Williams v. Dresser Industries, Inc.

Decision Date04 May 1992
Docket NumberNo. 1:92-CV-333-RHH.,1:92-CV-333-RHH.
Citation795 F. Supp. 1144
PartiesJohn R. WILLIAMS, and John B. Williams, Plaintiffs, v. DRESSER INDUSTRIES, INC., Defendant.
CourtU.S. District Court — Northern District of Georgia

Charles Wilson Dubose, Jennifer L. Wheatley Fletcher, Griffin, Cochrane & Marshall, Atlanta, Ga., for plaintiffs.

R. Peter Catlin, III, Bishop & Catlin, Brunswick, Ga., David J. Dempsey, Arlene Louise Coleman, Atlanta, Ga., Patrick G. Hatcher, Bye & Hatcher, Irvine, Cal., for defendant.

ORDER

ROBERT H. HALL, District Judge.

This is a case alleging Defendant's fraudulent concealment and misrepresentation in connection with a franchise arrangement between Plaintiffs and Defendant. Diversity jurisdiction is vested with this Court pursuant to 28 U.S.C. § 1332.

The case is currently before the Court on Defendant's Motion to Dismiss, Defendant's Motion for Protective Order, and Defendant's Motion for Protective Order and to Quash Subpoena. The Court DENIES Defendant's Motion to Dismiss 2-1, DENIES as moot Defendant's Motion for Protective Order 15-1, and DENIES as moot Defendant's Motion for Protective Order and to Quash Subpoena 8-1.

BACKGROUND

Plaintiffs John R. Williams and John B. Williams are residents of Georgia. Defendant Dresser Industries, Inc. ("Defendant", "Dresser") is a Delaware corporation maintaining its principal place of business in Dallas, Texas, and registered to do business in the State of Georgia. This case arises out of a franchise agreement between Plaintiffs and Defendant.

Defendant is a corporation involved in the manufacture of heavy construction equipment. At all relevant times, Defendant, through its distributors, sold construction equipment in the State of Georgia. Until January 28, 1988, Tri-State Tractor Company ("Tri-State"), under the ownership of R.E. Budd and its employees, held a franchise granted by Defendant pursuant to which Tri-State distributed Dresser equipment in Georgia.

On January 28, 1988, Plaintiffs purchased the assets of Tri-State for the approximate amount of two million, eighty thousand dollars ($2,080,000) and assumed liabilities in the approximate amount of twenty million dollars ($20,000,000). On that same day, January 28, 1988, Plaintiffs, as the new owners of Tri-State, entered into a new franchise agreement with Defendant to distribute Dresser equipment in Georgia. Pursuant to this new franchise agreement, Plaintiffs agreed to purchase a floor plan inventory of equipment, valued at more than ten million dollars ($10,000,000).

Prior to the execution of the new franchise agreement between Plaintiffs and Defendant, on or about January 22, 1988, agents of Defendant met with Plaintiffs and their accountant to discuss Plaintiffs' imminent purchase of Tri-State. At that January 22 meeting, Defendant's agents and Plaintiffs negotiated the terms of the new franchise agreement and agreed that it would be executed contemporaneously with Plaintiffs' purchase of Tri-State, which in fact it was. At some point during the negotiations, Plaintiffs specifically indicated to Defendant that Plaintiffs desired to continue Tri-State's relationship with Defendant substantially as it had been for the years previous and that, absent a commitment that the franchise relationship would continue unchanged, Plaintiffs would not purchase Tri-State.

On January 31, 1988, three days after Plaintiffs' purchase of Tri-State and their entering into the new franchise agreement with Defendant, Defendant announced its formation of a joint venture with Komatsu. Komatsu, formerly a competitor of Defendant's, sells construction equipment through its own dealerships located throughout Georgia. Komatsu is a much larger participent in the heavy equipment business than is Defendant.

