Best Effort First Time, LLC et al v. Southside Oil, LLC
Filing
51
MEMORANDUM OPINION. Signed by Judge George Levi Russell, III on 3/29/2019. (dass, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
BEST EFFORT FIRST TIME, LLC, et al., *
Plaintiffs,
*
v.
*
SOUTHSIDE OIL, LLC,
*
Defendant.
Civil Action No. GLR-17-825
*
MEMORANDUM OPINION
THIS MATTER is before the Court on Defendant Southside Oil, LLC’s
(“Southside”) Motion for Judgment on the Pleadings (the “Motion for Judgment”) (ECF
No. 43) and Plaintiffs’ Motion for Leave to File a Second Amended Complaint (the
“Motion to Amend”) (ECF No. 47). This action arises from a contract dispute between
Southside, a wholesale distributor of ExxonMobil motor fuels, and Plaintiffs, who are ten
Maryland retail gasoline stations.1 The Motions are ripe for disposition, and no hearing is
necessary. See Local Rule 105.6 (D.Md. 2018). For the reasons outlined below, the Court
will grant Southside’s Motion and deny Plaintiffs’ Motion.
I.
BACKGROUND2
In 2009, ExxonMobil sold its marketing assets, including some gas stations. (Am.
1
The ten Plaintiffs are Best Effort First Time, LLC; HMA, Inc.; AJ&R Petroleum,
Inc.; Fuel Management, Inc.; Energy Management, Inc.; Duncan Services, Inc.; Japan Plus,
Inc.; Japan Plus Two, Inc.; Japan Plus Four, Inc.; and Jamal & Luqman, Inc. (Am. Compl.,
ECF No. 14).
2
Unless otherwise noted, the Court takes the following facts from Plaintiffs’
Amended Complaint (ECF No. 14) and accepts them as true. See Erickson v. Pardus, 551
U.S. 89, 94 (2007) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
Compl. ¶ 6, ECF No. 14). Plaintiffs’ stations were some of those sold from ExxonMobil to
Southside. (Id.). Southside bought Exxon-branded fuel for resale directly from
ExxonMobil under a dealer agreement wherein Southside “step[ped] into the shoes of”
ExxonMobil as Plaintiffs’ landlord and supplier of fuels. (Id. ¶¶ 5–6). Prior to closing the
deal, Plaintiffs, along with others, instituted lawsuits against ExxonMobil and the proposed
purchasers, including Southside. (Id. ¶ 7). Those lawsuits settled on the basis of
individualized agreements between Southside and each Plaintiff (the “Settlement
Agreements”). (Id. ¶ 8).
Included in the Settlement Agreements were terms permitting Plaintiffs to purchase
the service stations they had previously leased from ExxonMobil. (Id. ¶ 9). Each Plaintiff’s
right to purchase was conditioned upon entering into twenty-year fuel supply contracts with
Southside (the “Supply Contracts”). (Id.). The Settlement Agreements required each
Plaintiff to purchase all of its fuel from Southside for the twenty-year term of the Supply
Contracts and to purchase a minimum number of gallons every year. (Id.).
The Settlement Agreement negotiations focused on the per-gallon price for each
grade of gasoline and diesel fuel in the Supply Contracts. (Id. ¶ 10). Plaintiffs sought a
price that would enable their business to be profitable while meeting the minimum volume
requirement. (Id.). Plaintiffs also did not want an “open-price term” contract because they
wanted to limit the amount Southside could increase the fuel prices. (Id. ¶¶ 10–11). An
open-price term contract permits the seller to increase the price to whatever the market will
bear. (Id. ¶ 12).
Plaintiffs and Southside ultimately agreed on a “rack plus” pricing formula.
2
(Id. ¶ 13). The “rack plus” pricing formula involves two numbers: the rack price and the
mark-up. (Id. ¶ 13). The rack price is the per-gallon price refiners, like ExxonMobil, charge
to distributors, like Southside, when distributors purchase fuel in full transport loads.
(Id. ¶ 14). The rack price is essentially the distributor’s cost for the product. (Id. ¶¶ 13–15).
The mark-up is the distributor’s built-in profit margin, which when added to the rack price
yields the mark-up price. (Id. ¶¶ 16–17).
