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Imperial Zinc Corp. v. Engineered Products Industries, L.L.C.

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

November 9, 2016

IMPERIAL ZINC CORP., Plaintiff,
v.
ENGINEERED PRODUCTS INDUSTRIES, L.L.C., et al, Defendants.

          MEMORANDUM AND ORDER

          RODNEY W. SIPPEL, UNITED STATES DISTRICT JUDGE

         Plaintiff Imperial Zinc Corp. brings two claims-Counts I and IV-for breach of contract and for action on account against Defendant Engineered Products Industries, LLC (EPI), and two class action claims-Counts II and III-against Defendant EFR, LLC, a member of and the manager of EPI, for breach of trust relationship and breach of fiduciary duty. EFR moves to dismiss Counts II and III, arguing Imperial has failed to state cognizable claims recognized under Missouri law. See Fed.R.Civ.P. 12(b)(6). I will grant the motion and dismiss the claims against EFR.

         THE COMPLAINT

          Plaintiff Imperial alleges the following facts. Imperial is an Illinois corporation that manufactures and sells zinc goods in Illinois. Defendant EPI is a Missouri limited liability company, the members of which are citizens of Missouri and Florida, which engaged in zinc and aluminum die casting and operated out of St. Clair, Missouri. Defendant EFR is a member of and the manager of EPI. Imperial alleges that EFR's member is a citizen of Missouri.[1]

         Imperial alleges that on a number of dates between July and November 2013, EPI orally contracted with Imperial to purchase zinc goods totaling more than $530, 000. Imperial manufactured the goods and delivered them to EPI, and EPI accepted and used the goods but did not pay for them. After Imperial applied all credits and setoffs, it demanded payment of $509, 857.28 from EPI. EPI admitted the debt but refuses to pay it. Imperial brings Counts I and IV against EPI for breach of contract and action on account.

         Imperial also brings two class action claims, Counts II and III, against EFR in its capacity as the manager and director of EPI. Imperial alleges the Plaintiff Class consists of Imperial and all of EPI's other unidentified creditors to whom EPI owed money at the time that it ceased doing business and whose debts have not been resolved. Imperial alleges the predominant common question is whether EPI continued to do business and incur business debt when it was insolvent by purchasing goods and services which its management, including EFR, knew or should have known could not be paid for because of the insolvency.

         In Count II, Imperial asserts a claim for breach of trust relationship. Imperial alleges EFR was EPFs manager on January 1, 2013 and served in the roles of officer and director of EPI during all times relevant to this suit. Imperial alleges EPI was insolvent on or around January 1, 2013, as its short-term and long-term debts and liabilities exceeded its assets. Imperial alleges EFR knew EPI was insolvent due to knowledge of EPFs financial records. Imperial alleges EFR knew EPI continued to be insolvent on or around July 7, 2013, when EPI began contracting with Imperial for delivery of goods for which it ultimately did not pay. Imperial alleges that due to its continued insolvency, on July 7, 2013, EPI was not a going concern, was incapable of doing business, and was effectively a de facto dissolved limited liability company. Imperial alleges that under Missouri law, EPFs status as a de facto dissolved company caused EFR, as manager, to hold a trustee-like position for the equal benefit of all of EPFs creditors. Imperial alleges EFR breached that trustee-like duty to EPFs creditors by allowing EPI to order more goods and services and engage in business transactions instead of forcing EPI to wind-up its affairs for the equal benefit of all creditors. Imperial seeks to recover its damages from EFR.

         In Count III, Imperial asserts a claim for breach of fiduciary duty, alleging EFR owed a fiduciary duty to Imperial and other members of the Plaintiff Class when EPI was insolvent and no longer a going concern. Imperial alleges that under Missouri law, EFR was duty-bound to ensure EPI did not continue to order zinc goods from Imperial or engage in other business transactions with its creditors and instead was required to wind-up EPFs affairs for the benefit of all of EPFs creditors. Imperial alleges EFR breached this duty by causing or allowing EPFs agents to continue to order goods and engage in transactions after it was insolvent.

         EFR moves to dismiss Counts II and III, arguing Imperial has failed to state claims that are recognized under Missouri law and that, to the extent Missouri recognizes the claims, Imperial fails to allege facts sufficient to support them.

         LEGAL STANDARD

         In ruling on a motion to dismiss, I must accept as true all factual allegations in the complaint and view them in the light most favorable to the plaintiff. Hager v. Ark. Dep't of Health, 735 F.3d 1009, 1013 (8th Cir. 2013). Under the federal rules, a plaintiff need not provide '"detailed factual allegations, '" but must provide "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twomblv, 550 U.S. 544, 555, 570 (2007)). "[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Id. "[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss." Id. at 679.

         Imperial alleges jurisdiction based on diversity of citizenship. The parties do not dispute that Missouri law governs the claims in this diversity case. This Court is therefore bound by the decisions of the Missouri Supreme Court, and if there is no decision on point, "we must predict how the court would rule, and we follow decisions from the intermediate state courts when they are the best evidence of Missouri law." United Fire & Cas. Co. v. Titan Contractors Serv., Inc., 751 F.3d 880, 883 (8th Cir. 2014) (internal citations omitted).

         ANALYSIS

         First, I note that the cases and statutes the parties primarily rely on deal with the duties of directors of corporations, not the managers of limited liability companies. Different statutory chapters govern Missouri corporations and LLCs. See Mo. Rev. Stat. §§ 347.010, et seq. (Missouri Limited Liability Company Act) and 351.010, et seq., (The General and Business Corporation Law of Missouri); see also Hibbs v. Berger, 430 S.W.3d 296, 313-14 (Mo.Ct.App. 2014) (noting the difference between analyzing fiduciary duties of individuals in charge of corporations and partnerships and the duties of members and managers of LLCs). "A limited liability company is a creature of statute and its corresponding rights and obligations are derived from statute." Hibbs, 430 S.W.3d at 313 (quotation marks omitted).[2] ...


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