Claybar et al v. Huffman et al

Filing 34

ORDER denying 15 Motion to Dismiss. Signed by Chief Judge William H. Steele on 9/19/2014. copies to parties. (sdb)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
WARREN CLAYBAR, et al.,
Plaintiffs,
v.
MICHAEL R. HUFFMAN, et al.,
Defendants.

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CIVIL ACTION 14-0205-WS-C

ORDER
This matter comes before the Court on defendant Michael R. Huffman’s Motion to
Dismiss (doc. 15). The Motion has been briefed and is now ripe for disposition.1
I.

Relevant Background.
This action arises from an alleged oral profit-sharing agreement by certain contractors

involved in the DEEPWATER HORIZON oil spill clean-up dating back to 2010. According to
well-pleaded factual allegations of the Second Amended Complaint, which are accepted as true
for purposes of this Order,2 plaintiff Rian Glasscock was offered a contract “to put together the
1

As originally formulated, Huffman’s Motion was styled as a “Motion to Dismiss
or in the Alternative for a More Definite Statement.” In an Order (doc. 18) entered on August 1,
2014, Judge DuBose summarily denied the request for more definite statement. As such, the
only remaining portion of the Motion is that seeking dismissal of Counts IV and V pursuant to
Rule 12(b)(6), Fed.R.Civ.P.
2

In their Response (doc. 29) to the Motion to Dismiss, plaintiffs have attached
more than 150 pages of exhibits. These documents are apparently intended to corroborate and
supplement plaintiffs’ account of the facts. The trouble is that this matter comes before the
Court on Rule 12(b)(6) review. At that stage, litigants and courts are typically confined to the
four corners of the pleadings. See, e.g., Keating v. City of Miami, 598 F.3d 753, 762 (11th Cir.
2010) (in deciding Rule 12(b)(6) motion, courts “limit[] our review to the four corners of the
complaint”); Wilchombe v. TeeVee Tunes, Inc., 555 F.3d 949, 959 (11th Cir. 2009) (“A court’s
review on a motion to dismiss is limited to the four corners of the complaint.”) (citation and
internal quotation marks omitted); Thaeter v. Palm Beach County Sheriff’s Office, 449 F.3d
1342, 1352 (11th Cir. 2006) (“When considering a motion to dismiss, … the court limits its
consideration to the pleadings and exhibits attached thereto.”) (citation omitted). Accordingly,
(Continued)

required resources and management” for a direct contract with non-party National Response
Corporation (“NRC”) to provide equipment and labor for the clean-up project. (Doc. 22, ¶¶ 16.)
Glasscock contacted plaintiffs Warren Claybar and Halley Moor, as well as defendant Huffman
Construction, Inc., “to partner in fulfilling the contract.” (Id., ¶ 17.)
For its part, Huffman Construction “did not have the local contacts necessary to fulfill the
resource requirements of the contract with NRC.” (Id., ¶ 18.) To address that deficiency,
Huffman Construction and Michael Huffman entered into an oral agreement with Glasscock,
Claybar and Moor, whereby plaintiffs would furnish the necessary equipment and labor to fulfill
the NRC contract, while defendants would provide insurance and administrative services. (Id., ¶
19.) Pursuant to this arrangement, the Second Amended Complaint alleges, the parties “agreed
to share equally in the net profits of the Defendants[’] contract with NRC,” meaning that each of
Glasscock, Claybar and Moor would receive 25% of those net proceeds, with Huffman
Construction retaining the other 25%. (Id., ¶ 20.) The NRC contract yielded a bountiful harvest,
as Huffman Construction allegedly received more than $4 million in net proceeds; however,
Huffman Construction and Huffman never paid any of those profits over to Glasscock, Claybar
and Moor. (Id., ¶¶ 21-22.)
Based on these factual allegations, plaintiffs bring state-law claims against both
defendants on theories of breach of contract, unjust enrichment, conversion, and fraud / reckless
or negligent misrepresentation, as well as a distinct claim for piercing the corporate veil. (See
doc. 22.)3 Two of these causes of action are germane to the pending Rule 12(b)(6) Motion.
With regard to the fraud claim (Count IV), the Second Amended Complaint alleges that,
although defendants agreed to share net profits from the NRC contract with plaintiffs, “[w]hen
they entered into that agreement, Defendants had no intention of honoring their agreement to pay

those exhibits cannot be considered at this time in shaping the facts before the Court. For the
same reasons, Huffman’s recitation in his brief of numerous facts exogenous to the pleadings
(see doc. 16, at 2-4) is improper in the context of a Rule 12(b)(6) motion; therefore, such extrapleading factual allegations are not examined herein.
3

