Execu-Ride Inc v. Trucker's Bank Plan

Filing 40

OPINION AND ORDER: GRANTING IN PART AND DENYING IN PART 25 MOTION to Dismiss by Defendant Trucker's Bank Plan. The Court denies the motion as to the tortious interference claims in Counts I and II, but grants the motion as to the good-faith-and-fair-dealing claim in Count IV and the request for attorneys' fees in the prayer for relief. Signed by Judge Jon E DeGuilio on 2/26/2018. (lhc)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
SOUTH BEND DIVISION
EXECU-RIDE CORP.,
Plaintiff,
v.
TRUCKER’S BANK PLAN, a division
of 1st SOURCE BANK,
Defendant.

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Case No. 3:17-CV-362 JD

OPINION AND ORDER
This case involves a dispute between a vehicle rental business, Execu-Ride Corp., and its
former lender, 1st Source Bank. The parties did business for over ten years before their
relationship soured. Execu-Ride alleges in this action that the Bank failed to timely release its
liens on Execu-Ride’s property once it settled its obligations to the Bank, and that the Bank made
false statements about it to other lenders and to a trade publication, among other allegations. This
suit was filed in state court in New Jersey, after which it was removed to federal court and then
transferred to this district. The Bank has now filed a partial motion to dismiss, arguing that
Execu-Ride’s claims for tortious interference and for breach of the duty of good faith and fair
dealing fail to state a claim, and that there is no legal basis for the complaint’s request for
attorneys’ fees as a form of relief. For the following reasons, the Court grants the motion in part
and denies it in part.
I. FACTUAL BACKGROUND
Execu-Ride owns and operates a vehicle rental business in New Jersey. In 2001, it
entered an agreement with the Bank under which the Bank provided a line of credit for purposes
of financing Execu-Ride’s business. Over time, the line of credit grew from $200,000 to

$2,500,000. Pursuant to their agreement, Execu-Ride granted the Bank a lien and security
interest in its fleet of vehicles. The Bank accordingly filed UCC-1 statements to perfect its
security interest.
This arrangement continued for a number of years, apparently without incident. In 2013,
however, the Bank reduced Execu-Ride’s credit limit, after which it decided to terminate its
relationship with Execu-Ride. The parties began discussing a workout in October 2013, but the
Bank declared Execu-Ride to be in default for missing its payment that month, even though
Execu-Ride believed that the payment would be included in the workout that was being
negotiated. Litigation then ensued in state court in New Jersey. Execu-Ride alleges that the
parties reached an agreement and that Execu-Ride satisfied its obligations to the Bank in March
2014. Despite Execu-Ride’s demands, though, the Bank did not file the documents to discharge
its security interest in Execu-Ride’s property until September 2015, after it was ordered to do so
by the state court. That state court action was ultimately dismissed without prejudice by
agreement of the parties.
Execu-Ride further alleges that the Bank made false statements about it to other lenders
and to others in the industry. It alleges that the Bank falsely told other lenders that Execu-Ride
continued to owe it money even after all the collateral had been paid off, and that Execu-Ride
had been past due on its loans with the Bank. One of the Bank’s executives also made similar
statements to a trade publication. Execu-Ride alleges that these false statements caused a number
of other lenders to cease doing business with it.
Execu-Ride initiated the present action by filing a complaint in a state court in New
Jersey. The complaint asserted claims for tortious interference with contractual relations and
with prospective economic advantage; breach of contract; breach of the duty of good faith and

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fair dealing; violation of New Jersey’s Uniform Commercial Code; fraudulent concealment of
evidence; and trade libel. The Bank removed this case to federal court and then moved to transfer
the case to this district. The court granted that motion, as the parties’ agreement contained a
forum-selection clause requiring any dispute between the parties to be brought in Indiana. [DE
19]. After the transfer, the Bank filed a partial motion to dismiss, and that motion is fully briefed.
II. STANDARD OF REVIEW
In reviewing a motion to dismiss for failure to state a claim upon which relief can be
granted under Federal Rule of Civil Procedure 12(b)(6), the Court construes the complaint in the
light most favorable to the plaintiff, accepts the factual allegations as true, and draws all
reasonable inferences in the plaintiff’s favor. Reynolds v. CB Sports Bar, Inc., 623 F.3d 1143,
1146 (7th Cir. 2010). A complaint must contain only a “short and plain statement of the claim
showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). That statement must
contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its
face, Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), and raise a right to relief above the speculative
level. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). However, a plaintiff’s claim need
only be plausible, not probable. Indep. Trust Corp. v. Stewart Info. Servs. Corp., 665 F.3d 930,
935 (7th Cir. 2012). Evaluating whether a plaintiff’s claim is sufficiently plausible to survive a
motion to dismiss is “‘a context-specific task that requires the reviewing court to draw on its
judicial experience and common sense.’” McCauley v. City of Chicago, 671 F.3d 611, 616 (7th
Cir. 2011) (quoting Iqbal, 556 U.S. at 678).
III. DISCUSSION
The Bank’s motion to dismiss raises three issues. First, the Bank moves to dismiss the
claims for tortious interference with contractual relations (Count I) and with prospective
economic advantage (Count II), asserting that those claims are barred by the economic loss
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doctrine. Second, it moves to dismiss the claim for breach of the duty of good faith and fair
dealing (Count IV) on the basis that Indiana law does not recognize such a duty. Third, it moves
to dismiss the request for attorneys’ fees in the complaint’s prayer for relief, arguing that none of
the claims in this action authorize that form of relief. The Court addresses each issue in turn.
A.

