SAAB 1 Enterprises, Inc. v. Colbea Enterprises, LLC et al

Filing 31

OPINION AND ORDER granting 27 Motion to Amend/Correct; finding as moot 30 Motion for Leave to File; granting in part and denying in part 7 Motion to Dismiss for Failure to State a Claim; granting in part and denying in part 14 Motion to Dismiss for Failure to State a Claim. So Ordered by Chief Judge William E. Smith on 2/28/14. (Jackson, Ryan)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
___________________________________
)
)
)
Plaintiff,
)
)
v.
)
)
COLBEA ENTERPRISES, LLC;
)
MOTIVA ENTERPRISES, LLC; and
)
EASTSIDE ENTERPRISES, LLC,
)
)
Defendants.
)
___________________________________)
SAAB 1 ENTERPRISES, INC.,

C.A. No. 13-599 S

OPINION AND ORDER
WILLIAM E. SMITH, Chief Judge.
This dispute involves the leasing, operation and servicing
of gas stations located in Massachusetts and Rhode Island.

Saab

1 Enterprises, Inc. (“Saab”) has brought claims against Colbea
Enterprises, LLC (“Colbea”), Motiva Enterprises, LLC (“Motiva”)
and Eastside Enterprises, LLC (“Eastside” and collectively with
Colbea

and

Motiva,

“Defendants”)

for

declaratory

judgment,

breach of contract, breach of the covenant of good faith and
fair dealing, conversion, and violations of Massachusetts and
Rhode

Island

consumer

protection

law.

Now

pending

is

Defendants’ Motion to Dismiss for failure to state a claim (ECF
Nos. 7 and 14).

For the reasons that follow, the Motion to

Dismiss is GRANTED IN PART and DENIED IN PART.

1

I.

Facts
Barely

six

months

old

and

not

yet

past

the

motion

to

dismiss stage, this case has generated close to 300 pages of
briefs, some 1300 pages of exhibits, and a panoply of lastminute, “emergency” motions seeking relief.

This need not have

happened, as the dispute is relatively straight-forward.

The

facts are summarized from the Second Amended Complaint 1 (ECF No.
27-3) and are not in dispute.
Saab is a Massachusetts corporation that operated a total
of

eleven

Shell

Massachusetts.
were

leased

outright.

branded

gas

stations

(Compl. ¶¶ 1, 7, 16.)
from

Defendants,

(Id. at ¶ 16.)

immediately relevant.

and

in

Rhode

Island

and

Nine of these stations

Saab

owned

two

of

them

Only the nine leased stations are

Though somewhat unclear, the Complaint

suggests that Colbea, Motiva and Eastside are all affiliated
with Shell Oil Company.

(Id. at ¶¶ 2-4.)

Colbea, Motiva and

Eastside are alleged to play various roles in the leasing and
servicing of Shell branded stations.

Saab apparently entered

into lease arrangements for the nine stations with Motiva.
at ¶ 13.)
supply

(Id.

Colbea and Eastside are “jobbers,” meaning that they

fuel

to

lessees

determined by Colbea.

like

Saab

at

prices

and

(Id. at ¶¶ 9, 11, 17-19.)

1

quantities

Lessees must

This document is captioned “Amended Complaint,” but it is
in fact the Second Amended Complaint. References herein to the
“Complaint” are to the Second Amended Complaint.
2

purchase fuel on these terms, and are not permitted to purchase
from third parties.

(Id. at ¶ 13.)

Acting as a jobber in 2011, Colbea significantly increased
the price of the fuel that Saab was obligated to buy, such that
the prices that Colbea charged were often higher than the retail
prices that Saab’s competitors charged at the pump.
23-24.)

(Id. at ¶¶

When Saab approached Colbea about price adjustments, a

Colbea manager insinuated that independent lessees would soon be
forced out of business and all Shell branded stations in the
area would be operated by Colbea and Eastside.

(Id. at ¶ 27.)

No longer able to operate except at significant losses,
Saab alleges that it was forced to cede control of two stations
in Cranston and North Kingston, Rhode Island.

(Id. at ¶ 28.)

In connection with Saab’s relinquishment of these stations, the
parties
wherein

executed
the

a

Mutual

parties

Termination

released

each

Agreement
other

and

from

Release

liability

associated with the leasing and operation of those two stations
(the “Rhode Island Release”).
Later,

Colbea

remaining stations.

refused

(See ECF No. 7-1.)
Saab’s

(Compl. ¶ 29.)

tender

of

rent

for

the

This led to negotiations

between the parties and the execution of a Settlement Agreement
and

General

“Settlement

Release

of

Claims

Agreement”).

