Cremium, LLC v. Eastern Shore Forest Products, Inc.
Filing
26
MEMORANDUM OPINION. Signed by Senior Judge Norman K. Moon on November 9, 2018. (sfc)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF VIRGINIA
LYNCHBURG DIVISION
11/09/2018
CREMIUM, LLC,
Plaintiff,
v.
CASE NO. 6:18–cv–00063
MEMORANDUM OPINION
EASTERN SHORE FOREST PRODUCTS, INC.,
JUDGE NORMAN K. MOON
Defendant.
This case concerns wood. Cremium, LLC sold it. Defendant Eastern Shore Forest
Products, Inc. (“Eastern Shore”) buys it. Eastern Shore, during peak demand for firewood in the
winter of 2017–18, convinced Cremium to switch from supplying Eastern Shore’s top competitor
to supplying Eastern Shore. But when the weather turned unexpectedly warm, Eastern Shore
allegedly balked at its purchase commitments to Cremium. Consequently, Cremium filed this
lawsuit for fraudulent inducement, breach of contract, quantum meruit, and tortious interference
with contract. Eastern Shore has moved to dismiss all but the breach of contract claim, and the
parties have submitted the motion on the briefs. The motion will be granted.
STANDARD OF REVIEW
A motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) tests the legal sufficiency of a
complaint to determine whether the plaintiff has properly stated a claim. Although a complaint
“does not need detailed factual allegations, a plaintiff’s obligation to provide the ‘grounds’ of his
entitle[ment] 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)
(citations omitted). A court does not “accept the legal conclusions drawn from the facts.”
Eastern Shore Markets, Inc. v. J.D. Assocs. Ltd. P’ship, 213 F.3d 175, 180 (4th Cir. 2000).
“Factual allegations must be enough to raise a right to relief above the speculative level,”
Twombly, 550 U.S. at 555, with all allegations in the complaint taken as true and all reasonable
inferences drawn in the plaintiff’s favor. Chao v. Rivendell Woods, Inc., 415 F.3d 342, 346 (4th
Cir. 2005).
FACTS AS ALLEGED
Cremium produced packaged firewood and bulk firewood in the eastern United States.
(Complaint ¶ 1). It had a long-standing business relationship with Custis Farms, Inc. (Id. ¶ 7).
For instance, during 2016 and 2017, Cremium supplied Custis Farms with 642 pallets of
firewood, with which Custis Farms was “very pleased,” according to a letter from its president.
(Id. ¶ 7).
In 2017, defendant Eastern Shore acquired Custis Farms and continued selling
firewood under its own brand, Custis Farms’ brand, or both. (Id. ¶ 9).
Cremium also supplied firewood through a third-party company called RMS. (Complaint
¶ 11). Eastern Shore communicated to Cremium that Eastern Shore viewed RMS as its top
competitor. (Id. ¶ 12). In spring 2017, while Cremium and RMS were in business negotiations
for the 2017–18 season, Eastern Shore allegedly falsely informed RMS that Eastern Shore had an
exclusive contract with Cremium, for the purpose of interfering with the Cremium-RMS
negotiations. (Id. ¶¶ 12–13).
In early January 2018, the president of Custis asked Cremium to help Eastern Shore
provide firewood to meet customer demand for the ongoing severe winter. (Complaint ¶15).
Cremium declined because of its commitments to RMS. (Id. ¶16). The president pressed
further, asking what it would take for Cremium to exclusively supply to Eastern Shore, thus both
helping Eastern Shore and harming its competitor, RMS, in the future. (Id. ¶17).
Cremium
again declined the overtures because it was unwilling to damage its relationship with RMS. (Id.
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¶ 18).
The president of Custis remained persistent. Eventually, Cremium relayed that it would
be willing to supply Eastern Shore if Eastern Shore committed to (A) buying Cremium’s full
production through mid-March 2018 at $0.45/bundle over what RMS paid and (B) picking up
Cremium’s firewood by Friday every week.
(Id. ¶ 19).
The parties agreed to terms as
represented in a short commitment letter dated for January 16, 2018.
Under the contract, Eastern Shore committed to buying 7,200 bundles of firewood per
week between January 20 and March 17, 2018.
(Dkt. 1-1). The price was $3.15 per bundle.
Quality control provisions were not included in the contract. (Complaint ¶¶ 22–23). Cremium
allegedly notified Eastern Shore that, to meet the demand, it would have to shorten its drying
time for the wood, although USDA standards would still be met. (Id. ¶ 26). Eastern Shore
allegedly accepted Cremium’s proposed drying time and drying process. (Id. ¶ 28).
The weather became unseasonably warm in February 2018. (Complaint ¶ 29). Demand
for firewood therefore dropped off.
Eastern Shore stopped taking delivery of Cremium’s
firewood and stopped paying Cremium. (Id. ¶ 30).
Cremium notified Eastern Shore of its
breach, and Eastern Shore allegedly knew the failure to timely pick up the firewood caused
Cremium to run out of warehouse space. (Id. ¶ 31). The president of Custis nonetheless asked
Cremium to return to the standard, longer drying cycle, and Cremium agreed to do so for future
product. (Id. ¶ 31).
On February 4, 2018, two men (including the president of Custis) who were “officers and
agents” of Eastern Shore, visited Cremium’s plant and “for the first time expressed
dissatisfaction with the” firewood, specifically the moisture content and consistency of the
bundle size. (Complaint ¶¶ 32–33). Cremium alleges that moisture content was not part of the
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contract, not a USDA requirement, and not an industry norm. (Id. ¶ 32). Cremium also offered
to “break down” any pallets with which Eastern Shore was dissatisfied, but Eastern Shore replied
that was not necessary. (Id.).
