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North Alabama Fabricating Co. Inc. v. Bedeschi Mid-West Conveyor Co., LLC

United States District Court, D. Kansas

May 8, 2017

NORTH ALABAMA FABRICATING COMPANY, INC., Plaintiff,
v.
BEDESCHI MID-WEST CONVEYOR COMPANY, LLC,, Defendants.

          MEMORANDUM AND ORDER

          DANIEL D. CRABTREE UNITED STATES DISTRICT JUDGE.

         Plaintiff North Alabama Fabricating Company, Inc. brings this lawsuit, asserting fraud and contract claims, against four defendants: (1) Bedeschi Mid-West Conveyor Company, LLC; (2) Dearborn Mid-West Conveyor Company, Inc.; (3) Larry Harp; and (4) Braxton Jones. Invoking Fed.R.Civ.P. 12(b)(6), defendants filed a Motion to Dismiss for Failure to State a Claim (Doc. 10). Plaintiff filed a Response opposing defendants' motion (Doc. 14). And, defendants filed a Reply (Doc. 20).

         Plaintiff then filed a Motion to Strike, in part, defendants' Reply (Doc. 23). Defendants have filed a Response opposing plaintiff's Motion to Strike (Doc. 24). After carefully considering all of the parties' submissions, the court denies defendants' Motion to Dismiss (Doc. 10) and denies plaintiff's Motion to Strike (Doc. 23). The court explains why below.

         I. Factual Background

         The following facts are taken from plaintiff's Complaint (Doc. 1), accepted as true, and viewed in the light most favorable to plaintiff. ASARCO LLC v. Union Pac. R.R. Co., 755 F.3d 1183, 1188 (10th Cir. 2014) (explaining that, on a Fed.R.Civ.P. 12(b)(6) motion to dismiss, the court must “accept as true all well-pleaded factual allegations in the complaint and view them in the light most favorable to the [plaintiff].” (citation and internal quotation marks omitted)).

         Plaintiff is a structural steel fabricating company located in Alabama. Defendants Bedeschi Mid-West Conveyor Company, LLC (“Bedeschi”) and Dearborn Mid-West Conveyor Company (“Dearborn”) are material handling systems providers that serve companies operating in various commercial industries. Plaintiff alleges that these two companies acted interchangeably and as one and the same when interacting with plaintiff. Plaintiff's Complaint thus refers to these two defendants collectively as “Mid-West.” Because it accepts plaintiff's allegations as true, the court also refers to these two defendants collectively as “Mid-West” when setting out the factual background that governs the court's ruling on the current motion.

         Essar Steel Minnesota, LLC (“Essar”) retained Mid-West as a material handling supplier for a construction project at its manufacturing facility (“the Minnesota Project”). After its retention, Mid-West engaged plaintiff as a material sub-supplier for the Minnesota Project. MidWest contracted with plaintiff, who agreed to manufacture fabricated steel equipment and support structures for use in the Minnesota Project. Mid-West and plaintiff entered into a Blanket Subcontract Agreement (“Subcontract”) in September 2015.[1]

         In October 2015, Mid-West issued to plaintiff a Subcontract Purchase Order (the “Purchase Order”).[2] The Purchase Order incorporates, among other things, the terms of the Subcontract, as well as the “Mid-West Conveyor Terms and Conditions” (the “Terms and Conditions”).[3] Plaintiff refers to the Purchase Order, Terms and Conditions, and Subcontract collectively as the “Contract Documents.” Plaintiff has no contractual relationship with Essar, the company that hired Mid-West for the Minnesota Project.

         The Purchase Order and Terms and Conditions establish a contract price of $4, 637, 371.00 that Mid-West is obligated to pay to plaintiff for performance under the Contract Documents. Section 3 of the Terms and Conditions provides that Mid-West temporarily may suspend work and shipments from plaintiff. Specifically, this provision recites that Mid-West “may change the rate of scheduled shipments or direct temporary suspension of scheduled shipments.” Doc. 1-3 at 2.

         Between November and December 2015, plaintiff delivered nine shipments of fabricated steel to the Minnesota Project. Plaintiff detailed and manufactured this product specifically for the Minnesota Project. And, plaintiff cannot use this product for any other purpose. Mid-West paid the invoices associated with those shipments.

         In the fall of 2015, Essar stopped construction on the Minnesota Project because it could not secure the additional funding needed to finish the construction. On December 22, 2015, Mid-West sent a letter to plaintiff. It reported that Mid-West had given Notice of Default to Essar because Essar had failed to provide and maintain Letters of Credit as a payment method for invoices submitted for work performed on the Minnesota Project. The letter also explained that, because Mid-West had no assurance of payment from Essar, Mid-West was invoking the provisions of Section 3 of the Terms and Conditions. As described above, that section allows Mid-West to direct temporary suspension of shipments for the Minnesota Project. The letter also asserted that Mid-West would continue to pursue compliant Letters of Credit or other credit facilities from Essar that would assure payment and permit Mid-West to resume shipments. The letter promised to keep plaintiff advised of future developments. Mid-West's temporary suspension applied to shipments of material then in the process of fabrication. It also applied to all future shipments not yet in fabrication.

         The next day, plaintiff sent a letter to Mid-West stating that it would suspend further operations and shipments. The letter also stated that plaintiff would await reinstatement of the suspended work. Afterwards, plaintiff sent invoices to Mid-West for the additional costs plaintiff had incurred from the work's suspension, as-it contends-Article 24 of the Subcontract allows. Mid-West never paid these invoices.

         On May 2, 2016, representatives for Mid-West and plaintiff met to discuss the possibility of Mid-West lifting the temporary suspension and having plaintiff resume shipments to the Minnesota Project. Both Mid-West and plaintiff agreed that, if this happened, the payment terms established by the Contract Documents would continue to control and Mid-West would remain obligated to satisfy all outstanding invoices.

