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

Filing 60

MEMORANDUM AND ORDER granting in part and denying in part 51 Motion for Summary Judgment. So Ordered by Chief Judge William E. Smith on 4/21/2016. (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

MEMORANDUM AND ORDER
WILLIAM E. SMITH, Chief Judge.
This dispute involves the leasing, operation and servicing of
gas

stations

Enterprises,

in

Massachusetts

Inc.

(“SAAB”)

has

and

Rhode

brought

Island.

claims

Saab

against

1

Colbea

Enterprises, LLC (“Colbea”), Motiva Enterprises, LLC (“Motiva”)
and

Eastside

Enterprises,

LLC

(“Eastside”)

(collectively,

“Defendants”) for breach of contract, breach of the covenant of
good

faith

and

fair

dealing,

conversion,

and

violation

Massachusetts and Rhode Island consumer protection laws.

of

On April

6, 2015, the Court stayed discovery as to the merits of SAAB’s
underlying
argument

claims
that

pending

they

are

resolution
barred

by

(“Settlement Agreement” or “Agreement”).
6, 2015.)

of
a

Colbea’s

threshold

settlement

agreement

(See Text Order, April

Now before the Court is Defendants’ Motion for Summary

Judgment (“Motion”) pertaining to the Settlement Agreement.
No. 51.)

(ECF

Colbea also seeks summary judgment on SAAB’s conversion

claim and on all claims relating to Defendants Motiva and Eastside.
For the reasons that follow, the Motion is GRANTED IN PART and
DENIED IN PART.
I.

Background
Colbea, a limited liability company whose members include

Motiva

and

Eastside,

leases

gasoline

Massachusetts to third-parties.

leasing

and

in

and

around

(Pl.’s Statement of Undisputed

Facts (“SUF”) ¶¶ 1-2, ECF No. 58.)
tenants,

stations

operating

SAAB was one of Colbea’s
a

number

Massachusetts and Rhode Island from Colbea.

of

stations

in

(See id. at ¶ 5.)

Sometime prior to November 2012, a dispute broke out between
Colbea

and

operated.

SAAB

surrounding

seven

of

the

gas

stations

SAAB

The only details of the dispute material to the present

Motion are the terms of the November 30, 2012 Settlement Agreement,
which was supposed to resolve the dispute.

(See Ex. A1 to Defs.’

Mot. [Settlement Agreement] ¶ 16, ECF No. 51-1.)

The Agreement

placed a number of obligations on both parties. First, it provided
that the parties would terminate the contracts for the seven
stations at issue in the dispute and that Colbea would discharge
any debts or obligations SAAB owed to Colbea on the properties.
(Id. at ¶ 1.)

2

Next, the Agreement provided that SAAB would surrender four
of the seven stations to Colbea (the “Relinquished Stations”) and
convey title to Colbea for the equipment located in the stations.
(Id. at ¶ 2.)

As part of the Agreement’s conveyance provision,

SAAB warranted that it had marketable title for the equipment and
that the equipment was free of any claims, liens, and security
interests.

(Id. at ¶ 4(iii).)

Further, by the effective date of

the Agreement, SAAB agreed to give Colbea a signed UCC termination
statement and release indicating that a lien held by Rockland Trust
was discharged as to the equipment in the Relinquished Stations.
(Id. at ¶ 8.)

In exchange for the equipment and SAAB’s warranties,

Colbea agreed to pay SAAB $200,000 in the form of fuel credits.
(Id. at ¶ 7.)

Per the Agreement, Colbea would pay SAAB $100,000

on the Agreement’s effective date and remit the remaining $100,000
in credits sixty days after the effective date.

(Id.)

Colbea

could offset the second $100,000 payment to compensate it for any
breaches of the Agreement committed by SAAB during the sixty-day
window.

(Id.)

The Agreement also provided SAAB with a six month probationary
lease for three of the stations at issue in the dispute (the
“Retained Stations”).

Starting on December 1, 2012, SAAB would

lease the stations pursuant to a six-month bridge lease attached
to the Agreement.

(Id. at ¶ 9.)

