Commercial Lubricants, LLC v. Safety-Kleen Systems, Inc.
1:14-cv-07483
E.D.N.YAug 8, 2017Background
- Safety-Kleen (Defendant) is a used-oil re-refiner; Commercial Lubricants (Plaintiff) bought assets of New York Commercial Lubricants (NYCL) in 2013 and continued distributing Safety-Kleen oil to NYC customers (including the MTA).
- NYCL had an earlier written Distributor Agreement with Safety-Kleen setting pricing, payment terms, termination, and a minimum annual purchase obligation; it is disputed whether that agreement was assigned to Plaintiff in the asset purchase.
- In Sept. 2013 parties negotiated an oral “exclusivity/price-support” arrangement: Plaintiff claims Safety-Kleen promised a $0.15/gal discount (or reduced price) tied to Plaintiff getting the MTA to consider switching from a Lubrizol additive to Infineum; the parties dispute whether the trigger was merely arranging a meeting or obtaining formal approval (QPL listing).
- Plaintiff alleges Safety-Kleen withheld technical data and provided price/support to competitors, interfering with Plaintiff’s MTA bids; Safety-Kleen claims Plaintiff accepted product in 2014 and failed to pay invoices exceeding $1M, and asserts counterclaims for breach of contract and unjust enrichment.
- Procedural posture: Safety-Kleen moved for partial summary judgment on most counts of Plaintiff’s Second Amended Complaint and for summary judgment on its counterclaims; the Court granted summary judgment on many tort and equitable claims, denied summary judgment as to the exclusivity/contract claims and Safety-Kleen’s counterclaims, and reserved ruling on the Waste Oil Agreement (arbitration) question.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Formation/terms of exclusivity/price-support agreement | Parties formed an enforceable oral agreement entitling Plaintiff to $0.15/gal (or $5.50 price) upon Plaintiff securing MTA consideration/meeting; Plaintiff performed | No meeting of minds on material term (trigger ambiguous); lack of enforceable contract or consideration | Ambiguity as to the agreement’s trigger creates genuine factual dispute; summary judgment denied on breach of exclusivity and implied exclusivity claims |
| Breach of implied covenant of good faith and fair dealing | Safety-Kleen acted in bad faith (withheld technical data) undermining Plaintiff’s ability to obtain MTA approval | Implied-covenant claim duplicates contract claim and fails if no contract | Duplicative parts of implied-covenant claims dismissed; but claim survives to the extent it alleges withholding technical data tied to the disputed exclusivity contract (factual issues remain) |
| Promissory estoppel | Plaintiff relied on Safety-Kleen’s promise and incurred expenses to obtain MTA consideration | No quantifiable reliance damages and claim duplicates contract if contract exists | Summary judgment for defendant: estoppel fails (duplicative if contract exists; otherwise Plaintiff offered no evidence of reliance injury) |
| Fraud | Misrepresentations induced Plaintiff to act; claims collateral to contract | Fraud is duplicative of contract claims or lacks evidence of present-fact misrepresentation, scienter, and intent to induce | Summary judgment for defendant: fraud dismissed (subsumed by contract or unsupported by proof of falsity/intent) |
| Tortious interference (contract & prospective advantage) | Safety-Kleen knowingly deprived Plaintiff of technical/pricing support and favored competitors, harming Plaintiff’s contracts/opportunities | Plaintiff fails to identify a specific breached third‑party contract and no wrongful conduct directed at third parties | Summary judgment for defendant on both interference claims (no identified breached contract; no wrongful conduct toward third parties proven) |
| Declaratory judgment as to past invoices/amounts owed | Declaratory relief needed to fix disputed charges and responsibilities | Declaratory relief improper as it seeks to adjudicate past actions already subject to suit | Summary judgment for defendant: declaratory-judgment claim dismissed as superfluous given breach/collection litigation |
| Waste Oil Agreement (arbitration/termination) | Plaintiff contends Safety-Kleen waived arbitration by litigating and discovery; disputes whether termination effective and amounts due after termination | Agreement contains arbitration clause; Safety-Kleen argues disputes must be arbitrated and termination effective Dec. 21, 2014 | Court reserved decision on arbitration/waiver and on damages beyond termination date; ordered briefing on waiver/prejudice before ruling |
| Safety-Kleen counterclaims (breach of contract & unjust enrichment) | Plaintiff disputes it assumed Distributor Agreement liabilities and asserts offsets; claims Distributor Agreement was not assigned | Safety-Kleen says Plaintiff stepped into NYCL’s shoes, accepted product in 2014, and failed to pay > $1M | Summary judgment denied for Safety-Kleen: genuine issues about successor liability/assignment and offsets exist; unjust enrichment claim likewise survives given contract existence disputed |
Key Cases Cited
- Vacold LLC v. Cerami, 545 F.3d 114 (2d Cir.) (contract-formation and when extrinsic evidence makes formation a question of fact)
- Anderson v. Liberty Lobby, 477 U.S. 242 (U.S.) (summary judgment standard; genuine issue of material fact)
- Luitpold Pharm., Inc. v. Ed Geistlich Sohne A.G. Fur Chemische Industrie, 784 F.3d 78 (2d Cir.) (contract ambiguity and use of extrinsic evidence at summary judgment)
- Kirch v. Liberty Media Corp., 449 F.3d 388 (2d Cir.) (elements of tortious interference with contract)
- Apfel v. Prudential–Bache Sec., 81 N.Y.2d 470 (N.Y.) (consideration adequacy and New York contract principles)