Getty Petroleum Marketing Inc. v. 2211 Realty, LLC et al
Filing
50
Judge F. Dennis Saylor, IV: MEMORANDUM AND ORDER entered granting in part and denying in part 26 Motion to Dismiss. Plaintiff's motion to dismiss the counterclaim is STAYED as to the claims against Getty. As to the claims against Green Valley, the motion is GRANTED as to Count 5 and DENIED as to Counts 2, 3, 4, and 6. (Castles, Martin)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
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GETTY PETROLEUM MARKETING,
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INC., and GREEN VALLEY OIL, LLC,
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Plaintiffs,
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v.
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2211 REALTY, LLC; JAMES J.
GRASSECHI; and EDWARD F. MARTIN, )
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Defendants.
_______________________________________)
Civil Action No.
11-40003-FDS
MEMORANDUM AND ORDER ON PLAINTIFFS’ MOTION TO DISMISS
COUNTS ONE THROUGH SIX OF THE COUNTERCLAIM
SAYLOR, J.
This is a lawsuit arising out of the termination of a dealer agreement for a gas station in
Warwick, Rhode Island. The case was brought by Getty Petroleum Marketing, Inc., and Green
Valley Oil, LLC, against 2211 Realty, LLC, and its two members, James J. Grassechi and
Edward F. Martin. On July 1, 2011, defendants filed a counterclaim against plaintiffs alleging
breach of contract, breach of the implied covenant of good faith and fair dealing, tortious
interference with business relations, trespass, violation of R.I.G.L. § 9-1-2, violation of R.I.G.L.
§ 5-55-4, defamation, slander per se, and unjust enrichment. Plaintiffs have filed a motion to
dismiss Counts 1 through 6 of the counterclaim for failing to state a claim upon which relief can
be granted under Fed. R. Civ. P. 12(b)(6). For the reasons set forth below, the motion will be
granted in part and denied in part.
I.
Factual Background
The following factual allegations are drawn from the counterclaim and the attached
exhibits.
A.
Performance under the Contact
Getty Petroleum Marketing, Inc., is a Maryland corporation with a principal place of
business in East Meadow, New York. (Countercl. ¶ 11). Green Valley Oil, LLC, is a
Pennsylvania limited liability company. (Id. at ¶ 8-9). Defendant Martin resides in Douglas,
Massachusetts, and Defendant Grassechi resides in Hubbardston, Massachusetts. (Id. at ¶ 5-6).
2211 Realty LLC, is a Rhode Island limited liability company, with Martin and Grassechi as its
only members. (Id. at ¶ 1, 4).
On September 1, 2007, Getty and 2211 Realty entered into various agreements, including
a Dealer Commission Contract (the “Contract”), for a gasoline service station located in
Warwick, Rhode Island. (Id. at ¶ 14).1 The Dealer Commission Contract was a nine-year
contract, pursuant to which Getty would supply 2211 Realty with petroleum products under the
Lukoil brand name. (Id. at ¶ 16-17). 2211 Realty also signed a mortgage that secured its
obligations to Getty with the property as collateral. (Id. at ¶ 20, Ex. B). According to their
terms, the Contract and the mortgage are governed by Rhode Island law. (Id. at ¶¶ 19, 22).
Martin and Grassechi signed a guaranty, guaranteeing any indebtedness 2211 Realty may incur
against Getty and its subsidiaries and affiliated companies. (Id. at ¶ 23, Ex. C).
On March 15, 2010, without notice to defendants, Getty assigned its agreements with
2211 Realty to Green Valley. (Id. at ¶ 26, 28). Defendants allege that Getty did so after Green
Valley entered into an agreement with BP in 2009 to rebrand approximately 235 of its New
England gas stations from Lukoil to BP. (Id. at ¶ 24). On April 1, 2010, representatives of
1
Other agreements included an Equipment Loan Agreement, an Equipment Schedule, a Sign and Pole
Agreement, a Credit Card Lease and Equipment Agreement, an Amortization Agreement, a Rider to Dealer
Supply/Commission Contract, a Point of Sale Agreement, and a Corporate Dealer Rider. (See Countercl. Ex. A).
