North Alabama Fabricating Company, Inc. v. Bedeschi Mid-West Conveyor Company, LLC et al
MEMORANDUM AND ORDER denying 10 Motion to Dismiss for Failure to State a Claim; denying 23 Motion to Strike. Signed by District Judge Daniel D. Crabtree on 05/08/2017. (mig)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
NORTH ALABAMA FABRICATING
Case No. 16-2740-DDC-TJJ
BEDESCHI MID-WEST CONVEYOR
COMPANY, LLC, et al.,
MEMORANDUM AND ORDER
Plaintiff North Alabama Fabricating Company, Inc. brings this lawsuit, asserting fraud
and contract claims, against four defendants: (1) Bedeschi Mid-West Conveyor Company, LLC;
(2) Dearborn Mid-West Conveyor Company, Inc.; (3) Larry Harp; and (4) Braxton Jones.
Invoking Fed. R. Civ. P. 12(b)(6), defendants filed a Motion to Dismiss for Failure to State a
Claim (Doc. 10). Plaintiff filed a Response opposing defendants’ motion (Doc. 14). And,
defendants filed a Reply (Doc. 20).
Plaintiff then filed a Motion to Strike, in part, defendants’ Reply (Doc. 23). Defendants
have filed a Response opposing plaintiff’s Motion to Strike (Doc. 24). After carefully
considering all of the parties’ submissions, the court denies defendants’ Motion to Dismiss (Doc.
10) and denies plaintiff’s Motion to Strike (Doc. 23). The court explains why below.
The following facts are taken from plaintiff’s Complaint (Doc. 1), accepted as true, and
viewed in the light most favorable to plaintiff. ASARCO LLC v. Union Pac. R.R. Co., 755 F.3d
1183, 1188 (10th Cir. 2014) (explaining that, on a Fed. R. Civ. P. 12(b)(6) motion to dismiss, the
court must “accept as true all well-pleaded factual allegations in the complaint and view them in
the light most favorable to the [plaintiff].” (citation and internal quotation marks omitted)).
Plaintiff is a structural steel fabricating company located in Alabama. Defendants
Bedeschi Mid-West Conveyor Company, LLC (“Bedeschi”) and Dearborn Mid-West Conveyor
Company (“Dearborn”) are material handling systems providers that serve companies operating
in various commercial industries. Plaintiff alleges that these two companies acted
interchangeably and as one and the same when interacting with plaintiff. Plaintiff’s Complaint
thus refers to these two defendants collectively as “Mid-West.” Because it accepts plaintiff’s
allegations as true, the court also refers to these two defendants collectively as “Mid-West” when
setting out the factual background that governs the court’s ruling on the current motion.
Essar Steel Minnesota, LLC (“Essar”) retained Mid-West as a material handling supplier
for a construction project at its manufacturing facility (“the Minnesota Project”). After its
retention, Mid-West engaged plaintiff as a material sub-supplier for the Minnesota Project. MidWest contracted with plaintiff, who agreed to manufacture fabricated steel equipment and
support structures for use in the Minnesota Project. Mid-West and plaintiff entered into a
Blanket Subcontract Agreement (“Subcontract”) in September 2015.1
In October 2015, Mid-West issued to plaintiff a Subcontract Purchase Order (the
“Purchase Order”).2 The Purchase Order incorporates, among other things, the terms of the
Subcontract, as well as the “Mid-West Conveyor Terms and Conditions” (the “Terms and
Plaintiff has attached the Subcontract to its Complaint. Doc. 1-1. The Subcontract states: “THIS
SUBCONTRACT AGREEMENT . . . is entered into by and between BEDESCHI MID-WEST
CONVEYOR, LLC . . . and North Alabama Fabricating Company . . . .” Id. at 2. The Subcontract never
Plaintiff also has attached the Purchase Order to its Complaint. Doc. 1-2. The Purchase Order
identifies Bedeschi Mid-West Conveyor as the contractor. The Purchase Order never references
Conditions”).3 Plaintiff refers to the Purchase Order, Terms and Conditions, and Subcontract
collectively as the “Contract Documents.” Plaintiff has no contractual relationship with Essar,
the company that hired Mid-West for the Minnesota Project.
The Purchase Order and Terms and Conditions establish a contract price of
$4,637,371.00 that Mid-West is obligated to pay to plaintiff for performance under the Contract
Documents. Section 3 of the Terms and Conditions provides that Mid-West temporarily may
suspend work and shipments from plaintiff. Specifically, this provision recites that Mid-West
“may change the rate of scheduled shipments or direct temporary suspension of scheduled
shipments.” Doc. 1-3 at 2.
Between November and December 2015, plaintiff delivered nine shipments of fabricated
steel to the Minnesota Project. Plaintiff detailed and manufactured this product specifically for
the Minnesota Project. And, plaintiff cannot use this product for any other purpose. Mid-West
paid the invoices associated with those shipments.
In the fall of 2015, Essar stopped construction on the Minnesota Project because it could
not secure the additional funding needed to finish the construction. On December 22, 2015,
Mid-West sent a letter to plaintiff. It reported that Mid-West had given Notice of Default to
Essar because Essar had failed to provide and maintain Letters of Credit as a payment method for
invoices submitted for work performed on the Minnesota Project. The letter also explained that,
because Mid-West had no assurance of payment from Essar, Mid-West was invoking the
provisions of Section 3 of the Terms and Conditions. As described above, that section allows
Mid-West to direct temporary suspension of shipments for the Minnesota Project. The letter also
asserted that Mid-West would continue to pursue compliant Letters of Credit or other credit
Plaintiff has attached the Terms and Conditions to its Complaint. Doc. 1-3. The Terms and
Conditions only reference Bedeschi. The Terms and Conditions never reference Dearborn.
facilities from Essar that would assure payment and permit Mid-West to resume shipments. The
letter promised to keep plaintiff advised of future developments. Mid-West’s temporary
suspension applied to shipments of material then in the process of fabrication. It also applied to
all future shipments not yet in fabrication.