(Id.

on
at

November
¶

30.)

30,

2012

(the

The

Settlement

Agreement provided that Saab would return control of four of the
3

remaining

seven

Stations”),

stations

would

to

continue

to

Defendants
operate

(the

the

“Returned

remaining

three

stations (the “Retained Stations”), and would receive a $200,000
fuel credit from Defendants in exchange for equipment belonging
to Saab located at the Returned Stations. 2

(Id. at ¶ 33; see

also Settlement Agreement, ECF No. 16-2.)
Saab alleges that Defendants failed to abide by the terms
of the Settlement Agreement by failing to deliver the Retained
Stations in operable condition and failing to pay the $200,000
fuel credit in exchange for Saab’s equipment.
Saab alleges
terms
induced

of

the

Saab

that

Defendants

Settlement
to

Returned Stations.

sign

it

never

Agreement,
in

order

intended
but
to

(Compl. ¶ 36.)
to

rather

obtain

abide

by

the

fraudulently

control

of

the

(Id. at ¶ 39.)

This dispute, however, is not the only bout on the card.
The three Retained Stations have been the subject of eviction
proceedings in Massachusetts state court.

There, Colbea alleged

that Saab breached the applicable lease agreements by failing to
pay rent in December 2012 and failing to operate the Retained
Stations for a period of time during that same month.
2

In a

At approximately the same time that the parties executed
the Settlement Agreement, they also executed a series of lease
agreements, letter agreements, and retail sales agreements.
(See ECF No. 21, Exs. B-F.)
The Court has reviewed and
considered these documents.
For ease of reference, these
ancillary documents are referred to collectively with the
Settlement Agreement.
4

ruling

issued

on

December

12,

2013,

Judge

Flynn

of

the

Massachusetts District Court found that Saab had indeed breached
the

lease

agreements

and

found

that

possession of the Retained Stations. 3
II.

Colbea

was

entitled

to

(See ECF No. 30-1.)

Discussion
“In

order

to

survive

a

motion

to

dismiss

under

Rule

12(b)(6), a plaintiff must ‘plead[] factual content that allows
the court to draw the reasonable inference that the defendant is
liable

for

the

misconduct

alleged.’”

Sanchez

v.

Pereira-

Castillo, 590 F.3d 31, 48 (1st Cir. 2009) (quoting Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009)).

The complaint must “contain

sufficient factual matter . . . to state a claim to relief that
is plausible on its face.”

Iqbal, 556 U.S. at 678 (quoting Bell

Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007) (internal
quotation marks omitted)).
The Court must “accept as true all the factual allegations
in the complaint and construe all reasonable inferences in favor
of the plaintiff.”
and

quotation

Sanchez, 590 F.3d at 41 (internal citation

marks

omitted).

3

Nevertheless,

“[t]hreadbare

Saab represents that it was barred from raising as a
defense Defendants’ breach of the Settlement Agreement.
See
Mass. Gen. Laws ch. 239, § 8A. As such, and because breach of
these lease agreements is not immediately at issue in this case,
the ruling of the Massachusetts District Court has no preclusive
effect on the matters before this Court.
5

recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.”
Defendants

proffer

a

variety

of

Iqbal, 556 U.S. at 678.
arguments

in

favor

of

dismissal, but because of this case’s tortured early goings,
they are set forth in a total of three memoranda.
14, 22, 28.)

(See ECF Nos.

Rather than summarize them at the outset, the

Court considers each argument, and Saab’s responses thereto, in
the context of the applicable count(s) of the Complaint. 4

5

4

The Court declines Saab’s request to treat the Motion to
Dismiss as a motion for summary judgment.
While a motion to
dismiss may be converted to a motion for summary judgment if the
district court considers materials outside the pleadings, TransSpec Truck Serv., Inc. v. Caterpillar Inc., 524 F.3d 315, 321
(1st Cir. 2008), the Court concludes that the operative
documents – namely the Settlement Agreement and the Rhode Island
Release – are sufficiently referenced in the Complaint.
See
Clorox Co. Puerto Rico v. Proctor & Gamble Commercial Co., 228
F.3d 24, 32 (1st Cir. 2000) (“[W]e may properly consider . . . a
document integral to or explicitly relied upon in the complaint,
even though not attached to the complaint, without converting
the motion [to dismiss] into one for summary judgment.”)
(internal citation and quotation marks omitted).
5

Defendants seek dismissal of all counts with respect to
Motiva and Eastside, arguing that the Complaint fails to state
claims against those entities.
In response, Saab urges the
Court to pierce the corporate veil of Colbea in order to reach
Motiva and Eastside.
Piercing the corporate veil is an
extraordinary measure undertaken in rare circumstances and only
after an intensive factual inquiry.
See Scott v. NG U.S. 1,
Inc., 881 N.E.2d 1125, 1132 (Mass. 2008).
While Saab has not
made a compelling case for piercing the corporate veil, a review
of the Complaint reveals that it asserts claims against Motiva
and Eastside sufficient to survive a motion to dismiss.
(See
Compl. ¶¶ 2, 36, 46 et seq.)
6

A.

