Randall S. Miller & Associates, P.C. et al v. Pitney Bowes Inc et al
Filing
31
OPINION and ORDER granting Defendants' 21 Motion to Dismiss Counts II and III of Plaintiffs' First 18 Amended Complaint. Signed by District Judge Gerald E. Rosen. (JOwe)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
RANDALL S. MILLER & ASSOCIATES,
P.C., and RANDALL S. MILLER,
Plaintiffs,
Case No. 14-14447
Hon. Gerald E. Rosen
v.
PITNEY BOWES INC. and
PITNEY BOWES GLOBAL
FINANCIAL SERVICES,
Defendants.
_________________________________/
OPINION AND ORDER GRANTING
DEFENDANTS’ MOTION TO DISMISS COUNTS II
AND III OF PLAINTIFFS’ FIRST AMENDED COMPLAINT
At a session of said Court, held in
the U.S. Courthouse, Detroit, Michigan
on
March 30, 2016
PRESENT:
Honorable Gerald E. Rosen
United States District Judge
I. INTRODUCTION
In their first amended complaint, Plaintiffs Randall S. Miller & Associates,
P.C. and Randall S. Miller have asserted state-law claims of breach of contract,
fraudulent misrepresentation, and innocent misrepresentation against Defendants
Pitney Bowes Inc. and Pitney Bowes Global Financial Services, based on
allegations that the software systems, associated hardware, and services provided
by Defendants to automate the mailing functions of the Plaintiff law firm have
failed to satisfy the terms of the parties’ contract or to conform with Defendants’
representations about how these products and services would perform. The
Court’s subject matter jurisdiction over these claims rests upon the diverse
citizenship of the parties. See 28 U.S.C. § 1332(a).
In addition to answering the complaint and filing a breach-of-contract
counterclaim against Plaintiffs, Defendants have filed a motion to dismiss the
fraudulent and innocent misrepresentation claims asserted in counts II and III of
Plaintiffs’ first amended complaint. In support of this motion, Defendants argue
(i) that Plaintiffs’ misrepresentation claims are insufficiently distinct from their
breach-of-contract claim to allow Plaintiffs to go forward with their tort claims
under Michigan law, and (ii) that, in any event, Plaintiffs have failed to plead
fraud with the particularity demanded under Fed. R. Civ. P. 9(b). In response,
Plaintiffs contend (i) that Michigan law, correctly construed, allows them to
pursue their misrepresentation claims so long as they have properly alleged the
elements of these claims, and without regard for any purported overlap between
some of these elements and the elements of their breach-of-contract claim, and (ii)
that Defendants’ appeal to the economic loss doctrine does not bar their claim of
2
fraud in the inducement or the fraud claims asserted by the individual Plaintiff,
Randall S. Miller.1 Following this response, Defendants filed a reply brief in
further support of their motion.
Having reviewed the parties’ written submissions in support of and
opposition to Defendants’ motion, as well as the remainder of the record, the
Court finds that the pertinent facts, allegations, and legal issues are sufficiently
presented in these materials, and that oral argument would not assist in the
resolution of Defendants’ motion. Accordingly, the Court will decide this motion
“on the briefs.” See Local Rule 7.1(f)(2), U.S. District Court, Eastern District of
Michigan. This opinion and order sets forth the Court’s rulings on this motion.
II. FACTUAL BACKGROUND
The following account of the facts giving rise to this suit is derived solely
from the allegations of Plaintiffs’ first amended complaint, which are accepted as
true for present purposes. Plaintiff Randall S. Miller & Associates, P.C. is a “law
firm that represents banking and lending institutions in connection with various
foreclosure related services.” (First Amended Complaint at ¶ 8.) Plaintiff Randall
S. Miller is the sole shareholder of the Plaintiff law firm. Defendant Pitney Bowes
1
Plaintiffs’ response is silent as to Defendants’ Rule 9(b) challenge to their claims
of fraudulent and innocent misrepresentation.
3
Inc. (“Pitney Bowes”) is a provider of technology services, including the
automation of mail processes and associated training services, and Defendant
Pitney Bowes Global Financial Services (“PBGFS”) is an affiliated company that
leases the equipment necessary to implement Pitney Bowes’ technology services.
