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Jacobson Warehouse Company, Inc. v. Schnuck Markets, Inc.

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

November 29, 2017

SCHNUCK MARKETS, INC., Defendant/Counterclaim Plaintiff.



         This matter is before the Court on the following motions: Defendant Schnuck Markets, Inc. (“Schnuck”)'s Motion to Dismiss Counts IV and V of Plaintiff's Complaint (Doc. No. 24); Plaintiff/Counterclaim Defendant Jacobson Warehouse Co., Inc., d/b/a/ XPO Logistics Supply Chain (“XPO”)'s Motion to Dismiss Counts III, IV, and V of Defendant/Counterclaim Plaintiff's Counterclaim (Doc. No. 37); and Plaintiff's Motion for Judgment on the Pleadings - Counts I and II of Counterclaim (Doc. No. 39). The motions are fully briefed and ready for disposition.

         I. Background [1]

         Plaintiff XPO is a global logistics company providing warehousing and related logistical services to clients. (Complaint (“Compl.”), Doc. No. 1 at ¶¶ 1, 7.) Defendant Schnuck is a supermarket retailer that owns and operates “Schnucks” branded grocery stores. (Compl. at ¶¶ 1, 8.) In May 2015, XPO and Schnuck entered into an Amended and Restated Operating Agreement (the “Agreement, ” Doc. No. 8-1) setting forth the terms and conditions under which XPO would provide certain warehouse management services for a new distribution facility Schnuck was designing (Compl. at ¶¶ 1, 9, 10.) In the Agreement, Schnuck agreed to pay XPO a weekly Warehousing Fee in exchange for its warehouse management services, and to provide information and other assistance required by XPO to perform those services. (Compl. at ¶¶ 10, 11, 19, 23.)

         XPO alleges that Schnuck subsequently breached its contractual and other obligations in at least three ways: (1) by failing to properly equip and furnish the new warehouse facility; (2) by failing to provide necessary information or otherwise cooperate with XPO, thereby materially impeding XPO's ability to manage the warehouse facility; and (3) by withholding, without cause or justification, fees owed to XPO for its services. On February 8, 2017, XPO notified Schnuck that it was in material default of its obligations and that XPO was terminating the Agreement. (Compl. at ¶ 28.) On February 14, 2017, Schnuck responded by purporting to terminate the Agreement due to XPO's alleged breaches of the Agreement. (Compl. at ¶ 29.)

         On February 17, 2017, XPO filed its Complaint against Schnuck seeking damages and a declaratory judgment stating that Schnuck is in breach of its obligations, owes XPO for services rendered, and that XPO validly terminated the contract. The complaint asserts causes of action for breach of contract (Count I); declaratory judgment (Count II); action on account (Count III); quantum meruit (Count IV); and unjust enrichment (Count V). Schnuck counterclaims for breach of contract (Count I); breach of the covenant of good faith and fair dealing (Count II); negligence (Count III); fraud (Count IV); conversion (Count V); and breach of contract - transition services agreement (Count VI). (First Amended Counterclaim (“FAC”), Doc. No. 59.)

         II. Discussion

         A. Motions to dismiss

         In ruling on a motion to dismiss, the Court assumes all facts alleged in the complaint are true, and liberally construes the complaint in the light most favorable to the plaintiff. Eckert v. Titan Tire Corp., 514 F.3d 801, 806 (8th Cir. 2008). To survive a motion to dismiss, a complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007). “Further, documents attached to or incorporated within a complaint are considered part of the pleadings, and courts may look at such documents for all purposes.” Brown v. Medtronic, Inc., 628 F.3d 451, 459-60 (8th Cir. 2010).

         1. Schnuck's motion to dismiss Counts IV and V of complaint

         In its quantum meruit claim (Count IV), XPO alleges that: Schnuck requested XPO manage and operate the facility; XPO conferred a benefit upon Schnuck by managing and operating the facility; Schnuck appreciated that a benefit was conferred, including but not limited to executing the Agreement and, for a time, by fully paying the weekly Warehousing Fees; Schnuck's acceptance and retention of the benefit of XPO's management and operation of the Facility is inequitable and unjust under the circumstances as Schnuck has not paid for the services XPO provided; and XPO has been unjustly enriched by its acceptance and retention of the services rendered by XPO to manage and operate the Facility without rendering full payment for the same. (Compl. at ¶¶ 49-53.) XPO further alleges that the services it provided had a fair and reasonable value of “not less than the amount of all unpaid Warehousing Fees.” (Compl. at ¶ 54.) XPO's unjust enrichment claim (Count V) is similarly pled. (Compl. at ¶¶ 56-61.)

