Opinion
Civil Action No. 05-140.
April 12, 2005
MEMORANDUM
I. INTRODUCTION
Presently before this Court is Defendant's, Chemical Injection Technologies, Inc. ("CIT"), Motion to Dismiss Plaintiff's Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the following reasons, CIT's Motion will be granted.
II. BACKGROUND
In November of 1996, the Plaintiff, Chemtech International, Inc. ("Chemtech") entered into a written Agreement (the "Agreement") with CIT. In the Agreement, CIT appointed Chemtech as the exclusive distributor of CIT'S "SUPERIOR Gas Chorlination" equipment in a territory that encompassed the countries of Thailand, Malaysia, Singapore and Taiwan (the "territory"). The Agreement provided that:
CIT will forward all sales leads, customers inquires, and all resale inquires to [Chemtech] CIT will not set up any other distributors or dealers in the territory [Thailand, Malaysia, Singapore Taiwan] . . . and will make every possible effort to avoid any "encroachment" into this territory by other CIT distributors. It is required that [Chemtech], in turn, respect the territories of other established exclusive SUPERIOR distributors, and will not represent, or sell products of, any competitor of CIT.
(Compl. Ex. A, at 1). The Agreement's length was for one-year. The Agreement also contained a renewal clause. Specifically, the renewal clause stated that "[t]his agreement will be renewed at the end of the initial period [one-year] providing that all terms and conditions have been met as stated in this agreement, and further providing that both parties are in accord as to projected unit sales." (Id. Ex. A, at 2). CIT signed the Agreement on November 8, 1996 and Chemtech signed it on November 18, 1996. Thus, the Agreement became effective on November 18, 1996.
On March 26, 2002, CIT wrote to Chemtech and stated that Chemtech would no longer serve as CIT's exclusive distributor in the territory. (See Compl. Ex. B). After this March 26, 2002 letter, Plaintiff avers a series of actions by CIT that illustrate CIT's breach of the Agreement. Specifically:
On or about April 16, 2003, Plaintiff learned that Defendant had been dealing directly with the Subdistributors and with Plaintiff's customers on or about March 26, 2002.
On or about July 1, 2004, Defendant, unilaterally, without cause, and in breach of the Agreement, revoked Plaintiff's distributor status as to certain products.
On or about August 19, 2004, Defendant unilaterally, without cause, and in breach of the Agreement, revoked Plaintiff's distributor status, and the Agreement, altogether.
As a result of the foregoing, Plaintiff has lost the profits it would have earned as a distributor of Defendant's products.
(Id. ¶ 11-14).
Plaintiff asserts four Counts in its Complaint. Count I is for breach of contract. Plaintiff asserts that CIT breached the Agreement by: (a) appointing distributors in the territory in violation of CI's right exclusivity; (b) directly dealing with CI's subdistributors and customers; (c) permitting other distributors to sell CIT's products in the territory; and (d) diverting to itself or others CIT's sales. Count II is for tortious interference with Plaintiff's existing contractual relationships. Count III is for tortious interference with Plaintiff's potential contractual relationships. Finally, Count IV is for an accounting. CIT's Motion seeks to dismiss all four counts against it. I will consider each count in turn.
III. STANDARD
A motion to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(6), tests the legal sufficiency of the complaint.Conley v. Gibson, 355 U.S. 41, 45-46 (1957). A court must determine whether the party making the claim would be entitled to relief under any set of facts that could be established in support of his or her claim. Hishon v. King Spalding, 467 U.S. 69, 73 (1984) (citing Conley, 355 U.S. at 45-46); see also Wisniewski v. Johns-Manville Corp., 759 F.2d 271, 273 (3d Cir. 1985). In considering a Motion to Dismiss, all allegations in the complaint must be accepted as true and viewed in the light most favorable to the non-moving party. Rocks v. City of Phila., 868 F.2d 644, 645 (3d Cir. 1989) (citations omitted). Exhibits which are attached to the complaint and upon which one or more claims are based can be considered in deciding a motion to dismiss pursuant to Rule 12(b)(6). See Rossman v. Fleet Bank (R.I.) Nat'l Assoc., 280 F.3d 384, 388 n. 4 (3d Cir. 2002).
