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Jeddo Coal Company v. Rio Tinto Procurement (Singapore) PTE Ltd.

United States District Court, M.D. Pennsylvania

March 9, 2017

JEDDO COAL COMPANY, Plaintiff,
v.
RIO TINTO PROCUREMENT (SINGAPORE) PTE LTD, et al., Defendants.

          MEMORANDUM OPINION

          Robert D. Mariani United States District Judge

         I. Introduction and Procedural History

         The 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).[1] The parties have briefed the Motion to Dismiss and it is now ripe for decision.[2] For the following reasons the Court will deny Defendants' Motion to Dismiss except as it pertains to Quebec Metal Powders LTD.

         II. Factual Allegations

         Plaintiffs Complaint alleges the following facts;

         In 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).

         In 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
ii. US$30.
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."

         The 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 agreement

(Doc. 1-16 §5; Doc. 1-4 at § 2.2(a)).

         All 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).

         On 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 stated that

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).

         On 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.

         III. Standard of Review

         A 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).

         "While 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 ...

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