Hammer Haag Steel, Inc. v. Peddinghaus Corporation
Filing
51
ORDER denying as moot 16 -motion to dismiss; granting 23 --motion to stay; staying the action until entry in state court of a final judgment; directing Hammer Haag to submit within fourteen days of entry of final judgment a notice in this case; permitting Peddinghaus to respond within fourteen days; directing the clerk to ADMINISTRATRIVELY CLOSE this case. Signed by Judge Steven D. Merryday on 12/7/2017. (BK)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
HAMMER HAAG STEEL, INC.,
Plaintiff,
v.
CASE NO. 8:17-cv-510-T-23JSS
PEDDINGHAUS CORPORATION,
Defendant.
____________________________________/
ORDER
Hammer Haag Steel, Inc., sues (Doc. 21) Peddinghaus Corporation under
Florida’s Deceptive and Unfair Trade Practices Act (“FDUTPA”) for deceptive
trade practices, under 28 U.S.C. § 2201 for a declaratory judgment, and under
Florida common law for fraudulent inducement. In an ongoing Illinois state court
action, Peddinghaus sues (Doc. 16-5 at 36) Hammer Haag for breach of contract.
Peddinghaus moves (Doc. 23) to dismiss Count III and to stay this action pending
resolution of the state action.
BACKGROUND
In January 2014, Hammer Haag agreed to pay Peddinghaus a total of
$650,000 for a steel fabricating machine known as the “Ring of Fire.” (Doc. 23 at 1)
The contract obligated Hammer Haag to pay $520,000 before shipment and to pay
the remaining $130,000 within thirty days after the day Peddinghaus installed the
“Ring of Fire” at Hammer Haag’s facilities. (Doc. 21-4 at 1) Hammer Haag paid
$550,000 but “withheld” the remaining $100,000. (Docs. 21 at 3, 23 at 2)
On December 1, 2015, Peddinghaus sued (Doc. 16-5 at 36) Hammer Haag
in the Twenty-First Illinois Judicial Circuit in Kankakee County, Illinois, for breach
of contract. Appearing in the state action, Hammer Haag failed to challenge
personal jurisdiction, failed to challenge venue, and failed to remove the action.
(Doc. 23 at 2) Three weeks after the removal deadline, Hammer Haag moved
(Doc. 16-2) to arbitrate. Denying the motion to arbitrate (the denial of which
Hammer Haag failed to appeal), Judge Albrecht found that “the Court is not satisfied
that Hammer Haag has . . . met its burden of proving that the terms and conditions
that include the arbitration clause are, in fact, part and parcel of the contract.”
(Doc. 17-2 at 55)
On March 1, 2017, fifteen months after Peddinghaus sued Hammer Haag in
state court, Hammer Haag began this action. Peddinghaus moves to stay this action
because, Peddinghaus argues, the state action involves the same commercial dispute
at issue in the federal action.
DISCUSSION
The Illinois action and the federal action are parallel.
Under Colorado River Water Conservation District v. U.S., 424 U.S. 800 (1976), a
federal district court in “limited” and “exceptional circumstances” can abstain from
the exercise of jurisdiction in deference to a prior and parallel state court litigation
-2-
presenting the same parties, the same issues, the same evidence, and the same
commercial dispute. In this instance, Hammer Haag admits that the federal action
“litigat[es] substantially the same issues” as the state action. (Doc. 16-5 at 5) Also,
the $100,000 sought by Peddinghaus in the state action is the same $100,000 sought
by Hammer Haag in the federal action.1
Peddinghaus argues that the basis for Hammer Haag’s FDUTPA and
fraudulent inducement claims is that “Peddinghaus Quotation 33088 was a form of
‘advertising’ that ‘misrepresented the characteristics’ and ‘the cuts/processes that the
[Ring of Fire system] was supposedly capable of performing’” and that Peddinghaus
“unilaterally ‘changed the terms and conditions’ of Quotation 33088 to ‘eliminate[]
the arbitration clause from the [resulting] contract’ between the parties.”