IV. DISCUSSION
The Defendant has moved to dismiss all four counts of Plaintiff's Complaint. I will consider each count in turn.
A. BREACH OF CONTRACT
Defendant asserts that the Agreement was no longer in effect by the time CIT terminated Chemtech's exclusive distributor status on March 26, 2002. Alternatively, CIT argues that even if the Agreement was in effect at the time it sent its March 26, 2002 letter to Chemtech, CIT acted within its rights under the renewal clause to terminate the Agreement.
Upon examining the parties' briefs and their case citations, they appear in agreement that Pennsylvania law should apply in this case. I agree. See Kawac, Inc. v. Cohen, No. 96-0371, 1996 WL 635652, at *2 n. 1 (E.D. Pa. Nov. 1, 1996) (citing Mellon Bank, N.A. v. Aetna Business Credit, Inc., 619 F.2d 1001, 1005 n. 1 (3d Cir. 1980)). Next, it is important to place Plaintiff's Complaint and its breach of contract claim within the context of deciding a motion to dismiss under Rule 12(b)(6). In assessing Plaintiff's breach of contract claim at this stage of the litigation, the interpretation of an unambiguous contract is a matter of law for the court, and there is no reason why a court cannot decide such an issue in a motion to dismiss. See Haskins v. Point Towing Co., 421 F.2d 532, 536 (3d Cir. 1970); Janskey Fin. Leasing v. Display Data Corp., 564 F. Supp. 160, 163 (E.D. Pa. 1983) (citations omitted); Newman v. Forward Lands, Inc., 430 F. Supp. 1320, 1323 (E.D. Pa. 1970). If contractual language is subject to only one reasonable interpretation, it will be deemed unambiguous.See Arnold M. Diamond, Inc. v. Gulf Coast Trailing Co., 180 F.3d 518, 521-22 (3d Cir. 1999). However, if a party has provided a reasonable alternative reading of the contract or contractual language at issue, then the contract should be deemed ambiguous.See id.
The Agreement lacks a choice of law provision.
In this case, the Agreement became effective on November 18, 1996. The length of the Agreement was for one-year from that date. All of the allegations giving rise to Plaintiff's breach of contract claim occurred on or after March 26, 2002. Thus, Plaintiff's breach of contract claim will turn on the language of the renewal clause and whether the contract was in fact renewed and in effect when Defendant's actions giving rise to the purported breach of contract claim occurred.
The renewal clause had two prerequisites. Specifically, the first prerequisite for renewal was that the terms and conditions of the Agreement were satisfied. The second prerequisite was that the parties were in agreement as to future projected unit sales goals. These prerequisites are unambiguous as they are only entitled to one reasonable interpretation. Next, if the Agreement was not renewed through March of 2002, then, simply put, there was no Agreement for CIT to breach. Stated differently, if the Agreement was not renewed, Chemtech could have been CIT's exclusive distributor, but as there would not be an Agreement between the parties, Chemtech would be considered as CIT's exclusive distributor at-will rather than CIT's exclusive distributor contractually.
In this case, after the initial one-year period under the Agreement concluded in November of 1997, Plaintiff does not allege in the Complaint that the terms and conditions of the Agreement were met, especially when one considers that the terms and conditions had to be satisfied up to and through March 26, 2002, the date Plaintiff alleges the purported breach began. Additionally, Plaintiff's Complaint does not allege that the parties then agreed to further projected unit sales unit goals. Thus, Plaintiff's Complaint does not allege that the second prerequisite for renewal of the Agreement was met. Instead, all that is illustrated by the Complaint is that the parties continued a relationship at-will after the Agreement expired in November of 1997. When CIT terminated Chemtech's exclusive distributorship in the territory, it was not terminating a contractual relationship with Chemtech, rather, it was simply terminating an at-will relationship. Therefore, for the reasons stated above, Chemtech's breach of contract claim cannot be sustained since Plaintiff has not alleged that there was an Agreement in place at the time the purported breach began in March, 2002.