The next day, plaintiff sent a letter to Mid-West stating that it would suspend further
operations and shipments. The letter also stated that plaintiff would await reinstatement of the
suspended work. Afterwards, plaintiff sent invoices to Mid-West for the additional costs
plaintiff had incurred from the work’s suspension, as—it contends—Article 24 of the
Subcontract allows. Mid-West never paid these invoices.
On May 2, 2016, representatives for Mid-West and plaintiff met to discuss the possibility
of Mid-West lifting the temporary suspension and having plaintiff resume shipments to the
Minnesota Project. Both Mid-West and plaintiff agreed that, if this happened, the payment terms
established by the Contract Documents would continue to control and Mid-West would remain
obligated to satisfy all outstanding invoices.
On May 4, 2016, Mid-West sent a letter to plaintiff lifting its temporary suspension and
directing plaintiff to resume shipments to the Minnesota Project immediately. Mid-West
requested that plaintiff ship the material as quickly as possible so that Mid-West could be paid
under a letter of credit between Essar and Mid-West that required delivery of materials on or
before June 10, 2016. Plaintiff communicated to Mid-West that it expected Mid-West to pay
plaintiff’s increased costs arising from the earlier suspension and the future accelerated shipment
schedule. Defendants Larry Harp (President and CEO of Mid-West) and Braxton Jones (Project
Manager for Mid-West) represented to plaintiff’s President, John R. Parrish, that Mid-West
would compensate plaintiff for these expenses.
On May 5, 2016, plaintiff sent a letter to Mid-West confirming its intention to resume
shipments. The letter acknowledged the position that Mid-West was in with its letter of credit
with Essar. But, the letter also clarified that plaintiff expected payment under the terms of the
Contract Documents. Plaintiff and Mid-West never have altered the payment terms established
by the Purchase Order and Terms and Conditions.
Between May and July 2016, plaintiff delivered 33 more shipments of fabricated steel to
the Minnesota Project. These shipments totaled more than $1.3 million. Like the earlier
shipments, plaintiff had manufactured the product specifically for the Minnesota Project.
Plaintiff could not use the product for another other purpose. Mid-West never paid the invoices
associated with these shipments.
Mid-West assured plaintiff that the letter of credit provided the necessary surety to enable
Mid-West to compensate plaintiff for its work. But, plaintiff repeatedly communicated to MidWest that Mid-West’s payment obligations to plaintiff were independent of any compensation it
might receive under the letter of credit. Mid-West has denied responsibility for the increased
costs plaintiff incurred from the accelerated shipments. Mid-West also has questioned the price
basis and costs associated with plaintiff’s past-due invoices. Plaintiff asserts that Mid-West’s
questions are an attempt to fabricate reasons excusing Mid-West’s failure to pay the invoices.
Plaintiff has provided Mid-West all information it has requested in a consistent and timely
fashion. Yet, Mid-West has raised questions about each of plaintiff’s invoices long after
payment was due. Plaintiff asserts that Mid-West failed to raise any of these issues within a
reasonable time after receipt of the invoices.
Plaintiff contends that Mid-West has sought to vary the terms of the Contract Documents
informally. These informal variations have included the payment terms. Plaintiff asserts that
Mid-West has attempted to vary the payment terms to benefit Mid-West and at plaintiff’s
expense. Plaintiff repeatedly has declined any attempts to amend or alter the Contract
Documents. At all times, plaintiff has reserved its rights under the Contract Documents.
On July 8, 2016, Essar filed for Chapter 11 bankruptcy protection in the United States
Bankruptcy Court for the District of Delaware. Plaintiff asserts that Mid-West has shown no
intention to adhere to its contractual relationship with plaintiff. To the contrary, plaintiff asserts
that Mid-West’s words and actions show that it does not intend to comply with its contractual
On October 28, 2016, plaintiff filed this action. Doc. 1. Plaintiff asserts three claims
arising from Mid-West’s failure to compensate plaintiff for its work under the Contract
Documents. The three claims are: (1) breach of contract against Bedeschi and Dearborn; (2)
fraud, promissory fraud, and misrepresentation against Bedeschi, Dearborn, Larry Harp, and
Braxton Jones; and (3) fraudulent suppression against Bedeschi, Dearborn, Larry Harp, and
Braxton Jones. Defendants have moved to dismiss all claims, except the breach of contract
claim against Bedeschi. The court addresses defendants’ dismissal arguments in Part V below.
Fed. R. Civ. P. 8(a)(2) provides that a complaint must contain “a short and plain
statement of the claim showing that the pleader is entitled to relief.” Although this Rule “does
not require ‘detailed factual allegations,’” it demands more than “[a] pleading that offers ‘labels
and conclusions’ or ‘a formulaic recitation of the elements of a cause of action’” which, as the
Supreme Court explained, “will not do.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” Id. (quoting Twombly,
550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Id. (citing Twombly, 550 U.S. at 556). “Under this standard, ‘the complaint must give
the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual
support for these claims.’” Carter v. United States, 667 F. Supp. 2d 1259, 1262 (D. Kan. 2009)
(quoting Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007)).
Although the court must assume that the complaint’s factual allegations are true, it is “not
bound to accept as true a legal conclusion couched as a factual allegation.” Id. at 1263 (quoting
Iqbal, 556 U.S. at 678). “Threadbare recitals of the elements of a cause of action, supported by
mere conclusory statements, do not suffice” to state a claim for relief. Bixler v. Foster, 596 F.3d
751, 756 (10th Cir. 2010) (quoting Iqbal, 556 U.S. at 678).
When evaluating a motion to dismiss under Fed. R. Civ. P. 12(b)(6), the court may
consider “not only the complaint itself, but also attached exhibits and documents incorporated
into the complaint by reference.” Smith v. United States, 561 F.3d 1090, 1098 (10th Cir. 2009).
