Duracore Pty Ltd. v. Applied Concrete Technology, Inc. et al

Filing 33

MEMORANDUM OPINION & ORDER denying 23 Motion to Dismiss for Failure to State a Claim; granting 27 Motion to Amend/Correct; Telephone Conference set for 1/30/2015 at 10:30 AM before Senior Judge Thomas B. Russell.. Signed by Senior Judge Thomas B. Russell on 1/26/2015. cc: Counsel(KJA)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
PADUCAH DIVISION
CIVIL ACTION NO. 5:13-CV-184-TBR

DURACORE PTY LTD.

PLAINTIFF

v.
APPLIED CONCRETE TECHNOLOGY, INC.
DAVID JOHNSON

DEFENDANT

MEMORANDUM OPINION AND ORDER
This matter comes before the Court on the Defendant’s motion to dismiss (Docket #23).
Plaintiff has responded. (Docket #28). Defendant has replied. (Docket #29). Plaintiff has also
filed a motion to amend complaint. (Docket #27). Defendant has replied. (Docket #30). This
matter is now ripe for adjudication. For the following reasons, Defendant’s Motion to Dismiss
(Docket #23) is DENIED and Plaintiff’s motion to amend complaint (Docket #27) is
GRANTED.
BACKGROUND
This action arises out of the purchase of concrete goods by Plaintiff Duracore Pty Ltd
(“Duracore”) from Defendant Applied Concrete Technology, Inc. (“Applied Concrete”). In the
spring of 2013, Applied Concrete agreed to sell concrete sealer and other products to Duracore.
(Docket #1). Applied Concrete invoiced Duracore for $107,400. (Docket #1, Ex. 1). Duracore
wired full payment to Applied Concrete and arranged for a freight company to pick up the goods
at Applied Concrete’s facility. (Docket #1, Ex. 2). Applied Concrete failed to deliver the goods.
Duracore alleges that David Johnson, the president of Applied Concrete, deceived Duracore into
sending money to Applied Concrete.

1

Johnson was served with a copy of the complaint on October 24, 2013. (Docket #6).
Johnson failed to answer, and this Court ordered an entry of default and then default judgment.
(Docket #9, 11). Approximately eleven months after Johnson was initially served, he entered an
appearance 1 in this case and moved to set aside default judgment against him. (Docket #17).
This Court granted Johnson’s motion. (Docket #22).
Johnson now moves to dismiss Duracore’s claims against him. (Docket #23). In addition
to its response, Duracore also seeks leave to file an amended complaint. (Docket #27). For the
foregoing reasons, the Court will grant Duracore’s motion to amend and deny Johnson’s motion
to dismiss.
STANDARD
The Federal Rules of Civil Procedure require that pleadings, including complaints,
contain a “short plain statement of the claim showing that the pleader is entitled to relief.” Fed.
R. Civ. P. 8(a)(2). A defendant may move to dismiss a claim or case because the complaint fails
to “state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b). When considering a
Rule 12(b)(6) motion to dismiss, the court must presume all of the factual allegations in the
complaint are true and draw all reasonable inferences in favor of the non-moving party. Total
Benefits Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 434 (6th Cir.
2008) (citing Great Lakes Steel v. Deggendorf, 716 F.2d 1101, 1105 (6th Cir. 1983)). “The court
need not, however, accept unwarranted factual inferences.” Id. (citing Morgan v. Church’s Fried
Chicken, 829 F.2d 10, 12 (6th Cir. 1987)).
Even though a “complaint attacked by a Rule 12(b)(6) motion to dismiss does not need
detailed factual allegations, a plaintiff’s obligation to provide the grounds of his entitlement to

1

Applied Concrete Technology, Inc. has still not entered an appearance in this case.
2

relief requires more than labels and conclusions, and a formulaic recitation of the elements of a
cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations
omitted). Instead, the plaintiff’s “[f]actual allegations must be enough to raise a right to relief
above the speculative level on the assumption that all the allegations in the complaint are true
(even if doubtful in fact).” Id. (citations omitted). A complaint should contain enough facts “to
state a claim to relief that is plausible on its face.” Id. at 570. A claim becomes plausible “when
the plaintiff pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)
(citing Twombly, 550 U.S. at 556). If, from the well-pleaded facts, the court cannot “infer more
than the mere possibility of misconduct, the complaint has alleged - but has not ‘show[n]’ - ‘that
the pleader is entitled to relief.’” Id. at 1950 (citing Fed. R. Civ. P. 8(a)(2)). “Only a complaint
that states a plausible claim for relief survives a motion to dismiss.” Id.
DISCUSSION
The parties raise three issues before the Court. First, may Duracore amend its complaint
after Johnson filed a motion to dismiss. Second, does Duracore’s claim for piercing the
corporate veil satisfy the general pleading standards of Rule 8. Third, does Duracore’s claim for
fraud satisfy the more stringent standard found in Rule 9(b).
I.

