The opinion
THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
FRANK KRAMMES TIMBER
HARVESTING, INC.,
Plaintiff
V. : 3:18-CV-1914
: (JUDGE MARIANI)
LETOURNEAU ENTERPRISES, LLC, :
Defendant.
MEMORANDUM OPINION
I. INTRODUCTION
Presently before the Court is a Report and Recommendation (“R&R”) (Doc. 17) by
Magistrate Judge Martin Carlson in which he recommends that the Court grant Defendant
Letourneau Enterprises’ Motion to Dismiss for Failure to State a Claim (Doc. 2) as to Plaintiff
Frank Krammes Timber Harvesting, Inc.’s (‘Krammes”) Complaint (Doc. 1-1). Krammes has
filed Objections to the Magistrate Judge’s R&R (Doc. 18) and a brief in support of those
Objections (Doc. 19), to which Defendant has filed a brief in opposition to Plaintiff's
Objections (Doc. 20). Additionally, Plaintiff has filed a reply brief. (Doc. 21). For the reasons
that follow, upon de novo review of Magistrate Judge Carlson’s R&R, the Court will overrule
Plaintiff's Objections and adopt as modified the pending R&R. Defendant's motion will be
granted. Count | of Plaintiffs Complaint will be dismissed with prejudice and Counts II and III
of Plaintiff's Complaint will be dismissed without prejudice. Plaintiff will be granted leave to
amend those Counts dismissed without prejudice.
Il. ANALYSIS
A District Court may “designate a magistrate judge to conduct hearings, including
evidentiary hearings, and to submit to a judge of the court proposed findings of fact and
recommendations for the disposition” of certain matters pending before the Court. 28 U.S.C.
§ 636(b)(1)(B). If a party timely and properly files a written objection to a Magistrate Judge's
Report and Recommendation, the District Court “shall make a de novo determination of those
portions of the report or specified proposed findings or recommendations to which objection
is made.” Id. at § 636(b)(1)(C); see also, Brown v. Astrue, 649 F.3d 193, 195 (3d Cir. 2011);
M.D. Pa. Local Rule 72.3.
The operative complaint is the Complaint filed in the Court of Common Pleas of
Schuylkill County and removed to this Court on October 1, 2018, by Defendant Letourneau
Enterprises, LLC. (Doc. 1). The Complaint contains three counts: Count | — Declaratory
Relief as to the parties’ relationship embodied in a contract; Count II - Promissory Estoppel;
and Count Ill - Unjust Enrichment. (Doc. 1-1). Thereafter, Letourneau filed a Motion to
Dismiss for Failure to State a Claim (Doc. 2), which the Court referred to Magistrate Judge
Carlson for the preparation of an R&R. In August 2019, the Magistrate Judge issued the
R&R (Doc. 17) presently before this Court.
In the R&R, Magistrate Judge Carlson recommends that this Court grant Letourneau’s
motion to dismiss with respect to Krammes’ breach of contract claim because “a contract
which clearly provides that the plaintiff will receive no minimum number of loads cannot be
read as requiring the delivery of some minimum quantity of loads” and thus the “breach of
contract fails as a matter of law and should be dismissed.” (Doc. 17, at 1). Magistrate Judge
Carlson concluded that the agreement between the parties “did not amount to an output
contract” (id. at 16) and that the agreement between the parties (Doc. 1-1, at 31) was a
completely integrated and unambiguous agreement that precluded the introduction of any
parol evidence to establish that the agreement otherwise amounted to an output contract
(Doc. 17, at 13-16). Additionally, Magistrate Judge Carlson recommends that this Court grant
Letourneau’s motion to dismiss with respect to the promissory estoppel and unjust
enrichment claims because the existence of a written agreement precludes both claims. (/d.
at 17-20).
