Topp, Inc. v. Uniden America Corp.

• Decision Date: 25 September 2007
• Docket Number: No. 05-21698-CIV.,05-21698-CIV.
• Citation: 513 F.Supp.2d 1345
• Parties: TOPP, INC., a Florida corporation, Plaintiff, v. UNIDEN AMERICA CORPORATION, a Delaware corporation, Defendant.
• Court: U.S. District Court — Southern District of Florida

Page 1345

513 F.Supp.2d 1345

TOPP, INC., a Florida corporation, Plaintiff, v. UNIDEN AMERICA CORPORATION, a Delaware corporation, Defendant.

No. 05-21698-CIV.

United States District Court, S.D. Florida, Miami Division.

September 25, 2007.

Kendall Coffey, Jeffrey B. Crockett, Paul J. Schwiep, Coffey Burlington LLP, Miami, FL, Plaintiff, Topp, Inc.

Stanley Wakshlag, Amanda M. Mc-Govern and Ismael Diaz, Kenny Nachwalter, P.A., Miami, FL, Jay D. Bennett, Frank G. Smith, III, Alston & Bird LLP, Atlanta, GA, for Defendant Uniden America Corporation.

ORDER GRANTING UNIDEN'S MOTION TO DISMISS COUNT 4 (FRAUD)

FEDERICO A. MORENO, District Judge.

THIS CAUSE came before the Court upon Uniden's Motion to Dismiss Topp's Amended Count 4 (Fraud) (D.E. No. 290), filed on April 26, 2007.

Topp, Inc. was formerly in the business of refurbishing and reselling cordless telephones. The company had a longstanding business relationship with Uniden American Corporation, a phone manufacturer and retailer, to refurbish and resell returned Uniden phones. At one time, Topp sold refurbished Uniden phones throughout the United States, Canada and Latin America. Topp also sold some new Uniden products in Latin America. However, the relationship between the two companies eventually soured and the instant action ensued.

In this order, the Court only addresses Count 4 of Topp's Second Amended Complaint, which alleges that Topp was fraudulently induced to enter a September 12, 2003 written agreement with Uniden. This written agreement provided that Uniden would supply Topp with returned phones. Topp claims that Topp was promised all of Uniden's returned phones under this contract, while Uniden argues that Uniden reserved the right to keep returned product for certain purposes. After considering the motion, response, reply to the response, and the pertinent portions of the record, the Court finds that Topp has not stated a claim for which relief can be granted. The Court dismisses the fraudulent inducement claim (Count 4) on the basis of the plain contractual language at issue and Florida's economic loss rule.

I. PROCEDURAL BACKGROUND

On April 6, 2007, Topp filed its Second Amended Complaint. Count 4 alleges that Topp was fraudulently induced to enter its September 12, 2003 written agreement with Uniden. (2d Am.Compl.¶ 49-51). On April 26, 2007, Uniden filed a Motion to Dismiss Topp's Amended Count 4 (Fraud), in which Uniden claims that Florida's economic loss rule bars Topp's fraudulent inducement claim. (D.E. No. 290). As support for this proposition, Uniden argues that the conduct forming the basis of the tort was not independent of the contract claims and that the damages in both contract and tort are the same. Id.

In Topp's Response to Uniden's Motion to Dismiss, Topp asserts that its count is "crystal clear" that Uniden's fraud induced the written contract. (D.E. No. 301 at 1). Topp further elaborates that Uniden made intentional misrepresentations of existing fact by stating that it was currently providing Topp with all of its returned cordless phones ("B-Stock"). Id. at 2. Topp also argues that Uniden falsely represented that it intended to deliver all of its returned cordless phones to Topp in the future. Id. at 3-4.

Uniden's reply reiterates that the written contract gave Uniden the right to retain an unlimited amount of B-Stock product. (D.E. No. 307 at 1). The company further asserts that no fraud action can lie where the alleged fraud contradicts a subsequent written contract and that Topp's alleged fraud and contract damages are the same. Id. at 1-2. Finally Uniden argues that the allegedly fraudulent statements concerned the same injury in tort and contract. Id. at 3.

II STANDARD

A court will not grant a motion to dismiss unless the plaintiff cannot prove any facts that would entitle him to relief. Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d 1364, 1369 (11th Cir. 1997). When ruling on a motion to dismiss, a court must view the complaint in the light most favorable to the plaintiff and accept the plaintiffs well-pleaded facts as true. Jenkins v. McKeithen, 395 U.S. 411, 421-22, 89 S.Ct. 1843, 23 L.Ed.2d 404 (1969); St. Joseph's Hosp., Inc. v. Hosp. Corp. of Am., 795 F.2d 948, 954 (11th Cir.1986).

III. STATEMENT OF LAW

A. Florida Law Applies

The Court reiterates its prior finding that Florida law and not Texas law applies to this claim, rejecting Topp's assertion that "it would be perverse" to apply Florida law. The Court previously ruled on this issue after a choice of law analysis, and again adopts its prior conclusion.

