Camcara, Inc. v. Air Prods. & Chems., Inc.

663 F.Supp.3d 443

CAMCARA, INC. d/b/a AST Waterjet, individually,and on behalf of all others similarly situated, Plaintiff, v. AIR PRODUCTS AND CHEMICALS, INC., Defendant.

CIVIL ACTION NO. 21-2264

United States District Court, E.D. Pennsylvania

Signed March 23, 2023

Jessica C. Colombo, Mathew P. Jasinski, Motley Rice LLC, Hartford, CT, Michael J. Quirk, Motley Rice LLC, Philadelphia, PA, William H. Narwold, Motley Rice LLC, Mt. Pleasant, SC, for Plaintiff.

Victoria Guilfoyle, Blank Rome LLP, Wilmington, DE, Bridget Mayer Briggs, Heidi Grace Crikelair, Stephanie C. Chomentowski, Blank Rome LLP, Philadelphia, PA, for Defendant.

MEMORANDUM OPINION

Smith, District Judge

Under the Pennsylvania Commercial Code, contracts setting an open-price term contain an implied covenant to set the price term in good faith. If sufficient evidence is shown at the summary judgment stage upon which reasonable jurors could disagree, a jury must determine whether the duty of good faith was violated.

Here, the dispute centers on a five-year supply agreement in which the defendant agreed to supply liquid nitrogen to the plaintiff. There were two open-price terms in this agreement, one related to the assessment of surcharges and the other to the payment of installation and removal costs. The defendant has moved for summary judgment on the plaintiff's claims relating to these price terms and on its counterclaims, where it seeks payment for certain outstanding invoices. The parties agree that the defendant's counterclaims, which are pleaded in the alternative, are inextricably intertwined with the plaintiff's claim concerning the payment and removal costs.

Based on the existing record, there are genuine disputes of material fact to the question of the defendant's good faith in assessing surcharges, which preclude this court from entering summary judgment in favor of the defendant and requires a jury to decide. However, regarding the payment of installation and removal costs, there is no such dispute and the defendant is entitled to judgment as a matter of law. Accordingly, for the reasons discussed below, the court will grant in part the motion for summary judgment as to the plaintiff's claim concerning payment of installation and removal costs and the defendant's contract-related counterclaim. The court will deny the motion as to the surcharges.

I. PROCEDURAL HISTORY

The plaintiff, Camcara, Inc., doing business as AST Waterjet ("AST"), individually and on behalf of a putative class, commenced this action by filing a complaint against the defendant, Air Products and Chemicals Inc. ("Air Products"), in the United States District Court for the District of Delaware on September 22, 2020. See Doc. No. 1. In the complaint, AST alleged that it had entered into a product supply agreement with Air Products in March 2015 by which Air Products would supply it with liquid nitrogen for a five-year period. See Compl. at ¶¶ 16, 21, Doc. No. 1. AST asserted that Air Products breached the agreement and its duty of good faith and fair dealing when it assessed and collected surcharges even though they did not relate to any increases in production or delivery costs. See id. at ¶¶ 49-56.

On October 27, 2020, Air Products filed a motion to dismiss and supporting memorandum of law. See Doc. Nos. 8, 9. AST filed a response in opposition to the motion to dismiss on November 25, 2020. See Doc. No. 15. Air Products filed a reply brief in further support of its motion to dismiss on December 11, 2020. See Doc. No. 18.

On February 24, 2021, the District of Delaware entered an order requiring the parties to show cause why the court should not transfer the case to the Eastern District of Pennsylvania. See Doc. No. 19. The parties filed conflicting responses to the order: Air Products agreed that the case should be transferred; AST argued that the case should remain in the District of Delaware. See Doc. Nos. 20, 21. On May 4, 2021, the District of Delaware transferred the case to this court pursuant to 28 U.S.C. § 1404(a). See Doc. No. 22.

This court held an initial pretrial conference in conjunction with oral argument on the motion to dismiss on June 21, 2021. On September 20, 2021, the court denied the motion to dismiss. See Doc. No. 34. Air Products filed an answer with affirmative defenses to the complaint, as well as two counterclaims for breach of contract and unjust enrichment, on October 4, 2021. See Doc. No. 35. AST filed an answer with affirmative defenses to Air Products' counterclaims on October 6, 2021. See Doc. No. 36. On that same date, the court held a telephone conference with counsel to discuss the schedule moving forward in this matter. The following day, the court entered an order (1) directing the parties to conduct focused discovery on the substantive issues on the lead plaintiff's claim and (2) indicating that the court would permit class discovery if the claim survived a motion for summary judgment. See Doc. No. 38.

