MAINE WINDJAMMERS INC v. SEA3 LLC et al

Filing 35

MEMORANDUM DECISION AND ORDER ON MOTION TO DISMISS COUNTERCLAIMS AND MOTION TO AMEND COUNTERCLAIMS granting in part and denying in part 24 Motion to Amend; granting in part and denying in part ECF No. 21 Motion to Dismiss By MAGISTRATE JUDGE JOHN H. RICH III. (nrg)

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
MAINE WINDJAMMERS, INC.,
Plaintiff
v.
SEA3, LLC, et al.,
Defendants

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No. 2:18-cv-00242-JHR

MEMORANDUM DECISION AND ORDER ON MOTION TO DISMISS
COUNTERCLAIMS AND MOTION TO AMEND COUNTERCLAIMS1
In this maritime breach of contract action, two of the defendants, Sea3, LLC (“Sea3”) and
Robert H. Larsen (“Mr. Larsen”) (together, the “defendants”), have brought counterclaims against
plaintiff Maine Windjammers, Inc. (the “plaintiff” or “Windjammers”) alleging misrepresentation
(Count I), fraud in the inducement (Count II), breach of contract (Count III), breach of implied
warranty of seaworthiness (Count IV), breach of express warranty of seaworthiness (Count V),
quantum meruit (Count VI), quasi contract/unjust enrichment (Count VII), and deceptive trade
practices (Count VIII). See Counterclaims, commencing on page 13 of Defendants’ Answer to
Plaintiff’s Amended Complaint; Affirmative Defenses; and Counterclaims (ECF No. 20), ¶¶ 1148. The plaintiff moves to dismiss (i) Counts I and II on the grounds that they conflict with the
terms of the parties’ agreement and, in any event, fail to meet the heightened fraud pleading
requirement of Rule 9(b), (ii) Count VIII under Rule 12(b)(6) because it seeks damages unavailable
under the relevant statute, and (iii) Counts I-VIII as to Mr. Larsen because he lacks standing to sue
in his personal capacity. See [Motion To Dismiss and] Memorandum of Law in Support of Maine

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The parties have agreed to have me preside over all proceedings in this action, including the entry of judgment. ECF
No. 7.

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Windjammer[s], Inc.’s Motion To Dismiss Count I, II, and VIII of Sea3 and [Counts I-VIII of]
Larsen’s Counterclaims (“Motion To Dismiss”) (ECF No. 22) at 1-2. In turn, the defendants seek
to add details to their fraud counterclaims (Counts I and II) and to pursue attorney fees pursuant to
their Maine Uniform Deceptive Trade Practices Act (“MUDTPA”) counterclaim (Count VIII).
See Motion To Amend at 2-4. See Defendants/Counterclaim Plaintiffs Sea3, LLC’s and Robert
H. Larsen’s Motion To Amend Counterclaims (“Motion To Amend”) (ECF No. 24) at 2-4.
For the reasons that follow, I grant the defendants’ motion to amend Counts I and II and
deny it as to Count VIII, and I grant the plaintiff’s motion to dismiss Count VIII in its entirety and
Counts I-V to the extent pressed by Mr. Larsen, and otherwise deny it.
I. Applicable Legal Standards
A. Motion To Amend
Pursuant to Rule 15(a)(2), “[t]he court should freely give leave [to amend a pleading] when
justice so requires.” Fed. R. Civ. P. 15(a)(2). Leave to amend should be granted in the absence of
reasons “such as undue delay, bad faith or dilatory motive on the part of the movant, repeated
failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing
party by virtue of allowance of the amendment, futility of amendment, etc. . . . .” Foman v. Davis,
371 U.S. 178, 182 (1962).
The First Circuit has explained:
A motion to amend a complaint will be treated differently depending on its timing
and the context in which it is filed. . . . As a case progresses, and the issues are
joined, the burden on a plaintiff seeking to amend a complaint becomes more
exacting. Scheduling orders, for example, typically establish a cut-off date for
amendments (as was apparently the case here). Once a scheduling order is in place,
the liberal default rule is replaced by the more demanding “good cause” standard
of Fed. R. Civ. P. 16(b). This standard focuses on the diligence (or lack thereof) of
the moving party more than it does on any prejudice to the party-opponent. Where
the motion to amend is filed after the opposing party has timely moved for summary
judgment, a plaintiff is required to show “substantial and convincing evidence” to
justify a belated attempt to amend a complaint.
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Steir v. Girl Scouts of the USA, 383 F.3d 7, 11-12 (1st Cir. 2004) (citations, internal quotation
marks, and footnotes omitted).
The defendants filed their motion on October 9, 2018, see Motion To Amend at 1, prior to
the parties’ November 7, 2018, deadline to amend pleadings and join parties, see Scheduling Order
(ECF No. 11) at 2. Therefore, the liberal default rule applies.
B. Motion To Dismiss
The Supreme Court has stated:
While 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 relief requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do. Factual allegations must
be enough to raise a right to relief above the speculative level.
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations and internal punctuation
omitted). This standard requires the pleading of “only enough facts to state a claim to relief that
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is plausible on its face.” Id. 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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
In ruling on a motion to dismiss under Rule 12(b)(6), a court assumes the truth of all of the
well-pleaded facts in the complaint and draws all reasonable inferences in favor of the plaintiff.
Román-Oliveras v. P.R. Elec. Power Auth., 655 F.3d 43, 45 (1st Cir. 2011). “In so doing, however,
we disregard facts which have been conclusively contradicted by [the alleging party’s] concessions
or otherwise.” Lister v. Bank of Am., N.A., 790 F.3d 20, 23 (1st Cir. 2015) (citations and internal
quotation marks omitted). Ordinarily, in weighing a Rule 12(b)(6) motion, “a court may not
consider any documents that are outside of the complaint, or not expressly incorporated therein,
unless the motion is converted into one for summary judgment.” Alternative Energy, Inc. v. St.
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Paul Fire & Marine Ins. Co., 267 F.3d 30, 33 (1st Cir. 2001). “There is, however, a narrow
exception for documents the authenticity of which are not disputed by the parties; for official
public records; for documents central to plaintiffs’ claim; or for documents sufficiently referred to
in the complaint.” Id. (citation and internal quotation marks omitted).
II. Factual Background
The plaintiff brings claims for breach of contract, promissory estoppel, and unjust
enrichment, see Complaint (ECF No. 1) ¶¶ 21-48, alleging the following:
Defendant Sea3 entered into an agreement with Windjammers (the “Agreement”) to lease
the schooner “Halie & Matthew” (the “Vessel”), with an option to purchase the Vessel. Id. ¶ 7.
Mr. Larsen and defendant Stephen Taylor personally guaranteed Sea3’s obligations pursuant to
the Agreement. Id. ¶ 8. Windjammers committed $50,000 toward the completion of a list of
agreed repairs and improvements to the Vessel. Id. ¶ 10. The defendants were responsible for
making the repairs and improvements but failed to complete them, instead leaving the Vessel in a
state of disrepair and refusing to pay the agreed-upon rental fees. Id. ¶¶ 11-17.
The defendants’ counterclaims tell a different story. They allege:
The parties’ relationship was governed not only by the Agreement but also by “verbal and
written discussions[.]” Counterclaims ¶ 6. Windjammers, however, misrepresented that the
Vessel was “fully operational prior to the execution of the agreement” and “attempted to induce
[the defendants] to execute the agreement without a survey quickly, and on false pretenses.” Id.
¶¶ 7-8. In actuality, Windjammers knew that the Vessel was not fully operational and had a
“troubled history with the Coast Guard.” Id. ¶¶ 9, 26. The defendants, for their part, “significantly
improved the condition of the Vessel[.]” Id. ¶ 10.

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III. Discussion
A. Fraud Counterclaims
The defendants seek to amend their fraud counterclaims (Counts I and II) to allege that,
prior to the execution of the Agreement, the plaintiff made false representations regarding various
systems (including the propulsion, plumbing, electrical, navigational, and communications
systems) as well as the bowsprit, propeller, transmission, and hull. See Defendants/Counterclaim
Plaintiffs Sea 3, LLC’s and Robert H. Larsen’s [Proposed] Amended Counterclaims (“Proposed
Amended Counterclaims”) (ECF No. 24-1), attached to Motion To Amend, ¶¶ 7-14.
The plaintiff moves to dismiss those counterclaims because they “directly conflict” with
the terms of the Agreement, see Motion To Dismiss at 1-4, and argues that, in any event, allowing
their amendment would undermine Rule 9(b)’s public policy purposes, see Response and
Objection of Maine Windjammers, Inc. to Defendants Sea3 and Larsen Motion To Amend
Counterclaims (“Opposition to Amend”) (ECF No. 28) at 2-3.
To the extent that the plaintiff moves to dismiss Counts I and II on the basis that they
conflict with the terms of the parties’ integrated agreement, see Motion To Dismiss at 2-4, its
motion is denied.
As the defendants note, see Defendants/Counterclaim Plaintiffs Sea3, LLC’s and Robert
H. Larsen’s Response to Plaintiff’s Motion To Dismiss the Counterclaims (“Opposition to
Dismiss”) (ECF No. 23) at 4-5, because “[f]raud vitiates all contracts into which it enters[,]” “[a]ny
person may introduce parol evidence to evidence the fact of a false and fraudulent representation
made for the purpose of inducing that person to execute a contract[,]” Harriman v. Maddocks, 518
A.2d 1027, 1029 (Me. 1986) (citations and internal punctuation omitted). This is true even when,
as here, the agreement contains an integration clause. See, e.g., Ferrell v. Cox, 617 A.2d 1003,
1006 (Me. 1992) (“Maine precedent is clear. A signed agreement that contradicts prior oral
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statements does not bar an action for fraud as a matter of law. . . . A plaintiff’s reliance on the
fraudulent misrepresentations of a defendant is unjustified only if the plaintiff knows the
representation is false or its falsity is obvious to the plaintiff.”).
To the extent that the plaintiff opposes the defendants’ bid to amend Counts I and II on the
basis that doing so would undermine Rule 9(b)’s public policy purposes, as a result of which those
counts should be dismissed, see Opposition to Amend at 2-3; Final Reply Memorandum of
Plaintiff, Maine Windjammers, Inc., in Support of Motion To Dismiss (“Dismiss Reply”) (ECF
No. 27) at 2-3, its argument is unpersuasive.
The plaintiff observes that Rule 9(b)’s purposes include (i) providing notice to defendants,
(ii) precluding groundless fraud claims “‘as a pretext to discovering a wrong,’” and
(iii) safeguarding “‘defendants from frivolous charges which might damage their reputations.’”
Opposition to Amend at 2-3 (quoting New England Data Servs., Inc. v. Becher, 829 F.2d 286, 289
(1st Cir. 1987)). It notes that, in J.S. McCarthy, Co. v. Brausse Diecutting & Converting Equip.,
Inc., 340 F. Supp.2d 54 (D. Me. 2004), this court permitted a plaintiff to engage in limited
discovery to attempt to satisfy the particularity requirement of Rule 9(b) when “the alleged facts
fraudulently withheld appeared to be uniquely and unequally within the knowledge of the party
seeking dismissal of the action for failure to comply with Rule 9(b).” Opposition to Amend at 2;
see also Dismiss Reply at 2-3; McCarthy, 340 F. Supp.2d at 60. It argues that in this case, by
contrast, the defendants possessed all of the facts of the alleged fraud long before they filed their
counterclaims. See Opposition to Amend at 2; Dismiss Reply at 2-3. However, McCarthy is
distinguishable in that it concerned the propriety of allowing a party to engage in discovery to
attempt to amend its complaint to satisfy Rule 9(b), not the underlying propriety of the amendment.
See McCarthy, 340 F. Supp.2d at 59-60.

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More generally, the plaintiff’s basis for opposing the defendants’ proposed amendments to
Counts I and II is unclear: it could constitute an argument of undue delay, bad faith, or undue
prejudice to the plaintiff were the amendments allowed.
To the extent that the plaintiff is arguing that the defendants engaged in undue delay, its
argument fails. The defendants filed their motion to amend their counterclaims on October 9,
2018, see ECF No. 24, less than two months after they first asserted them on August 20, 2018, see
ECF No. 8, and prior to the parties’ deadline to amend pleadings. The motion, therefore, is timely.
To the extent that the plaintiff is arguing that the defendants seek to amend Counts I and II
in bad faith, it articulates no bad faith, at most complaining that the defendants should not be
allowed “to overcome and correct [their] failure” to comply with Rule 9(b)’s heightened pleading
standard. See Opposition to Amend at 2. Yet, a party’s attempt to comply with the heightened
pleading standard of Rule 9(b) is not indicative of bad faith.
To the extent that the plaintiff is arguing that amendment would cause it undue prejudice,
it articulates no such prejudice. See id. at 2-3.
Tellingly, the plaintiff does not contend that Counts I and II, as the defendants propose to
amend them, would fail to meet Rule 9(b)’s particularity requirement, see Dismiss Reply at 2-3,
and I affirmatively find that they would.
For these reasons, I grant the defendants’ motion to amend their fraud counterclaims
(Counts I and II) and deny the plaintiff’s motion to dismiss them.
B. Deceptive Trade Practices
The plaintiff moves to dismiss Count VIII, the defendants’ counterclaim for damages
pursuant to the MUDTPA, 10 M.R.S.A. § 1212, on the basis that “money damages are not available
under that Act.” Motion To Dismiss at 2. The defendants “acknowledge that they are not entitled
to money damages” under the MUDTPA but argue that, if they prevail on their other counts
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seeking money damages, they might be entitled to attorney fees pursuant to 10 M.R.S.A. § 1213,
which are “available as a form of relief separate and apart from injunctive relief.” Opposition to
Dismiss at 3 n.2; Defendants/Counterclaim Plaintiffs Sea 3, LLC’s and Robert H. Larsen’s Reply
Memorandum

to

Plaintiff’s/Counterclaim

Defendant’s

Response

and

Objection

to

Defendants’/Counterclaim Plaintiffs’ Motion To Amend Counterclaims (“Amend Reply”) (ECF
No. 29) at 2 (citing Trusiani v. Ste Mar, Inc., Civil Action Docket No. CV-88-398, 1989 Me.
Super. LEXIS 243 (Me. Super. Ct. Nov. 27, 1989)). Accordingly, they move to amend Count VIII
to add a reference to 10 M.R.S.A. § 1213. See Proposed Amended Counterclaims ¶ 62.
The defendants’ argument boils down to an assertion that the MUDTPA can, in effect,
serve as an attorney fees enhancement when coupled with any viable claim for compensatory
damages. In Trusiani, the Maine Superior Court ruled that a plaintiff could recover punitive
damages and attorney fees after a jury determined that the defendant had both committed fraud
and violated the MUDTPA. See Trusiani, 1989 Me. Super. LEXIS 243, at *1. However, nothing
in the Trusiani decision suggests that the defendants can plead a MUDTPA claim for the sole
purpose of seeking attorney fees. See generally Trusiani, 1989 Me. Super. LEXIS 243. To the
contrary, this court has previously dismissed a MUDTPA claim because the plaintiff did not seek
injunctive relief. See McCarthy, 340 F. Supp.2d at 61-62.
Accordingly, because the defendants’ MUDTPA counterclaim, even as proposed to be
amended, does not state a claim upon which relief can be granted, I grant the plaintiff’s motion to
dismiss Count VIII of the counterclaims and deny the defendants’ motion to amend it.
C. Standing
The plaintiff seeks the dismissal of all counterclaims filed by Mr. Larsen, arguing that his
status as a guarantor of Sea3’s obligations is insufficient to confer standing to sue on his own
behalf. See Motion To Dismiss at 4-5. The defendants acknowledge that the Agreement conveys
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no “benefit” to Mr. Larsen, Opposition to Dismiss at 2 n.1, but contend that, for several reasons,
he nonetheless has standing to press his counterclaims, see id. at 9-10.
First, the defendants argue that the guarantee agreement involving Mr. Larsen should be
considered a “‘unitary transaction’” with the underlying agreement and that both should be
construed together. Id. (quoting Crowe v. Bolduc, 365 F.3d 86, 96 (1st Cir. 2004)). Second, the
defendants argue that the plaintiff makes no distinction between Sea3 and Mr. Larsen when
referring to the defendants’ obligations under the contract. See id. at 10. Finally, the defendants
argue that, because the plaintiff is seeking to “impose liability on Robert Larsen pursuant to the
personal guarantee he signed with respect to the Vessel Lease Agreement, and the obligations
imposed upon him under the terms of the Vessel Lease, he has a right to raise counterclaims to
that cause of action.” Id.
The defendants’ arguments are not persuasive. Standing is conferred on an individual
when he has a “personal stake in the outcome,” which is determined pursuant to a three-part test.
Pagán v. Calderón, 448 F.3d 16, 27 (1st Cir. 2006) (citation and internal quotation marks omitted).
The First Circuit has outlined that test as follows:
The first of these prerequisites deals with harm. The [counterclaimant] must
adequately allege that he suffered or is threatened by an injury in fact to a
cognizable interest. An injury in fact is one that is concrete and particularized, on
the one hand, and actual or imminent (as opposed to conjectural or hypothetical),
on the other hand. In turn, a particularized injury is one that affects the plaintiff in
a personal and individual way.
The second prerequisite deals with causation (what some courts have called
“traceability”). To meet this requirement, the [counterclaimant] must adequately
allege that the asserted injury is causally connected to the challenged conduct. This
causal connection must be demonstrable; in other words, it cannot be overly
attenuated.
The third prerequisite is redressability. The [counterclaimant] must adequately
allege that a favorable result in the litigation is likely to redress the asserted injury.

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Id. (citations and internal punctuation omitted) (emphasis added).
Under First Circuit precedent, Mr. Larsen’s allegations cannot satisfy the harm element of
the standing requirements as to Counts I, II, III, IV, and V. First Circuit law does not confer
standing if the harm to the individual is “derivative” of the underlying harm. Id. at 29 (citing
Guides, Ltd. v. Yarmouth Grp. Prop. Mgmt., 295 F.3d 1065 (10th Cir. 2002), and Stein v. United
Artists Corp., 691 F.2d 885, 896 (9th Cir. 1982), for the proposition that “one’s status as a
guarantor” does not confer “standing to assert an individual claim against a third party where that
harm is derivative of that suffered by the corporation”) (internal quotation marks omitted). The
first five counts of the counterclaims arise from the lease agreement between Sea3 and the plaintiff.
See Proposed Amended Counterclaims ¶¶ 25-51. Because Mr. Larsen is a non-party to that
agreement and a mere guarantor of Sea3’s obligations thereunder,2 any harm flowing to him as a
result of the conduct alleged in those counts is derivative of the underlying harm that the plaintiff
allegedly caused Sea3.3
On the other hand, careful review of Mr. Larsen’s allegations in Counts VI and VII
persuades me that those counts are not derivative of Sea3’s obligations pursuant to the lease
agreement. See Proposed Amended Counterclaims ¶¶ 52-59. He brings claims for quantum meruit
and for unjust enrichment, neither of which requires an express contractual relationship, see, e.g.,
Packgen v. BP Exploration & Prod., Inc., 754 F.3d 61, 70-71 (1st Cir. 2014), alleging that he

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The defendants do not allege that Mr. Larsen signed the Agreement in his personal capacity, see Proposed Amended
Counterclaims ¶ 6, and the Agreement, a copy of which the plaintiff appended to its complaint, reveals that he did not,
see Vessel Lease and Option To Purchase, Exh. A (ECF No. 1-1) to Complaint, at 11.
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The defendants’ specific arguments against the dismissal of all of Mr. Larsen’s counterclaims do not help them.
Crowe did not address standing. See Crowe, 365 F.3d at 95-97. Whether or not the court construes the guarantee
agreements together with the lease agreement makes no difference regarding standing. Construing them together
would not change the derivative nature of the harm Mr. Larsen alleges in Counts I through V. Moreover, neither the
plaintiff’s characterization of Mr. Larsen’s role, nor the fact that the plaintiff has brought claims against Mr. Larsen,
confers Mr. Larsen with standing to press those five counts.

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personally performed services that conferred a benefit to the Vessel of which Windjammers was
aware and for which Windjammers refused to pay, see Proposed Amended Counterclaims ¶¶ 4041, 43-45.4 Mr. Larsen has standing to press these claims.
Accordingly, I grant the defendants’ motion to dismiss Counts I through V of Mr. Larsen’s
counterclaims but deny it as to Counts VI and VII.
IV. Conclusion
For the foregoing reasons, I GRANT the Motion To Amend IN PART, as to Counts I and
II of the defendants’ counterclaims, and otherwise DENY it, and GRANT the Motion To Dismiss
IN PART, as to Count VIII of the defendants’ counterclaims in its entirety and Counts I, II, III,
IV, and V solely as to Mr. Larsen, and otherwise DENY it. The defendants are DIRECTED to
file on the ECF docket, no later than May 28, 2019, an amended unified answer, affirmative
defenses, and counterclaims consistent herewith, which shall supersede ECF No. 20.
Dated this 19th day of May, 2019.
/s/ John H. Rich III
John H. Rich III
United States Magistrate Judge

“Quantum meruit, also sometimes labelled ‘contract implied in fact,’ involves recovery for services or materials
provided under an implied contract.” Paffhausen v. Balano, 1998 ME 47, ¶ 6, 708 A.2d 269, 271 (citations omitted).
“Unjust enrichment describes recovery for the value of the benefit retained when there is no contractual relationship,
but when, on the grounds of fairness and justice, the law compels performance of a legal and moral duty to pay, and
the damages analysis is based on principles of equity, not contract.” Id. (citations, internal quotation marks, and
footnote omitted).
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