Despite the state-law nature of these claims, federal subject matter jurisdiction
over this matter appears proper. Plaintiffs have adequately pleaded diversity jurisdiction,
inasmuch as all plaintiffs are alleged to be citizens of different states than all defendants, and the
amount in controversy is pleaded to be well in excess of the $75,000 jurisdictional threshold.

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Plaintiffs their share of the profits.” (Doc. 22, ¶ 39.) Instead, the pleading asserts, defendants
falsely conveyed their assent to the profit-sharing arrangement “in order to procure the …
necessary resources to carry out the NRC contract” and did so with full knowledge “that
Plaintiffs would rely and act upon same.” (Id., ¶¶ 40-41.) In other words, the Second Amended
Complaint pleads that the alleged oral contract was merely a ruse by Huffman Construction to
mislead plaintiffs into providing assistance to perform the NRC contract, even though Huffman
Construction from the outset never intended to make good on its promises.
To support the claim for piercing the corporate veil (Count V), the Second Amended
Complaint alleges as follows: (i) Huffman and Huffman Construction “have combined and
operated their affairs in such a way as to lose the protection of separate corporate and individual
entities;” (ii) Huffman Construction “did not have bylaws at all material times;” (iii) Huffman
Construction “has no resolutions authorizing corporate activity;” (iv) Huffman Construction and
family members who were corporate officers would enter into loans without accompanying
promissory notes setting forth repayment terms; and (v) officers utilized such loaned corporate
funds to purchase recreational vehicles for personal use. (Doc. 22, ¶¶ 47-51.)
Defendant Huffman (but not defendant Huffman Construction) has now moved to
dismiss Counts IV and V, on the theory that the operative pleading fails to plead fraud with
particularity and lacks sufficient facts to justify piercing the corporate veil.
II.

Analysis.
A.

Legal Standard for Rule 12(b)(6) Motions.

To withstand Rule 12(b)(6) scrutiny and satisfy Rule 8(a), a plaintiff must plead “enough
facts to state a claim to relief that is plausible on its face,” so as to “nudge[ ][its] claims across
the line from conceivable to plausible.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127
S.Ct. 1955, 167 L.Ed.2d 929 (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, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d
868 (2009) (citation omitted). “This necessarily requires that a plaintiff include factual
allegations for each essential element of his or her claim.” GeorgiaCarry.Org, Inc. v. Georgia,
687 F.3d 1244, 1254 (11th Cir. 2012). Thus, minimum pleading standards “require [ ] more than
labels and conclusions, and a formulaic recitation of the elements of a cause of action will not
do.” Twombly, 550 U.S. at 555. As the Eleventh Circuit has explained, Twombly / Iqbal

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principles require that a complaint’s allegations be “enough to raise a right to relief above the
speculative level.” Speaker v. U.S. Dep’t of Health and Human Services Centers for Disease
Control and Prevention, 623 F.3d 1371, 1380 (11th Cir. 2010) (citations omitted). “To survive a
12(b)(6) motion to dismiss, the complaint does not need detailed factual allegations, ... but must
give the defendant fair notice of what the plaintiff’s claim is and the grounds upon which it
rests.” Randall v. Scott, 610 F.3d 701, 705 (11th Cir. 2010) (citations and internal quotation
marks omitted).
B.

Whether Plaintiffs Pleaded Fraud with Particularity.