A court “may consider documents referred to in the complaint if the documents are central to the
plaintiff’s claim and the parties do not dispute the documents’ authenticity.” Id. (quoting
Alvarado v. KOB–TV, L.L.C., 493 F.3d 1210, 1215 (10th Cir. 2007)).
Documents Considered on the Motion to Dismiss
Before turning to the substance of the pending motions, the court considers whether it
properly may consider certain documents when deciding the motion to dismiss. As explained
above, when deciding a motion to dismiss under Fed. R. Civ. P. 12(b)(6), the court may consider
“not only the complaint itself, but also attached exhibits and documents incorporated into the
complaint by reference.” Smith, 561 F.3d at 1098.
Here, the court considers the Subcontract, Purchase Order, and Terms and Conditions in
its analysis below. The court concludes that considering these documents is proper because
plaintiff refers to these documents in its Complaint and plaintiff has attached the documents to
the Complaint as exhibits. See Doc. 1 at 3 (Complaint ¶¶ 8–9) (referencing the Contract
Documents); Doc. 1-1 (Subcontract); Doc. 1-2 (Purchase Order); Doc. 1-3 (Terms and
Conditions). Also, the Contract Documents are central to plaintiff’s claims, and the parties do
not dispute their authenticity.
The court also considers two letters that plaintiff has attached to its Response to
Defendants’ Motion to Dismiss. Docs. 14-1, 14-2. Defendants argue that Fed. R. Civ. P. 12(d)
prohibits the court from considering these letters on a motion to dismiss because they are
documents outside the pleadings. See Fed. R. Civ. P. 12(d) (“If, on a motion under Rule 12(b)(6)
or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion
must be treated as one for summary judgment under Rule 56.”). The court disagrees. Here, the
two letters are not matters outside of the pleadings. Plaintiff’s Complaint specifically references
The first letter is dated December 22, 2015. Doc. 14-1. It was sent from defendant
Braxton Jones on Dearborn Mid-West Conveyor Company letterhead, and it identifies Mr. Jones
as “DMW Project Manager.” Id. The letter is addressed to plaintiff’s Executive Vice President,
and it provides notice of suspension of shipments for the Minnesota Project. Id. Plaintiff’s
Complaint references this letter and quotes two paragraphs from it. Doc. 1 at 4 (Complaint ¶ 16).
The second letter is dated May 4, 2015. Doc. 14-2. Plaintiff explains that the date is a
typographical error—the letter actually was sent on May 4, 2016. Doc. 14 at 3 n.1. Defendants
do not dispute plaintiff’s date correction.4 This letter also was sent by Braxton Jones on
Dearborn Mid-West Conveyor Company letterhead, and it identifies Mr. Jones as “DMW Project
Manager.” Doc. 14-2. The letter is addressed to plaintiff’s Executive Vice President, and it
provides notice that shipments to the Minnesota Project had resumed. Id. Again, plaintiff’s
Complaint references and quotes this letter. Doc. 1 at 5 (Complaint ¶ 21).
Although a court cannot consider matters outside the pleadings on a motion to dismiss, it
“may consider documents referred to in the complaint if the documents are central to the
plaintiff’s claim and the parties do not dispute the documents’ authenticity.” Smith, 561 F.3d at
1098 (quoting Alvarado, 493 F.3d at 1215). Here, each letter satisfies this standard. First,
plaintiff’s Complaint refers to the two letters. Second, the documents are central to plaintiff’s
claims against Dearborn—specifically that Dearborn is liable to plaintiff for its breach of
contract and fraud claims because Dearborn and Bedeschi interacted with plaintiff as if they were
one and the same. Third, the parties do not dispute the documents’ authenticity. Although
defendants argue that the court cannot consider these two letters on a motion to dismiss, they
never assert that the documents are inauthentic. To the contrary, defendants argue that the
letters’ contents support dismissal of plaintiff’s claims.
For these reasons, the court concludes that it properly may consider the two letters when
deciding defendants’ motion to dismiss. Such consideration of the two letters does not convert
the motion to dismiss to a motion for summary judgment. See GFF Corp. v. Associated
Wholesale Grocers, Inc., 130 F.3d 1381, 1385–86 (10th Cir. 1997) (affirming district court’s
The typographical error also is evident from the letter’s contents. The letter references shipments
made under the Purchase Order “dated September 25, 2015.” Doc. 14-2. It also directs plaintiff to
resume shipments “beginning 5/09/16.” Id.
refusal to convert a Rule 12(b)(6) motion to dismiss into one for summary judgment when it
considered a letter that “was indisputably authentic and central to [plaintiff’s] breach of contract
claim” and thus was “not ‘outside the pleading’ for purposes of the 12(b)(6) motion”).
Motion to Strike
The court next considers plaintiff’s Motion to Strike defendants’ Reply in Support of its
Motion to Dismiss. Doc. 23. Plaintiff moves to strike, in part, defendants’ Reply because,
plaintiff argues, the Reply asserts the new argument that plaintiff’s breach of contract claim
against Bedeschi fails as a matter of law. In its original motion, defendants only sought
dismissal of plaintiff’s breach of contract claim against Dearborn. Doc. 10 at 3–4. The motion
did not seek dismissal of the breach of contract claim against Bedeschi. See generally id. The
motion argued that the parties to the written contract are plaintiff and Bedeschi—not Dearborn.
Id. at 3–4. And thus, defendants argue, plaintiff has failed to state a breach of contract claim
against Dearborn. Id.
