Munster Steel Co Inc v. Crane 1 Services Inc

Filing 48

OPINION AND ORDER: For the reasons set forth in the Opinion and Order, the 13 Motion to Dismiss is GRANTED; however Count V is dismissed without prejudice. Signed by Judge Rudy Lozano on 1/30/2018. (jss)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
MUNSTER STEEL CO., INC.,
Plaintiff,
vs.
CRANE 1 SERVICES, INC.,
Defendant.

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No. 2:16-CV-345

OPINION AND ORDER
This matter is before the Court on Defendant’s Motion to
Dismiss Count V of Plaintiff’s Complaint, filed by the defendant,
Crane 1 Services, Inc., on September 16, 2016.

(DE #13.)

For the

reasons set forth below, the motion is GRANTED; however, Count V
is dismissed without prejudice.

BACKGROUND
The plaintiff, Munster Steel Co., Inc. (“Munster Steel”),
filed its complaint on July 26, 2016.

(DE #1.)

The complaint,

which is premised upon diversity jurisdiction, lists the following
claims against the defendant, Crane 1 Services, Inc. (“Crane 1”):
Count I, Breach of Contract; Count II, Breach of Implied Warranty
of Merchantability – I.C. 26-1-2-314; Count III, Breach of Implied
Warranty of Fitness for a Particular Purpose – I.C. 26-1-2-315;
Count IV, Negligence; Count V, Fraudulent Misrepresentation; and

Count VI, Negligent Misrepresentation.

(Id.)

Crane 1 filed the

instant motion to dismiss on September 16, 2016, arguing that Count
V of the complaint should be dismissed with prejudice because
Munster

Steel

particularity
Procedure.
(DE #15.)

failed
as

to

required

(DE #13.)

plead
under

fraud
the

with

Federal

the
Rules

requisite
of

Civil

Crane 1 also filed an answer that same day.

Munster Steel filed a response to the motion to dismiss

on September 30, 2016.
October 7, 2016.

(DE #16.)

(DE #17.)

Crane 1 filed its reply on

The motion is ripe for adjudication.

DISCUSSION
Relevant Facts
Munster Steel is an Indiana corporation in the business of
fabricating structural steel.

(DE #1, p. 1.)

As part of its

operations, Munster Steel utilizes heavy duty cranes that must be
able to withstand repetitive picks, speed requirements, and length
of life or load requirements.

(Id. at. 2.)

When it sold its old

facility in November of 2011 and ultimately moved to a new facility
in August of 2014, Munster Steel sought to purchase “Class D”
cranes specifically designed for heavy duty applications.
at 2-3.)

(Id.

Munster Steel solicited a proposal from Crane 1, a

Delaware corporation in the business of supplying and servicing
cranes and hoists, to design, supply, and install heavy duty “Class
2

D” cranes at its new facility; in connection with the negotiation
of the proposal, Crane 1 visited Munster Steel’s old facility and
took measurements and photographs of the existing cranes in order
to ensure that the new cranes would be of like kind.
3.)

(Id. at. 1,

On March 19, 2013, Crane 1 submitted a proposal to Munster

Steel in which it proposed to “furnish, install and provide all
required start-up testing for each system referenced within this
proposal” including cranes “designed to meet or exceed CMAA service
class “D” requirements with each crane utilizing the same hoist to
minimize required parts inventory and ease of maintenance” (the
“Proposal”).

(Id. at 3-4; see also DE #1-1.)

The Proposal

“articulated the details of how the cranes would be designed and
constructed.”

(DE #1, p. 20.)

Crane 1 “knowingly represented

that the cranes would meet all the specifications and standards
identified in the Proposal.”

(Id.)

On October 1, 2013, Munster

Steel accepted the Proposal and signed a purchase order in the
amount of $1,290,000.00 for the equipment detailed in the Proposal
(the “Purchase Order”); because the Purchase Order incorporated
the terms and specifications of the Proposal, the two documents
formed the basis of the agreement between Munster Steel and Crane
1 (collectively, the “Agreement”).

(Id. at 4; see also DE #1-2.)

At the time the Agreement was formed, Crane 1 “knew Munster Steel
would rely upon the representations made . . . regarding the manner
3

in

which

the

installed.”

cranes
(DE

#1,

were
p.

to

be

20.)

designed,

Munster

constructed

Steel

relied

and

on

the

representations made by Crane 1 when it entered into the Agreement
and ultimately paid Crane 1 in full for the equipment and service
provided.

(Id. at 22.)

However, Munster Steel alleges that Crane

1 “knowingly and intentionally designed and constructed the cranes
in a manner that failed to meet the requirements” of the Agreement.
(Id.)