About February 16, 2018, Eastern Shore informed Cremium that 12 previously-delivered
pallets were being returned because of mold. (Complaint ¶ 33). Cremium offered to inspect and
replace the pallets, but Eastern Shore declined and refused to return the pallets to Cremium’s
facility for inspection. (Id. ¶ 34). Eastern Shore has refused to continue to purchase firewood as
required under the agreement. Based on these facts, Cremium advances four claims.
First, in a fraudulent inducement claim, Cremium contends Eastern Shore purposely
induced Cremium to enter into the agreement, with no intent to perform, in order to harm Eastern
Shore’s competitor, RMS. (Complaint ¶¶ 37–38). The inducement allegedly forced Cremium
to furlough staff and cease operations, thus causing $1,700,000 in damages and lost profits.
Cremium also seeks $350,000 in punitive damages.
Second, Cremium advances a breach of contract claim based on the failure to take
possession of and pay for the firewood. Cremium contends it is owed over $37,000 for product
Eastern Shore took possession of and over $145,000 for “the amount due and owing under the
Agreement.” (Complaint ¶ 53).
Third, Cremium asserts a quantum meruit/unjust enrichment claim worth over $37,000
for the delivered product.
Fourth and finally, Cremium asserts a tortious interference with contract claim.
Specifically, Cremium says Eastern Shore induced it to breach its contract with RMS by using
fraud and deception to convince Cremium to end its relationship with RMS. Cremium asserts it
is entitled to over $2.7 million in lost revenue and future profits it would have received from
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RMS, as well as lost value in the company.
ANALYSIS1
I.
Fraud in the Inducement
Eastern Shore lodged several arguments against Cremium’s fraudulent inducement claim.
(Dkt. 16 at 6–15). Cremium failed to respond to two of those arguments: (1) that the claim was
not pled with the requisite particularity under Fed. R. Civ. P. 9(b), and (2) that Cremium did not
properly allege damages from the supposed fraud. (See dkt. 18 at 7–11). Accordingly, Cremium
concedes Eastern Shore’s points, and the claim will be dismissed. See Alvarez v. Lynch, 828
F.3d 288, 295 (4th Cir. 2016) (ignoring opponent’s argument is “an outright failure to join in the
adversarial process [that] ordinarily result[s] in waiver”); Turner v. Va. Dep't of Med. Assistance
Servs., 230 F. Supp. 3d 498, 509 (W.D. Va. 2017); Oliver v. Baity, 208 F. Supp. 3d 681, 690
(M.D.N.C. 2016) (A “party’s failure to address an issue in its opposition brief concedes the
issue.”); Brand v. N.C. Dep’t of Crime Control & Pub. Safety, 352 F. Supp. 2d 606, 618
(M.D.N.C. 2004).
II.
Quantum Meruit
As Eastern Shore observes, a quantum meruit claim does not exist when there is an
express contract. Mongold v. Woods, 278 Va. 196, 204 (Va. 2009); Raymond, Colesar, Glaspy
& Huss, P.C. v. Allied Capital Corp., 961 F.2d 489, 491 (4th Cir. 1992); Centex Constr. v.
Acstar Ins. Co., 448 F. Supp. 2d 697, 707 (E.D. Va. 2006). The parties do not dispute that such a
contract exists. Indeed, it was attached to the Complaint. The quantum meruit claim therefore
fails. To avoid this result, Cremium briefly argues that the basis of its quantum meruit claim is
1
The parties proceed on the theory that Virginia substantive law applies to this case, so the
Court—currently finding no basis to conclude otherwise—will do the same.
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Eastern Shore benefiting “by its actions in getting Cremium to terminate its relationship with
RMS and by Cremium going out of business.” (Dkt. 18 at 11). But those are not benefits that
Cremium conferred upon Eastern Shore and that Eastern Shore wrongfully retained without
payment, as needed for a quantum meruit claim. Centex Constr. v. Acstar Ins. Co., 448 F. Supp.
2d 697, 707 (E.D. Va. 2006). Instead, they are ancillary effects from (1) Cremium’s decision to
enter into a contract with Eastern Shore, and (2) Eastern Shore’s alleged breach.2
III.
Tortious Interference with Contract
The tortious interference claim also comes up short. Cremium did not respond to Eastern
Shore’s argument that the complaint failed to specifically identify a contractual relationship or
business expectancy with RMS.3 Hence, the claim will be dismissed. See Alvarez, 828 F.3d at
295; Turner, 230 F. Supp. 3d at 509; Oliver v. Baity, 208 F. Supp. 3d at 690; Brand, 352 F.
Supp. 2d at 618. The claim fails for another reason. The only basis advanced by Cremium to
satisfy the “improper method” element was the alleged fraud perpetrated by Eastern Shore. But
as discussed above, the fraud theory in this case does not survive, in turn undercutting the
tortious interference claim.
IV.
Attorneys’ Fees
Eastern Shore argues, and Cremium does not contest, that attorneys’ fees are unavailable
in this case because the contract has no fee shifting provision. That relief will therefore be
stricken.
2
Cremium’s new theory is also procedurally defective. It is betrayed by the plain face of
the complaint, which based the quantum meruit claim on Eastern Shore’s refusal to follow
through on its commitment, per the contract, to buy firewood from Cremium.
3
The elements of a tortious interference claim are (1) a valid contract or business
expectancy, (2) knowledge thereof by the interferor, (3) intentional interference using improper
methods, (4) causing an end of the relationship, (5) and damages. Dunlap v. Cottman
Transmission Systems, LLC, 287 Va. 207, 216 (Va. 2014).
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*
*
*
The motion to dismiss will be granted. An appropriate order will issue. The Clerk of
Court is requested to send a copy of this Opinion and the accompanying Order to the parties.
9th
Entered this _____ day of November, 2018.
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