         On May 4, 2016, Mid-West sent a letter to plaintiff lifting its temporary suspension and directing plaintiff to resume shipments to the Minnesota Project immediately. Mid-West requested that plaintiff ship the material as quickly as possible so that Mid-West could be paid under a letter of credit between Essar and Mid-West that required delivery of materials on or before June 10, 2016. Plaintiff communicated to Mid-West that it expected Mid-West to pay plaintiff's increased costs arising from the earlier suspension and the future accelerated shipment schedule. Defendants Larry Harp (President and CEO of Mid-West) and Braxton Jones (Project Manager for Mid-West) represented to plaintiff's President, John R. Parrish, that Mid-West would compensate plaintiff for these expenses.

         On May 5, 2016, plaintiff sent a letter to Mid-West confirming its intention to resume shipments. The letter acknowledged the position that Mid-West was in with its letter of credit with Essar. But, the letter also clarified that plaintiff expected payment under the terms of the Contract Documents. Plaintiff and Mid-West never have altered the payment terms established by the Purchase Order and Terms and Conditions.

         Between May and July 2016, plaintiff delivered 33 more shipments of fabricated steel to the Minnesota Project. These shipments totaled more than $1.3 million. Like the earlier shipments, plaintiff had manufactured the product specifically for the Minnesota Project. Plaintiff could not use the product for another other purpose. Mid-West never paid the invoices associated with these shipments.

         Mid-West assured plaintiff that the letter of credit provided the necessary surety to enable Mid-West to compensate plaintiff for its work. But, plaintiff repeatedly communicated to MidWest that Mid-West's payment obligations to plaintiff were independent of any compensation it might receive under the letter of credit. Mid-West has denied responsibility for the increased costs plaintiff incurred from the accelerated shipments. Mid-West also has questioned the price basis and costs associated with plaintiff's past-due invoices. Plaintiff asserts that Mid-West's questions are an attempt to fabricate reasons excusing Mid-West's failure to pay the invoices. Plaintiff has provided Mid-West all information it has requested in a consistent and timely fashion. Yet, Mid-West has raised questions about each of plaintiff's invoices long after payment was due. Plaintiff asserts that Mid-West failed to raise any of these issues within a reasonable time after receipt of the invoices.

         Plaintiff contends that Mid-West has sought to vary the terms of the Contract Documents informally. These informal variations have included the payment terms. Plaintiff asserts that Mid-West has attempted to vary the payment terms to benefit Mid-West and at plaintiff's expense. Plaintiff repeatedly has declined any attempts to amend or alter the Contract Documents. At all times, plaintiff has reserved its rights under the Contract Documents.

         On July 8, 2016, Essar filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware. Plaintiff asserts that Mid-West has shown no intention to adhere to its contractual relationship with plaintiff. To the contrary, plaintiff asserts that Mid-West's words and actions show that it does not intend to comply with its contractual obligations.

         On October 28, 2016, plaintiff filed this action. Doc. 1. Plaintiff asserts three claims arising from Mid-West's failure to compensate plaintiff for its work under the Contract Documents. The three claims are: (1) breach of contract against Bedeschi and Dearborn; (2) fraud, promissory fraud, and misrepresentation against Bedeschi, Dearborn, Larry Harp, and Braxton Jones; and (3) fraudulent suppression against Bedeschi, Dearborn, Larry Harp, and Braxton Jones. Defendants have moved to dismiss all claims, except the breach of contract claim against Bedeschi. The court addresses defendants' dismissal arguments in Part V below.

         II. Legal Standard

         Fed. R. Civ. P. 8(a)(2) provides that a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Although this Rule “does not require ‘detailed factual allegations, '” it demands more than “[a] pleading that offers ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action'” which, as the Supreme Court explained, “will not do.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

         “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Id. (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). “Under this standard, ‘the complaint must give the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual support for these claims.'” Carter v. United States, 667 F.Supp.2d 1259, 1262 (D. Kan. 2009) (quoting Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007)).

         Although the court must assume that the complaint's factual allegations are true, it is “not bound to accept as true a legal conclusion couched as a factual allegation.” Id. at 1263 (quoting Iqbal, 556 U.S. at 678). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice” to state a claim for relief. Bixler v. Foster, 596 F.3d 751, 756 (10th Cir. 2010) (quoting Iqbal, 556 U.S. at 678).

         When evaluating a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the court may consider “not only the complaint itself, but also attached exhibits and documents incorporated into the complaint by reference.” Smith v. United States, 561 F.3d 1090, 1098 (10th Cir. 2009). A court “may consider documents referred to in the complaint if the documents are central to the plaintiff's claim and the parties do not dispute the documents' authenticity.” Id. (quoting Alvarado v. KOB-TV, L.L.C., 493 F.3d 1210, 1215 (10th Cir. 2007)).

         III. Documents Considered on the Motion to Dismiss

         Before turning to the substance of the pending motions, the court considers whether it properly may consider certain documents when deciding the motion to dismiss. As explained above, when deciding a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the court may consider “not only the complaint itself, but also attached exhibits and documents incorporated into the complaint by reference.” Smith, 561 F.3d at 1098.

         Here, the court considers the Subcontract, Purchase Order, and Terms and Conditions in its analysis below. The court concludes that considering these documents is proper because plaintiff refers to these documents in its Complaint and plaintiff has attached the documents to the Complaint as exhibits. See Doc. 1 at 3 (Complaint ΒΆΒΆ 8-9) (referencing the Contract Documents); Doc. 1-1 (Subcontract); Doc. 1-2 (Purchase Order); Doc. 1-3 (Terms and ...


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