Amerifactors Financial Group LLC v. Windstream Supply LLC
ORDER denying 19 Motion to Dismiss. Signed by Judge D. P. Marshall Jr. on 7/6/12. (kpr)
IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
AMERIFACTORS FINANCIAL GROUP LLC
WINDSTREAM SUPPLY LLC
Windstream moves to dismiss Amerifactors's complaint pursuant to
Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6). Document No. 19. The
Court accepts the pleaded facts as true and views them in the light most
favorable to Amerifactors. Great Rivers Habitat Alliance v. Federal Emergency
Management Agency, 615 F.3d 985, 988 (8th Cir. 2010). But the burden of
proving federal jurisdiction remains with Amerifactors. Ibid. The grounds for
Windstream's motion are these: (1) Amerifactors lacks standing to sue; (2)
there is no stand-alone cause of action in Arkansas for violating an implied
covenant of good faith and fair dealing; (3) Amerifactors's claims are barred
by res judicata; and (4) Amerifactors has failed to plead facts sufficient to state
a viable cause of action.
1. Standing. Amerifactors is the twice-removed assignee of Hal-Tec.
Windstream's two threshold attacks on the assignment fail. Accepting the
pleaded facts as true, Amerifactors Financial Group, Inc. received the
assignment from Hal-Tec, then the Amerifactors corporation assigned its
rights to Amerifactors LLC. And in the Hal-Tec/ Amerifactors Inc. 2007
assignment, which was part of a factoring agreement, Hal-Tec agreed to sell
and assign to [Amerifactors] all of [its] right, title, and interest in and to all
[its] Accounts ... whether now existing or that may hereafter arise, that are
acceptable[.]" Document No. 1-3, at2. This forward-looking assignment covers
the disputed Windstream contract. Now to the main standing issue.
Hal-Tec entered into a construction agreement with Windstream in
January 2009. This contract contained clauses prohibiting assignment of its
contract without Windstream's approval and limiting enforcement of the
contract to Hal-Tec and Windstream or their "'permitted successors and
assigns[.]"* In May 2009, Hal-Tec and Windstream decided to terminate the
*The relevant contract provisions read as follows:
Contractor shall not assign, transfer or subcontract this Agreement or any
part thereof, or enter into any agreement with any person, firm or
corporation for performance of Contractor's obligation hereunder, or any
part of such obligations, without the prior written approval of Windstream.
No Third Party Beneficiary. This Agreement is entered into by and
beween, and may be enforced only by, the Parties, and this
construction contract; and came to an oral agreement about certain
termination terms. In this case; Amerifactors; as Hal-Tec' s assignee under the
original contract and the oral termination agreement; alleges that Windstream
violated these agreements and its implied covenant of good faith and fair
dealing. Windstream argues that Amerifactors lacks standing to sue because
Windstream's agreement with Hal-Tec specifically prohibited this type of
Arkansas law is murky on this point. The Arkansas Supreme Court has
made no governing holding. The Court therefore must make an 'Erie
educated guess' when the law of the forum state is not crystal clear."
Blankenship v. USA Truck, Inc., 601 F.3d 852,856 (8th Cir. 2010). Amerifactors
Agreement shall not be deemed to create any rights in third parties
(other than the Parties' permitted successors and assigns and any
persons, entities and enterprises entitled to indemnity hereunder),
including suppliers and customers of a Party, or to create any
obligations of a Party to any such third parties.
points the Court toward the Restatement (Second) of Contracts § 322:* That
section reads as follows:
(1) Unless the circumstances indicate the contrary, a contract term
prohibiting assignment of ithe contract bars only the delegation
to an assignee of the performance by the assignor of a duty or
(2) A contract term prohibiting assignment of rights under the
contract, unless a different intention is manifested,
(a) does not forbid assignment of a right to damages for
breach of the whole contract or a right arising out of the
assignor's due performance of his entire obligation;
(b) gives the obligor a right to damages for breach of the
terms forbidding assignment but does not render the
(c) is for the benefit of the obligor, and does not prevent the
assignee from acquiring rights against the assignor or the
obligor from discharging his duty as if there were no such
RESTATEMENT (SECOND) OF CONTRACTS § 322.
Arkansas Court of Appeals has cited this Restatement section in two cases.
Communications Distribution Corp. v. SCC Holdings Corp., No. CA04-1141, 2005 WL
1112187 (Ark. Ct. App. 11 May 2005); Sloan v. Tribble, No. CA96-1266, 1997 WL 573349
(Ark. Ct. App. 10 Sept. 1997) (Roaf, J., concurring). These unreported opinions point in
opposite directions; but they have no precedential value and shall not be cited, quoted,
or referred to by any court[,]" with limited exceptions not applicable here. ARK. SUP.