2
Green Valley met with Grasseschi and represented that Green Valley was the assignee of the
agreements between 2211 Realty and Getty. (Id. at ¶ 27). Thereafter, Edward Janoski and Bob
Burrell, both representatives of Green Valley, tried to persuade 2211 Realty to enter into a new
“Rack Plus” agreement, intended to replace the Dealer Commission Agreement. (Id. at ¶ 31).
Defendants allege that the Dealer Commission Agreement was costing Green Valley $20,000 to
$30,000 per month, and that the Rack Plus agreement would have reduced the amount Green
Valley had to pay 2211 Realty. (Id. at ¶¶ 32-36). Green Valley also informed 2211 Realty that it
intended to rebrand the gas station from Lukoil to BP. (Id. at ¶ 38). 2211 Realty refused to
terminate the Contract, and objected to Green Valley’s decision to rebrand to BP. (Id. at ¶¶ 3738).
In July 2010, Green Valley significantly reduced its deliveries of gasoline to 2211 Realty.
On July 28, 2010, it sent 2211 Realty a “Notice to Cure Default” alleging that 2211 Realty was
in default of the Contract for failing to pay for fuel deliveries on May 20 and June 26, 2010. (Id.
at ¶ 42-43, Ex. E). 2211 Realty immediately responded, denying the allegations and requesting
that the Notice to Cure be rescinded and that Green Valley resume fuel delivery. (Id. at 44, Ex.
F). Green Valley did not resume deliveries, and as a result, 2211 Realty closed the gas station on
July 30, 2010. (Id. at 45). Defendants allege that because the gas station closed abruptly, they
lost customers and substantial income and suffered damage to their reputation. (Id. at ¶ 53).
On August 26, 2010, Green Valley sent 2211 Realty a “Notice of Termination and
Demand for Payment,” which again claimed that it was in breach of the Contract, and advised
that the Contract would be terminated as of September 3, 2010. (Id. at ¶ 49, Ex. I). 2211 Realty
responded, again denying the allegations, and stating that Green Valley's conduct was causing it
3
significant harm. (Id. at ¶ 50, Ex. J). On January 2, 2011, Getty sent 2211 Realty a “Demand for
Payment,” which alleged that 2211 Realty was in default of its obligations under the
Amortization Agreement, and that the agreement would be terminated in five days from the date
of the demand letter. (Id. at ¶ 52, Ex. K; see also id., Ex. A, at 12; Compl. Ex. D).
B.
Green Valley Representatives Enter 2211 Realty’s Premises
Under the Contract, 2211 Realty was required to permit Getty upon request to inspect its
books and records and to enter the property for various purposes. (Id. at ¶ 72-73, Ex. 1).
Specifically, the contract provided:
21
26
27
Dealer shall permit Company, by its representatives or agents, to enter
onto the Station at any time to Inspect the Station, to obtain samples of
gasoline and other products, and to take pump and gasoline stick readings.
***
Dealer shall provide information daily of the number of gallons of
gasoline and other product sales, including the total dollar amount. Dealer
shall permit Company to inspect Dealer’s books and records relating to
such sales, and shall provide such other information as the Company from
time to time shall request, as in its judgment, it shall deem necessary.
Dealer shall maintain accurate daily inventory records for all products and
notify Company of any unusual inventory discrepancies. Dealer shall
provide copies of such records to Company upon request. Company shall
not be responsible for any loss, leakage or shrinkage of petroleum
products at the Station through or from any tank or other equipment.
Furthermore, if Dealer fails to maintain accurate daily inventory records
or to notify Company of any discrepancies and Company is required to
test the underground storage tanks and/or other equipment at the Station,
Dealer shall be responsible for any and all costs, associated with such
required testing.
(Countercl. Ex. A).
On the morning of July 20, 2010, Burrell called Martin and asked if Martin was going to
be at the gas station that morning. (Countercl. at ¶ 70). Martin replied that he would be in
4
Worcester. (Id.). Sometime later, one of 2211 Realty's employees informed Martin that Burrell
and representatives of SJP Enterprises, Inc. (a subcontractor that delivers gasoline for Green
Valley) and Tyree Environmental Corp. were at the station. (Id. at ¶¶ 62, 71). Martin called
Burrell and asked him to leave, but Burrell refused. (Id. at ¶ 76). While on the property, the
Green Valley representatives did not conduct a field audit or ask to inspect any books or records.