Eventually, Plaintiffs on November 28, 1989 sold Tri-State to SMA-Stith Equipment Company, Inc. ("SMA-Stith"), the local Komatsu dealer. On January 13, 1992, Plaintiffs commenced the instant lawsuit in the Superior Court of Fulton County, Georgia. On February 12, 1992, Defendant removed the case to this Court on the basis of diversity jurisdiction. In their Complaint, Plaintiffs allege Defendant's fraudulent concealment and misrepresentation in connection with the new franchise agreement between Plaintiffs and Defendant. Specifically, Plaintiffs allege that at no time during either the January 22 negotiations between Defendant's agents and Plaintiffs, or the January 28 execution of the new franchise agreement between the parties — or indeed any time prior to the January 31 public announcement of the joint venture — did Defendant inform Plaintiffs of its intention to enter into a joint venture agreement with Komatsu. Thus, Plaintiffs contend that Defendant fraudulently concealed the fact of the impending joint venture between Defendant and Komatsu, in order to induce Plaintiffs to enter into the new franchise agreement with Defendant. Plaintiffs further contend that absent such concealment and misrepresentation by Defendant, Plaintiffs would not have entered into the new franchise agreement, neither would they have purchased Tri-State under the terms and for the price to which they agreed. Plaintiffs allege that as a result of the Dresser-Komatsu joint venture, Plaintiffs' customers became unwilling to purchase the Dresser equipment which Plaintiffs had purchased pursuant to the franchise agreement, and prior to the merger, due to the customers' fear that the Dresser equipment would become obsolete. Plaintiffs thus allege that as a result of Defendant's failure to disclose the fact of the joint venture, and Plaintiffs' subsequent entry into the purchase arrangement and franchise agreement in question, Plaintiffs have been damaged and have been caused to incur substantial losses in the subsequent sale of Tri-State to SMA-Stith.

Presently, Defendant has filed a Motion to Dismiss, as well as a Motion for Protective Order Staying Discovery and a Motion for Protective Order and to Quash Subpoena. The Court will address each Motion separately.

DISCUSSION
I. Defendant's Motion to Dismiss
A. Standard of Review for Dismissal

Defendant moves to dismiss Plaintiff's Complaint on the grounds that Plaintiff fails to state a claim. Federal Rule of Civil Procedure 12(b)(6) allows dismissal of a complaint which fails "to state a claim upon which relief can be granted." In consideration of a Rule 12(b)(6) motion, the court may look only at the pleadings, in this case the Complaint. See Rule 12(b). The Court construes the complaint broadly, accepting all facts pleaded therein as true and viewing all inferences in a light most favorable to the plaintiff. Cooper v. Pate, 378 U.S. 546, 84 S.Ct. 1733, 12 L.Ed.2d 1030 (1964); Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). Thus, the court will grant a motion to dismiss only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Haines v. Kerner, 404 U.S. 519, 520-21, 92 S.Ct. 594, 596, 30 L.Ed.2d 652 (1972); Conley, 355 U.S. at 45-46, 78 S.Ct. at 102.

B. Application

In the instant case, Defendant contends that dismissal is appropriate on two separate grounds. First, Defendant argues that due to the absence of a fiduciary or confidential relationship between Defendant and Plaintiffs, Defendant owed no duty to Plaintiffs to disclose its confidential business plans to enter into a joint venture agreement with Komatsu. Second, Defendant argues that it may not be held liable for fraud in the instant case, since Plaintiffs allege Defendant's misrepresentation and concealment of a future event, rather than an existing or past fact, as is required of a claim of fraud under Georgia law. This Court, however, does not agree, and finds that dismissal of Plaintiffs' Complaint in the instant case is unwarranted.

