United States District Court, E.D. Missouri, Eastern Division
MEMORANDUM AND ORDER GRANTING IN PART AND DENYING IN
PART DEFENDANTS' MOTIONS TO DISMISS
D. NOCE UNITED STATES MAGISTRATE JUDGE
action is before the court on the motions of defendants
Sebright Products, Inc. and Gary Brinkmann to dismiss Counts
III, IV, V, and VII for failure to state a claim under
Fed.R.Civ.P. 12(b)(6) (ECF No. 35); defendant NewWay Global
Energy, LLC, to dismiss Counts I, II, IV, V, VI and VIII for
failure to state a claim (ECF No. 48); defendants David Wolf,
Jerry Flickinger, and JWR, Inc., to dismiss Counts I, II,
III, IV, V, and VI for failure to state a claim, or, in the
alternative, for a more definite statement as to Counts I,
II, III, V, and VI under Rule 12(e) (ECF No. 51); and
defendants Resource Converting, LLC; Tim Danley; and Rick
Kersey to dismiss Counts I and II under Rule 9(b) and Counts
IV, V, VI, and VIII under Rule 12(b)(6) (ECF No. 57).
Plaintiff has opposed all motions. (ECF Nos. 59, 67-69, 77).
After hearing oral arguments from the parties on February 3,
2017, the court grants defendants' motions in part and
otherwise denies them.
Tom Dunne alleges the following facts in his judicial
complaint. (ECF No. 1). In May 2015, defendant Gary Brinkmann
contacted Dunne to sell him certain license agreements.
(Id. at ¶ 16). These agreements would authorize
and obligate plaintiff to acquire for resale “PAD
systems” developed by defendants Resource Converting,
LLC; Sebright Products, Inc.; and JWR, Inc., and sold by
defendant NewWay Global Energy, LLC. (Id. at
¶¶ 16-17). The PAD systems are devices that would
purportedly convert municipal solid waste into renewable
fuels. (Id. at ¶ 16). The systems were
advertised to plaintiff as “using proven and tested
technology to create a homogenous dried fuel stock that can
be converted into different forms of energy.”
(Id. at ¶ 19). Defendant Jerry Flickinger gave
plaintiff a “budgetary quote for a single line
processing system to take municipal solid waste and prepare
it for conversion to fuel, ” stating a single system
was “capable of processing 250 tons per day.”
(Id. at ¶ 20). Brinkmann and Flickinger
allegedly assured plaintiff repeatedly of the PAD
systems' proven function and the substantial value of the
license agreements. (Id. at ¶ 21).
alleges that defendants Brinkmann, Flickinger, Danley, and
Kersey solicited payment from him for the PAD systems and
license agreements, and that they employed high-pressure
sales pitches. (Id. at ¶ 22). As a result of
defendants' assurances and representations, plaintiff
entered into license agreements with Resource Converting in
August 2015 and made an initial payment of $400, 000 with an
additional payment of $600, 000 to be made in November 2015.
(Id. at ¶¶ 22-24). Between May and October
2015, plaintiff and defendants met with many individuals in
Missouri to solicit the sale and purchase of the PAD Systems.
(ECF No. 77, Ex. A, ¶ 6). Between August and November
2015, plaintiff insisted on seeing a demonstration of an
operational PAD system. (ECF No. 1, ¶ 25). Brinkmann,
Kersey, and Flickinger showed plaintiff a partially assembled
piece of non-functioning equipment in a building located in
Iowa, stating that it had previously been in operation but
was being prepared for relocation. (Id. at ¶
26). Defendants were never able to show plaintiff a working
PAD system. (Id. at ¶¶ 27-30). On December
1, 2015, defendants demanded full payment of the remaining
$600, 000 due from plaintiff. (Id. at ¶ 29). In
June 2016, defendant Brinkmann stated to plaintiff that the
PAD Systems never existed as represented and never functioned
as promised. (Id. at ¶ 30).
20, 2016, counsel for plaintiff submitted a demand letter to
Brinkmann, Resource Converting, Sebright, JWR, NewWay,
Kersey, and Danley, demanding return of the $400, 000 paid by
plaintiff and threatening legal action if the sum was not
repaid by June 30, 2016. (ECF No. 77, Ex. E). Resource
Converting filed a breach of contract claim against Dunne on
June 30, 2016 in Iowa state court. (Id. at Ex. F).
On August 19, 2016, Dunne removed that case to the United
States District Court for the Southern District of Iowa and
also commenced the instant action in this district court.
Defendants filed motions to transfer the case to Iowa and to
dismiss the case. By a prior order, this court denied
defendants' motions to transfer this suit to Iowa. It now
considers defendants' motions to dismiss.
MOTIONS TO DISMISS
plaintiff filed his complaint, defendants Sebright and
Brinkmann moved to dismiss Counts III, IV, V, and VII for
failure to state a claim under Fed.R.Civ.P. 12(b)(6). (ECF
No. 35). Defendant NewWay also moved to dismiss Counts I, II,
IV, V, VI and VIII for failure to state a claim. (ECF No.