Specifically, the cranes delivered to Munster Steel were

not “Class D” and Crane 1 failed to fabricate and construct them
in a workmanlike manner.

(Id. at 4-15.)

Additionally, Crane 1

failed to provide as-built drawings or other documentation related
to

the

crane

specifications,

despite

represented that it would do so.
Because

the

cranes

were

the

fact

that

it

had

with

the

(Id. at 4-15, 20-21.)
not

in

accordance

specifications of the Agreement, Munster Steel has been “unable to
fully

utilize

the

cranes

to

perform

its

structural

fabrication and has lost significant revenue as a result.”
at 15.)

steel
(Id.

Munster Steel also incurred costs to investigate the

deficiencies.

(Id. at 22.)

As of the date the complaint was

filed, Crane 1 has “failed to take full responsibility and refuses
to replace the defective equipment or complete all repair work.”
(Id. at 15.)

4

Standard
Federal Rule of Civil Procedure 12(b)(6) allows a complaint
to be dismissed if it fails to “state a claim upon which relief
can be granted.”

Fed. R. Civ. P. 12(b)(6).

Allegations other

than fraud and mistake are governed by the pleading standard
outlined in Federal Rule of Civil Procedure 8(a), which requires
a “short and plain statement” that the pleader is entitled to
relief.

However, fraud and constructive fraud claims are subject

to heightened pleading standards; under Rule 9(b), a party must
“state with particularity the circumstances constituting fraud or
mistake.

Malice, intent, knowledge, and other conditions of a

person’s mind may be alleged generally.”

Fed. R. Civ. P. 9(b).

Cincinnati Life Ins. Co. v. Grottenhuis, No. 2:10-cv-00205-LJMWGH, 2011 WL 1107114, at *8 (S.D. Ind. Mar. 23, 2011) (it is
“undisputed that the constructive and actual fraud claims are
subject to heightened Rule 9(b) pleading standards.”).
In order to survive a Rule 12(b)(6) motion, 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 Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)).

All well-pleaded facts must

be accepted as true, and all reasonable inferences from those facts
must be resolved in the plaintiff’s favor.
5

Pugh v. Tribune Co.,

521 F.3d 686, 692 (7th Cir. 2008).

However, plaintiffs may plead

themselves out of court if the complaint includes allegations that
show they cannot possibly be entitled to the relief sought.
McCready v. eBay, Inc., 453 F.3d 882, 888 (7th Cir. 2006).

Analysis
A federal court sitting in diversity must apply federal
procedural law and the appropriate state substantive law.

First

Nat. Bank and Trust Corp. v. Am. Eurocopter Corp., 378 F.3d 682,
689

(7th

Cir.

2004).

Here,

it

is

substantive law controls this dispute.

undisputed

that

Indiana

To sustain a cause of

action for fraudulent misrepresentation in Indiana, a plaintiff
must allege:
(1) that the defendant made false statements
of past or existing material facts; (2) that
the defendant made such statements knowing
them to be false or recklessly without
knowledge as to their truth or falsity; (3)
that the defendant made the statements to
induce the plaintiff to act upon them; (4)
that the plaintiff justifiably relied and
acted upon the statements; and (5) that the
plaintiff suffered injury.
Dickerson v. Strand, 904 N.E.2d 711, 715 (Ind. Ct. App. 2009)
(citing Verrall v. Machura, 810 N.E.2d 1159, 1162 (Ind. Ct. App.
2004).

With regard to the false statements, “fraud may not be

based on representations regarding future conduct, or on broken
6

promises, unfulfilled predictions or statements of existing intent
which are not executed.”

Biberstine v. New York Blower Co., 625

N.E.2d 1308, 1315 (Ind. Ct. App. 1993).

Moreover, when a plaintiff

alleges both a breach of contract claim and a fraud claim, the
tort of fraud must be “separate and independent” from the contract
claim, and the injury sustained from the tort must be “distinct”
from the injury suffered as a result of the breach of contract.
JPMCC 2006–CIBC14 Eads Parkway, LLC v. DBL Axel, LLC, 977 N.E.2d
354, 364 (Ind. Ct. App. 2012) (citing Dean V. Kruse Found., Inc.
v. Gates, 932 N.E.2d 763, 768 (Ind. Ct. App. 2010)).
An analysis of the factors above requires application of the
procedural standards set forth in Federal Rule of Civil Procedure
9(b) to determine whether a claim for fraudulent misrepresentation
has been properly stated.

Rule 9(b) requires a plaintiff to allege

“the identity of the person making the misrepresentation, the time,
place, and content of the misrepresentation, and the method by
which the misrepresentation was communicated to the plaintiff.”
Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 737 (7th
Cir. 2014) (citation omitted).