Count I – Declaratory Relief

Count

I

seeks

declaratory

relief

that:

(1)

voids

the

Settlement Agreement due to a total failure of consideration and
material breaches by Defendants; (2) reinstates all agreements
between the parties prior to November 8, 2012; and (3) enjoins
Defendants from taking control of any of the stations.
The Court applies Massachusetts law in accordance with the
choice

of

law

provision

in

the

Settlement

Agreement.

(See

Settlement Agreement ¶ 24.)

“Rescission is available when a

contract has been abrogated.”

Cabot v. Cabot, 774 N.E.2d 1113,

1127 (Mass. App. Ct. 2002) (citing Worcester Heritage Soc., Inc.
v.

Trussell,

577

N.E.2d

1009,

1010

(Mass.

App.

Ct.

1991)).

“There is ample authority for refusing rescission where there
has been only a breach of contract rather than an utter failure
of

consideration

or

a

repudiation

Trussell, 577 N.E.2d at 1010.

by

the

party

in

breach.”

“In the absence of fraud, nothing

less than conduct that amounts to an abrogation of the contract
. . . can be made a ground for rescission of it by the other
party.”

Id.

A declaration that the Settlement Agreement is void and
unenforceable

is

unavailable

because

Saab

has

total failure of consideration or repudiation.

not

alleged

a

The Settlement

Agreement sets forth the consideration that Saab was to receive
in the form of payment for its equipment, debt forgiveness and a
7

release of claims.

(See Settlement Agreement ¶¶ 1, 12.)

Saab

asserts a total failure of consideration based on its not having
been paid for the equipment, but this assertion overlooks the
additional (and significant) benefits Saab derived in the form
of debt forgiveness and a release of claims.
Saab argues that Defendants committed fraudulent inducement
with

respect

to

the

Settlement

Agreement,

and

points

to

the

alleged comments of a Colbea manager regarding efforts to force
individual

lessees

out

of

business.

A

claim

for

fraudulent

inducement requires that the plaintiff establish the elements of
common law deceit, which include misrepresentation of a material
fact,

made

to

induce

action,

and

reasonable

reliance

on

false statement to the detriment of the person relying.
Commerce
(Mass.

Bank
App.

&

Trust

Ct.

Co.

v.

Hayeck,

1999).

709

Aside

N.E.2d

the
See
1126

conclusory

from

1122,

and

unsubstantiated allegations that Defendants did not intend to
honor

their

vague

insinuations

manager,

obligations

Saab

has

under

regarding
not

pled

the

Settlement

Agreement,

the

statements

by

the

facts

suggesting

that

and

Colbea

Defendants

fraudulently induced Saab to execute the Settlement Agreement.
See Hill v. Gozani, 638 F.3d 40, 55 (1st Cir. 2011) (“As with
all

allegations

circumstance

of

of
the

fraud,
fraud

a
with

plaintiff

particularity,

[Federal Rule of Civil Procedure] 9(b).”).
8

must

plead
pursuant

the
to

Dismissal of Count I is warranted because Saab has not pled
facts

indicating

a

total

failure

of

consideration,

nor

that

Defendants committed fraud in the inducement. 6
B.

Counts II-V – Breach of Contract, Breach of the Covenant
of Good Faith and Fair Dealing, and Violation of
Massachusetts and Rhode Island Consumer Protection Law

Counts II through V assert claims for breach of contract,
breach

of

the

violations

of

protection law.

covenant
both

of

good

Massachusetts

faith
and

and

fair

Rhode

dealing,

Island

and

consumer

Defendants seek dismissal of these claims on

the grounds that Saab released Defendants from such liability in
the Settlement Agreement and the Rhode Island Release.
The Court begins with Count V, alleging violation of R.I.
Gen. Laws § 6-13.1, Rhode Island’s consumer protection statute.
This statute provides for liability against those engaging in
unfair methods of competition or unfair or deceptive acts or
practices in the conduct of any trade or commerce that directly
or indirectly affects the people of the State of Rhode Island.
See R.I. Gen. Laws §§ 6-13.1-1 et seq.
Of the nine gas stations at issue in this case, only two
are

located

in

Rhode

Island.

