Magness Oil Co. v. Mountain Express Oil Co.
| Decision Date | 16 March 2022 |
| Docket Number | 3:21-CV-03034 |
| Parties | MAGNESS OIL COMPANY, M PROPERTIES LLC, and MAGNESS FAMILY LIMITED PARTNERSHIP LLP PLAINTIFFS v. MOUNTAIN EXPRESS OIL COMPANY and SCF RC FUNDING IV LLC DEFENDANTS |
| Court | U.S. District Court — Western District of Arkansas |
This action arises out of a dispute between the parties regarding ownership of the underground storage tanks ("USTs"), fuel pumps, fuel canopies, and fuel brand signage (collectively, "the disputed equipment") located at nine Arkansas convenience stores. (Doc. 2, pp 1-2).
On May 5, 2021, Plaintiffs Magness Oil Company, M Properties, LLC Magness Family Limited Partnership, LLP (collectively "Magness") filed suit against Defendants Mountain Express Oil Company ("Mountain Express") and SCF RC Funding IV, LLC ("SCF") (collectively, "Defendants").[1] Magness alleges Defendants' continued control of the disputed equipment constitutes conversion, tortious interference with a contract, and tortious interference with a business relationship. It seeks the following relief: (1) damages; (2) declaratory relief establishing Magness as the rightful legal owner of the disputed equipment; and (3) injunctive relief preventing Defendants from continuing to violate Magness's rights to the disputed equipment. Defendants move to dismiss Magness's suit pursuant to Federal Rule of Civil Procedure 12(b)(6), Failure to State Claim Upon Which Relief May be Granted; Rule 12(b)(1), Lack of Subject-Matter Jurisdiction; and Rule 12(b)(7), Failure to Join a Party Under Rule 19.[2] See Doc. 15, p. 2.
Defendants' Motion (Doc. 15), along with Defendants' Brief (Doc. 16) and Magness's Response (Doc. 21), are now before the Court. For the below reasons, Defendants' Motion to Dismiss is DENIED.
Magness is a wholesale fuel provider operating in Arkansas and the surrounding states. (Doc. 2, p. 2). It also owns (or controls) convenience stores, which it often leases to store operators that agree to purchase fuel and fuel products exclusively from Magness. Id. at pp. 3-4. Magness also holds long-term agreements with "fuel brand suppliers" like Valero and Citgo to provide the fuel for the stores and signage rights. Id.
The parties seem to agree on the following: Pursuant to a February 2019 Asset Purchase Agreement ("APA"), Magness sold its interest in 32 convenience stores to U.S. Assets, Inc., a nonparty to this action. Id. at pp. 4, 21, 45. At some point between February 2019 and March 2021, SCF acquired U.S. Assets's interest in the 32 convenience stores. Id. at 7. SCF then either sold its interest In those 32 stores to Mountain Express or hired Mountain Express to operate the stores. Id. Either way, by March 2021, some combination of Mountain Express and SCF-the defendants here-controlled the 32 stores. Id.
The present dispute concerns the particular set of assets Magness sold off in February 2019. Magness maintains the transaction with U.S. Assets excluded USTs, fuel pumps, fuel canopies, and fuel brand signage. As a result, it continues to own the disputed equipment, and Defendants' refusal to relinquish control is tortious. Defendants disagree. They contend Magness sold the disputed equipment to U.S. Assets. Thus, when U.S. Assets sold that same bundle to SCF, SCF assumed ownership of the disputed equipment.
All parties claim the February 2019 APA, properly interpreted, clearly establishes ownership. It does not. The APA, filed as an attachment to the Complaint, states that Magness agreed to "sell, convey, transfer, assign, and deliver the 'Purchased Assets'" to U.S. Assets for the sum of $50, 000, 000. Id. at pp. 21-22. As relevant, in Section 3.01, the APA defines "Purchased Assets" as:
Id. at pp. 25-26 (emphasis added). Confusingly, however, the APA also specifies that Magness did not intend to sell U.S. Assets "[t]hose items described on Schedule 4." Schedule 4 lists as excluded assets: "ANY AND ALL FUEL EQUIPMENT," including "all UST[s]," "Fuel Pumps," "Fuel Canopies," and "Fuel Brand Signage"tt[l]ocated at all locations." Id. at p. 48. In short, Section 3.01 and Schedule 4 conflict with one another.
