Hsmy, Inc. v. Getty Petroleum Marketing, Inc.

• Decision Date: 02 March 2006
• Docket Number: No. CIV.A. 05-818-JJF.,CIV.A. 05-818-JJF.
• Citation: 417 F.Supp.2d 617
• Parties: HSMY, INC., a Delaware Corporation, a/k/a H.S.M.Y., Inc., Plaintiff, v. GETTY PETROLEUM MARKETING, INC., a Maryland Corporation, Defendant.
• Court: U.S. District Court — District of Delaware

417 F.Supp.2d 617

HSMY, INC., a Delaware Corporation, a/k/a H.S.M.Y., Inc., Plaintiff, v. GETTY PETROLEUM MARKETING, INC., a Maryland Corporation, Defendant.

No. CIV.A. 05-818-JJF.

United States District Court, D. Delaware.

March 2, 2006.

John C. Andrade, Esquire of Parkowski, Guerke, & Swayze, P.A., Wilmington, DE, for Plaintiff.

Matt Neiderman, Esquire of Duane Morris LLP, Wilmington, DE, for Defendant.

MEMORANDUM OPINION

FARNAN, District Judge.

Pending before the Court is Defendant's Motion To Dismiss The Complaint (D.I.3). For the reasons discussed, the Motion will be granted in part and denied in part.

I. BACKGROUND

The following facts are alleged in Plaintiffs Amended Complaint (D.I.15). Plaintiff was engaged in the retail motor fuel and convenience store business at two locations in Delaware under the trade name "Getty." Defendant, a marketer of Getty brand fuel, was Plaintiffs landlord and supplier of motor fuel. Pursuant to the contract between the parties, Plaintiff was required to purchase all of its motor fuel from Defendant. The price of the fuel was set by Defendant and was to be posted at the time and place of delivery.

In March 2002, Plaintiff alleges that Defendant initiated a fraudulent scheme whereby it posted one price at delivery but withdrew a different amount from Plaintiffs checking account. Plaintiff and other Delaware retailers complained to the Office of Retail Gasoline Sales, a Division of Motor Fuel Tax of the Delaware Department of Transportation. Defendant allegedly retaliated by raising the motor fuel wholesale prices well above the retail prices charged by Plaintiffs competitors. Plaintiff, placed under extreme financial hardship due to the increase in prices, terminated one franchise and sold the other at a price substantially below market value.

Plaintiff filed its Complaint in Delaware Superior Court. The action was removed to this Court on November 30, 2005. Defendant filed its Motion To Dismiss The Complaint (D.I.3) on January 4, 2006. Plaintiff amended its Complaint on February 3, 2006. (D.I.15). Plaintiffs Amended Complaint alleges violations of Article 2 of the Uniform Commercial Code ("UCC") as codified under Delaware law, the Delaware Retail Gasoline Sales Law ("Retail Gas Law"), and the Delaware Deceptive Trade Practices Act ("DTPA"). Plaintiff also alleges that Defendant committed fraud, breached the contract between the parties, and breached the implied covenant of good faith and fair dealing.

II. PARTIES' CONTENTIONS

By its Motion, Defendant contends that the Court should dismiss Plaintiffs Complaint for failure to state a claim upon which relief may be granted. First, Defendant contends that Plaintiff has failed to state a claim for breach of contract because Defendant's actions fall within the safe harbor condition provided by the UCC, because Plaintiff has failed to allege the breach of an obligation, and because Defendant has not breached the implied covenant of good faith and fair dealing. Second, Defendant contends that Plaintiff cannot sue for injunctive relief under the Retail Gas Law and the DTPA because its agreements with Defendant were terminated over two years ago. Finally, Defendant contends that Plaintiff has failed to state a claim for fraud because it failed to plead with particularity and because the claim is nothing more than a breach of contract claim couched in fraud terms.

In response, Plaintiff contends that it has stated a claim for breach of contract because Defendant's actions do not fall within the safe-harbor provision of the UCC. Plaintiff further contends that it has stated a claim under the Retail Gas Law and the DTPA because both statutes provide for the monetary remedies sought. Plaintiff also contends that its Amended Complaint pleads fraud with sufficient particularity and that it has alleged every element of a fraud claim. Finally, Plaintiff contends that Defendant breached the implied covenant of good faith and fair dealing, which is read into every contract, by taking advantage of the parties' contractual relationship by charging Plaintiff higher prices than would be charged if Defendant had acted in good faith.

