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Tristate Hvac Equipment, Llp v. Big Belly Solar

December 19, 2011

TRISTATE HVAC EQUIPMENT, LLP, PLAINTIFF,
v.
BIG BELLY SOLAR, INC., DEFENDANT.



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

MEMORANDUM

Following my grant to TriState HVAC Equipment, LLP ("TriState") of leave to amend its complaint under Federal Rule of Civil Procedure 15(a)(2), and TriState's filing of its amended complaint, Big Belly Solar, Inc. ("Big Belly") has filed a motion under Rule 12(b)(6) to dismiss all but one of the seven counts in TriState's amended complaint. For the reasons that follow, I will grant in part and deny in part Big Belly's motion.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

This case arises from a distribution agreement between TriState, a Pennsylvania limited liability partnership with a principal place of business in West Conshohocken, Pennsylvania, and Big Belly, a Delaware corporation with a principal place of business in Needham, Massachusetts.*fn1 (Am. Compl. ¶¶ 1--2.) Big Belly appointed TriState as a nonexclusive distributor of its solar-powered trash-compactor products*fn2 in the territory covering Pennsylvania, New Jersey, and Delaware, but, under the distribution agreement, reserved the right to sell directly to so-called key and national accounts, a list of which was to be provided by the company.*fn3 (Am. Compl. ¶¶ 7--12; Distribution Agreement § 3(a), (c).) Big Belly recognized that its sales to these key and national accounts might require participation by its local distributors, and the distribution agreement provided that distributors such as TriState would be entitled to 25 percent of their normal margin if Big Belly involved the distributor in a sale to one of these accounts. (Am. Compl. ¶ 11; Distribution Agreement § 3(c), Sch. A.)

TriState asserts that Big Belly never provided a list of key or national accounts. (Am. Compl. ¶ 13.) TriState claims that on February 1, 2008, it sent Big Belly a list of its sales targets, which included the City of Philadelphia (the "City"), and that on February 26, 2008, Rick Gaudette, then Big Belly's vice president of sales, confirmed that Big Belly would not be pursuing the City as one of its own accounts. (Id. ¶¶ 14--15, 18.) Thereafter, TriState began its marketing effort to sell Big Belly trash compactors to the City, contacting the City's Streets Iqbal, 129 S. Ct. 1937, 1950 (2009), as well as the parties' distribution agreement, which Big Belly attached to its motion to dismiss TriState's original complaint, see Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993) (asserting that "a court may consider an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the document").

Department, the "Green Plan of Philadelphia," and individuals in the administration of Michael Nutter, the City's mayor. (Id. ¶¶ 19--22.) TriState asserts that it placed Big Belly trash compactors at the University of Pennsylvania and Drexel University, and that individuals from those schools "actively discuss[ed] the Big Belly trash cans with the City on behalf of TriState." (Id. ¶¶ 25--26.) TriState claims that on May 7, 2008, Gaudette again confirmed that the City was a TriState account and that Big Belly would not be pursuing the City-according to TriState, Gaudette said, "We continue to support your efforts to win Philly." (Id. ¶ 23.)

In September 2008, sometime after Gaudette left Big Belly, TriState updated William M. Eddy, Big Belly's director of sales, on its sales efforts, including its efforts to sell Big Belly trash compactors to the City. (Id. ¶¶ 27--29.) According to TriState, Eddy neither identified the City as a key account of Big Belly's nor instructed TriState not to market to the City. (Id. ¶ 30.)

In February or March 2009, Jack Kutner, a vice president at Big Belly, told TriState that Big Belly was in direct discussions with the City's Streets Department regarding the sale of Big Belly products. (Id. ¶¶ 32--33.) TriState sent an e-mail to Eddy to confirm that the City was one of TriState's accounts, but Eddy never acknowledged that the City was in fact a TriState account. (Id. ¶¶ 37--38.)

