United States District Court, E.D. Kentucky, Southern Division, London
LAUREL GROCERY COMPANY, LLC, Plaintiff / Counterclaim Defendant,
FRESHWAY, INC., et al., Defendants / Counterclaim Plaintiffs.
OPINION & ORDER
E. Wier, United States District Judge.
Freshway Defendants, operators of several Ohio grocery stores,
bought grocery products from Laurel, a Kentucky grocery
wholesaler, for a decade or more. In August 2016, Freshway,
after receiving bills claiming an unpaid balance exceeding
$150, 000, began questioning its dealings with Laurel. In
2018, Freshway terminated the relationship. Laurel soon
initiated this suit to reclaim the alleged amounts due.
Post-removal, Freshway filed its own set of grievances
regarding Laurel's conduct as supplier and alleged
accountant for Freshway. See DE 22 (Am. Answer &
Counterclaim). Laurel now targets five of Freshway's
counterclaims with a motion for partial dismissal.
See DE 23.
following reasons and under the applicable standards, the
Court GRANTS IN PART and DENIES IN
PART Laurel's motion. The Court dismisses
Counterclaim Count 5 but permits Counts 1-4 to proceed.
bases the challenged counterclaims on the following factual
allegations. In the spring of 2007, Freshway began
negotiating a wholesale agreement for grocery products with
Laurel based on the anticipated purchase of a grocery store,
Rittman IGA. During the talks, Laurel offered, and Freshway
accepted the following terms:
Freshway would receive wholesale grocery products on
three-week terms and a 3% rebate on all products purchased by
Freshway until the terms were repaid by Freshway. In return,
Freshway would buy its groceries from Laurel Grocery during
that same period.
DE 22 at 13, ¶ 15; see also DE 22-1 (4/20/2007
e-mail in support of alleged promise). In addition to this
so-called “Rittman Agreement, ” Freshway, in
March 2007, signed a “Customer Application and
Agreement” that set out further terms for Laurel's
supply of the Rittman store. DE 1-1 at 22 (Laurel Ex. 2);
see also DE 22 at 13, ¶ 17 (describing Ex. 2 as
a “true and accurate copy” of the subject
Freshway, the 2007 agreements terms concluded in 2009, when
Freshway purchased a new store, West Salem IGA. See
DE 22, at 14-15, ¶¶ 26-29. In December 2009,
Freshway and Laurel entered two new agreements governing
Freshway's grocery purchases. See Id. at
¶¶ 29-30 (describing Laurel Exs. 1 & 3 as
“true and accurate” copies); DE 1-1 at 16-20
& 25-26 (Laurel Exs. 1 & 3). The 2009 terms included
a 2% rebate “for the first five (5) years[.]” DE
1-1 at 16.
Freshway contends that Laurel employed a “staff of
accountants and associates to serve independent
retailers' accounting needs[, ]” to include
providing “financial statements and information to
assist [Laurel's] customers in making informed decisions
regarding growth and profitability.” DE 22 at 12,
¶¶ 6-7. In early 2007, Freshway gave Laurel
“exclusive control over [its] books and
finances”; Laurel from that point, and for the
remainder of the parties' relationship, was
Freshway's “accountant[.]” Id. at
14, ¶¶ 21, 25. As Freshway tells it, Laurel never
applied, and never intended to apply, the 3% rebate during
the period of the 2007-09 Rittman Agreement. DE 22 at 17
& 19, ¶¶ 48, 66. Further, Laurel, as
accountant, covered up its alleged overcharging by providing
Freshway only “sporadic[, ] . . . irregularly
prepared[, ] . . . incomplete and inaccurate” financial
records. DE 22 at 16 & 19, ¶¶ 42-43, 60.
on these facts, Freshway levels seven state law theories
against Laurel. DE 22 at 17- 24. Laurel pursues Rule 12
dismissal of Freshway's breach of contract, breach of
fiduciary duty, fraudulent inducement, fraudulent
misrepresentation, and promissory estoppel claims (Counts 1-
5, respectively). See DE 23. The motion-fully
briefed, see DE 24 (Response), DE 25 (Reply)- stands
ripe for review.
