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BP Products N.A., Inc. v. Twin Cities Stores, Inc.: US District Court : CONTRACT - morals clause not a pricing restriction; no good faith dealing violation

1Actually, it was BPs predecessor Amoco Oil Company that entered into the
agreements with TCS. For the sake of simplicity, the Court will refer to BP and Amoco
collectively as BP.
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
BP PRODUCTS NORTH AMERICA INC.,
Plaintiff,
v.
TWIN CITIES STORES, INC.,
Defendant.
Case No. 04-CV-2957 (PJS/JJG)
ORDER
Michael S. Ryan and Christopher J. Willey, MURNANE BRANDT, PA, for
plaintiff.
Brian S. McCool, John M. Koneck, and S. Jamal Faleel, FREDRIKSON &
BYRON, PA, for defendant.
This matter is before the Court on the motion of plaintiff BP Products North America Inc.
(BP) for summary judgment on the pricing counterclaim of defendant Twin Cities Stores, Inc.
(TCS). For the reasons set forth below, BPs motion is granted, and TCSs pricing
counterclaim is dismissed with prejudice.
I. BACKGROUND
TCS owns and operates gas stations and convenience stores throughout the Twin Cities
metropolitan area. In 1998, TCS and BP1 entered into a series of agreements, including a Master
Commission Marketer Agreement (MCMA). Faleel Aff. Ex. A, Apr. 13, 2007. Under the
MCMA, TCS agreed to permit BP to sell its gasoline at fifty-eight TCS stores, and BP agreed to
pay TCS a commission on each gallon of gasoline sold. MCMA 2(a), 10(a). The MCMA ran
from 1998 to 2005.
-2-
The MCMA gave BP the right to establish the retail price of gasoline at the
participating TCS stores. MCMA 2(a). Nothing in the MCMA limited BPs price-setting
discretion in any way. Undeterred by that fact, TCS has sued BP for allegedly breaching the
MCMA in the way that BP exercised its discretion to set retail gasoline prices. Specifically,
TCS alleges that, from April 2004 to May 2005, BP priced its gasoline well above market levels.
According to TCS, this caused fewer customers to buy gasoline at TCS stores and, as a result,
TCS sold fewer newspapers, beverages, snacks, and other products. TCS seeks to recover
commissions lost on gasoline sales and profits lost on sales of other products.
TCSs sole support for its broad pricing counterclaim is the report of expert witness
Gary Greene. On June 1, 2007, however, this Court granted BPs motion to exclude Greenes
report and bar him from testifying at trial. Docket No. 185. The Court found that, for several
reasons, Greenes opinions were not admissible under Fed. R. Evid. 702 and Daubert v. Merrell
Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). The Courts ruling left TCS with no
admissible evidence that BP priced gasoline at noncompetitive levels from April 2004 to May
2005.
Deprived of Greenes testimony, TCS has retreated to a much more limited claim. TCS
now argues that BP violated the MCMA in April 2004 when BP admittedly implemented, and
then quickly abandoned, a new pricing strategy under which BP priced its gasoline slightly
higher than the competition. Both Patrick Saunders, a BP regional sales manager, and Michael
Proud, a BP pricing analyst, testified that BP decided in April 2004 to price gasoline at each of
2A commission market site is a site at which the owner has agreed to permit BP to sell
its gasoline, and BP has agreed to pay the owner a commission on every gallon of gasoline sold.
The fifty-eight TCS stores covered by the MCMA are commission market sites.
3At oral argument, TCS contended that Patrick Saunders testified that after BP abandoned
its overall two-cent strategy, it continued to try to stay two cents above the market in particular
stores. Hrg Tr. 53, June 1, 2007 [Docket No. 186]. Saunders said no such thing. Both
Saunders and Proud testified that, after trying the two-cent pricing strategy for a short period, BP
went back to its previous pricing practices. Saunders Dep. 65; Proud Dep. 117.
