McDonnell Douglas Corp. v. SCI Technology, Inc., 91-CV-2077 CAS (TCM)

• Decision Date: 22 July 1996
• Docket Number: No. 91-CV-2077 CAS (TCM),4:95-CV-0242 CAS.,91-CV-2077 CAS (TCM)
• Citation: 933 F. Supp. 822
• Parties: McDONNELL DOUGLAS CORPORATION, Plaintiff, v. SCI TECHNOLOGY, INC., Defendant. SCI TECHNOLOGY, INC., Plaintiff, v. McDONNELL DOUGLAS CORPORATION, Defendant.
• Court: U.S. District Court — Eastern District of Missouri

933 F. Supp. 822

McDONNELL DOUGLAS CORPORATION, Plaintiff, v. SCI TECHNOLOGY, INC., Defendant.

SCI TECHNOLOGY, INC., Plaintiff, v. McDONNELL DOUGLAS CORPORATION, Defendant.

Nos. 91-CV-2077 CAS (TCM), 4:95-CV-0242 CAS.

United States District Court, E.D. Missouri, Eastern Division.

July 22, 1996.

COPYRIGHT MATERIAL OMITTED

Gary T. Carr, Douglas W. King, David J. Massa, Stephen R. Snodgrass, Thomas A. Schweich, Charles A. Weiss, Thomas J. Palazzolo, Bryan Cave, St. Louis, MO, for plaintiff McDonnell Douglas Corporation, a Maryland corporation.

Timothy F. Noelker, Linda L. Shapiro, Thompson Coburn, Peter Bushfield Work, David Z. Bodenheimer, Frederick W. Claybrook, Jr., Crowell and Moring, Washington, DC, W. Gordon Hamlin, Jr., E.A. Simpson, Jr., Powell and Goldstein, Atlanta, GA, for defendant SCI Technology, Inc.

MEMORANDUM AND ORDER

SHAW, District Judge.

This diversity matter is before the Court on plaintiff McDonnell Douglas Corporation's Motion to Dismiss Count I of the First Amended Counterclaim, and plaintiff's Motion to Dismiss Counts III and VIII of the First Amended Counterclaim.

This is an action for breach of contract and breach of express warranty by plaintiff McDonnell Douglas Corporation ("MDC"), arising from subcontracts entered into between MDC and defendant SCI Technology, Inc. ("SCI"), for avionics subsystems on the United States Navy's A-12 aircraft program. On April 10, 1996, SCI filed its eight-count Amended Counterclaim. MDC moves to dismiss SCI's fraudulent inducement claim, Count I, for failure to plead fraud with particularity under Federal Rule of Civil Procedure 9(b). MDC moves separately to dismiss (i) SCI's claim for unilateral mistake, Count III, on the basis that SCI has not alleged a mistake of existing fact within the narrow circumstances permitted by Missouri law; and (ii) SCI's claim for breach of fiduciary claim, Count VIII, on the basis that no fiduciary duty existed between MDC and SCI. SCI opposes the motions.

I. Standard of Review.

When ruling on a motion to dismiss, this Court must take the allegations of the counterclaim as true. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957) (motion to dismiss complaint). The counterclaim must be liberally construed in a light most favorable to the counterclaim plaintiff. See Coleman v. Watt, 40 F.3d 255, 258 (8th Cir.1994) (motion to dismiss complaint); Morton v. Becker, 793 F.2d 185, 187 (8th Cir.1986) (same). A motion to dismiss should not be granted merely because a counterclaim does not state with precision every element of the offense necessary for recovery. See Roberts v. Walmart Stores, Inc., 736 F.Supp. 1527, 1528 (E.D.Mo. 1990) (motion to dismiss complaint). "A counterclaim is sufficient if it contains allegations from which an inference can be drawn that evidence on these material points will be introduced at trial." Id. (internal quotations and citation omitted). Therefore, a motion to dismiss should not be granted unless it appears beyond doubt that the counterclaim plaintiff can prove no set of facts which would entitle it to relief. Coleman, 40 F.3d at 258; Kohl v. Casson, 5 F.3d 1141, 1148 (8th Cir.1993). With this standard in mind, the Court turns to the merits of plaintiff's motions to dismiss.

II. Discussion.

A. Motion to Dismiss Count I — Fraudulent Inducement.

In support of its motion to dismiss Count I of the amended counterclaim, MDC states that SCI has failed to plead any of the particulars of its fraud claim, including the name(s) of the person(s) who made the representations detailed in paragraph 20 of the counterclaim, to whom the representations were made, when they were made, whether they were oral or in writing, and the accompanying circumstances. MDC contends that such details are required by Rule 9(b), Fed.R.Civ. P., and Bennett v. Berg, 685 F.2d 1053, 1062 (8th Cir.1982), cert. denied, 464 U.S. 1008, 104 S.Ct. 527, 78 L.Ed.2d 710 (1983).

