Simplex, Inc. v. Gobal Source One International, Inc. et al
Filing
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OPINION denying 12 Motion to Strike and granting 13 Motion to Dismiss Count IV of the Complaint. Entered by Judge Sue E. Myerscough on 8/23/2012. (CT, ilcd)
E-FILED
Thursday, 23 August, 2012 11:21:33 AM
Clerk, U.S. District Court, ILCD
IN THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
SIMPLEX, INC., an Illinois Corporation,
Plaintiff,
v.
GLOBAL SOURCE ONE INTERNATIONAL,
INC., a California Corporation; AMERICAN
GUARD SERVICES, INC., a California
Corporation,
Defendants.
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No. 12-3101
OPINION
SUE E. MYERSCOUGH, U.S. District Judge:
This cause is before the Court on the Motion to Strike Plaintiff’s
Request for Attorney Fees Pursuant to Federal Rule of Civil Procedure
12(f) (d/e 12) and Motion to Dismiss Count IV of the Complaint
Pursuant to Federal Rules of Civil Procedure 12(b)(6) (d/e 13) filed by
Defendant American Guard Services, Inc. (AGS). For the reasons that
follow, the Motion to Strike Request for Attorney Fees is DENIED and
the Motion to Dismiss Count IV of the Complaint is GRANTED.
I. BACKGROUND
On March 30, 2012, Plaintiff Simplex, Inc. filed a four-count
Complaint based on diversity jurisdiction against Defendants AGS and
Global Source One International, Inc. (GSO). See Compl. (d/e 1). The
Complaint contains claims arising from a contract to purchase “load
banks” from Plaintiff and also alleges fraudulent inducement in the
formation of the contract to purchase. See Compl. Specifically, the
Complaint alleges that GSO purchased load banks from Plaintiff but
failed to pay for them. According to Plaintiff, GSO and AGS are related
entities who share common principals and, as part of the condition of
sale of the load banks to GSO, AGS agreed to guarantee GSO’s debt to
Plaintiff. When Plaintiff demanded payment from AGS, AGS failed to
pay. Plaintiff further alleges that GSO’s and AGS’s principals made
statements assuring Plaintiff they (the principals) would be responsible
for GSO’s debt should GSO fail to pay.
Plaintiff brings two claims against AGS: (1) Breach of
Contract/Guarantee (Count II); and (2) Fraudulent Inducement (Count
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IV). In the prayer for relief in Count II, Plaintiff requests attorney fees.
Only AGS has been served. See Order of Default (d/e 7) (finding
that service had not been perfected on GSO). Although an entry of
default judgment was initially entered against AGS, this Court set the
entry of default aside on July 17, 2012. See Opinion (d/e 11). AGS has
now filed an Answer, Affirmative Defenses, and Cross Claim (d/e 14) and
the two motions at issue herein.
II. ANALYSIS
A.
Motion to Strike Pursuant to Rule 12(f)
AGS requests that the Court strike Plaintiff’s request for attorney
fees because the purported guarantee documents (Exhibits 4 and 5) do
not provide for attorney fees. Plaintiff responds that AGS, by virtue of
the guarantee, agreed to the terms and conditions of the transaction
itself, including the terms in the two invoices (Exhibit 3) that provide
that the purchaser is responsible for all collection costs.
The Cross Corporate Guarantee states that GSO is a subsidiary of
AGS, that AGS “will cross guarantee GSO”, and that the “account will be
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set up under GSO.” See Exhibit 5. The invoices in question, which
identify GSO as the purchaser, provide that “[t]he purchaser will be
responsible for all collection costs if this invoice is not paid pursuant to
its terms and conditions.” See Exhibit 3.
Pursuant to the Federal Rules of Civil Procedure, the Court may
“strike from a pleading an insufficient defense or any redundant,
immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f).
“[M]otions to strike are not favored and will be denied unless the
language in the pleading has no relation to the controversy and is unduly
prejudicial.” Circuit Sys., Inc. v. Mescalero Sales, Inc., 925 F. Supp. 546,
548 (N.D. Ill. 1996).