-3-
its commission market sites2 two cents above each sites key competitor. Proud Dep. 110;
Saunders Dep. 64-65. BP abandoned this strategy after two to four weeks. Proud Dep. 115
(month); Saunders Dep. 64 (two weeks). BP then returned to its previous pricing practices.3
Proud Dep. 117; Saunders Dep. 65. TCS now argues that, in pricing its gasoline two cents per
gallon higher than the competition for a few weeks in 2004, BP breached the MCMA and is
liable to TCS for damages.
II. ANALYSIS
A. Standard of Review
Summary judgment is appropriate if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to a judgment as a
matter of law. Fed. R. Civ. P. 56(c). A dispute over a fact is material only if its resolution
might affect the outcome of the suit under the governing substantive law. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute over a fact is genuine only if the evidence is
such that a reasonable jury could return a verdict for either party. Ohio Cas. Ins. Co. v. Union
Pac. R.R., 469 F.3d 1158, 1162 (8th Cir. 2006). In considering a motion for summary judgment,
a court must assume that the nonmoving partys evidence is true and must draw all justifiable
-4-
inferences arising from the evidence in that partys favor. Taylor v. White, 321 F.3d 710, 715
(8th Cir. 2003).
B. TCSs Pricing Counterclaim
As noted, the MCMA explicitly gives BP the right to establish the retail price of
gasoline sold at participating TCS stores, MCMA 2(a), and nothing in the MCMA explicitly
limits that authority in any way. Thus, on first glance, it is difficult to understand how BPs
decisions about gasoline prices could violate the MCMA. TCS nonetheless argues that BPs
two-cent pricing strategy breached the MCMA in two ways. First, TCS argues that BPs pricing
practices breached 7 of the MCMA a paragraph that, on its face, has nothing to do with
gasoline pricing. Second, TCS contends that BPs short-term pricing experiment breached the
implied covenant of good faith and fair dealing. The Court considers each of these claims in
turn.
1. Paragraph 7 of the MCMA
Paragraph 7 of the MCMA provides:
7. BUSINESS OPERATIONS. Twin Cities will not
conduct any business operations at any Participating Fuel Facility
or Participating C-Store that, in [BP]s sole discretion, may reflect
poorly on [BP]s name or business reputation or may offend an
appreciable segment of the public. Likewise, [BP] will not
conduct itself at any Participating Fuel Facility in a manner that, in
Twin Cities sole discretion, may reflect poorly on Twin Cities
name or business reputation or may offend an appreciable segment
of the public. In addition to the terms of this Agreement, Twin
Cities agrees to specifically adhere to [BP]s policies, practices,
procedures, programs and standards regarding: (i) delivery, receipt
and sale of motor fuel; (ii) repair and maintenance of the
Aboveground Fuel Facility Improvements; (iii) motor fuel
inventory measuring and monitoring; (iv) retail image, appearance
and cleanliness; (v) remittance to [BP;] (vi) safety and security;
(vii) employee behavior, customer service and customer
-5-
interaction; (viii) acceptance of credit cards; and (ix) proper
execution of any and all motor fuel promotion activities developed
by [BP], including the proper display of point-of-purchase
materials.
TCS argues that, when BP priced its gasoline two cents higher than the competition for two to
four weeks, BP breached its promise to not conduct itself at any [TCS store] in a manner that, in
Twin Cities sole discretion, may reflect poorly on Twin Cities name or business reputation or
may offend an appreciable segment of the public. In other words, TCS argues that 7 was
intended to act as a check on BPs authority under the MCMA to set gasoline prices. In support
of its argument, TCS relies heavily on extrinsic evidence of 7s meaning.
In Minnesota, a court asked to interpret a written contract must first determine if the
contract is ambiguous. Travertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267, 271 (Minn.
2004). An unambiguous contract must be given its plain and ordinary meaning; that meaning is
deemed to be conclusive evidence of the parties intent. State ex rel. Humphrey v. Philip Morris
USA, Inc., 713 N.W.2d 350, 355 (Minn. 2006); Knudsen v. Transport Leasing/Contract, Inc.,
672 N.W.2d 221, 223 (Minn. Ct. App. 2003). Only if the contract is ambiguous will the court go
beyond the four corners of the document and examine extrinsic evidence of the parties intent.
