice. Minosa’s theory (accepted by the district court) effectively treated this category of breach—failure to maintain licensing compliance—as incurable.

The Fifth Circuit rejected that categorical approach for two reasons:

  • Doctrinal fit: The district court used non-Texas cases and did not ground a per se incurability rule in Texas law (or a defensible Erie guess), contrary to Weatherly v. Pershing, L.L.C..
  • Factual fit: The BIS Warning Letter stated “excess exports as well [as] future exports will be under this new license,” supporting Cyanco’s contention that the breach could be remedied (and perhaps remedied retroactively as to regulatory status).

At summary judgment, that was enough to require factfinding on whether Cyanco “remed[ied]” within 30 days and whether any additional contractually relevant steps (such as notice) were required by the parties’ agreement and course of dealing.

3) Materiality: no per se material-breach rule from export regulations; Restatement factors require factfinding

The district court concluded the breach was material because 15 C.F.R. § 764.2(e) allegedly barred Minosa from continuing to purchase. The Fifth Circuit disagreed, reading § 764.2(e) as targeting transactions “with respect to” an “item” where the buyer has knowledge of a violation “in connection with the item.” The court reasoned that “item” most plausibly refers to the discrete violative exports, not a permanent taint on the entire category of sodium cyanide.

The BIS Warning Letter’s statement that “excess exports … and future exports will be under this new license” further undermined the notion that the regulation compelled a permanent cessation of dealings. With that predicate removed, the court refused to bypass Texas’s Restatement-factor inquiry (from Mustang Pipeline Co. v. Driver Pipeline Co.) and reiterated (per Bartush-Schnitzius Foods Co. v. Cimco Refrig., Inc.) that materiality is ordinarily for the factfinder.

4) Impracticability argument fails on the same regulatory premise

Minosa’s impracticability theory depended on the same claim: that federal regulations prohibited further purchases from Cyanco once Minosa knew of a violation. Because the Fifth Circuit rejected that reading as a matter of law (at least on this record), impracticability could not support summary judgment.

Impact

  • Drafting lesson for “compliance” covenants: A clause requiring a party to “maintain all licenses … required” can be breached not only by expiration or suspension, but also by conduct that exceeds a license’s scope (e.g., quantity caps), creating unlicensed transactions.
  • Cure provisions retain force even in regulated industries: Courts applying Texas law should hesitate to declare an “incurable” breach as a matter of law absent Texas authority, clear contractual language (e.g., immediate termination for legal violations), or truly non-remediable harm.
  • No automatic materiality from a regulatory violation: The opinion resists transforming regulatory noncompliance into a per se material breach. Instead, materiality remains tethered to Restatement factors and the factual consequences (lost benefit, compensability, forfeiture, likelihood of cure, good faith).
  • Export-control disputes: Parties frequently assume that any export-control misstep compels cessation of commercial relations. This opinion suggests courts will examine the regulation’s text and the regulator’s posture (including warning letters and license amendments) before accepting that assumption—especially at summary judgment.
  • Erie discipline: The Fifth Circuit signals that “innovative” state-law rules (like categorical incurability) cannot be manufactured from non-state authorities without a careful, Texas-grounded Erie analysis.

Complex Concepts Simplified

Summary judgment
A pretrial ruling that ends a case (or an issue) when there is no genuine dispute of material fact and the moving party is entitled to win as a matter of law. Here, the Fifth Circuit held fact disputes existed on cure and materiality.
Contract ambiguity
A contract is ambiguous only if, after applying interpretive rules, it is genuinely uncertain which of multiple reasonable meanings controls. Ambiguity usually creates a fact issue and blocks summary judgment.
“Maintain” a license
Not just “keep a license from expiring.” If the contract requires “all licenses … required,” then the party must have sufficient licensing authority for the transactions it actually performs (including staying within quantity limits).
Cure provision
A clause giving the breaching party a window (here, 30 days after notice) to fix the breach before the other party can terminate. The opinion treats the cure clause as meaningful and resists declaring a broad category of breaches “incurable” without Texas support.
Material breach
A serious breach that justifies the other side’s nonperformance or termination. Under Texas law, materiality generally depends on multiple factors (Restatement § 241) and is usually decided by the factfinder.
Erie guess
When state law is unclear, a federal court predicts how the state’s highest court would rule. The Fifth Circuit cautioned against using out-of-state cases to create “innovative” state-law rules.
15 C.F.R. § 764.2(e)
An Export Administration Regulations provision restricting certain dealings in items subject to the EAR when a person has knowledge of violations “in connection with the item.” The court read it as not automatically and permanently barring future, properly licensed transactions between the same parties.

Conclusion

The Fifth Circuit’s central contribution is a pair of disciplined, Texas-law-centered holdings: (1) exceeding an export license’s scope can breach a contractual covenant to “maintain all licenses … required,” even if the underlying license document remains formally valid; but (2) whether that breach is cured under a contractual cure clause—and whether it is material—will commonly present fact issues, particularly where a regulator later provides licensing coverage that reaches the disputed exports.

More broadly, the opinion resists converting regulatory compliance disputes into automatic termination rights at summary judgment. Instead, it channels such disputes into the parties’ bargain (cure clauses and termination standards) and Texas’s established materiality framework, while insisting on proper Erie methodology when state-law answers are not explicit.