(Id. at ¶ 75).
Martin then went to the station. When he arrived, he saw a Green Valley representative
running from his office. (Id. at ¶ 77). Martin noticed that the Veeder-Root system—a system
that monitors the level of gasoline in the underground storage tanks—was dismantled and
attached to a Green Valley computer. (Id. at ¶ 60, 78).2 He also noticed that the date on the
Veeder-Root had been changed. (Id. at ¶ 78).3 He then ordered the Green Valley representatives
off the property. (Id.). After inspecting his office, he noticed that several boxes of credit card
receipts were missing. (Id. at ¶ 79).
II.
Procedural Background
This action was filed on January 5, 2011. On July 1, 2011, defendants answered the
complaint and filed a counterclaim. The counterclaim asserts nine counts: (1) breach of
contract, (2) breach of the implied covenant of good faith and fair dealing, (3) tortious
interference with business relations, (4) trespass, (5) violation of Rhode Island Gen. Laws § 9-12, (6) violation of Rhode Island Gen. Laws § 5-55-4, (7) defamation, (8) slander per se, and (9)
2
The Veeder-Root system also monitors tanks for leakage. It only holds data for the previous ten loads of
gasoline. (Id. at ¶ 69). Generally, a reading will be taken from the Veeder-Root prior to delivery and again after
delivery. (Id. at ¶ 60). At all times relevant to this litigation, 2211 Realty owned and maintained a Veeder-Root
TLS 350 system. (Id. at ¶ 68).
3
The Veeder-Root allows manual changes to the measurement readings in the system. (Id. at 69).
5
unjust enrichment. Plaintiffs have moved to dismiss Counts 1 through 6 of the counterclaim.
On December 5, 2011, Getty filed for bankruptcy, and the case was stayed as to any
claims against Getty on December 13, 2011. See 11 U.S.C. § 362. Because “a counterclaim is
‘an action or proceeding against the debtor,’ § 362(a)(1), relief from the stay must be sought”
before this Court can address those counterclaims. In re Merrick, 175 B.R. 333, 337 (B.A.P. 9th
Cir. 1994). Defendants have not requested relief from the stay, thus this Court will not consider
the counterclaims against Getty. See Austin v. Unarco Industries, Inc., 705 F.2d 1, 4 (1st Cir.
1983) (“[T]he automatic stay provisions of 11 U.S.C. § 362(a) apply only to the bankrupt
debtor.”).4
Getty has filed for bankruptcy, and thus all claims against it are stayed. See 11 U.S.C. §
362(a)(1). Accordingly, the Court will not address the motion to dismiss the counterclaims as to
Getty.
4
The Court notes that the policy behind the stay “is to protect the [debtor’s] estate from being eaten away
by creditors’ lawsuits and seizures,” thus, “the automatic stay is inapplicable to suits by the [debtor].”
Martin-Trigona v. Champion Fed. Sav. & Loan Ass’n., 892 F.2d 575, 577 (7th Cir. 1989) (emphasis in original); see
also In re Nelson, 994 F.2d 42, 44 (1st Cir. 1993); Rivera Colon v. Padilla Ferrer, 2003 WL 21692003, at *1 n.1
(D.P.R. July 14, 2003). As a result, “[t]he trustee or debtor in possession is not prevented by the automatic stay from
prosecuting or appearing in an action which the debtor has initiated and that is pending at time of bankruptcy,” In re
White, 186 B.R. 700, 704, 706-07 (B.A.P. 9th Cir. 1995) (citing In re Merrick, 175 B.R. at 337), and persons whom
the debtor has sued are not prevented by the stay from protecting their legal rights. Martin-Trigona, 892 F.2d at 577;
In re White, 186 B.R. at 704, 706-07. To the extent that counterclaims are essentially defenses to the debtor’s
claims, “when the debtor is in the position of the assailant, it would be inequitable to invoke the stay against the
defendant[s’] counterclaim . . . .” In re Anchev, 2009 Bankr. LEXIS 906, at *7 (Bankr. S.D.N.Y. Apr. 15, 2009)
(quoting In re Jandous Electric Construction Corp., 106 B.R. 48, 50 (Bankr. S.D.N.Y. 1989)); accord Bohack Corp.
v. Borden, Inc., 599 F.2d 1160, 1168 (2d Cir. 1979); see also ACandS, Inc. v. Travelers Cas. & Sur. Co., 435 F.3d
252, 259 (3d Cir. 2006) (“Defenses, as opposed to counter-claims, do not violate the automatic stay because the stay
does not seek to prevent defendants sued by a debtor from defending their legal rights and ‘the defendant in the
bankrupt’s suit is not, by opposing that suit, seeking to take possession of it . . . .’” (citation omitted)).