The Settlement Agreements provided that Southside would add a cents-per-gallon
mark-up of between 1.5¢ and 6.5¢, and each Plaintiff negotiated its particular rack-plus
price in their individual Supply Contracts with Southside. (Id. ¶¶ 17, 26). The parties also
agreed that Plaintiffs would pay federal and state taxes, environmental fees, and freight
charges on top of the rack-plus per-gallon price. (Id. ¶ 18). The Supply Contracts contained
identical arbitration provisions (the “Arbitration Provisions”), which provided that, “[a]ny
monetary claim arising out of or relating to this agreement, or any breach thereof, shall be
submitted to arbitration . . .” (Id. ¶ 30).
In 2015, Southside began charging Plaintiffs a per-gallon price that was
considerably more than the rack price plus the agreed-upon cents-per-gallon mark-up.
(Id. ¶ 38). Southside charged Plaintiffs a mark-up of as much as 12¢ or 13¢. (Id.). Southside
had negotiated an agreement with ExxonMobil wherein ExxonMobil would sell its fuels
to Southside at a per gallon price that was “considerably lower” than the price it charged
to other distributors. (Id. ¶ 39). Southside then calculated the rack price based on the nondiscounted prices ExxonMobil charged other distributors instead of its own discounted
3
price, which it regarded as “something different.” (Id.).
When Plaintiffs realized that the prices Southside charged other Maryland
ExxonMobil stations with open-price term contracts were “considerably lower than the
prices” Southside charged Plaintiffs “for the very same products, at the very same time,”
they asked Southside to provide ExxonMobil’s rack prices so they could determine if
Southside was charging them more than the permitted cents-per-gallon amounts. (Id. ¶ 40).
Southside provided Plaintiffs with price information, which showed that Southside’s prices
to Plaintiffs were considerably higher than the applicable cents-per-gallon amount above
the rack prices, despite Southside’s claim that they were not. (Id. ¶¶ 41, 43). Southside told
Plaintiffs that “rack prices” within the meaning of their contracts were not what Southside
paid to ExxonMobil but rather the prices ExxonMobil charged other distributors who did
not have a special discounted agreement. (Id. ¶¶ 42–43).
In order to earn a profit, Plaintiffs had to raise their retail prices above a competitive
level. (Id. ¶ 45). As a result, Plaintiffs lost business to their lower-priced competitors,
including other Maryland Exxon dealers who purchased from Southside at lower prices.
(Id.).
On March 27, 2017, Plaintiffs sued Southside. (ECF No. 1). In their five-count
Amended Complaint, they allege: Breach of Contract – Pricing (Count I); Breach of
Contract – Rebates (Count II); violation of 15 U.S.C. § 13 (2018) – Price Discrimination
(Count III); Lack of Consideration for the Arbitration Provision (Count IV); and
Arbitration Provision – Unlawful Waiver of Rights (Count V). (Am. Compl. ¶¶ 48–81).
On March 30, 2018, the Court dismissed Counts IV and V, and compelled Plaintiffs
4
to arbitrate Counts I and II. (Mar. 30, 2018 Mem. Op. at 27, ECF No. 38). The only
remaining claim before this Court, therefore, is Count III, for which Plaintiffs request
declaratory and injunctive relief. (Am. Compl. at 23).
On April 30, 2018, Southside filed its Motion for Judgment on the Pleadings. (ECF
No. 43). On May 14, 2018, Plaintiffs filed an Opposition. (ECF No. 46). Plaintiffs
contemporaneously filed their Motion for Leave to File a Second Amended Complaint,
seeking to address the deficiencies in Count III of its Amended Complaint. (ECF No. 47).
On May 29, 2018, Southside filed its Reply, (ECF No. 48), and its Opposition to Plaintiffs’
Motion (ECF No. 49). To date, the Court has no record the Plaintiffs filed a Reply.
II.
A.
DISCUSSION
Southside’s Motion for Judgment on the Pleadings
1.
Standard of Review
Southside moves under Federal Rule of Civil Procedure 12(c) for judgment on the
pleadings. “Under Rule 12(c), a party may move for judgment on the pleadings any time
after the pleadings are closed, as long as it is early enough not to delay trial.” Prosperity
Mortg. Co. v. Certain Underwriters at Lloyd’s, No. GLR-12-2004, 2013 WL 3713690, at
*2 (D.Md. July 15, 2013). The pleadings are closed when the defendant files an answer.
