United States District Court, D. Maryland
L. RUSSELL, III UNITED STATES DISTRICT JUDGE.
MATTER is before the Court on Defendant Southside Oil,
LLC's (“Southside”) Motion to Dismiss (ECF
No. 20) and Motion to Compel Arbitration (ECF No. 24). This
action arises from a contract dispute between Southside, a
wholesale distributor of ExxonMobil fuels, and Plaintiffs,
who are ten Maryland retail gasoline stations. The Motions are
ripe for disposition, and no hearing is necessary.
See Local Rule 105.6 (D.Md. 2016). For the reasons
outlined below, the Court will grant in part and deny in part
2009, Exxon sold its marketing assets, including some gas
stations. (Am. Compl. ¶ 6, ECF No. 14). Southside bought
Exxon-branded motor fuels for resale directly from ExxonMobil
under a dealer agreement. (Id. ¶ 5). The
Plaintiffs' stations were some of those sold from
ExxonMobil to Southside. (Id. ¶ 6). Under the
dealer agreement, Southside would step into the shoes of
ExxonMobil as Plaintiffs' landlord and supplier of motor
fuels. (Id.). Prior to closing the deal, Plaintiffs
in this case, along with others, instituted lawsuits against
ExxonMobil and proposed purchasers, including Southside.
(Id. ¶ 7). The lawsuits were settled on the
basis of individualized agreements between Southside and each
Plaintiff (the “Settlement Agreements”).
(Id. ¶ 8).
in the Settlement Agreements were terms permitting Plaintiffs
to purchase the service stations they had previously leased
from Exxon. (Id. ¶ 9). Each Plaintiff's
right to purchase was conditioned on the Plaintiffs each
entering into twenty-year motor fuel supply contracts with
Southside (the “Supply Contracts”).
(Id.). Settlement Agreements required each Plaintiff
to purchase all of its motor fuel from Southside for the
twenty-year term of the Supply Contracts, and purchase a
minimum number of gallons every year. (Id.).
of the Settlement Agreements focused on the per gallon price
for each grade of gasoline and diesel fuel in the Supply
Contracts. (Id. ¶ 10). Plaintiffs sought a
price that would enable their business to be profitable and
meet the minimum volume requirement. (Id.).
Plaintiffs also wanted to limit the amount Southside could
increase the prices of gasoline and fuel, so they did not
want an “open-price term” contract with
Southside. (Id. ¶¶ 10-11). An open-price
term contract does not place a limit on the per gallon profit
the seller can earn; the seller can increase the price of the
product over its cost with no ceiling. (Id. ¶
Plaintiffs and Southside agreed on a “Rack Plus”
pricing formula. The “Rack Plus” pricing formula
includes two numbers: (1) the rack price and (2) the markup
price. A rack price is the per gallon price charged by the
refiners (like ExxonMobil) to distributors (like Southside)
when distributors purchase gasoline in full transport loads.
The rack price is the distributor's cost of the product.
(Id. ¶¶ 13-15). The mark-up price is the
amount Southside can mark-up the products sold to Plaintiffs
over and above the rack price. Put differently, the mark-up
price is the amount Southside would add to the rack price as
a profit margin. (Id. ¶ 16-17). For example, a
rack plus two means Plaintiffs are charged a price that is
two cents per gallon above the rack price. Southside and
Plaintiffs agreed that Southside would add a cents-per-gallon
mark up between 1.5 and 6.5 cents, depending on the
particular Supply Contract between Southside and each
Plaintiff. (Id. ¶ 17). An additional two cents
is added for federal and state taxes, environmental fees, and
freight charges. (Id. ¶ 18). Each Plaintiff
signed a separate Supply Contract and agreed upon a
particular cents-per-gallon amount (between 1.5 and 6.5 cents
per gallon) to govern the purchases under the applicable
Supply Contract. (Id. ¶ 26).
Supply Contracts also contained identical arbitration
provisions (the “Arbitration Provisions”).
(Id. ¶ 30). The Arbitration Provisions provide:
“Any monetary claim arising out of or relating
to this agreement, or any breach thereof, shall be
submitted to arbitration . . . in accordance with the rules
of the American Arbitration Association . . . .”
(Def.'s Mot. Dismiss Ex. 3 [“Supply
Contract”] ¶ 34, ECF No. 20-4) (emphasis added).
