Marathon Petroleum Company, LP v. Future Fuels of America, LLC et al

Filing 80

OPINION ORDER granting in part and denying in part 52 Motion to Dismiss & FOR PARTIAL JUDGMENT ON THE PLEADINGS. Signed by District Judge Patrick J. Duggan. (MOre)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
MARATHON PETROLEUM COMPANY
LP, a Delaware limited partnership,
Plaintiff,

Case No. 10-14068

v.

Honorable Patrick J. Duggan

FUTURE FUELS OF AMERICA, LLC, a
Michigan limited liability company,
HAKIM FAKHROUY, a/k/a
ABDELHAKEEM FAKHOURY, and
OASIS OIL, LLC, a Michigan limited
liability company,
Defendants.
/
OPINION AND ORDER
At a session of said Court, held in the U.S.
District Courthouse, Eastern District
of Michigan, on December 14, 2011.
PRESENT:

THE HONORABLE PATRICK J. DUGGAN
U.S. DISTRICT COURT JUDGE

On October 11, 2010, Marathon Petroleum Company LP (“Plaintiff” or “MPC”)
filed this suit, alleging breaches of agreements relating to the sale and distribution of
petroleum products. Before the Court is Plaintiff’s motion to dismiss the Countercomplaint filed by Future Fuels of America, LLC (“Future Fuels”) and for partial
judgment on the pleadings with respect to Plaintiff’s claims. The matter has been fully
briefed, and the Court held a hearing on October 13, 2011. For the reasons stated below,
the Court grants the motion for partial judgment on the pleadings and grants in part the

motion to dismiss.
I. Factual and Procedural Background
This lawsuit concerns the operation of several gas stations in the metro Detroit area.
Plaintiff and Future Fuels entered into a Product Supply Agreement (“PSA”) under which
Future Fuels would distribute Plaintiff’s vehicle fuels and other related products. Plaintiff
also entered into several Improvement Agreements with Future Fuels and Future Fuels’
predecessor, EPPCO, Inc., to provide funds for certain improvements at these gas stations.
Defendant Fakhoury, the President and sole member of Future Fuels, guaranteed payment
of Future Fuels’ obligations to Plaintiff.
Future Fuels subsequently failed to submit timely payment to Plaintiff for purchases
of products under the PSA. On July 7, 2009, Plaintiff sent a letter to Fakhoury indicating
that Future Fuels owed Plaintiff a balance of $6,236,379.82 at that time and demanding
payment pursuant to the personal guaranty. See Compl. Ex. G. Future Fuels was trying to
refinance several loans and asked Plaintiff for additional time to work out payment
arrangements. This was apparently unsuccessful and Future Fuels’ financial difficulties
continued, leading Wayne County Circuit Judge Robert Ziolkowski to appoint a receiver
in the matter on April 26, 2010. See Countercl. Ex. G at 3.
On May 20, 2010, Plaintiff and Future Fuels entered into a “Letter Agreement”1
setting forth terms upon which Future Fuels would be permitted to continue distributing
Plaintiff’s products and purchasing those products on credit. See Compl. Ex. I. This

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Future Fuels refers to this agreement as the “Amended Supply Agreement.”
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agreement acknowledged that as of April 30, 2010, Future Fuels’ past due balance to
Plaintiff totaled $6,552,000. Id. at 1. In order to be permitted to purchase fuels on credit,
Future Fuels was required to make an initial payment of $450,000 to Plaintiff and provide
a letter of credit in the amount of $200,000. Id. Future Fuels was also required to submit
a plan within fourteen days outlining payment terms for the remaining past due balance.
Id. at 2. If the parties did not agree on a payment plan within thirty days of the date of the
Letter Agreement, Plaintiff would be permitted to “take such action as is permitted by law
to pursue Future Fuels for the Past Due Balance and other remedies under law.” Id. The
agreement further provided that if Future Fuels complied with the payment plan and there
was no additional default, Plaintiff would not allow any other distributors (known in the
industry as “jobbers”) to supply the gas stations being supplied by Future Fuels.2 Id.
Plaintiff alleges that Future Fuels failed to make any payments under the Letter
Agreement, and on June 30, 2010, Plaintiff sent a letter to Future Fuels terminating the
franchise relationship. See Pl.’s Mot. Ex. A. This letter states that the relationship was
being terminated because Future Fuels had failed to honor payment arrangements, had
failed to purchase Marathon-branded products for distribution since June 2009, and had
misbranded fuel using Marathon trademarks. The letter further provided that the PSA,
three Branding Agreements, and two Improvement Agreements would be terminated
effective September 30, 2010. Future Fuels alleges that it never received this letter, nor
did its court-appointed receiver. Countercl. ¶¶ 48-49.