Defendants first move to dismiss the suit pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief may be granted. See Doc. 15, p. 2. The Court denies Defendants' Motion on this basis.
To survive a 12(b)(6) motion, the "complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quotation marks omitted). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Glick v. W. Power Sports, Inc., 944 F.3d 714, 717 (8th Cir. 2019) (quoting Iqbal, 556 U.S. at 663)). In ruling, the Court must "accept as true all facts pleaded by the non-moving party and grant all reasonable inferences from the pleadings in favor of the nonmoving party." Gallagher v. City of Clayton, 699 F.3d 1013, 1016 (8th Cir. 2012) (quotation marks omitted).
Still, the complaint must contain sufficient facts "to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. Pleadings that contain mere "labels and conclusions" or "a formulaic recitation of the elements of the cause of action will not do." Id. A court is not required to "blindly accept the legal conclusions drawn by the pleader from the facts." Westcottv. City of Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990).
"Conversion is a common-law tort action for the wrongful possession or disposition of another's property." McQuillan v. Mercedes-Benz Credit Corp., 331 Ark. 242, 247 (1998); see also Hatchell v. Wren, 363 Ark. 107 (2005); Stonebridge Collection, Inc. v. Carmichael, 791 F.3d 811, 817 (8th Cir. 2015). Under Arkansas law, the plaintiff must demonstrate "the defendant wrongfully committed a distinct act of dominion over the property of another, which is a denial of or is inconsistent with the owners' rights." Id. "[T]he complaint must state that the plaintiff had a property interest in the subject goods and that the defendant wrongfully converted them." Big A Warehouse Distribs. v. Rye Auto Supply, 19 Ark.App. 286, 290 (1986).
Magness's conversion claim survives Defendants' Motion to Dismiss. The Complaint plausibly alleges, first, Magness's possessory right to the disputed equipment, and second, that by preventing Magness's access and use of that equipment, Defendants committed an act of dominion inconsistent with Magness's rights.
Both parties claim the APA resolves the issue of ownership.[3] Magness argues it demonstrates Magness retained ownership; Defendants contend it demonstrates Magness relinquished ownership. In reality, the APA contains two terms in direct conflict: section 3.01(b) indicates Magness conveyed the disputed equipment to U.S. Assets, while Schedule IV indicates Magness retained ownership of those same items.
"A motion to dismiss based on contractual language may be granted only where that language is unambiguous and conveys a definite meaning." ESI, Inc. v. Coastal Power Prod. Co., 13 F.Supp.2d 495, 498 (S.D.N.Y. 1998). Here, the contradictory terms contained in the APA render the contract ambiguous with respect to ownership, see Ingram v. Century 21 Caldwell Realty, 52 Ark.App. 101, 101 n.2 (1996) (), thereby precluding dismissal on that basis.[4]
Defendants raise two additional arguments. First, Defendants argue SCF is a Bona Fide Purchaser ("BFP"), a status that, they contend, defeats Magness's ownership claim; second, the USTs constitute "fixtures," and because Defendants own the real property upon which they sit, Defendants also own the USTs. But, regardless of the merits to these claims, "[a] defendant does not render a complaint defective by pleading an affirmative defense[.]" Jessie v. Potter, 516 F.3d 709, 713 (8th Cir. 2008). Instead, as courts in the
Eighth Circuit have noted:
[T]he issue under Rule 12(b)(6) is whether a plaintiff has alleged sufficient facts, accepted as true, to state a plausible claim for relief. Whether a defendant will be able to raise a defense that may prevail over those facts is, in most instances, irrelevant, as a plaintiff is not required to disprove an affirmative defense in order to state a valid claim.
Weems Indus., Inc. v. TeknorApex Co., 540 F.Supp.3d 839, 852 (N.D. Iowa 2021). Only where "an affirmative defense is apparent on the face of the complaint... can [it] provide the basis for dismissal under Rule 12(b)(6)." Zean v. Fairview Health Servs., 858 F.3d 520, 526 (8th Cir. 2017) (quotation marks omitted).
Under Arkansas law, to achieve BFP...
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