Windy Cove, Inc. v. Circle K Stores Inc.

BACKGROUND

Windy Cove, Inc., HB Fuels, Inc., and Staffing and Management Group, Inc. (collectively “Windy Cove”), are gasoline dealers who own Mobil-branded stations in southern California. In 2012, as required by the agreement under which the dealers purchased their gas stations from ExxonMobil, they entered into a 15-year exclusive fuel supply agreement with Circle K. Circle K purchases the gasoline it sells to Windy Cove and other dealers from ExxonMobil, a refiner. The agreement between Circle K and Windy Cove, governed by California law, provided that the “price per gallon to be paid by Purchaser shall be Seller’s price in effect at the time and place of delivery to dealers of the same class and in the same trade area as Purchaser.” California Commercial Code § 2305(2) provides that when a contract grants a party the power to fix the price, the

WINDY COVE, INC. V. CIRCLE K STORES INC.

party must do so “in good faith.” Windy Cove claims that Circle K did not set its prices for gasoline in good faith because (1) Circle K relied upon a non-industry-standard pricing formula to determine the prices, and (2) its prices were higher than that of another wholesaler.…