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Frank Krammes Timber Harvesting, Inc. v. Letourneau Enterprises, LLC

United States District Court, M.D. Pennsylvania

September 30, 2019

FRANK KRAMMES TIMBER HARVESTING, INC., Plaintiff,
v.
LETOURNEAU ENTERPRISES, LLC, Defendant.

          MEMORANDUM OPINION

          ROBERT D MARIANI UNITED STATES DISTRICT JUDGE

         I. Introduction

         Presently before the Court is a Report and Recommendation ("R&R") (Doc. 17) by Magistrate Judge Martin Carlson in which he recommends that the Court grant Defendant Letourneau Enterprises' Motion to Dismiss for Failure to State a Claim (Doc. 2) as to Plaintiff Frank Krammes Timber Harvesting, Inc.'s ("Krammes") Complaint (Doc. 1-1). Krammes has filed Objections to the Magistrate Judge's R&R (Doc. 18) and a brief in support of those Objections (Doc. 19), to which Defendant has filed a brief in opposition to Plaintiffs Objections (Doc. 20). Additionally, Plaintiff has filed a reply brief. (Doc. 21). For the reasons that follow, upon de novo review of Magistrate Judge Carlson's R&R, the Court will overrule Plaintiffs Objections and adopt as modified the pending R&R. Defendant's motion will be granted. Count I of Plaintiffs Complaint will be dismissed with prejudice and Counts II and III of Plaintiffs Complaint will be dismissed without prejudice. Plaintiff will be granted leave to amend those Counts dismissed without prejudice.

         II. Analysis

         A District Court may "designate a magistrate judge to conduct hearings, including evidentiary hearings, and to submit to a judge of the court proposed findings of fact and recommendations for the disposition" of certain matters pending before the Court. 28 U.S.C. § 636(b)(1)(B). If a party timely and properly files a written objection to a Magistrate Judge's Report and Recommendation, the District Court "shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made." Id. at § 636(b)(1)(C); see also, Brown v. Astrue, 649 F.3d 193, 195 (3d Cir. 2011); M.D. Pa. Local Rule 72.3.

         The operative complaint is the Complaint filed in the Court of Common Pleas of Schuylkill County and removed to this Court on October 1, 2018, by Defendant Letoumeau Enterprises, LLC. (Doc. 1). The Complaint contains three counts: Count I - Declaratory Relief as to the parties' relationship embodied in a contract; Count II - Promissory Estoppel; and Count III - Unjust Enrichment. (Doc. 1-1). Thereafter, Letoumeau filed a Motion to Dismiss for Failure to State a Claim (Doc. 2), which the Court referred to Magistrate Judge Carlson for the preparation of an R&R. In August 2019, the Magistrate Judge issued the R&R (Doc. 17) presently before this Court.

         In the R&R, Magistrate Judge Carlson recommends that this Court grant Letourneau's motion to dismiss with respect to Krammes' breach of contract claim because "a contract which clearly provides that the plaintiff will receive no minimum number of loads cannot be read as requiring the delivery of some minimum quantity of loads" and thus the "breach of contract fails as a matter of law and should be dismissed." (Doc. 17, at 1). Magistrate Judge Carlson concluded that the agreement between the parties "did not amount to an output contract" (id. at 16) and that the agreement between the parties (Doc. 1-1, at 31) was a completely integrated and unambiguous agreement that precluded the introduction of any parol evidence to establish that the agreement otherwise amounted to an output contract (Doc. 17, at 13-16). Additionally, Magistrate Judge Carlson recommends that this Court grant Letoumeau's motion to dismiss with respect to the promissory estoppel and unjust enrichment claims because the existence of a written agreement precludes both claims. (Id. at 17-20).

         Krammes objects to the R&R's recommendation that Letoumeau's motion to dismiss be granted with respect to its breach of contract claim on the grounds that Magistrate Judge Carlson erred "in finding that the September 11, 2017 Commitment for Plaintiff to take all of the Defendant's output was not part of the agreement between the parties and was parol evidence that could not be considered." (Doc. 19, at 6). Further, "the Magistrate Judge erred in interpreting in isolation the term 'no minimum/maximum number of loads' as meaning that Defendant had no obligation to bring any loads at all, under Pennsylvania law" and in concluding that no output contract exists. (Id. at 9). Additionally, Krammes contends that "if the Magistrate's logic is the contract really was not a contract, " then it should not be precluded from asserting alternative claims of promissory estoppel and unjust enrichment. (Doc. 19, at 17). The Court will address Krammes' objections with respect to the breach of contract claim and the promissory estoppel and unjust enrichment claims separately.

         1. Breach of Contract

         Krammes asserts that Magistrate Judge Carlson "erred in interpreting the September 13, 2017 agreement (Doc. 1-1, at 4) as not being an output contract and in finding Defendant had no obligation to bring any loads of materials to Plaintiff under the contract." (Doc. 19, at 13). The Court finds that Plaintiffs objection is without merit and cannot conclude that the contract between the parties amounted to an output contract.

         To the extent that Krammes advances arguments under the Pennsylvania Uniform Commercial Code ("Pennsylvania UCC"), 13 Pa. Cons. Stat. §§ 2101-2107, that the agreement involved in this matter is an output contract, the Court will assess Krammes' arguments assuming that the Pennsylvania UCC applies. Under the Pennsylvania UCC, an output contract is a type of contract that "measures the quantity by the output of the seller... as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output... may be tendered or demanded." 13 Pa. Cons. Stat. § 2306(a). Put differently, based on the statutory language, an output contract, by definition, "measures the quantity by the output of the seller." Id.

         Here, as the Magistrate Judge noted, nothing in the agreement (Doc. 1-1, at 4) suggests that Letoumeau agreed to provide for purchase by Krammes any output in its entirety or any other specified amount. Indeed, the agreement only specifies an obligation to accept "any and all loads of timber... brought... by Letourneau Enterprises, LLC." (Id.). The agreement is clear that an obligation exists for Krammes to accept what Letourneau brings, but the agreement lacks any indication that Letourneau was required to supply Krammes with any amount of "timber, wood chips, and stump grindings." (Doc. 1-1, at 4). Thus, the Court cannot conclude that the agreement is an output contract when it does not identify any output - a crucial element to an output contract.

         Krammes relies on the September 11, 2017, letter (Doc. 1-1, at 5) to establish that the agreement is an output contract, which it argues the Magistrate erred in failing to admit (Doc.19, at 6-8). The Court disagrees. As Magistrate Judge Carlson noted:

In order to determine whether a writing is the parties' complete expression of their agreement, the court must examine the writing and "if it appears to be a contract complete within itself, couched in such terms as import a complete legal obligation without any uncertainty as to the object or extent of the [parties'] engagement, it is ...

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