SAAB’s first rental payment under

the new lease was due on December 1, 2012.
3

(Id.)

Colbea would

extend the lease for another six months if SAAB did not breach the
bridge lease or Settlement Agreement during the first six-month
period.

(Id.)

And if SAAB successfully completed the second six-

month term, the parties would enter into a formal Retail Facility
Lease in December 2013.

(Id. at ¶ 11.)

Any default or breach on

SAAB’s part during the twelve-month probationary period, however,
would give Colbea an automatic right to terminate the leases and
regain

possession

of

the

Retained

Stations.

(Id.

at

¶

9.)

Finally, both parties mutually agreed to release all claims they
had against each other as of November 30, 2012.

(Id. at ¶¶ 12,

13.)
According

to

Colbea,

SAAB

obligations under the Agreement.

quickly

failed

to

meet

its

First, SAAB did not provide

Colbea with a release relating to the Rockland Trust lien by the
Agreement’s effective date.

(Pl.’s SUF ¶¶ 14-15, ECF No. 58.)

Second, and more significantly, SAAB failed to make its first set
of rental payments on December 1, 2012.

(Id. at ¶ 19.)

As a

result, Colbea notified SAAB on December 19, 2012 that it was
terminating SAAB’s leases for the Retained Stations.

(Id. at ¶¶

20-21.)
SAAB, for its part, claims that Colbea also failed to meet
its obligations under the Settlement Agreement.

SAAB’s principal

claim is that it never received any of the $200,000 fuel credit
Colbea agreed to provide.

(Ex. A to Pl.’s Opp’n [Saad Aff.] at ¶
4

26, ECF No. 57-2.)

And SAAB asserts that Colbea breached the

Agreement by refusing to accept its rental payments.

(Id. at ¶¶

32-34; see also Pl.’s Opp’n 14, 18, ECF No. 57-1.) 1
After
commenced

SAAB

failed

eviction

to

pay

rent

proceedings

(Pl.’s SUF ¶ 22, ECF No. 58.)

in

for

the

stations,

Massachusetts

state

Colbea
court.

In a ruling issued on December 12,

2013, Judge Flynn of the Massachusetts District Court found that
SAAB had breached the lease agreements and that Colbea was entitled
to possession of the Retained Stations.
[State Court Opinion] ¶ 34, ECF No. 51-15.)

(Ex. M to Defs.’ Mem.
Judge Flynn also found

that SAAB had not demonstrated any material breach of the lease
agreements by Colbea. (Id. at ¶ 39.) Thereafter, judgment entered
against SAAB on January 29, 2014, evicting it from the Retained
Stations, and ordering it to pay Colbea $510,603.07.

(Pl.’s SUF

¶ 24, ECF No. 58.)

1

In addition, SAAB alleges that Colbea refused to turn on
the Retained Stations’ credit card readers, though does not point
to how this conduct implicates the Settlement Agreement. (Ex. A
to Pl.’s Opp’n [Saad Aff.] at ¶¶ 29-31, ECF No. 57-2; see also
Pl.’s Opp’n 6, ECF No. 57-1.) Moreover, to the extent that SAAB
tries to argue this fact constituted a material breach of the Lease
Agreements for the Retained Stations – which were incorporated
into the Settlement Agreement – a Massachusetts state court has
already conclusively ruled against SAAB on this issue. (Ex. M to
Defs.’ Mem. [State Court Opinion] ¶ 39, ECF No. 51-15.)
Consequently, under the doctrine of issue preclusion, SAAB cannot
relitigate it.
See Heacock v. Heacock, 520 N.E.2d 151, 152-53
(Mass. 1988).
.
5

While the eviction actions were pending, SAAB filed the
present case.

After a tortured early history, the Court granted

in part and denied in part Colbea’s motion to dismiss.

(See

Opinion and Order, Feb. 28, 2014, ECF No. 31.) 2 The Court dismissed
Count I, in which SAAB sought a declaratory judgment rescinding
the Settlement Agreement.

(Id. at 7.)