Hous. & Redev. Auth. of Chisolm v. Norman, 696 N.W.2d 329, 337 (Minn. 2005). A written
contract is ambiguous only if its language is reasonably susceptible of more than one
interpretation. Denelsbeck v. Wells Fargo & Co., 666 N.W.2d 339, 346 (Minn. 2003). In
deciding whether a contract is ambiguous, a court must consider only the contracts language
(and not extrinsic evidence), read the contract as a whole, and, if possible, reject any
interpretation that would render a provision of the contract meaningless. Chergosky v.
Crosstown Bell, Inc., 463 N.W.2d 522, 525-26 (Minn. 1990).
-6-
When interpreted in light of these principles, the MCMA in general and 7 in
particular cannot plausibly be interpreted as placing limits on BPs authority to set gasoline
prices. To begin with, 7 says not a word about gasoline prices. It instead places restrictions on
the way that BP conduct[s] itself at any Participating Fuel Facility i.e., on the way that BP
employees or agents behave while they are present at TCS stores. It is difficult to characterize
pricing decisions made at faraway BP offices by pricing analysts who may never have set foot on
the premises of a TCS store as the conduct of a BP employee at a TCS store.
Moreover, 7 is obviously a morals clause. Its focus is not on pricing and economic
competitiveness, but on the manner in which BP agents conduct themselves while they are at
TCS stores among TCS customers. Under the MCMA, BP has extensive rights to enter onto
TCS property. BP is responsible for delivering gasoline to TCS stores, MCMA 2(a)(i), and BP
also has the right to construct, inspect, and remove fuel pumps at TCS stores, inspect the
premises of TCS stores, and audit TCSs books, MCMA 5(a), 12, 18. Paragraph 7 simply
ensures that, while BP agents are present at TCS stores working among TCS customers, they do
not behave in a manner that may reflect poorly on Twin Cities name or business reputation or
may offend an appreciable segment of the public. Clearly, the clause is aimed at such conduct
as using profanity, dressing inappropriately, acting rudely, or otherwise behaving in a manner
that might offend TCS customers.
TCSs reading of 7 is not only implausible in isolation, it is implausible in the context
of the contract as a whole. The MCMA explicitly gives BP the right to establish the retail
price of gasoline at participating TCS stores. MCMA 2(a). Even though many clauses in the
4See, e.g., MCMA 5(a) (modifications to existing fuel facilities are subject to the
parties approval, which will not be unreasonably withheld); id. 8 (TCS will designate a key
management person subject to [BP]s approval reasonably exercised); 18(a) (TCS will use
reasonable commercial efforts to maintain underground storage tanks); 28(a) (requiring BPs
approval of any sale of TCSs business operations, which will not be unreasonably withheld or
delayed).
-7-
MCMA require one party or the other to act reasonably in some respect,4 BP is not required to
act reasonably in setting gasoline prices or to set gasoline prices within a certain range (e.g.,
within three cents of a particular competitor or a particular benchmark). Presumably the parties
realized that the market would provide all of the constraints needed on BPs discretion. After all,
if BPs pricing drives off customers, it is not only TCS and other commission market sites that
lose money, but BP itself.
Against this backdrop, 7 cannot be read to impose restraints on BPs pricing of
gasoline. As already discussed, 7 is a morals clause governing the conduct of BP agents on
TCS premises. The clause does not even mention the pricing of gasoline, nor does it provide any
workable standard for determining when BPs pricing of gasoline harms TCSs name or
offends the general public. More importantly, 7 gives TCS the sole discretion to
determine what conduct reflect[s] poorly on [its] name or business reputation or may offend an
appreciable segment of the public. Therefore, under TCSs reading of the MCMA, it would be
TCS, and not BP, that would (as a practical matter) have the sole discretion to determine
gasoline prices. It simply makes no sense that the parties, after agreeing that BP would have the
right to establish the retail price of gasoline, would then take away virtually all of that
discretion through a clause that says nothing about gasoline pricing and that is located nowhere
near the clause that gives BP the sole authority to set gasoline prices. For these reasons, the
-8-
Court holds, as a matter of law, that 7 sets no limit on BPs discretion to determine the price of
gasoline, and that BPs pricing practices therefore did not breach 7.