In January of 2011, the Plaintiff law firm “contracted with PBGFS for the
lease of mail equipment and to assist [the law firm] in automating various mail
processes.” (First Amended Complaint at ¶ 9.) The law firm “remitted $28,127.00
as a down payment” for this leasing arrangement, and individual Plaintiff Randall
S. Miller “personally guaranteed” the lease. (Id. at ¶¶ 10-11.) At around the same
time, the law firm “contracted with Pitney Bowes to[,] among other things, install
a PlanetPress system for creating mortgage notices,” and to provide training to the
law firm employees who would use this system. (Id. at ¶ 12.) This PlanetPress
system “consisted of various software and hardware packages to ensure the leased
equipment performed the functions necessary to assist” the Plaintiff law firm. (Id.
at ¶ 13.)
Although Defendants “represented that the leased equipment would fully
automate [the Plaintiff law firm’s] mailing functions,” this equipment “failed to
provide the services Defendants represented it was capable of providing.” (Id. at
¶¶ 16-17.) The law firm “contacted Defendants on numerous occasions from
4
2011-2014 in an attempt to provide Defendants with an opportunity to remedy the
situation,” and also “continued paying for the leased equipment.” (Id. at ¶¶ 1819.) Despite these efforts, and “[d]espite numerous service calls and service
appointments, Defendants failed to remedy the situation,” and “the leased
equipment never properly performed the automated mail services” promised by
Defendants. (Id. at ¶ 20.) Accordingly, the Plaintiff law firm ceased making
payments to Defendants in 2014, and “advised Defendants to pick up the
equipment.” (Id. at ¶ 21.)
Plaintiffs commenced this suit against Defendants in late 2014, and
subsequently filed their first amended complaint on January 23, 2015. In this
three-count first amended complaint, Plaintiffs have asserted state-law claims of
breach of contract, fraudulent misrepresentation, and innocent misrepresentation.
Through the present motion, Defendants seek the dismissal of the latter two tort
claims, contending that they are legally insufficient in one or more respects.
III. ANALYSIS
A.
The Standards Governing Defendants’ Motion
Defendants have brought the present motion under Fed. R. Civ. P. 12(b)(6),
maintaining that Plaintiffs have “fail[ed] to state a claim upon which relief can be
granted” as to the misrepresentation claims asserted in counts II and III of their
5
first amended complaint. When considering a motion brought under Rule
12(b)(6), the Court must construe the complaint in a light most favorable to the
plaintiff and accept all well-pled factual allegations as true. League of United
Latin American Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007). Yet, “the
tenet that a court must accept as true all of the allegations contained in a complaint
is inapplicable to legal conclusions.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.
Ct. 1937, 1949 (2009).
Moreover, “[w]hile 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.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955,
1964-65 (2007) (internal quotation marks, alteration, and citations omitted).
Rather, to withstand a motion to dismiss, the complaint’s factual allegations,
accepted as true, “must be enough to raise a right to relief above the speculative
level,” and to “state a claim to relief that is plausible on its face.” Twombly, 550
U.S. at 555, 570, 127 S. Ct. at 1965, 1974. “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.” Iqbal, 556 U.S.
6
at 678, 129 S. Ct. at 1949.
B.
Plaintiffs Have Failed to Allege the Violation of a Duty Owed
Separately from the Obligations Incurred by Defendants Under the
Parties’ Contract, as Necessary to Pursue Their Tort Claims of False
and Innocent Misrepresentation.
As the first of their two challenges to the claims of fraudulent and innocent
misrepresentation asserted in counts II and III of Plaintiffs’ first amended
complaint, Defendants appeal to a principle of Michigan law that is referred to, at
least in some contexts, as the “economic loss” doctrine.2 As this Court has
previously explained, this doctrine is a more specific application of the “general
principle that a mere failure to perform a contractual obligation cannot support an
action in tort, absent the violation of a legal duty separate and distinct from the
contractual obligation.” Metropolitan Alloys Corp. v. Considar Metal Marketing,
Inc., No. 06-12667, 2007 WL 2874005, at *5 (E.D. Mich. Sept. 25, 2007). In
Defendants’ view, Plaintiffs’ tort claims of fraudulent and innocent
misrepresentation are insufficiently distinct from their breach-of-contract claim to
withstand scrutiny under this principle. In response, Plaintiffs do not necessarily
take issue with Defendants’ characterization of their claims, but they nonetheless
2
The parties assume without discussion that the issues raised in Defendants’
motion are governed by Michigan law, and the Court likewise proceeds under this
assumption in resolving Defendants’ motion.
