A federal court in Pennsylvania recently granted battery supplier C&D Technologies, Inc.’s motion to dismiss counterclaims brought by its former distributor Elliott Auto Supply Co, Inc. d/b/a Factor Motor Parts’ (FMP). C&D Techs., Inc. v. Elliott Auto Supply Co., 2024 WL 4349952 (E.D. Pa. Sept. 27, 2024).
The parties’ distribution agreement gave FMP the exclusive right to sell C&D batteries in a number of western states. C&D terminated the agreement due to several breaches it held to be incurable, including failure to make payments when due and failure to add new physical locations or subdistributors in Wyoming, Montana and South Dakota as required under the agreement. C&D sued to recover monies owed under the agreement, and FMP counterclaimed for several alleged breaches of the contract. C&D moved to dismiss all of FMP’s claims for failure to state a claim under Fed. R. Civ. P. 12(b)(6).
The court granted the motion to dismiss FMP’s counterclaims, holding that FMP failed to plead facts sufficient to support its claims. First, FMP claimed that C&D wrongfully terminated the agreement because they were only required to commit to adding new physical locations or subdistributors, not complete the additions. The court disagreed, finding that the text of the agreement was unambiguous; it required that the new locations or subdistributors be operating by the deadline and not just in development. Thus, the wrongful termination claim failed. Next, FMP claimed that C&D breached the exclusivity provisions of the agreement by contracting with a third-party distributor prior to the termination of the agreement. Again, the court found insufficient facts to support the breach claim. The court reasoned that the exclusivity clause did not prevent C&D from negotiating with another party while the agreement was still in effect and the agreement with the new distributor was not effective until after the FMP agreement terminated. Finally, FMP claimed C&D violated the covenant of good faith and fair dealing in terminating the agreement. The court rejected this claim as well because the agreement terms clearly allowed C&D to terminate in its sole discretion under the particular circumstances.
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