Even if TCSs reading of 7 were plausible, TCSs pricing counterclaim would fail
because TCS has not offered any evidence that BPs decision to price gasoline at two cents
above market for two to four weeks in fact reflect[ed] poorly on Twin Cities name or business
reputation or . . . offend[ed] an appreciable segment of the public. TCS points to evidence that
it experienced a significant drop in gasoline sales after April 2004, when BP implemented its
two-cent pricing strategy. TCS also cites the testimony of BPs pricing manager, Steven George,
in which George (who was unaware of the two-cent pricing strategy) stated that such a strategy
made no sense and that he never would have approved it. George Dep. 346. Finally, TCS offers
evidence that its sister company, Twin Cities Avanti Stores LLC (Avanti), which also operates
gasoline stations in the Twin Cities, did not experience a similar drop in sales.
The problem with TCSs evidence is that none of it explains why TCS experienced a drop
in sales volume from April 2004 to May 2005. TCS lines up the beginning of this period
April 2004 with the start of BPs two-cent pricing strategy, and contends that the latter caused
the former. But evidence of a temporal correlation is not the same as evidence of causation.
TCSs theory also makes no sense. According to TCS, gasoline customers are so exquisitely
sensitive to pricing that they instantly switched their business away from TCS stores based on a
two-cent difference in price. And yet, according to TCS, after BP once again priced its gasoline
competitively, these same customers failed to switch back to TCS stores.
It would be pure speculation to conclude that the drop in sales volume for a year was
caused by BP pricing the gasoline sold at TCS stores at two pennies per gallon higher than the
-9-
competition for a period of four weeks. And the comparison to TCSs sister company does not
remedy this problem. TCS contends that TCS and [Avanti] had essentially the same
management and were operated in virtually the same manner, with the only exception being that
[Avanti] management, and not BP, was pricing the gasoline at [Avantis] facilities. See Docket
No. 169 at 7. Putting aside the fact that TCS has provided no admissible evidence that this is
true, a factfinder would need a great deal more information about the Avanti stores in order to
draw the conclusion urged by TCS. TCS and Avanti stores are scattered throughout a large
geographical area, and thus function in different markets with different conditions. Yet TCS
provides no information about the market conditions of any particular TCS or Avanti store, much
less any (admissible) expert opinion ascribing changes in gasoline sales at one store solely to the
pricing of its gasoline.
Finally, whether BPs pricing manager considered the two-cent pricing strategy a good
experiment or a bad experiment is irrelevant to the question whether the experiment reflect[ed]
poorly on Twin Cities name or business reputation or . . . offend[ed] an appreciable segment of
the public. George testified that the pricing strategy would reduce sales while it lasted, but he
did not testify that it would have a long-term impact on TCSs name or reputation. Anyone can
drive around the Twin Cities area on any given day and observe some gasoline stations charging
more for gasoline than others just as anyone can observe some grocery stores and pizza
parlors and dry cleaners and shoeshine stands charging more than others. It is hard to believe
that minor, short-term pricing differences damage the reputation of businesses or offend many
members of the public; if they did, there would not be a business in existence whose reputation
had not been damaged.
-10-
At bottom, TCS has submitted no evidence that BPs short-lived two-cent pricing
experiment damaged the reputation of TCS or offended the public. Without such evidence, its
counterclaim must fail to the extent that it is based on an alleged breach of 7 of the MCMA.
2. Implied Covenant of Good Faith and Fair Dealing
TCS also argues that BPs conduct breached the implied covenant of good faith and fair
dealing. TCS and BP agree that, if there is no express contractual provision limiting BPs
authority to set gasoline prices (as the Court has found), then the implied covenant of good faith
and fair dealing acts as a check on BPs discretion. Hrg Tr. 72, June 1, 2007 [Docket No. 186]
(Hrg Tr.). The parties strongly disagree, though, on what is required of BP under the goodfaith
covenant.