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Future Fuels refers to this as the “cross-hauling” provision of the agreement.
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On September 30, 2010, Plaintiff discontinued the processing of Marathon credit
card payments at Future Fuels gas stations. The receiver contacted Plaintiff, indicating
that court approval was required before taking such action. The receiver requested that
Plaintiff reinstate credit card processing, but Plaintiff apparently refused.
Plaintiff filed this action soon afterward, asserting the following claims: Breach of
Contract (PSA) (Count I); Breach of Contract (Personal Guaranty) (Count II); Breach of
Contract (Improvement Agreements) (Count III); Unjust Enrichment / Quantum Meruit
(Count IV); Promissory Estoppel (Count V); Liability of Fakhoury (Count VI); Breach of
Oral Contract (Count VII); Account Stated (Count VIII); Violation of Lanham Act (Count
IX); Breach of the Uniform Commercial Code (Count X); Conversion (Counts XI and
XII); and Claim and Delivery (Count XIII). Plaintiff obtained a default judgment against
Future Fuels, but the Court subsequently set this judgment aside. Future Fuels filed a
Counter-complaint, alleging breach of the Supply Agreement and Amended Supply
Agreement (Count I); breach of the Improvement Agreements (Count II); violation of the
Petroleum Marketing Practices Act (Counts III and IV); and violation of the duty of good
faith and fair dealing (Count V).
On July 19, 2011, Plaintiff moved for judgment on the pleadings with respect to the
claims in its Complaint pursuant to Federal Rule of Civil Procedure 12(c). Plaintiff also
sought dismissal of Future Fuels’ counterclaims pursuant to Rule 12(b)(6). In response,
Future Fuels filed an Amended Counter-complaint pursuant to Rule 15(a)(1)(B), adding a

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claim for unjust enrichment (Count VI).3
II. Standard of Review
A motion for judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules
of Civil Procedure is subject to the same standards of review as a 12(b)(6) motion to
dismiss for failure to state a claim upon which relief can be granted. Grindstaff v. Green,
133 F.3d 416, 421 (6th Cir. 1998). A motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6) tests the legal sufficiency of the complaint. RMI Titanium Co. v.
Westinghouse Elec. Corp., 78 F.3d 1125, 1134 (6th Cir. 1996). Under Federal Rule of
Civil Procedure 8(a)(2), a pleading must contain a “short and plain statement of the claim
showing that the pleader is entitled to relief.” As the Supreme Court recently provided in
Iqbal, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal,
--- U.S. ----, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570, 127 S. Ct. 1955, 1974 (2007)). “A claim has facial plausibility 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,
127 S. Ct. at 1965). The plausibility standard “does not impose a probability requirement
at the pleading stage; it simply calls for enough fact to raise a reasonable expectation that

