Basler Electric Company v. Fortis Plastics, LLC et al
Filing
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MEMORANDUM AND ORDER Denying 14 MOTION to Dismiss Plaintiff's Complaint filed by Realization Services, Inc. and Denying 27 MOTION to Dismiss Amended Count III filed by Realization Services, Inc. Signed by Judge J. Phil Gilbert on 10/25/12. (bkl)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
BASLER ELECTRIC COMPANY,
Plaintiff,
vs.
Case No. 12-cv-713-JPG
FORTIS PLASTICS, LLC and
REALIZATION SERVICES, INC.,
Defendants.
MEMORANDUM AND ORDER
This matter comes before the Court on defendant Realization Services, Inc.’s (“RSI”)
motion to dismiss plaintiff Basler Electric Company’s (“Basler”) complaint (Doc. 14) and
amended Count III (Doc. 27). For the following reasons, the Court denies RSI’s motion to
dismiss.
I.
Facts and Procedural History
The facts of this case, taken from Basler’s well-pleaded complaint, are as follows. Basler
and defendant Fortis Plastics, LLC (“Fortis”) entered into a contract on September 22, 2010,
wherein Fortis was to produce and sell to Basler plastic components at an agreed price. Basler
then sold those plastic components to its customers. Thereafter, in February 2012, Fortis refused
to honor Basler’s purchase orders to manufacture the plastic components. Basler alleges that
Fortis’ decision to dishonor Basler’s purchase orders resulted from advice given to Fortis by RSI.
Specifically, RSI instructed Basler that Fortis would not supply the plastic components unless
Basler paid 300% of the price agreed upon in the contract. Fortis also refused to return to Basler
certain tooling and equipment Basler provided to Fortis so that Fortis could manufacture plastic
components exclusively for Basler.
On May 17, 2012, Basler filed its four-count complaint in the Circuit Court for the Third
Judicial Circuit, Madison County, Illinois, alleging breach of contract against Fortis, breach of
warranty against Fortis, tortious interference against RSI, and conversion against Fortis and RSI.
Defendants removed the case to this Court. Subsequent to removal, Basler filed an amended
tortious interference claim.
II.
Analysis
When considering a Rule 12(b)(6) motion to dismiss, the Court must “construe [the
complaint] in the light most favorable to the nonmoving party, accept well-pleaded facts as true,
and draw all inferences in [the non-moving] party’s favor.” Reger Dev., LLC v. Nat’l City Bank,
592 F.3d 759, 763 (7th Cir. 2010). The complaint must “contain sufficient factual matter,
accepted as true to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A
complaint must provide “enough fact to raise a reasonable expectation that discovery will reveal
evidence” to support the claim. Bell Atl. Corp., 550 U.S. at 556. However, the plaintiff need not
“show that she would probably prevail.” Redd v. Nolan, 663 F.3d 287, 291 (7th Cir. 2011). “A
well-pleaded complaint ‘may proceed even if it strikes a savvy judge that actual proof of those
facts is improbable, and that a recovery is very remote and unlikely.’” Id. (quoting Bell Atl.
Corp., 550 U.S. at 556).
RSI alleges in its motion to dismiss that both the tortious interference and conversion
claims against it in Counts III and IV contained in plaintiff’s complaint and amended Count III
must be dismissed. The Court will address both of these claims in turn.
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a. Amended Count III - Tortious Interference
In RSI’s motion to dismiss plaintiff’s amended Count III (Doc. 27), RSI argues that
Amended Count III must be dismissed because it (i) does not provide sufficient factual
allegations; (ii) conflates claims of tortious interference with a contract and tortious interference
with a prospective economic relationship; and (iii) improperly relies solely on allegations made
on ‘information and belief.’” Doc. 27, p. 7. The Court will consider both Basler’s inferences to
claims for tortious interference with a contract and tortious interference with a prospective
economic relationship in its analysis. First, the Court will consider whether Basler has pleaded
sufficient factual allegations to survive a Rule 12(b)(6) motion to dismiss.