See Burbach Broad. Co. of Del. v. Elkins Radio Corp., 278 F.3d 401, 405 (4th Cir. 2002).
A Rule 12(c) motion is governed by the same standard as Rule 12(b)(6) motions to
dismiss. Id. at 406. The purpose of a Rule 12(b)(6) motion is to “test[ ] the sufficiency of
a complaint,” not to “resolve contests surrounding the facts, the merits of a claim, or the
applicability of defenses.” King v. Rubenstein, 825 F.3d 206, 214 (4th Cir. 2016) (quoting
5
Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999)). A complaint fails to
state a claim if it does not contain “a short and plain statement of the claim showing that
the pleader is entitled to relief,” Fed.R.Civ.P. 8(a)(2), or does not “state a claim to relief
that is plausible on its face,” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible “when the
plaintiff pleads factual content that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556).
“Threadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Id. (citing Twombly, 550 U.S. at 555). Though the plaintiff is
not required to forecast evidence to prove the elements of the claim, the complaint must
allege sufficient facts to establish each element. Goss v. Bank of America, N.A., 917
F.Supp.2d 445, 449 (D.Md. 2013) (quoting Walters v. McMahen, 684 F.3d 435, 439 (4th
Cir. 2012)), aff’d sub nom. Goss v. Bank of America, NA, 546 F.App’x 165 (4th Cir. 2013).
In considering a Rule 12(b)(6) motion, a court must examine the complaint as a
whole, consider the factual allegations in the complaint as true, and construe the factual
allegations in the light most favorable to the plaintiff. Albright v. Oliver, 510 U.S. 266, 268
(1994); Lambeth v. Bd. of Comm’rs, 407 F.3d 266, 268 (4th Cir. 2005) (citing Scheuer v.
Rhodes, 416 U.S. 232, 236 (1974)). But, the court need not accept unsupported or
conclusory factual allegations devoid of any reference to actual events, United Black
Firefighters v. Hirst, 604 F.2d 844, 847 (4th Cir. 1979), or legal conclusions couched as
factual allegations, Iqbal, 556 U.S. at 678.
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2.
Analysis
In Count III, Plaintiffs allege a violation of the Robinson-Patman Act of 1936 (the
“RPA”). The RPA, an amendment to § 2a of the Clayton Antitrust Act, prohibits price
discrimination by producers. 15 U.S.C. § 13. A business violates the RPA when it sells two
of the same or similar products at different prices to different buyers within a brief period
and those sales cause injury to competition. Id. at § 13(a).3 There are three categories of
competitive injuries that give rise to an RPA claim: primary line, secondary line, and
tertiary line. See Volvo Trucks N. America, Inc. v. Reeder-Simco GMC, Inc., 546 U.S.
164, 176 (2006). Here, Plaintiffs allege a secondary-line injury, which involves price
discrimination that injures competition among the discriminating seller’s customers,
typically referred to as “favored” and “disfavored” purchasers. Id.; see Texaco Inc. v.
Hasbrouck, 496 U.S. 543, 558 n.15 (1990).
To establish a prima facie case of secondary-line injury under the RPA, Plaintiffs
must show that: (1) the fuel sales were made in interstate commerce; (2) the fuel sold to
them was of “like grade and quality” as that sold to the other buyers; (3) Southside
3
Section 13(a) of the RPA, in relevant part, states:
It shall be unlawful for any person engaged in commerce, in
the course of such commerce, either directly or indirectly, to
discriminate in price between different purchasers of
commodities of like grade and quality . . . where the effect of
such discrimination may be substantially to lessen competition
or tend to create a monopoly in any line of commerce, or to
injure, destroy, or prevent competition . . . .
15 U.S.C. § 13(a).
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discriminated in price between Plaintiffs and other fuel purchasers; and (4) the effect of
such discrimination was “to injure, destroy, or prevent competition” to the advantage of
the other purchasers. Volvo Trucks, 546 U.S. at 176 (quoting 15 U.S.C. § 13(a)).