In plaintiff’s Response, plaintiff argues that its Complaint sufficiently pleads that
Bedeschi and Dearborn acted as one and the same when dealing with plaintiff. Thus, plaintiff
has named both defendants in its breach of contract claim. To support its position on this issue,
plaintiff attached two letters to its Response. Docs. 14-1, 14-2. These letters are printed on
Dearborn letterhead, identify Project Manager Braxton Jones as a Dearborn employee, and
provide instructions to plaintiff about suspending and resuming shipments to the Minnesota
Project. Plaintiff’s Complaint references those letters and quotes portions of them. Doc. 1 at 4,
5 (Complaint ¶¶ 16, 21). Plaintiff did not attach these letters to its Complaint. But, as explained
above, the court may consider the letters on a motion to dismiss because they are referenced in
the Complaint, central to plaintiff’s claims, and the parties do not dispute their authenticity.
In its Reply, defendants argue that if the court considers the two letters on the motion to
dismiss, the letters’ content supports dismissal of all of plaintiff’s claims. Specifically,
defendants contend that the letters show that the parties agreed that plaintiff would not receive
payment until Bedeschi was paid under the letter of credit. Because Bedeschi never has been
paid, defendants argue that it owes no obligation to plaintiff. And thus, defendants assert,
plaintiff’s claims against all defendants fail as a matter of law.
Plaintiff moves to strike defendants’ Reply because defendants never asserted this
argument in their original motion. That is, defendants never sought dismissal of plaintiff’s
breach of contract claim against Bedeschi. Defendants disagree. They contend that they
properly asserted this argument in response to new allegations that plaintiff raised in its
Response. Defendants argue this is precisely the purpose of a reply brief. Doc. 24 at 2 (citing
Vonlintel v. Eagle Commc’ns, Inc., No. 14-4125-KHV, 2015 WL 5093271, at *1 (D. Kan. Aug.
28, 2015) (“A reply which merely responds to matters placed in issue by the response, and does
not spring upon the opposing party new reasons for [granting the original motion] is entirely
proper.”)). The court partially agrees with defendants. Although defendants’ Reply raises
arguments that respond to plaintiff’s allegations about the two letters, defendants’ Reply also
seeks dismissal of plaintiff’s breach of contract claim against Bedeschi based on the content of
those letters. Defendants never moved to dismiss this claim in their original motion. The court
thus could disregard this argument. The court nonetheless addresses this request below, and
explains why it does not warrant dismissal of plaintiff’s claims at the motion to dismiss stage.
The court also concludes that a motion to strike is not the proper procedure here. When a
reply raises a new argument, “the proper course of action for the nonmoving party to respond to
such arguments is to seek leave to file a surreply.” See Sheldon v. Khanal, No. 07-2112-KHV,
2008 WL 474262, at *4 (D. Kan. Feb. 19, 2008) (denying a motion to strike a reply as
improperly raising new arguments but considering whether the nonmoving party could obtain
leave to file a surreply under our court’s local rules). The court thus denies plaintiff’s motion to
Motion to Dismiss
The court now considers defendants’ Motion to Dismiss. Doc. 10. Defendants assert
five arguments seeking dismissal of certain claims in plaintiff’s Complaint. The court addresses
each one, in turn, below.
A. Does Plaintiff State a Claim for Relief Against Dearborn?
Defendants assert that plaintiff fails to state a claim against Dearborn because Dearborn
is not a party to the Contract Documents and plaintiff alleges no facts showing that Dearborn
played any role in connection with plaintiff’s contractual relationship with Bedeschi. In Kansas,5
a breach of contract claim requires: “(1) the existence of a contract between the parties; (2)
sufficient consideration to support the contract; (3) the plaintiff’s performance or willingness to
perform in compliance with the contract; (4) the defendant’s breach of the contract; and (5)
damages to the plaintiff caused by the breach.” Stechschulte v. Jennings, 298 P.3d 1083, 1098
(Kan. 2013). Defendants argue that plaintiff has failed to allege the first element—the existence
of a contract between plaintiff and Dearborn.
The parties’ submissions cite Kansas law but never explain why Kansas law applies. But, after
reviewing the Contract Documents, the court is satisfied that Kansas law is the governing law here.
In a diversity case, like this one, the court applies the substantive law of the forum state, including
its choice of law rules. Emp’rs Mut. Cas. Co. v. Bartile Roofs, Inc., 618 F.3d 1153, 1170 (10th Cir. 2010)
(citation omitted). In Kansas, courts generally apply the law chosen by the parties to control their
agreement unless doing so would contravene public policy. Brenner v. Oppenheimer & Co., Inc., 44 P.3d
364, 375 (Kan. 2002). Here, the Subcontract provides that Kansas law governs. Doc. 1-1 at 17. The
Terms and Conditions also provide that Kansas law governs. Doc. 1-3 at 4. The court thus applies
Kansas law because the parties have chosen Kansas law to govern their contractual relationship. Also, the
parties never dispute that Kansas law governs.
Indeed, none of the Contract Documents identify Dearborn as a party to the contract.
Instead, all of the Contract Documents reference an agreement between plaintiff and Bedeschi.
But, plaintiff alleges in its Complaint that Bedeschi and Dearborn “acted interchangeably and as
one in the same for purposes of its interactions with [plaintiff].” Doc. 1 at 1 (Complaint ¶ 1).
Defendants assert that this statement is a bald conclusion that fails to state a plausible claim
against Dearborn under the Fed. R. Civ. P. 8 pleading requirements. The court disagrees.
Supporting this allegation, plaintiff’s Complaint references communications that
Dearborn sent to plaintiff about the parties’ contractual relationship for the Minnesota Project.
Plaintiff’s Complaint collectively refers to Bedeschi and Dearborn as Mid-West because, it
contends, the two companies acted interchangeably when interacting with plaintiff. The
Complaint states that “Mid-West” sent plaintiff a letter on December 22, 2015, requesting
plaintiff to suspend shipments for the Minnesota Project. Doc. 1 at 4 (Complaint ¶ 16). The
Complaint also states that “Mid-West” sent plaintiff a letter on May 5, 2016, directing plaintiff to
resume shipments. Doc. 1 at 5 (Complaint ¶ 21). Both of these letters are on Dearborn’s
letterhead, are sent on behalf of Dearborn, and are signed by defendant Braxton Jones as “DMW
[Dearborn Mid-West] Project Manager.” Docs. 14-1, 14-2. These letters, which plaintiff
incorporated into its Complaint by reference, include sufficient facts to support, if true, a
plausible finding that Bedeschi and Dearborn acted interchangeably and as one and the same
when interacting with plaintiff.