TCS argues that, under Minnesota law, every party to a contract is required by the goodfaith
covenant to act reasonably. According to TCS, then, BP breached the MCMA whenever
it set an unreasonable gasoline price, no matter what BPs motives, and no matter what the
impact on TCS. BP counters that, under Minnesota law, the good-faith covenant is violated only
when a party acts maliciously, and then only when one party makes it impossible for another
party to perform under the contract. According to BP, then, BP can be held liable only if it acted
with ill will and its conduct made it impossible for TCS to perform under the MCMA.
This Court has clearly rejected the notion that the implied covenant of good faith and fair
dealing is breached only when one party to a contract makes it impossible for another party to
perform. See White Stone Partners, LP v. Piper Jaffray Cos., 978 F. Supp. 878, 881 n.2, 884-85
(D. Minn. 1997) (rejecting the impossibility of performance standard). Unfortunately, on the
other question that is, the question of whether conduct that is merely unreasonable can violate
-11-
the covenant Minnesota courts (and federal courts applying Minnesota law) have not been
entirely clear or consistent. As is discussed below, though, the substantial weight of authority is
that the covenant is breached only by conduct that is dishonest or malicious or otherwise in
subjective bad faith.
That is not surprising. Countless contracts give one party the discretion to control some
aspect of the parties relationship. The implied covenant of good faith and fair dealing prevents
the party with control from abusing its discretion in a manner that would inflict harm on the
vulnerable party and undermine the purpose of the contract. In exercising discretion under a
contract, a party must use faith that is good. This speaks not of objective reasonableness,
but of subjective motivation.
Reading into the implied covenant a duty to act with objective reasonableness or, put
differently, holding that the implied covenant can be breached by good-faith mistakes would
require courts to litigate a huge number of contractual disputes under tort-like standards. It
would also render superfluous any explicit language in a contract requiring parties to act
reasonably in one respect or another. These clauses which appear in the MCMA and in
countless other contracts would serve no purpose if every party to every contract was already
obligated to act with objective reasonableness.
Consistent with this analysis, Minnesota courts generally look to the defendants motive
to determine whether the defendant has breached the implied covenant of good faith and fair
dealing. For example, in White Stone Partners, the parties entered into a financing agreement
for a trailer park, subject to an acceptable environmental appraisal of the park. 978 F. Supp. at
879-80. Although the parties obtained an appraisal that found no problems with the trailer park,
-12-
the defendant nevertheless terminated the financing agreement, claiming that it was not satisfied
with the results of the (favorable) appraisal. Id. at 880. The plaintiff contended that the
defendants purported dissatisfaction with the appraisal was feigned, and that the defendants
true motive was that the deal was no longer economically attractive. Id. Based on these
allegations, the court held that the plaintiff had stated a viable cause of action for breach of the
implied duty of good faith. Id. at 885. In so holding, the court explained that the duty of good
faith requires only that a party granted discretion under a contract act honestly in exercising its
discretion, and that a party cannot be liable for a decision simply because it is unreasonable. See
id. at 882-84.
Minnesota courts have generally applied this same standard in subsequent good-faith
cases. See, e.g., Minnwest Bank Cent. v. Flagship Props. LLC, 689 N.W.2d 295 (Minn. Ct. App.
2004) (To establish a violation of this covenant, a party must establish bad faith by
demonstrating that the adverse party has an ulterior motive for its refusal to perform a
contractual duty.); Prairie Island Indian Cmty. v. Minn. Dept of Pub. Safety, 658 N.W.2d 876
(Minn. Ct. App. 2003) (as long as the States action was done honestly, the State has not
breached the covenant of good faith and fair dealing); Sterling Capital Advisors, Inc. v. Herzog,
575 N.W.2d 121, 125 (Minn. Ct. App. 1998) (Bad faith is defined as a partys refusal to fulfill
some duty or contractual obligation based on an ulterior motive, not an honest mistake regarding
ones rights or duties); LeMond Cycling, Inc. v. PTI Holding, Inc., No. 03-5441, 2005 WL
102969, at *7 (D. Minn. Jan. 14, 2005) (Good faith requires a party to act honestly, whether
negligently or not); cf. United States v. Basin Elec. Power Coop., 248 F.3d 781, 796 (8th Cir.
