United States District Court, D. Kansas
MEMORANDUM AND ORDER
ERIC F. MELGREN, District Judge.
Plaintiff Milby Law Office, P.A. seeks to recover fees allegedly owed for debt collection services, filing suit against Defendant Aaron's, Inc. under two counts: (1) breach of contract and (2) unjust enrichment/ quantum meruit. Aaron's has filed a Partial Motion to Dismiss (Doc. 7) for failure to state a claim for breach of contract. Milby's claims it is owed fees for services rendered in pursuit of the recovery of the debts, as well as the full contingency fee according to the contract and prior practice. The motion before the Court alleges that even if there was a contract, it was a contingency contract and Aaron's terminated its relationship with Milby before the contingency occurred. Kansas law precludes recovery for a contingency fee if the attorney was dismissed before the contingency contemplated in the contract occurred. Therefore, this Court agrees that Milby failed to meet the requisite pleading standard, and the Partial Motion to Dismiss count one alleging breach of contract is granted.
I. Factual and Procedural Background
Aaron's is a rent-to-own company incorporated in Georgia with stores throughout the United States. Milby is a law firm with its principle place of business in Kansas. Milby provided debt collection services to Aaron's for approximately ten years. These services were paid for on a contingency basis-one-third of "all amounts collected on the client's behalf." According to Milby's list of services provided to Aaron's, it would retain the money from the collected fees before sending the balance to the client. Milby claims it was Aaron's practice, from time to time, to remove files from Milby and sell the debt to a third party. On such occasions, Aaron's still paid Milby the full contingency fee as if the file had been fully collected.
In 2013, Aaron's removed all the files assigned to Milby for collection and terminated the relationship it had with Milby. Milby brought this suit in Sedgwick County, Kansas, for two counts, (1) breach of contract and (2) unjust enrichment/ quantum meruit, a claim for the reasonable value of services. It seeks repayment for the services rendered to Aaron's through its attempts to recover the debts in question. Milby also seeks payment of the full contingency fee for all files removed according to the contract and prior course of dealings. Milby also claims that it reduced at least eleven files to judgment with monies being collected, which entitles it to the contingency fee as well. Aaron's removed this suit to federal court under diversity jurisdiction. In March 2015, Aaron's filed a Partial Motion to Dismiss, which is now before the Court.
II. Legal Standard
Under Federal Rule of Civil Procedure 12(b)(6), a defendant may move for dismissal of any claim where the plaintiff has failed to state a claim upon which relief can be granted. Upon such motion, the court must decide "whether the complaint contains enough facts to state a claim to relief that is plausible on its face.'" A claim is facially plausible if the plaintiff pleads facts sufficient for the court to reasonably infer that the defendant is liable for the alleged misconduct. The plausibility standard reflects the requirement in Rule 8 that pleadings provide defendants with fair notice of the nature of claims as well as the grounds on which each claim rests.
Under Rule 12(b)(6), the court must accept as true all factual allegations in the complaint, but need not afford such a presumption to legal conclusions. If the allegations in the complaint are "so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiffs have not nudged their claims across the line from conceivable to plausible.'" "[T]he mere metaphysical possibility that some plaintiff could prove some set of facts in support of the pleaded claims is insufficient; the complaint must give the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual support for these claims."
As a preliminary matter, Milby argues that this Court must consider matters outside the pleadings to decide the motion to dismiss and therefore under Rule 12(d) must transform the Rule 12(b)(6) motion into one for summary judgment. If the court is able to decide the issue within the four corners of the pleadings, it may exclude the additional materials and continue to treat the motion as one to dismiss for failure to state a claim. In this case, dismissal is justifiable without considering outside materials. Therefore, the Court finds that it is able to decide the issue relying solely on the pleadings and excludes the documents attached to Milby's response.
The question of dismissal is a two-part analysis: (1) whether there was a breach of contract, and (2) whether there were any parts of the contract that survived past termination. To survive a motion to dismiss for failure to state a claim, all facts taken as true must show a claim that extends beyond the merely plausible. For the purpose of this motion, Milby's claim that a contract existed will be taken as true. Milby attached to its petition a document titled "Available Legal Services" as its evidence of a contract.
This Court has held that when a federal court is sitting over a case in diversity jurisdiction, it must apply the "choice of law provisions of the forum state." Kansas, the forum state here, applies the law of the place of contracting, or where the contract was made. A contract is "made where the last act necessary for its formation occurs." Neither party disputes the alleged contract was formed in Kansas, therefore Kansas law governs the question of breach of contract.
A. Breach of Contract
Aaron's filed a Partial Motion to Dismiss for count one of Milby's suit. Aaron's argues that even if there was a contract, it was a contingency fee contract. Due to the nature of these contracts, when the relationship is terminated without the contingency occurring, the contract is void. The motion to dismiss argues that Kansas law prevents attorneys from recovering the fee itself under contingency fee contracts if the contingency has not become a reality. Aaron's also claims that Milby has not ...