Rezac Livestock Commission Co., Inc. v. Pinnacle Bank et al
MEMORANDUM AND ORDER denying 48 Motion to Dismiss for Failure to State a Claim. Signed by District Judge Daniel D. Crabtree on 06/06/2017. (mig)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
REZAC LIVESTOCK COMMISSION
Case No. 15-cv-04958-DDC-KGS
PINNACLE BANK and
DINSDALE BROS., INC.,
MEMORANDUM AND ORDER
Plaintiff Rezac Livestock Commission Company, Inc. accuses defendant Dinsdale Bros.,
Inc. of being a modern-day cattle rustler and also accuses defendant Pinnacle Bank of serving as
Dinsdale’s accomplice. Doc. 46. Plaintiff contends that it sold Dinsdale nearly $1 million worth
of cattle in September 2015 but Dinsdale has never paid for them. So, trying to recover the
money, plaintiff makes three claims against Dinsdale (breach of contract, conversion, and
quantum meruit), one claim against Pinnacle Bank (conversion), and two claims against Dinsdale
and Pinnacle Bank together (unjust enrichment and civil conspiracy).
Dinsdale has filed a Motion to Dismiss Second Amended Complaint seeking to extricate
itself from this litigation entirely. Dinsdale’s Motion argues that plaintiff’s Second Amended
Complaint states no claim against it and so the court should dismiss it under Federal Rule of
Civil Procedure 12(b)(6). Doc. 48. After carefully reviewing the parties’ submissions, the court
denies Dinsdale’s motion.
Because Dinsdale brings its motion under Rule 12(b)(6), plaintiff’s Second Amended
Complaint (“Complaint”) supplies the governing facts and the court must accept those facts as
true.1 See S.E.C. v. Shields, 744 F.3d 633, 640 (10th Cir. 2014).
Plaintiff Rezac Livestock Commission Company, Inc. is a Kansas corporation that sells
cattle in St. Marys, Kansas.2 On September 29, 2015, a man named Charles D. Leonard attended
one of plaintiff’s livestock auctions at Dinsdale’s direction. Dinsdale is a Nebraska corporation
who buys and sells cattle. At the auction, Mr. Leonard told plaintiff that Dinsdale had sent him
to the auction to fill a large order of cattle for Dinsdale. This was not uncommon for Mr.
Leonard. He had purchased livestock from plaintiff on behalf of Dinsdale in the past—a fact that
plaintiff knew well. For this auction, Dinsdale had given Mr. Leonard specific instructions about
what cattle to purchase: “no steers over 900 lbs. and no heifers over 800 lbs.” Doc. 46 ¶ 13.
Mr. Leonard did as Dinsdale asked, purchasing 668 head of cattle for Dinsdale from plaintiff for
a total cost of $980,361.45. Mr. Leonard wrote plaintiff a check for the full purchase price,
drawn on Pinnacle Bank. He then told plaintiff that Dinsdale wanted the cattle shipped directly
to two Colorado feedlots. Plaintiff complied and shipped the cattle to Colorado.
Around October 1, 2015—after plaintiff had shipped the cattle—Dinsdale wired funds to
Pinnacle Bank to cover Mr. Leonard’s check. But before Dinsdale wired the funds, it
communicated with Pinnacle Bank about Mr. Leonard’s financial status. Mr. Leonard owed
Pinnacle Bank more than $1 million when he wrote plaintiff that $980,361.45 check. And
Dinsdale knew it, because the same family owns Dinsdale and Pinnacle Bank. Plaintiff alleges
Dinsdale attaches several documents to its Motion to Dismiss, and the court addresses, below, whether it can
consider those documents in its analysis. The facts in this section do not draw from the attached documents.
The court uses no apostrophe in St. Marys because the city itself does not use one.
that this common ownership gave Dinsdale access to information about Mr. Leonard’s financial
situation that it otherwise might not have had. See id. ¶ 24. Indeed, when the auction occurred,
Dinsdale knew that Mr. Leonard was behind in repaying his debt to Pinnacle Bank. And,
because of this knowledge, Dinsdale’s bookkeeper had been told “that any payments for cattle
purchased through [Mr.] Leonard would require payment directly to the sale barn,” here,
plaintiff. Id. ¶ 27. But Dinsdale did not pay plaintiff directly. Instead, Dinsdale decided to wire
the funds to Pinnacle Bank—after Dinsdale and Pinnacle Bank “specifically discussed . . . timing
. . . the wire to correspond with [plaintiff’s] presentation of [Mr.] Leonard’s check to Pinnacle
Bank.” Id. ¶ 29.
When Pinnacle Bank received Dinsdale’s wire to Mr. Leonard’s account, it “closed [Mr.]
Leonard’s account and set off the funds in the account against debts [that Mr.] Leonard owed to
Pinnacle Bank.” Id. ¶ 44. As a result, when plaintiff presented Mr. Leonard’s check to Pinnacle
Bank, his account had no money left in it to pay plaintiff. Plaintiff tried to cash Mr. Leonard’s
check twice, but both times Pinnacle Bank “refused to release the funds.” Id. ¶ 36. Because no
one had paid plaintiff for the cattle, it “attempted to reclaim the livestock and demanded [that]
Dinsdale” return the cattle “for lack of payment.” Id. ¶ 37. Dinsdale declined. In response,
plaintiff filed this lawsuit on September 29, 2015, trying to recover the more than $900,000 that
it claims Dinsdale still owes for the 668 head of cattle Mr. Leonard purchased.
On February 3, 2017, Dinsdale filed its Motion to Dismiss, arguing that plaintiff’s
Complaint fails to state a claim against it and thus should be dismissed under Federal Rule of
Civil Procedure 12(b)(6). Doc. 48. The court considers Dinsdale’s Motion to Dismiss under the
legal standard outlined in the following section.
Rule 12(b)(6) Legal Standard
Rule 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.’” 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, LLC v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007)).
On a motion to dismiss like this one, the court assumes the complaint’s factual
allegations are true, but need not accept mere legal conclusions as true. Id. at 1263. “Threadbare
recitals of the elements of a cause of action, supported by mere conclusory statements” are not
enough to state a claim for relief. Iqbal, 556 U.S. at 678.
Dinsdale asks the court to dismiss all five of plaintiff’s claims against it because they fail
to state a claim. The court considers each claim, separately, below.
Count I: Breach of Contract
In count one, plaintiff asserts a breach of contract claim against Dinsdale. But plaintiff
never alleges that Dinsdale made any contract with it. Instead, plaintiff alleges that a sale
contract existed between plaintiff and Mr. Leonard, in which Mr. Leonard agreed to pay plaintiff
$980,361.45 in exchange for 668 head of cattle.3 Plaintiff alleges that Dinsdale is bound to this
contract just as if it were a party because Mr. Leonard had authority as Dinsdale’s agent to enter
into the sale contract on Dinsdale’s behalf. Finally, plaintiff alleges that Dinsdale has breached
this contract by failing to pay for the cattle.
For its part in this controversy, Dinsdale contends that count one states no breach of
contract claim. It advances three arguments to support this position: (1) plaintiff “lacks the
contractual privity necessary to maintain a breach of contract claim against” Dinsdale; (2) “the
statute of frauds bars the contract” that plaintiff alleges between it and Dinsdale; and (3) the
Complaint “contains no indication of an agency relationship” between Dinsdale and Mr.
Leonard. Doc. 49 at 5, 9.
Dinsdale’s privity and statute of fraud arguments rely on its agency argument. In its
privity and statute of fraud arguments, Dinsdale contends that plaintiff, to state a claim, must
allege that a written contract exists, and that plaintiff and Dinsdale both signed the contract.
Dinsdale then characterizes the Complaint as alleging only two contracts: one between Dinsdale
and Mr. Leonard and one between Mr. Leonard and plaintiff. But plaintiff can allege a contract
exists between it and Dinsdale under an agency theory. That is, if plaintiff alleges that Mr.
Leonard acted as Dinsdale’s agent and that he had authority to purchase the cattle on Dinsdale’s
behalf, then plaintiff need not allege a contract signed by plaintiff and Dinsdale. Under that
Plaintiff does not appear to allege the existence of a written contract containing the agreement’s terms. Instead, the
Complaint’s allegations reference Mr. Leonard’s check to plaintiff but allege no other writing memorializing the
purported sale agreement.
theory, such a contract would bind Dinsdale to the contract it admits exists between Mr. Leonard
and plaintiff because “[a] contract executed by an authorized agent in his own name, but in fact
in behalf of his principal, is the contract of the principal, and suit may be brought against him to
enforce its provisions.” C. A. Karlan Furniture Co. v. Richardson, 324 P.2d 180, 183 (Kan.
1958) (quoting Edwards v. Gildemeister, 59 P. 259, Syl. ¶ 2 (Kan. 1899)). So, if plaintiff has
alleged that Mr. Leonard acted as Dinsdale’s authorized agent for the purpose of buying the
cattle, all three of Dinsdale’s arguments against plaintiff’s breach of contract claim would fail.
The court thus begins its analysis with Dinsdale’s agency argument.
