ALBOYACIAN et al v. BP PRODUCTS NORTH AMERICA, INC.
Filing
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OPINION. Signed by Judge William J. Martini on 11/22/11. (gh, )
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
ALBOYACIAN, et al.,
Civ. No. 9-5143
Plaintiffs,
OPINION
v.
HON. WILLIAM J. MARTINI
BP PRODUCTS NORTH AMERICA,
INC.,
Defendant.
WILLIAM J. MARTINI, U.S.D.J.:
This matter come before the Court on Defendant’s Federal Rule of Civil
Procedure 12(b)(6) motion to dismiss the Complaint for failure to state a claim
upon which relief may be granted. For the reasons stated below, the Court will
grant the motion in part and dismiss Counts Two, Five, Six, Seven, Eight, and Ten
of the Complaint. And the Court will dismiss the remaining Counts for lack of
ripeness.
I.
Factual and Procedural Background
Defendant BP Products North America, Inc. (“BP”) is a refiner and
marketer of gasoline and other petroleum products. The Plaintiffs operate BP
service stations throughout New Jersey pursuant to the Commissioner Marketer
Agreement (“CMA”). This Court has previously recognized that the CMA creates
a legal franchise under the New Jersey Franchise Practices Act, N.J.S.A. § 56:10-1,
et seq., (“NJFPA”), between BP and the signatory, see, e.g., Sarwari v. BP
Products North America, Inc., 2007 WL 1118344 (D.N.J. Apr. 9, 2007), and the
parties do not contest that issue. Under the CMA, a franchisee does not purchase
the BP fuel they dispense; rather, BP provides the fuel and the franchisee earns a
commission on each gallon sold. In the present cases, the Plaintiffs also leased
their respective service stations from BP pursuant to certain lease agreements. The
CMA at issue in this case explicitly provides that the agreement lasts for a term of
four years, and also explicitly provides that the franchisee shall have the option of
renewing the agreement for two additional terms of four years each. At various
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points after September 2006, the Plaintiffs and BP executed various CMA renewal
agreements that extended the franchises for four years (collectively with the CMA
and the lease agreements, the “Franchise Agreements”).
In August 2009, BP informed the Plaintiffs that it intended to withdraw from
the CMAs at the expiration of the term of each individual agreement. As an
alternative, BP offered all of the Plaintiffs the opportunity to purchase their service
stations and act as dealers who purchased fuel products directly from BP and then
sold them to customers – an arrangement BP refers to as Dealer Owned Dealer
Operated stations. BP also offered the alternative of becoming Company Owned
Dealer Operated stations, where BP would still own the service station property.
Under either alternative, a franchise relationship likely would no longer exist under
the NJFPA. See Sarwari v. BP Products North America, Inc., No. 06-2976, 2007
WL 1118344, at * (D.N.J. filed Sept. 15, 2006) (preliminarily enjoining BP from
changing nature of business arrangement with New Jersey franchisees).
On August 18, 2009, BP filed a complaint against Hillside Service, Inc.,
Mike Yigitkuri, and Vinod Oberoi seeking a declaration from this Court that it has
no obligation to continue business with the defendants, that it is not obligated to
renew the underlying CMAs, and that it is not responsible for any claimed lost
value of the defendants’ businesses (the “Hillside Action”). On October 7, 2009,
Ara Alboyacian, Mike Agolia, Ared Anac, Hagop Baga, Edward Balloutine, David
Chong, Sevan Curukcu, Alfred Deppe, Joseph Klein, Raffi Korogluyan, Paul
Lopes, Mary Lou Lopes, Abraham Manjikian, Imad Saleh, Walter Steele, Jayed
Suddal, Aret Tokatlioglu, Richard Walter, Gregory Yigitkurt, Mike Yigitkurt, and
Sahin Yigitkurt, (collectively, the “Franchisees”) filed the present action against
BP seeking, among other relief, a declaration that BP’s failure to renew the
underlying CMAs would constitute a violation of the NJFPA (the “Alboyacian
Action”). The Alboyacian Action also stated nine other causes of action.The
parties subsequently moved for summary judgment on the issue of whether the
terminations would violate the NJFPA in both cases, and BP also filed a motion to
dismiss in the Alboyacian Action seeking to dismiss that complaint in its entirety.
After an attempt at mediation failed, this Court found that the terminations would
violate the NJFPA, and the Court granted summary judgment against BP in both
cases, thereby dismissing the Hillside Action in its entirety. BP Products North
America , Inc. v. Hillside Service, Inc., Nos. 9-4210, 9-5143, 2011 WL 4343452
(D.N.J. Sept. 14, 2011).
