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Gulf Oil Limited Partnership v. Kanji & Kanji Enterprises

November 19, 2010


The opinion of the court was delivered by: Hurley, Senior District Judge


This action arises out of the interpretation of a written agreement regarding the sale of branded motor fuel. Defendant Kanji & Kanji Enterprises, Inc. ("Kanji") moves to dismiss the Complaint of plaintiff Gulf Oil Limited Partnership ("Gulf") pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6). For the reasons that follow, Kanji's motion is denied.


The material facts, drawn from the Complaint and the relevant agreement, are undisputed unless otherwise noted. Gulf is a limited partnership formed in Delaware and is engaged in the wholesale distribution of refined petroleum products to various independent dealers which operate service stations supplied by Gulf motor fuel. The contractual relationship between Gulf and independent dealers consists primarily of reseller agreements that create a petroleum marketing franchise relationship pursuant to the Petroleum Marketing Practices Act, 15 U.S.C. §§ 2801 et seq. ("PMPA"). Kanji, a New York corporation with its principal place of business in Huntington, New York, is one of these independent dealers.

On October 31, 2001, Tosco Refining, L.P. ("TOSCO") and Kanji entered into a written agreement entitled "Exxon Branded Reseller Agreement." Subsequently, on December 28, 2001, the parties amended it by a written agreement entitled "Exxon Branded Reseller Agreement First Amendment" ("Reseller Agreement").*fn1 By its own terms, the Reseller Agreement was to expire on October 31, 2006.

The Reseller Agreement created a petroleum marketing franchise relationship pursuant to the PMPA and provided that Tosco and its successors were to supply branded motor fuel to Kanji for its operation of a gasoline station in Huntington, New York. In 2003, Gulf succeeded Tosco as the supplier of branded motor fuel to Kanji. Thereafter, Gulf continued to provide Exxon-branded motor fuel to Kanji pursuant to the Reseller Agreement.

Pursuant to Section 11(b) the Reseller Agreement, Kanji was required to purchase certain minimum quantities of branded motor fuel from Gulf. Moreover, Section 29 of the Reseller Agreement contains a liquidated damages provision acknowledging that "[Gulf] will be harmed by loss of sales to [Kanji] in the event [Kanji] does not purchase the contractually required Minimum Volumes set forth in [the] agreement." (Reseller Agreement at 17, § 29(a).)

In 2008, Gulf notified Kanji that Gulf's license to use Exxon-branded motor fuel would terminate on February 28, 2009, and that Gulf would thereafter provide Kanji with Gulf branded motor fuel. On or about February 28, 2009, Kanji ceased purchasing motor fuel from Gulf and de-branded its gas station. Kanji has since operated as "Huntington Gas."

On October 13, 2009, Gulf initiated the instant action asserting two claims for breach of contract arising out of Kanji's failure to purchase motor fuel from Gulf pursuant to the terms of the Reseller Agreement. Gulf asserts that under the Reseller Agreement, it has the right to substitute another trademarked brand for Exxon motor fuel and that Kanji is contractually required to purchase the substituted fuel. Kanji counters that Gulf may "offer" to provide another brand of motor fuel, but that Kanji was not contractually obligated to accept it.

Before the Court is Kanji's motion to dismiss the Complaint. Kanji argues that the Complaint does not state sufficient facts to support Gulf's claim that Kanji was contractually obligated to purchase anything other than Exxon-branded motor fuel. For the reasons stated below, the Court finds that the Reseller Agreement is ambiguous as a matter of law. Accordingly, Kanji's motion to dismiss is denied.


I. Motion to Dismiss: Legal Standards

Rule 8(a) provides that a pleading shall contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The Supreme Court has recently clarified the pleading standard applicable in evaluating a motion to dismiss under Rule 12(b)(6).

First, in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007), the Court disavowed the well-known statement in Conley v. Gibson, 355 U.S. 41, 45-46 (1957) that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." 550 U.S. at 561. Instead, to survive a motion to dismiss under Twombly, a ...

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