United States District Court, D. Kansas
MEMORANDUM AND ORDER
D. CRABTREE UNITED STATES DISTRICT JUDGE.
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).
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.
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)).
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.
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.
October 2015, Mid-West issued to plaintiff a Subcontract
Purchase Order (the “Purchase
Order”). 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”). 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.
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.
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.
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.
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.
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.
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.
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.
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.
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
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.
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.
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
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)).
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
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).
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)).
Documents Considered on the Motion to Dismiss
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
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 ¶¶
8-9) (referencing the Contract Documents); Doc. 1-1
(Subcontract); Doc. 1-2 (Purchase Order); Doc. 1-3 (Terms and