Court Opinion

ID: 1021300
Source: CourtListenerOpinion
Date Created: 2013-07-04 23:04:32.214448+00
Date Added: 2024-06-11T11:50:41.011684
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                              No. 06-1239

CONVENIENCE RETAILING, LLC,

                                              Plaintiff - Appellant,

           versus

SUNOCO, INCORPORATED (R&M),

                                              Defendant - Appellee.

Appeal from the United States District Court for the District of
Maryland, at Baltimore. William D. Quarles, Jr., District Judge.
(1:05-cv-01565-WDQ)

Argued:   November 29, 2006             Decided:     December 21, 2006

Before MICHAEL and SHEDD, Circuit Judges, and David A. FABER, Chief
United States District Judge for the Southern District of West
Virginia, sitting by designation.

Reversed by unpublished per curiam opinion.

ARGUED: Harry Carl Storm, LERCH, EARLY & BREWER, CHARTERED,
Bethesda, Maryland, for Appellant.     Arthur Christopher Young,
PEPPER & HAMILTON, L.L.P., Philadelphia, Pennsylvania, for
Appellee. ON BRIEF: Susan Berry Bloomfield, William A. Goldberg,
LERCH, EARLY & BREWER, CHARTERED, Bethesda, Maryland, for
Appellant.    Matthew D. Janssen, PEPPER & HAMILTON, L.L.P.,
Philadelphia, Pennsylvania, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

       Convenience Retailing, LLC (“Convenience”), an operator of

retail motor fuel stations, brought this declaratory judgment

action against Sunoco, Inc., seeking rescission of the Branded

Reseller Agreement (“Agreement”) which governs its purchase of fuel

from       Sunoco.     Convenience     contends   that    it    is   entitled    to

rescission based on a material breach of the Agreement by Sunoco.

The    district      court   granted   Sunoco’s   Rule    12(b)(6)      motion   to

dismiss, holding that Convenience failed to plead facts which

constitute a material breach, and Convenience now appeals. Because

we find that Convenience adequately stated a claim for material

breach, we reverse.

                                         I

       Convenience operates retail motor fuel stations in Maryland

and Virginia, including the Mobil branded stations in Columbia,

Maryland (“Columbia Mobil”) and Ellicott City, Maryland (“Dorsey

Hall Mobil”).1 Convenience operates Columbia Mobil pursuant to the

Agreement,      which   it   originally      executed    with   Tosco   Operating

Company, Inc. (“Tosco”) and to which Sunoco became party as a

       1
      Because the district court dismissed this case at the
12(b)(6) stage, we must view the facts -- and we recite them here
-- in a light most favorable to Convenience (the non-moving party).
Venkatraman v. REI Sys., Inc., 417 F.3d 418, 420 (4th Cir. 2005).

                                         2
successor   to   Tosco.   Convenience   operates   Dorsey    Hall   Mobil

pursuant to a similar agreement.

     As pertinent to this appeal, the Agreement provides that

Sunoco will pay Convenience a facilities allowance of four cents

per gallon of motor fuel which it sells to Convenience.               The

facilities allowance is a “significant term” of the Agreement,

designed to provide compensation to Convenience for various costs

associated with the ownership and operation of Columbia Mobil. The

Agreement further provides for an open price term regarding the

fuel sold by Sunoco to Convenience.     However, a course of dealing

and course of performance was established under the Agreement that

the prices charged to it for motor fuel at Columbia Mobil would be

the same as the prices charged to other Mobil stations in the area,

including Dorsey Hall Mobil.   In addition, the Agreement requires

Sunoco to take steps to support the Mobil brand.            Finally, the

Agreement prohibited Sunoco from assuming the Agreement from Tosco

without Convenience’s prior written consent.

