United States District Court, M.D. Pennsylvania
D. Mariani United States District Judge
Introduction and Procedural History
above captioned matter arises out of a dispute regarding a
multi-year installment contract for the provision of coal.
Plaintiff, Jeddo Coal Company, filed a Complaint, (Doc. 1),
on April 14, 2016, seeking damages for an anticipatory breach
of contract (Count I), and breach of contract (Counts II,
III, & IV). Plaintiff also seeks a declaratory judgment
that the contract's damages provision is enforceable
(Count V). Presently before the Court is a Motion to Dismiss,
(Doc. 14), filed by defendant Rio Tinto Procurement
(Singapore) PTE LTD ("Rio Tinto"), as well as
defendants Rio Tinto Fer et Titane Inc., Rio Tinto Alcan
Inc., and High Purity Iron Inc. (collectively "Relevant
Companies"). Rio Tinto and the Relevant Companies
(collectively "Defendants") seek complete dismissal
of Plaintiff's Complaint pursuant to Federal Rule of
Civil Procedure 12(b)(6). The parties have briefed the Motion to
Dismiss and it is now ripe for decision. For the following
reasons the Court will deny Defendants' Motion to Dismiss
except as it pertains to Quebec Metal Powders LTD.
Complaint alleges the following facts;
2011, Plaintiff entered into a multi-year installment
contract for the provision of coal ("Original
Agreement"). (Doc. 1 at¶¶ 3-4, 16). The
Original Agreement was signed by Plaintiff and by Rio Tinto
"on its own behalf and as agent severally on behalf of
each of the Relevant Companies." (Id. at
¶¶ 18-19). "Relevant Companies" was
defined in the Original Agreement as Rio Tinto Fer, and Rio
Tinto Alcan. (Id. at ¶ 19). The Original
Agreement provided that between 2013 and 2016, Rio Tinto, Rio
Tinto Fer, and Rio Tinto Alcan would collectively purchase
72, 000 tons of coal per year from Plaintiff. (Id.
at ¶¶ 3, 16, 23).
2012, Rio Tinto, Rio Tinto Fer, and Rio Tinto Alcan
collectively purchased 72, 000 tons of coal at the Original
Agreement price. (Id. at ¶ 25). In 2013,
however, they informed Plaintiff that they would no longer
purchase coal under the Original Agreement. (Id. at
¶ 26). In response, Plaintiff agreed to modify the
Original Agreement's price and quantity schedules.
(Id. at¶ 27). Consequently, in 2014, Plaintiff
and Rio Tinto, Rio Tinto Fer, and Rio Tinto Alcan executed a
"Variation Agreement" that modified the Original
Agreement. (Id. at ¶ 28). In addition to
modifying price and quantity schedules, the Variation
Agreement added High Purity Iron as a "Relevant Company,
" and extended the contract term to from 2016 to 2019,
(Id. at ¶¶ 4, 27-28, 30), The Variation
Agreement also contained the following clause:
From 1 January 2014, if the Rio Tinto Party takes delivery of
less tonnage than indicated in Schedule B, Clause 2 as
amended, in any Contract Year, Rio Tinto Party will pay the
Supplier the equivalent of the greater of:
i. the Supplier's lost gross profit (defined as the
contract reference price for 9% ash less direct costs); and
for each ton of Product not taken.
(Doc. 1 at ¶ 46; Doc. 1-16 § 3(e)). Except as
modified by the Variation Agreement, the Original Agreement
remained in place. (Id. at ¶ 31). Collectively,
these agreements formed the "Amended Agreement" or
simply the "contract."
Amended Agreement is composed of a number of documents.
According to the contract, there is a hierarchy within the
documents, so that if there is a conflict among them, certain
documents prevail over others. (Doc. 1-4 at § 2.2(a)).
The hierarchy is as follows:
1. Variation Agreement;
2. Agreement Form;
3. Schedule F (Special Conditions);
4. Schedule E (Site Specific Terms);
5. Schedule A (General Conditions);
6. Schedule H (Relevant Companies);
7. Schedule B (Products and Specifications);
8. Schedule C (prices);
9. Schedule D (Delivery Schedule);
10. Schedule G (Late Charges)
11. Any other documents attached or referred to in the
(Doc. 1-16 §5; Doc. 1-4 at § 2.2(a)).
parties performed under the contract without incident in 2014
and 2015. (Doc. 1 at ¶ 57). In 2016, the contract called
for Defendants to purchase 44, 000 net wet tons of coal,
(Id. at ¶ 40). On December 18, 2015, Rio Tinto
wrote a letter informing Plaintiff that "[unexpected and
unforeseeable market conditions" had placed pressure on
Rio Tinto's business and stating that it "would like
to commence a discussion to review the Agreement to reflect
the current business outlook for" Rio Tinto.
