Maricopa, County of v. Office Depot Incorporated

Filing 24

ORDER - defendant's motion to dismiss 10 is granted in part and denied in part. Plaintiff's contract claims that are based on allegations that defendant breached the Master Agreement are dismissed and plaintiff's fraud claims are di smissed. The motion is otherwise denied. Plaintiff's contract claims are not barred by the statute of limitations and plaintiff has stated plausible contract claims based on allegations that defendant breached the Administration Agreement. Plaintiff is not given leave to amend any of the dismissed claims as amendment would be futile. Signed by Judge H Russel Holland on 11/21/2014.(KMG)

WO

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA

MARICOPA COUNTY, a political subdivision )
of the State of Arizona,
)
)
Plaintiff,
)
)
vs.
)
)
OFFICE DEPOT, INC., a Delaware
)
corporation,
)
)
Defendant.
)
__________________________________________)

No. 2:14-cv-1372-HRH

ORDER
Motion to Dismiss
Defendant moves to dismiss1 plaintiff’s complaint. This motion is opposed.2 Oral
argument was requested and has been heard.
Background
Plaintiff is Maricopa County. Defendant is Office Depot, Inc.
This case involves plaintiff’s purchase of office supplies from defendant via the U.S.
Communities program. “U.S. Communities Government Purchasing Alliance ... is a

1

Docket No. 10.

2

Docket No. 18.
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nonprofit organization designed to assist government agencies and educational institutions
in making purchases of products and services.”3 “U. S. Communities ... sponsors a variety
of procurement contracts, known as ‘master contracts’, by which state and local public
agencies and entities may purchase goods and services.”4 “U.S. Communities selects ‘lead’
public agencies to competitively solicit and enter into master contracts with various
suppliers[.]”5 Other public agencies, known as “participating public agencies”, can then
“piggyback” on the master contracts and “mak[e] purchases based on the relevant terms,
conditions and pricing of the master contract.”6
The County of Los Angeles “acted as a lead public agency” and entered into two
Master Agreements with defendant, one in 2001 and one in 2006,7 referred to herein
collectively as the Master Agreement.8 The Master Agreement defines the County of Los

3

Complaint at 2, ¶ 6, attached to Notice of Removal, Docket No. 1.

4

Id. at ¶ 7.

5

Id. at ¶ 8.

6

Id. at ¶ 9.

7

Id. at 3, ¶ 13.

8

The parties agree that the relevant terms and conditions of the 2001 and 2006 Master
Agreement are not materially different and thus all citations herein are to the 2006 Master
Agreement.
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Angeles as the “COUNTY” and Office Depot as the “VENDOR.”9 The Master Agreement
contained a “Most Favored Public Entity” clause (Section 23) which provided that
VENDOR represents that the price charged to COUNTY in this
Agreement do not exceed existing selling prices to other
customers for the same or substantially similar items or
services for comparable quantities under similar terms and
conditions.
If VENDOR’s prices decline, or should VENDOR, at any time
during the term of this Master Agreement, provide the same
goods or services under similar quantity and delivery conditions to the State of California or any county, municipality or
district of the State at prices below those set forth in the Master
Agreement, then such lower prices shall be immediately
extended to COUNTY. [10]
The Master Agreement also contained a piggybacking clause (Section 36), which provided:
The COUNTY has designated U.S. Communities Purchasing
and Finance Agency ... as the agency to provide administrative
services related to purchases by other governmental entities
(Participating Public Agencies) under this Agreement. At
COUNTY’s sole discretion and option, and upon VENDOR
entering into the requisite U.S. Communities Administration
Agreement, Participating Public Agencies may acquire items

9

2006 Master Agreement at iii, § 1.0, Exhibit 2, Complaint, attached to Notice of
Removal, Docket No. 1.
10

Id. at 12, § 23.