         In support of its motion to dismiss, Schnuck argues that quasi-contractual claims like quantum meruit and unjust enrichment cannot be based - even at the pleadings stage - on the terms and benefits conferred by an express contract. (Doc. No. 25 at 3-5.) XPO responds that while a plaintiff cannot recover on both an express contract and quasi-contractual claim, under the Federal Rules of Civil Procedure, quasi-contractual claims may be pled as alternative relief to breach of an express contract. (Doc. No. 33 at 4-5.) XPO further responds that neither of its quasi-contractual claims rely upon or presuppose the existence of the Agreement; the only references to the Agreement or Warehousing Fees were to show that Schnuck appreciated the benefit XPO conferred and to state that the value of the benefit was worth “no less than” the Warehouse Fees. (Id. at 6-10.) In reply, Schnuck argues that since neither party disputes the existence and validity of the Agreement, XPO's quasi-contractual claims cannot lie. (Doc. No. 41 at 3-4.)

         As a rule, a plaintiff cannot pursue quasi-contractual claims where there is an express contract between the parties. Prime Aid Pharmacy Corp. v. Express Scripts, No. 4:16-CV-1237-CEJ, 2017 WL 2021082, at *6 (E.D. Mo. May 12, 2017) (citing Affordable Communities of Missouri v. Fed. Nat. Mortg. Assn, 714 F.3d 1069, 1077 (8th Cir. 2013)). Here, there is no dispute that a contract exists; XPO is asserting claims based on an alleged breach of the Agreement. Under the federal notice pleading standards, however, a party may plead claims in the alternative, even if the claims are inconsistent. See Fed.R.Civ.P. 8(d)(2); Volz v. Provider Plus, Inc., No. 4:15-CV-0256-TCM, 2015 WL 3621113, at *2 (E.D. Mo. June 9, 2015). A review of the complaint indicates that this is not what XPO is actually doing. In Counts IV and V, XPO pleads the elements of a contract (perhaps implied-in-fact) to manage and operate the Facility, and the damages it seeks to recover, i.e., “the balance of all unpaid Warehousing Fees, plus pre-and post-judgment interests, costs of suit and attorneys' fees, ” are the same damages sought in its contract claims. Further, XPO has incorporated its breach of contract allegations into its quasi- contract claims (“XPO repeats and incorporates herein by reference the allegations set forth [above]”). (See Compl. at ¶¶ 48, 55.) XPO has not provided a basis for distinguishing its claims for unjust enrichment and quantum meruit from its contract claims, or explained how these claims are truly “alternative, ” given that there is no contention that the Agreement is somehow unenforceable. As pled, Counts IV and V must be dismissed. Accordingly, Schnuck's motion to dismiss Counts IV and V of the Complaint will be granted and XPO's claims for quantum meruit and unjust enrichment will be dismissed without prejudice.

         2. XPO's motion to dismiss Counts III, IV and V of Schnuck's Counterclaim

         a. Negligence (Count III)

         Schnuck alleges that XPO was negligent in operating the Facility. Specifically, Schnuck claims that XPO breached its duty of care by “failing to conduct its operations pursuant to prevailing warehouse industry practices and inadequately planning, hiring, training, staffing, and supervising at the Facility.” (FAC at ¶¶ 81-82.) XPO argues that Schnuck's negligence claim should be dismissed under the economic loss doctrine because it is not independent of its breach of contract claim; both claims reference the same subject matter of the Agreement - management of the Facility, and the same standard of care - “prevailing warehouse industry standards.” (Doc. No. 38 at 8.) Schnuck responds that the doctrine does not apply because the parties contractually created a relationship and status under which XPO is liable in negligence for its acts and omissions. (Doc. No. 45 at 2-7.) Schnuck further responds that even if the economic doctrine applied, Missouri recognizes an exception in cases involving the negligent rendition of services by a professional like XPO. (Id. at 7.)

         The economic loss doctrine prohibits a plaintiff from seeking to recover in tort for economic losses that are contractual in nature. Trademark Med., LLC v. Birchwood Labs., Inc., 22 F.Supp.3d 998, 1002 (E.D. Mo. 2014); Self v. Equilon Enterprises, LLC, No. 4:00-CV-1903-TIA, 2005 WL 3763533, at *8 (E.D. Mo. Mar. 30, 2005). The doctrine exists to protect the integrity of the bargaining process, through which the parties have allocated the costs and risks. Marvin Lumber & Cedar Co. v. PPG Indus., Inc., 223 F.3d 873, 882 (8th Cir. 2000).