Thus, the Complaint has alleged sufficient facts to make it plausible that plaintiff entered
into a contract with both Bedeschi and Dearborn, even though the plain language of the Contract
Documents refer only to Bedeschi. Plaintiff has stated a plausible claim for relief against
Dearborn and so, the court denies plaintiff’s Motion to Dismiss on this ground.
B. Are Plaintiff’s Fraud Claims Duplicative of Its Breach of Contract Claim?
Defendants next argue that plaintiff’s fraud claims fail to state a claim because they
simply restate its breach of contract claim. Defendants contend that plaintiff alleges the same
conduct to support both its breach of contract and fraud claims. Defendants also argue that
plaintiff seeks the same damages for its fraud claims as it seeks for its breach of contract claim.
Defendants thus argue that the court should dismiss plaintiff’s fraud claims because they merely
duplicate its breach of contract claim.
In Kansas, “[w]hen parties contemplate a remedy in the event of a breach of contract, the
bargained-for existence of a contractual remedy displaces the imposition of tort duties and
default consequences.” Universal Premium Acceptance Corp. v. Oxford Bank & Tr., 277 F.
Supp. 2d 1120, 1129 (D. Kan. 2003). But, this rule aside, “a party may be liable in tort for
breaching an independent duty toward another, even where the relationship creating such a duty
originates in the parties’ contract.” Id. at 1129–30. One such independent duty is the duty to
avoid mispresenting preexisting or present facts. See id. at 1130 (explaining that “a
misrepresentation claim must ‘relate to preexisting or present fact; statements, or promises about
only future occurrences are not actionable.’” (quoting Graphic Techs., Inc. v. Pitney Bowes, Inc.,
998 F. Supp. 1174, 1179–1180 (D. Kan. 1998) (further citation omitted))).
A plaintiff also may assert a misrepresentation claim based on a “promise to do
something in the future, if the promisor has no intention at the time the promise was made to
carry it out [because the promiser has committed] deceit, and if the promiser obtained anything
of value by reason thereof, there is actionable fraud.” Gerhardt v. Harris, 934 P.2d 976, 981
(Kan. 1997) (citing El Dorado Nat’l Bank v. Eikmeier, 300 P. 1085, 1089 (Kan. 1931)). Thus, in
Kansas, “[w]hen the alleged fraud relates to promises or statements concerning future events, the
gravamen of such a claim is not the breach of the agreement to perform, but the fraudulent
misrepresentation concerning a present, existing intention to perform, when no such intention
existed.” Id. (citing Modern Air Conditioning, Inc. v. Cinderella Homes, Inc., 596 P.2d 816, 824
Also, the Kansas Supreme Court has allowed litigants to assert contract and tort claims
based on the same set of facts. See Burcham v. Unison Bancorp, Inc., 77 P.3d 130, 145–46
(Kan. 2003); Bittel v. Farm Credit Servs. of Cent. Kan., 962 P.2d 491, 498 (Kan. 1998). The
Kansas court has explained that “when the same conduct could satisfy the elements of both a
breach of contract [claim] or of an independent tort [claim], unless the conduct is permitted by
the express provisions of a contract, a plaintiff may pursue both remedies.” Burcham, 77 P.3d at
145 (quoting Bittel, 962 P.2d at 498).
Applying this line of cases, the court concludes that plaintiff has stated plausible claims
for both breach of contract and fraud. Plaintiff’s Complaint alleges that defendants made various
misrepresentations involving a present existing intent to perform certain acts when defendants
had no such intention. Doc. 1 at 10 (Complaint ¶ 48). For example, the Complaint alleges that
defendants misrepresented that they would pay all invoices that plaintiff timely submitted as well
as the increased costs and expenses arising from the accelerated shipment scheduled. Id.
(Complaint ¶ 46). The Complaint also alleges that defendants failed to disclose present, existing,
material facts that were likely to mislead plaintiff, including the fact that defendants had no
intention to abide by the terms of the Contract Documents. Id. at 11 (Complaint ¶ 55). These
allegations, if proven true, could support a fraud claim independent of a breach of contract claim
under Kansas law.
Also, viewing the Complaint in the light most favorable to plaintiff, the Complaint
alleges that defendants breached their duty to refrain from misrepresenting present or preexisting
facts when they told plaintiff about a letter of credit between Mid-West and Essar. Plaintiff
asserts that defendants misrepresented that the letter of credit would provide payment to MidWest. Plaintiff contends that defendants misrepresented that this letter of credit provided the
necessary surety to enable Mid-West to compensate plaintiff for the increased costs incurred
from temporary suspension and then reinstatement on an accelerated schedule—payments that,
defendants contend, are not recoverable under the Contract Documents. Id. at 5–6 (Complaint ¶¶
22, 23, 27, 28). These alleged misrepresentations are independent of the contractual duties
imposed by the Contract Documents.
Defendants cite no provision of the contract that authorizes this alleged conduct or limits
plaintiffs’ ability to pursue a tort claim under this theory. See Burcham, 77 P.3d at 145
(explaining that a plaintiff may assert both contract and tort claims “unless the conduct is
permitted by the express provisions of a contract” (citation and internal quotation marks
omitted)). Although defendants cite the Terms and Conditions that allow Bedeschi to “change
the rate of scheduled shipments or direct temporary suspension of scheduled shipments, neither
of which shall entitle [plaintiff] to a modification of the price for goods or services covered by
this order,” this part of the contract refers only to Bedeschi’s right to make changes to the
shipment schedule. Doc. 1-3 at 2. Defendants assert that this provision authorized their request
for accelerated shipments and entitles plaintiff to no additional compensation. But, plaintiff’s
theory asserts that plaintiff is entitled to the additional compensation not based on the Contract
Documents, but from defendants’ alleged misrepresentations that they would pay the additional
compensation. The Contract Documents do not authorize defendants to make these alleged
misrepresentations. And, thus, plaintiff may assert fraud claims based on the alleged
misrepresentations, along with its breach of contract claim.