(Doc. 23 at 11) As Peddinghaus insists, these arguments are “the verbatim of record
defenses and arguments asserted by [Hammer Haag] against Peddinghaus” in the
state action. (Doc. 23 at 11) Thus Hammer Haag’s claims in the federal action and
defenses in the state action are factually and legally parallel.2
1
In Count I, Hammer Haag sues for approximately $100,000. In Count II, Hammer Haag
sues for a declaration that Hammer Haag may withhold payment of the $100,000 that Peddinghaus
sues for in the state action. (Doc. 21 at 5–6)
2
“As with the arbitration theory, [the] fundamental premise of the FDUTPA cause of action
mimics the theory [Hammer Haag] raised as a defense in the [state] litigation where it is currently
being litigated. . . . The subject federal lawsuit and the Illinois litigation remain one and the same.”
(Doc. 23 at 7–8)
-3-
Exceptional circumstances warrant staying the federal action.
Among the factors determining whether “exceptional circumstances” warrant
Colorado River abstention are:
(1) the order in which the courts assumed jurisdiction over property; (2) the
relative inconvenience of the fora; (3) the order in which jurisdiction was
obtained and the relative progress of the two actions; (4) the desire to avoid
piecemeal litigation; (5) whether federal law provides the rule of decision; and (6)
whether the state court will adequately protect the rights of all parties.
Moorer v. Demopolis Waterworks and Sewer Bd., 374 F.3d 994, 997 (11th Cir. 2004).
Colorado River’s principles “rest on consideration of ‘[w]ise judicial administration,
giving regard to conservation of judicial resources and comprehensive disposition of
litigation.’” Colorado River, 424 U.S. at 817. No one factor is determinative, but a
single factor “can be the sole motivating reason for the abstention.” Moorer,
374 F.3d at 997.
The potential for piecemeal litigation favors the state court forum, and the
state action is further advanced.
Because the two actions involve the same litigants, the same issues and
defenses, the same evidence and witnesses, and the same commercial dispute, a
parallel federal action causes inconvenience and unnecessary expense for witnesses
and litigants, squanders state and federal judicial resources, and presents a risk of
inconsistent results. Also, Peddinghaus sued in state court fifteen months before
Hammer Haag sued in federal court, and the state action is further advanced; a
-4-
July 13, 2017 order set an October 1, 2017 discovery deadline, and Peddinghaus
moved for summary judgment on October 26, 2017 (see state court docket).
Count III fails to state a claim for fraudulent inducement.
Hammer Haag alleges (1) that on January 6, 2014, Peddinghaus sent Hammer
Haag both “Quotation 33088” (Doc. 21-1 at 10) and a copy of Peddinghaus’s “terms
and conditions of sales” (Doc. 21-2), the latter of which includes a mandatory
arbitration clause, and (2) that on January 23, 2014, “in reliance” on the January 6
terms and conditions, Hammer Haag sent Peddinghaus “Purchase Order CH012114”
(Doc. 21-3). (Doc. 21 at 2, ¶¶ 10–13) Next, Peddinghaus sent Hammer Haag an
order acknowledgment.3 (Doc. 21-4)
But the parties dispute whether the contract included a mandatory arbitration
clause. In the state action, Judge Albrecht denied Hammer Haag’s motion to compel
arbitration and ruled (Doc. 17-2 at 52) that “[t]he court is not satisfied that Hammer
Haag . . . met its burden of proving that the terms and conditions that include the
arbitration clause are, in fact, part and parcel of the contract.” (Doc. 17-2 at 52)
Hammer Haag sues, alleges fraud, and demands rescission of the contract. To
state a claim for fraudulent inducement, a plaintiff must allege (1) that the defendant
falsely stated a material fact, (2) that the defendant knew of the statement’s falsity or
should have known of the statement’s falsity, (3) that the defendant intended that the
3
Hammer Haag attaches (Doc. 21-5) to the complaint the “new” terms and conditions,
which Hammer Haag alleges that “Peddinghaus later claimed supplanted the January 6 Terms and
Conditions,” which omit a compulsory arbitration clause. (Doc. 21 at 3, ¶ 15)
-5-
plaintiff rely on the false statement; and (4) that the defendant detrimentally relied on
the false statement. Gemini Inv’rs III, L.P. v. Nunez, 78 So. 3d 94, 97 (Fla. 3d DCA
2012). Under Rule 9(b), Federal Rules of Civil Procedure, a party alleging fraud
must “state with particularity the circumstances constituting fraud.”
