Martin v. Bimbo Foods Bakeries Distribution, Inc.
| Decision Date | 23 April 2015 |
| Docket Number | NO. 5:14-CV-17-BR,5:14-CV-17-BR |
| Court | U.S. District Court — Eastern District of North Carolina |
| Parties | JOHN T. MARTIN, Plaintiff, v. BIMBO FOODS BAKERIES DISTRIBUTION, INC.; f/k/a GEORGE WESTON BAKERIES DISTRIBUTION, INC., Defendant. |
This matter comes before the court on defendant Bimbo Foods Bakeries Distribution, Inc., f/k/a George Weston Bakeries Distribution, Inc.'s ("defendant" or "BFBD") motion for summary judgment. (DE # 46.) Plaintiff John T. Martin ("plaintiff" or "Martin") filed a response, (DE # 49), to which defendant replied, (DE # 50). This matter is ripe for disposition.
In 2006, for $108,000, Martin, as an "independent operator," purchased a distribution route which granted him exclusive rights to purchase bakery products from BFBD and sell those products to grocery store chains and independent grocers in a designated area. (Compl., DE # 1-1, ¶¶ 6, 8.)1 Around the same time, the parties entered into a Distribution Agreement ("Agreement") which governed their relationship. (Id. ¶ 5 & Ex. 1.)
As an independent operator ("IO"), Martin's income was based on the difference — referred to as the "margin" or "spread" — between the price at which he purchased and soldBFBD's bakery products. (Id. ¶ 8; Vickers Decl., DE # 24, ¶ 9.) In June of 2013, BFBD informed Martin and other local IOs that it was increasing the price at which it sold them certain products, which had the effect of decreasing the margins that IOs earned on the resale of those products. (Compl., DE # 1-1, ¶ 10; Barnes Decl., DE # 20, ¶¶ 10, 14.) Martin and most of the other IOs "united in an effort to fight the Defendant's effort to unilaterally reduce margins." (Compl., DE # 1-1, ¶ 12.) A committee of six IOs was formed to communicate and negotiate with BFBD about the reduced margins. (Id.) Martin was one of the committee members and took an active role in the committee. (Id. ¶¶ 12, 18; Def.'s Mem., DE # 47, at 5 ()). Various forms of communication between the committee, its counsel, representatives of BFBD, and defense counsel occurred. (Compl., DE # 1-1, ¶¶ 14-16.) The negotiations failed to produce the result that Martin and the other IOs sought. (Id. ¶ 15.)
In the meantime, Martin continued to operate his distribution route. (Id. ¶ 20.) On 21 December 2013, Brant Vickers, BFBD's sales representative, delivered to Martin a document entitled "Notice of Termination of Distribution Agreement." (Id. ¶ 24 & Ex. 5.) In that document, BFBD informed Martin that it recently discovered that he had "engaged in a practice of 'flushing' product by creating false sales and 'buyback' invoices," for which he received approximately $2,500 to which he was not entitled. (Id., Ex. 5.) According to the document, such fraudulent conduct constitutes a "material and noncurable breach" of the Agreement. (Id.) The document also refers to other "material violations" of the Agreement, which constitute a "chronic breach" of the Agreement. (Id.) BFBD terminated the Agreement effective immediately. (Id.)
On 8 January 2014, Martin filed the instant complaint in state court, asserting claims for breach of contract, fraud, and unfair and deceptive trade practices under Chapter 75 of the North Carolina General Statutes. Martin sought injunctive and compensatory relief, including punitive damages. On 9 January 2014, BFBD removed the action to this court. (DE # 1.) On 30 May 2014, the court denied Martin's motion for a preliminary injunction. (DE # 40.) Subsequently, the court granted in part BFBD's Rule 12(b)(6) motion, dismissing Martin's fraud claim. (DE # 41.) Now, BFBD moves for summary judgment on Martin's two remaining claims: breach of contract and unfair and deceptive trade practices.
Summary judgment is proper only if "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The court must ask "'whether reasonable jurors could find by a preponderance of the evidence that the plaintiff is entitled to a verdict . . . .'" Maryland Highways Contractors Ass'n, Inc. V. Maryland, 933 F.2d 1246, 1252 (4th Cir. 1991) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)). Summary judgment should be granted only in those cases "in which it is perfectly clear that no genuine issue of material fact remains unresolved and inquiry into the facts is unnecessary to clarify the application of the law." Haavistola v. Cmty. Fire Co. of Rising Sun, Inc., 6 F.3d 211, 214 (4th Cir. 1993). Anderson, 477 U.S. at 248.
