Alabama Aircraft Industries Inc et al v. Boeing Company, The et al
MEMORANDUM OPINION-re: Dfts' Motion to Dismiss Pltf's Second Amended Complaint 39 . Signed by Judge R David Proctor on 3/20/2013. (AVC)
2013 Mar-20 PM 12:17
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
INDUSTRIES, INC., et al.,
THE BOEING COMPANY, INC., et
Case No.: 2:11-CV-3577-RDP
This case is before the court on Defendants’ Motion to Dismiss Plaintiff’s Second Amended
Complaint (Doc. # 39). The Motion has been fully briefed (Docs. # 40, 46, 49, 52, 53, 54).
Plaintiff Alabama Aircraft, Inc. (“AAI” or “Pemco”)2 has been performing Programmed
Depot Maintenance (“PDM”) in Jefferson County, Alabama for the United States Air Force’s
(“USAF” or “Air Force”) KC-135 Stratotanker fleet since approximately 1969 and has processed
well over 2,400 such aircraft, more than Boeing or any other provider of these services. (Doc. # 34
at ¶ 8).
For purposes of this Motion, the facts are as alleged in Plaintiff’s Second Amended Complaint. These may
not be the actual facts of this case; however, they are the well-pleaded facts contained in the Second Amended Complaint.
The claims of the named Plaintiffs in this action, Alabama Aircraft Industries, Inc., Alabama Aircraft
Industries, Inc. – Birmingham, and Pemco Aircraft Engineering Services, Inc., are being prosecuted by and through
Joseph Ryan as the trustee of the Litigation Trust established in relation to the Chapter 11 Bankruptcy case of the named
Plaintiffs. Thus, the term “Plaintiff” will be used in the singular herein.
In or about August 1994, after a competitive bidding process, the Air Force awarded Pemco
(as AAI was known at that time)3 the 1994 PDM Contract to perform maintenance on its KC-135
aerial refueling tanker aircraft. AAI completed work on the final aircraft inducted for PDM under
this contract during 2003. (Doc. # 34 at ¶ 9).
In February or March 2004, Boeing4 and AAI began conversations about teaming up to bid
jointly on the government KC-135 PDM work. (Doc. # 34 at ¶ 29). On or about May 20, 2005, the
Air Force released its draft for the FY08 Recompete KC-135 PDM Contract, with a Request for
Proposal number of FA8105-05-R-0014 (hereafter, the “RFP”) for the FY08 KC-135 PDM work.
(Doc. # 34 at ¶ 33). The original RFP contemplated a Best Estimated Quantity (“BEQ”) of 44
KC-135 aircraft per year. (Doc. # 34 at ¶34).
On June 3, 2005, Pemco and Boeing entered into a Memorandum of Agreement (“6/2005
Recompete MOA”) to submit a joint proposal for the KC-135 PDM Contract under a “teaming”
arrangement in which Boeing would be the prime contractor and Pemco would be the principal
subcontractor. (Doc. # 34 at ¶35). Under the 6/2005 Recompete MOA, Pemco provided to Boeing
proprietary “technical and cost proposal information” including its lower cost structure and bidding
(Doc. # 34 at ¶¶ 36, 40, 41).
The 6/2005 Recompete MOA contained a
Non-Disclosure Agreement, under which the proprietary business and financial information provided
by Pemco to Boeing was to be used solely “for the purpose of negotiating a Memorandum of
Agreement leading to a long-term subcontracting relationship relating to the [KC-135 PDM]
program.” (Doc. # 34 at ¶ 38). The 6/2005 Recompete MOA also contained a Work Share
The terms “Plaintiff,” “Pemco” or “AAI” will be used interchangeably to refer to Plaintiff.
For ease or reference, Defendants will be referred to as “Boeing.”
Agreement that recognized the possibility that the BEQ of 44 aircraft was only an estimate and that
the actual number of planes involved in the Program was subject to change. (Doc. # 34 at ¶ 39).
Effective on September 6, 2005, the 6/2005 Recompete MOA was re-issued by Boeing and
Pemco, and amended by the addition of another company (the “9/2005 Recompete MOA”). (Doc.
# 34 at ¶ 44). Under the Work Share Agreement relating to the 9/2005 Recompete MOA, Boeing
agreed that “[u]pon successful award of a contract for the Program, it is agreed that Pemco will
receive 50% of all KC-135 inductions awarded on said contract.” (Doc. # 34 at ¶ 47). The Work
Share Agreement continued: “In the event that the number of aircraft drops below a quantity that
sustains two Sources of Repair (SOR), it is the intent of the parties that the touch labor would be
performed entirely at Pemco with the engineering and procurement remaining at BASC.” (Doc. #
34 at ¶ 47).
The 9/2005 Recompete MOA contains the following relevant clauses:
RELATIONSHIP OF THE PARTIES
Each party shall act as an independent contractor and not as agent for, partner
of, or joint venturer with the other party unless such agency, partnership or
joint venture is established and agreed to, under separate document, between
the parties. ... No other relationship outside of that contemplated by the terms
of this Agreement shall be created hereby. . . .