(Id. at ¶¶ 58-61; Doc. 1-17 at 1).
Representatives of Plaintiff and Rio Tinto then spoke by
phone, and Rio Tinto informed Plaintiff that, because of
price considerations, Rio Tinto was not inclined to purchase
coal from Plaintiff in 2016. (Doc. 1 at ¶¶ 62-63).
February 18, 2016, Plaintiff sent a follow up letter where it
sought "to determine [Rio Tinto's] intentions
regarding its contractual commitment with [Plaintiff] for the
2016 shipping season." (Doc. 1-17 at 2; Doc. 1 at¶
69;). On March 4, 2016, Plaintiff sent another letter to Rio
Tinto in which it sought payment for 8, 800 tons of coal for
which Plaintiff had already sent an invoice to Defendants.
(Doc. 1 at ¶ 72-73; Doc. 1-17 at 4). In the same letter,
Plaintiff also stated that, if Rio Tinto did not plan to
purchase coal in 2016, Plaintiff "expect[ed] to receive
the $30 per ton 'take or pay' compensation
provided" for in the contract. (Doc. 1-17 at 4; Doc. 1
at ¶ 72-74). By letter dated March 8, 2016, Rio Tinto
the business conditions facing us now are particularly bad
and we do not expect to be able to take product from you
while those conditions persist. Naturally it is beyond our
ability to know or predict for how long those conditions will
last, but, as it stands, we will not be able to take product
from you in 2016.....
As to the invoice for the stored product and storage fees, we
were obviously very surprised to receive it after telling you
that we could not take product this year.
(Doc. 1-17 at 6; Doc. 1 at ¶¶ 75-77).
March 9, 2016, Plaintiff responded with d letter
"formally demand[ing] payment of the sums we are owed
under the Contract for the 2016 Shipping season" and
attaching invoices for payment. (Doc. 1 at ¶¶
79-81; Doc. 1-17 at 8-13). By letter dated Mach 31, 2016, Rio
Tinto stated that "[g]iven our clear, early indication
that we would not take tonnage in 2016, your peremptory
issuing of the invoices is not in the spirt of our
relationship and we had hoped to have greater cooperation and
appreciation of our difficult position." (Doc. 1 at
82-84, 86; Doc. 1-17 at 14). It went on to dispute the
amounts Plaintiff claimed, including stating that it was Rio
Tinto's "view that the $30 per ton is a penalty,
being disproportionate to the loss [Plaintiff] would
incur." (Doc. 1 at 84-85; Doc. 1-17 at 15). Plaintiff
then initiated the present lawsuit on April 14, 2016.
Standard of Review
complaint must be dismissed under Federal Rule of Civil
Procedure 12(b)(6) if it does not allege "enough facts
to state a claim to relief that is plausible on its
face." Bell Atl. Corp, v. Twombly, 550 U.S.
544, 570, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007).
"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." Ashcrott v, Iqbal, 556
U.S. 662, 678, 129 S.Ct, 1937, 1949, 173 L.Ed.2d 868 (2009).
a complaint attacked by a Rule 12(b)(6) motion to dismiss
does not need detailed factual allegations, a plaintiff's
obligation to provide the 'grounds' of his
'entitlement to relief requires more than labels and
conclusions, and a formulaic recitation of a cause of
action's elements will not do." Twombly,
550 U.S. at 555 (internal citations and alterations omitted).
In other words, "[f]actual allegations must be enough to
raise a right to relief above the speculative level."
Id. A court "take[s] as true all the factual
allegations in the Complaint and the reasonable inferences
that can be drawn from those facts, but... disregard[s] legal
conclusions and threadbare recitals of the elements of a
cause of action, supported by mere conclusory
statements." Ethypharm S.A. France v. Abbott
Laboratories, 707 F.3d 223, 231 n.14 (3d Cir. 2013)
(internal citations and quotation marks omitted).
Twombly and Iqbal require [a court] to take
the following three steps to determine the sufficiency of a
complaint: First, the court must take note of the elements a
plaintiff must plead to state a claim. Second, the court
should identify allegations that, because they are no more
than conclusions, are not entitled to the assumption of
truth. Finally, where there are well-pleaded factual
allegations, a court should assume ...