As noted, Huffman’s Rule 12(b)(6) challenge to the Complaint is twofold. First, he
argues in cursory fashion that Count IV should be dismissed for failure to plead fraud with
particularity. (See doc. 16, at 6.) The Federal Rules of Civil Procedure provide that “[i]n
alleging fraud or mistake, a party must state with particularity the circumstances constituting
fraud or mistake.” Rule 9(b), Fed.R.Civ.P. There is no “one size fits all” checklist for satisfying
this requirement. See Tello v. Dean Witter Reynolds, Inc., 494 F.3d 956, 972-73 (11th Cir. 2007)
(“While allegations of date, time or place satisfy the Rule 9(b) requirement that the
circumstances of the alleged fraud must be pleaded with particularity, we have acknowledged
that alternative means are also available to satisfy the rule in substantiating fraud allegations.”)
(citation and internal marks omitted); Mechler v. John Hancock Life Ins. Co., 2008 WL 4493230,
*3 (S.D. Ala. Sept. 30, 2008) (“Plaintiffs’ fraud/fraudulent suppression claim could be better
pled; however, the complaint, taken as a whole, sufficiently alerts the defendant to the
misconduct with which it is charged.”). And the Eleventh Circuit has emphasized that “[t]he
application of Rule 9(b) … must not abrogate the concept of notice pleading.” Ziemba v.
Cascade Int’l, Inc., 256 F.3d 1194, 1202 (11th Cir. 2001) (citation and internal quotation marks
omitted).
Examining the Second Amended Complaint in toto, the Court readily concludes that it
adequately pleads the circumstances constituting the alleged fraud for Rule 9(b) purposes.
Indeed, the Second Amended Complaint alleges that defendants promised to pay Glasscock,
Claybar and Moor each 25% of the net profits of the NRC contract, that they made this promise
without ever intending to honor it, and that this promise tricked Glasscock, Claybar and Moor
into furnishing resources to assist Huffman Construction in fulfilling the NRC contract. In light
of those particularized factual allegations, no viable argument can be made that defendants have

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not been alerted to the “precise misconduct with which they are charged,” Durham v. Business
Management Associates, 847 F.2d 1505, 1511 (11th Cir. 1988), which is, after all, the purpose of
the particularity rule. For that reason, defendant Huffman’s Motion to Dismiss is denied insofar
as it seeks dismissal of Count IV for failure to plead fraud with particularity.4
C.

Whether Plaintiffs’ Allegations of Piercing the Corporate Veil are Sufficient.

The second prong of Huffman’s Rule 12(b)(6) Motion relates to Count V, which alleges
that Huffman Construction’s corporate veil should be pierced to impose individual liability on
Huffman. It is well settled that “[t]he veil separating corporations and their shareholders may be
pierced in some circumstances” to impose individual liability. Dole Food Co. v. Patrickson, 538
U.S. 468, 476, 123 S.Ct. 1655, 155 L.Ed.2d 643 (2003).5 Alabama courts have cautioned that
“[p]iercing the corporate veil to impose personal liability on a corporation’s shareholder is not a
4

At most, Huffman posits that Count IV flunks Rule 9(b) because it “fails to state
when the misrepresentation was made, where it was made, what was said or any other fact
attendant to the alleged misrepresentation.” (Doc. 16, at 6.) This contention is inaccurate.
Taken in context, the Second Amended Complaint may be reasonably read as identifying a midJune 2010 timeframe for the alleged misrepresentations. Moreover, the pleading specifically
alleges the nature of the misrepresentation (i.e., defendants’ promise to split profits with
plaintiffs when they had no intention of actually doing so), the manner in which such
misrepresentation deceived plaintiffs (i.e., their reliance on it to furnish resources to Huffman
Construction, anticipating a promised financial reward that defendants never planned to bestow),
and what Huffman Construction obtained as a consequence of the fraud (i.e., response resources
from plaintiffs to facilitate its performance of the NRC contract). That the pleading does not
enumerate “where it was made” is not fatal to the sufficiency of Count IV. Again, the Rule 9(b)
requirement that fraud be pleaded with particularity is not a rigid, inflexible checklist. Besides,
Huffman has not articulated any manner in which the Second Amended Complaint’s failure to
delineate the location where the alleged fraudulent statement was made results in inadequate
notice to defendants about the circumstances of the alleged fraud, or in any way frustrates their
ability to respond and defend against same. As such, defendant’s skeletal Rule 9(b) argument is
unconvincing.
5

See also M & M Wholesale Florist, Inc. v. Emmons, 600 So.2d 998, 999 (Ala.
1992) (“In order to recover against an individual for the debts of a corporation, the plaintiff must
show (1) that the individual agreed to be liable for the debts; or (2) that the facts surrounding the
transaction support a disregard for the corporate form.”); Cohen v. Williams, 318 So.2d 279, 281
(Ala. 1975) (“In a proper case, when the corporate form is being used to evade personal
responsibility this court has not been hesitant to disregard the corporate form and impose liability
on the person controlling the corporation and subverting it to his personal use by the conduct of
its business in a manner to make it merely his instrumentality.”).