Duracore May Amend Its Complaint.

A plaintiff may amend his complaint “only with the opposing party's written consent or
the court's leave.” Fed. R. Civ. P. 15(a)(2). The decision whether to grant or deny amendment is
within the discretion of the court. Foman v. Davis, 371 U.S. 178, 182 (1962). “The court should
freely give leave when justice so requires.” Fed. R. Civ. P. 15(a)(2). To deny an amendment, the

3

court must state a reason, such as “undue delay, bad faith or dilatory motive . . . , repeated failure
to cure deficiencies . . . , undue prejudice” or “futility of amendment.” Foman, 371 U.S. at 182.
In this case, Johnson argues he will be prejudiced if Duracore is allowed to amend their
complaint because Johnson has expended resources filing his motion to dismiss. (Docket #29).
Prejudice generally requires more than merely having a motion to dismiss pending. Cooper v.
American Employers' Ins. Co., 296 F.2d 303 (6th Cir. 1961); Newburgh/Six Mile Ltd. P'ship II v.
Adlabs Films USA, Inc., 724 F. Supp. 2d 740 750-51 (E.D. Mich. 2010) (finding prejudice where
amendment was sought after the close of discovery); Moore v. Paducah, 790 F.2d 557 (6th Cir.
1986) (reversing district court’s denial of amendment when the same set of facts supported both
the original and amended complaint). Examples of prejudice include “insufficient time to
conduct discovery,” being “unfairly surprised by the change in theories,” or otherwise showing
an inability to now “rebut the plaintiff’s new theory.” Roth Steel Products v. Sharon Steel Corp.,
705 F.2d 134, 155 (6th Cir. 1983).
Nor is Johnson’s argument of delay convincing. While it is true that Duracore sought to
amend its complaint more than one year after this lawsuit was filed, Johnson is the cause of this
long delay by his own failure to respond to this lawsuit for eleven months.
Accordingly, Duracore is permitted to amend its complaint.
I.

Piercing the Corporate Veil.
“In determining whether an amended complaint states a claim, we must accept all factual

allegations contained in the pleading as true, and resolve all factual ambiguities in favor of the
party who sought the amendment.” Roth Steel, 705 F.2d at 155.

4

Duracore’s first claim is for piercing the corporate veil between Applied Concrete and
Johnson, its president. Piercing the corporate veil is an equitable remedy. Inter-Tel Techs., Inc.
v. Linn Station Props., LLC, 360 S.W.3d 152, 165 (Ky. 2012). There is a long “checklist” of
factors that may be considered. Id. at 163-65. A non-exhaustive list of factors includes whether
there was inadequate capitalization, failure to observe corporate formalities, commingling of
funds, and whether the corporation is a “mere façade for the operation of the dominant
stockholders.” Id. Duracore has asserted several facts which may be grounds for piercing the
corporate veil, such as claiming Applied Concrete was not adequately capitalized, that it was
closely held and controlled by Johnson, and that Johnson commingled Applied Concrete’s funds
with his own. (Docket #27, Ex. 1). Duracore’s complaint is sufficient to put Johnson on notice
of the piercing the corporate veil claim asserted against him.
II.

Fraud.
A claim of fraud “triggers Rule 9(b)’s heightened standard.” Republic Bank & Trust Co.

v. Bear Stearns & Co., 683 F.3d 239, 247 (6th Cir. 2012). The plaintiff must “state with
particularly the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). “This rule
requires a plaintiff: (1) to specify the allegedly fraudulent statements; (2) to identify the speaker;
(3) to plead when and where the statements were made; and (4) to explain what made the
statements fraudulent.” Republic Bank, 683 F.3d at 247.
Duracore has met this heightened standard. Duracore specifies several statements
allegedly made by Johnson regarding Applied Concrete’s intention to sell products to Duracore.
Duracore notes the dates these statements were made. Duracore also explains that these
statements were fraudulent because Johnson represented that Applied Concrete intended to sell
to Duracore while Johnson knew Applied Concrete either could not or would not deliver goods.
5

(Docket #27, Ex. 1). Duracore has alleged sufficient facts which, taken as true, state a claim that
is plausible on its face. Republic Bank, 683 F.3d at 246.
CONCLUSION
For the foregoing reasons, Defendant’s Motion to Dismiss (Docket #23) is DENIED and
Plaintiff’s motion to amend complaint (Docket #27) is GRANTED.
The telephonic conference set January 28, 2015 is CANCELLED and is set January 30, 2015 at
10:30 a.m. Central Time. The Court shall place the call to counsel.

cc: counsel of record

January 26, 2015

6