Donnenfeld v. Petro, Inc.
Donnenfeld v. Petro, Inc.
Opinion of the Court
Plaintiff M. Norman Donnenfeld ("Donnenfeld" or "plaintiff") brings this putative class action against defendant Petro, Inc. ("Petro" or "defendant"), a home heating oil provider, for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, fraudulent inducement, and violations of New York's General Business Law and other state consumer protection laws. Presently before the Court is Petro's motion to dismiss the First Amended Class Action Complaint in its entirety. For the reasons set forth below, the Court grants the motion as to plaintiff's claims for breach of the covenant of good faith and fair dealing and fraudulent inducement, but otherwise denies it. The Court will grant plaintiff leave to re-plead the fraudulent inducement claim.
I. BACKGROUND
A. Facts
The Court takes the following facts from the First Amended Class Action Complaint. (ECF No. 20.) The Court assumes these facts to be true in deciding the motion to dismiss, and construes them in the light most favorable to plaintiff, the non-moving party.
Petro is a home heating oil provider that operates in several states, including New York. (Am. Compl. ¶¶ 3, 16, 21-23.) Petro offers three pricing plans to its home heating oil customers: variable, ceiling, and *213fixed. (Id. ¶¶ 4, 24.) These pricing plans are described on Petro's website as follows:
Variable Plan
The Variable Plan has an attractive rate that fluctuates up and down with market conditions. There are no price protective cost or termination fees associated with this plan.
Fixed Plan
Our Fixed Plan requires a 1-year commitment to Petro. The oil price remains the same for every delivery, for every gallon throughout the year, regardless of market conditions. Petro pre-purchases all of your oil and assumes all risk, so if you terminate your account prior to the expiration of your contract, an early termination fee of $599.00 will be assessed.
The Petro Ceiling Plan
Many customers feel this plan is a better option than the fixed price plan as it gives you a limit on how high your price can go and hopefully take advantage of lower prices in the future. The price will trend up or down based on market conditions at the time each delivery is made but will never exceed a set limit. A 1-year commitment to Petro is required for this plan. Similar to the fixed plan, Petro protects the cost of your oil and assumes all risk, so if you terminate your account prior to the expiration of your contract, an early termination fee of $399.00 will be assessed.
(Id. ¶ 4.)
On August 7, 2013, Donnenfeld entered into a fixed price Retail Fuel Delivery and Services Agreement with Petro ("the Fixed Price Contract"). (Id. ¶ 27, Ex. A.) Under that contract, Petro agreed to deliver home heating oil to Donnenfeld at a fixed price of $3.649 per gallon for the approximately one-year period from August 7, 2013 to August 31, 2014. (Id. Ex. A at 1.) In return, Donnenfeld agreed to obtain home heating oil exclusively from Petro during that period. (Id. ) The contract provided that, if Donnenfeld's account was "cancelled for any reason" during the one-year period, he would "be charged a $599.00 early termination fee." (Id. )
In connection with entering into the Fixed Price Contract, Donnenfeld received, among other documents, Petro's Terms and Conditions. (Id. at 3.) Those Terms and Conditions included a "Limits of Liability" provision, which provided that "[a]ny and all actions, whether based in contract or tort, whether for personal injury or property damage, and whether brought by buyer or buyer's insurance company, must be commenced within one year of the cause of action or shall be barred as a matter of law." (Id. )
On July 30, 2014, Donnenfeld continued his Fixed Price Contract for another year. (Id. ¶ 28.) That agreement was memorialized in a form letter to Donnenfeld from Mike Perna, the President and General Manager of Petro's Plainview, New York office. (Id. Ex. B.) The phrase "A note of thanks for renewing your contract with Petro" appeared at the top of the letter, and the first sentence read, "Thank you so much for renewing your heating oil agreement with Petro!" (Id. ) The letter provided that, for the approximately one-year period from September 1, 2014 to August 31, 2015, Petro would deliver home heating oil to Donnenfeld at a $3.699 per gallon fixed price. (Id. ) It further provided that Donnenfeld agreed to obtain home heating oil exclusively from Petro during that period. (Id. ) The letter also stated that, if Donnenfeld's account was "cancelled for any reason" during the one-year period, he would be charged a $599.00 early termination fee. (Id. )