Additionally, the Arbitration Provisions permit Southside to
“bring any action in any court of competent
jurisdiction for injunctive or other provisional relief . . .
necessary or appropriate to compel [Plaintiffs] to comply
with its obligations” or “to protect
[Southside's] trademark rights or obligations or other
property rights . . . .” (Id.). The
Arbitration Provisions also permits Southside to
“join with any action for injunctive or provisional
relief all monetary claims . . . which arise out of the acts
or omissions . . . giving rise to the action for injunctive
or provisional relief.” (Id.). Finally, the
Arbitration Provisions provides that either party may
“seek and obtain temporary injunctive relief from a
court of competent jurisdiction in accordance with applicable
law against threatened conduct that will cause loss or
damage, pending completion of the arbitration.”
2015, Southside began charging Plaintiffs a per gallon price
for Exxon branded fuel that was considerably more than the
rack price plus the cents per gallon amount. (Id.
¶ 38). Southside charged Plaintiffs a mark-up price as
high as twelve or thirteen cents, which resulted in a 400%
increase in Southside's profits. (Id.). This
price difference occured because ExxonMobil and Southside
reached an agreement where ExxonMobil would provide its motor
fuels at a per gallon price that was lower than the price
charged to other distributors. Southside, therefore, treated
the prices charged by ExxonMobil to other distributors as the
rack price, but thought the discounted price they personally
received was “something different.” (Id.
time, Plaintiffs learned that the prices charged by Southside
to other Maryland Exxon dealers with open-price term
contracts were “considerably lower than the prices
charged by Southside to plaintiffs for the very same
products, at the very same time.” (Id. ¶
40). Plaintiffs requested Southside provide ExxonMobil's
rack prices for the products so they could determine if
Southside was charging them more than the permitted
cents-per-gallon amounts. (Id.). Southside provided
Plaintiffs with price information that showed Southside's
prices to Plaintiffs were considerably higher than the
applicable cents-per-gallon amount above the rack prices,
despite Southside's claim that they were not.
(Id. ¶¶ 41, 43).
told Plaintiffs that the prices Southside actually paid to
ExxonMobil were not the rack prices within the meaning of the
contractual agreement. (Id. ¶ 42). Rather, the
“rack prices” were the prices ExxonMobil charged
other distributors who did not have a special discounted
agreement. (Id. ¶ 43). Southside stated the per
gallon prices they charged Plaintiffs were no more than the
cents-per-gallon amounts plus the prices ExxonMobil charged
other distributors, even though Plaintiffs' prices were
around twelve cents or more above the amount Southside
actually paid to ExxonMobil. (Id. ¶ 43).
on the differences in prices, Plaintiffs had to compete with
lower-priced retailers in the same market area who also
purchased fuel from Southside. In order to earn a profit,
Plaintiffs had to raise their retail prices above a
competitive level. (Id. ¶ 45). As a result,
Plaintiffs lost business to their lower-priced competitors,
including the other Maryland Exxon dealers who purchased from
Southside at lower prices. (Id.).
filed the present action on March 27, 2017 against Southside.
(ECF No. 1). In their five-count Complaint, they allege:
Beach of Contract-Pricing (Count I); Beach of
Contract-Rebates (Count II); violation of 15 U.S.C. §
13-Price Discrimination (Count III); Lack of Consideration
for the Arbitration Provision (Count IV); and Arbitration
Provision-Unlawful Waiver of Rights. (Id.
¶¶ 48-81). Plaintiffs seek declaratory judgments
and a permanent injunction. (Id.).
now moves to dismiss each count for failure to state a claim
upon which relief may be granted under Federal Rule of Civil
Procedure 12(b)(6), filing their Motion on May 12, 2017. (ECF
No. 20). Southside contemporaneously filed a Motion to Compel
Arbitration, seeking to compel arbitration for each count.
(ECF No. 24). Plaintiffs filed an opposition to each Motion
on June 9, 2017. (ECF Nos. 31, 32). Defendants filed a reply
supporting each Motion on June 23, 2017. (ECF Nos. 33, 34).
Standard of Review
Motion to Compel Arbitration
standard of review on a Motion to Compel Arbitration pursuant
to the Federal Arbitration Act is “akin to the burden
on summary judgment.” Novic v. Midland Funding,
LLC, 271 F.Supp.3d 778, 778 (D.Md. 2017) (quoting
Galloway v. Santander Consumer USA, Inc., 819 F.3d
79, 85 (4th Cir. 2016) (internal quotation omitted)).
reviewing a motion for summary judgment, the Court views the
facts in a light most favorable to the nonmovant, drawing all
justifiable inferences in that party's favor. Ricci
v. DeStefano, 557 U.S. 557, 586 (2009); Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 255 (1986) (citing
Adickes v. S.H. Kress & Co., 398 U.S. 144,
158-59 (1970)). Summary judgment is proper when the movant
demonstrates, through “particular parts of materials in
the record, including depositions, documents, electronically
stored information, affidavits or declarations, stipulations
. . . admissions, interrogatory answers, or other materials,
” that “there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a
matter of law.” Fed.R.Civ.P. 56(a), (c)(1)(A).
