Emmet G. Sullivan, United States District Court Judge.
3E Mobile, LLC, ("3E") commenced this lawsuit in November 2014 based on Global Cellular, Inc.'s ("Global") alleged breach of the parties' 2013 Manufacturing Agreement ("Agreement"). Compl., ECF No. 1. In January 2015, Global asserted counterclaims against 3E for breach of contract, breach of implied covenant of good faith, unjust enrichment, and attorneys' fees. Answer and Countercl. ("Countercl."), ECF No. 5. 3E moves to dismiss Global's counterclaims for failure to state a claim and to strike Global's demand for attorneys' fees. Pl.'s Mot. Dismiss, ECF No. 11. Upon consideration of the motion, the response and reply thereto, the applicable law, and the entire record, 3E's motion is DENIED.
3E is a manufacturer of cell phone protective cases. Countercl. at 9-10. Global is a provider of cell phone accessories, including protective cases. Id. In 2013, 3E and Global settled an intellectual property lawsuit in which 3E's predecessor Crystal Icing, Inc. ("Crystal") alleged that Global infringed on several registered copyrights by marketing, manufacturing, copying, and selling certain items, including cellphone accessories.
Pursuant to the Agreement, 3E agreed to manufacture certain items at Global's request, and Global agreed to sell those items to designated retailers at a specified price. Agreement, See Compl., Ex. A. The Agreement states that 3E "shall" provide the products ordered by Global within a specified amount of time, but that if 3E cannot provide the Product requested by Global for "any reason," 3E "may arrange
During the first six months of the Agreement's term, Global allegedly made more than 250 manufacturing requests and paid more than $150,000.00 in monthly advance payments. 3E did not produce any of the products ordered by Global. Def.'s Mem. Opp., ECF No. 12 at 1. After Global expressed concern about 3E's failure to source its orders, 3E executives advised Global to stop making the monthly payments. Id.
A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of a complaint. Browning v. Clinton, 292 F.3d 235, 242 (D.C.Cir.2002). A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal quotation marks and citations omitted). The plaintiff need not plead all of the elements of a prima facie case in the complaint, Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511-14, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002), nor must the plaintiff plead facts or law that match every element of a legal theory. Krieger v. Fadely, 211 F.3d 134, 136 (D.C.Cir.2000).
However, despite these liberal pleading standards, to survive a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted); Twombly, 550 U.S. at 562, 127 S.Ct. 1955. A claim is facially plausible when the facts pled in the complaint allow the Court "to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 556, 127 S.Ct.1955). While this standard does not amount to a "probability requirement," it does require more than a "sheer possibility that a defendant has acted unlawfully." Id. (citing Twombly, 550 U.S. at 556, 127 S.Ct.1955).
"[W]hen ruling on a defendant's motion to dismiss, a judge must accept as true all of the factual allegations contained in the
Global argues that 3E's failure to fulfill the more than 250 orders it placed during the first six months of the Agreement's term constitutes a breach of both the plain language of the contract and 3E's implied duties of good faith and fair dealing. Def.'s Mem. Opp. at 9-14. 3E contends that the plain language of the Agreement provides 3E with a choice — not an obligation — to fulfill Global's orders. Pl.'s Mem. Supp. at 11.
Global's breach of contract counterclaim rests on whether the plain language of the agreement obligates 3E to produce the Products ordered by Global. The relevant portion of the Agreement states:
Agreement, Section 2.C(emphasis added).