The Motion to Strike is denied. Plaintiff’s request for attorney fees
is not redundant, immaterial, impertinent, or scandalous. Moreover,
whether Plaintiff is entitled to attorney fees based on the language in the
guarantee and/or invoices is more appropriately decided on a motion for
summary judgment. See, e.g., Negro Nest, LLC v. Mid-Northern Mgmt.,
Inc., 362 Ill. App. 3d 640, 651 (2005) (finding that contract that
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provided for “all costs of collections,” where no evidence was presented
on the parties’ meaning of the phrase, did not include attorney fees);
Cohen v. Continental Illinois Nat. Bank & Trust Co. of Chi., 248 Ill.
App. 3d 188, 192 (1993) (“A guarantor is not liable for anything to
which he did not agree”); Boulevard Bank Nat’l Ass’n v. Philips Med.
Sys., Intern. B.V., 15 F.3d 1419, 1426 (7th Cir. 1994) (construing
“collections costs” as including attorney fees).
B.
Motion to Dismiss Pursuant to Rule 12(b)(6)
AGS has also moved to dismiss Count IV, the fraudulent
inducement claim, for failure to state a claim. Specifically, AGS asserts
that the allegations are insufficient to meet the pleading standard set
forth in Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 173 L. Ed.2d
868 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.
Ct. 1955, 167 L. Ed. 2d 929 (2007).
Under Rule 12(b)(6), dismissal is proper where a complaint fails to
state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6).
“In ruling on Rule 12(b)(6) motions, the court must treat all well-pleaded
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allegations as true and draw all inferences in favor of the non-moving
party.” In re marchFIRST Inc., 589 F.3d 901, 904 (7th Cir. 2009)
(citing Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008)).
“[T]he complaint must describe the claim in sufficient detail to give the
defendant ‘fair notice of what the ... claim is and the grounds upon which
it rests” and (2) its allegations must plausibly suggest that the plaintiff
has a right to relief, raising that possibility above a “speculative level.”
EEOC v. Concentra Health Serv., Inc., 496 F.3d 773, 776 (7th Cir.
2007).
For allegations of fraud, “a party must state with particularity the
circumstances constituted fraud or mistake. Malice, intent, knowledge,
and other conditions of a person’s mind may be alleged generally.”
Fed.R.Civ.P. 9(b); see also General Ins. Co. of America v. Clark Mali
Corp., 2010 WL 1286076, at *7 (N.D. Ill. 2010) (under Twombly and
Iqbal, “the idea is to state enough facts to present a plausible claim for
relief. Where the claim involves fraud, more is required”). “The
circumstances of fraud or mistake include ‘the identity of the person who
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made the misrepresentation, the time, place and content of the
misrepresentation, and the method by which the misrepresentation was
communicated to the plaintiff.’” Windy City Metal Fabricators &
Supply, Inc. v. CIT Tech. Fin. Serv., Inc., 536 F.3d 663, 668 (7th Cir.
2008) (quoting General Elec. Capital Corp. v. Lease Resolution Corp.,
128 F.3d 1074, 1078 (7th Cir. 1997) (quotation omitted)).
To state a claim for fraudulent inducement under Illinois law, a
plaintiff must allege: “(1) a false statement of material fact; (2) known or
believed to be false by the person making it; (3) an intent to induce the
other party to act; (4) action by the other party in reliance on the truth
of the statement; and (5) damage to the other party resulting from such
reliance.” Hoseman v. Weinschneider, 322 F.3d 468, 476 (7th Cir.
2003) (quotations and citations omitted). In Count IV, Plaintiff alleges
that GSO offered to purchase load banks from Plaintiff and sought to
pay for those load banks within 45 days of the date of shipment. Compl.
¶ 10. It was Plaintiff’s practice to require prepayment in full or cash on
delivery unless the purchaser had an open account with Plaintiff. Compl.