Since filing its Suggestion of Bankruptcy with this Court, there has been no appearance of counsel
representing Getty or the trustee of Getty’s estate, and there has been no other indication that Getty (or its estate) is
pursuing its claims against defendants. Therefore, the Court need not determine at this point whether relief from the
stay will be necessary for defendants to pursue their counterclaims should Getty choose to prosecute its claims while
the stay is in effect.
6
III.
Standard of Review
On a motion to dismiss, the Court “must assume the truth of all well-plead[ed] facts and
give plaintiff the benefit of all reasonable inferences therefrom.” Ruiz v. Bally Total Fitness
Holding Corp., 496 F.3d 1, 5 (1st Cir. 2007) (citing Rogan v. Menino, 175 F.3d 75, 77 (1st Cir.
1999)). To survive a motion to dismiss, the plaintiff must state a claim that is plausible on its
face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). That is, “[f]actual allegations must
be enough to raise a right to relief above the speculative level, . . . on the assumption that all the
allegations in the complaint are true (even if doubtful in fact).” Id. at 555 (citations omitted).
“The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a
sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949
(2009) (quoting Twombly, 550 U.S. at 556). Dismissal is appropriate if plaintiff’s well-pleaded
facts do not “possess enough heft to show that plaintiff is entitled to relief.” Ruiz Rivera v.
Pfizer Pharm., LLC, 521 F.3d 76, 84 (1st Cir. 2008) (quotations and original alterations omitted).
IV.
Analysis
A.
Breach of Contract (Count 1)
Plaintiffs do not dispute that the counterclaim states a claim for breach of contract as to
Green Valley.5
B.
Implied Covenant of Good Faith and Fair Dealing (Count 2)
Green Valley contends that the complaint fails to state a claim for a breach of the implied
covenant of good faith and fair dealing. “Under Rhode Island law there is an ‘implied covenant
5
The parties agree that Grassechi and Martin, in their individual capacity, have not alleged claims in
Counts 1 and 2 for breach of contract or for breach of the implied covenant of good faith and fair dealing, as they
were not parties to the contract.
7
of good faith and fair dealing between parties to a contract so that contractual objectives may be
achieved.’” Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 66 F. Supp. 2d 317, 329 (D.R.I.
1999) (citation omitted); Dovenmuehle Mortgage, Inc. v. Antonelli, 790 A.2d 1113, 1115 (R.I.
2002); Ide Farm & Stable, Inc. v. Cardi, 297 A.2d 643, 645 (R.I. 1972). “[A] breach of the duty
of good faith and fair dealing gives rise only to a breach of contract claim, not to a tortious cause
of action.” Ross-Simons of Warwick, 66 F. Supp. 2d at 329 (citing A.A.A. Pool Service v. Aetna
Cas. & Sur. Co., 121 R.I. 96, 98, 395 A.2d 724 (1978)). “The applicable standard in determining
whether the implied covenant of good faith and fair dealing has been breached is ‘whether or not
the actions in question are free from arbitrary or unreasonable conduct.’” Town of Narragansett
v. Palmisciano, 2006 WL 3290846, at *5 (R.I. Super. Nov. 6, 2006) (quoting Ross-Simons of
Warwick, 66 F.Supp.2d at 329).
Here, 2211 Realty contends that Getty assigned the contract to Green Valley because
Green Valley had no interest in maintaining the existing contractual relationship; it further
contends that Getty and Green Valley hoped to avoid their contractual obligations and to
pressure 2211 Realty into entering into a less favorable contract. Specifically, 2211 Realty
alleges that Getty assigned the contract after Green Valley had entered an agreement to rebrand
many of its gas stations, including those operated by 2211 Realty, from Lukoil to BP. After the
assignment, Green Valley then began pressuring 2211 Realty to enter into a less profitable
contract and to rebrand its stations. Ultimately, 2211 Realty alleges that Green Valley sent
representatives to break into Martin’s office and steal documents to make it appear as though
2211 Realty breached the contract. Such conduct, if proved, would almost certainly be
unreasonable and inconsistent with the purposes of the contract. See Psaty & Fuhrman, Inc. v.
