Asbury Square v. Amoco Oil Co., No. 4:03-cv-40199 (S.D. Iowa 10/7/2003), 4:03-cv-40199.
| Decision Date | 07 October 2003 |
| Docket Number | No. 4:03-cv-40199.,4:03-cv-40199. |
| Parties | ASBURY SQUARE, L.L.C., Plaintiff, v. AMOCO OIL COMPANY, n/k/a BP PRODUCTS NORTH AMERICA, INC., Defendant. |
| Court | U.S. District Court — Southern District of Iowa |
This matter comes before the Court on Defendant's Motion to Dismiss Count II pursuant to Federal Rule of Civil Procedure 12(b)(6) (Clerk's No. 4). A hearing on this motion was held on September 23, 2003. Plaintiff was represented by James G. Sawtelle and Stephen R. Eckley, with Mr. Sawtelle presenting oral argument resisting Defendant's motion; Defendant was represented by Mark S. Lillie and Robert L. Fanter, with Mr. Lillie presenting oral argument supporting Defendant's motion. While the Court finds the Defendant's argument on the motion to dismiss is well taken, and the Plaintiff has failed to comply with pleading requirements of Fed.R.Civ.P. 9(b), the motion will be denied at this time, and Plaintiffs request for leave to amend Count II is hereby granted.
The Plaintiff, Asbury Square, L.L.C. ("Asbury Square"), commenced this action against the Defendant, Amoco Oil Company, n/k/a BP Products North America, Inc. ("Amoco") in the United States District Court for the Southern District of Iowa, Central Division, on April 11, 2003. Jurisdiction is appropriate pursuant to 28 U.S.C. § 1332.
The lawsuit contains two claims, breach of contract and fraud, arising out of Amoco's alleged failure to fulfill contractual duties in cleaning up hydrocarbon contamination. On June 13, 2003, Amoco filed a motion to dismiss that seeks to eliminate one of the two claims asserted by Asbury Square in its Complaint. This claim, Count II of the Complaint, alleges fraud by Amoco.1 Amoco asserts that Asbury Square has failed to plead fraud with particularity and that this claim should be dismissed under Federal Rule of Civil Procedure 12(b)(6).
Asbury Square is an Iowa limited liability company with its principal place of business in Dubuque, Iowa. Amoco Oil Company, now known as BP Products North America, Inc., is a Maryland corporation, licensed to do business in Iowa, with its principal place of business in Chicago, Illinois.
At the center of this controversy is a shopping mall located in Dubuque, Iowa, that was owned by E. T. Holdings, Inc. ("E.T. Holdings"). This mall, known as Asbury Square Shopping Center, along with the property it sits on (collectively, the "Asbury property"), is currently owned by Asbury Square, the successor in interest to E.T. Holdings. Asbury Square is also the assignee of all rights and claims possessed by E.T. Holdings in relation to Amoco. Located adjacent to the Asbury property at all times material hereto was a gasoline service station owned and operated by Amoco (the "Amoco Station").
Petroleum products were released from the underground storage tank system of the Amoco Station into the surrounding environment. The released petroleum products, also referred to as hydrocarbon contamination, migrated from the Amoco Station property onto the Asbury property. This caused the soil underlying the parking lot and shopping center building to become contaminated. Amoco and E.T. Holdings became involved in litigation in 1995 over the hydrocarbon contamination on the Asbury property.
During the course of this litigation, Amoco extended certain indemnification to E.T. Holdings, its successors and assigns, in a letter dated May 23, 1998 (the "1998 Letter"). The relevant portion of that letter states that Amoco will "pay the full cost of any and all necessary investigation, assessment, remediation, and clean-up of hydrocarbon contamination emanating from the former Amoco Oil Company site." Asbury Square maintains this is a valid and binding contract. Asbury Square further alleges that Amoco had no intention of performing the promises it made in the 1998 Letter, the remediation system being used by Amoco was insufficient to clean up the property, and Amoco has made no attempt to remedy the deficiencies in its system. The promises in the 1998 Letter were made to E.T. Holdings during the trial stage of the litigation, and the 1998 Letter itself was subsequently incorporated into a settlement agreement resolving the parties' prior litigation.