*214Donnenfeld alleges that heating oil prices dropped significantly shortly after he agreed to continue his Fixed Price Contract with Petro. (Id. ¶ 29.) Based on Petro's representations that, under their ceiling plan, the price he paid for heating oil would be based on market conditions, Donnenfeld determined that he would save money by entering into a ceiling price contract. (Id. )
Accordingly, in December 2014, several months before his current contract was due to expire, Donnenfeld called Mike Perna to change to a ceiling price plan. (Id. ) To make that change, Petro charged Donnenfeld-and Donnenfeld paid-a $300 early termination fee. (Id. ¶ 29.) Donnenfeld then received a form letter from Mike Perna "confirm[ing] [the] phone conversation" and "outlin[ing] the terms of [the] ceiling price agreement." (Id. Ex. C (the "Ceiling Price Contract").) As with the previous letter, the phrase "A note of thanks for renewing your contract with Petro" appeared at the top of this letter, and the first sentence again read, "Thank you so much for renewing your heating oil agreement with Petro!" (Id. ) The letter stated that, for the approximately one-year period from December 5, 2014 to December 31, 2015, Petro would deliver home heating oil to Donnenfeld at a price that would "not exceed $2.899 per gallon," but that Donnenfeld's "actual delivered price ... w[ould] vary based on market conditions, including but not limited to, product availability, wholesale cost and other factors." (Id. ) Like the previous contracts, the letter provided that Donnenfeld agreed to obtain home heating oil exclusively from Petro during the relevant one-year period. (Id. ) Finally, the letter stated that, "with [Donnenfeld's] permission, [Petro] recorded the conversation detailing the terms of this Ceiling Price agreement, and w[ould] retain a copy of that recording for [Donnenfeld's] protection." (Id. )
Donnenfeld alleges that, despite a steady decline in oil prices throughout the term of his Ceiling Price Contract, his "price per gallon did not budge after the first two months." (Id. ¶ 39.) He alleges that "Petro has an unstated policy or practice of unilaterally and without justification, not reducing the per gallon price to customers who have entered into a Petro ceiling plan agreement, even as oil prices fall, and instead, charge Petro ceiling plan customers the top of the ceiling price per gallon on a regular basis." (Id. ¶ 6.)
B. Procedural History
Donnenfeld originally filed this lawsuit against Petro on February 18, 2016, in the United States District Court for the District of New Jersey. On May 9, 2016, Petro moved to dismiss the complaint for lack of personal jurisdiction and for failure to state a claim. In opposing the motion, Donnenfeld argued that, if the court found personal jurisdiction over Petro lacking, it should transfer the action to the United States District Court for the Eastern District of New York. Donnenfeld also requested leave to amend the complaint if the court determined that his pleadings were otherwise deficient. Petro argued in its reply that the interests of justice favored dismissal rather than transfer, and that Donnenfeld had failed to identify any special circumstances warranting transfer rather than dismissal.
On March 24, 2017, the district court dismissed plaintiff's complaint for lack of personal jurisdiction over Petro and, alternatively, for failure to state a claim. See generally Donnenfeld v. Petro Home Servs. , Civil Action No. 16-882,
Rather than submit an amended complaint in the District of New Jersey, Donnenfeld filed a complaint in this Court on April 18, 2017. (ECF No. 1.) On July 31, 2017, Petro moved to dismiss. (ECF No. 17.) In response, Donnenfeld filed the First Amended Class Action Complaint. (ECF No. 20.) On September 15, 2017, Petro moved to dismiss the First Amended Class Action Complaint. (ECF No. 23.) Donnenfeld opposed the motion on October 20, 2017. (ECF No. 26.) Petro filed a reply in further support of its motion on November 10, 2017. (ECF No. 27.) The Court heard oral argument on January 18, 2018. On January 22, 2018, Donnenfeld filed a letter supplementing his opposition to the motion to dismiss. (ECF No. 31.) Petro submitted a response to that letter on January 25, 2018. (ECF No. 32.)
The Court has fully considered the parties' submissions and arguments.