Krammes objects to the R&R’s recommendation that Letourneau’s motion to dismiss
be granted with respect to its breach of contract claim on the grounds that Magistrate Judge
Carlson erred “in finding that the September 11, 2017 Commitment for Plaintiff to take all of
the Defendant's output was not part of the agreement between the parties and was parol
evidence that could not be considered.” (Doc. 19, at 6). Further, “the Magistrate Judge erred
in interpreting in isolation the term ‘no minimum/maximum number of loads’ as meaning that
Defendant had no obligation to bring any loads at all, under Pennsylvania law” and in
concluding that no output contract exists. (/d. at 9). Additionally, Krammes contends that “if
the Magistrate’s logic is the contract really was not a contract,” then it should not be
precluded from asserting alternative claims of promissory estoppel and unjust enrichment.
(Doc. 19, at 17). The Court will address Krammes’ objections with respect to the breach of
contract claim and the promissory estoppel and unjust enrichment claims separately.
1. Breach of Contract
Krammes asserts that Magistrate Judge Carlson “erred in interpreting the September
13, 2017 agreement (Doc. 1-1, at 4) as not being an output contract and in finding Defendant
had no obligation to bring any loads of materials to Plaintiff under the contract.” (Doc. 19, at
13). The Court finds that Plaintiffs objection is without merit and cannot conclude that the
contract between the parties amounted to an output contract.
To the extent that Krammes advances arguments under the Pennsylvania Uniform
Commercial Code (“Pennsylvania UCC’), 13 Pa. CONS. STAT. §§ 2101-2107, that the
agreement involved in this matter is an output contract, the Court will assess Krammes’
arguments assuming that the Pennsylvania UCC applies. Under the Pennsylvania UCC, an
output contract is a type of contract that “measures the quantity by the output of the seller . . .
as may occur in good faith, except that no quantity unreasonably disproportionate to any
stated estimate or in the absence of a stated estimate to any normal or otherwise comparable
prior output . .. may be tendered or demanded.” 13 Pa. Cons. STAT. § 2306(a). Put
differently, based on the statutory language, an output contract, by definition, “measures the
quantity by the output of the seller.” /d.
Here, as the Magistrate Judge noted, nothing in the agreement (Doc. 1-1, at 4)
suggests that Letourneau agreed to provide for purchase by Krammes any output in its
entirety or any other specified amount. Indeed, the agreement only specifies an obligation to
accept “any and all loads of timber . . . brought... . by Letourneau Enterprises, LLC.” (/d.).
The agreement is clear that an obligation exists for Krammes to accept what Letourneau
brings, but the agreement lacks any indication that Letourneau was required to supply
Krammes with any amount of “timber, wood chips, and stump grindings.” (Doc. 1-1, at 4).
Thus, the Court cannot conclude that the agreement is an output contract when it does not
identify any output - a crucial element to an output contract.
Krammes relies on the September 11, 2017, letter (Doc. 1-1, at 5) to establish that the
agreement is an output contract, which it argues the Magistrate erred in failing to admit (Doc.
19, at 6-8). The Court disagrees. As Magistrate Judge Carlson noted:
In order to determine whether a writing is the parties’ complete expression of
their agreement, the court must examine the writing and “if it appears to be a
contract complete within itself, couched in such terms as import a complete
legal obligation without any uncertainty as to the object or extent of the [parties’]
engagement, it is conclusively presumed that [the writing represents] the whole
engagement of the parties.”
(Doc. 17, at 13) (quoting Haywood v. Univ. of Pittsburgh, 976 F. Supp. 2d 606, 636 (W.D.
Pa. 2013)). “Once a writing is determined to be the parties’ entire contract, the parol
evidence rule applies and any evidence of any previous oral or written negotiations or
agreements involving the same subject matter as the contract is almost always inadmissible
to explain or vary the terms of the contract.” Yocca v. Pittsburgh Steelers Sports, Inc., 854
A.2d 425, 436 (Pa. 2004).