Defendants’ Reply also argues that its conduct was authorized by the December 22, 2015
and May 4, 2016 letters that Braxton Jones sent to plaintiff. Defendants contend that these letters
constituted an agreement to alter the payment terms of the Contract Documents so that Bedeschi
owed no obligation to pay plaintiff until it received payment from Essar under the letter of credit.
Because Bedeschi never has received payment, defendants contend that it never was obligated to
pay plaintiff. Defendants thus argue that all of plaintiff’s claims fail as a matter of law. 6
Plaintiff disagrees, of course, with defendants’ interpretation of the Contract Documents
and the two letters. Plaintiff argues that the Subcontract prohibits modification of the parties’
agreement “unless in writing and duly signed by” the parties. Doc. 1-1 at 16. Plaintiff contends
that these letters do not satisfy the Subcontract’s requirements for modification and thus do not
change the terms of the Contract Documents.
All of these arguments require the court to interpret the parties’ Contract Documents.
They also require the court to resolve a factual dispute about those agreements and the
correspondence attendant to the parties’ contractual relationship. The court cannot decide these
issues on a motion to dismiss. Instead, the court must view the Complaint’s allegations in the
light most favorable to plaintiff to determine whether plaintiff has stated a claim for relief. Here,
the Complaint alleges that defendants made fraudulent misrepresentations independent of duties
arising under the Contract Documents. The Complaint alleges that defendants misrepresented
their pre-existing and present intent to perform certain acts. It also alleges that defendants
mispresented that a letter of credit provided the surety necessary to pay plaintiff for additional
This is the argument that plaintiff moved to strike because defendants never raised it in the
original motion. The court considers it nonetheless, concluding that it provides no reason to dismiss
costs plaintiff incurred. Defendants cite no provision of the Contract Documents that allow
defendants to make these alleged misrepresentations. So, with these allegations, plaintiff may
assert fraud claims as well as its breach of contract claim because plaintiff alleges that
defendants violated a duty created independent of the contract.
The cases defendants cite as support for their motion are distinguishable from the facts
alleged here because those cases involved tort claims arising from defendants’ contractual
duties, not an independent duty that gave rise to a fraud claim. See, e.g., Wade v. EMCASCO
Ins. Co., 483 F.3d 657, 675–76 (10th Cir. 2007) (explaining that the plaintiff’s fraud claim was
based on defendant’s alleged misrepresentation that it would perform its obligations under the
parties’ contract and thus holding that the plaintiff’s claim “sounds in breach of contract, not
fraud”); Brown v. Chaffee, 612 F.2d 497, 503 (10th Cir. 1979) (“[Plaintiff] cannot turn an action
for breach of contract into an action for fraud by merely alleging reliance on representations that
the contract would be performed and detriment from its breach”); VinStickers, LLC v. Millernet
Corp., No. 07-2031-JWL, 2008 WL 360578, at *3 (D. Kan. Feb. 8, 2008) (concluding that
plaintiff’s fraud claim was merely a claim that defendant had breached the parties’ contract by
charging plaintiff more than the parties agreed in the contract); LaCrosse Furniture Co., Ltd. v.
Shoda Iron Works Co., Ltd., No. 06-CV-2505-JTM, 2007 WL 4463572, at *2 (D. Kan. Dec. 17,
2007) (holding that plaintiff’s fraud claim was “merely a claim that [defendant] breached its
contract . . . and that [plaintiff] was injured by the defendant[’s] failure to satisfy its contractual
obligation. Such a claim is appropriate for contractual remedies, not fraud.”); Heller v. Martin,
782 P.2d 1241, 1245–46 (Kan. Ct. App. 1989) (rejecting plaintiff’s claim for punitive damages
because plaintiff made no evidentiary showing of damages caused by fraud “in addition to and
beyond the breach of contract damages”).
Also, the court rejects defendants’ argument that plaintiff is seeking the same damages
for both claims. Plaintiff’s breach of contract claim seeks to recover the Purchase Order amounts
plus amounts plaintiff incurred complying with Mid-West’s temporary suspension and
accelerated shipping schedule. Doc. 1 at 8 (Complaint ¶ 38). The fraud claims seek the
“substantial losses and damages” that plaintiff sustained from defendants’ alleged fraud,
misrepresentation, fraudulent concealment, suppression, and deceit. Id. at 11, 12 (Complaint ¶¶
52, 59). The court recognizes that plaintiff cannot make a double recovery, but should plaintiff
prevail on its claims, it can recover its extra-contractual damages if it proves the allegations
pleaded in the Complaint. See Ice Corp. v. Hamilton Sundstrand Inc., 444 F. Supp. 2d 1165,
1173 (D. Kan. 2006) (“Plaintiff will obviously not be allowed to make a double recovery, but at
this point may plead contract and tort claims in the alternative based on these specific
misrepresentations.”). Plaintiff thus has alleged damages from the alleged fraud that are separate
and distinct from its alleged contractual damages.