On April 16, 2009, TriState sent an e-mail to several individuals in the office of Mayor Nutter identifying TriState as a distributor for Big Belly products and describing the efforts the company had been making to sell Big Belly trash compactors to the City. (Id. ¶ 39.) An executive assistant in the Office of Sustainability responded to TriState's e-mail, advising the company that its proposal had been forwarded to the City's director of strategic initiatives. (Id. ¶ 41.) TriState was unable to contact the director of strategic initiatives, and the director never contacted TriState. (Id. ¶¶ 42--43.) TriState monitored the City's website, but the City never issued a request for proposal ("RFP") for Big Belly trash compactors. (Id. ¶ 44.) TriState later learned that Mayor Nutter would be holding a press conference on April 30, 2009, to announce the City's purchase of 500 Big Belly trash compactors for Center City. (Id. ¶ 45.)

On April 30, 2009, the same day as the scheduled press conference, TriState met with Eddy and Kutner at TriState's facility in West Conshohocken. (Id. ¶ 46.) When asked about the City, Kutner allegedly said that Big Belly had entered into a contract for the sale of its trash compactors to the City, explaining that Big Belly "sole-sourced" the contract. (Id. ¶¶ 48--50.) According to TriState, Kutner said that Big Belly had informed the City that it had to buy directly from Big Belly and that the City did not have to put the contract out for bid to distributors. (Id. ¶ 51.) TriState then asked to be compensated for its sales efforts with the City, as provided for in the distribution agreement, but Kutner refused to compensate TriState, even though Big Belly was allegedly aware "of the considerable efforts made by TriState." (Id. ¶¶ 55--57.)

In May, TriState met with various individuals from the City, including members of the Streets Department, the Procurement Office, and the Controller's Office. (Id. ¶¶ 59--65.) During a meeting with the Streets Department, TriState was informed that Eddy had told the City not to put the contract for Big Belly trash compactors out for bid. Eddy allegedly said that the City could purchase trash compactors with a wireless configuration only from Big Belly, that Big Belly could offer the City the best price, and that the City did not need to purchase the trash compactors through a Big Belly distributor. (Id. ¶ 61.)

TriState filed this action against Big Belly on March 10, 2010, alleging six counts. TriState alleged that Big Belly breached the distribution agreement by failing to identify the City as a key account and by failing to compensate TriState for its participation in the sale of Big Belly trash compactors to the City, as required by the agreement (count I). TriState claimed that it spent a significant amount of time and resources educating City officials about the benefits of Big Belly trash compactors and that these marketing efforts contributed to Big Belly's contract with the City and thus conferred a substantial benefit on Big Belly. By failing to compensate TriState for its marketing efforts, TriState alleged, Big Belly was unjustly enriched and profited at TriState's expense (count VI). TriState further alleged that by instructing the City not to put the Big Belly trash-compactor contract out for bid and by making false or misleading statements to the City-namely, that the City could purchase Big Belly trash compactors with a wireless configuration only from Big Belly-Big Belly breached the implied covenant of good faith and fair dealing in the distribution agreement (count II), tortiously interfered with TriState's prospective contractual relationship with the City (count III), and engaged in unfair competition under both the Lanham Act and the common law (counts IV and V).

In a memorandum and order dated October 20, 2010, I dismissed TriState's Lanham Act claim. See TriState HVAC Equip., LLP v. Big Belly Solar, Inc., 752 F. Supp. 2d 517 (E.D. Pa. 2010). TriState timely filed a motion for reconsideration of the dismissal of its claim and a motion for leave to amend its complaint to include new allegations and to replead its Lanham Act claim as well as to add a new claim alleging unfair competition or unfair or deceptive acts or practices in violation of Massachusetts's consumer-protection statute, Mass. Gen. Laws Ann. ch. 93A, § 2. Because TriState did not meet the standard for reconsideration of the dismissal of its claim, I denied its motion for reconsideration. See TriState HVAC Equip., LLP v. Big Belly Solar, Inc., No. 10-1054, 2011 WL 204738 (E.D. Pa. Jan. 20, 2011). But I granted TriState's motion for leave to amend its complaint. See TriState HVAC Equip., LLP v. Big Belly Solar, Inc., No. 10-1054, 2011 WL 3047784 (E.D. Pa. July 21, 2011). TriState promptly filed its amended complaint, asserting claims under the Lanham Act (count IV) and the Massachusetts statute (count VII), as well as the five common-law claims from its original complaint. Big Belly now seeks to dismiss all the claims against it except the breach-of-contract claim.