Because this is a diversity case, the court “appl[ies] the substantive law of the forum
state, including its choice of law rules.” Pepsi-Cola Bottling Co. of Pittsburgh, Inc. v. PepsiCo,
Inc., 431 F.3d 1241, 1255 (10th Cir. 2005) (citations omitted). Here, Kansas is the forum state
and the parties never contest the state law that should apply. Both party’s papers rely on Kansas
law. Because the parties have made the deliberate choice to rely on Kansas law, the court
applies Kansas law throughout this Memorandum and Order, and the parties have waived any
argument that some other state’s law applies to this motion. See Dr Pepper Co. v. Adams Inv.
Co., 940 F.2d 1538, 1991 WL 148876, at *1 (10th Cir. 1991) (finding that the parties had waived
a choice-of-law argument when both relied upon Texas law in their briefs); McCammond v.
Schwan’s Home Serv., Inc., 791 F. Supp. 2d 1010, 1012 n.1 (D. Colo. 2011) (“The Court notes
that the Motion was briefed pursuant to Colorado law and, at the hearing on the Motion, neither
party argued that Minnesota law applies to this issue. Accordingly, any right to assert Minnesota
law was arguably waived by the parties.” (citing Air Liquide Am. Corp. v. Cont’l Cas. Co., 217
F.3d 1272, 1275 n.2 (10th Cir. 2000))).
So, the court looks to Kansas agency law to settle the parties’ dispute whether plaintiff
has alleged facts sufficient to show that Dinsdale is bound to the sale contract between plaintiff
and Mr. Leonard. But applying Kansas law is more difficult than one might anticipate. The
difficulty arises from the murky state of Kansas agency law, a topic the Kansas Supreme Court
has wrestled with recently. Golden Rule Ins. Co. v. Tomlinson, 335 P.3d 1178, 1187 (Kan.
In Golden Rule Insurance Co. v. Tomlinson, the Kansas Supreme Court set out “to
improve upon the clarity of Kansas agency law,” which, the court explained had been murky for
years. Id. This lack of clarity arose from the existence of “some historical imprecision in
Kansas agency law.” Id. To explain this imprecision, the court must digress from its discussion
of Golden Rule and briefly provide some background about general, common law agency law
For many years, courts and commentators across the country have treated the questions
whether a principal-agent relationship exists and whether an agent has authority to act as two
separate questions.4 As a consequence, they have utilized a two-step process to determine
whether an alleged principal is liable for a contract signed by her alleged agent.5 In step one,
See, e.g., Restatement (First) of Agency §§ 1, 8, 140 & cmt. a (Am. Law Inst. 1933), Westlaw (database updated
Mar. 2017) (defining “agency” and “authority” as separate concepts and explaining that a principal is only liable for
the contracts of her agent if the agent is authorized); Villalpando v. Denver Health & Hosp. Auth., 181 P.3d 357,
362–63 (Colo. App. 2007) (referring to agency and authority as separate ideas, though referring to the agency
relationship as one “based on” a particular type of authority); Martin Fuel Distribs., Inc. v. Trans Gulf Fuel, Inc.,
496 So.2d 473, 476 (La. Ct. App. 1986) (discussing agency and authority as separate ideas). See also infra note 5.
See, e.g., Ronald C. Wyse, A Framework Analysis for the Law of Agency, 40 Mont. L. Rev. 31, 33, 47–48 (1979)
(explaining that “the initial step of any agency analysis must be to inquire if an agency relationship exists between
the . . . person who entered into the contractual relationship and the putative principal,” and then, once establishing
that such a relationship exists, asking whether the agent was authorized to enter into the contract on the principal’s
behalf); Allan H. Fisher et al., Essentials of Maryland Pleading 142 (2d ed., 1922) (“There are two steps in the proof
necessary if the plaintiff desires to hold the principal liable: first, the plaintiff must prove agency . . . ; second, that
the act was within the scope of the agent’s express, implied, or apparent authority.”); Time Warner City Cable v.
Adelphi Univ., 27 A.D.3d 551, 552–53 (N.Y. App. Div. 2006) (holding that evidence created a question of fact about
courts ask whether an agency relationship exists. E.g., Koricic v. Beverly Enters.-Neb., Inc., 773
N.W.2d 145, 150–51 (Neb. 2009). If it does, the court moves to step two and asks whether the
agent had the authority—either actual or apparent—to execute the contract at issue on the
principal’s behalf. See, e.g., id. at 151 (holding that “an agency relationship existed between”
the alleged principal and alleged agent, but that the agent’s “actual authority did not extend to
signing an arbitration agreement”). But for many years, Kansas courts have not explicitly
divided their agency inquiry into two steps. Instead, they have asked just one question: Did the
alleged agent have one of the “two types of agency” recognized by the courts, “one actual and
the other ostensible or apparent?” Greep v. Burns, 159 P.2d 803, 808 (Kan. 1945) (citations
omitted); accord In re Scholastic Book Clubs, Inc., 920 P.2d 947, 954 (Kan. 1996); Mohr v. State
Bank of Stanley, 734 P.2d 1071, 1075 (Kan. 1987). Asking just this one question led to the
historical impression that the Kansas Supreme Court set out to clarify in Golden Rule. See
Golden Rule, 335 P.3d at 1189 (explaining the difference between common law agency
principles and Kansas agency law as arising from the fact that present-day Kansas case law has
its “genesis in much older caselaw, which in turn relied on then current statements of agency law
made in various treatises” (first citing Greep, 159 P.2d at 807–09; further citations omitted).
Before it began its analysis, Golden Rule explained that the court must ask and answer
two questions to determine whether the alleged agent could bind the alleged principal to a
contract. Id. at 1186–87. Those two questions were: (1) “whether the evidence . . . supported
the existence of an agency relationship between [the plaintiff] as principal and [the alleged agent]
as agent” and (2) “whether [the agent’s] acts were within the scope of his authority as agent or
whether a principal-agent relationship existed and a separate question of fact whether the agent “had actual, implied,
or apparent authority to obligate” the principal to purchase airtime).
were otherwise binding on” the principal. Id. So, before the court even began its analysis in
Golden Rule, it had signaled an intent to adopt the two-step process.
The court then reviewed the general common law agency principles enshrined in the
Third Restatement of Agency and explained that those principles require “any agency analysis
[to] begin by first identifying whether a principal-agent relationship exists and, if so,
determining the nature and scope of the agent’s authority.” Id. at 1189. The court then reviewed
Kansas’s common law agency principles, arguing that “Kansas caselaw has been consistent with
the general common law agency principles . . . in substance if not always in form.” Id. The
court explained that the most “notable difference between Kansas cases and the Restatements”
was Kansas’s “focus on ‘types of agencies’ rather than types of authority.” Id. The court
dismissed this difference as one consisting merely of “terminology” caused by the fact that
present-day Kansas case law has its “genesis in much older caselaw, which in turn relied on then
current statements of agency law made in various treatises.” Id. (citations omitted). Then the
court went on to employ the Restatement’s two-step process, id. at 1193–95, but never explicitly
replaced Kansas’s previous one-step inquiry with that process.
Still, the court is convinced that the Kansas Supreme Court, by favorably discussing the
Third Restatement of Agency and structuring its analysis on the principles recited in that
Restatement, intended to adopt the Restatement’s two-step process. The court thus employs this
two-step process, and considers Kansas case law discussing “types of agencies” where they are
applicable within this two-step framework. This means the court must ask two questions here:
(1) Has plaintiff alleged facts sufficient to support a plausible inference that Mr. Leonard and
Dinsdale had a principal-agent relationship when Mr. Leonard purchased the 668 cattle from
plaintiff?; and, if so, (2) Has plaintiff alleged facts sufficient to support a plausible inference that
Mr. Leonard acted within the scope of his authority as Dinsdale’s agent when he purchased the
668 cattle from plaintiff?
In Golden Rule, the Kansas Supreme Court explained that a principal-agent relationship
(also referred to as an agency relationship) is created “when one person (a ‘principal’) manifests
assent to another person (an ‘agent’) that the agent shall act on the principal’s behalf and subject
to the principal’s control, and the agent manifests assent or otherwise consents so to act.” 335
P.3d at 1188 (quoting Restatement (Third) of Agency § 1.01 (Am. Law Inst. 2005)). And, a
principal-agent relationship cannot exist unless the agent acts for the principal’s benefit. See
Merchant v. Foreman, 322 P.2d 740, 745 (Kan. 1958) (explaining the duties of an agent to a
principal, which require an agent “to act with the utmost good faith and loyalty for the
furtherance and advancement of the interests of his principal” (citations omitted)); 2A C.J.S.
Agency § 5, Westlaw (database updated Apr. 11, 2017) (“[T]here are three elements that are
integral to an agency relationship: the agent is subject to the principal’s right of control; the
agent has a duty to act, as a fiduciary, primarily for the benefit of the principal; and the agent
holds the power to alter the legal relations of the principal.” (footnote omitted)). So, a principalagent relationship has three components: assent by both parties, benefit to the principal, and
control by the principal.