The Court now construes BP’s motion to dismiss in this, the Alboyacian
Action, as to the nine remaining counts of the Franchisees’ complaint.
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II.
Legal Analysis
A. Ripeness
This Court has an obligation to determine its own subject-matter jurisdiction
sua sponte. U.S. Express Lines Ltd. v. Higgins, 281 F.3d 383, 388-89 (3d Cir.
2002). This includes an obligation to address Article III standing issues, including
ripeness, where such issues exist. Peachlum v. City of York, Pennsylvania, 333
F.3d 429, 433 (3d Cir. 2003). The purpose of the ripeness doctrine is to determine
whether a party has brought an action prematurely, and it counsels abstention until
such time as a dispute is sufficiently concrete to satisfy the constitutional and
prudential requirements of the doctrine. Id. A dispute is not ripe for judicial
determination if it rests upon contingent future events that may not occur as
anticipated or may not occur at all. Wyatt, Virgin Islands, Inc., 385 F.3d 801, 806.
To the extent that the ripeness of any of the Franchisees’ claims is
contingent upon BP actually terminating any of the Franchises, those claims are
unripe because no terminations have yet occurred, and, indeed the terminations
may not occur at all. This is especially true in light of this Court’s prior opinion
resolving the motions for summary judgment.
Counts Three, Four, and Nine rely on the termination occurring in order for
them to be ripe, and so the Court must dismiss them. Count Three alleges BP
fraudulently induced the Franchisees into renewing their CMA agreements by
making oral and written representations signaling its intent to renew the franchises
beyond the renewal periods specifically provided in the franchise agreements.
Count Four alleges a claim against BP for negligent misrepresentation based on the
same conduct, and Count Nine alleges a claim for equitable estoppel based on the
same conduct. With regards to each Count, this Court sees no basis for harm unless
the intended termination occurs. As alleged, the harm arises because the
Franchisees invested in their franchises assuming the franchise-relationship would
continue. If it continues, the Franchisees’ will be in the exact same position they
had believed they were in when they made those investments. Thus, the Court will
dismiss Counts Three, Four, and Nine,1 without prejudice, as unripe, because their
justiciability rests on contingent future events which may not occur as anticipated.
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To the extent that Count Nine seeks specific performance or an injunction forcing BP to continue the franchise
relationship, such relief is not available to the Franchisees. Though it is a proper remedy in many equitable estoppel
actions, specific performance, by definition, does not apply to create new contractual rights; rather, specific
performance only encompasses performance of contractual duties. See Restatement (Second) of Contracts § 357
(1981). And the Court, having ruled that the intended terminations would violate the NJFPA, does not see a basis for
injunctive relief. Assuming BP terminates and the Franchisees succeed on their claim under a theory of equitable
estoppel, no irreparable harm will have occurred as monetary damages could adequately compensate the Franchisees
for any losses. See, e.g., Kos Pharmaceuticals, Inc. v. Andrx Corp., 369 F.3d 700, 728 (3d Cir. 2004).
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B. Motion to Dismiss Standard
In deciding a motion to dismiss under Rule 12(b)(6), a court must take all
allegations in the complaint as true and view them in the light most favorable to the
plaintiff. See Warth v. Seldin, 422 U.S. 490, 501 (1975); Trump Hotels & Casino
Resorts, Inc. v. Mirage Resorts Inc., 140 F.3d 478, 483 (3d Cir. 1998). This
assumption of truth is inapplicable, however, to legal conclusions couched as
factual allegations or to “[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements.” Ashcroft v. Iqbal, 556 U.S. 662, 129
S.Ct. 1937, 1949 (2009).
Although a complaint need not contain detailed factual allegations, “a
plaintiff’s obligation to provide the ‘grounds’ of his ‘entitlement to relief’ requires
more than labels and conclusions, and a formulaic recitation of the elements of a
cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
Thus, the factual allegations must be sufficient to raise a plaintiff’s right to relief
above a speculative level, such that it is “plausible on its face.” See id. at 570; see
also Umland v. PLANCO Fin. Serv., Inc., 542 F.3d 59, 64 (3d Cir. 2008). 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.” Iqbal, 129 S.Ct. at 1949 (2009) (citing Twombly, 550 U.S. at
556). While “[t]he plausibility standard is not akin to a ‘probability requirement’ . .
. it asks for more than a sheer possibility.” Iqbal, 129 S.Ct. at 1949 (2009).
C. Count One: Violation of the NJFPA
This Court’s prior decision on the motions for summary judgment resolved
Count One, and so the Court will not revisit that Count here. BP Products North
America , Inc., 2011 WL 4343452 at *4-5. There were no ripeness concerns as to
that Count because the Franchisees were seeking declaratory relief. For the
purposes of declaratory relief, an actual controversy existed that was sufficient for
this Court to exercise jurisdiction over the dispute.