Global argues the Agreement obligates 3E to provide the product ordered by Global ("... Manufacture
"The fundamental rule in interpreting the meaning of a contract is to ascertain and give effect to the intent of the contracting parties." Salem Preferred Partners, LLC. v. Diamond Heavy Vehicle Solutions, LLC, 1:12-CV-1202, 2012 WL 5905027, at *3 (M.D.Pa. Oct. 31, 2012) (citing Great Am. Ins. Co. v. Norwin Sch. Dist., 544 F.3d 229, 243 (3d Cir.2008)). "Courts have the responsibility to determine as a matter of law whether contract terms are clear or ambiguous." Haywood v. Univ. of Pittsburgh, 976 F.Supp.2d 606, 640 (W.D.Pa.2013) (citing Baldwin v. Univ. of Pgh. Med. Ctr., 636 F.3d 69, 75
Here, the terms of the Agreement are ambiguous and subject to more than one interpretation. The Agreement states that 3E "shall provide the product," but that if 3E cannot produce the product "for any reason," 3E "may" arrange for another Manufacturer to fill Global's orders. Agreement, Section 2.C. The legal distinction between "shall" and "may" is both critical and elementary. Shall is defined as a duty in "the mandatory sense that drafters typically intend and that courts typically uphold" whereas "may" is defined as "a possibility." Black's Law Dictionary (8th Ed.2004) at 1407 and 1000. A superb example of inartful drafting, the Agreement's ambiguity is expressed by its plain language: 3E cannot be both obligated, in a mandatory sense, to produce products for Global while also having the option to identify alternative manufacturers, if, for "any reason", it cannot fulfill Global's orders.
3E insists that the Agreement unambiguously provides that it "may manufacture products for Global, it may have the products produced by another manufacturer, and in the event the products are manufactured, they must be provided to Global within a certain amount of time." Pl.'s Rep. Br., ECF No. 13 at 3. 3E's reading of the Agreement is as untenable as it is unreasonable because it allows 3E to collect Global's advance payments absent any obligation to produce any product ordered by Global. Such an agreement is nonsensical on its face, and unfathomable in a context such as this where the parties expressly anticipated doing nearly $4 million worth of business with each other. See Agreement Section 4.A. For all of these reasons, the terms of the Agreement are ambiguous and Global has sufficiently pled a breach of contract counterclaim.
Furthermore, Global argues that even if 3E had the discretion under the Agreement to decide which orders to fill, 3E's refusal to source all 250 orders placed by Global in the first six months of the Agreement's term constitutes a violation of 3E's implied duty of good faith and fair dealing. Def.'s Mem. Opp. at 11.
Under Pennsylvania law, all contracts impose on each party a duty of good faith and fair dealing in the performance and enforcement of a contract. Bedrock Stone & Stuff, Inc. v. Mfrs. & Traders Trust Co., 2005 WL 1279148, 2005 U.S. Dist. LEXIS 10218 (E.D.Pa. May 25, 2005); Donahue v. Fed. Express Corp., 753 A.2d 238, 242 (Pa.Super.Ct.2000). Good faith is defined as "honesty in fact in the conduct or transaction concerned." Armstrong World Indus., Inc. v. Robert Levin Carpet Co., 1999 U.S. Dist. LEXIS 7743, *15 (E.D.Pa. May 19, 1999). An independent duty of good faith is generally recognized when there is a dispute about the parties' reasonable expectations. Id. "Good faith performance or enforcement of a contract emphasized faithfulness to an agreed common purpose and consistency with the justified expectations of the other party...." Pierce v. QVC, Inc., 555 F.Supp.2d 499, 503 (E.D.Pa.2008)(citing Restatement (Second) of Contracts § 205 Cmt. a.)
3E argues that the notice provision included in the Agreement bars Global's counterclaims because Global failed to give 3E notice and an opportunity to cure its default. Pl.'s Mem. Supp. at 4.
Manufacturing Agreement, ¶ 15. The plain text of the notice and cure provision indicates that it is triggered by default ("[u]pon
Finally, 3E moves under Federal Rule of Civil Procedure 12(f) to strike Global's claim for attorneys' fees. Pl.'s Mem. Supp. at 15. Global argues that its claim for attorneys' fees is well founded under federal and Pennsylvania law, both of which allow attorneys' fees to be awarded where a party's conduct is arbitrary, vexatious or in bad faith. See 28 U.S.C. § 1927; 42 Pa. Cons.St. Ann. § 2503(7), (9). At this stage of the litigation, the Court is unable to access whether a factual basis exists for an award of attorney's fees. Accordingly, it would be premature to strike Global's demand for attorneys' fees at this juncture. Therefore, 3E's motion to strike attorneys' fees is denied.
For the foregoing reasons 3E's Motion to Dismiss is DENIED.