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¶ 11. GSO did not meet Plaintiff’s requirements to have an open
account, and Plaintiff notified GSO that Plaintiff would not ship the load
banks until they were paid in full. Compl. ¶¶ 12, 13. GSO proposed
that AGS guarantee GSO’s open account with Simplex. Compl. ¶ 14.
Plaintiff alleges that “AGS’s principals made statements in which
they assured [Plaintiff] they would pay in accordance with the terms of
an open account should GSO fail to pay.” Compl. ¶ 15; see also Compl.
¶¶ 5, 6 (identifying, on information and belief, that GSO’s and AGS’s
principals are Sherine Assal and Sherif Assal). “GSO and AGS working
together both submitted financials executed by Sherif Assal, a principal in
both entities, to induce [Plaintiff] to agree to more favorable terms.”
Compl. ¶ 16. “AGS tendered a Cross Corporate Guarantee to be
tendered to [Plaintiff] on behalf of GSO.” Compl. ¶ 17.
Plaintiff further alleges that “[a]t that time that AGS made
statements to [Plaintiff] that it would guarantee GSO’s debt, AGS knew
that the statements were false.” Compl. ¶ 18. AGS’s statements that it
would guarantee its debt to Plaintiff were communicated to Plaintiff to
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induce Plaintiff to ship the load banks without first receiving payment
from GSO, AGS’s subsidiary. Compl. ¶ 19. Plaintiff, in reliance on
AGS’s false statements, did not require payment in full from GSO prior
to shipment or cash on delivery and shipped the load banks on December
6, 2011. Compl. ¶¶ 20, 21. GSO failed to tender payment when due,
and AGS failed to tender payment in accordance with the Cross
Corporate Guarantee. Compl. ¶¶ 22, 23. As a result, Plaintiff has
suffered damages in the amount of $137,480. Compl. ¶ 24.
The Court finds that Plaintiff has failed to plead with particularity
the circumstances constituting the fraud. Although Plaintiff alleges that
AGS’s principals made the statements, Plaintiff does not allege when the
statements were made, where the statements were made, the method by
which the statements were made, the content of the statements (other
than the general allegation that AGS would guarantee GSO’s debt), or
the reason why the statements were fraudulent. See, e.g., Fifth Third
Bank (Chicago) v. Stocks, 265 F.R.D. 316, 319 (N.D. Ill. 2010) (finding
the plaintiff failed to state a claim for fraud in the inducement where the
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plaintiff failed to plead “the identity of the person who made the
representation, the time, place and content of the misrepresentation, and
the method by which the misrepresentation was communicated to the
[claimant]” (citations omitted)); Lululemon USA, Inc. v. 109 N. State
Retail, LLC, 2009 WL 1732103, at *3 (N.D. Ill. 2009) (finding that the
plaintiff failed to plead with particularity the identity of the party making
one of the misrepresentations, when the misrepresentations were made,
the place the misrepresentations were made, and the method by which
the misrepresentations were made); In re Neale, 440 B.R. 510, 518
(Bankr. W.D. Wis. 2010) (“A complaint which fails to identify the
fraudulent statements or the reasons why they are fraudulent does not
satisfy the particularity requirements of Rule 9(b)”). Therefore, Count
IV is dismissed, but the dismissal is without prejudice.
III. CONCLUSION
For the reasons stated, Defendant AGS’s Motion to Strike
Plaintiff’s Request for Attorney Fees Pursuant to Federal Rule of Civil
Procedure 12(f) (d/e 12) is DENIED and Defendant AGS’s Motion to
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Dismiss Count IV of the Complaint Pursuant to Federal Rules of Civil
Procedure 12(b)(6) (d/e 13) is GRANTED. Count IV is DISMISSED
without prejudice. Plaintiff is granted leave to re-file within 14 days.
ENTERED: August 23, 2012
FOR THE COURT:
s/ Sue E. Myerscough
SUE E. MYERSCOUGH
UNITED STATES DISTRICT JUDGE
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