Dinsdale contends that plaintiff has not alleged a principal-agent relationship between
Dinsdale and Mr. Leonard for several reasons, all of which the court considers in the coming
pages. But one of Dinsdale’s arguments transcends the three elements of a principal-agent
relationship, so the court begins with it. In this argument, Dinsdale attacks plaintiff’s allegations
of agency broadly, asserting that, “[i]n its entirety, the [Complaint] makes only three allegations
(¶¶ 4, 9, 47) that Leonard was Dinsdale Bros.’ agent,” and that “[n]one of these allegations are
entitled to any deference or special treatment, especially since each such allegation is bald and
conclusory, with no supporting facts.” Doc. 49 at 6. To put it plainly, Dinsdale contends that
plaintiff alleges no facts supporting its agency theory. This contention does not fairly portray
plaintiff’s Complaint. Although Dinsdale is correct that paragraphs 4, 9, and 47 of the
Complaint allege legal conclusions—i.e., that Mr. Leonard was Dinsdale’s agent—and so need
not be accepted as true, Dinsdale’s argument ignores the rest of plaintiff’s Complaint. In doing
so, Dinsdale ignores many factual allegations that support plaintiff’s legal conclusion of agency.
The court thus disregards the allegations in paragraphs 4, 9, and 47 of the Complaint, but does
consider whether plaintiff’s factual allegations—if true—could support the elements of a
principal-agent relationship. This analysis begins with the requisite assent.
In Golden Rule, the Kansas Supreme Court explained that parties can manifest their
assent to create a principal-agent relationship “through written or spoken words or other
conduct.” 335 P.3d at 1188 (quoting Restatement (Third) of Agency § 1.03). So, “[a]
principal’s manifestation of assent to an agency relationship may be informal, implicit, and
nonspecific.” Restatement (Third) of Agency § 1.01 cmt. d; see also In re Scholastic, 920 P.2d
at 955 (“While an express contract may create an agency relationship, conduct implying an
agency relationship serves just as well.”). But, “it is not necessary to the formation of a
relationship of agency that the agent manifest assent to the principal.” Restatement (Third) of
Agency § 1.01 cmt. d. For example, the court may find that an alleged agent has assented to a
principal-agent relationship when the principal asks the alleged agent to act on its behalf, and the
alleged agent “performs the service requested by the principal following the principal’s
manifestation.” Id.; accord id. § 1.01 cmt. c.
Here, Dinsdale contends that plaintiff fails to allege facts capable of supporting a
plausible inference that Dinsdale and Mr. Leonard assented to a principal-agent relationship
between them. Dinsdale asserts that plaintiff “may not salvage [its] theory [of agency] by
claiming [plaintiff] assumed an agency relationship existed, or that [Mr.] Leonard acted as such,
or that the circumstances made agency seem natural and probable.” Doc. 49 at 8. This assertion
faithfully summarizes Kansas law,6 but the court finds no support for Dinsdale’s characterization
of plaintiff’s Complaint. Instead, the court finds plaintiff’s allegations sufficient to support its
claim that Dinsdale and Mr. Leonard assented to a principal-agent relationship. Specifically, the
Complaint alleges that Dinsdale sent Mr. Leonard to plaintiff’s auction “for the purpose of
purchasing livestock for and on behalf of Dinsdale,” and that Mr. Leonard in fact attended the
auction and purchased cattle on Dinsdale’s behalf. Doc. 46 ¶¶ 9–11, 13–14. These allegations
by themselves, provide a sufficient basis to support a plausible inference that Dinsdale and Mr.
Leonard assented to a principal-agent relationship. Cf. Blewett, 8 P.2d at 358 (holding that a
cattle buyer was the agent of a livestock company in part because the company “had sent him, or
permitted him to go, on [the] particular trip” in question).
Nevertheless, Dinsdale seems to argue that plaintiff cannot allege assent without alleging
or producing a written contract between Dinsdale and Mr. Leonard establishing Mr. Leonard’s
Kansas cases discussing “implied agencies” hold that an implied agency may not be inferred simply because a
third person assumed that agency existed or because “the alleged agent assumed to act as such.” Shugar v. Antrim,
276 P.2d 372, 375 (Kan. 1954) (citing Greep, 159 P.2d at 808). They also hold that an implied agency may not be
inferred “from facts which show that the alleged agent was a mere instrumentality” or simply “because the
conditions and circumstances were such as to make such an agency seem natural and probable, and to the advantage
of the supposed principal.” Id. (citing Greep, 159 P.2d at 808). Whether the court should rely on implied agency
cases when it considers whether a principal-agent relationship exists or, instead, only when considering whether
authority exists is a question discussed later in this Memorandum and Order. See infra pp. 23–24. The court need
not resolve that question to assess Dinsdale’s argument here.
agency. This argument contradicts long-established principles of Kansas law: “It is not essential
that any actual contract should subsist between the parties . . . .” Walker, 251 P. at 1095 (citation
omitted); see also In re Scholastic, 920 P.2d at 955 (“While an express contract may create an
agency relationship, conduct implying an agency relationship serves just as well.”). The court is
not persuaded by Dinsdale’s arguments and it evaluates the Complaint under the correct
statement of the substantive Kansas law governing this issue. Plaintiff thus alleges facts that, if
proven, suffice to support an inference that Dinsdale and Mr. Leonard assented to a principalagent relationship.
Benefit to the Principal
Dinsdale concedes that Mr. Leonard’s actions at the September 29, 2015 sale were
“beneficial to Dinsdale.” Doc. 49 at 7; see also id. at 8–9. By doing so, Dinsdale concedes that
plaintiff has alleged facts supporting the second element of an agency relationship. See id. at 7
(“Rezac asks the Court to imply Dinsdale Bros. as a party to the contract . . . because [Mr.]
Leonard’s role in the contract was beneficial to Dinsdale Bros.”); see also id. at 9 (“Instead,
Rezac alleges a buyer-seller relationship between Dinsdale Bros. and [Mr.] Leonard . . . In
dealing with Rezac, [Mr.] Leonard acted for his own benefit and the benefit of his customer,”
Dinsdale). Despite this concession, Dinsdale argues that plaintiff has failed to allege that Mr.
Leonard’s actions were intended to benefit Dinsdale. Dinsdale asserts two arguments trying to
support this contention.
First, Dinsdale asks the court to compare the facts of this case—such as they are at the
motion to dismiss stage—with those of Shugar v. Antrim, 276 P.2d 372 (Kan. 1942). In Shugar,
the defendant’s post-trial motion asked the Kansas Supreme Court to decide whether a principalagent relationship existed between a grain elevator owner, Howard Antrim, and Continental
Grain Company, a company who bought large amounts of grain from Antrim and had helped
finance his purchase of the grain elevator. Id. at 374. The plaintiffs in Shugar—farmers who
had stored their wheat at Antrim’s elevator—alleged that Continental owed them for “the value
of their wheat” when Antrim failed to pay them because Antrim was Continental’s agent. Id. at
373. The court held that no principal-agent relationship existed between Antrim and
Continental. Id. at 376. It based this holding in part on the fact that Continental’s name did not
appear on Antrim’s checks or in the name of Antrim’s business. Id. at 375–76. The court also
relied on the fact that Antrim had not sold the plaintiffs’ wheat to Continental, which showed
that Antrim had acted to benefit himself, not Continental. See id. at 374–75.
Plaintiff’s Complaint here alleges some facts similar to those in Shugar. But the facts
alleged here and the facts of Shugar are not so similar that the court must dismiss plaintiff’s
Complaint for failing to state a claim. For instance, plaintiff alleges that the name of Mr.
Leonard’s company is “Leonard Cattle Company.” Doc. 46 ¶ 4. So, as in Shugar, Dinsdale’s
name does not appear in the name of Mr. Leonard’s company. But plaintiff also alleges that Mr.
Leonard purchased the cattle at issue here specifically for Dinsdale. Id. ¶¶ 9–14. Thus, unlike
Shugar, plaintiff alleges that Mr. Leonard acted to benefit Dinsdale, not himself. So far, then,
the differences between Shugar and this case outpace their similarities.
Dinsdale tries to rally its argument on one final similarity, however. Dinsdale argues that
the check Mr. Leonard used to pay plaintiff did not include Dinsdale’s name, so the court should
rule as a matter of law that no principal-agent relationship existed—the same outcome as Shugar.
Doc. 49 at 9, 1; Doc. 49-1. Plaintiff has not attached the check to the Complaint, or incorporated
it by reference in the Complaint. So the court may consider the check only if the Complaint’s
reference to the check makes it central to plaintiff’s breach of contract claim and no dispute
exists about its authenticity. See Gee v. Pacheco, 627 F.3d 1178, 1186 (10th Cir. 2010) (listing
exceptions to the rule against looking outside the four corners of the pleadings). If not, the court
may not consider the check without converting Dinsdale’s motion to dismiss into one seeking
summary judgment. Id.
The court concludes that it may not consider the check. Plaintiff bases its breach of
contract claim on Dinsdale’s failure to pay for 668 cattle that Mr. Leonard purchased—and not
on any information contained in his check. So, yes, plaintiff’s contract claim references Mr.
Leonard’s check but it does so only to provide context for its allegations. Because plaintiff’s
claim does not reference the check’s terms or rest on those terms, it is not central to plaintiff’s
breach of contract claim. E.g., Capital Sols., LLC v. Konica Minolta Bus. Sols. USA, Inc., Nos.
08-2027-JWL, 08-2191-JWL, 2008 WL 3538968, at *3 (D. Kan. Aug. 11, 2008) (finding loan
documents not central to the plaintiff’s claim because the plaintiff’s “claims and allegations
against [the defendant] [did] not rest on the terms and conditions set forth in the loan
documents” (citing GFF Corp. v. Associated Wholesale Grocers, Inc., 130 F.3d 1381, 1385
(10th Cir. 1997))); Chastain v. Hodgdon, 202 F. Supp. 3d 1216, 1223 (D. Kan. 2016) (holding
that a book was extrinsic evidence when attached to a motion to dismiss “despite plaintiff’s
mentioning of the evidence in the complaint”). Also, the court recognizes that Mr. Leonard’s
check may aid Dinsdale’s arguments here,7 but that does not make it central to plaintiff’s claim.
