Commercial Lubricants, LLC v. Safety-Kleen Sys., Inc., 14-CV-7483 (MKB)
| Decision Date | 08 August 2017 |
| Docket Number | 14-CV-7483 (MKB) |
| Parties | COMMERCIAL LUBRICANTS, LLC, Plaintiff, v. SAFETY-KLEEN SYSTEMS, INC., Defendant. |
| Court | U.S. District Court — Eastern District of New York |
Plaintiff and Counterclaim-Defendant Commercial Lubricants, LLC commenced the above-captioned action against Defendant and Counterclaim-Plaintiff Safety-Kleen Systems, Inc., alleging that Defendant breached certain contracts relating to the distribution of recycled oil. (Compl., Docket Entry No. 1.) On August 13, 2015, Plaintiff filed the Second Amended Complaint ("SAC"), asserting claims for breach of an exclusivity agreement, breach of an implied exclusivity agreement, breach of a credit agreement, breach of the implied covenant of good faith and fair dealing, promissory estoppel, equitable estoppel, fraud, tortious interference with contract, tortious interference with prospective economic advantage, declaratory judgment and breach of a contract to dispose of "waste oil." (See generally SAC, Docket Entry No. 14.) Defendant filed counterclaims on March 16, 2015, alleging that Plaintiff breached a contract between the parties and was unjustly enriched by accepting Defendant's recycled oil product throughout 2014 without paying. (Counterclaim ¶¶ 22-35, Docket Entry No. 8.)
Defendant moves for partial summary judgment on Plaintiff's claims, as described below, and for summary judgment on its counterclaims. (Def. Mot. for Partial Summ. J. ("Def. Mot."), Docket Entry No. 39; Def. Mem. in Supp. of Def. Mot. ("Def. Mem."), Docket Entry No. 39-1; Def. Mot. for Summ. J. on Counter-claims ("Def. CC Mot."), Docket Entry No. 38; Def. Mem. in Supp. of Def. CC Mot. ("Def. CC Mem."), Docket Entry No. 38-1.) For the reasons discussed below, the Court grants Defendant's motion for partial summary judgment in part as to Plaintiff's claims for breach of the implied covenant of good faith and fair dealing and grants Defendant's motion for partial summary judgment as to Plaintiff's claims for promissory estoppel, equitable estoppel, fraud, tortious interference with contract and with prospective economic advantage, and declaratory judgment. The Court reserves judgment on the claim for breach of the "waste oil" agreement. Finally, the Court denies Defendant's motion for partial summary judgment as to Plaintiff's claims for breach of the exclusivity agreement and the implied exclusivity agreement, as well as Defendant's motion for summary judgment on its counterclaims for breach of contract and unjust enrichment.
Defendant is a used oil re-refiner, and Plaintiff is a distributor of recycled oil products in the New York metropolitan area.1 (Def. 56.1 ¶¶ 1-2.) On April 11, 2012, Defendant and acompany called New York Commercial Lubricants ("NYCL") entered into a contract governing NYCL's distribution of Defendant's recycled oil product (the "Distributor Agreement"). (Id. ¶¶ 3, 11.) On July 17, 2013, through an asset purchase agreement (the "APA"), Plaintiff purchased the assets of NYCL. ( Under the terms of the APA, Plaintiff purchased many of NYCL's contractual rights, including the right to conduct business under NYCL's commercial name, "Metrolube." (Def. 56.1 ¶ 5.) According to Plaintiff, it neither acquired nor was assigned the Distributor Agreement in connection with the APA.2 According to Defendant, Plaintiff effectively "stepped into the shoes" of NYCL because it kept the same employees, facility, equipment and website. (Def. CC 56.1 ¶ 5.)
Under the terms of the Distributor Agreement, NYCL was obligated to purchase an annual minimum amount of Defendant's product, together with such additional product as NYCL may order. (Distributor Agreement ¶ 2.) The pricing for the products was set forth as an attachment to the Distributor Agreement, but the Distributor Agreement further provided that "[p]rices are subject to change at any time upon written notice." (Id. ¶ 4.) Payment was duewithin thirty days of the date of Defendant's invoice, and unpaid amounts would be subject to interest at 1.5% per month. (Id. ¶ 13.) Both parties were entitled to "immediately terminate" the Distributor Agreement if the other party failed to perform in accordance with the Distributor Agreement or breached any provision of the Distributor Agreement and failed to correct the breach within thirty days' notice. (Id. ¶ 17.) Both parties were also permitted to terminate the Distributor Agreement with ninety days' notice. (Id.) No modifications to the Distributor Agreement would be deemed binding on either party unless in writing and signed by both parties. (Id. ¶ 25.)
