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Twin Creek Environmental Services, LLC. v. Pace Analytical Services, LLC

United States District Court, D. Kansas

July 12, 2018




         This case comes before the court on Defendants' motion to dismiss Plaintiff's amended complaint for failure to state a claim. (Doc. 13.) The motion has been fully briefed and is ripe for decision. (Docs. 14, 19, 20.) Defendants' motion is DENIED for the reasons set forth herein.

         I. Motion to Dismiss Standards

         In order to withstand a motion to dismiss for failure to state a claim, a complaint must contain enough allegations of fact to state a claim to relief that is plausible on its face. Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1974 (2007)). All well-pleaded facts and the reasonable inferences derived from those facts are viewed in the light most favorable to Plaintiff. Archuleta v. Wagner, 523 F.3d 1278, 1283 (10th Cir. 2008). Conclusory allegations, however, have no bearing upon the court's consideration. Shero v. City of Grove, Okla., 510 F.3d 1196, 1200 (10th Cir. 2007). In the end, the issue is not whether Plaintiff will ultimately prevail, but whether Plaintiff is entitled to offer evidence to support its claims. Beedle v. Wilson, 422 F.3d 1059, 1063 (10th Cir. 2005).

         II. Facts and Procedural History

         Plaintiff Twin Creek Environmental Services, LLC, is engaged in full service environmental management throughout the Midwest. In mid-June 2014, Plaintiff contracted with Defendant Pace Analytical Services, LLC, to perform environmental testing on samples taken from barrels that had been dumped on its property by a third party. Defendant was to perform tests to determine if certain harmful chemicals were present and if the amounts present violated standards set by the United States Environmental Protection Agency (EPA). On June 21, 2014, Plaintiff delivered samples to Defendant for testing. (Doc. 12 at 1-2.)

         The results of the testing showed the presence of acetone and methylene chloride in amounts that were greater than EPA limits. Plaintiff received the initial test results in July 2014. Plaintiff asked Defendant to retest the samples. On August 5, 2014, Defendant notified Plaintiff that laboratory contaminants resulted in false positives or results with a higher concentration.[1]Notably, except for three samples, the methylene chloride results were false. Defendant stated that it was unable to explain the acetone results. The letter did not include the retested sample results or any notes regarding the testing by Defendant's employees. (Doc. 12 at 3.)

         Defendant did not send any additional documentation to Plaintiff regarding the accuracy of the test results or any further testing performed on the samples. On an unknown date and without Plaintiff's knowledge or permission, Defendant forwarded the initial test results to the Kansas Department of Health and Environment (KDHE). KDHE had also tested samples from the barrels. KDHE's tests, however, did not produce any valid results. Defendant continued to communicate with KDHE regarding the test results without informing Plaintiff of the same. Defendant also allegedly provided KDHE with the complete analytical documentation regarding the testing. Plaintiff alleges that Defendant told KDHE that the initial test results were correct. Defendant, however, failed to inform Plaintiff that it had again reversed its opinion. Plaintiff contends that the chemical analysis was “corrupt and void due to the internal conditions and equipment contained in Pace's laboratory.” (Doc. 12 at 4.)

         In July 2016, KDHE relied on the initial test results to initiate an enforcement action and levy monitoring fees and financial penalties against Plaintiff for hazardous waste violations. During the administrative proceedings, the parties engaged in discovery. Plaintiff alleges that Defendant failed to respond to document requests and did not provide all documents requested. In August 2017, Plaintiff deposed Dave Neal, Defendant's General Manager. At the deposition, Neal provided additional documents to Plaintiff that allegedly show that Defendant “conspired with KDHE to conceal the discredited results from [Plaintiff].” (Doc. 12 at 6.)

         Additionally, Defendant performed further analysis of the samples as late as February 2017. Plaintiff alleges that the analysis showed that the initial results were even less reliable than stated in the August 2014 letter. Plaintiff alleges that Defendant refused to disclose these results to Plaintiff and never informed Plaintiff that it reanalyzed the samples. Defendant did not charge Plaintiff for the additional testing and analysis. Plaintiff alleges that this was due to Defendant's intent to conceal the additional testing from Plaintiff. Plaintiff was unable to discover Defendant's concealment until the deposition of Neal in August 2017. (Doc. 12 at 6-8.)

         Plaintiff filed this action in state court on September 18, 2017, alleging claims of breach of contract, breach of good faith, and fraud. (Doc. 1.) Defendant timely removed the action to this court. Defendant moved to dismiss the complaint on the basis that it was barred by the statute of limitations and failed to allege fraud with particularity. (Doc. 5.) Judge Marten granted the motion but allowed Plaintiff leave to amend. (Doc. 11.) Plaintiff filed an amended complaint on March 19, 2018. (Doc. 12.) Defendant now moves to dismiss the amended complaint. (Doc. 13.)

         III. Analysis

         A. Fraud Claim

         Defendant contends that Plaintiff's fraud claim should be dismissed for failure to plead with specificity, failure to show justifiable reliance and because it is barred by the statute of ...

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