II. STANDARD OF REVIEW
In reviewing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the Court must accept the factual allegations set forth in the complaint as true and draw all reasonable inferences in favor of the plaintiff. See Cleveland v. Caplaw Enters. ,
The Supreme Court clarified the appropriate pleading standard in Ashcroft v. Iqbal , setting forth a two-pronged approach for deciding motions to dismiss.
Additionally, when a case involves allegations of fraud or mistake, Federal Rule of Civil Procedure 9(b) requires those claims to be pleaded with particularity. Fed. R. Civ. P. 9(b) ("In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake."). Rule 9(b)"serves to provide a defendant with fair notice of a plaintiff's claim, safeguard his reputation from improvident charges of wrongdoing, and protect him against strike suits." ATSI Commc'ns, Inc. v. Shaar Fund, Ltd. ,
The Court notes that, in adjudicating this motion to dismiss, it may consider:
(1) facts alleged in the complaint and documents attached to it or incorporated in it by reference, (2) documents "integral" to the complaint and relied upon in it, even if not attached or incorporated by reference, (3) documents or information contained in defendant's motion papers if plaintiff has knowledge or possession of the material and relied on it in framing the complaint, (4) public disclosure documents required by law to be, and that have been, filed with the Securities and Exchange Commission, and (5) facts of which judicial notice may properly be taken under Rule 201 of the Federal Rules of Evidence.
In re Merrill Lynch & Co. ,
III. DISCUSSION
A. Contractual Statute of Limitations
Petro argues that the complaint should be dismissed as untimely under the one-year statute of limitations contained in the Terms and Conditions that were enclosed with Donnenfeld's initial Fixed Price Contract. As noted above, the "Limits of Liability" provision contained in those Terms and Conditions provided that "[a]ny and all actions, whether based in contract or tort, whether for personal injury or property damage, and whether brought by buyer or buyer's insurance company, must be commenced within one year of the cause of action or shall be barred as a matter of law." (Am. Compl. Ex. A at 4.)
The parties dispute whether the Terms and Conditions, which were provided to Donnenfeld only with his Fixed Price Contract, apply to the Ceiling Price Contract. Petro relies on language in the Terms and Conditions that defines the parties' "Agreement" to include "the Price Plan, these terms and conditions and any agreed renewal terms ." (Id. (emphasis added).) It asserts that the Ceiling Price Contract was a renewal of the Fixed Price Contract, and that the Terms and Conditions therefore continued to apply. To support the assertion that the Ceiling Price Contract was a renewal, Petro points to the language in the form letter from Mike Perna thanking Donnenfeld for "renewing [his] contract with Petro." (Id. Ex. C.)
*217Under New York law, "a novation is a new contract replacing and extinguishing a prior contract." Gem Glob. Yield Fund, Ltd. v. Surgilight, Inc. , No. 04-CV-4451 (KMK),
Relatedly, "where a contract is existing and valid but incomplete," extrinsic evidence is admissible to complete the writing. See, e.g., Coney Island Resorts, Inc. v. Giuliani ,
Here, there is a sufficient basis for Donnenfeld to plausibly assert that the parties' intentions are not manifest on the face of the agreement. The terms of the Ceiling Price Contract are silent as to whether that agreement was intended to extinguish, supersede, substitute, modify, or have any other effect on the Fixed Price Contract. It also does not state that Petro's Terms and Conditions would continue to apply; nor does it incorporate any Terms and Conditions by reference. Petro makes much of this confirmation letter's use of the word "renewal" at the top of the letter and in its first sentence. The Court is not persuaded that that usage is necessarily conclusive evidence of the parties' intentions, particularly because the letter references an earlier telephone conversation and is a confirmation letter that Donnenfeld did not sign. Accordingly, the Court cannot ascertain the parties' intentions as a matter of law on this motion to dismiss, and the parties should be given the opportunity to present extrinsic evidence to establish intent. See, e.g., D.S. Am. (E.), Inc. ,
*218Moreover, construing the language most favorably to Donnenfeld, there is a plausible argument that the Ceiling Price Contract is incomplete. It does not contain a merger clause, and expressly refers to the telephone conversation between Donnenfeld and Mike Perna. Presumably, the recording of that conversation will illuminate the parties' intentions as to the effect of the $300 early termination fee and the execution of the Ceiling Price Contract. It will also likely reveal any discussions about the terms and conditions that applied to the contract.