On January 24, 2022, AST filed a motion to amend/correct the complaint and supporting documents. See Doc. Nos. 53, 55. The court granted this motion as unopposed on January 27, 2022.¹ See Doc. No. 57. AST filed an amended complaint on February 14, 2022. See Doc. No. 59.² In the amended complaint, AST brought two counts for breach of contract. See id. at 14-16. Count I alleges that Air Products "arbitrarily and discriminatorily assessed [s]urcharges on [AST]" in violation of the agreement and its duty of good faith. See id. at 14-15. Count II alleges that Air Products breached the agreement by including shipping costs before installation and after removal of the storage equipment containing liquid nitrogen and by amortizing the storage equipment beyond the definite term of the agreement. See id. at 15-16.

On February 24, 2022, Air Products filed an answer with affirmative defenses to the amended complaint, as well as two counterclaims for breach of contract and unjust enrichment relating to AST allegedly failing to pay costs associated with the removal of the liquid nitrogen storage equipment from AST's property following termination of the agreement. See Doc. No. 63. On March 28, 2022, AST filed an answer with affirmative defenses to the counterclaims. See Doc. No. 80.

Following the close of discovery, Air Products filed the instant motion for summary judgment, a statement of undisputed material facts, and a memorandum in support thereof on May 25, 2022. See Doc. No. 85.³ On June 24, 2022, AST filed a response in opposition to the motion for summary judgment, a response to Air Products' statement of undisputed material facts along with AST's statement of additional facts which it believed precluded summary judgment, and a declaration with numerous attached exhibits. See Doc. Nos. 89, 90.⁴ Air Products filed a reply brief in support of its motion for summary judgment on July 1, 2022. See Doc. No. 96.⁵ On July 12, 2022, the court held oral argument on the motion for summary judgment. The motion is ripe for disposition.

II. FACTUAL BACKGROUND

Air Products produces and sells atmospheric gases, including liquid nitrogen. See Air Products and Chemicals Inc.'s Statement of Undisputed Material Facts in Supp. of its Mot. for Summ. J. ("Def.'s SOF") at ¶ 1, Doc. No. 87; Pl.'s Resps. to Def.'s Statement of Undisputed Material Facts ("Pl.'s Resp.") at ¶ 1, Doc. No 92-1.⁶ AST manufactures metal-fabricated components. See Def.'s SOF at ¶ 2; Pl.'s Resp. at ¶ 2. AST acquired a metal-cutting laser that required liquid nitrogen to operate. See Def.'s SOF at ¶¶ 3-4; Pl.'s Resp. at ¶¶ 3-4. On March 10, 2015, AST entered into a Microbulk⁷ Product Supply Agreement (the "Agreement") with Air Products for liquid nitrogen. See Def.'s SOF at ¶¶ 5, 7; Pl.'s Resp. at ¶¶ 5, 7.

A. The Agreement's Terms

Under the Agreement, AST would purchase all liquid nitrogen from Air Products for five years⁸ for the agreed-upon unit price. See Compl., Ex. 1, Product Supply Agreement ("PSA") at ECF p. 2, Doc. No. 1-1;⁹ see also Pl.'s SOF at ¶ 8. The Agreement permitted Air Products to increase the unit price upon written notice at least 15 days before the proposed increase would take effect. See PSA at ECF p. 2. After receiving this notice, AST could prevent a price increase via a "shop clause" in the Agreement, which required it to show, in writing, "evidence of a lower total price for like quantity, quality and delivery method from a responsible supplier[.]" Id.; Pl.'s SOF at ¶ 9. If the competitor's offer met these terms, Air Products would have "the option to meet the lower price offered or reinstate its previous pricing in effect at time of notification." PSA at ECF p. 2.

One month after entering into the Agreement, the parties amended it. Pl.'s SOF at ¶ 10. The amendments included (1) a requirement that Air Products remove a 450-liter storage tank and replace it with a larger 3,000-liter storage tank on AST's property, (2) an increase in the monthly service charge ("MSC")¹⁰ from $200 per month to $500 per month, and (3) a decrease in the unit price from $22 per 1,000 SCF¹¹ to $9.50 per 1,000 SCF. See id. at ¶¶ 2, 3, 8, 10.

B. Start of the Agreement

The relationship did not start well. See id. at ¶ 11. AST was dissatisfied with Air Products' service during the first year and informed Air Products that—despite four years remaining on the Agreement—AST intended to seek a new supplier of liquid nitrogen. See id. After receiving notice of AST's dissatisfaction, the parties exchanged emails which ultimately resulted in AST deciding to finish out the Agreement. See id. at ¶¶ 12-13. In addition, to avoid automatic renewal, AST notified Air Products on April 5, 2016, that it would terminate the Agreement at the conclusion of the five-year term in March 2020. See id. at ¶ 14.

On March 1, 2017, Air Products provided AST with notice of its intent to raise the unit price for the nitrogen from $9.50 to $10.45 per 1,000 SCF. See id. at ¶ 26. In response to this notice, AST attempted to...