2001) ([Under the federal common law of contracts,] [t]he good faith covenant does not impose
-13-
a general requirement that a party act reasonably. Rather, the covenant acts merely as a gap
filler to deal with circumstances not contemplated by the parties at the time of contracting.).
That said, TCS is correct that there is language in some cases that, when read in isolation,
seems to suggest that the implied covenant of good faith and fair dealing can be breached by
conduct that is merely unreasonable. See, e.g., Team Nursing Servs., Inc. v. Evangelical
Lutheran Good Samaritan Socy, 433 F.3d 637 (8th Cir. 2006); Baer Gallery, Inc. v. Citizens
Scholarship Found. of Am., Inc., 450 F.3d 816 (8th Cir. 2006); Alcorn v. BP Prods. N. Am. Inc.,
No. 04-0120, 2004 WL 1745761 (D. Minn. Aug. 2, 2004). Read carefully, though, these cases
are not as broad as TCS argues.
In both Team Nursing and Baer, the Eighth Circuit affirmed the dismissal of the
plaintiffs breach-of-good-faith claims on the ground that the defendants had acted in an
objectively reasonable manner. Team Nursing, 433 F.3d at 642; Baer, 450 F.3d at 822 n.2. But
in neither case was there any evidence that the defendants had acted dishonestly or maliciously.
Obviously, when a party acts neither unreasonably nor in bad faith, there is no breach of the
implied covenant. But that does not mean that, to escape liability, a party must act both
reasonably and with pure motives. The language of Team Nursing is admittedly broad, but in
neither Team Nursing nor Baer did the court have to decide whether a party who had acted
unreasonably, but in good faith, had breached the implied covenant. Thus, any language in these
cases suggesting that one can act in good faith and yet still breach the good-faith covenant is
dicta that cannot be considered authoritative in light of the substantial Minnesota case law to the
contrary.
-14-
As for Alcorn, that case involved allegations that BP charged the plaintiff gas stations
more for gasoline than it charged its company-owned stores. Alcorn, 2004 WL 1745761, at *1.
In a one-paragraph denial of BPs motion to dismiss the plaintiffs bad-faith claims, the court
stated that BP . . . is not free to set a price that is unreasonable or is otherwise not a good faith
price. Id. at *2. On its face, this language suggests that the good-faith covenant can be
breached by conduct that is merely unreasonable. But this language should not be given much
weight. First, it appeared in a single paragraph, without explanation or elaboration. Second, it
appeared in an order that denied a motion to dismiss that is, in an order that was not
appealable, and thus did not have to explain or elaborate to the same extent as an appealable
order. And finally, the unreasonable conduct alleged in Alcorn was necessarily malicious
conduct. A gasoline supplier does not accidentally or negligently charge competitors more for
its gasoline than it charges its own stations.
A comparison with this case is instructive. In this case, BP is alleged to have embarked
on a pricing strategy that was dumb a pricing strategy that BP quickly abandoned. There is
no hint in the record that the pricing strategy was aimed at anyone or anything no evidence,
for example, that BP meant to put TCS at a competitive disadvantage or retaliate against TCS for
some slight. Rather, the record suggests that BP was simply trying to set its prices in a way that
would maximize its profits. Thats what businesses do. In Alcorn, by contrast, BP was accused
of targeting the competitors of its stores and trying to put them at a competitive disadvantage. In
assessing BPs conduct, the jury would not have inquired into what a hypothetical reasonable
gasoline supplier would have done under the same circumstances; rather, the jury would have
-15-
inquired into BPs subjective motives. Thus, the statement in Alcorn was dicta because BP was
not alleged to have acted unreasonably but in good faith.