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power that is exercised lightly.” Gilbert v. James Russell Motors, Inc., 812 So.2d 1269, 1273
(Ala.Civ.App. 2001); see also First Health, Inc. v. Blanton, 585 So.2d 1331, 1334 (Ala. 1991)
(“Piercing the corporate veil is not a power that is lightly exercised. … The mere fact that an
individual or another corporation owns all or a majority of the stock of a corporation does not, of
itself, destroy the separate corporate entity.”). Notwithstanding this reluctance, Alabama courts
have demonstrated willingness to pierce the corporate veil “where a corporation is set up as a
subterfuge, where shareholders do not observe the corporate form, where the legal requirements
of corporate law are not complied with, where the corporation maintains no corporate records,
where the corporation maintains no corporate bank account, where the corporation has no
employees, where corporate and personal funds are intermingled and corporate funds are used
for personal purposes, or where an individual drains funds from the corporation.” Econ
Marketing, Inc. v. Leisure American Resorts, Inc., 664 So.2d 869, 870 (Ala. 1994) (citations
omitted).
The sum total of Huffman’s argument for dismissal of Count V is that “the facts alleged
by Plaintiffs in their complaint don’t meet the stringent overall requirements of Alabama case
law for ‘Piercing the Corporate Veil.’” (Doc. 16, at 8.) This barebones analysis is inadequate to
entitle Huffman to relief. As a threshold matter, movant’s line of reasoning disregards the
posture of this case at the pleadings stage, and fails to recognize or apply the relevant pleadings
standard. A plaintiff need not definitively prove his claims in the complaint, much less recite
each and every fact on which he intends to rely in support of those claims. See, e.g., Speaker,
623 F.3d at 1386 (“Speaker need not prove his case on the pleadings – his Amended Complaint
must merely provide enough factual material to raise a reasonable inference, and thus a plausible
claim”); Simpson v. Sanderson Farms, Inc., 744 F.3d 702, 708 (11th Cir. 2014) (“[a] plaintiff
need not plead detailed factual allegations” to survive a Rule 12(b)(6) motion) (citation and
internal quotation marks omitted). Again, the Federal Rules of Civil Procedure establish a
system of notice pleading. All that is needed is for plaintiffs’ Second Amended Complaint to
“present sufficient factual matter, accepted as true, to raise a right to relief above the speculative
level.” Simpson, 744 F.3d at 708 (citation and internal quotation marks omitted). By effectively
insisting that plaintiffs prove their case at the pleadings stage, Huffman misstates applicable law
and would subject Count V to more stringent review than that prescribed by Rules 8 and
12(b)(6).

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Pursuant to an Iqbal / Twombly analysis, the Court concludes that the Second Amended
Complaint sets forth a plausible claim for piercing the corporate veil. In particular, plaintiffs’
pleading delineates specific facts supporting a reasonable inference that Huffman Construction
neither observed the legal requirements of corporate law nor maintained corporate records, that
corporate and personal funds were intermingled (with corporate funds being used for personal
purposes), and that an individual (Huffman) has drained funds from the corporation. These are
just the sort of facts that the Alabama Supreme Court recognized in Econ Marketing might
justify the unusual step of piercing the corporate veil to impose pass-through individual liability.
As such, the factual allegations of Count V suffice to support a plausible claim for piercing the
corporate veil, and therefore withstand Iqbal / Twombly sufficiency review.6
III.

Conclusion.
For all of the foregoing reasons, defendant Michael R. Huffman’s Motion to Dismiss

(doc. 15) is denied in its entirety.
DONE and ORDERED this 19th day of September, 2014.
s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE

6

Of course, in so determining, the Court makes no findings and expresses no
opinions as to the ultimate merit (or lack thereof) of plaintiffs’ claim to pierce the corporate veil
of Huffman Construction and thereby hold Michael Huffman personally liable for alleged
corporate misdeeds. That assessment is “a question of fact … to be determined on a case by case
basis,” Hill v. Fairfield Nursing and Rehabilitation Center, LLC, 134 So.3d 396, 411 (Ala. 2013)
(citation omitted), at an appropriate time.

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