TERM AND EFFECTIVITY
After the release of any RFP or amendments thereto, if the contents thereof
are so unfavorable to the Prime or a Principal Subcontractor that participation
in the Program is no longer practical or financially viable; in such case, the
party seeking termination for this reason will provide written notice to the
other party within 15 days of the receipt of the RFP (or amendment) giving
notice of such.
The Parties recognize that one Party ... may fail to perform its obligations
under this Agreement ... and thereby cause damage to the other Parties ... .
The Parties, having full consideration to the nature of this transaction, agree
that the following categories of damages are disclaimed by each Party, and
the Non-breaching Parties neither expects, nor will seek, to recover from the
Breaching Party any incidental damages, punitive and exemplary damages
and any consequential damages, including but not limited to the following:
(a) any profits that the Non-breaching Parties expected to earn on the Prime
Contract or any other contract related to the Program; ...
. . . Nothing in this MOA shall constitute, create, give effect to or imply a
joint venture, partnership, or formal business organization. Each Party is an
independent contractor and not an agent for the other Party. ... No such
relationship is intended by any reference herein to a “team” or “team
This MOA shall be governed by the laws of the state of Missouri, without resort to
conflict of laws provisions.
This MOA together with its Exhibits and Attachments contains the entire agreement
between the Parties concerning the subject matter thereof and supersedes any
previous understanding, commitments or agreements, oral or written.
(Doc. # 40-6 at 4, 6, 8-9, 10).
Pursuant to its teaming arrangement with Boeing and the 9/2005 Recompete MOA, Pemco
made approximately $5 million in capital expenditures. (Doc. # 34 at ¶ 50).
On or about August 19, 2005, the Air Force formally released the FY08 Recompete KC-135
PDM Contract RFP, number FA8105-05-R-0014. Boeing and Pemco jointly worked under the
9/2005 Recompete MOA to bid in response to the RFP. (Doc. # 34 at ¶ 57). On or about October
1, 2005, the Air Force awarded a “Bridge Contract” for KC-135 PDM to Boeing, with Pemco serving
as Boeing’s subcontractor, pending the award of the FY08 Recompete KC-135 PDM Contract. (Doc.
# 34 at ¶ 58).
Pemco did not plan to submit a separate bid for the FY08 Recompete KC-135 PDM Contract
in response to the RFP. Instead, pursuant to the MOA, Pemco assisted Boeing in preparing a
proposal for the FY08 Recompete KC-135 PDM Contract. (Doc. # 34 at ¶ 59). On or about October
31, 2005, Boeing submitted the joint bid proposal in response to the RFP as a prime contractor, with
Pemco acting as its principal subcontractor and having responsibility for approximately one-half of
the KC-135 PDM work. (Doc. # 34 at ¶ 62).
On May 1, 2006, Boeing wrote to the Air Force concerning a “Letter of Intent” (LOI) dated
April 26, 2006, in which the government had proposed changes to the RFP # FA8105-05-R-0014
for the KC-135 PDM work and the proposed reduction of the BEQ to a baseline of 24 aircraft, from
the original proposed 44 aircraft per year. (Doc. # 34 at ¶ 66). On or about May 31, 2006, the Air
Force released an amendment to the FY08 Recompete KC-135 PDM Contract consistent with its
April 26, 2006 LOI reducing the annual BEQ from 44 to 24 aircraft. (Doc. # 34 at ¶ 68).
On June 6, 2006, Boeing terminated the 9/2005 Recompete MOA pursuant to Paragraph 5c
citing the reduced BEQ as the reason and stating that the “requested quantities is so unfavorable to
Boeing that further participation in the Program pursuant to the MOA is no longer practical or
financially viable.” (Doc. # 34 at ¶ 69).5
Again, paragraph 5c of the MOA provides:
After the release of any RFP or amendments thereto, if the contents thereof are so
unfavorable to the Prime or a Principal Subcontractor that participation in the
Program is no longer practical or financially viable; in such case, the party seeking
termination for this reason will provide written notice to the other party within 15
days of the receipt of the RFP (or amendment) giving notice of such.
(Doc. # 34 at ¶ 69).
On June 12, 2006, Pemco had filed an agency-level protest asking the Air Force to allow
submissions of new proposals. The Air Force contacted Pemco and asked it to withdraw the protest,
because it would create paperwork and would slow down the process. (Doc. # 34 at ¶ 75). Because
the Air Force promised to re-open the bidding, Pemco withdrew its protest.
On July 19, 2006, the Air Force announced that it was throwing open the RFP
FA8105-05-R-0014, for the FY08 KC-135 PDM work, to both new bidders and existing bidders to
submit or re-submit a proposal or a changed proposal. (Doc. # 34 at ¶ 74). On September 18, 2006,
Boeing submitted its own bid to the USAF in response to the amended RFP, which proposed doing
all the FY08 Recompete KC-135 PDM work at Defendants’ San Antonio facility. (Doc. # 34 at ¶
76). Pemco submitted its own bid on September 18, 2006 to serve as prime contractor on the FY08
Recompete KC-135 PDM.
(Doc. # 34 at ¶ 78).