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Rule 15 does not provide that a party may amend its pleading as a matter of course
following a motion for judgment on the pleadings under Rule 12(c). See Fed. R. Civ. P.
15(a)(1)(B) (allowing a party to amend once as a matter of course within “21 days after
service of a motion under Rule 12(b), (e), or (f).”). Nonetheless, the Court shall address
Future Fuels’ unjust enrichment claim, because for reasons stated more fully below, the
Court concludes that this claim lacks merit.
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discovery will reveal evidence of illegal [conduct].” Twombly, 550 U.S. at 556, 127 S. Ct.
at 1965.
In deciding whether the plaintiff has set forth a “plausible” claim, the court must
accept the factual allegations in the complaint as true. Id.; see also Erickson v. Pardus,
551 U.S. 89, 94, 127 S. Ct. 2197, 2200 (2007). This presumption, however, is not
applicable to legal conclusions. Iqbal, 129 S. Ct. at 1949. Therefore, “[t]hreadbare
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, 127 S. Ct. at 1964-65). Ultimately,
“[d]etermining whether a complaint states a plausible claim for relief will . . . be a
context-specific task that requires the reviewing court to draw on its judicial experience
and common sense.” Id. at 1950. In conducting this analysis, the Court may consider the
pleadings, exhibits attached thereto, and documents referred to in the complaint that are
central to the plaintiff’s claims. See Greenberg v. Life Ins. Co. of Va., 177 F.3d 507, 514
(6th Cir. 1999).
III. Plaintiff’s Motion for Partial Judgment on the Pleadings
Plaintiff argues that it should be granted partial judgment on the pleadings, as Future
Fuels has admitted that it owes Plaintiff $6,552,000 under the PSA and the Improvement
Agreements. In support of this contention, Plaintiff points to statements in Future Fuels’
Counter-complaint, Countercl. ¶ 16 (“Future Fuels incurred a balance owing to Marathon
for a sum of Six Million Five Hundred Fifty-Two [Thousand] Dollars ($6,552,000.00).”),
as well as Future Fuels’ acknowledgment of this balance in the Letter Agreement. See
Countercl. Ex. F (“Future Fuels acknowledges the monies it owes to MPC against its past
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due account to be $6,552,000 as of April 30, 2010.”).4 Future Fuels argues that Plaintiff
breached the Letter Agreement first, excusing Future Fuels’ performance. Specifically,
Future Fuels asserts that Plaintiff terminated the processing of credit card payments and
allowed other distributors to sell fuel to Future Fuels’ branded outlets. The relevant
section of the Letter Agreement states:
The parties further agree that provided Future Fuels is in compliance with such
Payment Plan and provided there has been no additional default on the part of
Future Fuels, then MPC agrees that:
1. any rebates earned under any single site agreement between them shall
not be retained by MPC to apply against the Past Due Balance of Future
Fuels; and,
2. credit card assignments shall be forwarded to Future Fuels and shall not
be retained by MPC to apply against the Past Due Balance of Future Fuels;
and,
3. MPC shall refrain from exercising any right it may have to pursue or
charge Future Fuels for default of the terms and conditions of the
agreements between them, including but not limited to the Branded Product
Supply and Trademark License Agreement dated January 24, 2009
(“PSA”), with regard to the practices of Future Fuels in supplying its
Marathon branded locations prior to the date hereof.
4. MPC will not add to the Marathon branded product supply agreement of
another Marathon brand jobber any of Future Fuels’ Branded Outlets (as
listed on Exhibit B to the PSA as of the date of this Letter Agreement)
without Future Fuels’ written consent.
Compl. Ex. I at 2. The paragraph immediately preceding Marathon’s obligations plainly
conditions those obligations upon Future Fuels’ “compliance with such Payment Plan” and
the non-occurrence of an “additional default on the part of Future Fuels.” Future Fuels has

4

Future Fuels filed an Amended Counter-complaint on August 9, 2011, removing the
paragraph in which it admitted this past due balance. This amended pleading, however,
still incorporates the Letter Agreement, in which Future Fuels acknowledged the past due
balance.
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not pleaded facts indicating that it complied with its payment obligations under the Letter
Agreement. Absent such facts, the Court cannot infer that Plaintiff was required to honor
the Letter Agreement’s credit card processing and cross-hauling provisions. As Plaintiff
did not breach the Letter Agreement first, Future Fuels’ performance was not excused.
Future Fuels has acknowledged that it owes the sum of $6,552,000 to Plaintiff under
the various agreements between the parties, and the pleadings fail to allege any facts upon
which this obligation can be excused. Plaintiff is therefore entitled to judgment on the
pleadings in this amount with respect to its claims for breach of contract (Counts I, III,
VII, and X) and account stated (Count VIII). Because the validity of Fakhoury’s guaranty
has not been disputed, Plaintiff is also entitled to judgment on the pleadings with respect to
its claims for breach of the guaranty (Count II) and liability of Fakhoury (Count VI).
IV. Plaintiff’s Motion to Dismiss Future Fuels’ Counterclaims
Plaintiff argues that Future Fuels’ counterclaims must be dismissed, and the Court
shall address these claims in turn.
A. Breach of Contract
Future Fuels alleges that Plaintiff breached the PSA by wrongfully suspending the
processing of credit card transactions and terminating the PSA without providing 90 days’
notice.5 According to Future Fuels, Plaintiff took these actions on or about September 30,
2010, several months after Future Fuels breached the PSA by failing to make payments