The Court’s March 30, 2018 Memorandum Opinion concluded that Plaintiffs had
adequately stated a claim as to the third and fourth elements of the RPA claim. ((Mar. 30,
2018 Mem. Op. at 22–27, ECF No. 38). The Court did not address the second element
because Southside did not dispute it in its motion to dismiss. (See id.). However, Southside
now asserts that Plaintiffs do not state a claim as to the second element of the RPA. It
asserts that, “because the gasoline was not purchased on like terms and conditions, pursuant
to established case law, the goods themselves cannot be of ‘like grade or quality,’ an
essential element of an RPA claim.” (Def.’s Mem. Supp. Mot. J. Pleadings [“Def.’s Mot.”]
at 2, ECF No. 43-1). The Court agrees.
The Supreme Court has established that the RPA “proscribes unequal treatment of
different customers in comparable transactions.” F.T.C. v. Borden Co., 383 U.S. 637, 643
(1966). In Borden, the Court determined that physically or chemically identical products
sold under both nationally advertised and private labels are of “like grade and quality,”
because “economic factors inherent in brand names and national advertising should not be
considered in the jurisdictional inquiry under the statutory ‘like grade and quality’ test.”
Id. at 645–46 (quoting Report of The Attorney General’s National Committee to Study the
Antitrust Laws 158 (1955)). The Supreme Court applied this holding in a subsequent case
regarding the sale of branded and unbranded gasoline, noting that branded gasoline and
unbranded gasoline are “of like grade and quality.” Texaco Inc., 496 U.S. at 556 n.14.
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While the United States Court of Appeals for the Fourth Circuit has not addressed
the standard for determining whether goods sold under different contract terms are of “like
grade and quality” for the purposes of the RPA, several other federal circuit courts have.
See Aerotec Int’l, Inc. v. Honeywell Int’l, Inc., 836 F.3d 1171 (9th Cir. 2016); Cleveland
v. Viacom, Inc., 73 F.App’x 736 (5th Cir. 2003) (unpublished); Coastal Fuels of Puerto
Rico, Inc. v. Caribbean Petroleum Corp., 990 F.2d 25 (1st Cir. 1993); A.A. Poultry Farms,
Inc. v. Rose Acre Farms, Inc., 881 F.2d 1396 (7th Cir. 1989); FLM Collision Parts, Inc. v.
Ford Motor Co., 543 F.2d 1019 (2d Cir. 1976). These cases provide the Court with
adequate guidelines by which to evaluate Plaintiffs’ allegations. The Court now considers
whether the Amended Complaint sufficiently alleges that the fuel sold to Plaintiffs was of
like grade or quality as that sold to other buyers under different contract terms.
In A.A. Poultry, the Seventh Circuit determined that eggs crated and sold
immediately were not of like grade and quality as eggs segregated from on-line egg
production, known as “specials.” 881 F.2d at 1407–08. The court reasoned that, “[a]lthough
‘special’ eggs as delivered may be physically indistinguishable to the buyer, they are not
fundamentally the same good, for the same reason a seat on the 6:00 a.m. flight from
Chicago to New York is not the same as a seat on the 5:00 p.m. flight, and a seat on the
5:00 p.m. flight reserved two weeks in advance is not the same as a seat on that flight for
which the passenger had to stand by.” Id. at 1408. The court also noted that “[n]o one
supposes that a seller must charge the same price on contracts signed at different times, or
on long-term contracts and spot sales.” Id. at 1407.
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Likewise, in Viacom, the Fifth Circuit found no violation of the RPA where retail
video stores received a lower price through their agreements to purchase an entire output
of videos under long-term purchase obligations, whereas other retailers paid more because
they could choose the titles to purchase after learning of the box office results. 73 F.App’x
at 741. The court concluded, “[a]s a result of the significant differences . . . between the
terms of the agreements, any disparities in amounts paid cannot support a claim for price
discrimination.” Id.
The Ninth Circuit has also held that “[u]nlawful secondary-line price discrimination
exists only to the extent that the differentially priced product or commodity is sold in a
‘reasonably comparable’ transaction.” Aerotec, 836 F.3d at 1188 (quoting Tex. Gulf
Sulphur Co. v. J.R. Simplot Co., 418 F.2d 793, 807 (9th Cir. 1969)). In Aerotec, the
plaintiff, an independent servicer of Honeywell products, alleged that Honeywell
discriminated against it under the RPA by giving greater discounts off the catalog price for
the same replacement parts to Honeywell-affiliated servicers. Id. at 1187–88. The Ninth
Circuit explained that the plaintiff was “mistaken in its premise that any transactional
differences are not reflective of materially different terms,” because “servicers under an
affiliate contract are subject to substantial obligations that are not imposed on independent
repair shops like [the plaintiff].” Id. at 1188.