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listed in this Agreement. Such acquisition(s) shall be at prices
stated in this Agreement, or lower.[11]
The Master Agreement incorporated by reference Exhibits B and C to the agreement,
which were Los Angeles County’s Request for Proposal (RFP) and defendant’s response
to the RFP.12 The RFP included the terms and conditions that would apply to all awards
from the RFP. One such term was a “Most Favored Customer” clause which provided that
“Vendor represents that the prices charged County in this Purchase Order do not exceed
existing selling prices to other customers for the same or substantially similar items or
services for comparable quantities under similar terms and conditions.”13 The RFP also
required that the
proposer agrees, for the period any agreement formulated
from this inquiry, that discounts quoted from price lists are
minimum and that prices proposed for core list items are firm
through March 4, 2007 except paper.... If prices decline or
should vendor at any time during the life of said agreement
sell the same materials or service under similar quantity and
delivery conditions to the State of California, or any county,
municipality or legal district of the State of California at prices
below those quoted herein, such lower prices shall be immediately extended to the County of Los Angeles.[ 14]

11

Id. at 16, § 36.

12

Id. at iii, § 1.1.

13

RFP at 7, ¶ 22, Exhibit 3, Complaint, attached to Notice of Removal, Docket No. 1.

14

Id. at 19, ¶ 16.
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One of the attachments to the RFP was an explanation of the commitments that a
supplier which enters into an Administration Agreement with U.S. Communities must
make. One of those commitments was the “Pricing Commitment”, which provided that
the
supplier’s U.S. Communities pricing is the lowest available
pricing (net to buyer) to state and local public agencies nationwide and a further commitment that, if a state or local public
agency is otherwise eligible for lower pricing through a federal,
state, regional or local contract, the supplier will match the
pricing under U.S. Communities.[15]
Defendant and U.S. Communities entered into an Administration Agreement,16 the
primary purpose of which was “to make available the Master Agreement to Participating
Public Agencies on a national basis[.]”17 Plaintiff piggybacked on the Master Agreement,
and “[f]rom 2006 through 2010 [plaintiff’s] expenditures to [defendant] for office products
under the 2006 Master Agreement totaled approximately $22.5 million.”18
Plaintiff alleges that defendant represented that U.S. Communities’ members, such
as plaintiff, would receive defendant’s best governmental pricing but that defendant failed

15

Attachment H at 2, RFP, Exhibit 3, Complaint, attached to Notice of Removal,
Docket No. 1.
16

Complaint at 5, ¶ 21, attached to Notice of Removal, Docket No. 1.

17

Administration Agreement at 1, Exhibit A, Declaration of Juli Ann Lund [etc.],
which is appended to Motion to Dismiss [etc.], Docket No. 10.
18

Complaint at 9, ¶ 40, attached to Notice of Removal, Docket No. 1.
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to provide the best pricing. Specifically, plaintiff alleges that defendant offered lower
prices to the City and County of San Francisco and to the City of Berkeley.19 Plaintiff also
alleges that defendant raised its prices even though it “knew its price changes were not in
compliance with the contract....”20 Plaintiff further alleges that defendant overstated and
misrepresented its costs in order to charge higher prices, discontinued items with set prices
so it could substitute higher priced items, and manipulated the cost of some items in order
to artificially increase the payments that would be made to defendant.21
Plaintiff commenced this action on May 1, 2014 in state court. On June 19, 2014,
defendant removed the action to this court on the basis of diversity jurisdiction. In its
complaint, plaintiff asserts five claims against defendant, three fraud claims and two
contract claims.
Plaintiff’s breach of contract claims are found in Count II of plaintiff’s complaint.
Plaintiff alleges that it had a “direct contractual relationship” with defendant and that
defendant “promised [plaintiff] ... that it would receive the lowest prices offered to any
state or local governmental entities in the United States for goods it purchased from”

19

Id. at 9-10, ¶¶ 44-45.

20

Id. at 11, ¶ 58.