D. Count Two: Breach of the Implied Covenant of Good Faith and Fair
Dealing
“A covenant of good faith and fair dealing is implied in every contract in
New Jersey” – including franchise agreements. Wilson v. Amerada Hess Corp.,
773 A.2d 1121, 1126 (N.J. 2001). The Franchisees allege that BP violated the
implied covenant by: (1) indicating an intent to terminate the franchise agreement;
(2) failing to advise the Franchisees of its intent to abandon the franchises before
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accepting the benefit of the Franchisees’ continued investments in their business;
(3) failing to disclose its intent to “circumvent” the Sarwari ruling and thereby
leading the Franchisees to believe the franchise relationship would continue; (4)
providing the Franchisees with “unrealistic” purchase options for post-termination
in constructive violation of the NJFPA; and (5) “circumventing the letter and
spirit” of the Sarwari ruling by requiring the Franchisees to meet “unreasonable”
conditions of performance.
BP argues that the Franchisees cannot succeed as a matter of law on their
claims for breach of the implied covenant of good faith and fair dealing because its
actions and intended actions would not prevent them from receiving their
reasonably expected fruits under the contract. BP is correct. Here, the Franchisees
have failed to allege with any specificity how the alleged failures to disclose have
prevented them from enjoying any fruits of the franchise agreement. Wilson v.
Amerada Hess Corp., 168 N.J. 236, 244 (2001); Sons of Thunder, Inc. v. Borden,
Inc. 148 N.J. 396, 420 (1997). While the Franchisees are correct that the exercise
of a contractual right may lead to a breach of the implied covenant, see id., that
argument misses the mark. It is the NJFPA – not the contracts at issue – that
prevents BP from terminating the franchise relationship without paying just
compensation where the franchisees are substantially complying with the franchise
agreement. Indeed, the contracts at issue implicitly contemplate that the franchise
relationships would end after a set date, and only the NJFPA prevents that
termination. The expected continuation of the franchise is not a fruit of the
contract, but a fruit of the NJFPA. And the Franchisees have not alleged or
explained how anything in the NJFPA, the Franchise Agreements, or the implied
covenant created any duties of disclosure that BP violated. As such, none of the
alleged breaching conduct destroys any fruits of the underlying contracts and the
Plaintiffs’ claim for breach of the implied covenant cannot succeed. Similarly, any
alleged obligations arising from the NJFPA or the “letter and spirit” of Sarwari are
not fruits of the contract such that they would give rise to actionable conduct under
the breach of the implied covenant doctrine. And so the Court will dismiss Count
Two.
E. Counts Five and Six: Tortious Interference
The Franchisees allege that BP tortuously interfered with their contracts with
third parties and with their prospective economic advantages by determining to
terminate the franchises and by subjecting the Franchisees to onerous standards of
performance. BP argues that Franchisees’ claims for tortious interference must fail
because the factual allegations, even if taken as true, are insufficient to support a
finding of malice. Again, BP is correct.
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Malice is an element of a prima facie case for a cause of action for tortious
interference, regardless of whether the allegations are interference with an
economic advantage or with an existing contract. Luso, 2009 WL 1873583, at *6
(citing cases). “Malice is not used here in its literal sense to mean ‘ill will;’ rather,
it means that harm was inflicted intentionally and without justification or excuse.”
Lamorte Burns & Co., Inc. v. Walters, 770 A.2d 1158, 1170 (N.J. 2001). “The
conduct must be both injurious and transgressive of generally accepted standards
of common morality or of law.” Id. at 1170-71. “The line clearly is drawn at
conduct that is fraudulent, dishonest, or illegal.” Id. at 1170.
Here, even assuming the allegations of the Complaint are true, BP’s conduct
cannot be characterized as malicious under this standard. True, BP’s allegations
could support a finding of ill will, but this is insufficient. There are no allegations
even suggesting that BP has engaged in fraudulent, dishonest, or illegal activity
with respect to either the decision to terminate the franchises or the decision to
shift certain responsibilities of performance onto the franchise owners. Whether
these decisions violate the NJFPA does not matter, as the Franchisees have failed
to allege specific facts tending to show that BP has done anything than argue in
good faith that the decisions do not violate the act. And allegations that these
actions are disadvantageous to the Franchisees and advantageous to BP are
similarly insufficient – actions taken for business reasons are not unjustified. Thus,
the Court will dismiss Counts Five and Six.
