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Keystone Dedicated Logistics v. Flexaust Co.

April 16, 2010


The opinion of the court was delivered by: Magistrate Judge Lisa P. Lenihan

Doc. No. 16


I. Summation

The Motion for Summary Judgment filed by Defendant Flexaust Company, Inc. ("Flexaust") will be denied as to Count I, Breach of Contract, but granted as to Counts II and III, Unjust Enrichment and Quantum Meruit, as more fully set forth below.

II. Factual and Procedural History

Plaintiff ("KDL") alleges that Flexaust breached the parties' Transportation Services Agreement (hereafter the "TSA") and obtained improper benefit from KDL's product transportation-related efforts. The record presently before this Court indicates that:

KDL is a Carnegie, Pennsylvania based transportation "logistics service" provider which analyzes a client's existing product shipping needs, practices and expenses; maintains carrier-industry contacts and negotiates - through a client bid package prepared by KDL - for lower shipping rates with many carriers (utilizing, e.g., volume discounts); provides oversight and weekly billing/payment services regarding the client's product shipments through selected third-party carriers; and makes its profit under contracts entitling it to a percentage of the client's transportation cost savings. Flexaust is a Warsaw, Indiana based manufacturer and supplier of industrial/commercial hoses which ships its products.

On October 2, 2007, the parties entered into a two-page Transportation Services Agreement, governed by Pennsylvania law, the Effective Date of which was left blank. See Complaint Exhibit 1. The TSA provides that KDL would perform services and be compensated as set forth on Schedule A. Id. at ¶ 2. Schedule A, executed concurrently, provides in turn that KDL would analyze one to three months of Flexaust's existing transportation requirements by modes (i.e., less than truckload, truckload, local cartage, expedite, international, and parcel).*fn1

Thereafter, "KDL [was] authorized to negotiate rates on behalf of Flexaust and Flexaust agree[d] to utilize those freight companies when said freight companies provide[d] a cost savings over current programs and [met] expected service levels defined by Flexaust." Schedule A at ¶ 2 (emphasis added). Agreed-upon carriers were referred to as "compliant carriers". Id.

KDL was to "process Flexaust freight bills weekly"; invoice Flexaust and distribute funds to KDL/compliant carriers; and "track all non-compliance carriers and provide cost of non-compliance usage." Id. at ¶ 3.*fn2

In accordance with the TSA, cost savings were determined by reference to the parties' agreed upon "Benchmark Rate Calculations" to be set forth on Schedule B. Although the record contains no schedule B, it contains Appendix B, B-1, B-2 and B-3, which appear to set forth the parties' agreements regarding baseline or "benchmark" prior transportation expenses and anticipated freight savings (the "transportation cost savings"), which were to be divided between the parties.*fn3 Flexaust was to "compensate KDL by the formula set forth below for all recognized freight savings" and KDL was to "calculate transportation savings defined as 'Benchmark Rate Calculation' less KDL transportation arrangements or other transportation arrangements that are less than 'Benchmark Rate Calculations.'" Schedule A at ¶ 4 (emphasis added). But "IF THERE [WERE} NO SAVINGS THEN THERE [WERE] NO FEES DUE TO KDL" other than weekly processing fees and expense reimbursements. Id. (emphasis in original).

The TSA further provides for an initial term of 48 months "from the date that the parties agree on carrier pricing", but permits a "one year trial period - early termination" pursuant to which Flexaust could elect to terminate during the 12th to 15th months of the contract. TSA at ¶ 4.

Early termination required that Flexaust "deliver a written cancellation notice" and provide KDL an "opportunity to meet Flexaust in person." Id. And cancellation under this provision would take effect ninety (90) days from the date of notice. Id. A party might also terminate "for cause", provided that it permitted a thirty (30) day window for remedy of any default. Id.

Finally, the "Exclusivity" paragraph of the TSA provides that for the term of the TSA and, if early termination were elected, for one year thereafter, Flexaust "agrees not to directly solicit the services of any transportation companies ...

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