See Capital Sols., LLC, 2008 WL 3538968, at *3 (explaining that extrinsic evidence that isn’t
Although Dinsdale does not raise the issue in this context, the court notes that Mr. Leonard’s check to plaintiff may
be the only writing alleged in this case that could satisfy the statute of frauds. But, that does not make the check
central to plaintiff’s claims—Dinsdale asserts the statute of frauds as a defense. See Augusta Bank & Tr. v.
Broomfield, 643 P.2d 100, 106 (Kan. 1982) (“When a defendant asserts the statute of frauds as an affirmative
defense, the burden of proof is on him”); Tyler v. Johnson, 318 P.3d 1020, 2014 WL 802322, at *1 (Kan. Ct. App.
Feb. 28, 2014) (“K.S.A. 2011 Supp. 60-208(c) includes the statute of frauds as one of the affirmative defenses that
must be asserted in an answer or a reply.”); Wolfson v. Nutt, No. 08-3190-GLR, 2010 WL 4568152, at *3 (D. Kan.
Nov. 3, 2010) (applying Kansas law and stating that “the statute of frauds is an affirmative defense under Fed. R.
Civ. P. 8(c)”).
central to a plaintiff’s claim is not properly considered in a Rule 12(b)(6) motion even if the
evidence is central to the defendant’s “theories of defense”). So, Dinsdale’s argument based on
Mr. Leonard’s check tries to take the court outside the Complaint. The court, in its discretion,
declines to turn Dinsdale’s motion into one for summary judgment and so it disregards Mr.
In its next argument, Dinsdale contends that plaintiff’s agency theory fails as a matter of
law because plaintiff “alleges a buyer-seller relationship between Dinsdale Bros. and [Mr.]
Leonard: Dinsdale Bros. bought cattle from [Mr.] Leonard in a distinct transaction that did not
involve [plaintiff]. In dealing with [plaintiff], [Mr.] Leonard acted for his own benefit and the
benefit of his customer,” Dinsdale. Doc. 49 at 9. But plaintiff’s Complaint does not allege that
Dinsdale bought cattle from Mr. Leonard in a separate transaction. Dinsdale’s argument tries to
add these allegations to the Complaint.8 The court does not consider allegations made in parties’
briefs when deciding a motion to dismiss. See Frederick v. S. Star Cent. Gas Pipeline, Inc., No.
10-1063-JAR, 2011 WL 1430005, at *3 (D. Kan. Apr. 14, 2011) (“[T]he [c]ourt only evaluates
the sufficiency of the pleadings on a motion to dismiss, rather than the statements of the parties
in their briefs.”). Instead, “‘the court’s function on a Rule 12(b)(6) motion is not to weigh
potential evidence that the parties might present at trial, but to assess whether the plaintiff’s
complaint alone is legally sufficient to state a claim for which relief may be granted’ under Rule
As part of this argument, Dinsdale directs the court to Exhibit Three, which Dinsdale attached to its Motion to
Dismiss. Exhibit Three appears to be a claim from Mr. Leonard’s pending bankruptcy proceedings. Doc. 49-3.
Dinsdale asks the court to take judicial notice of Exhibit Three. The court does so because Exhibit Three meets the
requirements of Fed. R. Evid. 201, and so the court may consider the document without converting the motion to
one for summary judgment. Yeasin v. Durham, –F. Supp. 3d–, 2016 WL 7014027, at *2 (D. Kan. Dec. 1, 2016).
But, in taking judicial notice of Exhibit Three, the court may only consider it “to show [its] contents, not to prove
the truth of the matters asserted therein.” Tal v. Hogan, 453 F. 3d 1244, 1264 n.24 (10th Cir. 2006) (citation
omitted). Exhibit Three merely informs the court that plaintiff filed a proof of claim in Mr. Leonard’s pending
bankruptcy proceeding. Doc. 49-3. Nothing about this fact establishes the proposition Dinsdale cites Exhibit Three
for: “The [Complaint] alleges that [plaintiff] conferred a benefit on Leonard.” Doc. 49 at 14. Therefore, nothing in
Exhibit Three alters any of the court’s conclusions.
8(a)(2).” Phillips v. Bell, 365 F. App’x 133, 137 (10th Cir. 2010) (quoting Smith v. United
States, 561 F.3d 1090, 1098 (10th Cir. 2009)). The court thus limits its discussion to the facts
plaintiff alleged in its Complaint and does not consider those that Dinsdale asserts in its Motion.
Plaintiff alleges facts sufficient to support a plausible inference that Mr. Leonard acted to
benefit Dinsdale. In its Complaint, plaintiff alleges that Dinsdale sent Mr. Leonard to plaintiff’s
auction “for the purpose of purchasing livestock for and on behalf of Dinsdale.” Doc. 46 ¶¶ 9–
11. Plaintiff also alleges that Mr. Leonard bought 668 head of cattle for Dinsdale at this auction,
and that plaintiff sent the cattle directly to Dinsdale. Id. ¶¶ 14, 22–23. Plaintiff never alleges
that Mr. Leonard purchased any cattle for himself, or that Dinsdale bought the cattle from Mr.
Leonard in a separate transaction. These allegations provide a sufficient basis for a plausible
inference that Mr. Leonard acted on Dinsdale’s behalf and for Dinsdale’s benefit at the
September 29, 2015 auction. Cf. Blewett, 8 P.2d at 358 (holding that a cattle buyer was the agent
of a livestock company in part because the company “had sent him, or permitted him to go, on
[the] particular [purchasing] trip” in question); C. A. Karlan Furniture Co., 324 P.2d at 182
(holding that a principal-agent relationship existed where the alleged agent purchased a
television set for the alleged principal at the principal’s request and had the set delivered to the
principal’s home directly). Plaintiff’s Complaint thus alleges facts supporting the second
element of a principal-agent relationship.
Control by the Principal
Dinsdale next contends that plaintiff’s Complaint cannot possibly support the third
element of a principal-agent relationship: control. Dinsdale makes three arguments on this front.
First, Dinsdale argues that plaintiff does not allege that Dinsdale exercised any control over Mr.
Leonard’s business affairs and policies. Doc. 49 at 8. Second, Dinsdale argues that plaintiff, to
plead control properly, must allege the existence of a written contract between Dinsdale and Mr.
Leonard. Doc. 53 at 5. And third, Dinsdale argues that plaintiff fails to allege facts showing that
Mr. Leonard “was somehow subject to Dinsdale Bros.’s control.” Doc. 49 at 7. The court
considers all three arguments, in turn, below.
Dinsdale’s first argument quotes AgriStor Leasing v. Meuli, a case decided by our court
applying Kansas agency law, as support for the proposition that “[i]n sales transactions, agency
does not arise unless the alleged principal ‘exercised any control over the business affairs of [the
alleged agent], or had any voice in setting policies.’” Id. at 8 (quoting AgriStor Leasing v. Meuli,
634 F. Supp. 1208, 1215 (D. Kan. 1986)). Relying on this proposition, Dinsdale contends that
plaintiff cannot allege control because it does not allege that Dinsdale exercised any control over
Mr. Leonard’s business affairs and policies. But Dinsdale quotes AgriStor Leasing out of
context and, in doing so, misapprehends Kansas law.
In his opinion in AgriStor Leasing, Judge Kelly considered whether an independent
dealer acted as a finance lessor’s agent. 634 F. Supp. at 1215. He held that it did not do so
because, in part “no evidence . . . indicate[d]” that AgriStor, the alleged principal, “exercised any
control over the business affairs of [the alleged agent], or had any voice in setting its policies.”
Id. But Judge Kelly did not hold that such evidence was necessary to allege a principal-agent
relationship. The alleged principal’s lack of control over the alleged agent’s business affairs and
policies was just one of several facts Judge Kelly cited to explain why no principal-agent
relationship existed in that case. See id. Indeed, Judge Kelly never discussed why these facts
mattered to his analysis or what characteristics are necessary for a principal-agent relationship to
exist. Id. AgriStor Leasing thus stands for the proposition that an alleged principal’s control
over an alleged agent’s business affairs and policies is just one more fact tending to establish a
principal-agent relationship. It does not hold that such control is an essential fact.
Dinsdale cites no other authority to support its argument that plaintiff must allege facts
showing that Dinsdale controlled Mr. Leonard’s policies or business affairs generally. The court
cannot find any. The court thus finds no fault with the absence of such allegations in plaintiff’s
Dinsdale next argues that plaintiff alleges no facts tending to show that Dinsdale had
control over Mr. Leonard because plaintiff does not allege “a contract establishing the agency.”
Doc. 53 at 5. According to Dinsdale, “[s]imply alleging general instructions or directions” is
insufficient to allege “plausible control.” Id. The court disagrees. As noted above, a principalagent relationship can exist without a written contract between the principal and agent. Indeed, a
principal-agent relationship can exist even if a contract provides that no such relationship exists.
