Flynn v. CTB, Inc.

• Decision Date: 02 January 2013
• Docket Number: Case No. 1:12-CV-68 SNLJ
• Parties: MIKE FLYNN, et al., Plaintiff, v. CTB, Inc., et al., Defendants.
• Court: U.S. District Court — Eastern District of Missouri

MIKE FLYNN, et al., Plaintiff, v. CTB, Inc., et al., Defendants.

Case No. 1:12-CV-68 SNLJ

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI SOUTHEASTERN DIVISION

Dated: January 2, 2013

MEMORANDUM AND ORDER

Plaintiffs are individuals who have brought this action on behalf of themselves and a putative class alleging that certain farm equipment did not function properly. Initially, plaintiffs named several entities as defendants, but only one defendant remains. That defendant, CTB, Inc., has moved to dismiss (#25), and the matter has been fully briefed. For the reasons set forth below, the Court grants in part, and denies in part, the motion to dismiss.

I. Background

For purposes of the motion to dismiss, the facts alleged in the complaint are taken as true. At various times in 2007 and 2008, plaintiffs each purchased a "Harvest Time" grain bin unloading system which was manufactured by the defendant. The system has an auger within a sweep arm that moves along and around the grain bin floor. The sweep pushes the grain into holes on the grain bin floor, and another auger moves the grain along to other unloading vessels. The system was marketed to unload any free-flowing grains. The system is more efficient than unloading the bins by hand, and it reduces hazards to farm workers by allowing workers to remain outside the bins.

Plaintiffs allege that the system does not work as advertised. They say that the power sweep component of the system fails to function properly because it cannot maintain sufficient contact with the grain nor move it with sufficient force to sweep the grain into the unloading system beneath the grain bin floor. As a result, human workers must be employed to push the sweep into the grain, exposing the workers to hazards, causing delays, and decreasing the value of the grain bin.

Plaintiffs further allege that defendant has been aware of the shortcomings of its Harvest Time system since at least 2006. Defendant has made "numerous modificiations" to the sweep to improve its effectiveness, but the changes have not remedied the inherent design limitations. Plaintiffs state that the sweep cannot sweep common grains such as corn, rice, wheat, soybeans, and sorghum (apparently the sweep is more effective on corn and chickpeas, which plaintiffs allege were tested by defendant). Plaintiffs thus seek class-wide relief for all purchasers of the Harvest Time power sweeps in the form of refunds or replacement sweeps. Plaintiffs' three counts are for Breach of Warranty, Unjust Enrichment, and Common Law Fraud.

II. Legal Standard

Defendants seek dismissal for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). The purpose of a Rule 12(b)(6) motion to dismiss for failure to state a claim is to test the legal sufficiency of a complaint so as to eliminate those actions which are fatally flawed in their legal premises and designed to fail, thereby sparing litigants the burden of unnecessary pretrial and trial activity. Young v. City of St. Charles, 244 F.3d 623, 627 (8th Cir. 2001) (quoting Neitzke v. Williams, 490 U.S. 319, 326-27 (1989)). A complaint must be dismissed for failure to state a claim if it does not plead enough facts to state a claim to relief thatis plausible on its face. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 560 (2007) (abrogating the traditional "no set of facts" standard set forth in Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). A petitioner need not provide specific facts to support his allegations, Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per curiam), but "must include sufficient factual information to provide the grounds on which the claim rests, and to raise a right to relief above a speculative level." Schaaf v. Residential Funding Corp., 517 F.3d 544, 549 (8th Cir. 2008), cert. denied, 129 S.Ct. 222 (2008) (quoting Twombly, 550 U.S. at 555-56 & n.3).

In ruling on a motion to dismiss, a court must view the allegations of the complaint in the light most favorable to the petitioner. Scheuer v. Rhodes, 416 U.S. 232 (1974); Kottschade v. City of Rochester, 319 F.3d 1038, 1040 (8th Cir. 2003). Although a complaint challenged by a Rule 12(b)(6) motion does not need detailed factual allegations, a petitioner must still provide the grounds for relief, and neither "labels and conclusions" nor "a formulaic recitation of the elements of a cause of action" will suffice. Twombly, 550 U.S. at 555 (internal citations omitted). "To survive a motion to dismiss, a claim must be facially plausible, meaning that the factual content . . . allows the court to draw the reasonable inference that the respondent is liable for the misconduct alleged." Cole v. Homier Dist. Co., Inc., 599 F.3d 856, 861 (8th Cir. 2010) (quoting Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)). When determining the facial plausibility of a claim, the Court must "accept the allegations contained in the complaint as true and draw all reasonable inferences in favor of the nonmoving party." Id. (quoting Coons v. Mineta, 410 F.3d 1036, 1039 (8th Cir. 2005)). Finally, where a court can infer from those factual allegations no more than a "mere possibility of misconduct," the complaint must be dismissed. Id. (quoting Iqbal, 129 S.Ct. at 1950).