On or about February 23, 2007, Pemco and Boeing each submitted separate Final Proposal
Revisions (“FPRs”) for the FY08 Recompete KC-135 PDM Contract. (Doc. # 34 at ¶ 81). In
Boeing’s FPR, it substantially dropped its labor hours per aircraft, especially in key years of the
contract. This resulted in a substantial price reduction in Boeing’s bid, which was more than large
enough to account for the $15 million difference in the evaluated prices. (Doc. # 34 at ¶ 82). On
or about June 18, 2007, Pemco and Boeing each submitted separate Second FPRs for the FY08
KC-135 PDM Contract. (Doc. # 34 at ¶ 85).
On or about August 31, 2007, Boeing belatedly provided Pemco with information regarding
its efforts to comply with its obligations under the 9/2005 Recompete MOA to implement a firewall
and take other precautions to protect Pemco’s proprietary information that it had received while
Boeing and Pemco were working together in connection with making the original joint proposal for
the FY08 Recompete KC-135 PDM. (Doc. # 34 at ¶ 88). The information provided by Boeing
revealed that it had failed to prevent Boeing personnel with specific knowledge of detailed Pemco
pricing and proprietary information from continuing to work on Boeing’s proposal to the Air Force
which was in direct competition with Pemco’s proposal. (Doc. # 34 at ¶ 89). On September 6, 2007,
Pemco notified the Air Force of their belief that Boeing personnel with knowledge of Pemco’s
proprietary information had worked on Boeing’s bid. (Doc. # 34 at ¶ 90). Pemco withdrew its
September 6, 2007 complaint after being advised that the complaint was holding up the award of the
contract. (Doc. # 34 at n.10).
On September 7, 2007, the USAF accepted Boeing’s revised bid, even though it found that
Pemco was as well qualified as Boeing. (Doc. # 34 at ¶ 77). The Air Force was impressed by
Boeing’s lower total evaluated price difference of $15 million. (Doc. # 34 at ¶ 77). Boeing failed
to submit any technical justifications or explanations for the change in its labor hour assumptions.
Plaintiff alleges that Boeing used Pemco’s proprietary information about costs, pricing, bidding
methodology in making this change. (Doc. # 34 at ¶ 82).
After Pemco submitted a bid protest that was sustained, on March 3, 2008, the Air Force
issued a notice to Pemco of a new award decision which again selected Boeing for award of the
FY08 Recompete KC-135 PDM Contract. (Doc. # 34 at ¶ 96).
On March 11-13, 2008, Pemco attended a Program Management Review (“PMR”) set of
briefings by the Air Force regarding the KC-135 PDM program which indicated that there was a
likelihood that the Air Force would actually increase quantities of KC-135 aircraft to be sent to
outside contractors for PDM work. Over the period from mid-March 2008 to late July 2008, Pemco
received other indications that this would probably occur. (Doc. # 34 at ¶ 98).
Before Boeing and Pemco entered into the 6/2005 Recompete MOA to submit their joint bid,
on April 1, 2005, they entered into another Memorandum of Agreement (the “Bridge MOA”) which
provided for the continuation of their contractual relationship for obtaining and sharing KC-135
PDM work for FY06 and FY07 on a PDM contract that had covered Fiscal Years 2002 through
2005. (Doc. # 34 at ¶ 112). On October 18, 2005, pursuant to the Bridge MOA, Boeing and Pemco
entered into a contract titled “Repair Agreement No. 06-003,” for a “Long Term Requirements
Contract” (or “LTRC”) under Government Price Contract Proposal number FA8105-05-D-0004 for
the performance of PDM on KC-135 aircraft. Pursuant to this LTRC, Pemco was to perform PDM
for Boeing on KC-135 aircraft for a base period of October 1, 2005 through September 30, 2007, and
two six-month option periods effective October 1, 2007 through September 30, 2008.
The LTRC was subsequently extended to cover later aircraft that Boeing was awarded under
its FA8105-05-D-0004 contract with the Air Force. Boeing and AAI were in agreement that the fair
value of AAI’s PDM work on such a volume of KC-135 aircraft would be approximately $6 million
per aircraft, per contract. (Doc. # 34 at ¶ 115). Thereafter, Boeing called AAI and informed AAI
that it had learned from the Air Force that it only had a total of $26 million available to fund PDM
work on 8 KC-135 aircraft, and that AAI would have to do the PDM work for that lower price, equal
to $3.25 million per aircraft. (Doc. # 34 at ¶ 116). On March 18, 2008, in a LTRC of the same date
(“the March 18, 2008 LTRC”), AAI accepted Boeing’s offer to do the work based on that pricing
model. (Doc. # 34 at ¶ 118). In doing so, AAI relied upon Boeing’s representation that $26 million
was all the funding available from the Air Force. (Doc. # 34 at ¶ 118). Plaintiff alleges that at this
time, Boeing knew (and/or reasonably expected) that it would seek and receive additional
compensation from the USAF for the PDM work during the performance of the 2008 Bridge
Contract. (Doc. # 34 at ¶ 119). AAI ultimately received and performed PDM work on 14 aircraft
under the terms of the March 18, 2008 LTRC.
Boeing later received a modification (or modifications) of its 2008 Bridge Contract with the
Air Force under which it received additional compensation for the work on each aircraft. (Doc. #
34 at ¶ 120). AAI learned about these subsequent modifications in approximately February 2009.
(Doc. # 34 at ¶ 122).
