Bp Products North America v. Twin Cities Stores

• Decision Date: 13 November 2007
• Docket Number: Case No. 04-CV-2957 (PJS/JJG).
• Citation: 534 F.Supp.2d 959
• Parties: BP PRODUCTS NORTH AMERICA INC., Plaintiff, v. TWIN CITIES STORES, INC., Defendant.
• Court: U.S. District Court — District of Minnesota

Page 959

534 F.Supp.2d 959

BP PRODUCTS NORTH AMERICA INC., Plaintiff, v. TWIN CITIES STORES, INC., Defendant.

Case No. 04-CV-2957 (PJS/JJG).

United States District Court, D. Minnesota.

November 13, 2007.

Michael S. Ryan and Christopher J. Willey, Murnane Brandt, PA, for plaintiff.

Brian S. McCool, John M. Koneck, and S. Jamal Faleel, Fredrikson & Byron, PA, for defendant.

ORDER

PATRICK J. SCHILTZ, District Judge.

This matter is before the Court on the motion of plaintiff BP Products North America Inc. ("BP") for summary judgment on the pricing counterclaim of defendant Twin Cities Stores, Inc. ("TCS"). For the reasons set forth below, BP's motion is granted, and TCS's pricing counterclaim is dismissed with prejudice.

I. BACKGROUND

TCS owns and operates gas stations and convenience stores throughout the Twin Cities metropolitan area. In 1998, TCS and BP¹ entered into a series of agreements, including a Master Commission Marketer Agreement ("MCMA"). Faleel Aft Ex. A, Apr. 13, 2007. Under the MCMA, TCS agreed to permit BP to sell its gasoline at fifty-eight TCS stores, and BP agreed to pay TCS a commission on each gallon of gasoline sold. MCMA ¶¶ 12(a), 10(a). The MCMA ran from 1998 to 2005.

The MCMA gave BP the right to "establish the retail price" of gasoline at the participating TCS stores. MCMA ¶ 2(a). Nothing in the MCMA limited BP's pricesetting discretion in any way. Undeterred by that fact, TCS has sued BP for allegedly breaching the MCMA in the way that BP exercised its discretion to set retail gasoline prices. Specifically, TCS alleges that, from April 2004 to May 2005, BP priced its gasoline well above market levels. According to TCS, this caused fewer customers to buy gasoline at TCS stores — and, as a result, TCS sold fewer newspapers, beverages, snacks, and other, products. TCS seeks to recover commissions lost on gasoline sales and profits lost on sales of other products.

TCS's sole support for its broad "pricing counterclaim" is the report of expert witness Gary Greene. On June 1, 2007, 2007 WL 4585385, however, this Court granted BP's motion to exclude Greene's report and bar him from testifying at trial. Docket No. 185. The Court found that, for several reasons, Greene's opinions were not admissible under Fed.R.Evid. 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). The Court's ruling left TCS with no admissible evidence that BP priced gasoline at noncompetitive levels from April 2004 to May 2005.

Deprived of Greene's testimony, TCS has retreated to a much more limited claim. TCS now argues that BP violated the MCMA in April 2004 when BP admittedly implemented, and then quickly abandoned, a new pricing strategy under which BP priced its gasoline slightly higher than the competition. Both Patrick Saunders, a BP regional sales manager, and Michael Proud, a BP pricing analyst, testified that BP decided in April 2004 to price gasoline at each of its "commission market" sites² two cents above each site's "key competitor." Proud Dep. 110; Saunders Dep. 64-65. BP abandoned this strategy after two to four weeks. Proud Dep. 115 (month); Saunders Dep. 64 (two weeks). BP then returned to its previous pricing practices.³ Proud Dep. 117; Saunders Dep. 65. TCS now argues that, in pricing its gasoline two cents per gallon higher than the competition for a few weeks in 2004, BP breached the MCMA and is liable to TCS for damages.

II. ANALYSIS

A. Standard of Review

Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on Me, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A dispute over a fact is "material" only if its resolution might affect the outcome of the suit under the governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute over a fact is genuine only if the evidence is such that a reasonable jury could return a verdict for either party. Ohio Cas. Ins. Co. v. Union Pac. R.R., 469 F.3d 1158, 1162 (8th Cir.2006). In considering a motion for summary judgment, a court must assume that the nonmoving party's evidence is true and must draw all justifiable inferences arising from the evidence in that party's favor. Taylor v. White, 321 F.3d 710, 715 (8th Cir.2003).

B. TCS's Pricing Counterclaim

As noted, the MCMA explicitly gives BP the right to "establish the retail price" of gasoline sold at participating TCS stores, MCMA ¶ 2(a), and nothing in the MCMA explicitly limits that authority in any way. Thus, on first glance, it is difficult to understand how BP's decisions about gasoline prices could violate the MCMA. TCS nonetheless argues that BP's two-cent pricing strategy breached the MCMA in two ways. First, TCS argues that BP's pricing practices breached ¶ 7 of the MCMA — a paragraph that, on its face, has nothing to do with gasoline pricing. Second, TCS contends that BP's short-term pricing experiment breached the implied covenant of good faith and fair dealing. The Court considers each of these claims in turn.