In considering a motion for summary judgment, the court is required to draw all reasonable inferences in favor of the non-moving party and to view the facts in the light mostfavorable to the non-moving party. Id. at 255. The moving party has the burden to show an absence of evidence to support the non-moving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). The party opposing summary judgment must then demonstrate that a triable issue of fact exists; he may not rest upon mere allegations or denials. Anderson, 477 U.S. at 248.
Under Pennsylvania law, a breach of contract claim has three elements: "(1) the existence of a contract, including its essential terms, (2) a breach of a duty imposed by the contract and (3) resultant damages." 2 CoreStates Bank, N.A. v. Cutillo, 723 A.2d 1053, 1058 (Pa. Super. Ct. 1999). In its motion, BFBD only challenges the second element, arguing that there is no genuine dispute of material fact that it did not breach a duty imposed by the Agreement. It maintains that Martin's fraudulent activity was "the sole reason for the termination of Plaintiff's Distribution Agreement." (Def.'s Mem., DE # 47, at 2.) In response, Martin contends that BFBD breached the Agreement by terminating it in retaliation for his vocal participation in the group which opposed BFBD's June 2013 price increases and argues that defendant's stated reason is pretextual. (Pl.'s Resp., DE # 49, at 9.)3
The Agreement permitted BFBD to terminate it in the event that Martin committed a breach of the Agreement in a fraudulent manner. Section 8.2 of the Agreement states: "NON-CURABLE BREACH: If the breach by DISTRIBUTOR involves . . . fraud, . . . [BFBD] may terminate this Agreement immediately upon written notice and DISTRIBUTOR shall have no right to cure." (Compl., DE # 1-1, Ex. 1 (emphasis in original).)
BFBD presents evidence suggesting that Martin engaged in a fraudulent practice known as "flushing," which occurs in two steps. First, the IO submits a false invoice to BFBD to create the impression that product which in fact remains on the IO's truck was delivered and placed in a store for sale to consumers. (Vickers Decl., DE # 24, ¶ 16.) Second, usually on the Monday of the following week, the IO creates a false buyback invoice for the exact amount of product that he allegedly sold. (Id. ¶¶ 16, 19.)4 The IO can then sell that inventory to another store if it is still fresh or return it to BFBD for full credit if it is stale. (Id. ¶ 14; Browning Decl., DE # 21, ¶ 5.) At the end of each week, BFBD "settles up" with the IO and gives credit for deliveries made and for returned products that did not sell by the "stale" date. (Vickers Decl., DE # 24, ¶ 13; Vickers Decl., DE # 48, ¶ 8.) However, BFBD charges the IO for any unsold fresh inventory remaining on the IO's truck at the end of the week. (Vickers Decl., DE # 24, ¶ 14; Browning Decl., DE # 21, ¶ 7.) Thus, "flushing" results in BFBD crediting the IO for deliveries that were never made instead of charging the IO for fresh product that remained on the truck.5 (Vickers Decl., DE # 24, ¶ 25.) This practice also creates the risk that BFBD will refund the IO for a returned stale product that was never offered for sale to consumers. (Id.; Vickers Decl., DE # 48, ¶ 16.)
On 7 December 2013, Martin generated a sales invoice and received credit for certain products allegedly delivered to Food Lion # 1374. (Vickers Decl., DE # 24, ¶ 20 & Ex. F.)Martin admits that he never actually placed the products at issue in that Food Lion. (Martin Dep., DE # 50-1, at 80:17-19; 81:3-4; 90:23-91:4.) Instead, he testifies that he told his 17-year-old son to deliver the products to another Food Lion, but concedes that he does not know if his son ever did so. (Id. at 79:19-25; 97:9-98:2.) BFBD presents evidence showing that at least some of the inventory in question was never placed in another store. It argues that there is no question of material fact that it terminated the Agreement based on this fraudulent activity. (Def.'s Mem., DE # 47, at 19.) As further support for this contention, BFBD notes that it has a "written policy that has been posted conspicuously in the Raleigh Depot since 2009" which prohibits the practice of "flushing" product. (Id. at 17; Stanton Dep., DE # 50-5, at 39:3-21; Vickers Decl., DE # 24, ¶ 17 & Ex. D.) Additionally, BFBD establishes that it "has terminated at least three other Distribution Agreements in North Carolina for the exact same practice of which Plaintiff is accused." (Def.'s Mem., DE # 47, at 18; Vickers Decl., DE # 24, ¶ 26 & Ex. I.)
Martin argues that there is a genuine dispute as to whether BFBD's given reason was the actual reason for the termination of the Agreement. (Pl.'s Resp., DE # 49, at 9.) In support of his claim that BFBD terminated the Agreement in retaliation for his opposition to the price increases, Martin presents two principal pieces of evidence. First, he points to the timing of the termination. Martin notes that the Agreement was...
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