Finally, the Second Circuit has also adhered to the principles outlined above, finding
no RPA violations when varying prices were the result of “different terms of sale.” FLM
Collision Parts, 543 F.2d at 1026 (“The [RPA], as its language indicates, requires equality
of treatment among purchasers, but it does not require a seller to adopt a single uniform
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price under all circumstances.”); see Coalition For A Level Playing Field, LLC v.
Autozone, Inc., 737 F.Supp.2d 194, 216–17 (S.D.N.Y. Sept. 7, 2010) (noting that the
“[RPA] does not prohibit price differences that reflect materially different contract terms”
and that “[t]he complaint . . . ignores the possibility that these contract differences account
for the lower prices paid by the retailer defendants”).
In this case, there is no question that the commodities at issue are physically
identical: Exxon-branded gasoline and diesel. As the case law from other circuits makes
clear, however, physically identical products are not always “of like grade and quality” for
the purposes of the RPA. Even if they are physically identical, goods that are sold under
“materially different terms” are not “of like grade and quality.” Plaintiffs argue that the
differences in the contracts—specifically, the Plaintiffs’ twenty-year supply contract with
“rack plus” pricing versus their competitors’ “short-term ([three] year) open-price term
contracts”—are not materially different terms, and consequently, do not affect the “grade
and quality” of the fuel at issue. (Pls.’ Resp. Opp’n Def.’s Mot. J. Pleadings [“Pls.’ Opp’n”]
at 2–3, ECF No. 47). The Court is not persuaded.
The fuel sold in this case is akin to the eggs sold in A.A. Poultry and the videos sold
in Viacom, where the physically identical eggs and physically identical videos,
respectively, were sold under materially different contract terms, rendering the products
not of like grade and quality. See A.A. Poultry, 881 F.2d at 1407–08; Viacom, 73 F.App’x
at 741. Here, the Amended Complaint alleges that Plaintiffs’ competitors “purchased under
open-price term contracts,” which it specifically distinguishes from its own negotiated
“rack plus” pricing formula. (Am. Compl. ¶¶ 12–13, 40). Plaintiffs state, “Under an ‘open11
price term’ contract, there is no practical limit on the per gallon profit the seller can earn.
That is, the seller can mark up the product over its cost to whatever extent the market will
bear, with no per gallon ceiling on the amount of the seller’s profit margin.” (Id. ¶ 12).
Under ‘rack plus’ pricing, by contrast, Southside could only charge Plaintiffs a certain
number of cents over and above ExxonMobil’s “rack price.” (Id. ¶¶ 13–15, 26). It is not
surprising, then, that these two clearly different pricing terms resulted in different fuel
prices for Plaintiffs and their competitors. The difference between the fuels at issue are the
result of separately negotiated pricing contracts, as specifically alleged in the Amended
Complaint, (Am. Compl. ¶¶ 12–13, 26, 40), and not a result of being branded or unbranded
Borden, 383 U.S. at 640.
In their Opposition to Southside’s Motion, Plaintiffs also concede that the contracts
contain material differences. They state, “[l]ong-term and short-term open-price term
contracts are fundamentally different.” (Pls.’ Opp’n at 3). While Plaintiffs attempt to argue
that these “fundamental” differences are not “material” differences, they later argue that
“the only ‘material differences’ between Plaintiffs’ contracts and the open-price term
contracts do not justify the lower prices charged to Plaintiffs’ competitors.” (Id. at 13).
Instead “these differences would support lower prices to Plaintiffs.” (Id.). This argument,
however, only supports the notion that the fuel sold to Plaintiffs is not of like grade and
quality as that sold to its competitors.
Plaintiffs next argue that, if the lower price had been in their favor, there would be
no RPA violation because they bargained for that lower price, but because the lower price
is not in their favor, then there is an RPA violation. The RPA and antitrust law are not so
12
fickle, nor are they meant to counteract the effects of knowledgeably negotiated contract
terms. The RPA “signals no large departure from antitrust law’s primary concern,
interbrand competition.” Volvo Trucks, 546 U.S. at 168.