7
contend (i) that the Michigan Supreme Court has recently retreated from the rule
that a party cannot pursue overlapping breach-of-contract and tort claims, and (ii)
that, in any event, their claims fall within a “fraud in the inducement” exception to
this rule. As discussed below, the Court finds that Defendants have the better of
the argument on this question.
In Neibarger v. Universal Cooperatives, Inc., 439 Mich. 512, 486 N.W.2d
612 (1992), the Michigan Supreme Court expressly adopted the economic loss
doctrine in the context of a sale of goods governed by the Uniform Commercial
Code (“UCC”). The court explained the doctrine as follows:
The economic loss doctrine, simply stated, provides that where
a purchaser’s expectations in a sale are frustrated because the product
he bought is not working properly, his remedy is said to be in contract
alone, for he has suffered only ‘economic losses.’ This doctrine
hinges on a distinction drawn between transactions involving the sale
of goods for commercial purposes where economic expectations are
protected by commercial and contract law, and those involving the
sale of defective products to individual consumers who are injured in
a manner which has traditionally been remedied by resort to the law
of torts.
Neibarger, 486 N.W.2d at 615 (internal quotation marks and footnotes with
citations omitted). After discussing the reasoning behind the economic loss
doctrine and surveying the decisions of other courts that had applied this doctrine,
the Neibarger court held that “where a plaintiff seeks to recover for economic loss
8
caused by a defective product purchased for commercial purposes, the exclusive
remedy is provided by the UCC.” 486 N.W.2d at 618; see also Huron Tool &
Engineering Co. v. Precision Consulting Services, Inc., 209 Mich. App. 365, 532
N.W.2d 541, 543-45 (1995) (considering whether the ruling in Neibarger extends
to intentional tort claims, and concluding that the economic loss doctrine applies
to fraud claims apart from those that allege fraud in the inducement).
In this case, the parties seemingly agree that the transaction giving rise to
Plaintiffs’ breach-of-contract claim is not properly characterized as a sale of goods
governed by the UCC. Nonetheless, the courts have applied a principle of
Michigan law closely related to the economic loss doctrine in cases involving
commercial transactions that fell outside the scope of the UCC. Most notably, in
Rinaldo’s Construction Corp. v. Michigan Bell Telephone Co., 454 Mich. 65, 559
N.W.2d 647, 651 (1997), the plaintiff construction company asserted a claim of
negligence against the defendant telephone carrier, Michigan Bell, alleging that
calls from its customers were not going through as a result of Michigan Bell’s
negligent installation and maintenance of the plaintiff’s telephone service. The
plaintiff acknowledged that its claim rested on the premise that Michigan Bell had
“negligently fail[ed] to properly and fully perform its contract,” and the Michigan
Supreme Court thus considered whether, and under what circumstances, “an action
9
in tort may arise out of a contractual promise.” Rinaldo’s Construction, 559
N.W.2d at 657.
Upon surveying its earlier decision in Hart v. Ludwig, 347 Mich. 559, 79
N.W.2d 895 (1956), the court reasoned that “the threshold inquiry” in determining
whether the plaintiff could proceed with its claim of negligence was “whether the
plaintiff alleges [the] violation of a legal duty separate and distinct from the
[defendant’s] contractual obligation.” Rinaldo’s Construction, 559 N.W.2d at
658. The court found that the plaintiff in that case had failed to identify such an
alleged violation of a separate legal duty:
In this case, as in Hart, the defendant agreed to provide the
plaintiff with services under a contract. Like the defendant in Hart,
Michigan Bell allegedly failed to fully perform according to the terms
of its promise. While plaintiff’s allegations arguably make out a
claim for “negligent performance” of the contract, there is no
allegation that this conduct by the defendant constitutes tortious
activity in that it caused physical harm to persons or tangible
property; and plaintiff does not allege violation of an independent
legal duty distinct from the duties arising out of the contractual
relationship. Like the plaintiff in [a prior case], regardless of the
variety of names plaintiff gives the claim, plaintiff is basically
complaining of inadequate service and equipment. Thus, under the
principles outlined above, there is no cognizable cause of action in
tort.
