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Crown Coal & Coke Co. v. Powhatan Mid-Vol Coal Sales, L.L.C.

United States District Court, W.D. Pennsylvania

March 8, 2013

CROWN COAL & COKE COMPANY, Plaintiff,
v.
POWHATAN MID-VOL COAL SALES, L.L.C. a/k/a POWHATTAN MID-VOL COAL SALES, LLC, Defendant

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[Copyrighted Material Omitted]

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For CROWN COAL & COKE COMPANY, Plaintiff, Counter Defendant: Vincent M. Roskovensky, LEAD ATTORNEY, Thorp, Reed & Armstrong, Pittsburgh, PA.

For POWHATAN MID-VOL COAL SALES, L.L.C., also known as POWHATTAN MID-VOL COAL SALES, LLC, Defendant: Gregory J. Krock, Buchanan Ingersoll & Rooney, Pittsburgh, PA.

For POWHATAN MID-VOL COAL SALES, L.L.C., Counter Claimant: Gregory J. Krock, Buchanan Ingersoll & Rooney, Pittsburgh, PA.

OPINION

David Stewart Cercone, United States District Judge.

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Crown Coal & Coke Company (" Crown" ) commenced this action against Powhatan Mid-Vol Coal Sales, LLC (" Powhatan" ) seeking redress for: (1) breach of contract, (2) unjust enrichment, (3) promissory estoppel and (4) an accounting. Powhatan answered and counterclaimed for (1) breach of contract, (2) unjust enrichment and (3) fraudulent misrepresentation. Presently before this court is Crown's motion to dismiss Powhatan's counterclaims and strike all corresponding additional defenses. For the reasons set forth below, the motion will be granted in part and denied in part.

It is well-settled that in reviewing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) " [t]he applicable standard of review requires the court to accept as true all allegations in the complaint and all reasonable inferences that can be drawn therefrom, and view them in the light most favorable to the non-moving party." Rocks v. City of Philadelphia, 868 F.2d 644, 645 (3d Cir. 1989). Under the Supreme Court's decision in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 561, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), dismissal of a complaint pursuant to Rule 12(b)(6) is proper only where the averments of the complaint plausibly fail to raise directly or inferentially the material elements necessary to obtain relief under a viable legal theory of recovery. Id. at 544. In other words, the allegations of the complaint must be grounded in enough of a factual basis to move the claim from the realm of mere possibility to one that shows entitlement by presenting " a claim to relief that is plausible on its face."

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Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570).

A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. In contrast, pleading facts that only offer " 'labels or conclusions' or 'a formulaic recitation of the elements of a cause of action will not do,'" nor will advancing only factual allegations that are merely consistent with a defendant's liability. Id. Similarly, tendering only " naked assertions" that are devoid of " further factual enhancement" falls short of presenting sufficient factual content to permit an inference that what has been presented is more than a mere possibility of misconduct. Id. at 1949-50; see also Twombly, 550 U.S. at 563 n. 8 (A complaint states a claim where its factual averments sufficiently raise a " 'reasonably founded hope that the [discovery] process will reveal relevant evidence' to support the claim." ) (quoting Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 347, 125 S.Ct. 1627, 161 L.Ed.2d 577 (2005) & Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 741, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975)); accord Morse v. Lower Merion School Dist., 132 F.3d 902, 906 (3d Cir. 1997) (a court need not credit " bald assertions" or " legal conclusions" in assessing a motion to dismiss) (citing with approval Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1357 (2d ed.1997) (" courts, when examining 12(b)(6) motions, have rejected 'legal conclusions,' 'unsupported conclusions,' 'unwarranted inferences,' 'unwarranted deductions,' 'footless conclusions of law,' or 'sweeping legal conclusions cast in the form of factual allegations.'" ).

This is not to be understood as imposing a probability standard at the pleading stage. Iqbal, 129 S.Ct. at 1949 (" The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." ); Phillips v. County of Allegheny, 515 F.3d 224, 235 (3d Cir. 2008) (same). Instead, " [t]he Supreme Court's Twombly formulation of the pleading standard can be summed up thus: 'stating ... a claim requires a complaint with enough factual matter (taken as true) to suggest the required element ... [and provides] enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element.'" Phillips, 515 F.3d at 235; see also Wilkerson v. New Media Technology Charter School Inc., 522 F.3d 315, 321 (3d Cir. 2008) (" The complaint must state 'enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element.'" ) (quoting Phillips, 515 F.3d at 235) (citations omitted). " Once a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint." Twombly, 550 U.S. at 563.

