United States District Court, D. Minnesota
Scott Matthew Cody, Tarshish Cody, PLC, Richfield, Minnesota, for Plaintiff and Counterclaim Defendants.
Christopher J. Heinze, Kirsten J. Libby, Libby Law Office, P.A., Saint Paul, Minnesota, for Defendants and Counterclaim Plaintiffs.
MEMORANDUM OPINION AND ORDER
RICHARD H. KYLE, District Judge.
Plaintiff Century BP, LLC ("Century") entered into agreements with Defendant Lakepointe Holdings II, LLC ("Lakepointe") and World Fuel Services, Inc. ("World Fuel") to lease and operate two gas stations in the Twin Cities-Lakepointe would supply the stations and equipment and World Fuel would supply BP-branded fuel. After various obstacles arose in opening and operating the gas stations, which had been shuttered for several years previously, Century closed the stations and was eventually evicted from the premises. It commenced the instant action alleging Defendants Lakepointe, World Fuel, and both companies' President, William Elliott, breached their agreements with Century, among other claims. Lakepointe and World Fuel counterclaimed for breach of contract against Century and its owners, Emad Abed and Faisal Dahdal. Defendants now move for summary judgment on all claims and counterclaims, and Century, Abed, and Dahdal cross-move for partial summary judgment. For the reasons explained below, the Court will grant Defendants' Motion in part and deny Century, Abed, and Dahdal's Motion.
In the fall of 2011, Abed and Dahdal created Century to operate gas stations in the Twin Cities. They decided on two BP-branded properties located at 2825 Coon Rapids Boulevard ("Coon Rapids Station") and 2545 Division Street ("Division Station"), both of which were owned by Lakepointe. They entered into negotiations with Elliott, Richard Bonneau (employed by Lakepointe), and Colleen Mercil (employed by World Fuel).
During negotiations, Bonneau represented that customers could use Roundy's Rewards Cards at the stations to obtain a discount on fuel purchases, which would increase business and profitability. (Bonneau Dep. at 32-33 (acknowledging using the Roundy's Rewards program as a selling point).) Century alleges Elliott represented that the Roundy's program would remain in effect for at least a year. Century also alleges that Lakepointe represented that the stations would be "operable." At first, Abed and Dahdal interpreted this to mean that they could open the stations and start doing business right away. However, after visiting the stations in December and January, which Abed described as "busted-up, filthy, [and] disgusting, " they knew they would need some cosmetic work before they could be opened. (Abed Dep. at 104; Dahdal Dep. at 104-06.) Century alleges it relied on these representations in deciding to lease the properties.
On December 12, 2011, Century and Lakepointe executed a Letter of Intent, stating that Century would lease the two stations and equipment from Lakepointe and Lakepointe would waive the first two moths of rent at both stations. Century alleges this two-month grace period was to allow it to get the stations running and earn an initial profit rent-free. On January 18, 2012, after further negotiation and inspection, Century (represented by counsel) entered into the following agreements ("the Agreements"):
(1) to lease the stations from Lakepointe (collectively the "Station Leases"), specifically to lease the Coon Rapids Station beginning January 18, 2012, with the first rent payment due April 1, 2012, and to lease the Division Station beginning March 1, 2012, with the first rent payment due May 1, 2012, each for a term of three years with an option to purchase; (2) to lease equipment at the stations from Lakepointe (collectively, the "Equipment Leases"); and (3) to purchase BP-branded fuel for both stations from World Fuel (collectively, the "Fuel Supply Agreements"). In addition to Century's agreements, Abed and Dahdal executed personal guarantees with Lakepointe and World Fuel, agreeing to perform Century's contractual obligations in the event of its default.
Century also executed an electronic funds transfer ("EFT") authorization, allowing Lakepointe to automatically debit Century's rent from a designated account when it came due. (First Heinze Aff. Ex. M.) Although the authorization does not mention either the Coon Rapids Station or Division Station but rather Century's "contractual obligations" generally (id.), Century was under the impression that the authorization was only for payments on the Coon Rapids Station and it would set up a separate account and authorization for the Division Station. Century's payments to World Fuel functioned somewhat differently. Although the record is not completely clear, it seems World Fuel would deliver gas to Century, the customers' credit card payments at the pump were directed to a World Fuel account, and every two weeks, World Fuel would invoice Century for any outstanding balance and debit that balance from a Century's account by EFT or charge it against a $15, 000 letter of credit Century provided.
After signing the Agreements, Century took control of the Coon Rapids Station and realized there was more work to be done than it expected. First, although an initial inspection of the underground fuel tank indicated it was in working condition, water seeped in after Century filled it with fuel and it had to pump out the damaged fuel and repair the tank. Century contacted Elliott and Elliott approved its choice of vendor for the repair. Although the Maintenance and Repair Rider to the Equipment Lease states that Lakepointe would pay for the fuel tank, it refused. It also refused Century's reimbursement request for the value of the damaged fuel ($2, 000).
Second, the station was not connected to the BP payment network and therefore could not process credit card payments. Although Elliott and Mercil were aware that the station was not connected to the payment network at the time and that connecting it could take several weeks, no one had communicated this to Century. Under the terms of its Fuel Supply Agreement, Century was required to use BP's payment network (and no other network), so Mercil contacted BP around February 8 asking it to connect the Coon Rapids Station. She was advised it would take two to three weeks, if all went smoothly- but of course, it did not. A "comedy of errors" ensued (Elliott Dep. at 79) and the Coon Rapids Station was not connected and able to process credit cards until approximately March 26-more than two months after Century's lease began and just a week before its first rent payment was due.
Third, and finally, Century discovered that it could not participate in the Roundy's Rewards program as (allegedly) promised. Roundy's and BP controlled the program, not Lakepointe or World Fuel. According to Mercil, the stations were equipped for the program but only Roundy's could decide which stations to enroll. She and Bonneau deny promising Century would be part of the program and the program is not mentioned in any of Century's agreements.
Century alleges Lakepointe and World Fuel misrepresented the condition of the stations and the payment systems and it maintains the stations were inoperable. Because of its trouble opening the stations, Century felt it had not received the benefit of its bargain and requested that Elliott modify the Leases to give Century two additional rentfree months in which to earn a profit. It also requested that Elliott pay for the fuel tank repairs and the lost fuel. Mercil negotiated some compensation from BP for the delays in setting up the payment network and issued Century a $1, 200 fuel credit. But Elliott otherwise refused to modify the Leases or reimburse Century.
Century ultimately opened the Coon Rapids Station for business beginning April 1 and Lakepointe successfully drafted Century's Equipment and Station rent for April from its account. However, at least two of World Fuel's attempted EFTs in April were returned for insufficient funds and when Lakepointe attempted EFTs for the rent due May 1 on the Coon Rapids Station and the Division Station, they also bounced. Although Century had told Lakepointe not to debit the Division ...