559 N.W.2d at 658 (internal quotation marks, alterations, and citation omitted);
see also I-Fusion Technology, Inc. v. TRW Automotive U.S., L.L.C., No. 306466,
10
2012 WL 6604701, at *3 (Mich. Ct. App. Dec. 18, 2012) (finding that “[b]ecause
[the plaintiff] has failed to identify a duty owed by [the defendant] separate and
distinct from its contractual obligations, no cognizable action in tort exists”); Mid
America Solutions, LLC v. Merchant Solutions International, Inc., No. 15-563,
2016 WL 96178, at *4 (W.D. Mich. Jan. 8, 2016) (explaining that “[r]egardless of
the label the Court applies,” Michigan law precludes “tort claims [that] arise solely
out of [a defendant’s] contractual duties”); Insight Teleservices, Inc. v. Zip Mail
Services, Inc., No. 14-11395, 2014 WL 7012653, at *11 (E.D. Mich. Dec. 11,
2014) (finding that “many of the tort claims” asserted by the plaintiff were
“indistinguishable from [its] breach of contract claims,” and thus were subject to
dismissal); Convergent Group Corp. v. County of Kent, 266 F. Supp.2d 647, 660
(W.D. Mich. 2003) (finding that it was “unnecessary for the Court to decide
whether the economic loss doctrine also applies to service contracts,” because the
defendant’s “fraud claim is based solely on [the plaintiff’s] contractual duties and,
therefore, is subject to dismissal” under the Michigan Supreme Court’s decision in
Hart).
This principle of Michigan law, if applicable here, plainly would bar
Plaintiffs’ claims of fraudulent and innocent misrepresentation, as Plaintiffs do not
allege, nor do they argue in response to Defendants’ present motion, that
11
Defendants owed them a duty separate and distinct from the obligations imposed
upon Defendants under the parties’ contract. Nonetheless, in an effort to avoid
this result, Plaintiffs first contend that the Michigan Supreme Court’s decision in
Cooper v. Auto Club Insurance Association, 481 Mich. 399, 751 N.W.2d 443
(2008), worked a significant change in the Michigan law governing Plaintiffs’ tort
claims in this case. The plaintiffs in Cooper brought suit against their insurer,
asserting both (i) a claim under Michigan’s no-fault auto insurance statute for
benefits due under a policy issued by the defendant insurer, and (ii) a claim of
fraud. See Cooper, 751 N.W.2d at 445-46. Under a “one-year-back” provision in
Michigan’s no-fault act, a claimant cannot recover benefits for losses incurred
more than one year before a suit is filed. Cooper, 751 N.W.2d at 447. The
defendant insurer argued that this “one-year-back” rule applied equally to the
plaintiffs’ statutory no-fault and common-law tort-based theories of recovery, but
the Michigan Supreme Court rejected this contention, reasoning that “[a] fraud
claim is clearly distinct from a no-fault claim” in light of the additional elements
that must be proven, the different rule governing the accrual of a fraud claim, and
the wider range of damages that are available in a fraud action. 751 N.W.2d at
448-49.
In Plaintiffs’ view, Cooper effectively “overrule[d]” the decision of the
12
Michigan Court of Appeals in Huron Tool, supra. (Plaintiffs’ 6/6/2015 Response
Br. at 8.)3 In particular, Plaintiffs read Cooper as broadly holding that a plaintiff
may pursue both breach-of-contract and fraud claims despite an “overlap” in these
claims, so long as the plaintiff pleads and proves the additional elements of the tort
3
It is not clear why Plaintiffs focus special attention on Huron Tool. That case,
after all, addressed a transaction governed by the UCC, and the court considered whether
the economic loss doctrine as adopted by the Michigan Supreme Court in Neibarger
should apply to intentional torts. See Huron Tool, 532 N.W.2d at 543-45. The Michigan
Supreme Court’s decision in Rinaldo’s Construction is more on point here, as it is not
narrowly focused on the economic loss doctrine as it applies to transactions governed by
the UCC, but instead stands for the more general principle, as invoked by Defendants in
the present motion, that a tort claim may co-exist with a breach-of-contract claim only if
the plaintiff alleges the “violation of an independent legal duty distinct from the duties
arising out of the [parties’] contractual relationship.” Rinaldo’s Construction, 559
N.W.2d at 658.