Basler’s complaint contains the following relevant allegations. First, Basler alleges that
“[o]n information and belief, [RSI], on its own initintive [sic], and in pursuit of its own interests,
directed Fortis to cease honoring the Agreement and the purchase orders entered into by Fortis
with Basler and directed Fortis to cease the manufacture and/or delivery of the plastic
components to Basler.” Doc. 23, p. 2. The complaint further alleges that RSI advised Basler
“that if Basler wished Fortis to complete and deliver plastic components which were subject of
such Agreement and purchase orders, that Basler must pay 300% of the price agreed to in said
contract.” Id. Through such conduct, Basler alleges that RSI “intentionally interfered with the
contractual relations between Fortis and [Basler] causing Fortis to breach its Agreement with
[Basler].” Id. Basler further alleges that RSI interfered with Basler’s “contractual relations
between Basler and its customers by causing Fortis to breach its Agreement with [Basler]”
because RSI was aware that the plastic components at issue were to be used to fulfill contracts
Basler had with its customers. Id. at 4
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The relevant elements for the two causes of actions alleged by Basler in Amended Count
III are as follows. Under Illinois law, a plaintiff must show the following to establish a tortious
interference with a contract claim:
(1) the existence of a valid and enforceable contract between the plaintiff and a
third party; (2) defendant’s awareness of the contract; (3) defendant’s intentional
and unjustified inducement of a breach; (4) defendant’s wrongful conduct caused
a subsequent breach of the contract by the third party; and (5) damages.
Echo, Inc. v. Timberland Machs. & Irrigation, Inc., 661 F.3d 959, 968 (7th Cir. 2011) (citing
Purmal v. Robert N. Wadington & Assocs., 820 N.E.2d 86, 98 (Ill. App. Ct. 2004)). Similarly,
the elements for tortious interference with a prospective economic advantage or a prospective
contractual relationship are:
(1) the plaintiff’s reasonable expectation of entering into a valid business
relationship; (2) the defendants’ knowledge of the plaintiff’s expectancy; (3)
purposeful interference by the defendants that prevents the plaintiff’s legitimate
expectancy from being fulfilled; and (4) damages to the plaintiff resulting from
such interference.
Burrell v. City of Mattoon, 378 F.3d 642, 652 (2004). With respect to pleading the appropriate
elements of a claim, Twombly does not change the fact that the federal court system employs a
notice pleading standard. Bissessur v. Indiana Univ. Bd. of Trs., 581 F.3d 599, 603 (7th Cir.
2009). As such, “[a] defendant is owed ‘fair notice of what the . . . claim is and the grounds
upon which it rests.’” Id. (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)).
Considering the recited elements and the relevant pleading standards, the Court finds
Basler sufficiently pleaded a tortious interference with contract claim. Here, Basler has put RSI
on notice that RSI’s recommendation to Fortis that it only deliver plastic components to Basler at
300% of the contract price induced Fortis to breach its contract with Basler.
Accordingly,
Basler did not simply plead a bare recitation of the elements of the claim for tortious interference
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with a contract. Rather, Basler’s complaint gives RSI sufficient notice of the nature of the claim
and the grounds upon which it rests. See id.
Similarly, the Court finds that Basler sufficiently pleaded a tortious interference with a
prospective economic relationship claim. Specifically, Basler alleged that it planned to sell the
plastic components to its customers and RSI had knowledge of this plan. Further, Fortis’s
refusal to sell plastic components to Basler, pursuant to RSI’s instructions, prevented Basler
from selling plastic components to its customers. As a result, Basler was damaged by the loss of
those sales. Again, Basler did more than make a threadbare recitation of the elements of a
tortious interference with a prospective economic relationship claim. Rather, Basler’s complaint
gives RSI notice of both its legal claim and the grounds upon which it rests.
The Court further finds that Basler’s allegations “[o]n information and belief” are
sufficient. Doc. 23, p. 2. A party may plead upon information and belief “where the facts are
peculiarly within the possession and control of the defendant.” Arista Records, LLC v. Doe 3,
604 F.3d 110, 120 (2d Cir. 2010); see also Michael v. Letchinger, 2011 WL 3471082, at *16
(N.D. Ill. Aug. 5, 2011). Basler may not be privy to RSI’s reasoning for directing Fortis to
breach the contract, or whether RSI’s direction was for its own purposes. Accordingly, it is
proper for Basler to plead this allegation upon information and belief.