     Convenience contends that Sunoco breached the Agreement by

repeatedly: (1) charging Convenience higher prices than those

charged to other dealers in Columbia, Maryland, in violation of the

established course of dealing and course of performance; (2)

overcharging Convenience for motor fuel, thus rendering illusory

the facilities allowance required by the Agreement; (3) failing to

pay the facilities allowance on diesel fuel; (4) failing to support

                                   3
the Mobil brand by eliminating Mobil brand educational programs and

expressing its intention not to extend Mobil trademark licensing in

2007; and (5) assuming the Agreement from Tosco without first

receiving   Convenience’s   written    consent.   Convenience   further

asserts that it provided Sunoco with timely written notice of its

claims and of Sunoco’s breaches and that it demanded that Sunoco

comply with its obligations under the Agreement.         After Sunoco

refused, Convenience brought this declaratory judgment action,

seeking termination of the Agreement and contending that Sunoco’s

breaches constitute -- both individually and in the aggregate --

material breach of contract.

     The district court granted Sunoco’s motion to dismiss, holding

that Convenience failed as a matter of law to allege material

breach.   Convenience subsequently moved to amend its complaint to

allege a claim for damages for Sunoco’s breaches.        The district

court denied this motion as moot, and Convenience now appeals both

the dismissal of the complaint and the denial of its motion to

amend.

                                  II

     We review de novo the dismissal of a complaint for failure to

state a claim under Rule 12(b)(6).     Hinkleman v. Shell Oil Co., 962

F.2d 372, 378 (4th Cir. 1992).        In so doing, we must accept the

factual allegations of the complaint as true, and we must affirm

                                  4
the dismissal only if the plaintiff fails to prove any set of facts

upon which relief can be granted.           Id.

      Under Maryland law, a material breach of contract occurs when

“the act failed to be performed [goes] to the root of the contract

or . . . [is] in respect to matters which would render the

performance of the contract a thing different in substance from

that which was contracted for.”        Traylor v. Grafton, 332 A.2d 651,

674   (Md.   1975).     Importantly,       despite   Sunoco’s   view   to    the

contrary,    Maryland   law   does   not    equate   a   material   breach    of

contract with a total failure to perform contractual obligations.

The Maryland Court of Appeals has expressly noted that a partial

failure to perform can constitute a material breach (thus granting

the right to rescission) when the breach goes to the root of the

contract.    Id.   It is only when “a covenant goes only to part of a

contract, is incidental and subordinate to its main purpose and its

breach may be compensated in damages” that a breach “does not

warrant rescission of the contract but compensation in damages[.]”

Id. (emphasis added).

      We hold that Convenience’s allegations suffice to state a

claim for material breach of contract under Maryland law.                    The

Agreement provides that its purpose is, inter alia, for Convenience

to purchase products from Sunoco for resale and to operate a retail

motor fuel business.     Convenience alleges that Sunoco has refused

to pay the facilities allowance on diesel fuel and has rendered

                                      5
illusory the allowance by raising the initial price charged for

fuel in violation of the established course of dealing and course

of performance. This allegation directly implicates the purpose of

the contract: i.e., the purchase of motor fuel by Convenience from

Sunoco.     Accordingly, the allegation goes to the root of the

contract    and   is   not   “incidental   or    subordinate   to   its   main

purpose.”    Traylor, 332 A.2d at 674.          Sunoco’s alleged failure to

perform thus renders Convenience’s position under the contract

different from that which was contracted for.2

                                    III

     Convenience has adequately alleged a claim for material breach

of contract for which it is entitled to seek rescission of the

Agreement, and the district court erred in dismissing this action

under Rule 12(b)(6).         Therefore, we reverse the judgment of the

district court and remand for further proceedings consistent with

this opinion.3

                                                                    REVERSED

     2
      Because we find Convenience’s allegation that Sunoco failed
to pay the facilities allowance states a claim for material breach,
we reverse the dismissal of this one-count declaratory judgment
action without considering Convenience’s remaining claims of
material breach.
     3
      In light of our disposition of this appeal, we vacate the
denial of Convenience’s motion for leave to amend its complaint.

                                     6