The court concludes that plaintiff may plead alternative claims for fraud and breach of
contract. See Lowe v. Postrock Midcontinent Prod. LLC, No. 13-4075-JAR, 2013 WL 6000004,
at *4 (D. Kan. Nov. 12, 2013) (holding that plaintiffs could bring both breach of contract and
misrepresentation claims based on the same conduct because the misrepresentation claims arose
from the general duty to refrain from misrepresenting material present or preexisting facts and
thus were independent of the contract); see also Shields v. U.S. Bank, No. Civ. A. 05-2073-CM,
2005 WL 3335099, at *2 (D. Kan. Dec. 7, 2005) (concluding that, although the court would not
permit plaintiff to make a double recovery, plaintiff could plead alternative claims for negligence
and breach of contract). Defendants’ Motion to Dismiss is denied on this basis.
C. Has Plaintiff Sufficiently Pleaded Fraud with Particularity?
Defendants next assert that plaintiff has failed to plead its fraud claims with particularity
as Fed. R. Civ. P. 9(b) requires. The rule requires a party when “alleging fraud or mistake [to]
state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b).
The rule’s purpose “is ‘to ensure that the complaint provides the minimum degree of detail
necessary to begin a competent defense.’” Fulghum v. Embarq Corp., 785 F.3d 395, 416 (10th
Cir. 2015) (quoting McCarthy v. Ameritech Pub., Inc., 763 F.3d 469, 478 n.2 (6th Cir. 2014)).
A fraud claim “must ‘set forth the time, place and contents of the false representation, the
identity of the party making the false statements[,] and the consequences thereof.’” Schwartz v.
Celestial Seasonings, Inc., 124 F.3d 1246, 1252 (10th Cir. 1997) (quoting Lawrence Nat’l Bank
v. Edmonds, 924 F.2d 176, 180 (10th Cir. 1991)). This pleading standard requires “[a]t a
minimum . . . the who, what, when, where, and how of the alleged fraud.” United States ex rel.
Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 726–27 (10th Cir. 2006)
(citations and internal quotation marks omitted).
But, the rule also allows a party to assert general allegations of “[m]alice, intent,
knowledge, and other conditions of a person’s mind.” Fed. R. Civ. P. 9(b); see also Schwartz,
124 F.3d at 1252 (explaining that “Rule 9(b) requires only the identification of the circumstances
constituting fraud, and that it does not require any particularity in connection with an averment
of intent, knowledge or condition of mind” (citation omitted)). And, “[a]llegations of fraud may
be based on information and belief when the facts in question are peculiarly within the opposing
party’s knowledge and the complaint sets forth the factual basis for the plaintiff’s belief.”
Scheidt v. Klein, 956 F.2d 963, 967 (10th Cir. 1992) (citations omitted).
Plaintiff’s Complaint asserts two fraud claims: Count II alleges fraud, promissory fraud,
misrepresentation; and Count III alleges fraudulent suppression. Defendants argue that plaintiff
has failed to plead these fraud claims with particularity as Fed. R. Civ. P. 9(b) requires. The
The Complaint asserts that Mid-West sent plaintiff a letter on May 4, 2016, that directed
plaintiff to resume shipments immediately to the Minnesota Project and that represented that
Mid-West had a letter of credit with Essar that would allow Mid-West to pay plaintiff for its
work. Doc. 1 at 5 (Complaint ¶¶ 21, 22, 23); Doc. 14-2. The letter was presented on Dearborn
letterhead and signed by defendant Braxton Jones on behalf of “Dearborn Mid-West Conveyor
Company.” Doc. 14-2. Plaintiff’s Complaint also alleges that defendants Larry Harp and
Braxton Jones, individually and on behalf of Mid-West, made false representations to plaintiff in
person and in writing between September 2015 and July 2016. Doc. 1 at 10 (Complaint ¶¶ 47–
48). And, plaintiff’s Complaint alleges that Mid-West, Mr. Harp, and Mr. Jones intentionally,
recklessly, and negligently suppressed material facts from plaintiff between September 2015 and
July 2016. Id. at 11–12 (Complaint ¶¶ 47–48).
The court concludes that these allegations allege fraud with sufficient particularity to
satisfy the requirements of Fed. R. Civ. P. 9(b). Plaintiff has alleged the who, what, where, when
and how of the alleged fraud in sufficient detail so that defendant can prepare a competent
defense to the allegations. The court thus denies defendants’ Motion to Dismiss plaintiff’s fraud
claims for this reason.
D. Has Plaintiff Stated a Claim for Fraudulent Suppression?
Defendants assert that plaintiff cannot state a claim for fraudulent suppression as a matter
of law. Doc. 10 at 9–10. Defendants contend that plaintiff seeks to impose a duty of disclosure
on defendants arising after the parties entered the contact and during the parties’ performance of
the contract. Defendants assert that Kansas law imposes no such duty on the parties to a
contract. See Plastic Packaging Corp. v. Sun Chem. Corp., 136 F. Supp. 2d 1201, 1205 (D. Kan.
2001) (holding that defendant has no duty to disclose information that it discovered while
performing the contract).
Plaintiff responds that Kansas law imposes a duty on defendants to correct any material
misrepresentations, even if no duty exists at the relationship’s inception. See Great Plains
Christian Radio, Inc. v. Cent. Tower, Inc., 399 F. Supp. 2d 1185, 1196 (D. Kan. 2005)
(explaining that, in Kansas, “a defendant who speaks is under a duty not to mislead by disclosing
only a portion of the truth” (citing Sparks v. Guar. State Bank, 318 P.2d 1062, 1065 (Kan.
1957))). And, plaintiff argues, the Complaint sufficiently alleges that defendants breached this
Defendants’ Reply never addresses this argument. In fact, their Reply never references
their original request for dismissal of the fraudulent suppression claim for failing to state a claim.