F. Count Seven: Unjust Enrichment
“To establish a claim for unjust enrichment, a plaintiff must show both that
defendant received a benefit and that retention of that benefit without payment
would be unjust.” Iliadis v. Wal-Mart Stores, Inc., 922 A.2d 710, 723 (N.J. 2007)
(quotation omitted). The plaintiff must also “show that it expected remuneration
from the defendant at the time it performed or conferred a benefit on defendant and
that the failure of remuneration enriched defendant beyond its contractual rights.”
Id. The key here is the phrase “beyond its contractual rights.” Where a contractual
agreement already binds the parties to certain courses of conduct, the defendant
might accept plaintiff’s performance as part of that agreement. See, e.g., St. Paul
Fire & Marine Ins. Co. v. Indemnity Ins. Co. of North America, 158 A.2d 825, 828
(N.J. 1960) (finding no basis for quasi-contractual liability where insurance
agreement governed parties’ performance).
The Franchisees argue that they invested time, money, and resources to
market and sell BP’s products, thereby unjustly enriching BP; this argument makes
little sense. In fact, the allegations of the Complaint, read in coordination with the
Franchise Agreements, suggest only that the Franchisees investments were in line
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with the terms of the agreements, and that any benefit BP received was – justly –
part of its contractual rights. See also Luso, 2009 WL 1873583, at *6. Thus, the
Court will dismiss Count Seven.
G. Count Eight: Quantum Meruit
The Franchisees also allege that BP is liable under a theory of quantum
meruit because, in making these investments to their businesses, they expected
reasonable compensation. BP argues that any claim sounding in quantum meruit
must fail because a valid agreement existed governing the parties’ relationship.
Again, BP is correct.
The theory of quantum meruit liability arises as an alternative to a breach of
contract action. Where a plaintiff is unable to prove the existence of a valid,
enforceable agreement, the plaintiff may instead attempt to collect compensation
for its services under quantum meruit. See Weichert Co. Realtors v. Ryan, 608
A.2d 280, 285-86 (N.J. 1992) (finding that no enforceable agreement existed but
allowing plaintiff to proceed under theory of quantum meruit). The goal of such
quasi-contract recovery is to bring justice to the parties without reference to their
intentions. Id. (quotations omitted).
Here, the intentions of the parties are clear because they entered binding,
agreements governing their relationships. Neither party has challenged the
enforceability of those agreements. And while the mere existence of a contract may
not be sufficient to defeat a claim for quantum meruit, the Franchisees have failed
to allege that they engaged in any activity above and beyond what was required of
them as part of those contracts; rather, it appears as though the Franchisees have
merely performed their contractual duties. 2 And if the Franchisees felt as though
BP had not adequately performed under the Franchise agreements, the appropriate
cause of action would be for breach of contract; they cannot succeed on a claim
under the doctrine of quantum meruit. See, e.g., Blue Sky MLS, Inc. v. RSG
Systems, LLC, No. 00-3832, 2002 WL 1065873, at *7 (D.N.J. Mar. 28, 2002)
(dismissing quantum meruit claim “to the extent it seeks to recover for work
performed by RSG that was contemplated” by enforceable agreements between the
parties).
2
Even assuming that the value of BP’s franchise and good-will were increased by the Franchisees, this hardly seems
like something that is outside the realm of the Franchise Agreements. Indeed, such benefits flow naturally from the
franchise relationship to both the franchisor and the franchisee over the course of the franchise agreement. See, e.g.,
Neptune T.V. & Appliance Service, Inc. v. Litton Microwave Cooking Products Div., 462 A.2d 595, 600 (N.J. Super.
A.D. 1983) (discussing mutual benefits of franchise relationship). And while a franchisee is especially vulnerable to
the loss of goodwill that accompanies termination, the Court does not see how that gives rise to an action under the
doctrine of quantum meruit. Fortunately for franchisees in this state, the NJFPA provides protection from such
losses. Id. at 600-01.
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For all these reasons, the Court will dismiss Count Eight.
H. Count Ten: Unconscionability
Finally, the Franchisees allege that the Franchise Agreements are
unconscionable contracts of adhesion. But they also, somewhat confusingly,
request as relief that the Court enjoin BP from terminating the franchises
established by those agreements. BP argues that the Franchisees have failed to
establish that unconscionability is actually a cause of action that a plaintiff may
bring in the affirmative. The Franchisees have conceded as much in their
opposition brief. As such, the Court will dismiss Count Ten.
III.
Conclusion
For the foregoing reasons, the Court will grant BP’s motion to dismiss. And
the Court will dismiss Counts Two, Five, Six, Seven, Eight, and Ten of the
Complaint with prejudice. The Court will also dismiss Counts Three, Four, and
Nine without prejudice as unripe. An appropriate order follows.
/s/ William J. Martini
WILLIAM J. MARTINI, U.S.D.J.
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