CT. R. 5-2(c).
The Court concludes that the Arkansas Supreme Court would apply the
Restatement if faced with the facts alleged here, particularly in light of an old
line of cases starting with Garetson-Greason Lumber Co. v. Home Life & Accident
Co., 131 Ark. 525, 199 S.W. 547 (1917). There, the Arkansas Supreme Court
held that "[n]otwithstanding the restricted assignment clause in the
[insurance] policy to the effect that the policy should not be assigned without
the written consent of the [insurance] company ... [the insured] had a right
to assign its right of action against the [insurer] to whomever it pleased." 131
Ark. at 529, 199 S.W. at 548. Garetson applies the rule of law eventually
embodied in the Restatement. And we too are dealing with the assignment
of contract rights, not contract duties. It is not as if Amerifactors is trying to
step into Hal-Tec's place and do the construction work for Windstream.
Hal-Tec assigned its right to sue Windstream for breach of contract to
The Hal-Tec/Windstream construction contract did not
explicitly restrict Hal-Tec's power to do so. In other words, "[n]o intent is
thereby revealed to avoid an assignment not meeting the restrictions." Cedar
Point Apartments, Ltd. v. Cedar Point Inv. Corp., 693 F.2d 748,754 (8th Cir.1982)
(applying Missouri law and citing the Restatement).
Thus, the Court
concludes, viewing the facts in the light most favorable to Amerifactors, that
the assignment of Hal-Tec' s rights under the agreements was valid. Ibid.
Windstream, of course, can pursue a claim against Hal-Tec for violating the
anti-assignment clause. RESTATEMENT (SECOND) OF CONTRACTS § 322(2)(b).
But in this lawsuit, Amerifactors has standing, as Hal-Tec's assignee, to
pursue its breach-of-contract claims against Windstream. Alleged injury,
causation, and redressability are all present. Coffey v. Commissioner ofInternal
Revenue, 663 F.3d 947,950 (8th Cir. 2011).
2. Implied Covenant of Good Faith and Fair Dealing. Windstream is
right that Arkansas law includes no such separate cause of action. Arkansas
Research Medical Testing, LLC v. Osborne, 2011 Ark. 158, at 6. Instead, a
breach of the implied covenant of good faith and fair dealing remains nothing
more than evidence of a possible breach of a contract between parties." Ibid.
Amerifactors's separate claim for breach of the implied covenant of good faith
and fair dealing is dismissed without prejudice. The issue survives as part of
the general claims for breach of contract.
3. Res Judicata.
Windstream next argues that res judicata bars
Amerifactors's claims. Res judicata is an affirmative defense that ordinarily
must be specifically pleaded[.]" Sanders v. Department oj Anny, 981 F.2d 990,
991 (8th Cir. 1992) (per curiam); see also FED. R. CIV. P. 8(c)(1). Windstream has
not pleaded yet. The rule, however, is not hard and fast: sometimes this
defense is considered and resolved on a 12(b) motion. E.g., In re Sonus
Networks, Inc., Shareholder Derivative Litigation, 499 F.3d 47, 56 (1st Cir. 2007)
(John R. Gibson, J., sitting by designation and writing).
As a matter of federal procedure, whether to consider public records,
like the Oklahoma court papers advanced by Windstream, is a matter within
the Court's discretion. Stahl v. U.S. Dep't ofAgriculture, 327 F.3d 697, 700-01
(8th Cir. 2003). Exactly what happened in the Oklahoma case is not clear
enough, however, for the Court to exercise its discretion and stop this case
now. Windstream's motion to dismiss on res judicata grounds is therefore
denied without prejudice. Windstream should plead res judicata as an
affirmative defense in its answer and ventilate the defense on summary
judgment. This can happen sooner rather than later, and probably should,
given what may have happened in the Oklahoma case. The Court needs to
know the undisputed material facts to decide whether the Oklahoma
judgment bars the door.
4. Failure to Plead Sufficient Facts.
The Court disagrees with
Windstream's characterization of Amerifactors's complaint. It moves beyond
bare conclusions and states facts, which, if accepted as true, cross Iqbal's
plausibility threshold. Ashcroftv.Iqbal, 556 U.S. 662, 678-79 (2009). TheCourt
therefore denies Windstream's motion to dismiss on this ground as welL
Motion, Document No. 19, denied.
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