21

Id. at 12, ¶ 59.
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defendant.22 Plaintiff alleges that defendant breached this promise because it “failed to
provide [plaintiff] with the lowest prices it offered to any state or local governmental
entities....”23 In Count V, plaintiff asserts a second contract-based claim, alleging that
defendant’s conduct violated the covenant of good faith and fair dealing that is implied in
every contract.24
Plaintiff’s fraud claims include a statutory fraud claim in Count I, a common law
fraud and deceit claim in Count III, and a negligent misrepresentation claim in Count IV.
All three of these claims are based on allegations that defendant “misrepresented to
[plaintiff], among other things that the prices it charged ... for office supplies were the
lowest it charged to any other state and local governmental entity in the United States.”25
Plaintiff further alleges that defendant “misrepresented ... that the prices being charged by
[defendant] to [plaintiff] were approved as provided by the contract, when such prices in
fact had not been so approved.”26 And plaintiff alleges that defendant withheld “the fact

22

Id. at 13, ¶¶ 73-74.

23

Id. at ¶ 75.

24

Id. at 16, ¶¶ 95-96.

25

Id. at 12, ¶ 64.

26

Id. at ¶ 65.
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that it was charging lower prices to other state and local governmental entities in the
United States for similar types and amounts of merchandise as it was selling to” plaintiff.27
Pursuant to Rules 9(b) and 12(b)(6), Federal Rules of Civil Procedure, defendant now
moves to dismiss all of plaintiff’s claims.
Discussion
“Rule 12(b)(6) authorizes courts to dismiss a complaint for ‘failure to state a claim
upon which relief can be granted.’” In re Rigel Pharmaceuticals, Inc. Securities Litig., 697
F.3d 869, 875 (9th Cir. 2012) (quoting Fed. R. Civ. P. 12(b)(6)). “To avoid dismissal, the
complaint must provide ‘more than labels and conclusions, and a formulaic recitation of
the elements of a cause of action will not do.’” Id. (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007)). “‘[A] plaintiff must ‘allege sufficient factual matter ... to state a claim
to relief that is plausible on its face.’” OSU Student Alliance v. Ray, 699 F.3d 1053, 1061 (9th
Cir. 2012) (quoting Pinnacle Armor, Inc. v. United States, 648 F.3d 708, 721 (9th Cir. 2011)).
“In evaluating a Rule 12(b)(6) motion, the court accepts the complaint’s well-pleaded
factual allegations as true and draws all reasonable inferences in the light most favorable
to the plaintiff.” Adams v. U.S. Forest Srvc., 671 F.3d 1138, 1142-43 (9th Cir. 2012). “Rule
9(b) provides that ‘[i]n alleging fraud or mistake, a party must state with particularity the
circumstances constituting fraud or mistake.’” United States ex rel. Cafasso v. General

27

Id. at 13, ¶ 66.
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Dynamics C4 Systems, Inc., 637 F.3d 1047, 1054-55 (9th Cir. 2011) (quoting Fed. R. Civ. P.
9(b)). “To satisfy Rule 9(b), a pleading must identify ‘the who, what, when, where, and
how of the misconduct charged,’” as well as “‘what is false or misleading about [the
purportedly fraudulent] statement, and why it is false.’” Id. at 1055 (quoting Ebeid ex rel.
United States v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010)).
Defendant first argues that plaintiff’s breach of contract claims in Count II are barred
by the statute of limitations, except for the period of August 23, 2009 through November
30, 2009. In Arizona, a claim for breach of a sales contract is subject to a four-year statute
of limitations. A.R.S. § 47-2725. Plaintiff’s damages are based on an audit performed by
its Internal Audit Department.28 The Audit Department’s “analysis was limited to the
period when the San Francisco contract and the [Master] Agreement ran concurrently
(January 2006 through November 2009)....”29 Thus, defendant argues that plaintiff does not
have any damages after November 30, 2009 and that it had to file its complaint within four
years of that day, or by November 30, 2013. Plaintiff did not file its complaint until May
1, 2014. But, the parties entered into a tolling agreement that provided that “[t]he period
commencing on August 23, 2013 and ending on April 30, 2014, inclusive ... shall not be

28

Complaint at 11, ¶ 54, attached to Notice of Removal, Docket No. 1.