Consequently, unless Plaintiffs can demonstrate that Cooper undermines the
Michigan Supreme Court’s prior decision in Rinaldo’s Construction, as well as the larger
body of Michigan case law of which it is a part, their attack on Huron Tool would appear
to be wholly unavailing. Indeed, it is especially puzzling to the Court why Plaintiffs
would devote more than two pages of their brief in response to Defendants’ motion to a
federal district court’s discussion of the question whether the Wisconsin courts would
adopt a “fraud in the inducement” exception to the economic loss doctrine. (See
Plaintiffs’ 6/6/2015 Response Br. at 9-11 (discussing the decision in Budgetel Inns, Inc. v.
Micros Systems, Inc., 8 F. Supp.2d 1137, 1144-49 (E.D. Wis. 1998)).) While the court in
Budgetel Inns certainly is critical of certain aspects of the ruling in Huron Tools, see
Budgetel Inns, 8 F. Supp.2d at 1146-49, this Court fails to see how Budgetel Inns’ inquiry
into how the Wisconsin courts might resolve an open question of Wisconsin law could
possibly be of any assistance in this Court’s effort to ascertain the contours of the
Michigan law that governs Plaintiffs’ claims in this suit. Simply stated, even if the Court
were to accept Budgetel Inns’ critique of Huron Tool, it nonetheless would be obliged to
follow this ruling by the Michigan Court of Appeals, at least to the extent that it continues
to accurately reflect the state of the Michigan law that governs the issues raised in
Defendants’ motion.
13
claim. (See id. at 7-12.) Yet, this proposed reading of the Michigan Supreme
Court’s ruling is belied by the language and reasoning of Cooper itself. First, the
court did not purport to address the possible interaction and co-existence of fraud
and breach-of-contract claims. Rather, the court considered whether the tort claim
asserted by the plaintiffs in that case should properly be viewed as “brought
under” Michigan’s no-fault act, and therefore subject to the act’s “one-year-back”
rule. See Cooper, 751 N.W.2d at 447 (observing that “a fraud action is a distinct
and independent action brought under the common law,” and not an “action for
recovery of . . . benefits payable under the no-fault act” (internal quotation marks
and alteration omitted)).
More importantly, Cooper expressly adheres to and reaffirms the principle
invoked by Defendants here. Specifically, the court emphasized that “although
mere allegations of failure to discharge obligations under an insurance contract
would not be actionable in tort, where, as here, the breach of separate and
independent duties are alleged, the insured should be allowed an opportunity to
prove their cause of action.” 751 N.W.2d at 449 (emphasis added) (internal
quotation marks, alterations, and citations omitted). In Cooper, then, the plaintiffs
were able to allege the “violation of a legal duty separate and distinct from the
[defendant’s] contractual obligation,” Rinaldo’s Construction, 559 N.W.2d at 658,
14
as required under prior Michigan case law to concurrently pursue breach-ofcontract and tort claims, because the defendant insurer owed a “separate and
independent duty not to deceive the [plaintiff] insureds, which duty is imposed by
law as a function of the relationship of the parties,” Cooper, 751 N.W.2d at 448
(footnote omitted).
Not surprisingly, then, the courts have continued to apply the principle of
Michigan law recognized in Rinaldo’s Construction and Huron Tool,
notwithstanding the Michigan Supreme Court’s intervening decision in Cooper.