Plaintiff alleges that after Boeing received the FY08 Recompete KC-135 PDM Contract in
March 2008, Boeing deliberately and systematically caused multiple instances of Customer
Furnished Materials Type 2 (“CFM2") deliveries to be delayed to AAI which resulted in it losing
early completion bonuses. (Doc. # 34 at ¶ 125).
Plaintiff also alleges that it was not paid for “over and above” work under the Boeing’s 1998
KC-135 PDM (and extensions, including the FY08 Recompete KC-135 PDM Contract) and/or the
2008 Bridge Contract. Under these respective contracts, in order for AAI to receive payment for
“over and above” work, Boeing must approve it as “over and above,” and then request the USAF to
accept it as “over and above” work. (Doc. # 34 at ¶ 133). Plaintiff asserts that Boeing owed a duty
to AAI to seek USAF approval for “over and above” work and negotiate proper contract
modifications in a timely and consistent fashion such that AAI could issue invoices and receive
payment for “over and above” work performed. AAI alleges that it performed such work, but was
not paid for it.6 (Doc. # 34 at ¶¶ 133-35). AAI has an outstanding and unpaid invoice (#27465) to
Boeing in the amount of $32,855.23 for “over and above work.” (Doc. # 34 at ¶ 138). Boeing did
Despite this factual assertion, Plaintiff has failed to allege that this breached a contractual obligation on
not obtain the necessary contract modification with the USAF in order for AAI to be compensated
for that work. (Doc. # 34 at ¶ 139).
Standard of Review
As a general rule, the Federal Rules of Civil Procedure require only that the complaint
provide “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.
R. Civ. P. 8(a). However, to survive a motion to dismiss, a complaint must “state a claim to relief
that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). “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, 129
S.Ct. 1937, 1949 (2009). The complaint must include enough facts “to raise a right to relief above
the speculative level.” Twombly, 550 U.S. at 555. Pleadings that contain nothing more than “a
formulaic recitation of the elements of a cause of action” do not meet Rule 8 standards, nor do
pleadings suffice that are based merely upon “labels or conclusions” or “naked assertion[s]” without
supporting factual allegations. Twombly, 550 U.S. at 555, 557. To be plausible on its face, the claim
must contain enough facts that “allow  the court to draw the reasonable inference that the defendant
is liable for the misconduct alleged.” Iqbal, 129 S. Ct. at 1949. And to survive Defendants’ Motion,
the allegations of Plaintiff’s Second Amended Complaint must permit the court based on its “judicial
experience and common sense . . . to infer more than the mere possibility of misconduct.” Id.
Plaintiff’s Second Amended Complaint was drafted after a lengthy hearing on May 24, 2012,
on Defendants’ Motion to Dismiss Plaintiff’s First Amended Complaint. At the May 24, 2012
hearing, the court and the parties engaged in detailed discussions about the pleading deficiencies in
Plaintiff’s First Amended Complaint. After the conclusion of the hearing, the court allowed Plaintiff
a third opportunity to draft a complaint setting forth claims with sufficient detail to satisfy Twombly
Plaintiff’s Second Amended Complaint contains the following counts:
Count One: Breach of Contract - 2005 Recompete MOA;
Count Two: Declaratory Judgment - Limitation of Liability is Unenforceable;
Count Three: Breach of Contract - 2005 Recompete MOA Non-Disclosure
Agreement Regarding Pemco’s Proprietary Information;
Count Four: Declaratory Judgment - Limitation of Liability is Unenforceable With
Respect to Non-Disclosure Violations
Count Five: Misappropriation of Proprietary and Trade Secret Information Missouri Trade Secrets;
Count Six: Misrepresentations - Boeing’s Bridge Contract;
Count Seven: Suppression of Facts - Boeing’s Bridge Contract;
Count Eight: Fraud - Breach of Duty to Correct and Update;
Count Nine: Breach of Contract - Boeing’s 2008 Bridge Contract;
Count Ten: Declaratory Judgment and Specific Performance for Over and Above
Work, and Alternately Breach of Contract;
Count Eleven: Breach of Contract for Over and Above Work
Counts One and Three
In their motion, Defendants have not moved to dismiss either of these claims, and the court
does not address them here.
Counts Two and Four
Counts Two and Four of the Second Amended Complaint seek a declaratory judgment that
the Limited Obligation clause of the September 2005 MOA is unenforceable. The Limited
Obligation clause of the September 2005 MOA only comes into play if Plaintiff prevails on its
breach of contract claims. If Plaintiff prevails on the breach of contract claims, the Limited
Obligation clause purports to provide Defendants a defense to Plaintiff’s recovery of certain
damages. Thus, Counts Two and Four seek declaratory relief on an affirmative defense.
Defendants’ Motion to Dismiss argues that such clauses are enforceable under Missouri law.
Plaintiff argues that the clause does not apply where a breach is deliberate or in bad faith. In either
case, although the court sees these claims as duplicative of Defendants’ affirmative defense to
damages, they are matters that will be properly determined in the course of this litigation one way
or the other in relation to Counts One and Three, and that is the appropriate time and manner to
address them. Therefore, Defendants’ Motion to Dismiss counts Two and Four will be denied.