In sum, the Court concludes that, based on the Amended Complaint’s allegations,
Plaintiffs fail to plausibly allege that the fuel they bought from Southside is of like grade
and quality as the fuel Southside sold to other retailers. Just as the Twombly Court
dismissed an antitrust conspiracy complaint in a case “with no ‘reasonably founded hope
that the [discovery] process will reveal relevant evidence’ to support an antitrust claim,”
the Court sees no “reasonably founded hope” that discovery in this antitrust case will reveal
relevant evidence to support Plaintiffs’ RPA claim. See 550 U.S. at 559–60 (alteration in
original) (internal quotations omitted) (quoting Dura Pharm., Inc. v. Broudo, 544 U.S. 336,
347 (2005)). Therefore, the Court will grant Southside’s Motion for Judgment and dismiss
Count III of the Amended Complaint.
B.
Plaintiffs’ Motion for Leave to File a Second Amended Complaint
1.
Standard of Review
Rule 15(a)(2) provides that “[t]he court should freely give leave [to amend a
complaint] when justice so requires.” Justice does not require permitting leave to amend
when amendment would prejudice the opposing party, the moving party has exhibited bad
faith, or amendment would be futile. See Edell & Assocs., P.C. v. Law Offices of Peter G.
Angelos, 264 F.3d 424, 446 (4th Cir. 2001) (citing Edwards v. Goldsboro, 178 F.3d 231,
242 (4th Cir. 1999)). Leave to amend is futile when an amended complaint could not
survive a motion to dismiss for failure to state a claim. See U.S. ex rel. Wilson v. Kellogg
13
Brown & Root, Inc., 525 F.3d 370, 376 (4th Cir. 2008). “Leave to amend, however, should
only be denied on the ground of futility when the proposed amendment is clearly
insufficient or frivolous on its face.” Johnson v. Oroweat Foods Co., 785 F.2d 503, 510
(4th Cir. 1986) (citing Davis v. Piper Aircraft Corp., 615 F.2d 606, 613 (4th Cir. 1980)).
2.
Analysis
Plaintiffs request leave of the Court to file a Second Amended Complaint to cure
the identified deficiencies in Count III of their Amended Complaint. Southside contends
that granting Plaintiffs leave to amend would be futile because the Second Amended
Complaint is deficient on its face and cannot survive a motion to dismiss. The Court agrees
with Southside.
In an effort to address the deficiencies in their Amended Complaint, Plaintiffs’ new
allegations “compare and contrast the contracts, describe their differences and similarities,
and the basis on which they do not result [in] non-comparable transactions that affect the
grade or quality of the products sold.” (Mem. P&A Supp. Pls.’ Mot. Leave File 2d Am.
Compl. [“Pls.’ Mot.”] at 7, ECF No. 47-2).4 Plaintiffs state that they “were not given the
opportunity to enter a three-year open-price term contract like the ones entered between
Southside and Plaintiffs’ competitors.” (2d Am. Compl. ¶ 10, ECF No. 47-4). They name
the original price ExxonMobil charged Southside—“Posted Price”—and the new price
4
In their Motion, Plaintiffs list their proposed amendments by paragraph number.
(Pls.’ Mot. at 2–5). But some of those paragraph numbers and allegations do not line up
with those in the proposed Second Amended Complaint. (Compare Pls.’ Mot. ¶¶ 38–40,
48–50, with 2d Am. Compl. ¶¶ 35–37, 45–46). Where they conflict, the proposed Amended
Complaint controls, not the Motion’s summary of the amendments.
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ExxonMobil started charging Southside in 2015—“Formula Price.” (Id. ¶ 35). Plaintiffs
then state their dispute with Southside “centers on the meaning of the term ‘Rack.’” (Id. ¶
36). Specifically, Plaintiffs believe “rack” should mean the Formula Price, whereas
Southside maintains it means the Posted Price. (Id.). Further, they allege that their rackplus price term contracts and competitors’ open-price term contracts “are not substantively
different from one another with respect to credit, terms of payment, credit card processing,
payment of credit card fees, trademark protection, service station image and appearance
standards, minimum purchase requirements, taxes and fees associated with the products,
and the terms governing resale of the products to consumers.” (Id. ¶ 45). Plaintiffs make
the argument discussed above that, if anything, the differences between their contracts and
those their competitors negotiated mean Southside should them a lower, not a higher, price.