E.g., In re Scholastic, 920 P.2d at 956 (holding that teachers were agents of Scholastic despite a
contract stating that the teachers were not Scholastic’s agents). So, plaintiff’s Complaint may
allege control sufficiently without alleging the existence of a contract between Dinsdale and Mr.
In its final control argument, Dinsdale argues that plaintiff fails to allege that Mr.
Leonard “was somehow subject to Dinsdale Bros.’s control.” Doc. 49 at 7. This assertion takes
a fanciful view of the Complaint. In its Complaint, plaintiff alleges that Mr. Leonard attended
the September 29, 2015 auction “at the direction of Dinsdale.” Doc. 46 ¶ 10. Plaintiff also
Dinsdale also argues that the Complaint “alleges a written contract between [plaintiff] and [Mr.] Leonard that
never mentions Dinsdale Bros.—consideration, mutuality, or meeting of the minds by Dinsdale Bros. are wholly
absent from the [Complaint].” Doc. 49 at 7. This argument is misdirected. Plaintiff need not allege a contract
between plaintiff and Dinsdale if it alleges facts showing that Mr. Leonard was Dinsdale’s agent and had the
authority to make the sale contract on Dinsdale’s behalf. So, Dinsdale’s argument about “consideration, mutuality,
or meeting of the minds” has no proper place in the agency analysis.
alleges that Dinsdale gave Mr. Leonard specific orders about what kind of steers and heifers to
purchase—“no steers over 900 lbs. and no heifers over 800 lbs.” Id. ¶ 13. Plaintiff alleges still
more control by Dinsdale when the Complaint explains that Mr. Leonard told plaintiff that
Dinsdale wanted the cattle delivered to two Colorado feedlots after the sale. Id. ¶ 22. These
allegations, jointly and perhaps even separately, suffice to support an inference that Mr. Leonard
acted subject to Dinsdale’s control.
In sum, the Complaint alleges facts supporting all three elements of a principal-agent
relationship. Plaintiff therefore has alleged that a principal-agent relationship existed between
Mr. Leonard and Dinsdale when Mr. Leonard purchased the 668 head of cattle at issue in this
case.10 This conclusion leaves only the question whether plaintiff has alleged facts sufficient to
support a plausible inference that Mr. Leonard possessed authority to purchase the cattle on
Dinsdale’s behalf. The next section takes up that question.
Kansas “law recognizes two distinct types of [authority], one actual and the other
ostensible or apparent.” Theis v. duPont, Glore Forgan Inc., 510 P.2d 1212, 1216 (Kan. 1973).
Actual authority “may be either express or implied,” id., and “determining the scope of an
agent’s actual authority will often require looking at the same evidence that established the
existence of the relationship in the first place,” Golden Rule, 335 P.3d at 1195. Apparent
authority is a little different. It is invoked “when a third party has dealt with an ostensible agent
and then seeks to bind the principle to a transaction despite the fact that the agent had no actual
authority to bind him.” Theis, 510 P.2d at 1217 (citations omitted). But, actual authority and
The court concludes only that Mr. Leonard was Dinsdale’s agent for the purposes of the transaction with plaintiff;
it need not consider Mr. Leonard and Dinsdale’s relationship beyond that transaction. See In re Scholastic, 920 P.2d
at 955 (explaining that parties may assent to an agency for a limited purpose where the agent “has power to act with
reference to the [limited] subject matter” only).
apparent authority are not mutually exclusive of one another. Golden Rule, 335 P.3d at 1190,
Because the parties do not separate their arguments into the two steps required by Golden
Rule, the court must consider whether plaintiff has alleged facts showing either actual or
apparent authority. If plaintiff alleges that Mr. Leonard had authority to enter into the sale
contract with plaintiff on Dinsdale’s behalf, then Dinsdale is bound to the contract as if it were a
party to it.
Actual Express Authority
In a principal-agent relationship, express authority exists when “the principal has
delegated authority to the agent by words which expressly authorize the agent to do a delegable
act.” Id. at 1189 (quoting Prof’l Lens Plan, Inc. v. Polaris Leasing Corp., 710 P.2d 1297, 1303
(Kan. 1985)); see also id. at 1188 (defining express authority as “stated in very specific or
detailed language” (quoting Restatement (Third) of Agency § 2.01 cmt. b)). The Complaint here
alleges that Dinsdale sent Mr. Leonard to plaintiff’s September 29, 2015 auction with express
instructions to purchase certain types of cattle on Dinsdale’s behalf. Doc. 46 ¶¶ 9–11, 13. These
allegations support a plausible inference that Dinsdale gave Mr. Leonard express authority to buy
the cattle in question on Dinsdale’s behalf.
Dinsdale tries to disagree. It argues that plaintiff alleges no authority because plaintiff
never alleges “that Dinsdale Bros. had any kind of agency contract with” Mr. Leonard. Doc. 53
at 5. According to Dinsdale’s argument, this omission precludes plaintiff from ever establishing
any type of authority because an agent does not have authority unless “a contract [exists]
establishing the agency that gives . . . the agent ‘authority to bind’ the alleged principal.” Id.
(citations omitted). For support, Dinsdale cites Scholastic Book Clubs. But to no avail.
Nothing in Scholastic Book Clubs suggests that an agent lacks authority to act when no
contract exists establishing his power to bind the principal. Indeed, the case stands for the
opposite proposition: “While an express contract may create an agency relationship, conduct
implying an agency relationship serves just as well.” In re Scholastic Book Clubs, Inc., 920 P.2d
at 955. Nothing in Kansas agency law requires plaintiff to allege the existence of an agency
contract granting Mr. Leonard the ability to bind Dinsdale. The court thus finds no fault with the
absence of such allegations in the Complaint.
Accordingly, the court concludes that plaintiff has alleged facts sufficient to show that
Mr. Leonard had actual, express authority from Dinsdale to purchase the 668 head of cattle at
issue on Dinsdale’s behalf.
Implied Actual Authority
Even if plaintiff had not alleged express actual authority, it alleges facts sufficient to
support a plausible inference that Mr. Leonard had implied actual authority to enter into the sale
contract on Dinsdale’s behalf.
In Golden Rule, the Kansas Supreme Court explained that Kansas agency principles were
“consistent” with those of the Restatement in “substance,” even though they use different terms.
335 P.3d at 1189. But Kansas cases before Golden Rule define implied actual authority quite
differently than the Restatement. In the Restatement (Third) of Agency, an agent has implied
actual authority to act
“either (1) to do what is necessary, usual, and proper to accomplish or perform an
agent’s express responsibilities or (2) to act in a manner in which an agent
believes the principal wishes the agent to act based on the agent’s reasonable
interpretation of the principal’s manifestation in light of the principal’s objectives
and other facts known to the agent.”
Id. at 1188–89 (quoting Restatement (Third) of Agency § 2.01 cmt. b; further citations omitted).
According to Kansas cases before Golden Rule, however, an “implied agency” allowing an agent
to act and so bind his principal exists when, from the parties’ statements, conduct, “and other
relevant circumstances, it appears the intent of the parties was to create a relationship permitting
the assumption of authority by an agent which, when exercised by him, would normally and
naturally lead others to believe in and rely on his acts as those of the principal.” Shugar, 276
P.2d at 375; accord Prof’l Lens Plan, Inc., 710 P.2d at 1303. The court thus considers the
Kansas Supreme Court’s statement that Kansas agency principles are “consistent” with the
Restatement as tacit recognition that there are places where the substance of Kansas agency law
before Golden Rule differs from the Restatement to some small degree.
But Golden Rule does not tell future courts how its holdings affect prior cases, and
Golden Rule is not an implied actual authority case. So, the court is unsure whether to apply the
Restatement’s definition of implied authority or the definition used by Kansas cases before
Golden Rule. When facing such a conundrum general principles of federalism are helpful. “A
federal court sitting in diversity must apply state law as propounded by the forum’s highest
court.” Royal Maccabees Life Ins. Co. v. Choren, 393 F.3d 1175, 1180 (10th Cir. 2005) (citing
Rancho Lobo, Ltd. v. Devargas, 303 F.3d 1195, 1202 n.2 (10th Cir. 2002)). “Absent controlling
precedent, the federal court must attempt to predict how the state’s highest court would resolve
the issue.” Id. (citing F.D.I.C. v. Schuchmann, 235 F.3d 1217, 1225 (10th Cir. 2000)) (footnote
omitted). Because Golden Rule did not overrule or clearly abrogate the Kansas Supreme Court’s
prior implied authority rulings, and because Golden Rule is not an implied authority case itself,
the court concludes that it must rely on pre-Golden Rule implied authority cases from the Kansas
Supreme Court to decide whether plaintiff has alleged implied authority here.
Thus, the court asks whether, from the parties’ statements, conduct, “and other relevant
circumstances,” it appears that the parties intended to “create a relationship permitting the
assumption of authority by an agent which, when exercised by him, would normally and
naturally lead others to believe in and rely on his acts as those of the principal.” Shugar, 276
P.2d at 375. But, the court may not infer implied authority simply because a third person
assumed it existed or because “the alleged agent assumed to act as such.” Id. (citation omitted).
Also, it may not infer that implied authority existed “from facts which show that the alleged
agent was a mere instrumentality,” or simply “because the conditions and circumstances were
such as to make such an agency seem natural and probable, and to the advantage of the supposed
principal.” Id. (citation omitted). However, implied authority “may exist notwithstanding either
a denial of the agency by the alleged principal or a lack of mutual understanding of agency
between the parties.” In re Scholastic, 920 P.2d at 955 (citations omitted).