         It is true that XPO agreed to adhere to performance requirements and key performance indicators as set forth in the Agreement. (Doc. No. 8-1 at Section 2(a)(iii); Sections 6(d), 6(g), 6(i)). However, “[w]hile a mere breach of contract does not provide a basis for tort liability, the negligent act or omission which breaches the contract may serve as a basis for an action in tort.” Baily Int'l, Inc. v. Harcros Chemicals, Inc., No. 4:14-CV-1708-JAR, 2015 WL 1781672, at *2 (E.D. Mo. Apr. 15, 2015) (quoting Union Elec. Co. v. Chicago Bridge & Iron Co., No. 4:14-CV-31-RWS, 2015 WL 1262941, at *6 (E.D. Mo. Mar. 19, 2015)). “If the duty arises solely from the contract, the action is contractual. The action may be in tort, however, if the party sues for breach of a duty recognized by the law as arising from the relationship or status the parties have created by their agreement.” Id.

         Here, Schnuck alleges that XPO was obligated to “perform the services necessary for the proper, accurate and efficient operation of the Facility” and to perform those services “in a good, professional, workmanlike, expeditious, and economical manner, consistent with the most efficient operation of the warehouse in accordance with the standards and prevailing practices in the warehouse industry.” (FAC at ¶¶ 24, 26.) Thus, Schnuck's negligence claim does not arise solely in contract and will not be dismissed on this basis. See Union Elec., 2015 WL 1262941, at *6.

         Moreover, where, as here, contracting parties “require the exercise of reasonable skill, diligence, and care in the handling of business given over or entrusted to” a defendant, a special relationship or status is created by their contract. Owen Cont'l Dev., LLC v. Vill. Green Mgmt. Co., No. 4:11-CV-1195-FRB, 2011 WL 5330412, at *3 (E.D. Mo. Nov. 4, 2011) (quoting Autry Morlan Chevrolet, Cadillac, Inc. v. RJF Agencies, Inc., 332 S.W.3d 184, 193 (Mo.Ct.App. 2010)). A tort action may be pursued “if the party sues for breach of a duty recognized by the law as arising from the relationship or status the parties have created by their agreement.” Id. (quoting Business Men's Assurance Co. of Am. v. Graham, 891 S.W.2d 438, 453 (Mo.Ct.App. 1994)). In an action by a bailor against the bailee, the bailor may proceed on alternate theories of general negligence of the bailee, specific negligence of the bailee, or breach of the bailment contract. Inst. of London Underwriters v. Eagle Boats, Ltd., 918 F.Supp. 297, 299-300 (E.D. Mo. 1996) (internal citations omitted). The duty of the bailee is to exercise ordinary care in the handling and safekeeping of the bailed property. Id. (internal citations omitted).

         Schnuck further asserts that because XPO provided professional services to Schnuck and held itself out as a professional by representing it was skilled in the warehousing business and capable of operating the Facility consistently with prevailing practices in the warehousing industry, the professional services exception to the economic loss doctrine applies. (Doc. No. 45 at 7.) This exception is applied to negligence claims involving defendants who have been held to a professional, rather than an ordinary, standard of care and who have provided professional services to the plaintiff. JR14, LLC v. Jetcorp Tech. Servs., Inc., No. 4:17-CV-1469-RWS, 2017 WL 3720075, at *1 (E.D. Mo. Aug. 29, 2017).

         Given these allegations, it would be premature at this stage of the proceedings to conclude that Schnuck's negligence claim arises solely in contract and dismiss it as barred by the economic loss doctrine. Accordingly, XPO's motion to dismiss Schnuck's negligence as barred by the economic loss doctrine will be denied. Id. at *2.

         Next, XPO argues that Schnuck's negligence claim should be dismissed to the extent it seeks damages barred by a Limitation of Liability provision in the Agreement. (Doc. No. 38 at 5-7.) Section 5(b) provides:

[U]nless otherwise prohibited by law, neither party shall be liable for incidental or consequential damages or indirect, special or punitive damages. Notwithstanding the foregoing limitations on types of damages, in the event that XPO would otherwise be liable to Schnucks for consequential, indirect, special or punitive damages, XPO shall be liable to Schnucks for such damages up to Schnucks' self-insured retention under any applicable insurance policy maintained by Schnucks, not to exceed Five Hundred Thousand Dollars ($500, 000)[.]

(Agreement, Doc. No. 8-1 at ยง 5(b)) (Emphasis added). XPO contends this provision is an unambiguous and broad waiver that bars either party from seeking the enumerated categories of damages. Schnuck contends that Section 5(b) only applies to contractual claims under the Agreement, and does not waive ...

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