The

6

others

are

located

in

Defendants recently filed a Motion for Leave to File a
Supplemental Memorandum (ECF No. 30).
Therein, Defendants
argued that Count I should be dismissed based on a theory of res
judicata because Saab did not assert affirmative defenses of
failure of consideration, breach of contract, and/or fraudulent
inducement in the Massachusetts eviction proceedings.
This
motion may be terminated as moot.
9

Massachusetts.

(See Compl. ¶ 7.)

The two Rhode Island stations

were relinquished to Defendants in December 2010, leading to the
parties’ execution of the Rhode Island Release.
1.)

(See ECF No. 7-

The Rhode Island Release contains a comprehensive waiver of

all claims by both parties relating to the two stations in Rhode
Island.

(Id. at ¶ 2.)

breached

the

terms

of

Saab does not allege that Defendants
the

Rhode

Island

Release,

and

asserts

claims only with respect to Defendants’ alleged breach of the
Settlement Agreement.

Given that Saab released Defendants from

liability with respect to the only stations located in Rhode
Island,

and

does

not

allege

a

breach

of

the

Rhode

Island

Release, Saab has not pled facts sufficient to demonstrate an
actionable violation of § 6-13.1.
1(5).

See R.I. Gen. Laws § 6-13.1-

As such, Count V must be dismissed.

The

Court

declines

to

grant

dismissal,

respect to Counts II, III and IV.

however,

with

Though Defendants contend

that Saab waived its right to assert these claims by executing
the

Settlement

Agreement,

Defendants

Saab

has

committed

pled
a

facts

material

sufficient
breach

of

to

suggest

that

its

terms.

While a waiver of claims is generally enforceable, see

Schuster v. Baskin, 236 N.E.2d 205, 208 (Mass. 1968), a failure
of

a

party

to

pay

that

which

constitutes a material breach.

is

due

under

an

agreement

Lease-It, Inc. v. Massachusetts

Port Auth., 600 N.E.2d 599, 602 (Mass. App. Ct. 1992).
10

Such

material breach generally serves to relieve the other party of
its duty to perform.

Id.

Saab has pled facts sufficient to suggest that Defendants
committed
failing

a

to

material
compensate

Returned Stations.

breach
Saab

of
for

the
the

Settlement
equipment

Agreement

located

at

by
the

As such, the Complaint plausibly suggests

that Saab may prevail on Counts II, III and IV despite the
release of claims in the Settlement Agreement.
C.

Count VI – Conversion

Count
Defendants
Defendants

VI

asserts

are
seek

a

claim

unlawfully

in

dismissal

for

conversion,

possession

on

grounds

of

alleging

Saab’s

that

the

that

equipment.
Settlement

Agreement validly conveyed title to the equipment to them.
A claim for conversion requires that the plaintiff show
that

the

defendant

“intentionally

property to which it had no right.”

exercised

control

over

Fine v. Sovereign Bank, 671

F. Supp. 2d 219, 224 (D. Mass. 2009).

The Settlement Agreement

does

equipment

purport

to

convey

title

to

the

Colbea.

(Settlement Agreement ¶¶ 7-8.)

exchange

for

a

$200,000

payment.

(Id.)

from

Saab

to

But, it does so in
The

Court

denies

dismissal with respect to Count VI because Saab has pled facts
sufficient to suggest that Defendants breached this obligation
to pay, and thus did not validly obtain title to the equipment.

11

III. Conclusion
While the waters of this case have been muddied by the
voluminous filings of both parties, and while the Complaint is
no shining beacon of clarity, the allegations that it sets forth
are sufficient to plausibly state Saab’s entitlement to relief
with respect to Counts II, III, IV and VI.

As such, Defendants’

Motion to Dismiss is GRANTED IN PART and DENIED IN PART. 7

IT IS SO ORDERED.

William E. Smith
Chief Judge
Date: February 28, 2014

7

For the Clerk’s ease of reference: ECF Nos. 7 and 14,
representing Defendants’ Motion to Dismiss, are GRANTED IN PART
and DENIED IN PART to dismiss Counts I and V; ECF No. 27, Saab’s
Motion for Leave to File a Second Amended Complaint, is GRANTED;
and ECF No. 30, Defendants’ Motion for Leave to File a
Supplemental Memorandum, may be TERMINATED AS MOOT.
12