The parties do not dispute that after Plaintiff purchased NYCL's assets, Plaintiff supplied Defendant's oil to Plaintiff's customers, including to the New York City Metropolitan Transportation Authority ("MTA"). (Def. 56.1 ¶ 10; Deposition of Gary Stetz ("Stetz Dep.") 250, 253-54, Docket Entry No. 39-4.) According to Plaintiff, the pricing for these products was established through in-person, telephone and, rarely, e-mail negotiations between Plaintiff and Defendant, rather than through form "pricing letters," as the Distributor Agreement contemplates. (Stetz Aff. ¶ 10.) In addition, "contrary to the express terms of the Distributor Agreement," Gary Stetz, the Managing Member of Commercial Lubricants, personally negotiated with Defendant a sixty-day payment period on each invoice. (Id. ¶ 11.)
Plaintiff states that the preexisting relationship between NYCL and Defendant was "a large part of the reason [Plaintiff] purchased the assets of NYCL." (Id. ¶ 12.) Prior to and following the execution of the APA, Stetz had many conversations with Defendant's representatives, "such as Curt Knapp and Steve Lewis,"3 who assured him that the "strategicpartnership" would continue after the APA. (Id.) Plaintiff made "certain investments in its operations" knowing that it would receive a return on its investment from Defendant's guarantee that the "strategic partnership" would continue, particularly through the "exclusive price support," or preferred pricing, that Defendant granted Plaintiff.4 (See id. ¶ 13.) Plaintiff also asserts that the course of dealing between the parties "included frequent in-person and over the telephone negotiations of pricing terms, discounts and credits," little of which was memorialized. (Id. ¶ 15.)
Plaintiff alleges that in late 2013 and throughout 2014, Defendant stopped communicating its strategy to Plaintiff and sought to avoid adhering to the "strategic partnership" by sending Plaintiff "mixed messages."5 (Pl. Opp'n 4-5.)
Plaintiff had a contract with the MTA for the sale of a line of Defendant's oil product, CJ-4+Lubrizol,6 which arose from Plaintiff's winning bid #5598 with the MTA. (Def. 56.1 ¶ 11.) Defendant wanted the MTA to switch from using CJ-4+Lubrizol, an older product, to CJ-4+Infineum, a new product, because it would be more profitable for both Plaintiff and Defendant. (Id. ¶ 13.) In July of 2013, after Plaintiff acquired NYCL's assets, Plaintiff negotiated a new agreement with Defendant under which Plaintiff would receive a fifteen-cent-per-gallon discount on the CJ-4+Lubrizol needed to complete bid #5598 with the MTA.7 (Stetz Aff. ¶ 23.) According to Defendant, it agreed to provide Plaintiff with the discount only if Plaintiff "[brought] about that change at the [MTA]," (id. ¶ 14) — namely, convinced the MTA to switch to CJ-4+Infineum. According to Plaintiff, Defendant agreed to provide the discount if Plaintiff simply facilitated a meeting with the MTA to discuss adding CJ-4+Infineum to theMTA's Qualified Product List. (Stetz Aff. ¶ 23; Pl. 56.1 ¶ 14.) The parties do not dispute that Plaintiff did, in fact, facilitate the meeting with the MTA, and that Defendant did not provide the fifteen-cent discount.8 (Stetz Aff. ¶ 23.) Plaintiff states that as a result of Defendant's failure to issue the fifteen-cent discount per gallon on CJ-4+Lubrizol for the duration of the MTA bid #5598, Defendant owes Plaintiff "tens of thousands of dollars." (Id. ¶ 24.)
Plaintiff further contends that between September of 2013 and February of 2014, it convinced the MTA to "consider" adding CJ-4+Infineum on its Qualified Products List and requested from Defendant the data and information that the MTA "required to approve CJ-4+Infineum and place that product on its Qualified Products List." (Am. Compl. ¶¶ 41-42.) Despite the repeated requests, Defendants allegedly failed to provide the requested data and information. (Id. ¶ 43.) Plaintiff states that as a result of its efforts to persuade the MTA to consider CJ-4+Infineum, the MTA put out a bid in January of 2014 for an NGEO without specifying what additive was required. (Id. ¶ 45.) This allowed Plaintiff to submit a bid for oil with Infineum; however, without the technical data that the MTA required and that was inDefendant's exclusive possession, Plaintiff alleges that it was unable to submit the bid. (Id. ¶¶ 45-47.) The bidding period closed on February 26, 2014, and Plaintiff did not submit a bid because it lacked the necessary technical data. (Id. ¶ 48.)
Plaintiff also asserts that Defendant agreed it would provide to Plaintiff "exclusive pricing support for sales of Defendant's re-refined oil" to New York City agencies, including the MTA. (Id. ¶ 14.) That is, Defendant agreed that it would provide lower pricing to Plaintiff than to Plaintiff's competitors for the sale of re-refined oil that would be submitted in connection with bids to New York City agencies.9 (Id.) Plaintiff asserts, however, that it learned Defendant had provided price support to GH Berlin, a rival distributor, which allowed GH Berlin to submit a bid to the MTA and receive the contract. (Id. ¶ 49.) In...
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