Count Five - Misappropriation of Proprietary and Trade Secret Information Missouri Trade Secrets
Defendants argue that this claim fails as a matter of law because Alabama’s choice of law
principles dictate that this court must apply Alabama law to Plaintiff’s purported trade secrets act
claim. Plaintiff argues that Missouri law applies because Boeing violated Missouri law in Missouri.
Plaintiff further references the parties’ Non-Disclosure Agreement as support for the argument that
Missouri law applies.
The court notes, however, that Plaintiff does not set forth the “Applicable Law” provision
of the Non-Disclosure Agreement in full. That clause provides,
11. Applicable Law. The interpretation of this Agreement and the
rights and liabilities of the parties to this Agreement shall be
governed by the law of the state of Missouri, excluding its conflicts
of laws principles.
(Doc. # 40-7).
Plaintiff argues that this language does not limit the application of Missouri law solely to
breaches of the Non-Disclosure Agreement. The court disagrees. A review of the entire clause
reveals that the parties only agreed that Missouri law would apply to the interpretation of the NonDisclosure Agreement itself. Moreover, the parties specifically excluded the application of Missouri
conflicts of laws principles.
A federal court sitting in diversity applies the choice of law rules of the state in which it sits.
Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487 (1941). In Alabama, the long established
choice of law rule of lex loci delicti governs tort causes of action and requires that the substantive
law of the place where the tort occurred must be employed, while procedural law of the forum state
is to be applied. Alabama Great So. R.R. v. Carroll, 97 Ala. 126, 11 So. 803 (1892). “[A]n Alabama
court will determine the substantive rights of an injured party according to the law of the state where
the injury occurred.” Fitts v. Minnesota Mining & Manufacturing Co., 581 So.2d 819, 820 (Ala.
1991). Where, as here, the injury allegedly suffered by Plaintiff is financial, the location where the
injury was felt normally is the determinative consideration. Fitts, 581 So.2d at 820.
Courts in Alabama faced with financial injury claims have consistently held, under the
doctrine of lex loci delicti, that the law of the state where a plaintiff suffered its alleged financial
injury arising from the common law tort claim is the law that governs those claim. See San
Francisco Residence Club, Inc. v. Baswell-Guthrie, 2012 WL 4339316, *30 (N.D. Ala. 2012); San
Francisco Residence Club, Inc., et al. v. Park Tower, LLC, et al., Case No. 5:08-CV-01423-AKK,
Doc. # 294 at 11 (N.D. Ala. Jan. 12, 2012); Chambers v. Cooney, 2007 WL 2493682, *11 (S.D. Ala.
2007) Glass v. Southern Wrecker Sales, 990 F.Supp. 1344, 1348 (M.D. Ala. 1998).
Plaintiff has its principle place of business in Alabama. (Doc. # 34 at ¶ 1). Therefore, any
financial injury was suffered in Alabama. Accordingly, this court must apply Alabama law to
Plaintiff’s trade secrets claim. Unfortunately for Plaintiff, under Alabama law, the claim in Count
Five is time-barred. The Alabama Trade Secrets Act, Ala.Code 1975 § 8-27-5, provides that “[a]n
action for misappropriation must be brought within two years after the misappropriation is
discovered or by the exercise of reasonable diligence should have been discovered.” Plaintiff
notified the Air Force of the alleged misappropriation of its proprietary information on September
6, 2007. (Doc. # 34 at ¶ 90). Therefore, Plaintiff was aware of the violation, at the latest, by that
date. The original Complaint in this case was not filed until October 7, 2011, over four years later.
Plaintiff’s Trade Secrets Act claim is therefore barred by the applicable statute of limitations.7
Plaintiff’s Fraud Claims - Counts Six through Eight
To survive a motion to dismiss, a complaint “does not need detailed factual allegations,” but
it must provide the defendant with fair notice of what the claim is about and the grounds upon which
it rests. Twombly, 550 U.S. 544, 545 (2007). There is an important exception to this general rule
where the claim is grounded in fraud: in that instance, the complaint must comply with Federal Rules
of Civil Procedure 9(b). Rule 9(b) provides that in “alleging fraud . . . a party must state with
particularity the circumstances constituting fraud.” In order to comply with this requirement, a
Moreover, this claim is somewhat duplicative of Count Three, which alleges a breach of the parties’ NonDisclosure Agreement based upon the same or similar facts.
plaintiff must set forth “(1) precisely what statements were made in what documents or oral
representations or what omissions were made, (2) the time and place of each such statement and the
person responsible for making (or, in the case of omissions, not making) same, (3) the content of
such statements and the manner in which they misled the plaintiff, and (4) what the defendants
obtained as a consequence of the fraud.” Ziemba v. Cascade Int’l, Inc., 256 F.3d 1194, 1202 (11th
Cir. 2001), quoting Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d 1364, 1371 (11th Cir.
1997). The court will apply these Rule 9(b) requirements to Plaintiff’s fraud claims contained in
Counts Six, Seven, and Eight in turn.
Count Six - Misrepresentations: Boeing’s Bridge Contract
Count Six of Plaintiff’s Complaint alleges that Boeing made certain misrepresentations of
material facts in connection with the October 1, 2005 Bridge Contract. A plaintiff alleging fraud
under a misrepresentation theory in Alabama “must prove four elements: (1) a false representation;
(2) that the false representation concerned a material existing fact; (3) that the plaintiff relied upon
the false representation; and (4) that the plaintiff was damaged as a proximate result of the reliance.”
