Hercules Tire & Rubber Co. v. Robison Tire Co., CIVIL ACTION NO. 2:16-CV-27-KS-MTP

HERCULES TIRE & RUBBER COMPANY INC. PLAINTIFF/COUNTER-DEFENDANT v. ROBISON TIRE COMPANY,INC. DEFENDANT/COUNTER-DEFENDANT/CROSS-PLAINTIFF v. AMERICAN TIRE DISTRIBUTORS

HOLDINGS, INC. CROSS-DEFENDANT

CIVIL ACTION NO. 2:16-CV-27-KS-MTP

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF MISSISSIPPI DIVISION

March 22, 2018

MEMORANDUM OPINION AND ORDER

This matter is before the Court on the Motion to Dismiss [22] filed by Plaintiff/Counter-Defendant Hercules Tire & Rubber Company, Inc. and Cross-Defendant American Tire Distributors Holdings, Inc. After reviewing the submissions of the parties, the record, and the applicable law, the Court finds that this motion should be granted in part and denied in part.

I. BACKGROUND

On March 7, 2016, Plaintiff/Counter-Defendant Hercules Tire & Rubber Company, Inc. ("Hercules"), brought suit against Robison Tire Company, Inc. ("Robison"). On June 15, 2016, Robison filed its Answer [11], which asserted numerous counterclaims against Hercules and brought in American Tire Distributors Holdings, Inc. ("ATD-H"), as an additional party. ATD-H is a competitor of Robison and became the parent corporation of Hercules in January 2014.

Robison is a tire distributor and entered into a purchase agreement (the "HPA") with Hercules, which was renewed in November 2013. Under the HPA, Robison was granted exclusive territory to sell certain Hercules products. In August 2014, Robison fell behind on its payments to Hercules. In September 2014, Robison and Hercules came to an agreement as to a payment plan regarding the past due invoices (the "September Agreement"). In October 2014, however, Hercules demanded full payment of the outstanding amounts at the alleged behest of ATD-H.

Robison also had a dealer agreement with Goodyear which was set for renewal in January 2015. Robison alleges that, due to pressures placed on Goodyear by ATD-H, that agreement was not renewed.

II. DISCUSSION

A. Standard of Review

To withstand a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)). "A claim has facial plausibility 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.; see also In re Great Lakes Dredge & Dock Co., 624 F.3d 201, 210 (5th Cir. 2010) ("To be plausible, the complaint's '[f]actual allegations must be enough to raise a right to relief above the speculative level.'") (quoting Twombly, 550 U.S. at 555). A complaint containing mere "labels and conclusions, or a formulaic recitation of the elements" is insufficient. Bowlby v. City of Aberdeen, Miss., 681 F.3d 215, 219 (5th Cir. 2012) (citation and internal quotation marks omitted). However, "detailed factual allegations" are not required. Iqbal, 556 U.S. at 678, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 555, 127 S. Ct. 1955). Although courts are to accept all well-pleaded facts as true and view those facts in the light most favorable to the nonmoving party, courts are not required "to accept as true a legal conclusion couched as factual allegation." Randall D.Wolcott, M.D., P.A. v. Sebelius, 635 F.3d 757, 763 (5th Cir. 2011) (citations omitted). "[W]hen a successful affirmative defense appears on the face of the pleadings, dismissal under Rule 12(b)(6) may be appropriate." Miller v. BAC Home Loans Servicing, L.P., 726 F.3d 717, 726 (5th Cir. 2013) (quoting Kansa Reins. Co. v. Cong. Mortg. Corp. of Tex., 20 F.3d 1362, 1366 (5th Cir. 1994)).

Because the choice-of-law provision of the HPA states that Ohio law is to be applied, the parties generally agree that Ohio law applies to all claims sounding in contract and that Mississippi law applies to all claims sounding in tort. Their disagreements over choice-of-law are focused on the unlawful termination claim Robison brings, and the Court will therefore address those arguments under its analysis of that claim.

B. Joinder of ATD-H

Hercules and ATD-H argue that ATD-H has not been properly joined in this suit because the "cross-claim" against it is not proper under Rule 13(g) and because it is not a third-party defendant under Rule 14(a). However, though Robison incorrectly labels ATD-H as a "cross-defendant" and the claims against it as "cross-claims," and has admitted that this was inartfully done, its Answer [11] correctly joins ATD-H under Rule 20(a)(2). Rule 13(h) allows for "the addition of a person as a party to a counterclaim " so long as it meets the requirements of Rule 19 or 20. Fed. R. Civ. P. 13(h). Rule 20(a)(2) allows for the joinder of defendants so long as the claim arises "out of the same transaction, occurrence, or series of transactions or occurrences" and there is a common question of fact or law. Fed. R. Civ. P. 20(a)(2).