Here, plaintiff alleges that Mr. Leonard attended the September 29, 2015 auction “at the
direction of Dinsdale” and with specific orders for what kind of steers and heifers to purchase for
Dinsdale: “no steers over 900 lbs. and no heifers over 800 lbs.” Doc. 46 ¶¶ 10, 13. Plaintiff
also alleges that Mr. Leonard directed plaintiff to ship the cattle directly to Dinsdale’s desired
feedlots. Id. ¶¶ 22–23. Moreover, plaintiff alleges that Mr. Leonard “had previously purchased
livestock from [plaintiff] for and on behalf of Dinsdale Bros., and [plaintiff] knew of
Dinsdale.”11 Id. ¶ 12. Taken together, these facts normally and naturally could lead others to
believe that Mr. Leonard’s act of buying the cattle was, in fact, Dinsdale’s act. The court thus
concludes that plaintiff has alleged facts that, if proven true, could support a plausible inference
that Mr. Leonard had implied actual authority to purchase the 668 head of cattle at issue on
See Mohr, 734 P.2d at 1076 (“While the [agency] relation[ship] may be implied from a single transaction, it is
more readily inferable from a series of transactions.” (quoting 2A C.J.S. Agency § 52)).
“[T]he apparent authority doctrine has relevance only when a third party has dealt with an
ostensible agent and then seeks to bind the principle to a transaction despite the fact that the
agent had no actual authority to bind him.” Theis, 510 P.2d at 1217 (citations omitted). So,
apparent authority exists when “the principal has intentionally or by want of ordinary care
induced and permitted third persons to believe [a person] to be his agent even though no
authority, either express or implied, has been conferred upon him.” Id. at 1216 (citation
Blewett v. Errickson demonstrates, in a way that is helpful to the analysis here, when an
agent has apparent authority to act. In Blewett, the Kansas Supreme Court held that the alleged
agent—a cattle buyer—had apparent authority to bind his principal—a livestock company—to a
sale contract with the plaintiff. 8 P.2d at 359. There, the principal had sent his agent on a trip to
plaintiff’s area to buy cattle. Id. at 358. While on this cattle buying trip, the agent met the
plaintiff’s son and bought some cattle from him. Id. The agent paid for the cattle by drawing “a
draft” on his principal, which his principal paid. Id. Apparently, the agent engaged in several
other similar transactions in the area near the plaintiff. And the plaintiff knew about the agent’s
other purchases. Id. The plaintiff also had received a card from the agent—as had many other
cattle buyers in the area—that the principal had furnished to the agent and which “indicated that
[the agent] was a member of, or the representative of” the principal. Id. A few months later, the
agent returned to plaintiff’s area. This time, he bought cattle from the plaintiff on the same
principal’s behalf. Id. Again, the agent paid for the cattle by drawing a draft on his principal.
Id. But, this time, the principal refused to pay for the cattle, arguing that the agent had no
authority to purchase the cattle on its behalf. Id. The Kansas Supreme Court rejected the
principal’s argument. Id. at 359.
The supreme court held that the principal had “held [the agent] out as his representative
to transact business for him, including the buying of cattle, and had permitted him to buy cattle,
which he received and for which he paid” during the earlier trip, but failed to give “plaintiff, or
cattle men generally,” any notice that the principal had revoked or limited the agent’s authority
to buy cattle on the principal’s behalf during the later trip. Id. So, the court held that the
evidence supported a finding that the agent had apparent authority to purchase the cattle on his
principal’s behalf. Id.
One allegation in plaintiff’s Complaint here closely resembles the facts of Blewett, but
this one allegation is not enough to bring the Complaint within Blewett’s holding. Here, plaintiff
alleges that Mr. Leonard “had previously purchased livestock from [plaintiff] for and on behalf
of Dinsdale Bros., and [plaintiff] knew of Dinsdale.” Doc. 46 ¶ 12. So, plaintiff alleges facts
equivalent to the agent’s two trips in Blewett. But, unlike Blewett, plaintiff never alleges that
Dinsdale took any steps to hold Mr. Leonard out as its agent on those previous occasions, nor
does plaintiff allege that Dinsdale paid plaintiff directly on those previous occasions. Other
factual differences between Blewett and plaintiff’s allegations here exist, but the court finds it
unnecessary to delve into them. Suffice it to say, plaintiff’s lone allegation in common with the
facts of Blewett is not enough to support a finding of apparent authority.
Because plaintiff does not allege that Dinsdale took any step to hold Mr. Leonard out as
its agent before the September 29, 2015 auction, plaintiff has not alleged any intentional or
negligent act by Dinsdale that would permit a reasonable person to believe that Mr. Leonard had
authority to bind Dinsdale to the sale contract. The court thus concludes that plaintiff has alleged
facts sufficient to support an inference that Mr. Leonard had both express and implied actual
authority to purchase the 668 cattle in question on Dinsdale’s behalf, but not apparent authority.
To summarize, the court concludes that plaintiff has alleged sufficient facts that, if
proven true, could support a plausible finding of a principal-agent relationship between Mr.
Leonard and Dinsdale and that Mr. Leonard had authority to enter into the sale contract with
plaintiff on Dinsdale’s behalf. So, plaintiff has alleged sufficient facts to support its claim that
Dinsdale is bound to the sale contract between plaintiff and Mr. Leonard and therefore may be
held liable to plaintiff for a breach of that contract under an agency theory. Because plaintiff
alleges these facts, the court assumes, for the purposes of this motion, that Dinsdale is bound to
the sale contract. Dinsdale’s arguments based on the statute of frauds and privity thus fail. At
this stage of the litigation, Dinsdale is just as much a signatory to the sale contract as Mr.
Leonard is. The court thus denies Dinsdale’s motion to dismiss count one of the Complaint.
Count II: Conversion Against Dinsdale
Next, Dinsdale’s motion asks the court to dismiss plaintiff’s conversion claim against
Dinsdale because it fails to state a claim for relief. Dinsdale advances four arguments to support
this request, two of which contend that plaintiff’s claim is barred as a matter of law. The court
begins by addressing these arguments.
Is Plaintiff’s Conversion Claim Barred as a Matter of Law?
Dinsdale first argues that plaintiff bases its conversion claim on a debt and that a debt
cannot provide the basis for conversion under Kansas law. See Doc. 49 at 10 (“[Plaintiff’s]
conversion claim seeks to compel Dinsdale Bros. to pay the debt owed by [Mr.] Leonard to
[plaintiff].”). Although Dinsdale is correct under Kansas law that a debt cannot provide the
predicate property interest for a conversion claim,12 it is incorrect that plaintiff bases its
conversion claim on a debt. Plaintiff alleges that Dinsdale’s “failure to deliver possession of the
[cattle] to [plaintiff] or to pay [plaintiff] for the [cattle] constitutes conversion.” Doc. 46 ¶ 56.
These words in the Complaint make it clear that plaintiff bases its conversion claim on
Dinsdale’s failure to return the cattle, and not on a debt. The fact that plaintiff seeks the value of
the cattle as damages for Dinsdale’s alleged conversion does not alter this conclusion. Indeed,
conversion plaintiffs commonly seek money damages equal to the property’s value. 18 Am. Jur.
2d Conversion § 66, Westlaw (database updated Feb. 2017). Dinsdale’s first argument thus fails.
Dinsdale next argues that Kansas law bars plaintiff’s conversion claim because the cattle
“were not converted or stolen, [but] . . . were transferred pursuant to valid contracts.” Doc. 49 at
11. Dinsdale rests this argument on a line of Kansas cases holding that, “when parties enter into
a contract which defines their respective rights and duties, tort causes of action concerning the
same subject matter as the contract are precluded.” Regal Ware Inc. v. Vita Craft Corp., 653 F.
Supp. 2d 1146, 1152 (D. Kan. 2006) (citing Ford Motor Credit Co. v. Suburban Ford, 699 P.2d
992, 998 (Kan. 1985)); Doc. 49 at 10. But, as the Kansas Supreme Court explained in Burcham
v. Unison Bancorp, Inc., courts must construe this rule narrowly. 77 P.3d 130, 145 (Kan. 2003).
“[W]hen conduct could satisfy the elements of both a breach of contract or of an independent
tort, unless the conduct is permitted by the express provisions of a contract, a plaintiff may
pursue both remedies.” Id. (quoting Bittel v. Farm Credit Servs. of Cent. Kan., 962 P.2d 491,
498 (Kan. 1998)). Dinsdale asserts that it “took possession of the cattle pursuant to specific
provisions of lawful sales contract” and “paid for the cattle in the manner agreed upon in that
contract.” Doc. 49 at 11. Thus, Dinsdale argues, the conduct plaintiff alleges may not provide
the basis for a conversion claim.
Temmen v. Kent-Brown Chevrolet Co., 605 P.2d 95, 99 (Kan. 1980).