8
Housing Auth., 68 A.2d 32, 36 (R.I. 1949) (stating parties can be “deprived of the benefit [of the
contract]” if their “conduct indicates bad faith or some other tortious intent”); Thompson
Trading, Ltd. v. Allied Breweries Overseas Trading, Ltd., 748 F. Supp. 936, 941-42 (D.R.I.
1990). Such allegations are sufficient to state a claim for breach of the implied covenant of good
faith and fair dealing, and the motion to dismiss as to Count 2 will therefore be denied.6
C.
Tortious Interference with Business Relations (Count 3)
The counterclaim alleges that Green Valley engaged in affirmative acts that interfered
with defendants’ relationship with their customers. To bring a claim for tortious interference
with business relations, defendants must allege “(1) the existence of a business relationship or
expectancy, (2) knowledge by the interferor of the relationship or expectancy, (3) an intentional
act of interference, (4) proof that the interference caused the harm sustained, and (5) damages to
the plaintiff.” L.A. Ray Realty v. Town Council, 698 A.2d 202, 207 (R.I. 1997) (quoting
Mesolella v. City of Providence, 508 A.2d 661, 669 (R.I. 1986)).
To be actionable, there must be “an ‘intentional and improper’ act of interference, not
merely an intentional act of interference.” Avila v. Newport Grand Jai Alai LLC, 935 A.2d 91,
98 (R.I. 2007); C.N.C. Chemical Corp. v. Pennwalt Corp., 690 F. Supp. 139, 142 (D.R.I. 1988)
(citing Federal Auto Body Works v. Aetna Casualty & Surety Co., 447 A.2d 377, 379-80 (R.I.
1982)).7 “Malice, in the sense of spite or ill will, is not required; rather legal malice—an intent
6
Of course, if Green Valley can show that its actions were based on legitimate business considerations or it
was not acting in “bad faith or [with] some other tortious intent” there may be no breach of the implied covenant,
even if it breached the contract or its actions are otherwise actionable in tort. See Psaty & Fuhrman, Inc, 68 A.2d at
36; Ross-Simons of Warwick, 66 F. Supp. 2d at 330; Landry v. Farmer, 564 F. Supp. 598, 611 (D.R.I. 1983).
7
Whether interference is improper depends upon the facts in a particular situation, the court may consider,
among other things, “(1) the nature of the actor’s conduct; (2) the actor’s motive; (3) the contractual interest with
which the conduct interferes; (4) the interests sought to be advanced by the actor; (5) the balance of the social
interests in protecting freedom of action of the actor and the contractual freedom of the putative plaintiff; (6) the
proximity of the actor’s conduct to the interference complained of; and (7) the parties’ relationship.” Avila, 935
9
to do harm without justification—will suffice.” Mesolella, 508 A.2d at 669-670. Therefore, to
establish a prima facie case, defendants “must allege . . . not only that the putative tortfeasors
intended to do harm to the contract [or business relationship] but that they did so without the
benefit of any legally recognized privilege or other justification. Upon such a showing, the
alleged offenders would then have the opportunity—and the burden—to prove that the . . .
interference was indeed justified.” Belliveau Bldg. Corp. v. O’Coin, 763 A.2d 622, 627 (R.I.
2000)
Here, defendants contend in essence that Green Valley intentionally reduced and
terminated gasoline deliveries to interfere with their relationship with their customers and cause
them financial harm. Green Valley contends that the intentional interference claim must fail
because that claim does not allege (1) that it knew the identities of defendants’ customers, or (2)
that it induced defendants’ customers to end their business relationship. However, it is sufficient
for these purposes to allege that Green Valley knew of defendants’ relationship with their
customers and that its actions prevented those customers from continuing the business
relationship. See L.A. Ray Realty, 698 A.2d at 207; Mesolella, 508 A.2d at 669; RESTATEMENT
(SECOND) OF TORTS § 766B cmt c. (“Also included [in the tort] is interference with a continuing
business or other customary relationship not amounting to a formal contract.”).