The Court, however,

declined to dismiss Counts II (Breach of Contract/Violation of
R.I. Gen. Laws § 6a-2-305 & M.G.L. c. 106 § 2-305), Count III
(Breach of Good Faith and Fair Dealing), Count IV (Violation of
M.G.L. c. 93A), and Count VI (Conversion).

(Id. at 10-11.) 3

It

also denied Colbea’s motion to dismiss the other named defendants,
Motiva and Eastside.

(Id. at 11.)

2

The Court based its prior Order on SAAB’s Second Amended
Complaint (ECF No. 33), which remains the operative complaint in
the action. (See Opinion and Order 2 n.1, Feb. 28, 2014, ECF No.
31.)
3

Counts II-IV do not allege Colbea breached the Settlement
Agreement.
Instead, they assert claims, including a breach of
contract claim, for conduct that allegedly occurred prior to the
Agreement. (See Second Am. Compl. ¶¶ 62-87, ECF No. 33.) Indeed,
at oral argument relating to Defendants’ earlier Motion to Dismiss,
SAAB expressly stated that it was not asserting a breach of
contract claim as to the Settlement Agreement in these counts.
(See Ex. P to Defs.’ Mem. 29:6-17, 62:13-63:25, ECF No. 51-18.)
Instead, in Count I, it sought a declaratory judgment rescinding
the Settlement Agreement. The Court dismissed Count I (Opinion
and Order 7-9, ECF No. 31), and SAAB has not moved to amend its
Complaint to add a new breach of contract claim as to the
Settlement Agreement.
6

II.

Standard of Review
Summary judgment is appropriate “if the movant shows that

there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.”
56(a).

Fed. R. Civ. P.

An issue of fact is only considered “‘genuine’ if it ‘may

reasonably be resolved in favor of either party.’”

Cadle Co. v.

Hayes, 116 F.3d 957, 960 (1st Cir. 1997) (quoting Maldonado-Denis
v. Castillo-Rodriguez, 23 F.3d 576, 581 (1st Cir. 1994)).

When

deciding a motion for summary judgment, the court must “examine[]
the entire record ‘in the light most flattering to the nonmovant
and indulg[e] all reasonable inferences in that party’s favor.’”
Id. at 959 (quoting Maldonado-Denis, 23 F.3d at 581).
III. Discussion
A.

Counts II-IV

The only question before the Court as to Counts II-IV is
whether they are barred by the Settlement Agreement.

As SAAB

concedes in its Opposition, the answer to this question turns on
whether Colbea materially breached the Agreement, which would
excuse SAAB from the Agreement’s waiver of claims provision.
(Pl.’s Opp’n 13-14, ECF No. 57-1.)

SAAB has presented no evidence

at summary judgment on which a jury could conclude Colbea’s alleged
breaches were material.
“A settlement agreement is a contract and its enforceability
is determined by applying general contract law.”
7

Sparrow v.

Demonico, 960 N.E.2d 296, 301 (Mass. 2012). 4

Accordingly, “[n]ot

all breaches of contract by one party will excuse performance by
the other.”

Dunkin’ Donuts Inc. v. Gav-Stra Donuts, Inc., 139 F.

Supp. 2d 147, 155 (D. Mass. 2001).

Non-material breaches entitle

the non-breaching party “merely to recover for that breach while
continuing to abide by the contract.”

See Center Garment Co. v.

United Refrigerator Co., 341 N.E.2d 669, 673 (Mass. 1976).
material

breach,

on

the

other

hand,

“justif[ies]

the

A

[non-

breaching party] in throwing the contract over and suing for the
total breach.”

Id.

Generally, for a breach to be material it must be “so serious
and so intimately connected with the substance of the contract” as
to justify the other party in refusing to perform further. Bucholz
v. Green Bros. Co., 172 N.E. 101, 102 (Mass. 1930); see also LeaseIt, Inc. v. Massachusetts Port Auth., 600 N.E.2d 599, 602 (Mass.
App. Ct. 1992).

Determining the severity of a breach depends on

all the circumstances of the case.

Keane, Inc. v. Swenson, 81 F.

