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K7 & Associates, Inc. v. Total Basement Solutions

March 1, 2007

K7 & ASSOCIATES, INC. DOING BUSINESS AS LIREMODEL.COM, PLAINTIFF,
v.
TOTAL BASEMENT SOLUTIONS, INC. DEFENDANT.



The opinion of the court was delivered by: James F. McCLURE, Jr. United States District Judge

ORDER

BACKGROUND

On November 15, 2006, plaintiff K7 & Associates, Inc. ("K7") instituted this civil action against defendant Total Basement Solutions, Inc. ("TBS"). In its complaint, plaintiff alleges that defendant breached a contract that the two parties entered into in February, 2006. On January 8, 2007 defendant filed an answer to plaintiff's complaint. In its answer, defendant asserted a counterclaim against plaintiff alleging that plaintiff was in fact the party who breached the contract.

On January 31, 2007, plaintiff filed a motion to dismiss defendant's counterclaim. (Rec. Doc. No. 15.) The motion is now fully briefed and ripe for our decision. Now, for the following reasons, we will grant plaintiff's motion.

DISCUSSION

I. Motion to Dismiss Standard

When considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the court must view all allegations stated in the complaint as true and construe all inferences in the light most favorable to plaintiff. Hishon v. King & Spaulding, 467 U.S. 69, 73 (1984); Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). This standard is the same for a motion to dismiss a counterclaim; the court must view all allegations in the counterclaim as true and construe all inferences in the light most favorable to the defendant. United States v. Union Gas Co., 743 F.Supp. 1144, 1150 (E.D.Pa. 1990) (Bechtle, C.J.)

In ruling on such a motion, the court primarily considers the allegations of the pleading, but is not required to consider legal conclusions alleged in the complaint. Kost, 1 F.3d at 183. At the motion to dismiss stage, the court considers whether the non-moving party is entitled to offer evidence to support the allegations in the complaint. Maio v. Aetna, Inc., 221 F.3d 472, 482 (3d Cir. 2000). A complaint or counterclaim should be dismissed only if the court, from evaluating the allegations, is certain that under any set of facts relief cannot be granted. Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Morse v. Lower Merion School Dist., 132 F.3d 902, 906 (3d Cir. 1997); Markowitz v. Northeast Land, Co., 906 F.2d 100, 103 (3d Cir. 1994).

The failure-to-state-a-claim standard of Rule 12(b)(6) "streamlines litigation by dispensing with needless discovery and factfinding." Neitzke v. Williams, 490 U.S. 319, 326-27 (1989). A court may dismiss a claim under Rule 12(b)(6) where there is a "dispositive issue of law." Id. at 326. If it is beyond a doubt that the non-moving party can prove no set of facts in support of its allegations, then a claim must be dismissed "without regard to whether it is based on an outlandish legal theory or on a close but ultimately unavailing one." Id. at 327.

II. Statement of Relevant Allegations

In its complaint, K7 alleges that on or about February 22, 2006, it entered into a contract with TBS in which TBS granted a dealership to K7 with the exclusive right to sell TBS's products in a certain area.*fn1 (Rec. Doc. No. 1, ¶ 5.) The contract specified that K7 was given six months from the date of contracting to begin operations. (Id. ¶ 11.) Following the beginning of operations, K7 was given a six-month grace period in which no sales quota was assessed. (Id. ¶ 10.) At the end of the grace period, K7 then had to purchase an average of $84,000 per month for the first twelve months following the grace period, for a total of $1,008,000. (Id.) The annual purchase requirement would then increase ten percent each year until the termination of the contract. (Id.) Finally, the contract gave TBS the option to terminate the agreement if K7 failed to meet the minimum sales quota for any twelve-month period. (Id.)

K7 alleges that it began operations on or about May 5, 2006. Then, on October 11, 2006, it received a letter from TBS terminating the agreement because it had not achieved the minimum sales quota required by the contract. (Id. ¶ 12.)

In its answer and counterclaim, TBS disputes the date that K7 began operations. Specifically, TBS alleges that K7 began operations on March 16, 2006. (Rec. Doc. No. 8, ¶ 11.) Therefore, the grace period ended on September 16, 2006. (Id. ¶ 32) Then, it alleges that K7 breached its obligation to buy $84,000 in materials from TBS during the period of September 16, 2006 to October 12, 2006. (Id. ¶¶ 42-43.) Specifically, TBS alleges that K7 purchased $0 in material during this time period. (Id. ¶ 44.) Furthermore, although not specifically discussed under the "Counterclaim" portion of its answer, TBS alleges that K7 breached ...


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