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Willow Creek Fuels, Inc. v. Farm & Home Oil Co.

September 18, 2009

WILLOW CREEK FUELS, INC., PLAINTIFF,
v.
FARM & HOME OIL CO., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Jones, J.

MEMORANDUM

Before the Court is a Motion to Dismiss filed by Defendants Buckeye Energy Services LLC, Buckeye Energy Holdings LLC, and Farm & Home Oil Co. (Doc. No. 11), Plaintiff Willow Creek Fuels, Inc.'s Response in Opposition thereto (Doc. No. 12), and Defendants' Reply (Doc. No. 15). For the following reasons, Defendants' Motion will be granted as to Willow Creek's federal antitrust claims (Counts I and II) and the Court will decline to exercise supplemental jurisdiction over Willow Creek's state law claims (Counts III, IV, and V).

I. Procedural History

On November 17, 2008, Willow Creek Fuels, Inc. ("Willow Creek") and Scott W. Adams, Sr., the Secretary and Chief Operating Officer of Willow Creek, filed their original Complaint against Buckeye Partners, LP and Farm & Home Oil Co. ("F&H"). On February 10, 2009, Willow Creek, as the sole Plaintiff, filed an Amended Complaint. The Amended Complaint named three defendants: Buckeye Energy Services, LLC ("BES"), F&H, and Buckeye Energy Holdings, LLC ("BEH"). On February 20, 2009, all three Defendants filed a Motion to Dismiss the Amended Complaint pursuant to Federal Rule of Civil Procedure 12(B)(6). On March 9, 2009, Willow Creek filed a Response in opposition to the Motion to Dismiss. On April 6, 2009, Defendants filed a Reply. On May 27, 2009, Defendants filed a Notice of Supplemental Authority. This Court heard oral argument on September 14, 2009.

II. Factual Allegations

The Court recites the facts as alleged in the Complaint and as viewed in the light most favorable to Plaintiff.

Willow Creek Fuels, Inc. ("Willow Creek") is in the business of supplying petroleum products, including fuel oil, diesel fuel, gasoline, kerosene and propane. (Am. Compl. ¶ 8.) Willow Creek supplies its products to homes, businesses, school districts, and other governmental entities in central and southeastern Pennsylvania. (Am. Compl. ¶¶ 8, 42.)

Between December 2006 and May 2007, Willow Creek entered into a series of Petroleum Sales Agreements ("PSAs") with F&H whereby Willow Creek would buy specified quantities of oil and gasoline products from F&H, with payments and deliveries to occur monthly. (Am. Compl. ¶¶ 19, 33-38; Am. Compl., Ex. B, Petroleum Sales Agreements between Willow Creek and F&H, Various Dates in 2006 ("2006 PSAs").) In reliance on the PSAs, Willow Creek entered into fuel sales contracts with various businesses and government entities. (Am. Compl. ¶ 42.)

Through its representations, F&H induced Willow Creek to secure two lines of credit totaling $1,125,000 in order to continue satisfying its obligations to F&H pursuant to the PSAs. (Am. Compl. ¶¶ 39, 51.) Willow Creek satisfied all its obligations under the PSAs, including making sixty (60) payments to F&H between November 2006 and October 2007. (Am. Compl. ¶¶ 40, 50.) As a result of the $1,125,000.00 credit procured by Willow Creek for the benefit of F&H, the remaining balance under the Sales Contract was $395,708.47 as of December 1, 2007. (Am. Compl. ¶ 41.) Willow Creek procured the majority of the money owed under the PSAs and transferred said money to F&H. (Am. Compl. ¶ 72.)

On November 14, 2007, F&H wrote to Willow Creek and stated that it was terminating five of the PSAs due to Willow Creek's failure to make payments for previously received deliveries of oil and gasoline products. (Am. Compl. ¶¶ 43-44; Letter from Richard A. Longacre to Willow Creek, Nov. 14, 2007 ("Longacre Letter").)*fn1 F&H stated in the Letter that, as of November 14, 2007, Willow Creek owed F&H $1,520,708.47 in unpaid invoices for sales of oil and gasoline, hauling charges, and late payment charges (collectively, "Outstanding Obligations"). (Am. Compl. ¶ 44; Longacre Letter.) In the Letter, F&H also stated that it intended to mitigate any damages due to Willow Creek's breach of contract by selling the oil and gasoline on the open market and applying the proceeds toward Willow Creek's Outstanding Obligations. (Am. Compl. ¶¶ 46-47; Longacre Letter.) F&H sold the oil and gasoline products on hand or sold future PSAs for a substantial profit over what it would have received from Willow Creek per the terminated PSAs. (Am. Compl. ¶ 48.)

When F&H did not deliver the oil and gasoline products referenced in the Letter, Willow Creek was unable to fulfill the terms of the sales contracts it had made with its customers. (Am. Compl. ¶ 49.) As a result of F&H's actions, Willow Creek sustained direct lost profit in the amount of $1,245,945.31 and was forced to file Chapter 11 bankruptcy on February 19, 2008. (Am. Compl. ¶¶ 53-54.) In addition, Willow Creek's former customers were left empty-handed, and some of those former customers were forced to contract elsewhere at market prices far higher than they would have had to pay pursuant to their sales contracts with Willow Creek. (Am. Compl. ¶ 49.)

In December 2007, BEH entered into an agreement to acquire F&H, and on January 10, 2008, BEH acquired all equity interests in F&H for cash consideration of approximately $145.5 million. (Am. Compl. ¶¶ 5-7.) BES is a wholly owned subsidiary of BEH and a subsidiary of Buckeye, a national distributor of petroleum products. (Am. Compl. ¶¶ 7, 25, 57(d).) Since the merger, Defendants have collectively maintained one of the largest petroleum products pipeline systems in the United States and have owned and operated fifty refined petroleum products terminals. (Am. Compl. ¶ 17.) By way of the merger, and having eliminated Plaintiff from the market, Defendants willfully acquired monopoly power in the relevant market with the specific intent of successfully excluding competition. (Am. Compl. ¶¶ 25-26, 57(d).)

Defendants later placed bids with Willow Creek's former customers. (Am. Compl. ¶ 26.) In some instances, Defendants ultimately contracted with Willow Creek's former customers. (Am. Compl. ¶ 26.) In other instances, Willow Creek's former customers were forced to purchase petroleum products from other suppliers at prices significantly higher than those previously charged by Willow Creek. (Am. Compl. ¶ 27.) In the latter instances, Willow Creek believes these petroleum products were actually sold by Defendants. (Am. Compl. ¶ 27.)

Willow Creek brings claims under the Sherman Act, 15 U.S.C. §§ 1 & 2, and the Clayton Act, 15 U.S.C. § 1, as well as contract and ...


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