29

Audit of Office Depot Contract (Master Agreement 42595) at 6, Exhibit B, Lund
Declaration, which is appended to Motion to Dismiss [etc.], Docket No. 10.
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included in computing the running of any statute of limitations....”30 Thus, defendant
argues that plaintiff’s breach of contract claims for August 23, 2009 through November 30,
2009 are not barred, but that plaintiff’s claims for breach of contract are otherwise barred
by the statute of limitations.
The state and any political subdivisions thereof are “exempt from the statute of
limitations under the common law rule of nullum tempus occurrit regi (‘time does not run
against the king’), which is codified in A.R.S. § 12-510.” In re Diamond Benefits Life Ins.
Co., 907 P.2d 63, 65 (Ariz. 1995). A.R.S. § 12-510 provides that “[e]xcept as provided in §
12-529, the state shall not be barred by the limitations of actions prescribed in this chapter.”
Thus, plaintiff argues that it is exempt from the statute of limitations.
Defendant argues that plaintiff’s reliance on A.R.S. § 12-510 is misplaced. Section
12-510 makes clear that the exemption for political subdivisions only “applies to limitations
periods set forth in Chapter 5 of Title 12[.]" Aspen Creek Builders, Inc. v. Mundell ex rel.
Ariz. Registrar of Contractors, Case No. 1 CA–CV 10–0903, 2011 WL 6810924, at *3 (Ariz.
Ct. App. Dec. 27, 2011). Because the limitations period for contract actions relating to the
sales of goods is not found in Chapter 5 of Title 12, but rather in Chapter 2 of Title 47,
defendant argues that A.R.S. § 12-510 has no application here.

30

Tolling Agreement at 1, ¶ 2, Exhibit C, Lund Declaration, which is appended to
Motion to Dismiss [etc.], Docket No. 10.
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Defendant has, however, overlooked A.R.S. § 12-544, which is foundin Chapter 5 of
Section 12. Section 12-544(4) provides that “[t]here shall be commenced and prosecuted
within four years after the cause of action accrues, and not afterward” actions “arising
under the provisions of title 47, chapter 2, for breach of any contract of sale, which action
shall be governed by § 47-2725, notwithstanding any other provision of this section or of
§ 12-543 or 12-548.” In other words, section 12-544(4) incorporates the UCC statute of
limitations for breach of a sales contract into Chapter 5 of Title 12. Because the UCC statute
of limitations for breach of a sales contract can be found in Chapter 5 of Title 12, A.R.S. §
12-510 does apply here. And, pursuant to A.R.S. § 12-510, plaintiff is exempt from the
statute of limitations.
Defendant next argues that plaintiff’s contract claims are not plausible because
plaintiff was not an intended beneficiary of the contract terms which it alleges defendant
breached. Although plaintiff alleges that it had a direct contractual relationship with
defendant, plaintiff has not cited to any contract to which both it and defendant were
parties. Plaintiff is not a party to the Master Agreement and plaintiff was not a party to any
of the other agreements attached to the RFP or defendant’s response to the RFP. “Under
Arizona law, a person who is not a party to a contract can recover under that contract only
if he is a primary beneficiary under the terms of the contract[.]” Nahom v. Blue Cross and
Blue Shield of Ariz., Inc., 885 P.2d 1113, 1117 (Ariz. Ct. App. 1994). In order to assert

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contract claims against defendant, plaintiff has to show that it is at least plausible that it
was a third-party beneficiary of a contract to which defendant was a party.
“Determining whether a third party is a direct beneficiary of the contract or merely
an incidental beneficiary requires construing that contract.” Id. at 1118. “[T]he interpretation of a contract is a question of law[.]” Grosvenor Holdings, L.C. v. Figueroa, 218 P.3d
1045, 1050 (Ariz. Ct. App. 2009). “The purpose of contract interpretation is to determine
the parties’ intent and enforce that intent.” Id.