Finally, the Court does not find it improper that Basler has suggested two causes of action
within one count. Under Federal Rule of Civil Procedure 10(b), “[i]f doing so would promote
clarity, each claim founded on a separate transaction or occurrence . . . must be stated in a
separate count . . . .”
Basler’s claims of tortious interference with a contract and tortious
interference with a prospective economic relationship are founded on the same transaction or
occurrence. Accordingly, while desirable, it was not necessary for Basler to set forth these
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claims in separate counts. Now, the Court will turn to address whether Basler’s conversion
claim against RSI must be dismissed.
b. Count IV - Conversion
RSI alleges that Basler’s conversion claim must be dismissed because the economic loss
doctrine bars recovery on such a claim. The Court finds it appropriate to deny RSI’s motion to
dismiss Basler’s conversion claim for the same reason it denied Fortis’ motion to dismiss (Doc.
25). “‘Economic loss’ has been defined as ‘damages for inadequate value, costs of repair and
replacement of the defective product, or consequent loss of profits – without any claim of
personal injury or damage to other property.’” Moorman Mfg. Co. v. Nat’l Tank Co., 435 N.E.2d
443, 449 (Ill. 1982) (citing Note, Economic Loss in Products Liability Jurisprudence, 66 Colum.
L. Rev. 917, 918 (1966)). In Moorman, the case from which Illinois’ economic loss doctrine
derives its name, the Illinois Supreme Court held that economic loss was not recoverable under
the tort theories of strict liability, negligence, and innocent misrepresentation. Moorman, 435
N.E.2d at 449, 451-53. The policy reason underlying the Moorman doctrine states that “[w]hen
the defect is of a qualitative nature and the harm relates to the consumer’s expectation that a
product is of a particular quality so that it is fit for ordinary use, contract, rather than tort, law
provides the appropriate set of rules for recovery.” Id. at 451.
Moorman recited the following three exceptions to the economic loss doctrine:
(1) where the plaintiff sustained damage, i.e., personal injury or property damage,
resulting from a sudden or dangerous occurrence; (2) where the plaintiff’s
damages are proximately caused by a defendant’s intentional, false representation,
i.e., fraud; and (3) where the plaintiff’s damages are proximately caused by a
negligent misrepresentation by a defendant in the business of supplying
information for the guidance of others in their business transactions.
In re Chi. Flood Litig., 680 N.E.2d 265, 275 (Ill. 1997). The Seventh Circuit has specifically
recognized intentional torts as an exception to the Moorman doctrine. Dundee Cement Co. v.
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Chem. Labs., Inc., 712 F.2d 1166, 1170 (7th Cir. 1983); see also ABC Trans Nat’l Transp., Inc.
v. Aeronautics Forwarders, Inc., 413 N.E.2d 1299, 1312-14 (Ill. App. Ct. 1980) (allowing
recovery of lost profits where complaint alleged fraud, conspiracy, and breach of fiduciary duty);
Int’l Bhd. of Teamsters Local 734 Health and Welfare Trust Fund v. Phillip Morris, Inc., 34 F.
Supp. 2d 656, 661 (N.D. Ill. 1998) (acknowledging Moorman doctrine allows recovery where the
economic loss resulted from an intentional tort).
Here, Basler alleges not merely a negligence claim that would invoke the Moorman
doctrine. Rather, Basler has pleaded the intentional tort of conversion. As the Seventh Circuit
recognized in Dundee, the Moorman doctrine is inapplicable to intentional torts. Accordingly,
Basler’s conversion claim is not inconsistent with the Moorman doctrine and it should not be
dismissed.
II.
Conclusion
Accordingly, the Court DENIES RSI’s motions to dismiss (Docs. 14 & 27).
IT IS SO ORDERED.
DATE: October 25, 2012
s/ J. Phil Gilbert
J. PHIL GILBERT
DISTRICT JUDGE
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