Under these circumstances, it seems hard to believe that Alcorn intended to hold
without even citing, much less distinguishing, the many Minnesota cases to the contrary that a
party can breach the implied covenant of good faith by making a good-faith error. This
conclusion is bolstered by the fact that Alcorn cited White Stone Partners, which clearly holds
that, although a party to a contract must exercise its discretion honestly, it need not necessarily
exercise it reasonably. In sum, Team Nursing, Baer, and Alcorn cannot be read as broadly as
TCS suggests.
The Court therefore concludes that, because the express terms of the MCMA give BP the
authority to set gasoline prices, and because nothing in the MCMA limited BPs authority in any
manner, BPs decisions about the price of its gasoline could give rise to liability only if those
decisions breached the implied covenant of good faith and fair dealing. The Court further
concludes that BPs pricing decisions could not breach the implied covenant of good faith and
fair dealing even if they were objectively unreasonable unless those decisions were made
dishonestly, maliciously, or otherwise in subjective bad faith. As TCS conceded at oral
argument, there is no evidence that BP acted for any improper purpose. Hrg Tr. 55-56. Thus,
there is no evidence from which a jury could find that BP violated the implied covenant of good
faith and fair dealing.
Even if TCS were correct that BP could violate the implied covenant by acting
unreasonably (but in good faith) in setting gasoline prices, there is no evidence from which a
jury could conclude that BPs conduct was, in fact, unreasonable. The Court rejects TCSs
-16-
assertion that BP could violate its duty of good faith merely by having the highest gasoline prices
on a particular day. And the Court rejects as preposterous the suggestion of TCSs expert
witness that BP acted unreasonably and thus breached the MCMA any time that its
gasoline was not the lowest priced gasoline on the market. See Hrg Tr. 6. Given the normal ebb
and flow of the market in which gasoline prices vary from locale to locale, store to store, day
to day, and even hour to hour TCS must prove something more than that BP did not always
have the lowest price or once in a while had the highest price in order to prove that BP
acted unreasonably.
The only evidence that BP ever set its prices higher than the market for any sustained
length of time is the evidence of BPs short-lived two-cent pricing strategy. The evidence in the
record suggests that BP experimented with this strategy to determine whether it would boost its
profits and, after it quickly became apparent that the strategy was not working, BP abandoned it.
There is no evidence that BPs strategy was not only unsuccessful, but unreasonable. There is,
after all, a difference. Every day, businesses experiment with pricing and marketing and
inventory and the like. Many of those experiments fail, but that does not mean that the
businesses acted negligently in trying them. Without evidence that BP acted unreasonably in
trying a new pricing strategy, a jury could not return a verdict for TCS, even if the Court were to
agree with TCS that a party to a contract can violate the good-faith covenant while acting in
good faith.
For all of these reasons, the Court grants BPs motion with respect to TCSs pricing
counterclaim. That counterclaim is dismissed with prejudice and on the merits.
-17-
ORDER
Based on the foregoing, and on all of the files, records, and proceedings herein, IT IS
HEREBY ORDERED THAT:
1. Plaintiffs motion for summary judgment [Docket No. 156] is GRANTED IN
PART AND DENIED IN PART.
2. The motion is GRANTED with respect to defendants pricing counterclaim, and
that claim is DISMISSED WITH PREJUDICE AND ON THE MERITS.
3. The motion is DENIED in all other respects for the reasons stated in the Courts
June 1, 2007 Order [Docket No. 185].
Dated: November 13, 2007 s/Patrick J. Schiltz
Patrick J. Schiltz
United States District Judge
 

 
 
 

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        may cover this.

I already filed a claim.
I rejected a settlement
        offer.

I accepted a settlement
        offer.

  Were there any witnesses?
Bystanders Witnessed This.
Police Responded and Filed
        a Police Report

Police Responded but Did
        Not File a Police Report


 

 

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Copyright © Michael E. Douglas, Attorney at Law, Saint Paul MN. All Rights Reserved.
Minnesota Law Firm representing Personal Injury, Car / Auto Accident, Workers Compensation, Medical Malpractice, Social Security Disability claims.
Dedicated to Injured Workers, Victims of Negligence, Car Accidents, Victims of Fraud, and those in need of legal assistance.