In short, Donnenfeld plausibly alleges that the Ceiling Price Contract replaced the Fixed Price Contract such that dismissal of the claims as untimely at this stage is unwarranted. Specifically, Donnenfeld alleges that he entered into the Fixed Price Contract with Petro in August 2013, which he renewed in July 2014. (Am. Compl. ¶¶ 27-28.) He further alleges that he paid a $300 fee to terminate the Fixed Price Contract before its expiration, and entered into a new contract with Petro-the Ceiling Price Contract. (Id. ¶ 29.) These allegations are sufficient, at the motion to dismiss stage, to plausibly allege that the Ceiling Price Contract extinguished the Fixed Price Contract. See, e.g., Schuster v. Dragone Classic Motor Cars, Inc. ,
Accordingly, for all of the foregoing reasons, Petro's motion to dismiss the claims as untimely is denied without prejudice to renewal after discovery.
B. Breach of Contract
To state a claim for breach of contract under New York law, a complaint must allege four elements: "(1) the existence of an agreement, (2) adequate performance of the contract by plaintiff, (3) breach of the contract by defendant, and (4) damages." Eternity Glob. Master Fund Ltd. v. Morgan Guar. Tr. Co. of N.Y. ,
Donnenfeld's breach of contract claim centers on Petro's contractual representation that his "actual delivered price ... w[ould] vary based on market conditions, including but not limited to, product availability, wholesale cost and other factors." (Am. Compl. Ex. C.) In short, Donnenfeld contends that Petro breached the Ceiling Price Contract by charging him prices that did not vary based on market conditions. (See, e.g., id. ¶¶ 6, 9, 30, 92-96.) To support this contention, Donnenfeld alleges that, other than for the first two months of the contract,
Petro asserts that these allegations fail to establish that Donnenfeld's delivered price did not vary based on "market conditions" including the factors identified in the Ceiling Price Contract as affecting those conditions-namely, "product availability, wholesale costs, and other factors." (Am. Compl. Ex. C.) The Court concludes, however, that these allegations are sufficient to state a plausible breach of contract claim that survives a motion to dismiss.
Several courts in this district and others have allowed breach of contract claims involving similar contractual language and supporting factual allegations to proceed past motions to dismiss. In Oladapo v. Smart One Energy, LLC , for example, the at-issue contract provided that the plaintiff's monthly gas prices would be determined by the defendant "at its sole discretion, in response to changing gas market conditions." No. 14 CV 7117-LTS,
Similarly, in Yang Chen v. Hiko Energy, LLC , the at-issue contract provided that the plaintiffs' monthly gas and electricity charges would reflect wholesale costs and other "market-related factors." No. 14 CV 1771 VB,
Finally, Mirkin v. Viridian Energy, Inc. , involved a contract that provided that the defendant would provide gas and electricity to the plaintiff "based on wholesale market conditions." No. 15-cv-1057,
*220The Court reaches the same conclusion here. Petro represented that Donnenfeld's monthly price would be "based on market conditions ... including but not limited to, product availability, wholesale cost and other factors." (Am. Compl. Ex. C.) This language, when read in the light most favorable to Donnenfeld, can be readily interpreted as a promise that Donnenfeld's price would decline when market prices did. The allegations briefly detailed above are sufficient, at this stage, to plausibly allege a breach of that promise. Accordingly, Petro's motion to dismiss the breach of contract claim is denied.
C. Good Faith and Fair Dealing
Petro moves to dismiss Donnenfeld's claims for breach of the covenant of good faith and fair dealing as duplicative of his breach of contract claim.
Under New York law, a covenant of good faith and fair dealing is implied in every contract. Payday Advance Plus, Inc. v. Findwhat.com, Inc. ,
Here, the factual allegations supporting Donnenfeld's breach of contract claim are identical to those supporting his claim for breach of the covenant of good faith and fair dealing. Accordingly, Petro's motion to dismiss the claim for breach of the covenant of good faith and fair dealing is granted.
D. Unjust Enrichment
Petro also moves to dismiss the unjust enrichment claim as duplicative of the breach of contract claim.