Plaintiffs are required to plead

the “who, what, where, and when of the alleged fraud” because, in
doing so, they must “conduct a precomplaint investigation in
sufficient depth to assure that the charge of fraud is responsible
and supported, rather than defamatory and extortionate.”
7

Ackerman

v. N.W. Mut. Life Ins. Co., 172 F.3d 467, 469 (7th Cir. 1999).
Moreover, claims of fraud must sufficiently allege fraudulent
intent on the part of the defendant.

Graue Mill Dev. Corp. v.

Colonial Bank & Tr. Co. of Chicago, 927 F.2d 988, 992 (7th Cir.
1991).

As noted by the Seventh Circuit Court of Appeals:
Cryptic statements suggesting fraud are not
enough; mere allegations of fraud . . .,
averments to conditions of mind, or references
to plans and schemes are too conclusional to
satisfy
the
particularity
requirements.
Rather, pleadings must state the specific
content of the false representations as well
as the identities of the parties to the
misrepresentation.”

Id. at 992–93 (internal citations, quotation marks, and brackets
omitted).
Here, Crane 1 argues that Munster Steel failed to allege the
elements

of

fraudulent

misrepresentation

with

particularity,

failed to properly allege that Crane 1 acted with fraudulent
intent, and failed to properly allege a separate and independent
tort for fraud with injuries distinct from those resulting from
the breach of contract.

Munster Steel responds by arguing that

its claim is pled with sufficient particularity, that it is not
based on future promises, and that it has properly alleged distinct
contract and tort claims.

8

As to Rule 9(b)’s particularity requirement,1 the “who” in
this case is generally alleged to be representatives of Crane 1.
While the specific identity of the Crane 1 employee or employees
responsible for the fraud is not mentioned in the complaint, there
is some precedent for the notion that the “institutional identity”
will suffice at the motion to dismiss stage.

See e.g. MDG Intern.,

Inc. v. Australian Gold, Inc., No. 1:07CV1096-SEB-TAB, 2008 WL
3982072, at *3 (S.D. Ind. Aug. 22, 2008) (citing Blaz v. Michael
Reese

Hosp.

Found.,

191

F.R.D.

570,

574

(N.D.

Ill.

1999)).

Similarly, the “when” can be inferred to be sometime between
November of 2011 (the time Munster Steel sold its old facility)
and August of 2014 (the time the new facility was substantially
completed) during which Munster Steel solicited and received the
Proposal from and entered into the Agreement with Crane 1.2
However, the remaining elements are insufficiently pled.

The

complaint does not refer to “where” the alleged misrepresentations
occurred.
mentioned,

Munster Steel’s old facility and new facility are
but

not

in

connection

with

any

specific

1 Although the parties separate their arguments regarding “particularity”
and “unfulfilled future promises,” the analysis overlaps and will be
addressed accordingly by the Court.
2 Specifically, Munster Steel alleges that it solicited the Proposal from
Crane 1 “prior to [the new facility’s] completion” (DE #1, p. 3), that the
Proposal was submitted on March 19, 2013 (Id.; see also DE #1-1), and that
the Agreement was entered into on October 1, 2013 (DE #1, p. 4; see also DE
#1-2).

9

representations.

More

importantly,

Munster

Steel

fails

to

adequately allege “what” specific false statements of past or
existing material facts Crane 1 purportedly made.

In its response

brief, Munster Steel argues that it has met the particularity
requirements with regard to this issue because it “specifically
alleged Crane 1 represented that it could provide Class D cranes
to Munster Steel in its 2013 [P]roposal after it had visited
Munster Steel’s facility,” that “Crane 1 made the representation
knowing that Munster Steel would not enter the [A]greement without
that

representation,”

that

“Crane

1

knowingly

designed

and

constructed the cranes contrary to what it had represented,” and
that “despite the fact that Crane 1 knew the cranes were not Class
D, it led Munster Steel to believe that it had provided Class D
cranes.”

(DE #16, pp. 5-6.)

However, as pointed out by Crane 1,

the complaint itself only alleges that Crane 1 made representations
as to future conduct and promises.

For example, the complaint

alleges that Crane 1 proposed to furnish, install and provide
specific

equipment

to

Munster

Steel

and

that

the

Proposal

articulated the details of how the cranes “would be designed and
constructed.”
the

cranes

It alleges that Crane 1 knowingly represented that

“would

meet

all

the

specifications

and

standards

identified in the Proposal.”

These facts are distinguishable from

those

Indiana,

in

Pain

Ctr.

of

SE

10

LLC

v.

