United States of America v. Sevier Valley Oil

MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM and Memorandum in Support

D. UtahJanuary 24, 2017

4845-7769-5552 v1 DAVID M. BENNION (5664) PARSONS BEHLE & LATIMER 201 South Main Street, Suite 1800 Salt Lake City, Utah 84111 Telephone: 801.532.1234 Facsimile: 801.536.6111 DBennion@parsonsbehle.com Attorney for Tesoro Refining & Marketing Company LLC IN THE UNITED STATES DISTRICT COURT DISTRICT OF UTAH, CENTRAL DIVISION UNITED STATES OF AMERICA, Plaintiff, vs. SEVIER VALLEY OIL COMPANY, INC., Defendant. _____________________________________ SEVIER VALLEY OIL COMPANY, INC., Third-Party Plaintiff, vs. SILVER EAGLE REFINING, INC., a Montana corporation, TESORO PETROLEUM COMPANIES, INC., a Delaware corporation, HOLLY REFINING & MARKETING COMPANY, LLC, a Delaware Limited Liability Company, SINCLAIR PETROLEUM COMPANY, a Wyoming corporation, ROCK CANYON OIL, LLC, a Utah Limited Liability Company, and RON OSBORNE TRUCKING, INC., a Utah corporation, Third-Party Defendants. MOTION TO DISMISS Case No.: 2:16-CV-861-EJF Honorable Evelyn J. Furse Case 2:16-cv-00861-EJF Document 39 Filed 01/24/17 Page 1 of 8 2 4845-7769-5552 v1 Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, Tesoro Refining & Marketing Company LLC, improperly sued in the name of Tesoro Petroleum Companies, Inc. (“Tesoro”), through the undersigned counsel of record, hereby files the following motion to dismiss Sevier Valley Oil Company, Inc.’s (“Sevier Valley”) Third-Party Complaint. INTRODUCTION AND FACTUAL BACKGROUND On August 5, 2016, the United States of America sued Sevier Valley Oil Company, Inc. for breach of contract and violations of the False Claims Act. (Dkt. 2.) The United States of America alleged that Sevier Valley provided diesel fuel to Amtrak that did not conform to standards set forth in a contract between the United States and Sevier Valley. (Id.) On December 20, 2016, Sevier Valley filed a Third-Party Complaint against seven third- party defendants, alleging that they had either (1) supplied diesel fuel to Sevier Valley or (2) transported diesel fuel for Sevier Valley. (Dkt. 24 at ¶¶ 1-7, 17.) Sevier Valley alleged both breach of contract and breach of the covenant of good faith and fair dealing against each third-party defendant. (Id.) Tesoro is one of the third-party defendants Sevier Valley sued. (Id. at ¶ 3.) Sevier Valley’s Third-Party Complaint, however, does not allege the terms of any agreement between Sevier Valley and Tesoro. And it does not allege how Tesoro purportedly breached any such agreement. Sevier Valley’s Third-Party Complaint does not allege that Tesoro was contractually bound to supply or transport diesel fuel to Sevier Valley of any particular specification or standard, let alone the standard applicable to the Sevier Valley/Amtrak contract. Indeed, Sevier Valley’s Third-Party Complaint makes no separate allegation against Tesoro at all, but instead asserts a single, generalized allegation of breach against all seven third-party defendants—without specifying what any one of them did or did not do in breach of any particular Case 2:16-cv-00861-EJF Document 39 Filed 01/24/17 Page 2 of 8 3 4845-7769-5552 v1 agreement. The most detailed allegation of Tesoro’s conduct in the entire Third-Party Complaint is that: [T]o the extent Plaintiff [i.e., the United States] is able to prove these allegations at trial, the deficiencies as alleged by Plaintiff, if any, were caused by, arise out of, or relate to product or services that were supplied or performed by and that are the contractual responsibility of Third-Party Defendants per their contracts or agreements with Sevier Valley, or their failure to comply with said contractual requirements. (Id. at ¶ 14.) As a result, Sevier Valley’s Third-Party Complaint literally and as a matter of law fails to state a claim upon which relief can be granted. There is simply no way for Tesoro to know what it is even being sued for. Because Sevier Valley Third-Party Complaint does not allege any facts that give rise to a cause of action, and does not give Tesoro sufficient notice of the claims against it, the Complaint should be dismissed. LEGAL STANDARD To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a complaint must have sufficient information to “give the defendant fair notice of what the claim is and the grounds upon which it rests.” See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citation omitted). “[A] plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions.” Id. (citation omitted). “[A] formulaic recitation of the elements of a cause of action will not do.” Id. There must be sufficient facts to put the defendant on notice and to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570 (2007)). Case 2:16-cv-00861-EJF Document 39 Filed 01/24/17 Page 3 of 8 4 4845-7769-5552 v1 ARGUMENT I. Sevier Valley’s Assertion of Contract Against Tesoro Should Be Dismissed Because It Does Not Provide Tesoro Sufficient Notice of a Claim. Sevier Valley’s breach of contract allegations do not provide enough information to give Tesoro “notice of what the claim is and the grounds upon which it rests.” Twombly, 550 U.S. at 555. First, Sevier Valley does not specify what it agreed to with Tesoro. Sevier Valley alleges it contracted with the seven third-party defendants to either (1) supply diesel fuel or (2) transport