Dinsdale fails to identify—specifically—the contract that authorized its possession of the
cattle. Because plaintiff alleges conversion based on Dinsdale’s failure to pay for or return the
cattle, plaintiff may allege a contract and conversion claim unless Dinsdale’s failure to pay for or
return the cattle is permitted by the express provisions of a contract. Surely, though, Dinsdale
does not mean to argue that plaintiff agreed to sell the cattle to Mr. Leonard on Dinsdale’s behalf
for free and reduced this agreement to writing. And indeed, Dinsdale appears to concede that no
such contract exits. See Doc. 49 at 11 (“Once again, [plaintiff] must rely upon a breach of
contract claim against [Mr.] Leonard, not a conversion claim against Dinsdale Bros.”).
On what “lawful sales contract,” then, does Dinsdale rely? As best the court can tell,
Dinsdale means to rely on a contract—or contracts—between it and Mr. Leonard. See id. (citing
to Exhibits 4 and 5, which appear to be invoices from Mr. Leonard to Dinsdale). But plaintiff
never alleges that it is a party to any contract between Mr. Leonard and Dinsdale, so no contract
between Dinsdale and Mr. Leonard can define Dinsdale and plaintiff’s respective rights and
duties. Moreover, the court views this argument by Dinsdale as yet iteration of its argument that
Mr. Leonard was Dinsdale’s agent. The court already has decided that issue.
Nevertheless, the court briefly addresses Dinsdale’s attempt to rely on evidence outside
plaintiff’s Complaint to support its motion to dismiss the conversion claim. Hoping to establish
that Dinsdale received and paid for the cattle according to the terms of a lawful contract with Mr.
Leonard, Dinsdale points to two exhibits attached to its Motion to Dismiss. These exibits seem
to be invoices from Mr. Leonard to Dinsdale and what looks to be Mr. Leonard’s account
statement from Pinnacle Bank. Doc. 49 at 11, Exs. 4–5. As with Mr. Leonard’s check, plaintiff
attached neither of these documents to its Complaint and does not incorporate them into the
Complaint by reference. And, neither document is central to plaintiff’s conversion claim against
Dinsdale. To be sure, proof that Dinsdale paid Mr. Leonard for the cattle may be central to
Dinsdale’s defense. But that does not make it central to plaintiff’s claims. See Capital Sols.,
LLC, 2008 WL 3538968, at *3.
Dinsdale argues that the court nonetheless should consider these documents because
plaintiff is trying to “play shell games” with the court by “spinning” the Complaint’s claims.
Doc. 53 at 2. This accusation is not persuasive. Plaintiff’s conversion claim rests not on the
terms of any contract, but instead on Dinsdale’s failure to pay for or return the cattle purchased
on its behalf by Mr. Leonard. The court cannot consider the exhibits Dinsdale references in its
motion without converting the motion to dismiss into one for summary judgment. The court
declines to do so.
Because plaintiff never alleges a contract that allows Dinsdale to retain possession of the
cattle without paying for them, plaintiff properly may plead both a breach of contract claim and
conversion claim based upon Dinsdale’s failure to pay for or return the cattle. Cf. Burcham, 77
P.3d at 146 (holding that the plaintiffs could plead both a contract claim and an independent tort
claim because “the duties and liabilities [the] plaintiffs attempt[ed] to impose were not those
bargained for in the . . . [contract]. Nor were duties, such as a fiduciary duty, negated by the
contract”); Regal Ware, 653 F. Supp. 2d at 1152 (holding that the plaintiff there could not plead
both a contract and conversion claim because it based its conversion claim on the allegation that
the defendant “was obligated to return the Advance Royalty” to it, but the defendant’s obligation
to return the Advance Royalty was controlled by the contract between the parties).
Does Plaintiff Allege Facts Sufficient to Plead a Claim for Conversion?
Dinsdale also contends that plaintiff has failed to allege facts sufficient to plead a
conversion claim. In Kansas, “[c]onversion is the ‘unauthorized assumption or exercise of the
right of ownership over goods or personal chattels belonging to another to the exclusion of the
other’s rights.’” Armstrong v. Bromley Quarry & Asphalt, Inc., 378 P.3d 1090, 1095 (Kan.
2016) (quoting Bomhoff v. Nelnet Loan Servs., Inc., 109 P.3d 1241, 1246 (Kan. 2005)); see also
Guernsey v. Fulmer, 71 P. 578, 578 (Kan. 1903) (“[I]n an action for conversion, the petition
must allege that at the time of the conversion the plaintiff was either in possession, or had a right
to the possession, of the property converted.”). To allege the elements of a conversion claim,
then, plaintiff must allege that the cattle belonged to plaintiff, but that Dinsdale exercised
ownership over them without authorization and to the exclusion of plaintiff.
In the Complaint, plaintiff alleges that it was the rightful owner of the cattle because
Dinsdale failed to pay for them, and that Dinsdale retained possession of the cattle even though
plaintiff asks Dinsdale to return them. Doc. 46 ¶¶ 52, 54–55. These facts are sufficient to state a
claim for conversion. Cf. Res. Ctr. for Indep. Living, Inc. v. Ability Res., Inc., 534 F. Supp. 2d
1204, 1212–13 (D. Kan. 2008) (holding that the plaintiff stated a conversion claim when the
complaint alleged that the defendants retained use of the plaintiff’s equipment without
Still, Dinsdale contends that because plaintiff shipped the cattle to Dinsdale before
cashing Mr. Leonard’s check, plaintiff cannot allege that it is the rightful owner of the cattle or
that Dinsdale exercised unauthorized control over the cattle. Doc. 49 at 11–12. Kansas law
holds otherwise: “One in possession of a chattel, as a bailee or otherwise, who, on demand,
refuses without proper qualification to surrender it to another entitled to its immediate possession
is subject to liability for conversion.” Sells v. Muncie Auto Salvage, Inc., 178 P.3d 688, 2008
WL 762520, at *3 (Kan. Ct. App. Mar. 21, 2008) (quoting Queen v. Lynch Jewelers, LLC, 55
P.3d 914, 921 (Kan. Ct. App. 2002)). Plaintiff thus alleges facts that, if true, could support its
claim for conversion. The court denies Dinsdale’s motion to dismiss count two of the
Counts III and V: Quantum Meruit Against Dinsdale and Unjust
Enrichment Against Dinsdale and Pinnacle Bank
Dinsdale next asks the court to dismiss counts three and five of the Complaint. In count
three, plaintiff asserts a quantum meruit claim against just Dinsdale. In count five, plaintiff
asserts an unjust enrichment claim against Dinsdale and Pinnacle Bank.
Dinsdale makes six arguments in support of this part of its motion to dismiss. The court
can deal with three of these arguments quickly. They are: (1) plaintiff “cannot recover in unjust
enrichment against Dinsdale Bros. for [Mr.] Leonard’s failure to pay” plaintiff; (2) plaintiff
alleges that it conferred a benefit on Mr. Leonard, not on Dinsdale; and (3) plaintiff fails to state
a claim because plaintiff does not allege that it relied on any promise by Dinsdale. Doc. 49 at
13–15. All of these arguments assume that plaintiff has failed to allege that Mr. Leonard was
Dinsdale’s agent and authorized to purchase the cattle on Dinsdale’s behalf. The court already
has ruled to the contrary and so none of these arguments can prevail. Dinsdale’s benefit and
promise arguments—(2) and (3)—also fail for a second, independent reason: They rely on
exhibits attached to Dinsdale’s Motion to Dismiss, see id. at 14, that the court already has
declined to consider, see supra p. 16. Nothing about counts three or five alters the court’s
decision not to consider these exhibits at this stage. The court thus denies Dinsdale’s motion to
dismiss based on these three arguments.
Dinsdale’s other three arguments deserve more discussion and the court addresses them
May Counts Three and Five Coexist?
Dinsdale contends that plaintiff may not assert a claim for quantum meruit while also
asserting a claim for unjust enrichment because Kansas courts do not recognize quantum meruit
and unjust enrichment as separate causes of action. See Doc. 49 at 12. Dinsdale cites no Kansas
state authority directly supporting this proposition. Instead, Dinsdale cites cases from our court
noting that “[i]n Kansas, quantum meruit and restitution are recognized as equivalent theories.”
Fusion, Inc. v. Neb. Aluminum Castings Inc., 934 F. Supp. 1270, 1275 (D. Kan. 1996) (citations
omitted); Doc. 49 at 12. Although it is tempting to assume that the Kansas courts’ tendency to
use the terms “unjust enrichment” and “quantum meruit” interchangeably means that they do not
consider the two as separate causes of action, the court cannot rest its decision on an assumption.
The court is especially hesitant to rely on such an assumption because commentators and courts
from other states have opined for decades that “the two doctrines”—quantum meruit and unjust
enrichment—“are not interchangeable.” 66 Am. Jur. 2d Restitution § 33 (footnote omitted).13
“[U]njust enrichment applies only in the absence of any quasi-contractual relationship;
quantum meruit requires proof that services were rendered under circumstances consistent with
contract relations.” Id. So, without Kansas Supreme Court authority—or other persuasive
Kansas state authority—expressly holding that Kansas does not recognize the two doctrines as
separate causes of action, the court will not dismiss count five as duplicative. See Choren, 393
F.3d at 1180 (“A federal court sitting in diversity must apply state law as propounded by the
forum’s highest court.” (citation omitted)); see also Progressive Cas. Ins. Co. v. Engemann, 268
See also Danforth v. Ruotolo, 650 A.2d 1334, 1335 n.2 (Me. 1994) (“The parties erroneously labeled the theory of
recovery in this case ‘unjust enrichment.’ Admittedly we have contributed to their confusion. See, e.g., A.F.A.B.,
Inc. v. Town of Old Orchard Beach, 610 A.2d 747, 748–49 (Me. 1992) (using terms “unjust enrichment” and
“quantum meruit” interchangeably); Estate of Boothby, 532 A.2d 1007, 1010 (Me. 1987) (stating that quantum
meruit rests on doctrine of unjust enrichment) . . . . As we have recently noted, the two theories are not the same.