In Bev Smith, Inc. v. Atwell, 301 Mich. App. 670, 836 N.W.2d 872, 882-83 (2013),
for example, the Michigan Court of Appeals cited Huron Tool in holding that the
plaintiff was “limited to its contractual remedies under the UCC,” where the
claims of fraudulent misrepresentation and silent fraud that the plaintiff also
sought to pursue “essentially reiterated the allegations set forth in plaintiff’s
breach-of-contract claim.” Similarly, a number of courts in this District have
looked to Huron Tool — as well as other above-cited Michigan court decisions
such as Hart and Rinaldo’s Construction — in determining that tort claims were
subject to dismissal for lack of allegations that the defendant had violated a legal
duty arising separately from the parties’ contractual relationship. See, e.g., Mid
America Solutions, 2016 WL 96178, at *2-4; Visteon Corp. v. VarrocCorp
15
Holding B.V., No. 14-12418, 2015 WL 1530333, at *2-3 (E.D. Mich. March 31,
2015); Insight Teleservices, 2014 WL 7012653, at *9-11.4 Accordingly, the Court
agrees with Defendants that the decision in Huron Tool is “alive and well,”
(Defendants’ 6/30/2015 Reply Br. at 5), and that it continues to accurately state
the rule of Michigan law that a fraud claim is subject to dismissal if the plaintiff
“fails to allege any wrongdoing by [the] defendant[] independent of [the]
defendant[’s] breach of contract.” Huron Tool, 532 N.W.2d at 546.
In an abrupt about-face from its attack on the continued viability of Huron
Tool, Plaintiffs next points to the recognition of the Michigan courts, in Huron
Tool and more recent cases, that “the economic loss doctrine does not bar claims
of fraud in the inducement.” Bev Smith, 836 N.W.2d at 883; see also Huron Tool,
532 N.W.2d at 544-45. This Court readily acknowledges the distinction drawn
under Michigan law between an ordinary fraud claim and a claim of fraud in the
inducement — and, indeed, has expressly addressed this aspect of Huron Tool in a
prior decision. See Metropolitan Alloys, 2007 WL 2874005, at *6.
The salient question, however, is whether the allegations of Plaintiffs’
4
Notably, the plaintiff in one of these cases pointed to the decision in Cooper as
“support for its position that its fraud claim implicates separate duties from [its] breach of
contract claim,” but the court found Cooper distinguishable on some of the same grounds
cited above by this Court. See Mid America Solutions, 2016 WL 96178, at *4.
16
complaint support a plausible claim of fraud in the inducement. Plaintiffs make no
effort in their response to Defendants’ motion to explain how their allegations
might meet this standard, and the Court concludes upon independent examination
that they do not. As Defendants aptly observe, the alleged misrepresentations
identified in Plaintiffs’ complaint — i.e., that the equipment leased from
Defendants “would print and stuff mailings for all states,” that it would “sort and
stamp all mail,” that the accompanying software “would fully integrate with [the
Plaintiff law firm’s] software,” and that the law firm’s “employees would be
provided training specific to the machine,” (First Amended Complaint at ¶ 28) —
precisely track Plaintiffs’ allegations as to the performance promised by
Defendants under the parties’ contract, (see id. at ¶¶ 15-16, 23 (alleging that
Defendants agreed under the contract to provide equipment, software, and services
“that would fully automate [the Plaintiff law firm’s] mailing functions,” and to
“provid[e] training to [law firm] employees who would be . . . utilizing the leased
equipment”)).5 Under these circumstances, where the allegations in support of a
5
The Court notes that Plaintiffs’ initial and first amended complaints are
unaccompanied by any written agreements executed by the parties, so these pleadings fail
to disclose anything beyond their bare allegations as to the nature of Defendants’
obligations under the parties’ contracts. While Defendants submitted a lease agreement
and guaranty as exhibits to their counterclaim, Plaintiffs have made no effort to identify
any purported distinctions between the promises made by Defendants in these (or any
other) agreements and the alleged representations giving rise to Plaintiffs’ tort claims.
17
plaintiff’s breach-of-contract and fraud in the inducement claims are
“indistinguishable,” the courts have held that such allegations fail to state a viable
claim of fraud in the inducement under Michigan law. Visteon Corp., 2015 WL
1530333, at *3; see also Huron Tool, 532 N.W.2d at 546 (finding that the
plaintiff’s claim of fraud in the inducement was subject to dismissal where the
fraudulent representations alleged by the plaintiff were “indistinguishable from the
terms of the contract and warranty that plaintiff alleges were breached”); Uhl v.