Thus, it appears that defendants have abandoned this argument. But, even if defendants haven’t
abandoned this argument, the court concludes that plaintiff has stated a claim for relief under
Kansas law. As plaintiff correctly explains, a duty to refrain from misrepresentation or
suppression of facts arises when one elects to speak either voluntarily or in response to an
inquiry. See Sparks, 318 P.2d at 1065 (explaining that if one elects to speak at all, he must make
a full and fair disclosure (citations and internal quotation marks omitted)). Here, plaintiff’s
Complaint alleges that Mr. Harp and Mr. Jones made representations that defendants would pay
plaintiff’s extra-contractual expenses associated with the accelerated shipment schedule and that
an existing letter of credit with Essar would allow defendants to pay those expenses. Plaintiff’s
Complaint also alleges that Mr. Harp and Mr. Jones suppressed material facts when they made
these representations or, alternatively, they later learned that these representations were untrue
but failed to correct them. These facts sufficiently assert a plausible claim for fraudulent
suppression under Kansas law. The court thus denies defendants’ Motion to Dismiss plaintiff’s
fraudulent suppression claim.
E. Are Plaintiff’s Claims Against Dearborn, Larry Harp, and Braxton Jones
Barred by the Statute of Frauds?
Finally, defendants assert that plaintiff’s claims against Dearborn, Larry Harp, and
Braxton Jones are barred by the statute of frauds because these three defendants never executed a
signed writing promising that they would be liable for any of Bedeschi’s alleged debts.
Kan. Stat. Ann. § 33-106 requires an agreement “to answer for the debt, default or
miscarriage of another person” to be in writing and signed by the party charged. A contract that
fails to satisfy these requirements is unenforceable under the statute of frauds. Evans v. Lynch,
436 P.2d 867, 869 (Kan. 1968). But, an exception to the statute of frauds exists—oral
agreements are enforceable in Kansas when a party relies “upon the agreement to his or her
detriment and a gross injustice would result if the oral agreement was not enforced.” Bank of
Alton v. Tanaka, 799 P.2d 1029, 1035 (Kan. 1990).
Here, defendants’ statute of frauds argument fails to carry the day for two reasons. First,
plaintiff’s fraud claims seek to hold Dearborn, Mr. Harp, and Mr. Braxton liable for extracontractual damages. These claims do not try to hold these defendants liable for Bedeschi’s
contractual debts. Instead, the fraud claims seek to hold defendants liable for their own
purported fraudulent conduct. The statute of frauds thus does not provide an affirmative defense
to plaintiff’s fraud claims. See Zurn Constructors, Inc. v. B.F. Goodrich Co., 746 F. Supp. 1051,
1058 (D. Kan. 1990) (holding that the statute of frauds did not preclude the plaintiff’s fraud
claim because the claim did not depend upon proof of a contract but instead depended on proof
of the elements of fraud).
Second, to the extent plaintiff seeks to recover other damages from Dearborn, Bedeschi,
and Braxton, plaintiff has pleaded sufficiently an exception to the statute of frauds—detrimental
reliance. Plaintiff alleges that defendants made various misrepresentations and that plaintiff
relied on those misrepresentations to its detriment, incurring substantial losses and damages. See
Doc. 1 at 9–11 (Complaint ¶¶ 46, 50, 51). Viewing the Complaint’s allegations in the light most
favorable to plaintiff, the statute of frauds does not bar those claims.
Defendants counter, arguing that plaintiff cannot invoke an exception to the statute of
frauds because plaintiff cites no cases applying the detrimental reliance exception to an alleged
promise to pay the debt of another. One of the cases plaintiff cites applied the rule to a promise
to convey property. See Taylor v. Holyfield, 180 P. 208, 208–09 (Kan. 1919) (holding that “the
evidence [established] such a performance of the contract by the plaintiff as to take it out of the
operation of the statute [of frauds]”). The other case cited the detrimental reliance rule in a
guaranty case, but did not apply it on summary judgment because plaintiff submitted no evidence
to support it. See Wolfson v. Nutt, No. 08-3190-GLR, 2010 WL 4568152, at *3–6 (D. Kan. Nov.
3, 2010) (holding that an alleged loan agreement and personal guaranty were barred by the
statute of frauds because plaintiff adduced no evidence of a written contract and had shown no
reason to “to take the alleged guaranty outside the statute [of frauds]”).
But, defendants have cited no cases holding that the detrimental reliance exception
cannot apply to a promise to pay the debt of another. Indeed, the court’s own research has
located no authority for this proposition. The Tenth Circuit, however, has affirmed application
of the detrimental reliance exception to promises to pay the debt of another in cases applying
other states’ laws governing the statute of frauds. See DeBoer Constr., Inc. v. Reliance Ins. Co.,
540 F.2d 486, 494 (10th Cir. 1976) (applying Oklahoma law and affirming the trial court’s
decision that performance had occurred sufficient to take an oral agreement for a labor and
material payment bond outside of the statute of frauds); see also Abraham v. H. V. Middleton,
Inc., 279 F.2d 107, 109 (10th Cir. 1960) (applying New Mexico law and affirming a trial court’s
decision that an oral promise to pay the debt of another was not barred by the statute of frauds
for three reasons including that plaintiff “fully performed the drilling contract in reliance upon
the oral promise”).
On this record, the court cannot conclude that the statute of frauds bars plaintiff’s claims
against Dearborn, Mr. Harp, and Mr. Braxton. The court thus denies defendants’ Motion to
Dismiss on this basis as well.
For the reasons explained above, the court denies plaintiff’s Motion to Strike, In Part,
Defendants’ Reply in Support of Motion to Dismiss for Failure to State a Claim (Doc. 23)
because a motion to strike is not the proper procedural vehicle to address new arguments asserted
in a reply. The court also denies defendants’ Motion to Dismiss for the reasons explained above.
IT IS THEREFORE ORDERED BY THE COURT THAT defendants’ Motion to
Dismiss for Failure to State a Claim (Doc. 10) is denied.
IT IS FURTHER ORDERED THAT plaintiff’s Motion to Strike (Doc. 23) is denied.
IT IS SO ORDERED.
Dated this 8th day of May, 2017, at Topeka, Kansas.
s/ Daniel D. Crabtree
Daniel D. Crabtree
United States District Judge
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