III. Choice of Law

In this diversity action, the Court applies the substantive law of the state in which the district court sits. Urban Hotel Dev. Co. v. President Dev. Co., L.C., 535 F.3d. 874, 877 (8th Cir. 2008); Roemmich v. Eagle Eye Dev. L.L.C., 526 F.3d. 343, 348 (8th Cir. 2008). In the present case, Missouri substantive law applies. Erie R. Co. v. Tompkins, 304 U.S. 64 (1938); Bath Junkie Branson, L.L.C. v. Bath Junkie, Inc., 528 F.3d 556, 561 (court assumes Missouri law controls where both parties relied on Missouri law). The obligation to apply state law extends to the forum state's choice of law principles. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941). Missouri honors choice of law provisions in contracts where application of the selected forum's law is not contrary to a fundamental policy of Missouri. Kagan v. Master Home Prods., Ltd., 193 S.W.3d 401 (Mo. Ct. App. 2006). Here, the parties' contract terms contain an Indiana choice of law clause. Because both Missouri and Indiana have enacted Article 2 of the Uniform Commercial Code pertaining to sales of goods, there is no policy conflict, and a Missouri court would thus enforce the choice of law provision.

The parties agree that Indiana law governs plaintiffs' warranty claims. However, they disagree over whether Missouri or Indiana law applies to the non-contractual claims Unjust Enrichment (Count II) and Fraud (Count III). The Terms of Sale's choice of law provision states "This Agreement shall be governed by the laws of the State of Indiana." Defendant argues that the Agreement and only the Agreement is governed by Indiana law, so claims arising independently of the agreement are not subject to that provision.

Defendant relies on Inacom Corp. v. Sears, Roebuck & Co., 254 F.3d 683, 687 (8th Cir. 2001); in that case, the parties' choice of law provision stated that the "Agreement shall begoverned by...the law of the State of Illinois, as applied to contracts made and to be performed solely within such state, without regard to conflict or choice of law rules, provisions or principles." 254 F.3d at 687. There, the Eighth Circuit held that "While this provision adequately covers disputes concerning how to construe the [Agreement], the language is not broad enough to govern the choice of law for the fraudulent concealment claim, which sounds in tort." Id. As a result, the Court held that the forum state's choice of law rule governed.

Here, unlike in Inacom, the Terms of Sale do not contain the "as applied to contracts" language. Thus, plaintiffs contend that this Court must apply Indiana law to all of plaintiffs' claims. However, a choice of law provision "will not be construed to govern tort as well as contract disputes unless it is clear that this is what the parties intended." Kuehn v. Childrens Hosp., Los Angeles, 119 F.3d 1296, 1302 (7th Cir. 1997) (citing, e.g., Krock v. Lipsay, 97 F.3d 640, 645 (2d Cir.1996); Thompson & Wallace of Memphis, Inc. v. Falconwood Corp., 100 F.3d 429, 432-33 (5th Cir.1996); Caton v. Leach Corp., 896 F.2d 939, 942-43 (5th Cir.1990)). The Eighth Circuit adhered to the same standard in Inacom. 254 F.3d at 687-89 (discussing the intentions of the parties as manifested by the choice of law clause). That court contrasted the Inacom parties' clause to "broad clauses, which choose a particular state's law to govern, construe and enforce all rights and duties of the parties arising from or relating in any way to the subject matter of the applicable contract," and noted that the clause provides only that a particular state law should apply to construe the contract. Id. at 687-88 (quoting Caton v. Leach Corp., 896 F.2d 939, 943 (5th Cir. 1990); internal changes omitted).

On the one hand, plaintiffs would have the Court apply the choice of law provision to the contract and related tort claims because they insist it is the sort of "broad clause" that wascontemplated by Inacom. On the other hand, defendant contends that the provision is not broad enough. This Court agrees with defendant. Looking to Caton, the Fifth Circuit case to which the Eighth Circuit refers in Inacom, it appears that the parties' choice of law provision is narrow. The instant provision (like the provision in Caton) addresses only the "Agreement" itself, and it "does not address the entirety of the parties' relationship." Caton, 896 F.2d at 943. ¹ As a result, the choice of law provision does not apply to the plaintiffs' non-contract claims, and Missouri choice of law rules shall apply instead to Counts II and III.²

IV. Discussion

Plaintiffs' Complaint includes three counts: Count I, Breach of Warranty; Count II, Unjust Enrichment; and Count III, Common Law Fraud. Defendant states that each count fails to...