Supp. 2d 250, 256 (D. Mass. 2000) (citing Boston Housing Auth. v.
Hemingway, 293 N.E.2d 831 (Mass. 1973)).

Among the factors courts

consider in weighing the severity of a breach are:

(1) the extent

to which the injured party will be deprived of the benefits which

4

The Agreement specifies that Massachusetts law governs
disputes arising under it. (See Ex. A1 to Defs.’ Mot. [Settlement
Agreement] ¶ 24, ECF No. 51-1.) Accordingly, the Court relies on
opinions interpreting Massachusetts law.
8

he reasonably expected; and (2) the extent to which the injured
party can be adequately compensated for the part of that benefit
of

which

he

will

be

deprived.

See

Restatement

(Second)

of

Contracts, § 241 (1981) (cited with approval in Keane, Inc. v.
Swenson, 81 F. Supp. 2d 250, 256 (D. Mass. 2000)). 5

Further, while

the question of materiality is ordinarily a question for the trier
of fact, courts may determine the materiality of a breach as a
matter of law when the question “admits of only one reasonable
answer (because the evidence on the point is either undisputed or
sufficiently lopsided).”

Quirk v. Massachusetts Dep’t of Envtl.

Prot., 815 N.E.2d 655 at *2 (Mass. App. Ct. 2004) (unpublished)
(quoting Gibson v. City of Cranston, 37 F.3d 731, 736 (1st Cir.
1994)).
SAAB claims that Colbea materially breached the Agreement by
refusing SAAB’s tender of rents for the Retained Stations and
failing to compensate SAAB $200,000 for the equipment it deeded to
Colbea in the Relinquished Stations.
No. 57-1.)

The Court disagrees.

(See Pl.’s Opp’n 14, 18, ECF
As to SAAB’s first point –

Colbea’s failure to accept SAAB’s rental payments – the terms of

5

The Restatement (Second) of Contracts lists a number of
factors courts may consider. In addition to the two listed above,
they include: (1) the extent to which the party failing to perform
will suffer forfeiture; (2) the likelihood that the party failing
to perform will cure his failure; and (3) the extent to which the
behavior of the party failing to perform or to offer to perform
comports with standards of good faith and fair dealing.
Restatement (Second) of Contracts, § 241 (1981).
9

the Agreement clearly required SAAB to remit payment by December
1, 2012.
No. 51-1.)

(Ex. A1 to Defs.’ Mot. [Settlement Agreement] ¶ 16, ECF
SAAB concedes that it did not make its rental payments

by this date, thereby failing to abide by this term of the
Agreement.

(Pl.’s SUF ¶ 19, ECF No. 58).

Consequently, the Court

fails to see how Colbea’s refusal to accept SAAB’s rent constitutes
a breach of the Agreement on Colbea’s part.
The second purported breach on which SAAB relies – that Colbea
failed to pay SAAB $200,000 in fuel credits – fairs no better.
For starters, SAAB received a substantial portion of the benefit
it expected under the Settlement Agreement.

In addition to the

$200,000 in fuel credits, the Agreement provided that Colbea would
forgive the entire debt SAAB owed Colbea relating to the seven
stations (Ex. A1 to Defs.’ Mot. [Settlement Agreement] ¶ 1, ECF
No. 51-1); that Colbea would extend three new gas station leases
to SAAB (id. at ¶¶ 9-11); and that Colbea would waive any and all
claims it had against SAAB prior to the effective date of the
Agreement (id. at ¶ 12).

Aside from the fuel credits, SAAB has

not presented any evidence to dispute that it received these other
benefits.

Further, SAAB could easily remedy Colbea’s alleged

breach of the fuel credit provision without voiding the entire
Agreement: it could sue for Colbea’s breach and seek to recover
the $200,000 Colbea failed to remit to it. Such a straight-forward
remedy, when combined with the substantial benefit SAAB received
10

from the Agreement, admits to only one conclusion – Colbea’s
alleged breach was not material and SAAB remains bound by the
Agreement including its waiver of claims provision.

For this

reason, Colbea is entitled to summary judgment on Counts II-IV.
B.