II. STANDARD OF REVIEW

"To survive a motion to dismiss [under Rule 12(b)(6)], a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Iqbal, 129 S. Ct. at 1949 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Factual allegations "that are 'merely consistent with' a defendant's liability," or that permit the court to infer no more than "the mere possibility of misconduct" are not enough. Id. at 1949--50 (quoting Twombly, 550 U.S. at 557). Rather, the plaintiff must plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. at 1949. When a court evaluates a motion to dismiss, "the factual and legal elements of a claim should be separated." Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). The court "must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions." Id. at 210--11; see also Iqbal, 129 S. Ct. at 1950 (asserting that a court should assume the veracity of well-pleaded factual allegations, but legal conclusions "are not entitled to the assumption of truth"). And the court must draw all reasonable inferences in favor of the plaintiff. See McTernan v. City of York, 577 F.3d 521, 526 (3d Cir. 2009).

III. DISCUSSION

Big Belly seeks to dismiss counts II--VII of TriState's amended complaint, in which TriState alleges breach of the implied covenant of good faith and fair dealing; tortious interference with a prospective contractual relation; unjust enrichment; unfair competition under both section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and the common law; and unfair competition or unfair or deceptive acts or practices in violation of Massachusetts's consumer-protection statute, Mass. Gen. Laws Ann. ch. 93A, § 2.

Before turning to Big Belly's arguments and the merits of TriState's claims, I must first address the question of which state's laws apply. As I noted in a prior opinion, the distribution agreement contains a choice-of-law clause that provides that the agreement "shall be subject to the laws of the Commonwealth of Massachusetts and [Big Belly] and Distributor consent to be bound by the provisions of such laws." (Distribution Agreement § 22.) And as I further asserted, because there is nothing to suggest that either of the exceptions to Pennsylvania's general rule of enforcing a contractual choice-of-law provision applies here, this choice-of-law provision should be given effect.*fn4 See TriState HVAC Equip., 752 F. Supp. 2d at 530. Massachusetts law therefore governs TriState's breach-of-contract claim. And Massachusetts law similarly governs TriState's claim for breach of the implied covenant of good faith and fair dealing, since the claim alleges a breach of duty implied in the agreement. But the parties have not fully briefed the question whether the choice-of-law provision also applies to TriState's other claims.

With respect to TriState's two common-law tort claims, both parties have assumed, without citing any authority or providing any analysis, that Pennsylvania law applies. Because both parties have cited Pennsylvania law, I will do so here, for purposes of Big Belly's motion to dismiss. But I will give the parties the opportunity to further address the choice-of-law issue should it later become an issue.

With respect to its unjust-enrichment claim, TriState asserts, without citing any authority, that the choice-of-law provision applies and therefore that Massachusetts law governs. Big Belly, on the other hand, does not address the issue but cites Pennsylvania law in arguing that TriState's unjust-enrichment claim should be dismissed. Because there does not appear to be any conflict between Massachusetts law and Pennsylvania law, I need not decide which law governs TriState's unjust-enrichment claim. See Hammersmith v. TIG Ins. Co., 480 F.3d 220, 230 (3d Cir. 2007) (asserting that under Pennsylvania's choice-of-law rules, "[i]f two jurisdictions' laws are the same, . . . a choice of law analysis is unnecessary").

A. Breach of the Implied Covenant of Good Faith and Fair Dealing (Count II)

Under Massachusetts law, "[t]he covenant of good faith and fair dealing is implied in every contract." Uno Rests., Inc. v. Boston Kenmore Realty Corp., 805 N.E.2d 957, 964 (Mass. 2004). The Massachusetts Supreme Court has explained that "[t]he purpose of the implied covenant is to ensure that neither party interferes with the ability of the other to enjoy the fruits of the contract and that, when performing the obligations of the contract, the parties remain faithful to the intended and agreed ...


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