Omni USA, Inc. v. Parker-Hannifin Corp.

• Citation: 798 F.Supp.2d 831
• Decision Date: 28 June 2011
• Docket Number: Civil Action No. H–10–4728.
• Parties: OMNI USA, INC., Plaintiff, v. PARKER–HANNIFIN CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of Texas

798 F.Supp.2d 831

OMNI USA, INC., Plaintiff,

v.PARKER–HANNIFIN CORPORATION, Defendant.

Civil Action No. H–10–4728.

United States District Court, S.D. Texas, Houston Division.

June 28, 2011.

Daniel Amando Ruiz, Law Office of Daniel A. Ruiz, Houston, TX, for Plaintiff.

Jeremy Richard Stone, Mehaffy Weber PC, Houston, TX, for Defendant.

OPINION AND ORDER

MELINDA HARMON, District Judge.

The above referenced action alleges that Defendant Parker–Hannifin Corporation (“Parker”) improperly designed, manufactured, marketed, and serviced defective industrial oil seals sold to Plaintiff Omni USA, Inc. (“Omni”) specifically for use in its gearboxes as part of agricultural irrigation systems sold to a third party. The Original Petition (# 1, Ex. B) asserts claims for breach of express warranties, breach of implied warranties, breach of contract, violations of the Texas Deceptive Trade Practices–Consumer Protection Act (“DTPA”), Tex. Bus. & Com.Code Ann. §§ 17.41–17.63 (allowing recovery for breach of warranty and misrepresentation), fraudulent inducement, negligent misrepresentation, fraud, and attorney's fees.

Pending before the Court is Parker's motion to dismiss under Federal Rules of Civil Procedure 12(b)(6), 8, and 9(b) and, alternatively, motion for more definite statement under Rule 12(e) (instrument # 2).

Standards of Review

Federal Rule of Civil Procedure 8(a)(2) provides, “A pleading that states a claim for relief must contain ... a short and plain statement of the claim showing that the pleader is entitled to relief.” All well pleaded facts must be viewed as true, “in the light most favorable to the plaintiff.” Lindquist v. City of Pasadena, Texas, 525 F.3d 383, 386 (5th Cir.2008). The plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all allegations in the complaint are true (even if doubtful in fact).” Id. at 555, 127 S.Ct. 1955. “[A] plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. “Without some factual allegation in the complaint, it is hard to see how a claimant could satisfy the requirement of providing not only ‘fair notice’ of the nature of the claim, but also the ‘grounds' on which the claim rests.” Id. at 555, n. 3, 127 S.Ct. 1955. 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. Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009), citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955.

Fraud claims must also satisfy the heightened pleading standard set out in Federal Rule of Civil Procedure 9(b): “In allegations alleging fraud ..., a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.” The Fifth Circuit strictly construes the Rule and requires the plaintiff pleading fraud in federal court “ ‘to specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent.’ ” Flaherty & Crumrine Preferred Income Fund, Inc. v. TXU Corp., 565 F.3d 200, 206–07 (5th Cir.2009) ( quoting Williams v. WMX Techs. Inc., 112 F.3d 175, 177 (5th Cir.1997), cert. denied, ––– U.S. ––––, 130 S.Ct. 199, 175 L.Ed.2d 125 (2009)).¹ A dismissal for failure to plead with particularity as required by this rule is treated the same as a Rule 12(b)(6) dismissal for failure to state a claim. Lovelace v. Software Spectrum, Inc., 78 F.3d 1015, 1017 (5th Cir.1996).

