The opinion of the court was delivered by: STEWART DALZELL, District Judge
Several individuals and business entities that have leased service
stations from Sunoco, Inc. and Sunoco, Inc. (R&M) (together,
"Sunoco") bring this diversity action against Sunoco for breach of
contract. Plaintiffs' motion for class certification is now before
Sunoco distributes and markets gasoline in twenty states and in the
District of Columbia through three kinds of service stations. First, it
transports gasoline to its company-operated stations ("co-ops"). Second,
Sunoco sells gasoline to distributors ("jobbers") at the "rack" price
then in effect at the terminal*fn2 where the jobber takes delivery of
the gasoline. From the terminal, jobbers transport the gasoline to their own stations, where they resell it to the public.
Finally, Sunoco enters into Dealer Franchise Agreements (DFAs) with
individuals and entities like the plaintiffs ("dealers"). Among other
things, a typical DFA will include a lease of a Sunoco-owned service
station to a dealer and a provision obligating Sunoco to provide gasoline
to the station at the "dealer price in effect."*fn3 Every business
day,*fn4 Sunoco's Pricing Department sets the DTW price for each of the
448 price zones in which the 1, 271 dealers operate.*fn5
Because the DFAs include an open price term for the gasoline that
Sunoco supplies, Sunoco must at least in jurisdictions that have
adopted the Uniform Commercial Code set a DTW price in "good
faith," with "honesty in fact and the observance of reasonable commercial
standards of fair dealing in the trade." See generally U.C.C.
§§ 2-103(1)(b), 2-305(2) (1998). Plaintiffs contend that Sunoco has
breached their DFAs because it has not set the DTW price in good faith.
Specifically, they allege Sunoco has set the DTW price with "an apparent
goal of . . . eliminat[ing] Dealers . . . from their marketing
operations throughout the United States, so as to take over and operate,
or eliminate the Dealers' service stations." Compl. ¶ 20.
Although plaintiffs initially attempted to bring suit on behalf of all
dealers who purchased Sunoco-branded gasoline pursuant to an open-price
term during the period from August 1, 1999 through the present,
see Compl. ¶ 22, they now "seek to certify a class . . .
consisting of the 249 Franchise Dealers" identified in Dr. Keith B.
Leffler's Declaration.*fn6 Pls.' Mem. Supp. Class Cert. at 2 & Ex.
6. Dr. Leffler selected these 249 dealers because they operated in the 77
price zones where (1) the average DTW price was more than 0.5 cents
higher than the average benchmark price*fn7; and (2) dealers'
competitors supply more than fifty percent of the gasoline. We turn now
to the merits of plaintiffs' motion to certify this 249-dealer class.
Before deciding whether plaintiffs come within one of the provisions of
Rule 23(b), we must consider whether they have satisfied the
prerequisites listed in Rule 23(a). Georgine v. Amchem Prods.,
Inc., 83 F.3d 610
, 624 (3d Cir. 1996), aff'd sub nom. Amchem
Prods., Inc. v. Windsor, 521 U.S. 591 (1997). The four prerequisites
to a class action are:
(1) the class is so numerous that joinder of all
members is impracticable, (2) there are questions
of law or fact common to the class, (3) the claims or defenses of
the representative parties are typical of the
claims or defenses of the class, and (4) the
representative parties will fairly and adequately
protect the interests of the class.
Fed.R.Civ.P. 23(a) (2004). As a shorthand, courts regularly
refer to the prerequisites as numerosity, commonality, typicality, and
adequacy of representation. See Amchem, 83 F.3d at 624. Because
Sunoco does not challenge that a 249-member class is so numerous as to
make joinder impracticable, see Defs.' Mem. Opp'n Class Cert.
at 28-29, we conclude that plaintiffs have satisfied the numerosity
requirement and shall proceed to the other prerequisites to class
The commonality threshold is relatively low because the named
plaintiffs need only "share at least one question of fact or law with the
grievances of the prospective class." Baby Neal v. Casey,
43 F.3d 48, 56 (3d Cir. 1994). While plaintiffs claim that this case raises
the common question of whether Sunoco's DTW pricing procedures breached
its contractual obligation to set those prices in good faith,*fn8 Sunoco insists that plaintiffs have not demonstrated commonality.
Sunoco points out that Texas has developed an inquiry into whether a
merchant acted in "good faith," within the meaning of U.C.C. §
2-103(1)(b), that differs from the approach that other states, including
Ohio, use. Compare Tom-Lin Enters., Inc. v. Sunoco, Inc.,
349 F.3d 277 (6th Cir. 2003) (interpreting Ohio law) with Mathis v.
Exxon Corp., 302 F.3d 448 (5th Cir. 2002) (construing Texas law).
The differences that Sunoco cites, however, are not relevant to this case
because none of the members of the proposed class do business in Texas.
To be sure, there may be state-to-state variation about how to evaluate
a merchant's good faith in the states where Sunoco dealers do operate,
but the parties' briefs have not yet persuaded us that such variations
are significant enough to preclude a finding of commonality.
Sunoco also suggests that it could not have set DTW prices in bad faith
out of a desire to take over plaintiffs' businesses because divorcement
laws in several of those states prohibit it from operating service
stations. See, e.g., Conn. Gen. Stat. § 14-344a (2003).
While divorcement laws cast doubt on whether Sunoco hoped to take over
the plaintiffs' stations in certain states, they do not resolve the question of whether Sunoco set DTW prices in bad faith in those
states. It is possible and not inconsistent with the complaint
that Sunoco acted in bad faith to extract as much money as
possible from dealers, hoping to take over stations only where the law
would not prohibit it.
In another attempt to avoid a finding of commonality, Sunoco alleges
that two of the named plaintiffs (and many other members of the proposed
class) have released it from any claims arising out of their DFAs. This
defense, if established, could prevent dealers from recovering damages,
even if Sunoco acted in bad faith. The existence of a possible
affirmative defense, however, does not negate the common question about
whether Sunoco would have been liable but for that defense. Moreover, if
Sunoco established its defense, we could amend ...