Counts I and II: Tortious Interference
The Bank first moves to dismiss Execu-Ride’s claims in Counts I and II for tortious

interference. In support, it relies on the economic loss doctrine, which “‘prohibits plaintiffs from
recovering in tort economic losses to which their entitlement only flows from a contract.’” Trico
Equip., Inc. v. Manor, Civ. No. 08-5561, 2011 WL 705703, at *3 (D.N.J. Feb. 22, 2011) (quoting
Bracco Diagnostics, Inc. v. Bergen Brunswig Drug Co., 226 F. Supp. 2d 557, 562 (D.N.J.
2002)).1 In other words, the economic loss doctrine bars recovery on “a contract claim in tort
claim clothing.” G&F Graphic Servs., Inc. v. Graphic Innovators, Inc., 18 F. Supp. 3d 583, 588–
89 (D.N.J. 2014) (internal quotation omitted). “‘[W]hether a tort claim can be asserted alongside
a breach of contract claim depends on whether the tortious conduct is extrinsic to the contract
between the parties.’” Trico Equip., 2011 WL 705703, at *3 (quoting State Capital Title &
Abstract Co. v. Bus. Servs., LLC, 646 F. Supp. 2d 668, 676 (D.M.J. 2009)). The economic loss
doctrine bars a claim if the plaintiff “simply is seeking to enhance the benefit of the bargain [it]
contracted for,” but it does not apply if the plaintiff asserts that the defendant breached a “duty
owed to the plaintiff that is independent of the duties that arose under the contract.” Saltiel v. GSI
Consultants, Inc., 788 A.2d 268, 280 (N.J. 2002).
In arguing that the economic loss doctrine bars Execu-Ride’s claims for tortious
interference, the Bank construes those claims as resting solely on the allegation that it improperly
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Both parties rely on New Jersey law as to these claims. In the absence of any dispute between
the parties, the Court does so as well.
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delayed in discharging its liens on Execu-Ride’s property. The Bank argues that its duty to
discharge the liens arises from the parties’ contract, so its failure to comply with that duty could
not support independent tort claims. If that were the sole basis for these claims, they would
clearly be encompassed in the economic loss doctrine, and Execu-Ride does not attempt to argue
otherwise. Instead, it asserts that this claim is based on distinct allegations of conduct extrinsic to
the contract. In particular, it asserts that this claim rests on disparaging statements that the Bank
made about it to third parties. For example, the complaint alleges that the Bank “made willfully
false statements [about Execu-Ride] to lenders in the industry,” including that Execu-Ride still
owed the Bank money and was past due on its loans, and that the Bank made similar false
statements about Execu-Ride to a trade publication. [DE 22 ¶¶ 28–29]. The complaint alleges
that as a result of those false statements, a number of lenders ceased doing business with ExecuRide. Id. ¶ 31.
There is no indication that the parties’ contract contemplates or attempts to regulate
statements of that sort to third parties. Accordingly, at least as thus framed, these claims arise
from conduct that is extrinsic to the contract, so they would not be barred by the economic loss
doctrine. For its part, the Bank makes no attempt to argue that a claim founded on those
allegations would be barred by the economic loss doctrine.2 Instead, it disputes that these claims,
as pled in the complaint, are actually based on those allegations. As the Bank notes, the only
specific conduct that the complaint identifies under the headings for these counts is the Bank’s
delay in discharging its liens. [DE 22 ¶¶ 34, 40]. As just noted, that conduct would not be a valid
basis for these claims. However, both of these counts also incorporate by reference each of the

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In fact, those same statements form the basis for Execu-Ride’s claim for trade libel, which the
Bank has not moved to dismiss.
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preceding paragraphs of the complaint. Id. ¶¶ 32, 38. Those paragraphs include the allegations
about the Bank’s false statements to Execu-Ride’s lenders and to a trade publication, and the
allegation that Execu-Ride’s lenders ceased doing business with it as a result of those false
statements. Id. ¶¶ 28–31.
A complaint need not be artfully drafted or organized to survive a motion to dismiss, and
dismissing these claims in order for Execu-Ride to copy and paste those allegations under the
headings for these particular counts would be a needless exercise. Since the complaint
incorporated the allegations in those paragraphs into these counts, and since Execu-Ride has now
clarified the basis for these claims, the Court finds that the complaint adequately states claims for
tortious interference based on the Bank’s alleged statements to a trade publication and to other
third parties. Therefore, the Court denies the motion to dismiss as to the tortious interference
claims in Counts I and II.
B.