C. TORTIOUS INTERFERENCE CLAIMS
CIT has also moved to dismiss Counts II and III of the Complaint. Count II is for CIT's alleged tortious interference with Plaintiff's existing contractual relationships and Count III is for CIT's alleged tortious interference with Plaintiff's potential contractual relationships. Defendant argues that both of these claims should be dismissed based upon the "gist of the action" doctrine. As the courts have noted:
[w]hen a plaintiff alleges that the defendant committed a tort in the course of carrying out a contractual agreement, Pennsylvania courts examine the claim and determine whether the "gist" or gravaman of it sounds in contract or tort; a tort is maintainable only if the contract is "collateral" to the conduct that is primarily tortious.Sunquest Info. Sys. v. Dean Witter Reynolds, Inc., 40 F. Supp. 2d 644, 651 (W.D. Pa. 1999) (citations omitted). Stated differently, "when the tort involves actions arising from a contractual relationship, the plaintiff is limited to an action under the contract." Phila. Elec. Co. v. Gen. Elec. Power Generation Serv. Div., No. 97-4840, 1999 WL 1244419, at *6 (E.D. Pa. Dec. 21, 1999) (citation omitted). "The important difference between contract and tort actions is that the latter lie from the breach of duties imposed as a matter of social policy while the former lie for the breach of duties imposed by mutual consensus."Id. (citing Phico Ins. Co. v. Presbyterian Med. Servs., 663 A.2d 753, 757 (Pa.Super.Ct. 1995)).
Upon examining Plaintiff's two tortious interference claims, each arises from CIT's purported breach of the Agreement rather than CIT's breach of a duty imposed by social policy. For example, in the Complaint, Chemtech avers that:
Defendant acted with the intent to harm Plaintiff by using the Subdistributors as direct distributors of Defendant's products, inducing the Subdistributors to not deal with Plaintiff pursuant to Plaintiff's agreements with them, and by itself dealing directly with Plaintiff's customers, all without regard to Plaintiff's agreements with the Subdistributors and in breach of the Agreement.
(Compl. ¶ 18) (emphasis added). Furthermore, Chemtech avers that CIT dealt directly and through the Subdistributors, thereby interfering with Chemtech's prospective contractual relationships. (Compl. ¶¶ 22-23). Thus, the allegation is that CIT began to deal directly with the Subdistributors Chemtech had set up for itself under the terms of the exclusivity Agreement it had with CIT to sell CIT's products. Therefore, the allegation is that by circumventing Chemtech's role as exclusive distributor for CIT in the territory, CIT tortiously interfered with existing contracts Chemtech had with its Subdistributors as well as tortiously interfered with future contracts Chemtech might have had if it remained CIT's exclusive distributor in the territory. Such tortious interference claims are merely re-casting Chemtech's breach of contract claim against CIT. As such, the Agreement is not collateral to these claims and Counts II and III are therefore barred by the "gist of the action" doctrine.
D. ACCOUNTING
The sole remaining count is Count IV of the Complaint. In Count IV of the Complaint, Chemtech seeks an accounting "for all profits received as a result of [CIT's] conduct." (Compl.). However, Chemtech concedes that there is no independent cause of action for an accounting and that it is only entitled to an accounting if it prevails on one of its other causes of actions. (See Pl.'s Rep. to Def.'s Rep. to Pl.'s Resp. to Def.'s Mot. Dismiss, at 2). As the remaining counts have been dismissed, Plaintiff's accounting claim must also be dismissed.
V. CONCLUSION
I have concluded that all of the claims asserted in the Complaint should be dismissed. First, I concluded that Plaintiff has not alleged that the Agreement was renewed up through March, 2002, thereby precluding Plaintiff's breach of contract claim. Second, I concluded that Plaintiff's tortious interference with existing and potential contractual relationships should be dismissed under the "gist of the action" doctrine. Finally, I dismissed Plaintiff's claim for an accounting as both parties conceded that the claim was premised on one of the other claims remaining active.
An appropriate Order follows.