Billy Barnes Enterprises, Inc. v. Williams, 982 So.2d 494, 499 (Ala. 2007) (citation omitted); see
also Cook’s Pest Control, Inc. v. Rebar, 28 So.3d 716, 725 (Ala. 2009) (“To establish a prima facie
case of fraudulent misrepresentation, a plaintiff must show: (1) that the representation was false, (2)
that it concerned a material fact, (3) that the plaintiff relied on the false representation, and (4) that
actual injury resulted from that reliance.”) (citations omitted).
Plaintiff alleges that the following misrepresentations were made to it by Boeing:
That the USAF only had $26 million of funding available to pay for PDM
work on 8 aircraft (i.e., $3.25 million per aircraft), and a correspondingly low
$3.25 million for each additional aircraft that could be sent to Plaintiff, i.e.,
that the only way the work could be obtained was by Plaintiff agreeing to do
the PDM work for $3.25 million per aircraft.
That Boeing had done its best to get the most advantageous arrangement with
USAF, and what Boeing showed the Plaintiff was the best obtainable from
That Boeing was going to be paid the same type of revenue per aircraft that
Plaintiff was going to receive.
That this was the most advantageous arrangement with the USAF that Boeing
would be able to procure.
That Boeing was in the same predicament as Plaintiff in the matter of
(Doc. # 34 at ¶ 245).
Plaintiff thereafter makes formulaic allegations that “Boeing knew and/or reasonably
anticipated that (1) Boeing would receive more than $3.25 million per aircraft, (2) Boeing could and
would seek and receive additional compensation from the USAF for such PDM work during the
performance of the contract, and (3) Boeing’s other representations were false or stated so as to be
misleading in context.” However, glaringly absent from Plaintiff’s Second Amended Complaint is
any factual allegation that the representations were actually false when they were made and that
Boeing knew they were false. “[A] formulaic recitation of the elements of a cause of action” does
not satisfy Rule 8 pleadings standards, much less the the more particularized pleading standards of
Rule 9. Twombly, 550 U.S. at 555, 557. Pleadings based upon “labels or conclusions” or “naked
assertion[s]” without supporting factual allegations are due to be dismissed. Twombly, 550 U.S. at
At the May 24, 2012, hearing on Defendants’ Motion to Dismiss the First Amended
Complaint, the court clearly instructed Plaintiff that in re-pleading its fraud claims,
[Y]ou’re going to have to be very particular, consistent with 9(b),
about what Boeing knew when it made these representations that
were inconsistent with the representations and also specific about the
fact that Boeing made these representations with the intent to deceive
and what facts you have in which to plead to support that allegation.
and give me the 9(b) particulars, if you have them and you can
present them, as to why you can plead with good faith at this point
that Boeing, first, knew it was making misrepresentations at the time
it made them; . . .
(Doc. # 33 at 82, 84). Despite being specifically instructed to provide details regarding Boeing’s
alleged knowledge of the falsity of its representations, Plaintiff’s Second Amended Complaint fails
to provide these particulars as to falsity. The Second Amended Complaint does not allege that the
a false representation concerned a material existing fact. Rather, it assumes based on hindsight that
the representations must have been false when made. Plaintiff’s failure to allege that the statements
were false when made negates Plaintiff’s misrepresentation claim, particularly on a third attempt at
drafting the claim. Allen v. Baker, 99 So.3d 324, 331 (Ala.Civ.App. 2012) (where the alleged
misrepresentation is a truthful statement, an essential element of a misrepresentation claim is
negated); see GE Capital Aviation Services, Inc. v. Pemco World Air Services, Inc., 92 So.3d 749
(Ala. 2012) (where there is no evidence8 that the representation at issue was false, a fraud claim fails
as a matter of law). Therefore, Defendant’s Motion to Dismiss Plaintiff’s misrepresentation claim
in Count Six is due to be granted.
Although in this case, there is no assertion the representation was knowingly false when made, the legal
principle nevertheless applies with full force.
Count Seven - Suppression of Facts - Boeing’s Bridge Contract
In Count Seven, Plaintiff alleges that Boeing suppressed certain material facts in connection
with the Bridge Contract. “To make out a prima facie case of fraudulent suppression, [a plaintiff]
must show: (1) that [the defendant] had a duty to disclose; (2) that [the defendant] suppressed an
existing, material fact; (3) that [the defendant] had actual knowledge of the fact of its materiality;
(4) that [plaintiff’s] lack of knowledge induced her to act; and (5) that she suffered actual damages
as a proximate result.” Hardy v. Blue Cross & Blue Shield of Ala., 585 So.2d 29, 32 (Ala. 1991).
Plaintiff’s Second Amended Complaint alleges that the following material facts known
to Defendants were suppressed:
That Boeing intended to, and would, seek and receive additional
compensation from the USAF for such PDM work during the performance
of the contract.
That Boeing was being paid a higher per-aircraft amount than it was passing
on to Plaintiff (even after allowing for normal differences such as parts
supplied by Boeing).