III. LEGAL STANDARD

Pursuant to Federal Rule of Civil Procedure 12(b)(6), the Court may dismiss a complaint for failure to state a claim upon which relief may be granted. Fed.R.Civ.P. 12(b)(6). The purpose of a motion to dismiss is to test the sufficiency of a complaint, not to resolve disputed facts or decide the merits of the case. Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir.1993). When considering a motion to dismiss, a court must accept as true all allegations in the complaint and must draw all reasonable factual inferences in the light most favorable to the plaintiff. Neitzke v. Williams, 490 U.S. 319, 326-27, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989); Piecknick v. Pennsylvania, 36 F.3d 1250, 1255 (3d Cir. 1994). However, the Court is "not required to accept legal conclusions either alleged or inferred from the pleaded facts." Kost, 1 F.3d at 183. Dismissal is only appropriate when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

IV. DISCUSSION

A. Whether Plaintiff Has Stated A Claim For Breach Of Contract For Which Relief May Be Granted

In order to establish a claim for breach of contract, a plaintiff must show: "first, the existence of a contract, whether express or implied; second, the breach of an obligation imposed by that contract; and third, the resultant damage to the plaintiff." VLIW Tech., L.L.C. v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del.2003).

Accepting all allegations in Plaintiff's Amended Complaint as true and drawing all reasonable inferences in the light most favorable to Plaintiff, the Court concludes that Plaintiff has stated a claim for breach of contract. The parties do not dispute the existence of a contract or that Plaintiff was damaged. Instead, the parties dispute whether Plaintiff has alleged that Defendant breached an obligation. The Court concludes that Plaintiff has asserted an allegation of a breached obligation. For example, in its Amended Complaint, Plaintiff alleges that, pursuant to the parties' contract, the prices for fuel were to be posted or listed at the time and place for delivery. Plaintiff alleges that Defendant changed the price of the fuel after delivery and debited a different amount from Plaintiff's bank account, thereby breaching an obligation that the Defendant had to set the prices at the time of delivery. Accordingly, the Court will deny Defendant's Motion To Dismiss The Complaint as it relates to Plaintiff's claim for breach of contract.

B. Whether Plaintiff Has Stated A Claim For Which Relief May Be Granted Pursuant to 6 Del. C. § 2-305

In addition to the breach of contract claim above, Plaintiff alleges that Defendant breached the parties' contract by failing to use good faith in fixing fuel prices. 6 Del. C. § 2-305 provides that "[a] price to be fixed by the seller . . . means a price for him to fix in good faith." 6 Del. C. § 2-305(2). The official comment to UCC § 2-305 provides that in the normal case where a seller has set a price in accordance with a "posted price," "price in effect," or "market price," the good faith requirement will be satisfied. U.C.C. § 2-305(2) cmt. 3.

Accepting all allegations in Plaintiff's Amended Complaint as true and drawing all reasonable inferences in the light most favorable to Plaintiff, the Court concludes that Plaintiff has stated a claim for breach of contract pursuant to 6 Del. C. § 2-305. Plaintiff alleges throughout its Amended Complaint that Defendant did not use good faith in fixing prices and that it fixed prices in a way that controlled Plaintiff's profit margin. First, Plaintiff alleges that Defendant often set the wholesale price for fuel equal to or higher than that of the retail price of other stores. Second, Plaintiff alleges that Defendant charged a higher price than the one set at delivery in March 2002. Finally, after Plaintiff complained to the Office of Retail Gasoline Sales, Defendant allegedly fixed fuel prices at higher rates in retaliation.

Defendant contends that its pricing falls within the "safe harbor" for posted price, price in effect, or market price. Viewing the facts in the light most favorable to Plaintiff, however, the Court cannot conclude that Defendant's wholesale prices, allegedly above the retail prices of other merchants, and that Defendant's alleged retaliatory price increase fall within the posted or market price. Additionally, Defendant has offered no standard included in the contract by which the prices would be set. Kellam Energy, Inc. v. Duncan, 668 F.Supp. 861 (D.Del.1987) (stating that when a contract stipulates "that the price will be set according to a particular standard, Section 2-305 has no role to play and parol evidence will be excluded"). Accordingly, the Court will deny Defendant's Motion To Dismiss The Complaint as it relates to Plaintiff's claim for breach of contract pursuant to 6 Del. C. § 2-305.

C. Whether Plaintiff Has Stated A Claim For Breach Of The Implied Covenant Of Good Faith And Fair Dealing For Which Relief May Be Granted

The covenant of good faith and fair dealing is implied in every agreement in Delaware. Dunlap v. State Farm Fire & Cas. Co., 878 A.2d 434, 442 (Del.2005). The covenant requires parties "in a contractual relationship to refrain from arbitrary or unreasonable conduct which has the effect of preventing the other party to the contract from receiving the fruits of the contract." Wilgus v. Salt Pond Inv. Co., 498 A.2d 151, 159 (Del.Ch.1985). One example of a breach of the implied covenant of good faith and fair dealing occurs when one party frustrates the purpose of the contract "by taking advantage of their position to control implementation of the...