Generally, an unjust enrichment claim is precluded if a valid and enforceable contract governs the subject matter of a dispute. E.g. , Beth Israel Med. Ctr. v. Horizon Blue Cross & Blue Shield of N.J., Inc. ,
Here, Donnenfeld has alleged that he was fraudulently induced to enter into the Ceiling Price Contract. Although, as discussed below, that claim is insufficiently pleaded, the Court is allowing Donnenfeld to amend the claim. Because the claim for fraudulent inducement has not been dismissed without leave to amend, the Court declines to dismiss the unjust enrichment claim at this time.
E. Fraudulent Inducement
Petro moves to dismiss Donnenfeld's fraudulent inducement claim as duplicative of his breach of contract claim and for failure to satisfy Rule 9(b).
Generally, "a fraud claim may not be used as a means of restating what is, in substance, a claim for breach of contract." Wall v. CSX Transp., Inc. ,
The Court is not persuaded that Donnenfeld's fraudulent inducement claim is based on misrepresentations collateral to the Ceiling Price Contract. To support the claim, Donnenfeld relies primarily on Petro's description, on its website, of its ceiling price plan. As noted above, that description read, in relevant part, "Many customers feel this plan is a better option than the fixed price plan as it gives you a limit on how high your price can go and hopefully take advantage of lower prices in the future." (Am. Compl. ¶ 4.) Donnenfeld asserts that this statement constituted a misrepresentation that ceiling price plan customers would save money on home heating oil if market prices fell, which induced him to enter into the Ceiling Price Contract. These alleged misrepresentations are the same contractual representations that Donnenfeld alleges Petro breached-namely, that, under a ceiling *222price plan, his oil prices would decline with market conditions.
In his opposition, Donnenfeld additionally argues that Petro employees, including Mike Perna, made oral misrepresentations during telephone calls. However, plaintiff's only allegations to that effect are entirely conclusory. (See, e.g., id. ¶ 5 ("[Representatives of Petro advise customers ... both orally and in writing that ceiling price customers will reap the benefits when market rates fall.").) These vague allegations do not satisfy Rule 9(b), and thus cannot salvage the fraudulent inducement claim.
Accordingly, the motion to dismiss the fraudulent inducement claim is granted. Because the Court does not believe that a claim for fraudulent inducement would necessarily be futile, however, it will grant plaintiff an opportunity to amend the claim.
F. New York General Business Law
Plaintiff asserts claims under New York General Business Law ("GBL") Sections 349 and 350. Section 349 prohibits "[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service." Section 350 prohibits "[f]alse advertising in the conduct of any business, trade or commerce or in the furnishing of any service in this state." These provisions "contemplate[ ] actionable conduct that does not necessarily rise to the level of fraud" and "encompass[ ] a significantly wider range of deceptive business practices." Claridge v. N. Am. Power & Gas, LLC , No. 15-CV-1261 PKC,
To state a claim under either section, "a plaintiff must allege that a defendant has engaged in (1) consumer-oriented conduct that is (2) materially misleading and that (3) plaintiff suffered injury as a result of the allegedly deceptive act or practice." Orlander v. Staples, Inc. ,
1. Consumer-Oriented Conduct
Petro argues that Donnenfeld has failed to allege that its conduct was consumer-oriented. It asserts that the dispute is essentially a private one, and that Donnenfeld has failed to identify other customers with similar complaints against Petro.
Conduct is "consumer oriented" under the GBL if it "has a broader impact on consumers at large" as opposed to on just the plaintiff. See Shapiro v. Berkshire Life Ins. Co. ,
Here, Donnenfeld alleges that Petro represents on its website that customers who enter into ceiling plan contracts will benefit from decreases in market prices. (E.g. , Am. Compl. ¶¶ 4-5, 63.) This allegation is sufficient to meet the relatively low threshold for pleading consumer-oriented conduct. See, e.g., Casper Sleep, Inc. v. Mitcham ,
Additionally, Petro's argument that a complaint must identify other customers who have complained about the same conduct in order to state a GBL claim is meritless. E.g. , Aghaeepour v. N. Leasing Sys., Inc. , No. 14 CV 5449 (NSR),
2. Injury
Petro also moves to dismiss the GBL claims for failure to allege an injury. Relying on Orlander , Petro argues that Donnenfeld must identify both a monetary loss stemming from the deceptive practice and a failure to deliver contracted-for services.