The parties' central dispute arises in the context of a specialized industry. Powhatan sells mid-volatile metallurgical coal used to produce coke. Coke is an essential ingredient in the steelmaking process and is produced by heating metallurgical coal in the absence of oxygen inside a refectory-lined coke battery. Coke batteries typically operate 24 hours a day, 7 days a week at uniform temperatures. Given these conditions, most coke producers enter into long-term contracts with suppliers for a steady and reliable supply of coal. Even with a long-term contract in place, it is not uncommon for the contracting parties to renegotiate, amend, or otherwise modify their contract due to changes in the economy, the supply and demand for steel, and/or their specific business operations. Therefore, from the perspective of suppliers

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like Powhatan, it is critical to remain in continuous contact with their customers under long-term contract in order to (1) monitor and better understand the customer's existing operations, (2) anticipate issues and developments that may affect their future operations and coal needs, and (3) identify opportunities to pursue mutually-agreeable modifications to the contract(s) that benefit the suppliers.

In May of 2004, Crown and Powhatan entered a five-year agreement in which Powhatan retained Crown to serve as its exclusive agent for all sales of Powhatan coal in North America. Under the agreement, Crown was responsible for, among other things, devoting adequate resources to (1) maximize coal sales, (2) maintain good business relations with Powhatan's coal customers, and (3) keep in contact with key personnel at companies consuming metallurgical coal. In exchange, after Powhatan's receipt of full payment for the coal deliveries, Crown was to receive a sales commission of $2.50 per ton.

The five-year term did not begin until the first production and sale of coal was made under the agreement, which occurred on July 27, 2006. By that point in time Powhatan already had long-term supply contracts in place with three major customers: Sun Coke Company, U.S. Steel and Dofasco.

Crown alleges Powhatan breached the agreement by failing to pay $ 404,896.74 in outstanding invoices. Crown asserts the parties do not dispute: (1) their agreement is valid, (2) Crown issued invoices for all coal sold while the agreement was in effect, (3) Powhatan was paid for all sales, and (4) Crown has not been paid commissions for sales made in 2011. Accordingly, Crown maintains the material terms of the agreement are clear and unambiguous and the elements of its contract claims are established as a matter of law.

In its answer Powhatan admits generally that the agreement was valid when executed, Crown was to receive commissions for sales of coal, Crown issued invoices seeking its commissions for the coal sold during 2011, and Powhatan received full payment for the coal. Nevertheless, Powhatan denies owing Crown any money and defends on the ground that the agreement was amended in August of 2007.

Moreover, Powhatan asserts that Crown has breached the agreement as amended and counterclaims for reliance damages flowing therefrom. At the time the agreement was executed the key employee to perform Crown's duties was Courtenay O. Taplin (" Taplin" ). Taplin was a vice president at Crown and an experienced sales representative in the metallurgical coal industry. Taplin performed Crown's obligations under the agreement when it became operative in July of 2006 and continued to do so until the summer of 2007. At that point Taplin resigned and joined Compass Point Resources, LLC. " Taplin's resignation left Crown without a sales representative who possessed the knowledge, skill, customer relationships, and experience to perform Crown's duties and services to Powhatan." Counterclaim (Doc. No. 7) at ¶ 70.

Following Taplin's resignation, Powhatan informed Crown that Taplin's departure was a " material adverse event" that in its view would prevent Crown from being able to satisfy its obligations under the agreement. It further advised that it might be forced to terminate the agreement and pursue another sales agent.

According to Powhatan, Crown did not dispute this assessment. Instead, in August of 2007 Crown sent a letter to the president and chief executive officer of Powhatan in which Crown agreed to appoint Taplin as its agent with regard to servicing the three long-term North American

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customers: Sun Coke Company, U.S. Steel and Dofasco. As part of this arrangement Crown promised to (1) split its commissions with Taplin by paying him $.50 per net ton and (2) notify the aforementioned companies that Taplin would be their point of contact.

Powhatan believed that Taplin was performing the obligations of the agreement at that point by maintaining contact with the three customers, monitoring their business developments and strategies, and watching for opportunities to better Powhatan's position with them. Powhatan continued to labor under this belief until it subsequently learned that Crown had never followed through on the representations in its letter and in fact ...


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