SCI responds that it provided the factual details allegedly absent from its counterclaim by means of the affidavit of SCI executive P. Michael Dunn, filed and served in July 1994, and that MDC has used the details in conducting extensive deposition discovery on SCI's fraud claim for the past ten months. Thus, SCI contends that MDC is asserting a "purely formalistic" argument. Further, on July 1, 1996, SCI filed a "Notice of Intent" to submit certain exhibits to its counterclaim to incorporate deposition testimony concerning the alleged fraudulent inducement. Finally, SCI also contends that by granting it leave to file an amended counterclaim, the Court implicitly rejected MDC's Rule 9(b) argument as previously advanced in July 1994.

The Court finds that MDC's motion to dismiss should be granted, with leave to amend within twenty days. Rule 9(b) requires that "the circumstances constituting fraud ... be stated with particularity." In this context, "'Circumstances' include such matters as the time, place and contents of false representations, as well as the identity of the person making the misrepresentation and what was obtained or given up thereby." Bennett, 685 F.2d at 1062; see also Greenwood v. Dittmer, 776 F.2d 785, 789 (8th Cir.1985). The degree of particularity required to comply with Rule 9(b) varies from case to case:

The sufficiency of a pleading under Rule 9(b) depends upon the nature of the case, the complexity or simplicity of the transaction or occurrence, the relationship of the parties and the determination of how much circumstantial detail is necessary to give notice to the adverse party and enable him to prepare a responsive pleading.

United States ex rel. O'Keefe v. McDonnell Douglas Corp., 918 F.Supp. 1338, 1345 (E.D.Mo.1996) (internal quotations and citations omitted).

In this case, SCI makes detailed allegations concerning the content of the misrepresentations. (See First Amended Counterclaim, ¶ 20.) As MDC states, however, the amended counterclaim is devoid of information concerning who made the representations, to whom the representations were made, when the representations were made, whether the representations were oral or in writing, and the accompanying circumstances.

Rule 9(b) does not require that details concerning each of these points be pleaded, as the rule is harmonized with the general principle of Rule 8 that a party need only plead a "short and plain statement" of a claim. Fed.R.Civ.P. 8(a); see Craighead v. E.F. Hutton & Co., Inc., 899 F.2d 485, 491 (6th Cir.1990); O'Keefe, 918 F.Supp. at 1345. To plead fraud with sufficient particularity, however, the identity of the person making the misrepresentation and the time and place thereof must be pleaded in addition to the content of the misrepresentation. Bennett, 685 F.2d at 1062. Thus, the Court finds that SCI's fraudulent inducement claim does not meet the particularity requirement of Rule 9(b), which is not a "purely formalistic" deficiency.

The fact that SCI attempts to bolster the allegations of its fraudulent inducement claim with affidavits and other evidence illustrates the deficiency of its pleading. The particularity requirements of Rule 9(b) must be met in the pleading itself, and may not be supplied in extraneous documents. See Miller v. Gain Financial, Inc., 995 F.2d 706, 709 (7th Cir.1993); GL Industries of Michigan, Inc. v. Forstmann-Little, 800 F.Supp. 695, 700 (S.D.Ind.1991); Beck v. Cantor, Fitzgerald & Co., Inc., 621 F.Supp. 1547, 1552 (N.D.Ill.1985); Arroyo v. Wheat, 591 F.Supp. 141, 144 (D.Nev.1984). Finally, the Court had not previously addressed the sufficiency of SCI's fraudulent inducement claim, and did not implicitly decide the issue when it sua sponte granted leave to file the amended counterclaim.

Accordingly, defendant's motion to dismiss Count I of SCI's amended counterclaim will be granted. SCI will be granted twenty days from the date of this order in which to file a second amended counterclaim which meets the requirements of Rule 9(b).

B. Motion to Dismiss Counts III and VIII.

As a threshold matter, MDC has submitted materials outside the pleadings in support of its motion to dismiss Counts III and VIII of the amended counterclaim. A motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) "must be treated as a motion for summary judgment when matters outside the pleadings are presented and not excluded by the trial court." Woods v. Dugan, 660 F.2d 379, 380 (8th Cir.1981) (per curiam). When matters outside the pleadings are presented on a motion to dismiss, the court may either treat the motion as one to dismiss and exclude the matters outside the pleadings, or treat the motion as one for summary judgment and provide the parties with notice and an opportunity to provide further materials. See Gibb v. Scott, 958 F.2d 814, 816 (8th Cir.1992). The Court will exclude from consideration all matters outside the pleadings and treat MDC's motion as a motion to dismiss.

1. Count III — Unilateral Mistake.

SCI asserts a claim for unilateral mistake in Count III of the amended counterclaim.¹ In support of its motion to dismiss Count III, MDC asserts that under Missouri law a contracting party generally may not escape contractual responsibilities by claiming unilateral mistake, citing Great Western Sugar Co. v. Mrs. Alison's Cookie Co., Inc., 749 F.2d 516, 521 (8th Cir.1984) (applying Missouri law). MDC states that the only exception to this rule occurs where (i) the mistake of one party is either known to the other party or is so obvious under the circumstances that it should have been known to the other party; and (ii) the mistake concerns a matter so vital that the parties essentially never agreed to the same proposition because of miscalculation or false information. Id. (citations omitted).

MDC contends that under the facts alleged in the counterclaim, SCI cannot meet the narrow exception and state a claim for unilateral mistake because (a) SCI does not allege that it was mistaken as to terms and...