“‘Where the intent of the parties is

expressed in clear and unambiguous language, there is no need or room for construction
or interpretation and a court may not resort thereto.’” Id. (quoting Mining Inv. Group,
L.L.C. v. Roberts, 177 P.3d 1207, 1211 (Ariz. Ct. App. 2008)).
“[A] third-party beneficiary exists only when the contracting parties intended ‘to
directly benefit that person’ and the contracting parties must ‘indicate that intention in the
contract itself.’” Armbruster v. WageWorks, Inc., 953 F. Supp. 2d 1072, 1076 (D. Ariz. 2013)
(quoting Sherman v. First American Title Ins. Co., 38 P.3d 1229, 1232 (Ariz. Ct. App. 2002)).
Not only must the benefit be intentional and direct but the
third person must be the real promisee. The promise must be
made to him in fact although not in form and it is not enough
that the contract may operate to his benefit but it must appear
that the parties intended to recognize him as the primary party
in interest and as privy to the promise.
Basurto v. Utah Const. & Min. Co., 485 P.2d 859, 863 (Ariz. Ct. App. 1971) (footnote
omitted).
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Plaintiff’s contract claims are based on an allegation that defendant was contractually obligated to provide “its best government pricing, without qualification” to plaintiff.31
Defendant contends that plaintiff’s claim to this contractual right to the best government
pricing is based principally on two sources, Section 23 of the Master Agreement which is
the “Most Favored Public Entity” clause, and the Pricing Commitment that was contained
in the U.S. Communities document that was attached to the RFP.32 But, defendant argues
that plaintiff was not an intended beneficiary of Section 23 and that the RFP and its
responses thereto do not create any contractual obligations which plaintiff can enforce.
The court agrees with defendant that plaintiff was not an intended beneficiary of
Section 23 of the Master Agreement, which provided:
VENDOR represents that the prices charged to COUNTY in
this Agreement do not exceed existing selling prices to other
customers for the same or substantially similar items or
services for comparable quantities under similar terms and
conditions.
If VENDOR’s prices decline, or should VENDOR, at any time
during the term of this Master Agreement, provide the same
goods or services under similar quantity and delivery conditions to the State of California or any county, municipality or
district of the State at prices below those set forth in the Master

31

Complaint at 8, ¶ 36, attached to Notice of Removal, Docket No. 1.

32

Plaintiff also relies on the “Price Guarantee” clause in the award letter for the 2006
Master Agreement and on two provisions from the RFP, a price guarantee provision and
a “most favored customer” provision.
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Agreement, then such lower prices shall be immediately
extended to COUNTY.[33]
By its very terms, Section 23 of the Master Agreement applies only to Los Angeles County
and not to any piggybacking agency because Section 23 only refers to the “COUNTY.”34
Nothing in Section 23 indicates that the parties intended its terms to apply to participating
public agencies. And, nothing in Section 36 of the Master Agreement indicates that the
parties to the contract intended to give participating public agencies the right to enforce the
Master Agreement. Section 36 provided, in pertinent part, that “Participating Public
Agencies may acquire items listed in the Agreement. Such acquisition(s) shall be at the
prices stated in this Agreement, or lower.”35 All Section 36 does is give participating public
agencies the right to purchase office supplies at the same rates defendant provided to Los
Angeles County. Because plaintiff was not an intended beneficiary of Section 23 of the
Master Agreement, plaintiff’s breach of contract claims that are based on defendant’s
alleged breach of the Master Agreement are dismissed.

