Seaboard Farms v. Pork Data, No. C 00-4031-MWB (N.D. Iowa 12/11/2000)
| Decision Date | 11 December 2000 |
| Docket Number | No. C 00-4031-MWB.,C 00-4031-MWB. |
| Parties | SEABOARD FARMS, INC., Plaintiff, v. PORK DATA, INC., Defendant. |
| Court | U.S. District Court — Northern District of Iowa |
The necessity of pleading fraud with particularity is an issue that appears with surprising frequency in commercial litigation. Despite the frequency with which this court — and, indeed, the Eighth Circuit Court of Appeals — has attempted to clarify the requirements for pleading fraud, there still appear to be misconceptions. This matter comes before the court pursuant to the May 12, 2000, motion of plaintiff Seaboard Farms, Inc., to dismiss Count III of the Counterclaim of defendant Pork Data, Inc., which alleges fraud in the inducement to a contract involving the sale of feeder pigs, on the ground that Pork Data has failed to allege the elements of fraud or to plead fraud with the required particularity. This matter also comes before the court pursuant to Seaboard Farms' July 13, 2000, motion to strike, or in the alternative Seaboard Farms' reply to, Pork Data's memorandum in opposition to Seaboard Farms' motion to dismiss. Finally, this matter comes before the court pursuant to Pork Data's November 21, 2000, motion to amend its Answer and Counterclaim to replead its fraud counterclaim.
Seaboard Farms filed this action on March 22, 2000, in the name of its parent corporation, Seaboard Corporation. However, Seaboard Farms sought leave to amend its Complaint on May 12, 2000, asserting that, through a scrivener's error, the wrong corporate entity had been identified as the plaintiff in this action. On May 17, 2000, the court granted the motion to amend and the plaintiff in this action is therefore Seaboard Farms, Inc. In its Complaint, as amended, Seaboard Farms asserts a breach-of-contract claim arising from Pork Data's alleged breach of a contract between the parties under which Pork Data was to purchase feeder pigs from Seaboard Farms. More specifically, Seaboard Farms alleges that Pork Data began paying only seventy-four percent of the agreed purchase price for feeder pigs, without explanation or contractual right to a discount, and consequently has fallen $285,877.42 in arrears and has accrued $6,343.24 in late charges. Seaboard Farms seeks payment of all amounts due under the contract, all contractual penalties, costs, and reasonable attorneys' fees resulting from Pork Data's breach of the contract.
In an Answer and Counterclaim filed April 19, 2000,1 Pork Data denies Seaboard Farms' breach-of-contract claim, and asserts three counterclaims. Count I of Pork Data's Counterclaim asserts breach of contract by Seaboard Farms, alleging that Seaboard Farms breached a prior contract between the parties as a means of coercing Pork Data into agreeing to a new contract with substantially higher prices. Count II of Pork Data's Counterclaim, also a breach-of-contract claim, asserts that Seaboard Farms has breached its contract with Pork Data to deliver feeder pigs in January at 86% of the live price. Count III of the Counterclaim, the adequacy of which is contested in Seaboard Farms' motion to dismiss, alleges fraud in the inducement.
In its motion to dismiss, filed May 12, 2000, Seaboard Farms contends that Count III of Pork Data's Counterclaim must be dismissed, because Pork Data has failed to state a claim for fraud. Instead, Seaboard Farms contends that Pork Data's fraud counterclaim is merely a conclusory allegation "that Plaintiff committed fraud in the inducement and operation of its two contracts," Counterclaim, Count III, ¶ 20, but nowhere in either Count III itself or in the general allegations of the Counterclaim, has Pork Data pleaded any of the required elements of fraud. Moreover, Seaboard Farms contends that Pork Data has failed to plead fraud with the particularity required by Rule 9(b) of the Federal Rules of Civil Procedure and controlling precedent in this circuit and district. Indeed, Seaboard Farms contends that virtually none of the circumstances of the alleged fraud are stated in the Counterclaim.