Origin

Healthcare

Solutions LLC, No. 1:13-CV-00133-RLY, 2014 WL 6750042 (S.D. Ind.
Dec. 1, 2014), a case upon which Munster Steel relies heavily.
Origin,

the

false

misrepresentations”

statements
given

at

by

a

issue

sales

included

In

“affirmative

representative

during

a

business presentation that induced the plaintiffs to later enter
into a contract to purchase software and related services.
at *1-4.

Id.

Specifically, the plaintiffs alleged that they were

“falsely assured” that the defendant “had installed dozens of these
systems without error,” that its sales representatives and support
staff “had been extensively trained,” and that the particular
software package the plaintiffs were considering did not have any
“glitches.”

Id. at *1.

The district court found that the

plaintiffs had adequately alleged a claim for fraud, in part,
because the defendants had made the aforementioned “misleading
representations

regarding

the

characteristics

and

services

associated with [the] software” prior to the signing of the
contracts at issue.

Id. at 3.

The additional cases upon which

Munster Steel relies are similarly distinguishable because, in
each,

the

district

court

determined

that

false

material

representations as to past or existing facts had been adequately
alleged.

See ABN Amro Mortg. Group, Inc. v. Maximum Mortg., Inc.,

429 F. Supp. 2d 1031, 1039–41 (N.D. Ind. 2006) (finding the
plaintiff had sufficiently pled a fraudulent mortgage scheme where
11

the “creation of the false appearance” was based on the allegation
that

the

defendant

had

provided

the

plaintiff

with

false

information on existing loan documents, had falsely represented
that there were existing mortgages on the properties at issue, and
had falsely represented to the plaintiff that he was entitled to
a payoff on the existing mortgages); DNET Services, LLC v. Digital
Intelligence

Sys.

Corp.,

No.

1:08-CV-0252-DFH-JMS,

2009

WL

1259375, at *4 (S.D. Ind. May 5, 2009) (finding fraud was pled
with particularity because the plaintiff had alleged “detailed
certain written and oral communications” regarding representations
that “may have concerned past or existing facts”).

Here, however,

Munster Steel has not alleged that Crane 1 made any representations
as to its past or existing work, performance, expertise, skill, or
any

other

material

fact;

rather

all

of

the

alleged

misrepresentations concern what Crane 1 agreed it would do for
Munster Steel. 3

This failure dooms its claim for fraudulent

3 Munster Steel points to the fact that Crane 1 submitted the Proposal after
it had toured the old facility and had reviewed and observed Munster Steel’s
crane operations. However, the complaint simply states that Munster Steel
had invited Crane 1 to tour its facility “to gain an understanding of Munster
Steel’s operations,” was provided an “extensive review” of the cranes being
used, and that Crane 1 “took measurements and photos of the existing cranes
to ensure the new cranes would be of like kind.” (DE #1, p. 3.) It does not
reference any discussions or representations made regarding Crane 1’s past or
existing crane projects or technical abilities. Munster Steel also argues
that its claim survives because it has alleged that Crane 1 did not provide
as-built drawings or documentation of the cranes’ specifications after their
delivery as it had agreed to do; however, these allegations again concern
unfulfilled promises rather than past or existing material
misrepresentations.

12

misrepresentation because “[i]t is well-settled that fraud may not
be premised upon “representations of future conduct, on broken
promises, or on representations of existing intent that is not
executed.”

See e.g. Strodtman v. Integrity Builders, Inc., 668

N.E.2d 279, 283 (Ind. Ct. App. 1996) (finding that plaintiffs
failed to allege a claim of fraud because any misrepresentations
made in connection with the contract involved future conduct that
the defendant had agreed, yet ultimately failed, to perform);
Biberstine, 625 N.E.2d at 1315 (representations that the plaintiff
would be allowed to keep his stock pertained to future conduct
rather than past or existing facts); Comfax Corp. v. N. Am. Van
Lines,

Inc.,

587

(counterclaimants

N.E.2d
failed

118,
to

125

allege

(Ind.
actual

Ct.

App.

fraud

1992)
because

counterdefendant’s only representations involved future actions on
which the counterclaimants had relied).
Because the Court has found that Munster Steel has failed to
state a claim for fraudulent misrepresentation due to the lack of
any allegation that Crane 1 made false statements of past or
existing material facts, Crane 1’s remaining arguments need not be
addressed.

13

CONCLUSION
For the reasons set forth above, the motion to dismiss (DE
#13) is GRANTED; however, Count V is dismissed without prejudice.

DATED: January 30, 2018

/s/ RUDY LOZANO, Judge
United States District Court

14