33

2006 Master Agreement at 12, ¶ 23, Exhibit 2, Complaint, attached to Notice of
Removal, Docket No. 1.
34

The same would be true of plaintiff’s reliance on the “Price Guarantee” provision
in the award letter and the two provisions in the RFP. These provisions only apply to Los
Angeles County and do not extend any rights to participating public agencies such as
plaintiff.
35

2006 Master Agreement at 16, § 36, Exhibit 2, Complaint, attached to Notice of
Removal, Docket No. 1.
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Defendant next argues that plaintiff has no right to enforce the Pricing Commitment
that is part of the U.S. Communities program. The Pricing Commitment was a supplier’s
commitment that supplier’s U.S. Communities pricing is the
lowest available pricing (net to buyer) to state and local public
agencies nationwide and a further commitment that, if a state
or local public agency is otherwise eligible for lower pricing
through a federal, state, regional or local contract, the supplier
will match the pricing under U.S. Communities.[36]
Defendant contends that the Pricing Commitment can only be found in the Administration
Agreement and that neither plaintiff nor Los Angeles County are parties to the Administration Agreement. Rather, defendant and U.S. Communities are the only parties to the
Administration Agreement, and defendant argues that they are the only intended
beneficiaries of that agreement and that a participating public agency, such as plaintiff, had
no right to enforce any of the terms and conditions in the Administration Agreement.
This argument by defendant fails. Defendant and U.S. Communities were not the
only intended beneficiaries of the Administration Agreement. Participating public agencies
such as plaintiff were third-party beneficiaries of the Administration Agreement.
Defendant and U.S. Communities entered into the Administration Agreement because they
“desire[d] ... to make available the Master Agreement to Participating Public Agencies on

36

Attachment H at 1, RFP, Exhibit 3, Complaint, attached to Notice of Removal,
Docket No. 1.
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a national basis[.]”37 The language indicates that the primary purpose of the Administration Agreement was to allow defendant to sell office goods to other public agencies besides
Los Angeles County at the prices it had negotiated with Los Angeles County. In other
words, the Administration Agreement was entered into for the benefit of participating
public agencies. One of the terms of the Administration Agreement was the Pricing
Commitment. This Commitment had to be for the benefit of the participating public
agencies as they were the entities which would be purchasing office supplies as a result of
defendant and U.S. Communities entering into the Administration Agreement. The only
possible beneficiaries of the Pricing Commitment term were participating public agencies.
Whether this term was incorporated into the Master Agreement is irrelevant. The Pricing
Commitment was a term of the Administration Agreement, defendant was a party to that
Agreement, and plaintiff was an intended third-party beneficiary of that Agreement and
that term. Thus, plaintiff has stated a plausible breach of contract claim based on
defendant’s alleged breach of the Pricing Commitment in the Administration Agreement.
Defendants next argue that plaintiff’s breach of the implied covenant of good faith
claim should be dismissed because plaintiff’s breach of contract claims fail. But, plaintiff’s
breach of the implied covenant of good faith claim survives defendant’s motion to dismiss
because at least some of plaintiff’s breach of contract claims survive.
37

Attachment G at 1, Defendant’s Response, Exhibit 4, Complaint, attached to Notice
of Removal, Docket No. 1.
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Turning then to plaintiff’s fraud claims, defendant first argues that plaintiff has
failed to plead its fraud claims with particularity. Defendant argues that plaintiff has not
pled a single misrepresentation that was made by defendant to plaintiff. Rather, plaintiff
alleges that it was “aware of the terms of the 2006 Master Agreement” and that the RFP
“was supplied” to it.38 But defendant argues that nowhere in its complaint does plaintiff
allege that defendant made any representations directly to plaintiff. Plaintiff alleges that
defendant “represented that U.S. Communities’ members would receive [defendant’s] best
governmental pricing, without qualification” and attaches “several documents that are
representative of [defendant’s] marketing of the 2006 Master Agreement” to its complaint.39
But, defendant argues that plaintiff has not alleged that it ever received any of these
“marketing” materials. In short, defendant argues that plaintiff has failed to plead who at
Office Depot made what representations to whom at Maricopa County, when such
representations were made, or how or where they were conveyed.
Contrary to plaintiff’s contention, plaintiff was required to plead its claim for
negligent misrepresentation with particularity.