The counterclaim alleges that Getty and Green Valley knew that Grassechi and Martin
were owners of 2211 Realty, and that they had entered into contracts with Getty whereby Getty
would provide gasoline that defendants would sell. Despite this knowledge, after Getty assigned
the contract to Green Valley, Green Valley reduced and ultimately stopped delivering gasoline to
A.2d at 98 (quoting Belliveau Building Corp. v. O’Coin, 763 A.2d 622, 628 n.3 (R.I. 2000)); see also Thompson
Trading, Ltd. v. Allied Breweries Overseas Trading, Ltd., 748 F. Supp. 936, 944-945 (D.R.I. 1990) (“[T]he
invocation of a contractual right, if found in fact to be unreasonable, can also constitute improper interference.”).
10
defendants. As a result, defendants did not have enough gasoline to meet its customers’ demand
and had to abruptly close the gas station, losing customers and money and suffering damage to
their reputation. Although these factual allegations are not as detailed or specific as they could
be, reading the counterclaim in the light most favorable to defendants, it may be reasonably
inferred that Green Valley took these actions to interfere with defendants’ customer relationships
in order to pressure them to alter their contractual arrangement. See Iqbal, 129 S.Ct. at 1949
(citing Twombly, 550 U.S. at 556); Thompson Trading, Ltd., 748 F. Supp. at 944-945 (“Although
the means employed [to assign the contract] appear innocent, the alleged resulting interference
may still be improper.”).8
Of course, it is possible that Green Valley acted pursuant to legitimate business
considerations and did not intend to harm defendants’ business relationship with their customers,
or that its actions were otherwise legally justified. See Belliveau Bldg. Corp., 763 A.2d at
628-629. Such issues, however, cannot be decided on a motion to dismiss. See Thompson
Trading, Ltd., 748 F. Supp. at 944-945; C.N.C. Chemical Corp., 690 F. Supp. at 143 (stating that
initiating lawsuit “without probable cause and for the purpose of interfering with . . . contractual
relations” could constitute improper interference).
Accordingly, the motion to dismiss as to Count 3 will be denied.
D.
Trespass to Land (Count 4)
The counterclaim also alleges that Green Valley is liable for trespass. “In Rhode Island,
a party claiming trespass must show: ‘(1) the adverse party intentionally entered onto the
8
Although the causal chain between Green Valley’s actions and the interference with defendants’ business
relations is somewhat attenuated, to prove causation in this context defendants need only show “either that but for
the interference there would have been a relationship or that it is reasonably probable that but for the interference the
relationship would have been established.” L.A. Ray Realty, 698 A.2d at 207.
11
owner’s property; and (2) plaintiff had rightful possession of such property.’” Goat Island S.
Condo. Ass’n v. IDC Clambakes, Inc., 382 B.R. 178, 179 (D.R.I. 2008) (quoting Smith v. Hart,
2005 WL 374350, at *5 (R.I. Super. Mar. 1, 2005)); see also State v. Verrecchia, 766 A.2d 377,
382-83 (R.I. 2001). “One who has consent or privilege and enters on to another’s property is not
a trespasser.” Smith, 2005 WL 374350, at *5 (citing Ferreira v. Strack, 652 A.2d 965, 969 (R.I.
1995)).
According to the counterclaim, defendants had rightful possession of the property, and
agents of Green Valley entered the property. Green Valley contends that under the Contract, it
was legally entitled to enter. As noted, the Contract required 2211 Realty to “permit the
Company, by its representatives or agents, to enter on the Station at any time to inspect the
Station,” and “permit the Company to inspect [2211 Realty’s] books and records relating to
[product sales].” (Contercl. Ex. A, ¶ 21, 26). In addition, under the Contract, 2211 Realty was
required to “provide copies of [daily inventory] records to Company upon request.” (Contercl.
Ex. A, ¶ 27).