Count VI

That Colbea did not materially breach the Agreement, however,
does not mean SAAB’s case has finally run out of gas.

SAAB also

attempts to recover for the equipment it turned over in the
Relinquished Stations through a conversion claim.

To sustain this

claim, SAAB must establish that (1) Colbea exercised dominion over
SAAB’s property; (2) without right; and (3) thereby deprived SAAB,
the rightful owner, of the property’s use and enjoyment.

In re

Hilson, 863 N.E.2d 483, 491 (Mass. 2007). Additionally, plaintiffs
generally must demand return of the property to properly state a
conversion claim.
(Mass. 1942).
without

Atl. Fin. Corp. v. Galvam, 39 N.E.2d 951, 952

A conversion action, however, “may be maintained

previous

demand

where

the

defendant’s

assumption

of

dominion over the property was wrongful from the beginning, so
that the conversion was complete without the demand.”

Id.; see

also Gen. Elec. Co. v. Halmar Distribs., Inc. (In re Halmar
Distribs., Inc.), 968 F.2d 121, 129 (1st Cir. 1992), opinion
corrected (July 16, 1992).
Here, SAAB concedes that the Settlement Agreement purportedly
conveyed title to the equipment and that it never demanded the
11

equipment’s return.

(Ex. B to Defs.’s Mem. [Saab Dep. Tr.],

187:12-14, ECF No. 51-4.)

But SAAB argues that a demand was not

necessary because Colbea wrongfully possessed the property from
the beginning.

(Pl.’s Opp’n 20, ECF No. 57-1.)

remain on this point.

Questions of fact

Although the Settlement Agreement purports

to convey title to the equipment from SAAB to Colbea, it does so
in exchange for the $200,000 payment, broken into two $100,000
installments.

Colbea’s

first

installment

was

due

on

the

Agreement’s effective date; the second installment was due sixty
days

later.

Colbea

concedes

it

never

made

either

of

these

payments, a fact SAAB argues shows Colbea never obtained lawful
possession of the property.

Colbea counters that it was excused

from paying for the equipment because SAAB did not provide Colbea
with a lien release required by the Agreement.

Based on these

arguments, SAAB’s conversion claim turns on whether SAAB’s failure
to provide the lien release materially breached the Agreement.
Unlike SAAB’s claim that Colbea materially breached the Settlement
Agreement, this presents a question of material fact for the jury. 6
C.

Defendants Motiva and Eastside

6

In opposition to SAAB’s conversion claim, Colbea points to
deposition testimony in which Mr. Saab, SAAB’s principal,
testified that Colbea had “lawful possession of the equipment.”
(Ex. B to Defs.’ Mem. [Saab Dep. Tr.] 163:19-21, ECF No. 51-4.)
This amounts to a legal conclusion that the Court need not credit
at summary judgment.
12

Finally, Colbea moves for summary judgment as to all claims
against Motiva and Eastside, arguing that SAAB has not raised any
claims against them individually.

It is undisputed that both are

members of Colbea, a limited liability company (“LLC”).
SUF ¶ 2, ECF 58.)

(Pl.’s

And SAAB does not present any evidence to

suggest that either entity was a party to the Settlement Agreement,
that either played a role in the allegations raised in SAAB’s
Complaint, or that either in any way violated the formalities of
the LLC to warrant piercing the corporate veil.

Based on this,

and the fact that SAAB does not object to Colbea’s Motion as
applied to Motiva and Eastside, summary judgment is appropriate
for both defendants on all counts.
IV.

Conclusion
For the forgoing reasons, Defendants’ Motion for Summary

Judgment is GRANTED IN PART and DENIED IN PART.

Colbea’s Motion

as to Counts II-IV and Defendants Motiva Enterprises and Eastside
Enterprises is GRANTED.
dismissed from the case.

Defendants Motiva and Eastside are hereby
Colbea’s Motion as to Count V, SAAB’s

conversion claim, however, is DENIED as to Colbea and will proceed
to trial.
IT IS SO ORDERED.

William E. Smith
Chief Judge
Date: April 21, 2016
13