Arch Wood Protection, Inc. v. Flamedxx, LLC
2013 U.S. Dist. LEXIS 37416
E.D. Tenn.2013Background
- Plaintiff FlameDXX is a TN LLC that coats OSB with a fire-retardant; Defendant Arch Wood Protection supplies OSB to customers.
- In 2009 the parties executed a confidentiality agreement and an Exclusive Production Services and Distribution Agreement (the Contract) governing semi-exclusive production and distribution.
- Under the Contract, Plaintiff would produce coated OSB for Defendant, refrain from selling to Defendant’s customers, and forward leads to Defendant; Plaintiff could sell to identified customers.
- Threshold Service Level in Part 2 of Schedule 1 required minimum purchases; if not met, Defendant could cancel after 30 days unless covered by meeting the threshold later.
- ICC and IAMPO evaluations were prerequisites to calculating threshold levels; Plaintiff obtained IAMPO but could not obtain ICC criteria, allegedly due to Defendant’s knowledge and fraud.
- Plaintiff later alleged confidential information was disclosed to competitors and that Defendant failed to return samples; Defendant filed an earlier contract-related complaint and the Court granted some fees and later set aside default.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Promissory fraud sufficiency | Plaintiff alleges Defendant promised to satisfy thresholds despite knowing ICC had no criteria. | Contract did not obligate threshold satisfaction and ICC issue voided any threshold. | Promissory fraud pleaded sufficiently; misrepresentation during negotiations supports claim. |
| Breach of contract—threshold levels | Threshold levels were an obligation and Defendant breached by failing to meet them. | Contract did not impose an affirmative purchase obligation; thresholds not binding. | Count Two dismissed; Defendant not obligated to purchase at threshold levels. |
| Breach of the confidentiality agreement | Defendant breached by disclosing confidential information to competitors and failing to return samples. | Damages limited by contract; some damages not recoverable. | Count Three survives in part; damages limitation not applicable to breach; §56 struck with amendment opportunity. |
| TCPA claim viability | Promissory fraud and deceptive negotiation practices support TCPA claim. | Thresholds and contract bar deceptive conduct claim; implied no deception. | Count Four denied dismissal; TCPA claim remains viable with contract context of promissory fraud. |
Key Cases Cited
- Shah v. Racetrac Petroleum Co., 338 F.3d 557 (6th Cir. 2003) (parol evidence not required for promissory fraud; reliance issue remains for jury)
- Adkins v. Bluegrass Estates, Inc., 360 S.W.3d 404 (Tenn. Ct. App. 2011) (contract interpretation and damages principles; reading contract as a whole)
- Farmers & Merchants Bank v. Petty, 664 S.W.2d 77 (Tenn. Ct. App. 1983) (early promissory fraud recognition in Tennessee)
- Ginsburg v. Ins. Co. of N. Am., 427 F.2d 1318 (6th Cir. 1969) (treats reasonable reliance and integration considerations in tort/contract interplay)