Because “Rule 9(b) applies by its plain language to all averments of fraud, whether they are part of a claim of fraud or not,” it applies to statutory claims based on allegations of fraud. Lone Star Ladies Inv. Club v. Schlotzsky's, Inc., 238 F.3d 363, 368 (5th Cir.2001); Melder v. Morris, 27 F.3d 1097, 1100 n. 6 (5th Cir.1994). “Claims alleging violations of the Texas Insurance Code and the Deceptive Trade Practices Act ... are subject to the requirements of Rule 9(b).” Frith v. Guardian Life Ins. Co. of America, 9 F.Supp.2d 734, 742–43 (S.D.Tex.1998). See also, e.g., Berry v. Indianapolis Life Ins. Co., 608 F.Supp.2d 785, 800 (N.D.Tex.2009); Patel v. Holiday Hospitality Franchising, Inc., 172 F.Supp.2d 821, 824–25 (N.D.Tex.2001) (and cases cited therein) (“[C]laims alleging violations of the DTPA are subject to the requirements of Rule 9(b).”); Flowserve Corp. v. Hallmark Pump Co., 2010 WL 2232285, *6 (S.D.Tex. Feb. 3, 2010) (same). Where “[t]he factual background of ... claims is substantively identical,” causes of action arising under DTPA, the Texas Insurance Code, or common law fraud must satisfy Rule 9(b), which reaches “all cases where the gravamen of the claim is fraud even though the theory supporting the claim is not technically termed fraud.” Frith, 9 F.Supp.2d at 742, citing Berry, 608 F.Supp.2d at 789, 800; Hernandez v. Ciba–Geigy Corp., USA, 200 F.R.D. 285, 290–91 (S.D.Tex.2001). The same is true of claims for negligent misrepresentation where the factual allegations underlying it and a fraud claim are the same. Benchmark Elecs. v. J.M. Huber Corp., 343 F.3d 719, 723 (5th Cir.2003) (“Although Rule 9(b) by its terms does not apply to negligent misrepresentation claims, this court has applied the heightened pleading requirements when the parties have not urged a separate focus on the negligent misrepresentation claims.... That is the case here, as Benchmark's fraud and negligent misrepresentation claims are based on the same set of alleged facts.”), citing Williams v. WMX Techs., Inc., 112 F.3d 175, 177 (5th Cir.1997); Berry v. Indianapolis Life Ins. Co. (“Berry II”), No. 3:08–CV–0248–B, 2010 WL 3422873, *16 (N.D.Tex. Aug. 26, 2010), citing Benchmark and Biliouris v. Sundance Res., Inc., 559 F.Supp.2d 733, 737 (N.D.Tex.2008) (dismissing negligent misrepresentation claim based on the same operative facts as an insufficient fraud claim).

Federal Rule of Civil Procedure 15(a)(2) states, “The court should freely give leave [to amend the pleadings] when justice so requires.” The decision whether to permit amendment “is entrusted to the sound discretion of the district court.” Wimm v. Jack Eckerd Corp., 3 F.3d 137, 139 (5th Cir.1993). Nevertheless, the Fifth Circuit has commented that the term “discretion” “ ‘may be misleading because Fed.R.Civ.P. 15(a) evinces a bias in favor of granting leave to amend.’ ” Mayeaux v. Louisiana Health Serv. & Indemn. Co., 376 F.3d 420, 425 (5th Cir.2004) (citation omitted). “[A]bsent a ‘substantial reason’ such as undue delay, bad faith, dilatory motive, repeated failures to cure deficiencies, or undue prejudice to the opposing party, ‘the discretion of the district court is not broad enough to permit denial.’ ” Id. (citation omitted).

When a plaintiff's complaint fails to state a claim, the court should generally give the plaintiff at least one chance to amend the complaint under Rule 15(a) before dismissing the action with prejudice. Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 329 (5th Cir.2002) (“District courts often afford plaintiffs at least one opportunity to cure pleading deficiencies before dismissing a case, unless it is clear that the defects are incurable or the plaintiffs advise the court that they are unwilling or unable to amend in a manner that will avoid dismissal.”); United States ex rel. Adrian v. Regents of the Univ. of Cal., 363 F.3d 398, 403 (5th Cir.2004) (“Leave to amend should be freely given, and outright refusal to grant leave to amend without a justification ... is considered an abuse of discretion. [citations omitted]”).

Federal Rule of Civil Procedure 15(a) provides in relevant part,

A party may amend the party's pleading once as a matter of course at any time before a responsive pleading is served or, if the pleading is one to which no responsive pleading is permitted and the action has not been placed upon the trial calendar, the party may so amend it at any time within 20 days after it is served. Otherwise a party may amend the party's pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires.

A court has discretion in deciding whether to grant leave to amend. Foman v. Davis, 371 U.S. 178, 181, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). Since the language of the rule “evinces a bias in favor of granting leave to amend,” the court must find a “substantial reason” to deny such a request.

Ambulatory Infusion Therapy Specialists, Inc. v. Aetna Life Ins. Co., Civ. A. No. H–05–4389, 2006 WL 2521411, *3 (S.D.Tex. Aug. 29, 2006), quoting Smith v. EMC Corp., 393 F.3d 590, 595 (5th Cir.2004), and Mayeaux v. La. Health Serv. & Indem. Co., 376 F.3d 420, 425 (5th Cir.2004). Factors for the court to consider in determining whether a substantial reason to deny a motion for leave to amend include “undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party, and futility of amendment.” Wimm v. Jack Eckerd Corp., 3 F.3d 137, 139 (5th Cir.1993). The court should deny leave to amend if it determines that “the proposed change clearly is frivolous or advances a claim or defense that is legally insufficient on its face ....” 6 Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Proc. § 1487 (2d ed.1990).

Factual Allegations of the Original Petition ²

The petition asserts that in 2004 Omni met with...