Under Georgia law, there are five essential elements to the tort of fraud: (1) a false representation by the defendant; (2) made with scienter; (3) made with the intention of deceiving the plaintiff or of inducing the plaintiff to act or refrain from acting; (4) upon which representation the plaintiff reasonably relied; (5) with the proximate result that the plaintiff suffered damage. City of Dodge v. Gardner, 232 Ga. 766, 769-70 n. 1, 208 S.E.2d 794 (1974); Guernsey Petroleum Corp. v. Data General Corp., 183 Ga.App. 790, 793, 359 S.E.2d 920 (1987); Morrison v. Hayes, 176 Ga.App. 128, 130, 335 S.E.2d 596 (1985); Hardy v. Gordon, 146 Ga.App. 656, 657, 247 S.E.2d 166 (1978); Shaw v. Cook County Fed. Sav. & Loan, 139 Ga.App. 419, 420, 228 S.E.2d 326 (1976). See also, Grizzle v. Guarantee Ins. Co., 602 F.Supp. 465, 467 (N.D.Ga.1984) (O'Kelley, J.). Moreover, Georgia law imposes upon parties a duty to speak, and Georgia courts have consistently held that concealment of a material fact when one is under a duty to speak constitutes fraud. See Reeves v. Williams & Co., 160 Ga. 15, 20-21, 127 S.E. 293 (1925); Kieffer v. Linton, 196 Ga.App. 327, 328, 396 S.E.2d 13 (1990); Woodall v. Orkin Exterminating Co., 175 Ga.App. 83, 84, 332 S.E.2d 173 (1985). The Court in Woodall explained the approach under Georgia law as follows:

"Fraud is exceedingly subtle in its nature. There are infinite means by which it can be accomplished. In its conception human ingenuity is limitless in its capabilities. It is therefore impossible to state any general rule by which particular frauds are to be identified. Classification is almost, if not quite, impossible. It may be perpetrated by signs and tricks, and even silence may in some instances amount to fraud." Cit. "Concealment of material facts may amount to fraud ... where the concealment is of intrinsic qualities of the article which the other party by the exercise of ordinary prudence and caution could not discover cit.; and misrepresentation may be perpetrated by acts as well as words and by artifices designed to mislead. Cit."

175 Ga.App. at 84, 332...

To continue reading

Request your trial
4 cases
  • DL Lee & Sons v. ADT Sec. Systems, Mid-South
    • United States
    • U.S. District Court — Southern District of Georgia
    • 27 Abril 1995
    ...Under Georgia law, concealment of material fact when one is under a duty to speak constitutes fraud. Williams v. Dresser Industries, Inc., 795 F.Supp. 1144, 1147 (N.D.Ga.1992) (The plaintiff need not allege a strict fiduciary or confidential relationship in order to sustain claims for fraud......
  • INTERN. TELECOMMUNICATIONS EXCHANGE CORP. v. MCI Telecommunications Corp.
    • United States
    • U.S. District Court — Northern District of Georgia
    • 31 Marzo 1995
    ...Georgia law, "questions of fraud, bad faith, and materiality of misrepresentation are normally for the jury." Williams v. Dresser Indus., Inc., 795 F.Supp. 1144, 1148 (N.D.Ga.1992). Only "where the evidence as a whole excludes every reasonable inference but one" may the Court rule upon frau......
  • Burger King Corp. v. Austin
    • United States
    • U.S. District Court — Southern District of Florida
    • 9 Octubre 1992
    ...of long duration, evidence of a confidential relationship.") (footnote omitted) (citation omitted). But see, Williams v. Dresser Indus., Inc., 795 F.Supp. 1144 (N.D.Ga.1992); West Coast Video Enter., Inc. v. Ponce de Leon, No. 90 C 1236, 1991 WL 49566, at *6-8, 1991 U.S. Dist. LEXIS 4209, a......
  • Williams v. Dresser Industries, Inc.
    • United States
    • U.S. Court of Appeals — Eleventh Circuit
    • 28 Agosto 1997
    ...for judgment as a matter of law, and the judgment is REVERSED. 1 R18 at 96.2 Plaintiff's Exh. 528.3 Id.4 Williams v. Dresser Industries, Inc., 795 F.Supp. 1144, 1148 (N.D.Ga.1992).5 Id. at 1150.6 Id. at 1152.7 Sherrin v. Northwestern Nat'l Life Ins. Co., 2 F.3d 373, 377 (11th Cir.1993).8 An......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT