Cakebread Art Antiques Collectables, Inc. v. Keno et al
ORDER AND REASONS re 13 MOTION to Dismiss Plaintiff's Amended Complaint, MOTION to Strike - IT IS ORDERED that defendants motion is GRANTED IN PART and DENIED IN PART. The motion for a partial dismissal pursuant to Rule 12(b)(6) is GRANTED, but defendants request to strike the phrase auction misconduct from the complaint pursuant to Rule 12(f) is DENIED. Signed by Judge Lance M Africk. (Reference: All Cases)(bwn)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
CAKEBREAD ART ANTIQUES
REF: ALL CASES
LESLIE KENO ET AL.
ORDER AND REASONS
Defendants have filed a motion1 for partial dismissal pursuant to Rule 12(b)(6)
of the Federal Rules of Civil Procedure. The motion seeks dismissal of all claims
other than breach of contract. In addition, the motion requests that the Court strike
the allegedly scandalous reference to “auction misconduct” in plaintiff’s complaint
pursuant to Rule 12(f) of the Federal Rules of Civil Procedure. For the following
reasons, the Rule 12(b)(6) motion for a partial dismissal is granted, but the Rule 12(f)
request to strike is denied.
Plaintiff is an auction house located in New Orleans. Defendants Leigh Keno
and Leslie Keno are brothers who own defendant Keno Art Advisory, LLC. The Keno
brothers are appraisers and auctioneers who have appeared on the television
programs “Antiques Roadshow” and “Buried Treasure,” and who also own and
operate an auction house in New York City. Defendants are, as plaintiff describes
them, “sophisticated auction consumers.”
R. Doc. No. 13. Plaintiff’s opposition is found at R. Doc. No. 16.
The amended complaint alleges that defendants participated in an auction
hosted by the plaintiff on April 23 and April 24, 2016. Most, if not all, of the items
auctioned were held by the plaintiff on consignment. In other words, the auction
house did not actually own the items at the time of the auction but rather sold them
on behalf of the items’ owners and earned a commission for doing so.
In order to gain access to the plaintiff’s auction, defendants agreed to certain
“Conditions of Sale.” The Conditions explained that a successful bid is considered a
sale and that participants in the auction would be personally liable for the purchase
price of any sales into which they entered. The Conditions further provided that the
purchase price must be paid no later than 4:30 p.m. central time on the fifteenth
calendar day following the conclusion of the auction.
By the close of the auction, Leigh and Leslie had allegedly purchased
approximately $400,000 dollars’ worth of “lots”—the term used to designate specific
items of property offered for sale at an auction. Plaintiff claims that the Keno
brothers artificially inflated the prices for many of the lots they won by placing
simultaneous bids for the same lot, with Leslie bidding online against Leigh who was
bidding by telephone. By this method, the Keno brothers allegedly ensured that the
winning bid for a particular lot would far exceed the lot’s appraised value. 2
Ultimately, defendants’ bids accounted for approximately half of the value of the lots
auctioned by plaintiff.
During a status conference with the Court, plaintiff suggested that defendants bid
in this manner because they were purchasing the items on behalf of clients and
defendants’ fees are tied to the sales prices of the items obtained. That supposition
Defendants allegedly failed to pay for the majority of the lots they won. In
subsequent email and telephone exchanges with the plaintiff, defendants confirmed
their liability for the amounts owed but claimed inability to pay. Concerned about
hurting its relationship with its clients, plaintiff paid the clients for the sales price of
the items purchased by defendants.
Plaintiff filed this lawsuit seeking to recover the amounts of those unpaid sales
as well as damages for the alleged injury to plaintiff’s business reputation. The
complaint not only claims that Louisiana law entitles plaintiff to recover what it is
owed under the contracts with defendants, but also that Leigh and Leslie’s alleged
practice of simultaneously bidding on the same object in order to drive up the price is
itself unlawful and entitles plaintiff to certain special and general damages.
Specifically, the complaint asserts claims for negligence, tortious interference with
business operations, and detrimental reliance.
Rule 12(b)(6) of the Federal Rules of Civil Procedure permits a defendant to
seek a dismissal of a complaint based on the “failure to state a claim upon which relief
can be granted.” Fed. R. Civ. P. 12(b)(6). In deciding a motion to dismiss, the Court
accepts as true the well-pled factual allegations in the complaint, and construes them
in the light most favorable to the plaintiffs. Hunter v. Berkshire Hathaway, Inc., No.
15-10854, 2016 WL 3710253, at *3 (5th Cir. July 11, 2016) (citation omitted). The
court generally must not consider any information outside the pleadings in deciding
the motion, Sullivan v. Leor Energy, LLC, 600 F.3d 542, 546 (5th Cir. 2010), however
“a court may consider documents outside the complaint when they are: (1) attached
to the motion; (2) referenced in the complaint; and (3) central to the plaintiff’s claims.”
Maloney Gaming Mgmt., 2011 WL 5903498 (5th Cir. 2011).
For the complaint to survive a motion to dismiss, the facts taken as true must
state a claim that is plausible on its face. Brand Coupon Network, L.L.C. v. Catalina
Marketing Corp., 748 F.3d 631, 637-38 (5th Cir. 2014). A claim is facially 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,
556 U.S. 662, 678 (2009). “The plausibility standard is not akin to a probability
requirement, but it asks for more than a sheer possibility that a defendant has acted
unlawfully.” Culbertson v. Lykos, 790 F.3d 608, 616 (5th Cir. 2015) (citation omitted)
(internal quotation marks omitted). A complaint is insufficient if it contains “only
labels and conclusions, or a formulaic recitation of the elements of a cause of action.”
Whitley v. Hanna, 726 F.3d 631, 638 (5th Cir. 2013) (citation omitted) (internal
quotation marks omitted). The Court cannot grant a motion to dismiss under Rule
12(b)(6) “unless the plaintiff would not be entitled to relief under any set of facts that
he could prove consistent with the complaint.” Johnson v. Johnson, 385 F.3d 503,
529 (5th Cir. 2004).
Plaintiff has no stated claim for negligence under Louisiana Civil Code article
To recover for negligence a plaintiff must prove each of five elements:
(1) the defendant had a duty to conform his conduct to a specific standard of care;
(2) the defendant’s conduct failed to conform to the appropriate standard of care;
(3) the defendant’s substandard conduct was a cause-in-fact of the plaintiff's injuries;
(4) the defendant’s substandard conduct was a legal cause of the plaintiff’s injuries;
and (5) actual damages. Nagle v. Gusman, 61 F. Supp. 3d 609, 620 (E.D. La. 2014).
“A plaintiff’s failure to prove any one of these elements results in a determination of
no liability.” Id.
Plaintiff does not clearly articulate how defendants were negligent.
complaint appears to allege that the Keno brothers acted negligently by entering into
contracts with the knowledge that they would be unable to perform their contractual
obligations. 3 While the Court must accept as true the plaintiff’s factual allegation
that the Keno brothers knew they had liquidity problems prior to entering the
contracts, the Court need not accept as true the plaintiff’s assertion that the Keno
brothers had a legal duty to refrain from behaving in such a manner. See Iqbal, 556
U.S. at 678 (“[T]he tenet that a court must accept as true all of the allegations
contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of
the elements of a cause of action, supported by mere conclusory statements, do not
suffice.”); Saenz v. City of El Paso, Tex., No. 14-CV-244, 2015 WL 4590320, at *10
(W.D. Tex. Jan. 26, 2015) (internal quotations and citations omitted) (plaintiff’s
allegation that defendants “were negligent in the use or misuse of firearms” was “a
legal conclusion couched as a factual allegation, which is not entitled to the
assumption of truth for purposes of assessing a motion to dismiss”).
The distinction between an action on a contract and a tort action is that “the
former flows from the breach of a special obligation contractually assumed by the
R. Doc. No. 12, at 16 ¶ 83.
obligor, whereas the latter flows from the violation of a general duty owed to all
persons.” Certain Underwriters at Lloyd’s, London v. Sea-Lar Mgmt., 787 So.2d 1069,
1075 (La. App. 4th Cir. 2001) (internal quotations omitted). Whether a legal duty is
owed is a question of law. Terrebonne Concrete, LLC v. CEC Enterprises, LLC, 76 So.
3d 502, 510 (La. App. 1 Cir. 2011).
Under Louisiana law, there is no general duty to disclose material financial
information unless “the parties stand in some confidential or fiduciary relation to one
See Louisiana State Univ. Sys. Research & Tech. Found. v. Qyntessa
Biologics, L.L.C., 168 So. 3d 468, 474 (La. App. 1 Cir. 2014). The auction house does
not claim that it had a confidential or fiduciary relationship with the Keno brothers,
and it is clear under Louisiana law and the alleged circumstances that no such
relationship existed between the parties prior to their entering into the subject
See Terrebonne Concrete, LLC, 76 So. 3d at 510 (“The defining
characteristic of a fiduciary relationship is the special relationship of confidence or
trust imposed by one in another who undertakes to act primarily for the benefit of
the principal in a particular endeavor.”); Louisiana State Univ., 168 So. 3d at 474 n.6
(“While the most frequent illustrations are those of trustee and beneficiary, attorney
and client, parent and child, or husband and wife, a confidential relationship also
embraces partners and co-partners, principal and agent, master and servant,
physician and patient, and generally all persons who are associated by any relation
of trust and confidence.”).
Before entering into a contract, the Keno brothers had no general duty under
Louisiana law to inform the plaintiff of their alleged liquidity problem. Because the
defendants had no such duty, plaintiff’s negligence claim fails.
Plaintiff also has no stated claim for tortious interference with business
operations. The auction house cites this Court’s opinion in Dorsey v. N. Life Ins. Co.,
No. 04-0342, 2005 WL 2036738, at *15 (E.D. La. Aug. 15, 2005), for the proposition
that tortious interference with a business occurs where the defendants engage in
“malicious and wanton interference” with a business. But this Court explained in
Dorsey that “[a] plaintiff bringing a claim for tortious interference with business must
ultimately show ‘by a preponderance of the evidence that the defendant improperly
influenced others not to deal with the plaintiff.’” Id. (quoting Junior Money Bags,
Ltd. v. Segal, 970 F.2d 1, 10 (5th Cir. 1992)). Such is not the allegation here.
The complaint nowhere alleges that the Keno brothers improperly persuaded
others not to do business with the auction house. Moreover, the “narrow” and “very
limited” remedy of tortious interference with a business is reserved for situations in
which the defendant’s interference is motivated by malice, id. at 16, and plaintiff
admits that it has not alleged that defendants acted maliciously. 4 Simply put, the
Plaintiff specifically states: “Notably, in light of the Dorsey v. N. Life Ins. Co., 2005
U.S. LEXIS 17742 (ED. LA. 8/15/2005) [sic], plaintiffs [sic] acknowledge that they
have not asserted any allegations of ‘malice’ by defendants and that if this Honorable
Court finds the Dorsey case controlling then the assertion of tortious interference with
business damage claim is waived.” R. Doc. No. 16, at 2 n.1; see also R. Doc. No. 16, at
3 n.2 (repeating the admission).
limited claim of tortious interference with business operations is not implicated by
the circumstances alleged in this case.
Plaintiff also has no stated claim for detrimental reliance. The theory of
detrimental reliance is codified at La. Civ. Code art. 1967, which states that “[a] party
may be obligated by a promise when he knew or should have known that the promise
would induce the other party to rely on it to his detriment and the other party was
reasonable in so relying.” The doctrine of detrimental reliance “is designed to prevent
injustice by barring a party from taking a position contrary to his prior acts,
admissions, representations, or silence.” Suire v. Lafayette City–Parish Consol. Gov’t,
907 So.2d 37, 59 (La. 2005). “To establish detrimental reliance, a party must prove
three elements by a preponderance of the evidence: (1) a representation by conduct
or word; (2) justifiable reliance; and (3) a change in position to one’s detriment
because of the reliance.” Id.
Significantly, under Louisiana law “the focus of analysis of a detrimental
reliance claim is not whether the parties intended to perform, but, instead, whether a
representation was made in such a manner that the promisor should have expected
the promisee to rely upon it, and whether the promisee so relies to his detriment.”
Audler v. CBC Innovis Inc., 519 F.3d 239, 254 (5th Cir. 2008) (emphasis added). The
Court further observes that “detrimental reliance is not favored by Louisiana law and
the Court must examine the claim strictly.” Caplan v. Ochsner Clinic, L.L.C., 799 F.
Supp. 2d 648, 657 (E.D. La. 2011) (citation omitted). Moreover, “[t]he doctrine usually
functions when no written contract or an unenforceable contract exists between the
parties.” Drs. Bethea, Moustoukas & Weaver LLC v. St. Paul Guardian Ins. Co., 376
F.3d 399, 403 (5th Cir. 2004) (citation omitted).
Plaintiff cannot state a claim for detrimental reliance by arguing that it would
not have entered into the contract if it had known that defendants did not intend to
perform. “[T]he focus of analysis of a detrimental reliance claim is not whether the
parties intended to perform.” Audler, 519 F.3d at 254. Rather, the relevant question
is whether defendants made some other false representation in the absence of which
plaintiff would not have entered into the contract. Id. Plaintiff has not identified any
In addition, a valid and enforceable contract existed between the parties in this
The doctrine of detrimental reliance “usually functions when no written
contract or an unenforceable contract exists between the parties.”
Moustoukas & Weaver LLC, 376 F.3d at 403. Given that “detrimental reliance is not
favored by Louisiana law and the Court must examine the claim strictly,” Caplan,
799 F. Supp. 2d at 657, plaintiff’s detrimental reliance claim must be dismissed.
Rule 12(f) provides that the Court “may strike from a pleading an insufficient
defense or any redundant, immaterial, impertinent, or scandalous matter.” A motion
to strike “is a drastic remedy to be resorted to only when required for the purposes of
justice.” Watson v. Clear Channel Broad. Inc., No. 13-5503, 2014 WL 1246121, at *1
(E.D. La. Mar. 24, 2014) (citing Augustus v. Bd. of Pub. Instruction of Escambia
County, Fla., 306 F.2d 862, 868 (5th Cir. 1962)).
Such motions are “generally
disfavored, and should be used sparingly” by the courts. Calderon v. JPMorgan Chase
Bank, N.A., 2012 WL 3484683, at *1 (E.D. La. Aug. 14, 2012). Whether to strike is a
matter within the Court’s discretion. See Veranda Assocs., L .P. v. Hooper, 496 F.
App’x 455, 458 (5th Cir. 2012).
The Court disagrees with defendants that the references in the complaint to
“auction misconduct” should be stricken pursuant to Rule 12(f). Although defendants
are correct that there is no cause of action for “auction misconduct,” the Court will
not bar the plaintiff from characterizing the defendants’ conduct in those terms.
Given the allegations in the complaint, the description is not so scurrilous or unfair
as to warrant the extreme remedy of striking it from the complaint.
For the foregoing reasons,
IT IS ORDERED that defendants’ motion is GRANTED IN PART and
DENIED IN PART. The motion for a partial dismissal pursuant to Rule 12(b)(6) is
GRANTED, but defendants’ request to strike the phrase “auction misconduct” from
the complaint pursuant to Rule 12(f) is DENIED.
New Orleans, Louisiana, November 14, 2016.
LANCE M. AFRICK
UNITED STATES DISTRICT JUDGE
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