## Facts

- Arch Wood Protection, Inc. supplied oriented strand board (OSB) to construction-industry customers.
- Flamedxx, LLC produced and applied a fire-retardant coating for OSB.
- During negotiations in February 2009, the parties executed a confidentiality agreement governing proprietary information shared in discussions.
- On May 14, 2009, the parties executed an Exclusive Production Services and Distribution Agreement under which Flamedxx would produce coated OSB for Arch Wood, and Flamedxx agreed to restrict certain competing sales and to forward sales leads to Arch Wood (subject to reserved customers).
- The contract included a “Threshold Service Level” clause that set minimum purchase quantities; if Arch Wood failed to purchase the stated amounts, Flamedxx could cancel its obligations upon 30 days’ notice.
- Arch Wood sued Flamedxx; Flamedxx filed an amended counterclaim alleging: (1) promissory fraud, (2) breach of contract, (3) breach of the confidentiality agreement, and (4) violation of the Tennessee Consumer Protection Act (TCPA).
- Arch Wood moved to dismiss the amended counterclaim under Rule 12(b)(6).

## Issues

1. Whether the amended counterclaim plausibly alleged promissory fraud under Tennessee law, including whether the parol-evidence rule barred the claim at the pleading stage.
2. Whether the Threshold Service Level language created an enforceable purchase obligation whose nonperformance could support a breach-of-contract claim.
3. Whether Flamedxx adequately pleaded breach of the confidentiality agreement and damages, and whether certain allegations should be stricken or repleaded.
4. Whether the alleged conduct plausibly stated a TCPA claim for unfair or deceptive acts or practices in trade or commerce.

## Decision

- The motion to dismiss was granted in part and denied in part.
- Promissory fraud: denied; the allegations plausibly asserted promises of future performance made without present intent to perform, and the parol-evidence rule did not require dismissal at this stage.
- Breach of contract: granted; the Threshold Service Level provision was construed as a termination trigger for Flamedxx, not an affirmative purchase obligation imposed on Arch Wood.
- Breach of confidentiality agreement: denied as to the core claim; granted in part as to certain insufficient or inconsistent allegations, with leave to amend those aspects.
- TCPA: denied; the allegations plausibly described deceptive conduct sufficient to proceed under the statute.

## Legal Principles

- Under Tennessee law, promissory fraud may be based on a promise of future action made without a present intent to perform; such allegations can state a claim when plausibly pleaded.
- The parol-evidence rule does not categorically bar claims sounding in fraudulent inducement or promissory fraud at the pleading stage, even where a written agreement addresses related subject matter.
- Contract interpretation turns on the text: minimum-quantity language tied to a counterparty’s termination right may function as a condition affecting remedies or continuation, rather than creating an affirmative purchase duty.
- A confidentiality agreement can create enforceable, independent obligations; allegations of misuse or disclosure of protected information can state a breach claim, while deficient sub-allegations may be stricken or repleaded without defeating the entire claim.
- The TCPA can apply to business-to-business conduct when the pleaded facts plausibly amount to unfair or deceptive acts or practices in trade or commerce.

## Conclusion

The court permitted Flamedxx to proceed on promissory fraud, a TCPA claim, and most confidentiality-agreement allegations, but dismissed the breach-of-contract counterclaim because the contract’s purchase thresholds established Flamedxx’s cancellation option rather than a binding purchase commitment by Arch Wood.


Arch Wood Protection, Inc. v. Flamedxx, LLC, 932 F. Supp. 2d 858 (E.D. Tenn. 2013)