1. Paragraph 7 of the MCMA

Paragraph 7 of the MCMA. provides:

7. BUSINESS OPERATIONS. Twin Cities will not conduct any business operations at any Participating Fuel Facility or Participating C-Store that, in [BP]'s sole discretion, may reflect poorly on [BP]'s name or business reputation or may offend an appreciable segment of the public. Likewise, [BP] will not conduct itself at any Participating Fuel Facility in a manner that, in Twin Cities' sole discretion, may reflect poorly on Twin Cities' name or business reputation or may offend an appreciable segment of the public. In addition to the terms of this Agreement, Twin Cities agrees to specifically adhere to [BP]'s policies, practices, procedures, programs and standards regarding: (i) delivery, receipt and sale of motor fuel; (ii) repair and maintenance of the Aboveground Fuel Facility Improvements; (iii) motor fuel inventory measuring and monitoring; (iv) retail image, appearance and cleanliness; (v) remittance to [BP;] (vi) safety and security; (vii) employee behavior, customer service and customer interaction; (viii) acceptance of credit cards; and (ix) proper execution of any and all motor fuel promotion activities developed by [BP], including the proper display of point-ofpurchase materials.

TCS argues that, when BP priced its gasoline two cents higher than the competition for two to four weeks, BP breached its promise to "not conduct itself at any [TCS store] in a manner that, in Twin Cities' sole discretion, may reflect poorly on Twin Cities' name or business reputation or may offend an appreciable segment of the public." In other words, TCS argues that ¶ 7 was intended to act as a check on BP's authority under the MCMA to set gasoline prices. In support of its argument, TCS relies heavily on extrinsic evidence of ¶ 7's meaning.

In Minnesota, a court asked to interpret a written contract must first determine if the contract is. ambiguous. Travertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267, 271 (Minn.2004). An unambiguous contract must be given its plain and ordinary meaning; that meaning is deemed to be conclusive evidence of the parties' intent. State ex rel. Humphrey v. Philip Morris USA, Inc., 713 N.W.2d 350, 355 (Minn.2006); Knudsen v. Transport Leasing/Contract, Inc., 672 N.W.2d 221, 223 (Minn.Ct.App.2003). Only if the contract is ambiguous will the court go beyond the four corners of the document and examine extrinsic evidence of the parties' intent. Hous. & Redev. Auth. of Chisholm v. Norman, 696 N.W.2d 329, 337 (Minn. 2005). A written contract is ambiguous only if its language is reasonably susceptible of more than one interpretation. Denelsbeck v. Wells Fargo & Co., 666 N.W.2d 339, 346 (Minn.2003). In deciding whether a contract is ambiguous, a court must consider only the contract's language (and not extrinsic evidence), read the contract as a whole, and, if possible, reject any interpretation that would render a provision of the contract meaningless. Chergosky v. Cross-town Bell, Inc., 463 N.W.2d 622, 626-26 (Minn.1990).

When interpreted in light of these principles, the MCMA in general — and ¶ 7 in particular — cannot plausibly be interpreted as placing limits on BP's authority to set gasoline prices. To begin with, ¶ 7 says not a word about gasoline prices. It instead places restrictions on the way that BP "conduct[s] itself at any Participating Fuel Facility" — i.e., on the way that BP employees or agents behave while they are present at TCS stores. It is difficult to characterize pricing decisions made at faraway BP offices by pricing analysts who may never have, set foot on the premises of a TCS store as the "conduct" of a BP employee "at" a TCS store.

Moreover, ¶ 7 is obviously a morals clause. Its focus is not on pricing and economic competitiveness, but on the manner in which BP agents conduct themselves while they are at TCS stores among TCS customers. Under the MCMA, BP has extensive rights to enter onto TCS property. BP is responsible for delivering gasoline to TCS stores? MCMA ¶ 2(a)(i), and BP also has the right to construct, inspect, and remove fuel pumps at TCS stores, inspect the premises of TCS stores, and audit TCS's books, MCMA ¶¶ 15(a), 12, 18. Paragraph 7 simply ensures that, while BP agents are, present at TCS stores working among TCS customers, they do not behave in a manner that "may reflect poorly on Twin Cities' name or business reputation or may offend an appreciable' segment of the public." Clearly, the clause is aimed at such conduct as using profanity, dressing inappropriately, acting rudely, or otherwise behaving in a manner that might "offend" TCS customers.

TCS's reading of ¶ 7 is not only implausible in isolation, it is implausible in the context...