See Taylor v. Nair, Case No.

CV–13–01982–PHX–DGC, 2014 WL 2639656, at *2 (D. Ariz. June 13, 2014) (quoting Neilson
v. Union Bank of Cal., N.A., 290 F. Supp. 2d 1101, 1141 (C.D. Cal. 2003)) (“‘It is well

38

Complaint at 8, ¶¶ 37-38, attached to Notice of Removal, Docket No. 1.

39

Id. at ¶ 35 and Exhibit 5.
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established in the Ninth Circuit that both claims for fraud and negligent misrepresentation
must meet Rule 9(b)’s particularity requirements’”). Also contrary to plaintiff’s contention,
there is not “less particularity” required for an Arizona Consumer Fraud Act claim.
Plaintiff was required to plead its fraud claims with particularity which means pleading the
who, what, when, where and how of the alleged fraud, which plaintiff has failed to do.
Plaintiff makes only vague allegations that defendant marketed the Master Agreement as
having the lowest government pricing. But, plaintiff does not allege specifically when these
representations were made, who at defendant made these representations, or that anyone
working for plaintiff actually heard or read these representations. Plaintiff’s fraud claims
have not been pled with particularity, and they are dismissed.
Plaintiff requests leave to amend its fraud claims, but amendment would be futile
as to plaintiff’s common law fraud claims because those claims are barred by the economic
loss rule. “The economic loss doctrine prohibits certain tort actions seeking ‘pecuniary
damage[s] not arising from injury to the plaintiff’s person or from physical harm to
property.’” Sullivan v. Pulte Home Corp., 306 P.3d 1, 2 (Ariz. 2013) (quoting Restatement
(Third) of Torts: Liability for Economic Harm § 2 (Tentative Draft No. 1, 2012)). “‘Economic
loss,’ ... refers to pecuniary or commercial damage, including any decreased value or repair
costs for a product or property that is itself the subject of a contract between the plaintiff
and defendant, and consequential damages such as lost profits.” Flagstaff Affordable

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Housing Ltd. Partnership v. Design Alliance, Inc., 223 P.3d 664, 667 (Ariz. 2010).

The

economic loss rule limits a party to its “contractual remedies for purely economic loss”
arising from the other party’s “alleged failure to adequately perform its promises under”
a contract. Cook v. Orkin Exterminating Co., 258 P.3d 149, 153 (Ariz. Ct. App. 2011).
Because plaintiff’s common law fraud claims are based on the same alleged conduct as its
contract claims, these claims are barred by the economic loss rule.
Amendment would also be futile as to plaintiff’s statutory fraud claim. “[A]
misrepresentation of law or of the legal effect of a contract does not constitute actionable
fraud.” Barnes v. Lopez, 544 P.2d 694, 697 (Ariz. Ct. App. 1976). Plaintiff’s statutory fraud
claim is based on allegations that defendant represented that its contracts guaranteed that
plaintiff would be charged the lowest governmental pricing for office supplies. These are
representations as to the meaning of the contract, not representations of fact.
Conclusion
Based on the foregoing, defendant’s motion to dismiss40 is granted in part and
denied in part. Plaintiff’s contract claims that are based on allegations that defendant
breached the Master Agreement are dismissed and plaintiff’s fraud claims are dismissed.
The motion is otherwise denied. Plaintiff’s contract claims are not barred by the statute of
limitations and plaintiff has stated plausible contract claims based on allegations that

40

Docket No. 10.
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defendant breached the Administration Agreement. Plaintiff is not given leave to amend
any of the dismissed claims as amendment would be futile.
DATED at Anchorage, Alaska, this 21st day of November, 2014.
/s/ H. Russel Holland
United States District Judge

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