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Rite Aid Hdqtrs. Corp. v. Orly Plastics Enterprise, Inc.

United States District Court, M.D. Pennsylvania

November 20, 2014



JOHN E. JONES, III, District Judge.

Four motions are presently pending before the Court in this action: Plaintiff's Motion to Remand to State Court; Defendants' Motion to Dismiss; Plaintiff's Motion for Leave to Amend the Complaint; and the Motion of Thomas Thomas & Hafer LLP to Withdraw as Counsel for Defendants. Based on the discussion herein, the Court will remand this matter to the Court of Common Pleas of Cumberland County and, accordingly, abstain from adjudicating the other motions.


This action, sounding in breach of contract and unjust enrichment, involves certain transactions between Plaintiff, Rite Aid HDQTRS. Corp. ("Rite Aid"), a Delaware corporation with a principal place of business in Pennsylvania, and Defendants, Orly Plastics Enterprise, Inc. and Orly Industry, Inc., based in New York. According to the Complaint, Rite Aid and Orly Plastics entered into a Master Purchase Agreement (the "MPA" or the "Agreement") effective August 1, 2010, and expiring July 31, 2011, pursuant to which Rite Aid agreed to purchase plastic trash can liners ("liners") from Orly Plastics. (Doc. 1-1, ¶¶ 10, 16). Although the MPA expired on a date certain, it could be "extended by the mutual written consent of the parties." ( Id. Ex. A, ¶ 2.8). The Agreement delineated certain size, thickness, and quantity specifications for the liners. ( Id. ¶ 10). In terms of the parties obligated under the MPA, it stated that it "shall be binding on and shall benefit any and all successors, trustees, permitted assigns and other successors in interest of the Parties." ( Id. ¶ 15). It also contained an alternative dispute resolution ("ADR") clause and a provision stating that the Agreement would be governed by the laws of Pennsylvania and that litigation not subject to ADR "shall be brought exclusively in the Court of Common Pleas for Cumberland County, Pennsylvania." ( Id. ¶ 6; Ex. A, ¶ 6.6).

The parties' transactions commenced in August 2010 and continued through the fall of 2011. ( Id. ¶ 16).

On August 1, 2011, Orly Industry requested that "the name on file" with Rite Aid be changed from Orly Plastics to Orly Industry. ( Id. ¶ 17). As no new vendor paperwork was filed and an IRS W-9 form was not provided, Rite Aid did not treat Orly Industry as a new vendor but as the alter ego of Orly Plastics. ( Id. ). Rite Aid maintains that Orly Plastics and Orly Industry shared the same address, phone number, facsimile number, email address, principal, and computers, and were essentially the same entity or that Orly Industry was the successor of Orly Plastics. ( Id. ¶¶ 9, 20).[1]

In the fall of 2011, Rite Aid became suspicious that Defendants were shortchanging Rite Aid with respect to the quantity included in and the weights of the liner shipments. ( Id. ¶ 23). Random inspections of cases of liners revealed that all of the examined cases were light in weight and/or short in count. ( Id. ¶ 24). Rite Aid believes and avers that Defendants had been deficiently fulfilling its orders since the inception of the MPA; by its calculations, Rite Aid was shortchanged by an average of 29.07% of what Rite Aid had paid and what Defendants were required to provide under the MPA. ( Id. ).

Rite Aid thereafter contacted Defendants' principal, Mr. Jacob Torkieh, in an effort to resolve the issue and requested $200, 000, the amount Rite Aid believed it was owed. ( Id. ¶ 25). Mr. Torkieh did not deny the allegation but, instead, outlined various ways Orly Industry would "make it up" to Rite Aid. ( Id. ).

As of September 28, 2011, Rite Aid had paid Defendants a total of $724, 824.20. ( Id. ¶ 26). After it became apparent that Defendants had been defrauding them, Rite Aid ceased payment on all further invoices from Orly Industry. ( Id. ). Rite Aid's Senior Buyer sent a letter to Orly Industry dated December 29, 2011, demanding repayment in the amount it had calculated in liner shortages, advising that it would not make payments on the then-current invoices which totaled $72, 563.05, and requesting mediation pursuant to the MPA's ADR clause. ( Id. ¶ 27).

Orly Industry never responded to the letter and filed a lawsuit against Rite Aid in state court in New York seeking payment of outstanding invoices. ( Id. ¶ 28). Rite Aid removed the case to the United States Court for the Eastern District of New York and thereafter filed a motion to dismiss. ( Id.; see Orly Industry, Inc. v. Rite Aid HDQTRS. Corp., No. 12-855 (E.D.N.Y.)). On August 23, 2013, the New York district court issued an order granting the motion in part on improper venue grounds. (Doc. 6-2). The court reasoned that the MPA's mandatory forum selection clause governed those transactions predating the expiration of the Agreement ( i.e., the purchases occurring before July 31, 2011) and that, even though Orly Industry was a nonsignatory to the MPA, it was bound by the same because it was closely related to Orly Plastics. ( Id. pp. 8-10). Since no written consent had been executed extending the Agreement, the court determined that the transactions post-dating July 31, 2011 were not covered by the MPA and, thus, that its forum selection clause was inapplicable to those later purchases. ( Id. p. 8). Following the district court's decision, Rite Aid answered the pleading and asserted counterclaims based on breach of contract and unjust enrichment. The post-expiration purchases continue to be litigated in the New York district court.

In the instant matter, Rite Aid advances claims sounding in breach of contract or implied contract (Count I) and unjust enrichment (Count II). (Doc. 1-1, ¶¶ 30-42). It calculates damages as follows:

Based upon the amount Rite Aid paid to Orly Plastics and Orly Industry from the inception of the MPA through September 2011 and the average liner weight shortage of 29.07%, Rite Aid is entitled to a rebate in the amount of $210, 706.33. Deducting the $72, 563.05 amount in invoices put on hold by Rite Aid with a discount of 29.07% to account for Orly Industry's short orders, Rite Aid is owed $160, 109.46.

( Id. ¶ 29).


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