5

Future Fuels also alleges violations of a term of the PSA prohibiting the sale of “hot
fuel,” see Countercl. ¶ 60(c), but this claim must be dismissed for failure to plead any
supporting facts.
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owed to Plaintiff. The Court concludes that Future Fuels committed the first substantial
breach of the PSA, excusing Plaintiff’s performance. Thus, Future Fuels’ counterclaim for
breach of the PSA must be dismissed.
Future Fuels contends that Plaintiff breached the cross-hauling provisions of the
Letter Agreement by supplying Future Fuels’ branded outlets through other Marathon
distributors. As noted above, these provisions were expressly conditioned upon Future
Fuels’ compliance with its payment plan, and Future Fuels has failed to plead facts
indicating that it complied. The Court therefore concludes that Plaintiff did not breach the
Letter Agreement.
Future Fuels claims that Plaintiff breached the Improvement Agreements by
terminating the PSA without giving 90 days’ notice, Countercl. ¶ 64, but the provisions
cited by Future Fuels only state that each Improvement Agreement terminates upon
termination of the PSA. See Countercl. Exs. A § 9, B § 6(a)(4), C § 1(i)(3), D § 6(a)(4).
The Court has concluded that Future Fuels has not stated a claim for wrongful termination
of the PSA. Because termination of the PSA results in the termination of the respective
Improvement Agreements, the claims asserted under each Improvement Agreement fail for
the same reasons.
B. Violations of the Petroleum Marketing Practices Act
Future Fuels alleges that Plaintiff violated the Petroleum Marketing Practices Act
(“PMPA”), 15 U.S.C. § 2802(d)(1)(A), by terminating the franchise relationship without
providing the necessary notice. The statute requires delivery of the notice via certified
mail or personal delivery to the franchisee. 15 U.S.C. § 2804(c)(2). Plaintiff argues that it
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provided the required notice and satisfied all delivery requirements, pointing to a letter to
Fakhoury dated June 30, 2011.6 See Pl.’s Mot. Ex. A. Although this letter appears to
satisfy the statute’s content requirements and displays the words “via certified U.S. mail,
return receipt requested,” this does not establish that the letter was actually delivered to
Fakhoury personally or sent via certified mail. Future Fuels alleges that it never received
the termination notice, nor did its receiver. Countercl. ¶ 75. For purposes of Plaintiff’s
motion to dismiss, the Court must accept this allegation as true. If the notice was not sent
or delivered as required, Plaintiff’s termination of the franchise relationship may have
violated 15 U.S.C. § 2802(d)(1)(A). Future Fuels has asserted a plausible claim under the
PMPA, and Plaintiff’s motion to dismiss must be denied with respect to this claim.
Future Fuels asserts a second claim under the PMPA, alleging that Plaintiff failed to
provide 90 days’ notice of its intent to terminate the franchise relationship as required by
§ 2804(a). Because the pleadings do not establish that Future Fuels received the notice
required by § 2804, the Court concludes that this claim cannot be dismissed.
Plaintiff contends that the applicable statute of limitations bars Future Fuels’ PMPA
claims, but the Court disagrees. The statute requires an aggrieved franchisee to bring its
claim within 1 year after the later of: (1) the date of termination of the franchise; or (2) the
date the franchisor fails to comply with the statute’s requirements. 15 U.S.C. § 2805(a).
The notice of termination was allegedly sent to Future Fuels on June 30, 2010, and the