12(b)(6) motion targeting counterclaims is subject to the
familiar Twombly / Iqbal plausibility
rubric. See Static Control Components, Inc. v. Lexmark
Int'l, Inc., 697 F.3d 387, 401 (6th Cir. 2012). To
survive a motion to dismiss, “a complaint must contain
sufficient factual matter, accepted as true, to ‘state
a claim to relief that is plausible on its face.'”
Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)
(quoting Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955,
1974 (2007)). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id. However,
“a formulaic recitation of a cause of action's
elements will not do[.]” Twombly, 127 S.Ct. at
1965. Courts “must construe the complaint in the light
most favorable to the plaintiff and accept all allegations as
true.” Keys, 684 F.3d at 608. Yet, courts need
not accept “legal conclusion[s] couched as [ ] factual
allegation[s].” Papasan v. Allain, 106 S.Ct.
2932, 2944 (1986). The Court evaluates and tests the
well-pleaded Complaint contents. Peterson v.
Ostrander, No. 17-2160, 2018 WL 4739692, at *2 (6th Cir.
Apr. 6, 2018) (“[T]he court must confine its analysis
to the pleadings and accept all well-pleaded allegations as
“matters outside of the pleadings are not to be
considered by a court in ruling on a . . . motion to
dismiss.” Weiner v. Klais & Co., 108 F.3d
86, 88 (6th Cir. 1997). However, the Court may
“consider other materials that are integral to the
complaint, are public records, or are otherwise appropriate
for the taking of judicial notice.” Ashland, Inc.
v. Oppenheimer & Co., 648 F.3d 461, 467 (6th Cir.
2011) (internal quotation marks and citation omitted).
on Rule 8's minimal standards, Twombly and
Iqbal require a plaintiff to “plead facts
sufficient to show that her claim has substantive
plausibility.” Johnson v. City of Shelby, 135
S.Ct. 346, 347 (2014). Where plaintiffs state “simply,
concisely, and directly events that . . . entitle[ ] them to
damages, ” the rules require “no more to stave
off threshold dismissal for want of an adequate
statement[.]” Id.; El-Hallani v.
Huntington Nat. Bank, 623 Fed.Appx. 730, 739 (6th Cir.
2015) (“Although Twombly and Iqbal
have raised the bar for pleading, it is still low.”).
Breach of Contract - Count 1
argues that the Kentucky UCC's 4-year statute of
limitations bars Freshway's claim regarding breach of the
2007 Rittman Agreement. DE 23-1 at 5-6. Freshway contends
that the UCC does not govern and that the claim is timely
under Kentucky's 15-year limitations period for contracts
executed prior to July 15, 2014. KRS 413.090. Alternatively,
Freshway avers that Laurel's obfuscation (as
Freshway's accountant) of the alleged failure to apply
rebates warrants tolling under KRS 413.190(2). The Court, for
the following reasons, finds that KRS 355.2-725provides the
applicable limitations period and, though the contract claim
is facially untimely, that the pleadings plausibly frame a
basis for equitable tolling.
Kentucky, the sales article of the UCC applies to
“transactions in goods[.]” KRS 352.2-102; see
Riffe v. Black, 548 S.W.2d 175, 177 (Ky. Ct. App.
1977). Kentucky's UCC coverage includes
“mixed contracts for goods and services where the
predominant factor is the sale of goods.” Marley
Cooling Tower Co. v. Caldwell Energy & Envtl., Inc.,
280 F.Supp.2d 651, 659 (W.D. Ky. 2003); see also
Riffe, 548 S.W.2d at 177 (finding UCC warranty
provisions applicable to “services when the sale is
primarily one of goods and the services are necessary to
insure that those goods are merchantable and fit for the
ordinary purpose”). Freshway contends that the Rittman
Agreement only “tangentially involved the purchase of
goods” and that “its primary purpose was to
provide Freshway with the means to purchase [the]
Rittman” store. DE 24 at 7. But, two significant
First, the operative pleading contains neither direct
allegations to this effect or inferential support for the
argument. Indeed, the pleaded facts are to the contrary.