That Boeing was retaining, and would retain, for itself all excess amounts on
AAI-inducted aircraft that Boeing was able to obtain from the USAF, without
disclosing to AAI that such excess funding was available and the amounts
That Boeing reasonably anticipated receiving additional compensation from
the USAF for such PDM work during the performance of the contract.
Material information as to the nature and content of Defendants’ many
communications with Air Force representatives and personnel.
Material information received by Defendants relating to pricing of PDM work
on aircraft to be delivered under extensions and modifications of Contract
Material information as to the prices that Boeing would charge the USAF for
PDM work and aircraft serviced by Plaintiff.
That Boeing billed the USAF and in fact received additional compensation
at a materially higher cost to the USAF, such that Boeing pocketed at least an
additional $750,000 to $769,000 per aircraft that Plaintiff was delivering
from PDM work.
(Doc. # 34 at ¶ 281).
Defendants argue that Plaintiff’s suppression claim fails because there was no duty to
disclose. “A duty to communicate can arise from a confidential relationship between the plaintiff
and the defendant, from the particular circumstances of the case, or from a request for information,
but mere silence in the absence of a duty to disclose is not fraudulent.” Lawson v. Harris Culinary
Enterprises, LLC, 83 So.3d 483, 492 (Ala. 2011). Moreover,”[a]n action for suppression will lie
only if the defendant actually knows the fact alleged to be suppressed.” McGarry v. Flournoy, 624
So.2d 1359, 1362 (Ala. 1993).
Plaintiff first argues that a confidential relationship existed between the parties and gave rise
to a duty to speak. However, the September 2005 MOA defined the parties’ relationship as follows:
“Nothing in this MOA shall constitute, create, give effect to or imply a joint venture, partnership,
or formal business organization. Each Party is an independent contractor and not an agent for the
other Party. ... No such relationship is intended by any reference herein to a ‘team’ or ‘team
members.’” (Doc. # 40-6). Although Plaintiff and Defendant agreed to attempt to work together for
their mutual benefit, they were both sophisticated businesses, experienced in their work, who
generally operated as competitors. Furthermore, according to Plaintiff’s Second Amended
Complaint, the parties were already in litigation over the alleged breach of the September 2005 MOA
at the time Plaintiff alleges there existed a confidential relationship. (Doc. # 34 at ¶ 272). But it is
clear that under these circumstances (and more precisely, these allegations even taken as true), no
special or confidential relationship existed which would give rise to a duty to communicate.
Plaintiff also argues that it posed direct inquiries to Defendant which gave rise to duty to
speak. Although at no point does Plaintiff ever set forth the details of any such inquiry in the
Second Amended Complaint, Plaintiff has alleged that it made the direct inquiries. “AAI would
periodically request updates from Boeing concerning its government contracting status with the
USAF ... .” (Doc. # 34 at ¶ 270). “The duty to disclose further arose from direct requests for
information from Plaintiff.” (Doc. # 34 at ¶ 285). “Despite the many requests we made for
additional information, ...” (Doc. # 34 at ¶ 310). “The duty to disclose further arose from direct
requests for information from Plaintiff, ...” (Doc. # 34 at ¶ 319).
Although the better practice would have been to provide more details about the request for
information, particularly given that this was Plaintiff’s third attempt to state its claims against
Defendants, the court concludes that the allegations are sufficient to permit the court based on its
“judicial experience and common sense . . . to infer more than the mere possibility of misconduct,”
Iqbal, 129 S. Ct. at 1949, and that they satisfy Rule 9(b). Thus, Defendant’s Motion to Dismiss
Count Seven of Plaintiff’s Second Amended Complaint is due to be denied.9
Count Eight - Fraud: Breach of Duty to Correct and Update
This claim was specifically pled in the alternative to Counts Six and Seven. (Doc. # 34 at
¶ 292). Because this claim is duplicative of count Seven, which the court is allowing to proceed,
Count Eight is redundant. Moreover, as argued by Defendants, it is not at all clear that Alabama
This is not to say this claim will survive on a more developed factual record unless Plaintiff is able to present
evidence regarding the details of the particular requests for information, including but not limited to the dates, substance,
and manner of such inquiries.
even recognizes such a claim. The only Alabama case cited by Plaintiff for the proposition that such
a claim exists was actually addressing the elements of an estoppel as to lands claim. See Snodgrass
v. Snodgrass, 101 So. 837, 842-43 (Ala. 1924). For these reasons, Defendants’ Motion to Dismiss
Plaintiff’s breach of duty to correct and update claim is due to be granted.
Count Nine - Breach of Contract: Boeing’s 2008 Bridge Contract
This count involves Defendants’ alleged failure to provide parts to Plaintiff in a timely
manner. Plaintiff claims this failure by Defendants is a breach of Boeing’s 2008 Bridge Contract.
Defendants argue that Plaintiff’s claim fails because Plaintiff is not a party to the 2008 Bridge
Contract between Defendants and the Air Force. In response, Plaintiff argues that this count actually
alleges a breach of the Long Term Requirements Contract (“LTRC”) between Plaintiff and
Interestingly, however, the LTRC is nowhere mentioned in Count Nine. Despite the fact that
this is a breach of contract claim, no contractual term which was allegedly breached is set forth.