Significantly, a party must be able to present the materials
it cites in “a form that would be admissible in
evidence, ” Fed.R.Civ.P. 56(c)(2), and supporting
affidavits and declarations “must be made on personal
knowledge” and “set out facts that would be
admissible in evidence, ” Fed.R.Civ.P. 56(c)(4).
Motion to Dismiss for Failure to State a Claim
purpose of a Rule 12(b)(6) motion is to test the sufficiency
of a complaint, ” not to “resolve contests
surrounding the facts, the merits of a claim, or the
applicability of defenses.” King v.
Rubenstein, 825 F.3d 206, 214 (4th Cir. 2016) (quoting
Edwards v. City of Goldsboro, 178 F.3d 231, 243-44
(4th Cir. 1999)). A complaint fails to state a claim if it
does not contain “a short and plain statement of the
claim showing that the pleader is entitled to relief, ”
Fed.R.Civ.P. 8(a)(2), or does not “state a claim to
relief that is plausible on its face, ” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is
facially plausible “when the plaintiff pleads factual
content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Id. (citing Twombly, 550
U.S. at 556). “Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do
not suffice.” Id. (citing Twombly,
550 U.S. at 555). Though the plaintiff is not required to
forecast evidence to prove the elements of the claim, the
complaint must allege sufficient facts to establish each
element. Goss v. Bank of Am., N.A., 917 F.Supp.2d
445, 449 (D.Md. 2013) (quoting Walters v. McMahen,
684 F.3d 435, 439 (4th Cir. 2012)), aff'd sub
nom., Goss v. Bank of Am., NA, 546 F.App'x
165 (4th Cir. 2013).
considering a Rule 12(b)(6) motion, a court must examine the
complaint as a whole, consider the factual allegations in the
complaint as true, and construe the factual allegations in
the light most favorable to the plaintiff. Albright v.
Oliver, 510 U.S. 266, 268 (1994); Lambeth v. Bd. of
Comm'rs of Davidson Cty., 407 F.3d 266, 268 (4th
Cir. 2005) (citing Scheuer v. Rhodes, 416 U.S. 232,
236 (1974)). But, the court need not accept unsupported or
conclusory factual allegations devoid of any reference to
actual events, United Black Firefighters v. Hirst,
604 F.2d 844, 847 (4th Cir. 1979), or legal conclusions
couched as factual allegations, Iqbal, 556 U.S. at
Motion to Compel Arbitration
resolving an arbitrability dispute must engage in a two-step
inquiry. Peabody Holding Co., LLC v. United Mine Workers
of Am., 665 F.3d 96, 101 (4th Cir. 2012). First, the
court must determine who decides whether a
particular dispute is arbitrable-the arbitrator or the court.
Id. Second, if the court determines that it is the
proper forum to adjudicate arbitrability, then the court must
decide whether the dispute is in fact arbitrable.
Id. (alteration in original).
The Proper Forum to Determine Arbitrability
bottom, the Court concludes that it is the proper forum to
determine the arbitrability of Plaintiffs' claims.
is an issue for judicial determination unless the agreement
“‘clearly and unmistakably' provide[s] that
the arbitrator shall determine what disputes the parties
agreed to arbitrate.” Id. at 102 (citations
omitted). Although this is an exacting standard,
“[v]irtually every circuit to have considered the issue
has determined that incorporation of the American Arbitration
Association's (AAA) arbitration rules constitutes clear
and unmistakable evidence that the parties agreed to
arbitrate arbitrability.” Oracle Am., Inc. v.
Myriad Grp. A.G., 724 F.3d 1069, 1074 (9th Cir. 2013).
United States Court of Appeals for the Fourth Circuit has yet
to rule on this precise issue as it relates to incorporation
of the AAA rules. However, the Fourth Circuit has recently
adopted the reasoning of the majority of its sister circuits
with respect to another category of arbitration rules,
holding that “the explicit incorporation of JAMS
[Comprehensive Rules & Procedures] serves as ‘clear
and unmistakable' evidence of the ...