B. The Economic Loss Rule

Under Florida law, the economic loss rule operates to bar tort claims for purely economic loss in cases involving a defendant who is a manufacturer or distributor of a product or where the parties have contractual privity. See Indem. Ins. Co. of N. Am. v. Am. Aviation, Inc., 891 So.2d 532, 536 (Fla.2004). If the parties have contractual privity, and a claim for tort simply restates a claim for breach of contract, the tort claim is barred. Eclipse Med., Inc. v. Hydro-Surgical Instruments, Inc., 262 F.Supp.2d 1334, 1354 (S.D.Fla.1999), aff'd, 235 F.3d 1344 (11th Cir.2000); see also Thompkins v. Lil' Joe Records, Inc., 476 F.3d 1294, 1316 (11th Cir.2007) (stating that the fraud claim was the exact basis for the breach of contract claim and that the economic loss rule "probably" applied); Time Inn, S.A. v. Safilo U.S.A., Inc., 802 So.2d 382, 383-84 n. 1 (Fla.Dist.Ct.App.2001) (stating that a claim for fraud in the inducement is not barred by the economic loss rule as a matter of law, but if the claim is not independent of contract, then the economic loss rule will apply).

Underlying the economic loss rule is the assumption that the parties to a contract have allocated the economic risks of nonperformance through the bargaining process. A party to a contract who attempts to circumvent the contractual agreement by making a claim for economic loss in tort is, in effect, seeking to obtain a better bargain than he originally made. Indem. Ins. Co. of N. Am. v. Am.' Aviation, Inc., 891 So.2d 532, 536 (Fla.2004).

1. The Language of the Contract

No action for the tort of fraud in the inducement will lie where the alleged fraud contradicts a subsequent written contract. Eclipse, 262 F.Supp.2d at 1342. Reliance on fraudulent representations is unreasonable as a matter of law in such situations. Id. (citing Barnes v. Burger King Corp., 932 F.Supp. 1420, 1428 (S.D.Fla.1996)). Fraudulent inducement claims will fail even where the subsequent contract "simply says nothing" about the allegedly false promise. Id. at 1342.

Furthermore, when alleged misrepresentations are discussed and incorporated into a written contract containing a merger clause that supercedes all prior representations and agreements, the economic loss rule bars recovery for fraudulent inducement. Bates v. Rosique, 777 So.2d 980, 982 (Fla.Dist.Ct.App.2001); Hotels of Key Largo v. RHI Hotels, Inc., 694 So.2d 74, 77 (Fla.Dist.Ct.App.1997); see also Excess Risk Underwriters, Inc. v. Lafayette Life Ins. Co., 208 F.Supp.2d 1310, 1319 (S.D.Fla.2002) (highlighting merger clauses in the contracts at issue); Barnes, 932 F.Supp. at 1424. A party cannot take a position contradictory to a contract that plainly and unambiguously states that there are no other agreements or representations other than those contained in the contract. Bates, 777 So.2d at 982; see also Englezios v. Batmasian, 593 So.2d 1077, 1078 (Fla.Dist.Ct.App.1992) ("A party may not recover in fraud for an alleged oral misrepresentation which is adequately dealt with in a later written contract.").

2. Tort and Contract Claims Must be Distinct and Separate

A plaintiff cannot avoid the economic loss rule merely by labeling a claim as fraud or fraud in the inducement. See Hotels of Key Largo, 694 So.2d at 77; Behrman v. Allstate Ins. Co., 388 F.Supp.2d 1346, 1349, aff'd, 178 Fed.Appx. 862 (11th Cir.2006). Misrepresentations relating to the breaching party's performance under a contract do not give rise to an independent cause of action because such misrepresentations are interwoven and indistinct from the heart of the contractual agreement. Hotels of Key Largo, 694 So.2d at 78; see also Premix-Marbletite Mfg. Corp. v. SKW Chem., Inc., 145 F.Supp.2d 1348 (S.D.Fla.2001) (barring fraudulent inducement claim where misrepresentations constituting fraud went "directly to the heart of the parties' contractual relationship"). Ultimately, a claim that a defendant fraudulently induced a party to enter a contract by misrepresenting his intention to abide by the terms of the contract is barred by the economic loss rule. Excess Risk, 208 F.Supp.2d at 1319.

In Hotels of Key Largo, the plaintiffs claimed that the defendants fraudulently induced them into entering licensing agreements that would allow the plaintiffs to join the Radisson Hotels family and receive the attendant benefits. 694 So.2d at 75. The plaintiffs argued that the defendants did not fulfill their obligations, yet the court ruled that the terms of the contract were "clear and unambiguous" and that the plaintiffs did not state a cause for fraudulent inducement. Id. at 76. The type of fraud claim at issue was not independent of the contract, so the economic loss rule applied. Id. at 78.

In Excess Risk, statements allegedly made by a defendant to induce the plaintiff to enter into the contracts at issue were also embodied in the contracts. 208 F.Supp.2d at 1319. Therefore, the court ruled that the claim for fraudulent inducement were barred by the economic loss rule. Id. The plaintiff failed to state a claim independent from the acts and omissions that constituted the breach of contract. Id. at 1318. In addition, the court in Behrman barred a fraudulent inducement claim because it determined that precontract statements that variable annuity contracts would not endanger plaintiffs "nest egg" related...