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Elkhart M Fabricating, Inc. v. Martin

United States District Court, E.D. Missouri, Eastern Division

April 9, 2015

ELKHART M FABRICATING, INC., and BULL MOOSE TUBE COMPANY, Plaintiffs,
v.
JOHN K. MARTIN, ELKHART M DISTRIBUTING, INC. and STEURY PROPERTY, L.L.C., Defendants.

MEMORANDUM AND ORDER

JEAN C. HAMILTON, District Judge.

This matter is before the Court on Plaintiffs' Motion to Dismiss Counts IV, V and VI of Defendants' Fourth Amended Counterclaim. (ECF No. 52). The Motion has been fully briefed and is ready for disposition.

BACKGROUND

Plaintiffs Elkhart M Fabricating, Inc. ("EMF") and Bull Moose Tube Company ("Bull Moose") initiated this action on February 11, 2014 by filing suit against Defendants John K. Martin, Elkhart M Distributing, Inc. ("EMD"), and Steury Property, L.L.C. ("Steury") in the Circuit Court for St. Louis County, Missouri. (Removal Notice, ECF No. 1, ¶ 1). Defendants then timely removed to this Court on April 7, 2014. Id. They filed an answer on April 28, 2014, which has been amended four times and currently includes several counterclaims against Plaintiffs. (4th Amd. Answer, ECF No. 47).

The counterclaims involve various business agreements that Defendants Martin and EMD entered into with Plaintiffs EMF and Bull Moose. Two agreements are relevant here. The first is the Asset Purchase Agreement, under which EMF, a wholly-owned subsidiary of Bull Moose, agreed to purchase the assets of EMD. (Complaint, ECF No. 4, ¶¶ 11, 12). The second is the Employment Agreement, under which "Martin agreed to be employed by EMF as President of EMF for a period of five years." (4th Amd. Answer, p. 26 ¶ 10).

Defendants allege in their counterclaims, inter alia, that Plaintiffs negligently and fraudulently made misrepresentations in the course of negotiating these agreements. Id. pp. 32-34. They also allege that Plaintiffs breached fiduciary and disclosure duties owed to Martin that arose in the course of his employment with EMF. Id. p. 35. These allegations make up Counts IV, V, and VI of Defendants' counterclaims. Plaintiffs seek in their Motion to have each of these claims dismissed for failure to state a claim. (Motion ¶ 3).

MOTION TO DISMISS STANDARD

Fed. R. Civ. P. 8(a)(2) requires "a short and plain statement of the claim showing that the pleader is entitled to relief'...." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Fed.R.Civ.P. 8(a)(2)). When ruling on a motion to dismiss for failure to state a claim under Rule 12(b)(6), courts must view the allegations in the complaint in the light most favorable to the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). Courts must also "accept the allegations contained in the complaint as true and draw all reasonable inferences in favor of the nonmoving party." Coons v. Mineta, 410 F.3d 1036, 1039 (8th Cir. 2005). A Rule 12(b)(6) motion to dismiss must be granted if the complaint does not contain "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570 (2007). Stated differently, to survive a Rule 12(b)(6) motion, a complaint's "[f]actual allegations must be enough to raise a right to relief above the speculative level...." Id. at 555 (citations omitted).

DISCUSSION

I. Counts IV and V

Plaintiffs contend Count IV, the fraudulent misrepresentation claim, and Count V, the negligent misrepresentation claim, should be dismissed because Defendants insufficiently pled that the alleged misrepresentations caused damages. "Specifically, Defendants allege that EMD and Martin in fact relied, and had a right to rely upon, the misrepresentations and omissions by BMT when he created and submitted sales forecasts to BMT. '" (Plaintiff Support Memo, ECF No. 53, at 4 (emphasis in original) (footnote omitted) (quoting 4th Amd. Answer, p.33 ¶ 75)). Plaintiffs contend this allegation is insufficient because the Complaint "fails to allege any facts that suggest how Martin's sales forecasts, if indeed they were influenced by the alleged misrepresentations, proximately caused injury to Martin or EMD." Id.

Defendants respond that Plaintiffs argument is beyond the scope of a motion to dismiss. (Defendant Response, ECF No. 56, at 5). This is because "Defendants have alleged damage, and are not required to plead the extent of that damage at this time. The allegation must be taken as true, though Plaintiffs are certainly entitled to discovery on the issue." Id. Defendants further allege that the misrepresentations related to EMF's business performance, which was part of the basis for Martin's compensation. Id. at 5-6. Thus, the misrepresentations had an impact on Martin's willingness to enter into the agreement. Id.

There is a preliminary question here as to whether Missouri or Indiana law applies. Both parties have noted the issue in their briefing. Neither party, however, attempts to resolve the issue, and it will have no impact on the outcome of the Motion. In both Missouri and Indiana, one element of the torts of fraudulent and negligent misrepresentation is causation. Verni v. Cleveland Chiropractic Coll., 212 S.W.3d 150, 154 (Mo. 2007) ( en banc ) (Missouri fraudulent misrepresentation); Reed v. Reid, 980 N.E.2d 277, 292 (Ind. 2012) (Indiana fraudulent misrepresentation); Renaissance Leasing, LLC v. Vermeer Mfg. Co., 322 S.W.3d 112, 134 (Mo. 2010) ( en banc ) (Missouri negligent misrepresentation); U.S. Bank, N.A. v. Integrity Land Title Corp., 929 N.E.2d 742, 747 (Ind. 2010) (Indiana negligent misrepresentation). Specifically, a claimant must show that some injury was caused by the tortfeasor's alleged misrepresentations. Thus, to survive a Rule 12(b)(6) motion under either Indiana or Missouri misrepresentation law, a claimant must allege sufficient facts to establish a plausible claim that the alleged tortfeasor caused him injury.

In support of Count IV, the fraudulent misrepresentation claim, Defendants make the following factual allegations.

62. Jack Meyer, President of [Bull Moose], orally represented to EMD and Martin that [Bull Moose] would give EMF pricing that would give EMF a significant advantage over EMF's competition.
63. Jack Meyer, President of [Bull Moose], represented to EMD and Martin that EMF would have capital to expand ...

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