Here, the Court concludes that the agreement is a complete, fully integrated, and
unambiguous document. The terms as to each party to the agreement are clear. Krammes
agrees to “accept any and all loads of timber, wood chips, and stump grindings brought to
them by Letourneau Enterprises, LLC.” (Doc. 1-1, at 4). The agreement sets forth the price
for each load, but also states that “[t]here will be no minimum/maximum number of loads as
part of this agreement.” (/d.). Letourneau, on the other hand, promised nothing — the
parties are only bound when and if Letourneau provides “woody materials.” (Doc. 1-1, at 5).
It follows that if Letourneau provides no loads, then it is not in breach of the language “any
and all” as that applies only to the agreement of Krammes to accept any loads which
Letourneau might provide. Nor may Letourneau be deemed to have violated the contract by
failing to provide any “minimum” number of loads, since the agreement expressly
contemplates no minimum of loads to be delivered by Letourneau. Thus, there is no
ambiguity in the agreement. Furthermore, there is nothing to suggest that the agreement is
incomplete or not fully integrated. Accordingly, the Court cannot conclude that parol
evidence should be admitted, including the September 11, 2017, letter (Doc. 1-1, at 5).
Nonetheless, even assuming that the September 11, 2017, letter (Doc. 1-1, at 5),
should be admitted, as Krammes asserts, the letter does not help establish an output contract
between the parties. The letter does not state that Letourneau will provide Krammes with any
or all of the “woody materials” that are generated from the “Atlantic Sunrise Project.” (/d.).
The letter also does not state that Letourneau will exclusively provide Krammes with the
wood from that project. (/d.). The letter only states that Krammes will accept all woody
materials generated from the project, which is, in fact, consistent with the terms of the parties’
agreement. (/d.). Put differently, the letter only discusses what Krammes promises to accept
and pay for any wood materials if Letourneau elects to supply wood, but it states no
obligation on the part of Letourneau to supply any woody materials at all. Thus, one could
not reasonably glean from this letter that Letourneau promised to provide any woody
materials at all.
Krammes also objects on the grounds that the agreement is an output contract
because “[t]he Report fails to acknowledge the implied exclusivity of dealing set forth in
section 2306(b)” (Doc. 19, at 14). The assertion that the Report failed to acknowledge
implied exclusivity of dealing is without merit. Section 2306(b) of the Pennsylvania UCC
States:
A lawful agreement by either the seller or the buyer for exclusive dealing in the
kind of goods concerned imposes unless otherwise agreed an obligation by the
seller to use best efforts to supply the goods and by the buyer to use best efforts
to supply the goods and by the buyer to use best efforts to promote their sale.
13 PA. CONS. STAT. § 2306(b). After a close reading of the statute, nothing in the statutory
language indicates that “exclusive dealing” should be read into the agreement. Additionally,
Plaintiff cites to no case law to suggest that exclusivity should be implied into this agreement.
Thus, the Court cannot conclude that an exclusivity requirement should be read into the
agreement. In light of this, the Court cannot conclude that the agreement is an output
contract.
While the Court cannot conclude that the parties’ agreement amounts to an output
contract, the Court finds that the parties had a unilateral contract, which was never fully
formed. “Unilateral contracts . . . involve only one promise and are formed when one party
makes a promise in exchange for the other party’s act or performance.” First Home Sav.
Bank, FSB v. Nernberg, 648 A.2d 9, 13 (1992) (internal citations omitted). “Significantly, a
unilateral contract is not formed and is, thus, unenforceable until such time as the offeree
completes performance.” Id. For example:
lf A promises B $ 100 if B walks across the Brooklyn Bridge, a unilateral
contract will be formed if B does as A requests. It is a unilateral contract
because it consists of a promise in exchange for a performance. However, the
contract is not formed until B walks across the bridge. At that time, A owes B
$100 even though B no longer has any obligation to A. A unilateral contract is
formed by the very act which constitutes the offeree’s performance.