Accordingly, Donnenfeld was not required to allege that he did not receive contracted-for services, as the Ceiling Price Contract was not a contract for services. Instead, Donnenfeld was required to allege only that "on account of a materially misleading practice, [ ]he purchased a product and did not receive the full value of h[is] purchase."
*224Orlander ,
Petro also makes the related argument that any monetary GBL injury must be independent of alleged breach of contract damages. Relying on a Second Circuit decision that pre-dates Orlander , some courts have imposed such a requirement. E.g. , Fleisher v. Phoenix Life Ins. Co. ,
However, in a recent case, Nick's Garage, Inc. v. Progressive Casualty Insurance Co. ,
Based on this most-recent guidance from the Second Circuit, and given the allegations that Donnenfeld did not receive the full value of his purchase and repeatedly overpaid for home heating oil based on alleged deceptive practices, the Court declines to dismiss the GBL claims for failure to allege a monetary loss independent of the loss caused by Petro's alleged breach of contract.
G. Consumer Protection Laws of Other States
Finally, Petro moves to dismiss the consumer protection claims brought by Donnenfeld, on behalf of the putative class, under various other state laws. Defendant argues these claims should be dismissed because plaintiff lacks standing to assert claims under the consumer protection laws of states where he does not reside.
*225The Second Circuit recently resolved "considerable disagreement over this question in the district courts" in Langan v. Johnson & Johnson Consumer Cos. ,
Here, the parties do not dispute that Donnenfeld has standing to sue Petro, and the Court likewise finds that requirement satisfied. Accordingly, defendant's motion to dismiss the claims brought on behalf of customers residing outside of New York is denied.
IV. CONCLUSION
For the foregoing reasons, the Court grants defendant's motion to dismiss the claims for breach of the covenant of good faith and fair dealing and fraudulent inducement. The Court otherwise denies the motion. Plaintiff is granted leave to amend the claim for fraudulent inducement, and must do so within thirty (30) days of the date of this Order. A failure to do so will result in a dismissal of that claim with prejudice.
SO ORDERED.
The term "renewal" is not defined in any of the written agreements. To the extent Petro relies on the legal meaning of that term, courts have defined that term differently than Petro does here. For example, as one court explained, "[r]enewal normally involves 'a continuation of the relationship on essentially the same terms and conditions as the original contract.' " D.S. Am. (E.), Inc. v. Chromagrafx Imaging Sys., Inc. ,
Donnenfeld also argues that the contractually shortened statute of limitations is unenforceable and, in any event, does not apply to these claims. He further argues that, even if the one-year limitations period does apply, it should be equitably tolled. Because the Court cannot determine on this motion whether the provision even applied to the Ceiling Price Contract, it does not reach these additional arguments at this time.
Petro makes much of the allegation that it charged Donnenfeld less than the ceiling price for the first two months of the contract. That allegation, however, does not foreclose the claim that Petro breached the contract in those months or in the remaining months.
Some courts have dismissed similar breach of contract claims. See, e.g., Windley v. Starion Energy, Inc. , No. 14 cv 9053,
Although this claim is entitled "Fraudulent Concealment/Nondisclosure" in the complaint, the allegations center on inducement. (See, e.g. , Am. Compl. ¶ 77 ("These statements were made with the intent to induce customers, such as Donnenfeld, and did induce him to switch from the Fixed Price Plan to the Ceiling Price Plan.").) Moreover, the parties' briefing on the motion to dismiss focuses on fraudulent inducement. The Court analyzes the claim accordingly.
Petro argues that Donnenfeld should not be given an additional opportunity to amend this claim because the claim was previously dismissed with leave to re-plead in the District of New Jersey. As discussed above, that opinion focused primarily on personal jurisdiction. Moreover, it did not specifically address any deficiencies in the fraudulent inducement claim. Accordingly, the Court disagrees that Donnenfeld should not be given an opportunity to amend the claim.
Reference
- Full Case Name
- M. Norman DONNENFELD, on behalf of himself and all other persons similarly situated v. PETRO, INC. doing business as Petro Home Services
- Cited By
- 20 cases
- Status
- Published