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Cremium, LLC v. Eastern Shore Forest Products, Inc.

United States District Court, W.D. Virginia, Lynchburg Division

November 9, 2018

Cremium, LLC, Plaintiff,
v.
Eastern Shore Forest Products, Inc., Defendant.

          MEMORANDUM OPINION

          NORMAN K. MOON SENIOR UNITED STATES DISTRICT JUDGE.

         This case concerns wood. Cremium, LLC sold it. Defendant Eastern Shore Forest Products, Inc. (“Eastern Shore”) buys it. Eastern Shore, during peak demand for firewood in the winter of 2017-18, convinced Cremium to switch from supplying Eastern Shore's top competitor to supplying Eastern Shore. But when the weather turned unexpectedly warm, Eastern Shore allegedly balked at its purchase commitments to Cremium. Consequently, Cremium filed this lawsuit for fraudulent inducement, breach of contract, quantum meruit, and tortious interference with contract. Eastern Shore has moved to dismiss all but the breach of contract claim, and the parties have submitted the motion on the briefs. The motion will be granted.

         STANDARD OF REVIEW

         A motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) tests the legal sufficiency of a complaint to determine whether the plaintiff has properly stated a claim. Although a complaint “does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds' of his entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted). A court does not “accept the legal conclusions drawn from the facts.” Eastern Shore Markets, Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 180 (4th Cir. 2000). “Factual allegations must be enough to raise a right to relief above the speculative level, ” Twombly, 550 U.S. at 555, with all allegations in the complaint taken as true and all reasonable inferences drawn in the plaintiff's favor. Chao v. Rivendell Woods, Inc., 415 F.3d 342, 346 (4th Cir. 2005).

         FACTS AS ALLEGED

         Cremium produced packaged firewood and bulk firewood in the eastern United States. (Complaint ¶ 1). It had a long-standing business relationship with Custis Farms, Inc. (Id. ¶ 7). For instance, during 2016 and 2017, Cremium supplied Custis Farms with 642 pallets of firewood, with which Custis Farms was “very pleased, ” according to a letter from its president. (Id. ¶ 7). In 2017, defendant Eastern Shore acquired Custis Farms and continued selling firewood under its own brand, Custis Farms' brand, or both. (Id. ¶ 9).

         Cremium also supplied firewood through a third-party company called RMS. (Complaint ¶ 11). Eastern Shore communicated to Cremium that Eastern Shore viewed RMS as its top competitor. (Id. ¶ 12). In spring 2017, while Cremium and RMS were in business negotiations for the 2017-18 season, Eastern Shore allegedly falsely informed RMS that Eastern Shore had an exclusive contract with Cremium, for the purpose of interfering with the Cremium-RMS negotiations. (Id. ¶¶ 12-13).

         In early January 2018, the president of Custis asked Cremium to help Eastern Shore provide firewood to meet customer demand for the ongoing severe winter. (Complaint ¶15). Cremium declined because of its commitments to RMS. (Id. ¶16). The president pressed further, asking what it would take for Cremium to exclusively supply to Eastern Shore, thus both helping Eastern Shore and harming its competitor, RMS, in the future. (Id. ¶17). Cremium again declined the overtures because it was unwilling to damage its relationship with RMS. (Id. ¶ 18).

         The president of Custis remained persistent. Eventually, Cremium relayed that it would be willing to supply Eastern Shore if Eastern Shore committed to (A) buying Cremium's full production through mid-March 2018 at $0.45/bundle over what RMS paid and (B) picking up Cremium's firewood by Friday every week. (Id. ¶ 19). The parties agreed to terms as represented in a short commitment letter dated for January 16, 2018.

         Under the contract, Eastern Shore committed to buying 7, 200 bundles of firewood per week between January 20 and March 17, 2018. (Dkt. 1-1). The price was $3.15 per bundle. Quality control provisions were not included in the contract. (Complaint ¶¶ 22-23). Cremium allegedly notified Eastern Shore that, to meet the demand, it would have to shorten its drying time for the wood, although USDA standards would still be met. (Id. ¶ 26). Eastern Shore allegedly accepted Cremium's proposed drying time and drying process. (Id. ¶ 28).

         The weather became unseasonably warm in February 2018. (Complaint ¶ 29). Demand for firewood therefore dropped off. Eastern Shore stopped taking delivery of Cremium's firewood and stopped paying Cremium. (Id. ¶ 30). Cremium notified Eastern Shore of its breach, and Eastern Shore allegedly knew the failure to timely pick up the firewood caused Cremium to run out of warehouse space. (Id. ¶ 31). The president of Custis nonetheless asked Cremium to return to the standard, longer drying cycle, and Cremium agreed to do so for future product. (Id. ¶ 31).

         On February 4, 2018, two men (including the president of Custis) who were “officers and agents” of Eastern Shore, visited Cremium's plant and “for the first time expressed dissatisfaction with the” firewood, specifically the moisture content and consistency of the bundle size. (Complaint ¶¶ 32-33). Cremium alleges that moisture content was not part of the contract, not a USDA requirement, and not an industry norm. (Id. ¶ 32). Cremium also offered to “break down” any pallets with which Eastern Shore was dissatisfied, but Eastern Shore replied that was not necessary. (Id.).

         About February 16, 2018, Eastern Shore informed Cremium that 12 previously-delivered pallets were being returned because of mold. (Complaint ¶ 33). Cremium offered to inspect and replace the pallets, but Eastern Shore declined and refused to return the pallets to Cremium's facility for inspection. (Id. ¶ 34). Eastern Shore has refused to continue to purchase firewood as required under the agreement. Based on these facts, Cremium advances four claims.

         First, in a fraudulent inducement claim, Cremium contends Eastern Shore purposely induced Cremium to enter into the agreement, with no intent to perform, in order to harm Eastern Shore's competitor, RMS. (Complaint ¶¶ 37-38). The inducement allegedly forced Cremium to furlough staff and cease operations, thus causing ...


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