At trial, the jury found for E.T. Holdings and awarded $16.7-million in compensatory damages. This amount was later reduced by $13-million in an order of remittitur by the court. Amoco used the 1998 Letter at trial2 as well as in proceedings before the court following the jury verdict.3 The parties ultimately settled while an appeal and cross-appeal were pending before the Eighth Circuit. The settlement required Amoco to pay $3.75-million4 and provided in exchange that E.T. Holdings would release any and all claims against Amoco with the exception of any claims it may have from the 1998 Letter. This letter was attached to the parties' Confidential Settlement Agreement. Asbury Square argues the use of the 1998 Letter is evidence that Amoco had an ulterior motive in making the promises contained in the letter and that such promises were made in bad faith and lacking an existing intent to perform.
Following the trial and settlement, Amoco ceased all remediation and clean-up efforts for an unspecified amount of time. Amoco halted operations in conjunction with efforts to persuade the IDNR to loosen its requirements regarding Amoco's mandatory remediation activities.
According to Asbury Square, nearly five years after the settlement there still remains substantial hydrocarbon contamination on the Asbury property. Asbury Square claims this is a result of Amoco's failure to fulfill its obligations — obligations that Amoco never had any intention of completing.
In or around 2002, Asbury Square retained an environmental engineering firm to review the performance of Amoco's remediation system. The engineering firm found the remediation in place was inadequate and set forth some recommendations to properly clean up the property. Amoco was furnished with this report in August 2002 but has not done anything to remedy the noted deficiencies.
In addition, a Site Monitoring Report was submitted to the Iowa Department of Natural Resources ("IDNR") on February 14, 2003. In this report, Amoco has, through its consultants, confirmed the continued existence of contamination in the soil and groundwater underlying the shopping center property. Some of the levels of contamination have actually been increasing. As a result of the contamination still present, the Asbury property is classified by the IDNR as a "High Risk" site. This classification requires, among other things, the ongoing monitoring of indoor air quality in the shopping center building.
Asbury Square, as the assignee of all rights arising out of this contract, has made demand upon Amoco to pay for all costs necessary to investigate, assess, remediate, and clean up the hydrocarbon contamination on the property owned by Asbury Square. Asbury Square alleges that Amoco has failed to do this and has further refused to fulfill its obligation, thereby breaching the express terms of the parties' agreement. Asbury Square further claims the alleged breach of this contract has and will continue to damage Asbury Square as the hydrocarbon contamination has not been cleaned up.
Based on these and other facts,5 Asbury Square has advanced a fraud claim in addition to the breach of contract claim in its Complaint. The fraud claim alleges Amoco "had no intention of honoring its commitment to pay the costs of cleaning up the contamination" on the Asbury property at the time it made the promises in the 1998 Letter. It further alleges Amoco made the promises in bad faith and with the motive of using the remediation and clean-up promises to influence the jury, the judge, and E.T. Holdings. Asbury Square argues the jury, judge, and E.T. Holdings did in fact rely on the 1998 Letter in arriving at an amount of damages at trial, ordering remittitur following trial, and entering into a subsequent settlement with Amoco. It is this claim that Amoco seeks to have dismissed.
Pending before the Court is Defendant's Motion to Dismiss.6 Amoco seeks to have Count II of Plaintiffs Complaint dismissed. Count II of the Complaint is a claim for fraud. Amoco's contentions are that Asbury Square's fraud claim is nothing more than a breach of contract action and that it is based on nothing more than the opposing party's understanding of the contract, neither of which are actionable as fraud. Amoco seeks dismissal for failure to state a claim based on a stated failure to plead with particularity as required by the Federal Rules of Civil Procedure. Meanwhile, Asbury Square maintains it has pleaded fraud with the requisite particularity in its Amended Complaint.
Rule 12(b)(6) allows the court to dismiss a cause of action for failure to state a claim upon which relief can be granted. See Fed.R.Civ.P. 12(b)(6). Motions under this rule "can serve a useful purpose in disposing of legal issues with a minimum of time and expense to the interested parties." Hiland Dairy. Inc. v. Kroger Co., 402 F.2d 968, 973 (8th Cir. 1968), cert. denied, 395 U.S. 961 (1969). "The issue is not whether a plaintiff will ultimately prevail, but rather whether the plaintiff is entitled to offer evidence in support of the plaintiffs claims." DeWit v. Firstar Corp., 879 F. Supp. 947, 959 (N.D. Iowa 1995) (). "A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can not prove any set of facts in support of his claim that would entitle him to relief." Schaller Tel. Co. v. Golden Sky Sys., Inc., 298 F.3d...
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