Count IV: Good Faith and Fair Dealing
The Bank next moves to dismiss Count IV, which alleges that the Bank breached its

implied contractual duty of good faith and fair dealing. The parties agree that Indiana law does
not recognize such a duty, but that New Jersey law does, so the only question is whether Indiana
or New Jersey law governs this claim.
The Bank notes that the contract upon which this claim is based contains a choice-of-law
provision stating that Indiana law governs the contract. The Bank argues that this provision
controls, and that because Indiana law does not recognize an implied duty of good faith and fair
dealing, this count fails to state a claim. In response, Execu-Ride begins by arguing that because
this action was transferred to this district from New Jersey under 28 U.S.C. § 1404(a), New
Jersey’s choice-of-law rules apply. It then argues that New Jersey would decline to enforce the

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choice-of-law provision because applying the law of a state that does not recognize a duty of
good faith and fair dealing would violate the public policy of New Jersey.
Execu-Ride’s argument fails at the outset, however.3 It is true, as a general matter, that
when a case is transferred under § 1404(a), the court applies the choice-of-law rules of the state
from which the case was transferred. Ferens v. John Deere Co., 494 U.S. 516, 519 (1990).
However, when a case is transferred under § 1404(a) pursuant to a forum-selection clause, that
rule does not apply. As the Supreme Court explained in Atlantic Marine: “when a party bound by
a forum-selection clause flouts its contractual obligation and files suit in a different forum, a
§ 1404(a) transfer of venue will not carry with it the original venue’s choice-of-law rules . . . .”
Atlantic Marine Const. Co. v. U.S. Dist. Ct., 134 S. Ct. 568, 582 (2013) (“The court in the
contractually selected venue should not apply the law of the transferor venue to which the parties
waived their right.”).
Here, this case was transferred to this district under § 1404(a), but that transfer was
ordered pursuant to a forum-selection clause that required any suit arising out of the contract to
be brought in Indiana. [DE 19 (“[T]his Court finds the forum-selection clause enforceable and
applicable to all of Plaintiff’s claims.”)]. Therefore, consistent with Atlantic Marine, the Court
applies Indiana’s choice-of-law rules. 134 S. Ct. at 582 (“A federal court sitting in diversity
ordinarily must follow the choice-of-law rules of the State in which it sits.”). And because

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The second step of Execu-Ride’s argument likely fails as well. In Ocean City Exp. Co. v. Atlas
Van Lines, Inc., No. 13-1467, 2013 WL 3873235, at *4 (D.N.J. July 25, 2013), a court in the
District of New Jersey noted that the “implied duty of good faith and fair dealing arises from
New Jersey’s common law, not from some overarching legislative statement of public policy.”
(internal citation omitted). Accordingly, the court enforced a choice-of-law provision for Indiana
law, and thus dismissed a claim for breach of the implied duty of good faith and fair dealing. Id.
at *4–5. Execu-Ride cites no case that has declined to enforce a choice-of-law provision under
these circumstances.
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Execu-Ride has made no argument that Indiana would decline to enforce a choice-of-law
provision for Indiana law, the Court finds that Indiana law governs this claim. Therefore, since
Indiana law does not recognize an implied contractual duty of good faith and fair dealing, this
count fails to state a claim, so the motion to dismiss is granted.
C.

Attorneys’ Fees
Finally, the Bank moves to dismiss Execu-Ride’s request for attorneys’ fees in its prayer

for relief, arguing that attorneys’ fees are not recoverable through any of the claims Execu-Ride
asserts in this action. In its response, Execu-Ride does not argue to the contrary, but instead
argues that dismissing that request would be premature because “it remains to be seen if the
Bank’s conduct rose to the point where the finder of fact may deem it just to award . . . attorneys’
fees.” [DE 33 p. 11]. Execu-Ride does not attempt to identify any authority that would permit
such an award, though, nor did it respond to 1st Source Bank’s argument that there is none.
Given the absence of any legal basis for Execu-Ride’s request for this form of damages, the
Court grants the motion to dismiss as to the request for attorneys’ fees.
IV. CONCLUSION
The Bank’s motion to dismiss [DE 25] is GRANTED in part and DENIED in part. The
Court denies the motion as to the tortious interference claims in Counts I and II, but grants the
motion as to the good-faith-and-fair-dealing claim in Count IV and the request for attorneys’ fees
in the prayer for relief.
SO ORDERED.
ENTERED: February 26, 2018
/s/ JON E. DEGUILIO
Judge
United States District Court

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