(Id. ¶ 46). Plaintiffs argue that because their competitors’ open-price contracts vest pricing
discretion in Southside, that Southside exercised its discretion to charge Plaintiffs’
competitors less than Plaintiffs, which has injured Plaintiffs.
While Plaintiffs’ new allegations give more context to the formation and substance
of their contracts with Southside, they cannot escape the “fundamental” difference that
persists between their contracts and their competitors’ contracts: the rack-plus price term
and the open-price term. The Second Amended Complaint maintains this distinction when
it states, “[u]nder Plaintiffs’ contracts with Southside, the per gallon price is a certain centsper-gallon (e.g., [three] cents, four cents) over ‘Rack,’” and “[t]he open-price term
contracts of Plaintiffs’ competitors vest discretion in Southside, subject to the UCC’s ‘good
faith’ requirement, to set the prices for sales to retailers.” (2d Am. Compl. ¶¶ 36–37).
15
Plaintiffs even concede that certain other contractual differences could justify differences
in price, but argue that those differences should only be in their favor: “[a]lthough there
are non-price differences between the [P]laintiffs’ contracts and the open-price term
contracts, the differences do not justify a lower per gallon price to [P]laintiffs’
competitors.” (Id. ¶ 46). As explained above, this argument is incompatible with the
purpose of antitrust law and the RPA. See Volvo Trucks, 546 U.S. at 176 (“Mindful of the
purposes of the [RPA] and of the antitrust laws generally, we have explained that [the RPA]
does not ‘ban all price differences charged to different purchasers of commodities of like
grade and quality’; rather, the Act proscribes ‘price discrimination only to the extent that
it threatens to injure competition.’”) (quoting Brooke Grp. Ltd. v. Brown & Williamson
Tobacco Corp., 509 U.S. 209, 220 (1993)). Here, Plaintiffs’ “rack-plus price” term is the
product of its own negotiation with Southside, a contract term that the Second Amended
Complaint identifies as “the most important provision to be negotiated” with Southside.
(2d Am. Compl. ¶ 10). The purpose of the RPA or antitrust law is not to undo that
negotiation in order to give Plaintiffs the result they expected but did not receive.
In addition, as noted above, there is no “reasonably founded hope” that discovery
will reveal relevant evidence to cure Plaintiffs’ claim, because the pricing differences are
inherent in the contracts themselves, and no amount of fact-finding could change what has
already been negotiated and settled. Plaintiffs’ amendments simply do not justify the
burdensome expense of discovery, particularly in the antitrust context. See Twombly, 550
U.S. at 558 (“[I]t is one thing to be cautious before dismissing an antitrust complaint in
16
advance of discovery, but quite another to forget that proceeding to antitrust discovery can
be expensive.”).
After reviewing the proposed Second Amended Complaint, the Court concludes that
the amendments are clearly insufficient on their face because the deficiencies present in
the Amended Complaint persist. See Kellogg Brown & Root, 525 F.3d at 376; Johnson,
785 F.2d at 510. Thus, the Court concludes that leave to amend would be futile and will
deny Plaintiffs’ Motion.
The Court is mindful that the effect of this ruling will be to limit the Plaintiffs’
claims for relief to their breach of contract claims in arbitration. (Mar. 30, 2018 Mem. Op.
at 27 (“The Court will deny the Motion to Dismiss without prejudice as to Counts I and II
because those Counts will be submitted to arbitration.”)). This is appropriate because, as
Plaintiffs state in their proposed Second Amended Complaint, their dispute with Southside
“centers on the meaning of the term ‘Rack,’” (2d Am. Compl. ¶ 36), a quintessential
question of contract interpretation.
III.
CONCLUSION
For the foregoing reasons, the Court will grant Southside’s Motion for Judgment on
the Pleadings (ECF No. 43) and deny Plaintiffs’ Motion for Leave to File a Second
Amended Complaint (ECF No. 47). A separate Order follows.
Entered this 29th day of March, 2019.
/s/
George L. Russell, III
United States District Judge
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