Unjust enrichment applies only in the absence of any quasi-contractual relationship.” (citations omitted)); 32nd St.
Surgery Ctr., LLC v. Right Choice Managed Care, 820 F.3d 950, 955 (8th Cir. 2016) (“Under Missouri law,
quantum meruit and unjust enrichment are separate, but related, remedies in quasi-contract.” (citations omitted)).
F.3d 985, 988 (10th Cir. 2001) (explaining that, absent controlling precedent, federal courts must
attempt to predict how the state’s highest court would resolve the issue and should do so by
“consider[ing] a number of authorities, including analogous decisions by the [state] Supreme
Court, the decisions of the lower courts in [the state], the decisions of the federal courts and of
other state courts, and ‘the general weight and trend of authority’” (citation omitted)).
Dinsdale provides no such authority and the court has not located any. Without a
definitive answer from Kansas law,14 plaintiff, at this stage, may allege counts three and five as
alternative (or even inconsistent) legal theories, which Rule 8(d) permits.15 Neither party has
addressed the separate-cause-of-action or Rule 8(d) issues to the degree that informs a definitive
conclusion on this question. See, e.g., Mr. Elec. Corp. v. Khalil, No. 06-2414-CM, 2013 WL
451584, at *7 (D. Kan. Feb. 6, 2013) (finding that the plaintiff cited no authority to support its
argument and so declining to address the argument for the moment); Cease v. Safelite Glass
Corp., 911 F. Supp. 477, 483 (D. Kan. 1995) (finding the parties’ briefing insufficient to answer
the question before the court and so declining to rule on the issue); Voelkel v. Gen. Motors Corp.,
846 F. Supp. 1482, 1483 n.1 (D. Kan. 1994) (denying summary judgment in part because “of the
defendant’s failure to brief [one of its] claim[s] properly”).
The court located one case that is seemingly on point but not addressed in either parties’ papers—Tommey v.
Computer Sciences Corporation, No. 11-cv-02214-EFM-GLR, 2013 WL 1000659 (D. Kan. Mar. 13, 2013). In
Tommey, our court held that the plaintiff’s unjust enrichment claim was duplicative of her FLSA claim and so
dismissed the unjust enrichment claim. Id. at *3. Tommey mentions that quantum meruit and unjust enrichment
may be duplicative under Kansas law, but it does so only in dicta. Id. Thus, Tommey does not provide the
definitive, Kansas state-law answer that the court requires here.
See Campbell v. Barnett, 351 F.2d 342, 344 (10th Cir. 1965) (explaining that Rule 8(d) allows plaintiffs to plead
as many “alternate, hypothetical and inconsistent claims”); Blazer v. Black, 196 F.2d 139, 144 (10th Cir. 1952)
(“[Although] the substantive right to recover on [plaintiff’s] claim is governed by state law, the form or mode of [its]
claim for relief is a matter of Federal procedure.” (first citing Cont’l Collieries v. Shober, 130 F.2d 631, 634 (3d
Cir. 1942); then citing Fed. R. Civ. P. 8(e)(1))); W. Mach. Co. v. Consol. Uranium Mines, Inc., 247 F.2d 685, 686
(10th Cir. 1957) (“It is enough that both counts, considered separately or together, state a claim on which relief can
be granted, and we are therefore interested to know whether the proof supports either or both theories, whether
inconsistent or not.” (citations omitted)); Rajala v. Allied Corp., 66 B.R. 582, 597 (D. Kan. 1986) (allowing the
plaintiff to proceed with two counts that sought “to recover under alternate theories of unjust enrichment and
quantum meruit for [the defendant’s] royalty-free access to General Poly’s extrusion technology”).
At this stage, too much theory exists to terminate either count. The court thus declines to
dismiss either count three or count five of the Complaint based on Dinsdale’s argument that the
two are duplicative.
Does the Existence of a Written Contract Preclude Plaintiff’s
Quantum Meruit and Unjust Enrichment Claims?
Dinsdale next argues that plaintiff may not assert its unjust enrichment and quantum
meruit claims because a written contract exists. In Kansas, a plaintiff may not recover under
quantum meruit when a contract “control[s] the relationship between the parties.” Wolfert
Landscaping Co., LLC v. LRM Indus., Inc., 287 P.3d 300, 2012 WL 5392143, at *4 (Kan. Ct.
App. Nov. 2, 2012). The same is true for unjust enrichment. Orica New Zealand Ltd. v. Searles
Valley Minerals Operations Inc., No. 04-2310-KHV, 2005 WL 387659, at *3 (D. Kan. Feb. 17,
2005) (applying Kansas law). But Dinsdale contends that it is not a party to the contract plaintiff
alleges, so Dinsdale cannot rely on the terms of that contract as the reason to dismiss counts three
and five of the Complaint. See id. (granting dismissal only because the defendant stipulated that
it was a party to the express contract). Indeed, as explained by one of the cases Dinsdale cites,
Rule 8(d) allows a plaintiff to plead the existence of a breached contract and unjust enrichment
as alternative claims. ICE Corp. v. Hamilton Sundstrand, Inc., 444 F. Supp. 2d 1165, 1171 (D.
Kan. 2006). The court thus denies Dinsdale’s motion to dismiss on this basis.
Should the Court Accept Plaintiff’s Allegations in Count Five as True?
In its final argument, Dinsdale instructs the court not to accept the Complaint’s
“allegations concerning recovery based upon unjust enrichment” as true because “the ‘question
whether one party can recover damages from another based upon the theory of unjust enrichment
is a question of law.’” Doc. 49 at 12 (quoting T.R., Inc. of Ashland v. Brandon, 87 P.3d 331, 336
(Kan. Ct. App. 2004); and citing Shields, 744 F.3d at 640). Dinsdale’s argument appears to
assert that all allegations supporting plaintiff’s claim for unjust enrichment are legal conclusions
because recovering on that claim presents a question of law. Dinsdale’s argument
misapprehends what constitutes a “legal conclusion” in the context of a Rule 12(b)(6) motion.
Whether part of a claim is a question of law or fact does not matter to the Rule 12(b)(6)
standard, and so has no bearing on whether a plaintiff’s allegation is a “legal conclusion.”
Allegations that are legal conclusions and therefore need not be accepted as true are those that
allege no facts but instead allege the ultimate legal conclusion necessary for the plaintiff to
recover on its claim. The court accepts allegations as true that are meant to serve as factual
support for legal conclusions. Beyond asserting that all of plaintiff’s unjust enrichment
allegations are legal conclusions, Dinsdale makes no argument against their sufficiency. The
court thus denies Dinsdale’s motion to dismiss based on this argument.
Accordingly, the court denies Dinsdale’s motion to dismiss counts three and five of
Count VI: Civil Conspiracy Against Dinsdale and Pinnacle Bank
In its final argument, Dinsdale asks the court to dismiss plaintiff’s civil conspiracy claim.
To allege a civil conspiracy claim under Kansas law, plaintiff must allege facts supporting the
following five elements: “(1) two or more persons; (2) an object to be accomplished; (3) a
meeting of minds in the object or course of action; (4) one or more unlawful overt acts; and (5)
damages proximately caused by those acts.” York v. InTrust Bank, N.A., 962 P.2d 405, 422
(Kan. 1998) (citing Kansas ex rel. Mays v. Ridenhour, 811 P.2d 1220, 1226 (Kan. 1991)).
Dinsdale challenges only the fourth element, contending that plaintiff fails to allege “any
claims against Dinsdale” and so, according to Dinsdale, “alleges no wrong giving rise to a
tortious cause of action independent of the alleged conspiracy.” Doc. 49 at 16. Because the
court has denied Dinsdale’s motion to dismiss plaintiff’s breach of contract, conversion, quantum
meruit, and unjust enrichment claims, Dinsdale’s argument necessarily fails. Plaintiff has
pleaded the commission of wrongs that give rise to at least three, if not four, causes of action
independent of the conspiracy claim. Cf. Res. Ctr. for Indep. Living, 534 F. Supp. 2d at 1213
(holding that the plaintiff stated a claim for conspiracy under Kansas law over the defendant’s
argument that “the [complaint’s] independent tort claims fail as a matter of law” because the
court had not dismissed the claims and so the “plaintiff ha[d] pled the commission of wrongs that
give rise to five causes of action independent of the conspiracy claim”); accord In re Motor Fuel
Temperature Sale Practices Litig., 534 F. Supp. 2d 1214, 1236 (D. Kan. 2008). The court denies
Dinsdale’s motion to dismiss count six of the Complaint.
IT IS THEREFORE ORDERED BY THE COURT THAT defendant Dinsdale Bros.,
Inc.’s Motion to Dismiss (Doc. 48) is denied.
IT IS SO ORDERED.
Dated this 6th day of June, 2017, at Topeka, Kansas.
s/ Daniel D. Crabtree
Daniel D. Crabtree
United States District Judge
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