See, e.g., DE 22 at 13, ¶ 14 (“agreement
regarding Freshway's purchases from Laurel
Grocery”); id. at ¶ 15 (alleging that,
under the Rittman Agreement, “Freshway would receive
wholesale grocery products” and “Freshway would
buy its groceries from Laurel Grocery”). Second,
Freshway expressly contradicts its theory as to
store-purchase primacy by also contending that “the
Rittman Agreement was tangentially related
to Freshway's purchase of” the Rittman store. DE 24
at 14 n.37 (emphasis added). Though Freshway's briefing
vacillates between theories as to the Rittman's
Agreement's purpose, the relevant pleading is
Court finds that Freshway unambiguously alleges a contract
predominantly concerned with the sale of goods. Freshway
pleads that Laurel “set forth the terms of the Rittman
Agreement in” an April 20, 2007, e-mail. See
DE 22 at 13, ¶ 16. The subject e-mail directly speaks to
purchases of goods from Laurel. See DE 22-1 at 4
(“Opening Inventory purchased from Laurel”).
Moreover, the crux of Freshway's breach counterclaim is
Laurel's alleged promise to grant a “3% rebate on
all products purchased by Freshway[.]”
DE 22 at 13, ¶ 15. Freshway's contention that the
primary concern of an agreement setting terms for
Freshway expenditures was to provide it the “means to
purchase” a business is illogical and, on the pleaded
facts, wholly unfounded. Because Freshway alleged an
agreement to purchase goods from Laurel, the KRS 355.2-725(1)
four-year limitations period governs Freshway's breach
does not dispute Laurel's contention that, per the
pleading, any breach of the alleged Rittman Agreement must
have occurred in or before 2009. See DE 23-1 at 5.
Freshway's factual claims fully support this
contention. Thus, Freshway's 2019 counterclaim is
facially untimely and, absent delayed accrual or tolling,
barred by KRS 355.2-725(1).
Tolling & Equitable Estoppel
state-law provisions frame the balance of the parties'
timeliness dispute. Under KRS 355.2-725(2), “[a] cause
of action accrues when the breach occurs, regardless of the
aggrieved party's lack of knowledge of the breach.”
Thus, in the Commonwealth, a sales contract “breach can
occur before the aggrieved party actually knows of it and is
damaged by it.” Willits v. Peabody Coal Co.,
188 F.3d 510 (6th Cir. 1999) (table). Notwithstanding this
unflagging accrual rule, per subsection (4), “the law
on tolling” persists. KRS 355.2-725(4). Thus, Freshway
contends, DE 24 at 11, that it has pleaded facts to justify
tolling under KRS 413.190:
When a cause of action mentioned in KRS 413.090 to 413.160
accrues against a resident of this state, and he by
absconding or concealing himself or by any other indirect
means obstructs the prosecution of the action, the time of
the continuance of the absence from the state or obstruction
shall not be computed as any part of the period within which
the action shall be commenced. But this saving shall not
prevent the limitation from operating in favor of any other
person not so acting, whether he is a necessary party to the
action or not.
KRS 413.190(2). Laurel argues that KRS 413.190 is
inapplicable because the tolling statute's
cross-referenced coverage-KRS 413.090 to 413.160-does not
include KRS 355.2-725. DE 25 at 3. Laurel, however, cites no
authority for its interpretation of KRS 355.2-725. Further,
the Court notes that KRS 413.190 extends to
“causes of action mentioned in”
the referenced limitations statutes, not merely to claims
subject to the limitations periods those provisions supply.
See id. Those causes of action include contract
claims. In any event, the Court, for present purposes, need
not decide whether KRS 413.190 applies to UCC sales
contracts. The tolling statute is merely “a
codification of equitable estoppel principles[.]”
500 Assocs., Inc. v. Vermont Am. Corp., 496
Fed.Appx. 589, 595 (6th Cir. 2012); see also Emberton v.
GMRI, Inc., 299 ...