48). Defendants Wolf, Flickinger, and JWR moved to dismiss
Counts I, II, III, IV, V, and VI for failure to state a
claim, or, in the alternative, for a more definite statement
as to Counts I, II, III, V, and VI. (ECF No. 51). Defendants
Resource Converting, Danley, and Kersey moved to dismiss
Counts I and II under Rule 9(b) and Counts IV, V, VI, and
VIII under Rule 12(b)(6) (ECF No. 57). Plaintiff has opposed
all motions (ECF Nos. 59, 60, 67-69, 77), but voluntarily
dismissed Count IV. (ECF No. 63).
Federal Rule of Civil Procedure 12(b)(6), a party may move to
dismiss part or all of a case for its failure to state a
claim upon which relief can be granted. Fed. R. Civ. Pro.
12(b)(6). A complaint “must include enough facts to
state a claim to relief that is plausible on its face,
” providing more than just labels and conclusions.
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007). Such a complaint will “allow the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged, ” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009), and will state a claim
for relief that rises above mere speculation.
Twombly, 550 U.S. at 555.
reviewing the pleadings under this standard, the court
accepts all of the plaintiff's factual allegations as
true and draws all inferences in the plaintiff's favor,
but the court is not required to accept the legal conclusions
the plaintiff draws from the facts alleged. Retro
Television Network, Inc. v. Luken Commc'ns, LLC, 696
F.3d 766, 768-69 (8th Cir. 2012).
a court sitting in diversity will apply the choice-of-law
rules of its forum state. Eagle Tech. v. Expander
Americas, Inc., 783 F.3d 1131, 1137 (8th Cir. 2015). In
this case, the court has determined that the substantive law
of Missouri provides the substantive rules of
Counts I and II
Count I of his complaint, plaintiff alleges fraudulent
misrepresentation and concealment against all defendants.
(ECF No. 1, ¶¶ 31-37). In Count II, he alleges
fraudulent inducement and seeks rescission of the license
agreements against all defendants. (Id. at
¶¶ 38-45). In both counts, plaintiff alleges that
defendants either personally or through their agents
“made false material representations regarding
existence and/or function of the PAD Systems.”
(Id. at ¶¶ 32, 39). He alleges that all of
the defendants had direct knowledge of the PAD Systems'
non-functional nature and intended plaintiff to rely on the
representations and sign the license agreements.
(Id. at ¶¶ 32-33, 39-41).
Federal Rule of Civil Procedure 9(b), a fraud allegation
demands a higher degree of notice than that required for
other claims, and a party must state “the time, place
and contents of false representations, as well as the
identity of the person making the misrepresentation and what
was obtained or given up thereby.” BJC Health Sys.
v. Columbia Cas. Co., 478 F.3d 908, 917 (8th Cir. 2007).
In other words, the complaint must state the “who,
what, where, when, and how” of the alleged fraud.
argues that these counts fail to plead fraud with
particularity against it, because plaintiff did not identify
NewWay or its agents with any specificity in alleging
fraudulent conduct. (ECF No. 48). NewWay further argues that
plaintiff alleged no facts showing when and where he
purportedly heard any particular statements and so has not
adequately pleaded the elements of reliance and causation.
Id. Defendants David Wolf, Jerry Flickinger, and
JWR, Inc. similarly argue that these counts engage in
“group pleading” and do not meet the Rule 9(b)
specificity requirement and so must be dismissed. (ECF No.
51). In the alternative, these defendants request a more
definite statement. Id. Resource Converting, Tim
Danley, and Rick Kersey make the same Rule 9(b) specificity
argument. (ECF No. 57).
Court has carefully reviewed plaintiff's complaint and
concludes that it does not adequately state the
“who” or the “when”:
16. On or about May 20, 2015, Brinkmann, individually and/or
on behalf of Sebright, JWR, NewWay and Resource, solicited
Plaintiff with the objective of selling Plaintiff certain
products described herein, and ultimately with the purpose of
selling Plaintiff certain license agreements (“License
Agreements”), to service an area with a radius of one
hundred miles (100) from St. Louis, authorizing and
obligating Plaintiff to acquire for resale certain Resource
PAD systems which purportedly converted municipal solid waste
to biomass and ultimately to renewable fuels (“PAD
17. According to Brinkmann, NewWay is a company solely
created to be the holding company that sells the PAD Systems
which were developed by JWR, Sebright, and Resource.
Brinkmann has identified the entities as “partner
companies.” 18. In furtherance of advertising said PAD
Systems and License Agreements, Brinkmann, purportedly on
behalf of Resource and as an employee of Sebright, forwarded
a brochure, attached hereto as Exhibit A, entitled
“Waste Conversion Systems ...