Delaware Business Litigation Report

District Court Denies Dismissal of Breach of Contract and Fraud Claims, But Dismisses Deceptive Trade Practices Claim

HSMY, Inc. v. Getty Petroleum Mktg., Inc., C.A. No. 05-818-JJF, 2006 U.S. Dist. LEXIS 8268 (D. Del. Mar. 2, 2006). Plaintiff filed a complaint for breach of contract, breach of the covenant of good faith and fair dealing, fraud, and violations of Article 2 of the Uniform Commercial Code, the Delaware Retail Gasoline Sales Law ("DRGSL") and the Delaware Deceptive Trade Practices Act ("DDTPA") in the Delaware Superior Court. Defendant removed the case to the U.S. District Court for the District of Delaware and moved to dismiss the complaint. Plaintiff subsequently amended its complaint.

The plaintiff alleged that the defendant was engaged in a fraudulent scheme in which it posted one price for its gas products at delivery but withdrew a different amount from plaintiff's bank account for payment, and that defendant had retaliated against plaintiff, after plaintiff complained to Delaware's Office of Retail Gasoline Sales about the alleged scheme, by raising wholesale fuel prices above the retail prices charged by plaintiff's competitors. The defendant contended that the plaintiff failed to state a claim for breach of contract because (i) it failed to allege the breach of an obligation, (ii) defendant's actions fell within the safe harbor provisions of the UCC, and (iii) defendant did not breach the covenant of good faith and fair dealing. The defendant also contended that plaintiff was not entitled to injunctive relief under the DRGSL or the DDTPA because its agreements with defendant had terminated over two years before, and there was nothing to enjoin as plaintiff no longer owned any retail operations. Finally, the defendant argued that plaintiff failed to plead its fraud claim with particularity, and that the fraud claim was really a breach of contract claim pled in fraud terms. The Court denied dismissal of the breach of contract, breach of the covenant of good faith and fair dealing, violation of the UCC, and fraud claims. The Court held that the plaintiff stated a claim that defendant's "wholesale prices, allegedly above the retail prices of other merchants, and . . . allegedly retaliatory price increase" did not fall within the posted or market price, and that the defendant "took advantage of its position as [p]laintiff's exclusive supplier to fix wholesale prices in excess of competitior's [sic] retail prices." The Court dismissed the DRGSL and DDTPA claims, however, holding that plaintiff was not entitled to injunctive relief because it had discontinued its businesses.

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