United States District Court, W.D. Pennsylvania
MERCHANTS DISTRIBUTORS, LLC and, CAPITAL RESCOURCES, LLC, Plaintiffs,
HAROLD FRIEDMAN INC., d/b/a FRIEDMAN'S FRESHMARKETS, Defendant.
J. Schwab, United States District Judge
Merchants Distributors, LLC ("MDI") and Capital
Resources, LLC ("Capital") (together,
"Plaintiffs"), initiated this breach of contract
and declaratory judgment action by filing a Complaint against
Defendant, Harold Friedman Inc. ("Defendant" or
"HFI"), on January 26, 2018. (ECF 1). Defendant
filed an Answer, Affirmative Defenses and Counterclaims for
breach of contract, breach of confidential relationship, and
tortious interference. (ECF 9).
before the Court is Plaintiffs' Motion to Dismiss
Defendant's Counterclaims pursuant to Federal Rule of
Civil Procedure 12(b)(6) with a brief in support (ECF 17 and
18). Defendant filed a Response in Opposition (ECF 21), to
which Plaintiffs filed a Reply. (ECF 22). For the reasons
that follow, Plaintiffs' Motion to Dismiss will be
granted, and Defendant's Counterclaims will be
STANDARD OF REVIEW
purposes of a Rule 12(b)(6) motion to dismiss, claims and
counterclaims are treated equivalently and therefore the
standard of review is the same. Red Bend Hunting &
Fishing Club v. Range Resources-Appalachia, LLC, No.
4:16-CV-00864, 2016 WL 7034686, at *4 n.35 (M.D. Pa. Dec. 2,
2016). Under Rule 12(b)(6), a counterclaim must be dismissed
for "failure to state a claim upon which relief can be
granted." Although detailed factual pleading is not
required, a counterclaim must set forth sufficient factual
allegations that, taken as true, set forth a plausible claim
for relief. Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). The plausibility standard does not require a showing
of probability that a claim has merit, Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 556 (2007), but it does
require that a pleading show "more than a sheer
possibility that a defendant has acted unlawfully."
Iqbal, 556 U.S. at 678.
upon the landmark United States Supreme Court decisions in
Twombly and Iqbal, the United States Court
of Appeals for the Third Circuit explained that a District
Court must undertake the following three steps to determine
the sufficiency of a claim:
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 their veracity and then determine whether
they plausibly give rise to an entitlement for relief
Connelly v. Steel Valley Sch. Dist., 706 F.3d 209,
212 (3d Cir. 2013) (citation omitted). The final step
requires this Court to consider the specific nature of the
claims presented and to determine whether the facts pled to
substantiate the claims are sufficient to show a
"plausible claim for relief." Covington v.
Int'l Ass'n of Approved Basketball Officials,
710 F.3d 114, 118 (3d Cir. 2013).
determining the adequacy of a counterclaim, the Court must
accept the factual allegations as true and draw all
reasonable inferences in the light most favorable to the
defendant. GE Capital Mortg. Servs., Inc. v. Pinnacle
Mortg. Inv. Corp., 897 F.Supp. 854, 860 (E.D. Pa. 1995).
However, the Court need not accept inferences or conclusory
allegations that are unsupported by the facts set forth in
the claim. See Reuben v. U.S. Airways, Inc., 500
Fed.Appx. 103, 104 (3d Cir. 2012) (citing Iqbal, 556
U.S. at 678); Fowler v. UPMC Shadyside, 578 F.3d
203, 210-11 (3d Cir. 2009) (stating that District Courts
"must accept all of the complaint's well-pleaded
facts as true, but may disregard any legal
Court may not dismiss a counterclaim merely because it
appears unlikely or improbable that the defendant can prove
the facts alleged or will ultimately prevail on the merits.
Twombly, 550 U.S. at 563 n.8. Instead, this Court
must ask whether the facts alleged raise a reasonable
expectation that discovery will reveal evidence of the
necessary elements. Id. at 556. Generally speaking,
a claim that provides adequate facts to establish "how,
when, and where" will survive a motion to dismiss.
Fowler, 578 F.3d at 212. In short, a motion to
dismiss should be granted if a party fails to allege facts,
which could, if established at trial, entitle him or her to
relief. Twombly, 550 U.S. at 563 n.8.
accordance with the foregoing standard of review, the
following facts are derived from Defendant's
Counterclaims and are accepted as true solely for the purpose
of adjudicating Plaintiffs' Motion to
admits that it entered into a number of contractual
agreements with Plaintiffs on October 14, 2016, regarding the
provision of wholesale grocery services as well as the
lending of money. (ECF 1, ¶ 7; ECF 9, ¶ 7).
Plaintiffs sued Defendant for breach of contract after
Defendant allegedly failed to make payments that were due
under the agreements. See ECF 1, ¶¶ 7-21.
Defendant filed counterclaims against Plaintiffs for breach
of contract and breach of the covenant of good faith and fair
dealing, claiming that the agreements related to
"resets" of Defendant's grocery stores that
occurred between August 31, 2015, and September 15, 2015.
See ECF 9, ¶¶ 43, 45, 68-70. Defendant
alleges that Plaintiffs did not perform the resets
competently, which resulted in problems for Defendant's
grocery business, including "serious cash flow
issues." See Id. ¶¶ 46-52. In
addition, Defendant claims that Plaintiffs began to require
"pre-wire payment" before making product
deliveries, which purportedly added to its financial
problems. Id. ¶ 54. Defendant also filed
counterclaims against Plaintiffs for breach of a confidential
relationship and tortious interference, alleging that
Plaintiffs shared confidential information with a potential
purchaser and interfered with its efforts to sell the
business to third parties. Id. ¶¶ 59,
75-77, 81, 84. Defendant claims that it suffered millions of
dollars in damages as a result of Plaintiffs' conduct and
had to close its business in January 2018. Id.
Choice of Law
contractual agreements attached to Plaintiffs' Complaint
each contain a provision specifying that the agreement shall
be governed by and construed in accordance with North
Carolina law.See ECF 1-2 at 7; ECF 1-3 at 9;
ECF 1-10 at 2; ECF 1-11 at 9. Despite the choice of law
provision, the parties analyzed Defendant's breach of
contract counterclaim under both Pennsylvania and North
Carolina law, but they analyzed Defendant's tort
counterclaims under Pennsylvania law. Therefore, the Court
must begin its analysis by determining what law applies to
the issues presented by the parties. As a federal court
sitting in diversity, we must apply the choice of law rules
of the forum state, ...