In Pork Data's July 3, 2000, resistance to Seaboard Farms' motion to dismiss — which Seaboard Farms challenges as untimely in its July 12, 2000, motion to strike — Pork Data contends that its "notice pleading" of fraud satisfies the requirements of Rule 8(a) of the Federal Rules of Civil Procedure, and that Rule 9(b) must be read in view of Rule 8(a). Even assuming that it is required to plead the circumstances of the alleged fraud, as Seaboard Farms contends, Pork Data argues that it has done so, at least by implication, from the general allegations of the Counterclaim. Pork Data contends that Seaboard Farms has been adequately apprised of the fraud claim against it as well as the factual grounds upon which that claim is based.
In reply, Seaboard Farms reiterates that Pork Data's contention that it need not specifically plead the required elements of fraud under Iowa law in its complaint is simply wrong. Moreover, Seaboard Farms contends that, even if the background allegations contained in Pork Data's Counterclaim are considered, those allegations still fall well short of pleading the elements of the alleged fraud or pleading the circumstances of the alleged fraud with the necessary particularity. Seaboard Farms points out that this court has recognized that Rule 9(b) becomes superfluous if it requires nothing more than the degree of specificity required by "notice pleading" under Rule 8(a). Rather, Seaboard Farms contends, the Eighth Circuit Court of Appeals has specifically held that Rule 9(b) requires pleading of the circumstances of the fraud with particularity. Finally, Seaboard Farms contends that Pork Data's attempts to show that its pleadings satisfy the requirements of Rule 9(b) are fruitless.
The court will deny Seaboard Farms' motion to strike Pork Data's resistance to Seaboard Farms' motion to dismiss, although the court agrees that Pork Data's resistance was untimely and that no extension of time to resist the motion was ever requested. Seaboard Farms took advantage of the opportunity to reply to Pork Data's resistance and, as the preceding paragraph indicates, Seaboard Farms has had a full and fair opportunity to address any untimely arguments raised by Pork Data. Therefore, no prejudice to Seaboard Farms can be shown from the untimeliness of Pork Data's resistance and the court has considered both Pork Data's belated resistance to the motion to dismiss and Seaboard Farms' reply to that resistance in its disposition of the motion to dismiss.
Long after the issue of the adequacy of its pleading of fraud was joined, Pork Data offered a motion to amend its Answer and Counterclaim on November 21, 2000, in which it seeks to add certain paragraphs to Count III of its Counterclaim. Although Seaboard Farms represents, in a response filed December 4, 2000, that it has no resistance to Pork Data's motion to amend Count III of the Counterclaim, Seaboard Farms contends that the proposed amendment still fails to satisfy the requirements of Rule 9(b) or Rule 12(b)(6). Seaboard Farms points out that, in the seven months since Seaboard Farms first challenged the sufficiency of Pork Data's fraud allegations, Pork Data has done no discovery and has produced no sufficient factual allegations to sustain the claim in the face of Seaboard Farms' motion to dismiss. Seaboard Farms contends further that its alleged "alteration" of the contract, upon which Pork Data's fraud claim is apparently based, allegedly occurred before Pork Data ever signed the contract, which, without more, cannot constitute fraud. Therefore, Seaboard Farms contends that the court must dismiss Count III of the Counterclaim, either as originally stated or as amended.
The issue on a motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) is not whether a claimant will ultimately prevail, but whether the claimant is entitled to offer evidence in support of its claims. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683 (1974); United States v. Aceto Agric. Chem. Corp., 872 F.2d 1373, 1376 (8th Cir. 1989). In considering a motion to dismiss under Rule 12(b)(6), the court must assume that all facts alleged in the plaintiff's complaint (or defendant's coutnerclaim) are true, and must liberally construe those allegations. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99 (1957); Gross v. Weber, 186 F.3d 1089, 1090 (8th Cir. 1999) (); St. Croix Waterway Ass'n v. Meyer, 178 F.3d 515, 519 (8th Cir. 1999) (); Gordon v. Hansen, 168 F.3d 1109, 1113 (8th Cir. 1999) (same); Midwestern Machinery, Inc., v. Northwest Airlines, 167 F.3d 439, 441 (8th Cir. 1999) (same); Duffy v. Landberg, 133 F.3d 1120, 1122 (8th Cir.) (same), cert. denied, ___U.S. ___, 119 S.Ct. 62, 142 (1998).
The United States Supreme Court and the Eighth Circuit Court of Appeals have both observed that "a court should grant the motion and dismiss the action only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Handeen v. Lemaire, 112 F.3d 1339, 1347 (8th Cir. 1997) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229 ...
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