The counterclaim alleges that representatives of Green Valley, without the permission,
authorization, or knowledge of defendants, entered Martin’s office at the property owned by
2211 Realty. (Countercl. ¶ 74). While on the property, the representatives did not conduct a
field audit, and did not ask to inspect defendants’ books or records. (Id. at ¶ 75). After they left,
Martin noticed several items missing from his office, including a box that contained original
credit card receipts. (Id. at ¶ 78-79). Assuming the truth of these allegations, Green Valley did
not have a legal right to enter defendants’ property. The Contract did not give Green Valley an
open-ended legal right to enter 2211 Realty’s property at any time without notice for any
12
purpose. Rather, the Contract required 2211 Realty to permit Green Valley to enter the property
at any time for the limited purpose of “inspect[ing] the Station,” and “inspect[ing the] books and
records.” This language, at the very least, indicates that 2211 Realty’s obligation will be
triggered after Green Valley request permission—presumably, a reasonable request—to inspect
the station and the books and records.
The Court need not interpret the precise meaning of the Contract at this early stage of the
litigation, it is enough to say that the Contract clearly does not allow Green Valley to enter the
property without permission and take 2211 Realty’s business records. The motion to dismiss as
to Count 4 will therefore be denied.
E.
Rhode Island General Laws § 9-1-2 (Count 5)
The counterclaim alleges that Green Valley’s actions constitute the commission of a
“crime or offense,” and therefore defendants may recover damages pursuant to Rhode Island
Gen. Laws § 9-1-2. Section 9-1-2 states:
Whenever any person shall suffer any injury to his or her person, reputation, or
estate by reason of the commission of any crime or offense, he or she may recover
his or her damages for the injury in a civil action against the offender, and it shall
not be any defense to such action that no criminal complaint for the crime or
offense has been made; and whenever any person shall be guilty of larceny, he or
she shall be liable to the owner of the money or articles taken for twice the value
thereof, unless the money or articles are restored, and for the value thereof in case
of restoration.
R.I. Gen. Laws § 9-1-2. “Under Section 9-1-2, a [claimant] may bring a cause of action even if
no criminal complaint for the crime or offense has been filed.” Gray v. Derderian, 400 F. Supp.
2d 415, 430 (D.R.I. 2005) (citing Mello v. Dalomba, 798 A.2d 405, 411 (R.I. 2002)). To obtain
civil remedies under the statute, a claimant need only prove criminal liability by a preponderance
of the evidence. Cady v. IMC Mortg. Co., 862 A.2d 202, 215 (R.I. 2004). Although “[i]t is not
13
necessary for the [claimant] to allege the commission of the crime, which is the basis of his
claim for damages, with the technical accuracy required in the criminal complaint[,] . . . it must
be described sufficiently for identification.” Williams v. Smith, 68 A. 306, 308-309 (R.I. 1907).
Here, the counterclaim does not identify or otherwise describe which crime or crimes are
the basis for liability. Count 5 simply alleges that “[b]y their actions, Counterclaim Defendants
have engaged in criminal conduct.” (Countercl. ¶ 116). This does not sufficiently describe what
conduct defendants allege was criminal such that plaintiffs could identify the crime that is the
basis for a claim for damages. Williams, 68 A. at 308-309; cf. W. Reserve Life Assur. Co. v.
Caramadre, 2012 WL 399184, at *12-*13 (D.R.I. Feb. 7, 2012) (denying motion to dismiss and
allowing plaintiffs to “revive” cause of action under § 9-1-2 where plaintiffs amended complaint
to allege a different crime as basis for claim for damages).9 Accordingly, the motion to dismiss
as to Count 5 will be granted.
F.
Rhode Island General Law § 5-55-4 (Count 6)
The counterclaim further alleges that Green Valley violated defendants’ rights under
Rhode Island General Laws § 5-55-4(d)(2) by not giving them 120 days’ notice prior to
terminating the Contract. Section 5-55-4(d)(2) applies where the asserted cause for terminating
the franchise agreement “is among those specified in subdivision (c)(1) . . . .” Subdivision (c)(1)
allows a franchisor to terminate a franchise agreement if: (1) under the franchise agreement, the
franchisor leases real property and improvements to the franchisee, and (2) there is a lawful
9
In their memorandum in opposition to plaintiffs’ motion to dismiss, defendants allege that plaintiffs’
conduct violates R.I. Gen. Laws § 11-44-1 (obstruction of lawful pursuits) and R.I. Gen. Laws § 11-41-4 (obtaining
property by false pretenses or personation). However, the counterclaim does not articulate claims for relief based on
either of these crimes, or indeed any crime. See Western Reserve Life Assur. Co. of Ohio v. Conreal LLC, 715 F.