There is no question that ATD-H was properly joined with respect to the tortious interference claim pleaded against both ATD-H and Hercules, and all the claims against only ATD-H were part of the same series of events as the claims against Hercules and involve commonquestions of fact. Therefore, the Court finds that, though incorrectly labeled a "cross-defendant," ATD-H was properly joined as a party under Rules 13(h) and 20(a)(2).

C. Breach of Contract - HPA

Robison claims that Hercules breached the HPA by selling their products to ATD-H within Robison's exclusive territory. However, the HPA explicitly states that "HERCULES assumes no responsibility for any PRODUCTS which may be sold in the TERRITORY by others" and that it "reserves the right to sell in the TERRITORY any of its products or services." (HPA [11-1] at ¶ 2.) With this language, Hercules retained the right to sell its products in Robison's exclusive territory and denies responsibility if third parties, such as ATD-H, sell its products in the territory. Therefore, Hercules actions in selling ATD-H its products within Robison's exclusive territory could not have breached the HPA because the HPA specifically allowed for it. The breach of contract claim regarding Hercules' breach of the HPA, then, must fail, and it will be dismissed with prejudice.

D. Breach of Contract - September Agreement

Robison argues that Hercules also breached the September Agreement, which was a modification of the HPA. Hercules counters that, because the HPA contained a clause prohibiting oral modification, the September Agreement is not enforceable. This is a claim under contract law, and therefore the Court applies Ohio law.

Under Ohio law, even if where a written contract includes a no-oral-modification clause, that clause may be waived by the parties' actions. 3637 Green Rd. Co., Ltd. v. Specialized Component Sales Co., Inc., 69 N.E.3d 1083, 1092 (Ohio Ct. App. 2016).

As applied to contracts, waiver is a voluntary relinquishment of a known right. Waiver assumes one has an opportunity to choose between either relinquishing or enforcing of the right. A party who has a duty to perform and who changes itsposition as a result of the waiver may enforce the waiver. The party asserting waiver must prove the waiving party's clear, unequivocal, decisive act.

Id. at 1093 (quoting EAC Props., LLC v. Brightwell, No. 10AP-853, 2011 WL 1944101, at *5 (Ohio Ct. App. May 17, 2011)) (internal citations and quotations omitted). "The issue of whether a no-oral-modification clause or a written waiver clause has been waived by a parties' [sic] actions is a question of fact." Id. (citing Field Excavating, Inc. v. McWane, Inc., No. CA2008-12-114, 2009 WL 3721013, at *4 (Ohio Ct. App. Nov. 9, 2009)).

In its Answer [11], Robison alleges that Jed Emans, Hercules's national sales manager, and Narciso Munez, Hercules's credit manager, entered into the September Agreement on behalf of Hercules and agreed that Robison would pay the $273,000 balance at the time and make additional payments on balances past due by the end of September 2014. (See Answer [11] at ¶ 14.) Emans and Munez also agreed to extend the due date on all outstanding invoices by thirty days, in exchange for a one percent charge on each invoice. (See id.) In light of this agreement, Robison paid the $273,000, and made additional payments of $160,000, and Hercules continued to ship its products to Robison. (See id. at ¶ 15.) Also included as part of the Robison's pleading is an email from Munez to Emans and other Hercules personnel¹ which details the terms of the agreement. (See Exhibit 1 to Robison's Letter [11-3].)

While ultimately the question of whether Hercules's actions amounted to "clear, unequivocal, decisive" acts that waived the no-oral-modification clause is a question for a jury, the Court finds that the allegations contained in the Answer [11] and its attached exhibits are enough that a jury could find a waiver has been made. The Motion to Dismiss [22] will therefore be denied as to this claim.

E. Tortious Interference with Hercules

Robison brings claims of tortious interference with business relations and tortious interference with a contract against ATD-H, who it claims unlawfully interfered with its dealings with Hercules. ATD-H argues, though, that any interference done by it was "privileged interference" because Hercules is its wholly-owned subsidiary. Alternatively, it argues that it holds a position of responsibility over Hercules and is privileged. ATD-H also makes a general, conclusory argument that Robison has not sufficiently pleaded the malice element of these claims. Because these claims are brought under tort law, Mississippi law applies.

For a tortious interference with business relations claim, "a cause of action exists where one engages in some act with a malicious intent to interfere and injure the business of another, and injury does...