6

Future Fuels argues that this letter is not properly considered in evaluating the motion
under Rule 12(b)(6), but the Court notes that as a document referred to in the Countercomplaint, it is appropriately considered at this time. See Greenberg, 177 F.3d at 514.
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franchise was terminated on September 30, 2010. Future Fuels asserted its PMPA claims
on June 29, 2011, prior to the expiration of the limitations period. The Court therefore
concludes that Future Fuels’ claims were timely filed.
C. Bad Faith
Future Fuels asserts that Plaintiff breached the PSA and Letter Agreement, violating
the duty of good faith and fair dealing implied in these contracts. Countercl. ¶¶ 90-92.
The Court has concluded, however, that Future Fuels first breached these agreements by
failing to make the required payments to Plaintiff. Plaintiff was not obligated to perform;
thus, its refusal to perform does not demonstrate bad faith. Accordingly, this claim must
be dismissed.
D. Unjust Enrichment
In its unjust enrichment claim, Future Fuels asserts that Plaintiff made a deliberate
effort not to protect Future Fuels’ exclusive distributorship with respect to its branded
outlets, resulting in assignment of those outlets to other Marathon distributors. Countercl.
¶ 104-05. Under the theory of unjust enrichment, the law will imply a contract where one
party inequitably receives and retains a benefit from another. Morris Pumps v. Centerline
Piping, Inc., 273 Mich. App. 187, 194-95, 729 N.W.2d 898, 903-04 (Mich. App. 2006).
Plaintiff’s position is that it was under no obligation to prevent cross-hauling, as Future
Fuels breached the Letter Agreement by failing to make necessary payments.7 As stated

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Future Fuels contends that Plaintiff’s argument is improperly raised in a reply brief, but
Future Fuels added the unjust enrichment claim in its amended Counter-complaint, filed
after Plaintiff’s motion. Thus, the reply brief was Plaintiff’s first opportunity to address
this claim. Moreover, Future Fuels responded to many of Plaintiff’s arguments in its sur11

above, the Court has concluded that Plaintiff’s obligations under the Letter Agreement
were conditioned upon Future Fuels making its initial payment and submitting a payment
plan. Future Fuels has failed to plead facts indicating that it satisfied these conditions.
The Court cannot conclude that Plaintiff was obligated to honor the Letter Agreement’s
cross-hauling provisions. Thus, there is no indication that the result here was unjust;
Plaintiff was not required to prevent the cross-hauling that is the subject of Future Fuels’
claim. Moreover, an unjust enrichment claim does not lie where an express contract
between the parties covers the same subject matter. Id. at 194, 729 N.W.2d at 903. The
Letter Agreement constitutes such a contract, and bars Future Fuels’ claim.
V. Conclusion
Accordingly,
IT IS ORDERED that Plaintiff’s motion for partial judgment on the pleadings is
GRANTED with respect to the following claims in Plaintiff’s Complaint: Breach of
Contract (PSA) (Count I); Breach of Contract (Personal Guaranty) (Count II); Breach of
Contract (Improvement Agreements) (Count III); Liability of Fakhoury (Count VI);
Breach of Oral Contract (Count VII); Account Stated (Count VIII); and Breach of the
Uniform Commercial Code (Count X). Plaintiff is entitled to the amount of $6,552,000 on
its claims.
IT IS FURTHER ORDERED that Plaintiff’s motion to dismiss Future Fuels’
Counter-complaint is GRANTED IN PART and DENIED IN PART. The following

reply brief. The Court therefore concludes that Plaintiff’s argument is properly raised at
this time.
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claims in the Counter-complaint are DISMISSED: breach of the Supply Agreement and
Amended Supply Agreement (Count I); breach of the Improvement Agreements (Count
II); violation of the duty of good faith and fair dealing under the Uniform Commercial
Code (Count V); and unjust enrichment (Count VI). Plaintiff’s motion is denied with
respect to Future Fuels’ claims for violation of the Petroleum Marketing Practices Act
(Counts III and IV).

s/PATRICK J. DUGGAN
UNITED STATES DISTRICT JUDGE
Copies to:
Abdu H. Murray, Esq.
Scott A. Warheit, Esq.
Amy M. Johnston, Esq.
Mohsin A. Mashhour, Esq.
Shereef H. Akeel, Esq.
Troy C. Otto, Esq.

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