Supp. 2d 270, 287 n.16 (D.R.I. 2010).
14
termination of that lease under which the franchisor is entitled to possession of the real property
and improvements.10
Defendants contend that the Equipment Loan Agreement—through which Getty loaned
2211 Realty the equipment necessary to store, handle, and dispense Getty’s products—is a lease
of improvements to real property, and therefore they were entitled to 120 days’ notice before
termination of the Dealer Commission Contract. (See Countercl. Ex. A, at 12, ¶ 1). However,
even assuming the Equipment Loan Agreement was a lease of an improvement of real property,
it is unclear why subdivision (c)(1) applies. Based on the pleadings and attached exhibits, it
appears that Green Valley asserted that it was terminating the franchise agreement because
“2211 Realty is in material default under the Agreements.” (Countercl. Ex. I).11 Thus, it appears
that plaintiffs were required to comply with the notice requirement of § 5-55-4(d)(1), which
applies when “the asserted cause [for terminating the franchise agreement] is substantial
noncompliance with the obligations of the franchise agreement.” R.I. Gen. Laws § 5-554(d)(1).12
10
Specifically, subdivision (c)(1) provides:
With respect to franchise agreements where the franchisor leases real property and improvements
to the franchisee, the agreement may be terminated; provided, that there is a lawful termination of
lease, license, or other non-ownership under which the franchisor shall be entitled to possession or
control of that real property and improvements.
11
Specifically, Green Valley asserted that 2211 Realty had materially defaulted “pursuant to the terms of
the Dealer Commission Contract, at least in the following respects: failure to remit funds from sales of gasoline and
failure to maintain and provide proper records and receipts in breach of Sections 6, 26, 27 and 28,” and “these
defaults entitle GVO to terminate that agreement.” (Countercl. Ex. I). Green Valley then gave notice that “the
remaining Agreements are also terminated pursuant to their terms and upon such notice as may be required therein.”
(Countercl. Ex. I). According to the terms of the Equipment Loan Agreement, “in the event . . . the Supply or
Commission Contract between Company and Operator is terminated, Company may forthwith, without notice,
terminate this agreement, and in any manner take possession of the Equipment.” (Countercl. Ex. A, at 12, ¶ 6).
12
Section 5-55-4(d)(1) states:
[The] franchisor shall give the franchisee seven (7) days from receipt of notice in which to correct
any breach. If the breach has not been corrected within the seven (7) day period, the franchisor
15
It is not clear to the Court why the notice requirements of § 5-55-4(d)(2) apply. Most
significantly, it is unclear whether Green Valley asserted it was terminating the Contract for a
reason specified in subdivision (c)(1), and whether the Equipment Loan Agreement constituted a
lease of “real property and improvements.”13 At a minimum, further factual development is
needed to resolve these issues. Under the circumstances, the motion to dismiss as to Count 6
will be denied.
IV.
Conclusion
For the foregoing reasons, plaintiffs’ motion to dismiss the counterclaim is STAYED as
to the claims against Getty. As to the claims against Green Valley, the motion is GRANTED as
to Count 5 and DENIED as to Counts 2, 3, 4, and 6.
So Ordered.
/s/ F. Dennis Saylor
F. Dennis Saylor IV
United States District Judge
Dated: February 16, 2012
may terminate the franchise agreement in accordance with the notice requirements of the franchise
agreement.
R.I. Gen. Laws § 5-55-4. Paragraph 29 of the Contract states:
Company may immediately terminate this contract, upon two (2) days written notice to Dealer or
such other notice given in accordance with applicable law (or without notice in the event of a
misbranding or trademark violation) and in any manner take possession of the equipment and, at
its option may suspend deliveries of gasoline or petroleum products during any period of default in
the event Dealer does not comply with anyone of the terms and conditions of this contract, or upon
any violation of any applicable law, statute, rule or regulation . . . .
(Countercl. Ex. A, at ¶ 29).
13
Specifically, it is unclear whether the equipment leased through the Equipment Loan Agreement was an
improvement to real property, and whether, by referring to “franchise agreements where the franchisor leases real
property and improvements,” subdivision (c)(1) applies to franchise agreements where there a lease of an
improvement to real property, but no lease of real property. These issues would benefit from additional factual
development and briefing.
16
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