Greene v. Oliver Realty, Inc., 526 A.2d 1192, 1194 (Pa. Super. Ct. 1987). Applied to the
facts of this matter, Letourneau has yet to “walk across the Brooklyn Bridge.” /d. Based on
the agreement, Letourneau would be bound by its terms only when it provided any woody
materials to Krammes. However, Letourneau never did. As such, until it performed,
Letourneau had no obligation to Krammes, and thus was never bound by the terms of the
agreement. Accordingly, the Court concludes that because Letourneau did not perform, no
contract was ever formed between the parties.
For the foregoing reasons, the Court agrees with the Magistrate Judge that Krammes’
“breach of contract claim fails as a matter of law and should be dismissed.” (Doc. 17, at 16).
As such, the Court will dismiss Krammes’ breach of contract claim. Because the Court has
concluded that there is no plausible breach of contract claim based on the unambiguous
language of the agreement, the Court concludes that leave to amend is futile with respect to
the breach of contract claim. See Phillips v. Cnty. Of Allegheny, 515 F. 3d 224, 245 (3d Cir.
2008) (citing Grayson v. Mayview State Hosp., 293 F.3d 103, 108 (3d Cir. 2002)).
2. Promissory Estoppel
Because the Court concluded that a contract does not exist between the parties,
Krammes’ promissory estoppel claim is not necessarily precluded, as the Magistrate Judge
recommended. However, the Court agrees with the Magistrate Judge on the basis that
Krammes does not allege the first element of promissory estoppel, i.e. “the promissor makes
a promise that he reasonably expects to induce action or forbearance by the promise.” (Doc.
17, at 17-18). Krammes’ reliance on the September 11, 2017, letter to allege a promise that
Letourneau made is unavailing because, as discussed above, it does not contain any
obligation or promise by Letourneau. Moreover, Krammes’ Complaint does not allege any
other promise that Letourneau made and which Krammes subsequently relied upon.
Therefore, Krammes failed to state a claim upon which relief could be granted. However, the
Court cannot conclude that leave to amend would be futile. See Phillips, 515 F.3d at 245.
Thus, the Court will allow Krammes to amend Count II of its Complaint, asserting a claim for
promissory estoppel.
3. Unjust Enrichment
With respect to the unjust enrichment claim, because the Court has determined that
no binding contract exists between the parties at this time because of the unilateral nature of
the parties’ agreement as explained above, the Court cannot agree with the Magistrate
Judge’s conclusion that the parties’ written agreement precludes recovery for unjust
enrichment. (Doc. 17, at 19). To succeed on a claim for unjust enrichment, Plaintiff must
demonstrate: (1) that it “conferred a benefit upon Defendants; (2) Defendants appreciated the
benefit; and (3) Defendants accepted and retained the benefit under circumstances making it
inequitable for Defendants to retain the benefit without paying him.” Argue v. Triton Digital,
Inc., 2017 WL 1611254, at *4 (W.D. Pa. 2017).
Here, Krammes’ Complaint fails to aver any way in which Plaintiff conferred a benefit
on Letourneau, and that Letourneau otherwise unconscionably retained such benefit without
compensation to Krammes. The closest Plaintiff comes to making such an allegation is when
it avers that Krammes conferred a benefit by providing the September 11, 2017, letter, which
it alleges allowed Letourneau to commence performance (Doc. 1-1, at 20, J 94-95).
Nonetheless, it is unclear how this is a benefit, and further, how that benefit came at Plaintiffs
expense.
Accordingly, the Court will dismiss Krammes’ unjust enrichment claim. However,
because leave to amend at this stage would not be futile, the Court will allow Krammes to
amend its unjust enrichment claim set forth in Count III.
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Ill. CONCLUSION
For the reasons set forth above, upon de novo review of the R&R (Doc. 17), the
Court will adopt the R&R as modified. Letourneau’s Motion to Dismiss (Doc. 2) will be
granted. Count | will be dismissed with prejudice. Counts II and III will also be dismissed,
but without prejudice and with leave to amend. A separate Order follows.
Zt MEE □□□ □
Robert D: Mariani
United States District Judge
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