Hammer Haag asserts (1) that “unbeknownst” to Hammer Haag, Peddinghaus
“claims” to have changed the terms and conditions to omit the arbitration clause and
(2) that “[a]t no time between January 6, 2015, and the initiation of litigation did
Peddinghaus ever communicate the New Terms and Conditions to [Hammer Haag]
or advise [Hammer Haag] that the January 6 Terms and Conditions were not part of
the [Ring of Fire] contract or that it repudiated those terms and conditions of sale.”
(Doc. 21 at 3, ¶ 15, 16) Hammer Haag alleges (1) that “[b]y incorporating the
January 6 Terms and Conditions into the contract for the [Ring of Fire], Peddinghaus
[“represented” to Hammer Haag] that all disputes between the parties were subject to
mandatory arbitration which it intended for [Hammer Haag] to rely upon” (Doc. 21
at 6, ¶ 46) and (2) that Peddinghaus’s purported repudiation of the January 6 terms
and conditions “rendered its incorporation of these terms and conditions into the
[Ring of Fire] contract false statements of fact and rendered its concealment of the
New Terms and Conditions fraudulent.”4 (Doc. 21 at 7, ¶ 49)
4
Peddinghaus argues that there is no action for fraud in the inducement if the alleged
fraud “contradicts” the written contract. (Doc. 23 at 22) See Eclipse Med., Inc. V. Am. Hydro-Surgical
Instruments, Inc., 262 F. Supp. 2d 1234, 1342 (S.D. Fla. 1999) (Ryskamp, J.) (“Reliance on fraudulent
misrepresentations is unreasonable as a matter of law where the alleged misrepresentations
(continued...)
-6-
But Peddinghaus’s alleged actions cannot amount to the false statement of a
material fact. No false statement of material fact exists; Judge Albrecht found (1)
that “Quotation 33088” and the accompanying terms and conditions amounted to an
offer (“Hammer Haag failed to [meet] its burden of proving that the terms and
conditions that include the arbitration clause are, in fact, part and parcel of the
contract”) and (2) that the “Ring of Steel” contract contains no arbitration clause.5
CONCLUSION
Count III of the amended complaint is DISMISSED. Peddinghaus’s
motion (Doc. 16) to dismiss is DENIED AS MOOT. Peddinghaus’s motion
(Doc. 23) to stay is GRANTED, and this action is STAYED until entry in state
court of a final judgment (including disposition of any matter suspending rendition
4
(...continued)
contradict the express terms of the ensuing written agreement.”). But Hammer Haag responds
(Doc. 26 at 15) that no writing exists “resolv[ing] or contradict[ing] the representations Peddinghaus
made to Hammer Haag about arbitrating disputes between the parties”:
As a factual matter, there is no evidence that Peddinghaus ever sent
“new” terms and conditions to [Hammer Haag] at any time before
disputes arose between the parties. There is also no evidence that
Peddinghaus actually did “change” its terms and conditions as it
purported in the Illinois court. [Hammer Haag] specifically denies
that it ever received any terms and conditions apart from those
Peddinghaus sent January 6, 2015. Peddinghaus offered no evidence
for having done so at the hearing on the matter in Illinois and
Peddinghaus can offer this Court no copy of its “final” contract with
[Hammer Haag] because it does not have one.
5
Judge Albrecht reasoned that the arbitration clause contained within the “terms and
conditions of sales” attached to Quotation 33008 formed part of an “initial conversation” for the
Ring of Fire’s purchase, the contractual terms of which “substantially and fundamentally” changed
in the later communications that resulted in an offer and acceptance. (Doc 17-2 at 47–48)
-7-
under Rule 9.020(i), Florida Rules of Appellate Procedure). Hammer Haag must
submit a notice within fourteen days of entry of a final judgment. Peddinghaus may
respond within fourteen days. The clerk is directed to administratively CLOSE the
case.
ORDERED in Tampa, Florida, on December 7, 2017.
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