Rather, Plaintiff merely alleges that Defendant had a “good faith obligation” to provide the parts.
Plaintiff utterly fails to cite any contractual provision whatsoever that purports to require Defendants
to provide the parts at issue in a timely manner (or even within any particular time frame).
Therefore, this count fails to state a claim. Adkins v. Cagle Foods JV, LLC, 411 F.3d 1320, 1327
(11th Cir. 2005) (finding breach of contract claim failed because plaintiffs could not identify any
contractual provision breached by defendant). As Plaintiff has failed to plead any contractual basis
for this alleged duty, Defendants’ Motion to Dismiss Count Nine is due to be granted.
Count Ten - Declaratory Judgment and Specific Performance for Over and
Above Work, Alternately Breach of Contract
In Count Ten, Plaintiff purports to assert claims for declaratory judgment and specific
performance (and alternatively breach of contract) in relation to “over and above” work Plaintiffs
allegedly performed. To begin with, the court notes that this count constitutes a classic example of
a shotgun pleading, which the Eleventh Circuit has “condemned repeatedly.” Muglata v. Samples,
256 F.3d 1284 (11th Cir. 2001). “Shotgun pleading” refers to an unfocused, scattered approach
which makes it difficult (often impossible) for the court and the opposing parties to discern the
nature of the claims being asserted. See Pelletier v. Zweifel, 921 F.2d 1465, 1518 (11th Cir. 1991).
This one claim asserts three alternate theories, including one for specific performance, the
deficiencies of which were discussed at length at the May 24, 2012 hearing. “When faced with a
shotgun pleading, the trial court, whether or not requested to do so by the party’s adversary, ought
to require the party to file a repleader.” U.S. ex rel. Atkins v. McInteer, 470 F.3d 1350, 1354 n. 6
(11th Cir. 2006) (citing Byrne v. Nezhat, 261 F.3d 1075, 1133 (11th Cir. 2001)). However, this is
Plaintiff’s third attempt to plead its claims. Therefore, another opportunity to replead is simply not
Moreover, this count fails to state a breach of contract claim for the same reasons as Count
Nine. Plaintiff has failed to allege that Defendants breached a specific provision in a contract to
which Plaintiff was a party. Again, Plaintiff instead alleges that “Boeing ha[d] a good faith
obligation to provide Plaintiff compensation for all such ‘over and above’ work.” (Doc. # 34 at ¶
340). Plaintiff does not point to a particular contract provision giving rise to this “good faith duty.”
The court notes that if there was a specific contractual provision between Plaintiff and Defendants
which had been breached, surely by the third version of its Complaint, it is reasonable to expect that
Plaintiff be able to identify it.
Moreover, although it is a potential remedy under a contract claim, specific performance is
not preferred. But here, the main point is that specific performance is a remedy for a contract breach
[W]hether to award specific performance is within the discretion of
the trial court, and, if a trial court determines that a party has an
adequate remedy in an award of money damages, that remedy is
preferred. See General Aviation, Inc. v. Aerial Servs., Inc., 700 So.2d
1385, 1387 (Ala.Civ.App. 1997) (affirming the trial court’s
conclusion that the plaintiff had “an adequate remedy via money
damages”); Alabama Water Co. v. City of Anniston, 227 Ala. 579,
584, 151 So. 457, 461 (1933) (“’Courts prefer to leave parties the
right to break their contracts and to respond in damages; the action for
specific performance being a device of equity to enforce contracts of
peculiar value and importance.’” (quoting City of Bremerton v.
Bremerton Water & Power Co., 88 Wash. 362, 372, 153 P.2d 372,
Goodwyn, Mills & Cawood, Inc. v. Markel Ins. Co., 911 So. 2d 1044, 1051 (Ala. 2004). Without
a specific contract claim, Plaintiff cannot seek to recover any damages, much less specific
performance. Therefore, Defendants’ Motion to Dismiss Count Ten is due to be granted.
Count Eleven - Breach of Contract for Over and Above Work
Count Eleven alleges a breach of contract claim related to “over-and-above” work, but it fails
to state a breach of contract claim for the same reasons that Counts Nine and Ten: Plaintiff has not
identified any contractual provision breached by defendant. Interestingly, the “over-and-above” work
which is the subject of this breach of contract claim was discussed at the May 24, 2012 hearing on
Defendants’ Motion to Dismiss Plaintiff’s First Amended Complaint. There, Plaintiff’s counsel
stated that with regard to the “over-and-above work,” Plaintiff was not alleging a breach of contract,
but rather just that Plaintiff was asked to perform extra work for which it was not paid. (Doc. # 33
at 14). Plaintiff has had ample opportunity to identify a particular contractual provision breached
by Defendants and plead such a breach, but have failed to do so. Therefore, Defendants’ Motion to
Dismiss Count Eleven is due to be granted.
For the reasons discussed above, Defendants’ Motion to Dismiss Plaintiff’s Second Amended
Complaint (Doc. # 39) is due to be granted in part and denied in part. The Motion is due to be
granted as to Counts Five, Six, and Eight through Eleven, and denied as to Counts Two, Four and
Seven. A separate order will be entered.
DONE and ORDERED this
day of March, 2013.
R. DAVID PROCTOR
UNITED STATES DISTRICT JUDGE
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