diesel fuel for Sevier Valley. (Dkt. 24 at ¶¶ 1-7, 17.) The Third-Party Complaint, however, does not specify which defendants contracted to performed any particular task. It does not allege, for example, whether Sevier Valley is suing Tesoro on an agreement to supply diesel fuel or transport diesel fuel. (Id.) This failure makes it impossible for Tesoro to know what it is being sued for. Second, the Third-Party Complaint does not specify how Tesoro breached the alleged contract. It only alleges that all seven third-party defendants “fail[ed] to perform their contractual obligations.” (Dkt. 24 at ¶ 21.) The Third-Party Complaint does not mention any terms in any of the contracts at issue or any contractually agreed specification Tesoro allegedly failed to meet. (Id.) Without knowing the terms of the alleged contract, there is no way for Tesoro to know how, according to Sevier Valley, it breached. (Id.) Without that fundamental information, Tesoro cannot defend itself. Sevier Valley’s breach of contact claim is insufficient to give Tesoro “notice of what the claim is and the grounds upon which it rests.” Twombly, 550 U.S. at 555. As a result, the breach of contract claim should be dismissed under Rule 12(b)(6). See Martin v. Am. Auto. Ass'n of N. California Nevada & Utah, No. 2:15-cv-2496, 2016 WL 3267119, at *3 (E.D. Cal. June 15, Case 2:16-cv-00861-EJF Document 39 Filed 01/24/17 Page 4 of 8 5 4845-7769-5552 v1 2016) (dismissing the plaintiff’s breach of contract claim under Rule 12(b)(6) because “Plaintiff does not allege the terms of the contract that defendant allegedly breached”); see Bernstein v. Apollo Grp., Inc., No. 5:13-cv-01701, 2014 WL 854834, at *4 (N.D. Cal. Feb. 28, 2014) (dismissing plaintiff’s breach of contract claim under Rule 12(b)(6) because “the claim does not allege the terms of the contract” at issue or how the defendant breached). II. Sevier Valley’s Allegations of Breach of the Covenant of Good Faith and Fair Dealing Should Be Dismissed Because They Do Not Provide Tesoro Sufficient Notice of a Claim. Similarly, Sevier Valley’s assertion of breach of the covenant of good faith and fair dealing does not provide enough information to give Tesoro “notice of what the claim is and the grounds upon which it rests.” Twombly, 550 U.S. at 555. As mentioned above, Sevier Valley does not specify the substance of any agreement with Tesoro. (See Dkt. 24 at ¶¶ 23-26.) And the Complaint does not specify what action or inaction of Tesoro purportedly breached the covenant of good faith and fair dealing. (Id.) The Complaint only refers vaguely to “acts, failures to act, and breaches of duty” by Defendants. (Id. at 25.) As before, there is no way for Tesoro to know what actions are at issue based on those allegations. Sevier Valley’s allegations of breach of the covenant of good faith and fair dealing are insufficient to give Tesoro “notice of what the claim is and the grounds upon which it rests.” Twombly, 550 U.S. at 555. As a result, the breach of the covenant of good faith and fair dealing claim should be dismissed under Rule 12(b)(6). See Slipak v. Bank of Am., N.A., No. 2:11-cv- 01971, 2011 WL 5526445, at *4 (E.D. Cal. Nov. 14, 2011) (dismissing the claim for breach of the implied covenant of good faith and fair dealing because “Plaintiff does not allege the terms of Case 2:16-cv-00861-EJF Document 39 Filed 01/24/17 Page 5 of 8 6 4845-7769-5552 v1 the contract entered into between the parties or how either Defendant's conduct frustrated any of its specific provisions”). Additionally, Sevier Valley’s Third-Party Complaint makes no allegations relating to the breach of covenant of good faith and fair dealing that are different from its scanty, generalized allegation, quoted above, of breach of contract. A breach of covenant of good faith and fair dealing claim that is no different from an underlying breach of contract claim is subject to dismissal as a matter of law. See Terry v. Hinds, 47 F. Supp. 3d 1265, 1274-75 (D. Utah 2014) (dismissing the plaintiff’s breach of the covenant of good faith and fair dealing claim because “express breach of contract and breach of the implied covenant of good faith and fair dealing are separate causes of action” and “express breach claims are more appropriately analyzed under a theory of express breach of contract rather than a breach of the implied covenant of good faith and fair dealing.”) CONCLUSION Sevier Valley’s Third-Party Complaint lacks any substantive factual allegation against Tesoro, and certainly lacks sufficient detail to put Tesoro on notice of any claim against it. For the reasons set forth above, the Court should dismiss Sevier Valley’s Third-Party Complaint under Rule 12(b)(6). Case 2:16-cv-00861-EJF Document 39 Filed 01/24/17 Page 6 of 8 7 4845-7769-5552 v1 DATED January 24, 2017. PARSONS BEHLE & LATIMER /s/ David M. Bennion David M. Bennion Attorney for Tesoro Refining & Marketing Company LLC Case 2:16-cv-00861-EJF Document 39 Filed 01/24/17 Page 7 of 8 8 4845-7769-5552 v1 CERTIFICATE OF SERVICE I hereby certify that on January 24, 2017, I caused a true and correct copy of the foregoing to be filed with the U. S. District Court, District of Utah Court via electronic filing and Notice of Electronic filing reflected service on all counsel of record. /s/ David M. Bennion Case 2:16-cv-00861-EJF Document 39 Filed 01/24/17 Page 8 of 8