Komatsu Forklift Co., 512 F.3d 294, 305 (6th Cir. 2008) (explaining that a
plaintiff cannot establish fraud in the inducement “where [the opposing] party
simply failed to uphold its side of the bargain” in a contractual relationship);
TIBCO Software, Inc. v. Gordon Food Service, Inc., No. 03-25, 2003 WL
21683850, at *5 (W.D. Mich. July 3, 2003) (finding that a fraud in the inducement
counterclaim asserted by the defendant was “interwoven with” its breach-of-
To be sure, one of the representations allegedly made by Defendants — i.e., that
the goods and services provided by Defendants “would save [the Plaintiff law firm]
money and . . . would ‘pay for itself’ as a result of the savings on postage alone,” (id. at ¶
28(d)) — presumably was not reflected in a contract executed by the parties. The
Michigan courts have held, however, that statements of this sort that do not “concern[] an
existing or past fact” cannot support a claim of fraud. Cummins v. Robinson Township,
283 Mich. App. 677, 770 N.W.2d 421, 436 (2009). Although there is a recognized
exception to this rule if such a statement is made in bad faith as “a device to perpetrate a
fraud,” Foreman v. Foreman, 266 Mich. App. 132, 701 N.W.2d 167, 177 (2005) (internal
quotation marks and citations omitted), the allegations of Plaintiffs’ complaint do not
support the application of this exception here.
18
contract claim “rather than extraneous to the contractual dispute” between the
parties, and thus was “barred by the economic loss doctrine”).
To be sure, Plaintiffs expressly allege in their complaint that Defendants
made false representations concerning the capabilities of their equipment and
services in order “to induce [the Plaintiff law firm] to enter into a contract for the
lease of the equipment at issue and to further induce Plaintiff Miller to guarantee
the lease.” (First Amended Complaint at ¶ 29.) Such a “formulaic recitation of
the elements” of a claim of fraudulent inducement, however, cannot withstand a
challenge under Rule 12(b)(6), see Twombly, 550 U.S. at 555, 127 S. Ct. at 1965,
absent factual allegations indicating that Defendants promised something beyond
simply delivering on their contractual obligations. As the Sixth Circuit has
observed, to hold otherwise would “turn[] every breach-of-contract claim into a
claim for fraud in the inducement, because every party enters into an agreement
with the expectation that all parties will abide by the agreement’s terms.” Uhl,
512 F.3d at 305. Accordingly, the Court finds that Plaintiffs have failed to state a
viable claim of fraud in the inducement under Michigan law.
Finally, Plaintiffs argue that Defendants’ appeal to the economic loss
doctrine is unavailing as to the claim of fraud asserted by the individual Plaintiff,
Randall S. Miller. In support of this contention, Plaintiffs point solely to an
19
unpublished decision from a court in this District, finding that the economic loss
doctrine was not applicable in that case “because [the plaintiff’s] claim is not
based upon a breach of a commercial contract for goods, [but] rather . . . is based
upon the alleged breach of a legally enforceable promise to repay a loan.”
Dell’Orco v. Brandt, No. 03-71929, 2005 WL 1355088, at *5 (E.D. Mich. May 3,
2005). In Plaintiffs’ view, this same reasoning should apply to the tort claims
asserted by Mr. Miller, which rest upon his role as guarantor rather than a
transaction for goods or services.
The Court agrees — albeit not for the reason given by Plaintiffs — that the
principle of Michigan law set forth in such cases as Rinaldo’s Construction and
Huron Tool does not operate to bar the misrepresentation claims asserted by Mr.
Miller. As discussed earlier, these cases hold that a plaintiff cannot pursue
overlapping breach-of-contract and fraud claims absent allegations of the
“violation of a legal duty separate and distinct from the [defendant’s] contractual
obligation.” Rinaldo’s Construction, 559 N.W.2d at 658. Here, however, Mr.
Miller presumably is not a party to the contract between Defendants and the
Plaintiff law firm that gives rise to the breach-of-contract claim asserted in count I
of Plaintiffs’ complaint. (See First Amended Complaint at ¶¶ 9, 12, 23-24
(referring to contractual undertakings promised by Defendants to the Plaintiff law
20
firm and money paid by the firm to Defendants under the parties’ contract).) It
follows that Mr. Miller’s claim of misrepresentation cannot possibly rest on
Defendants’ alleged breaches of their contractual obligations, which were owed
solely to the Plaintiff firm. Instead, if Mr. Miller is able to state a viable tort claim
against Defendants, any such claim must necessarily derive from a separate legal
duty allegedly owed by Defendants to him personally.
Nonetheless, the Court readily concludes that any such claim of fraud
asserted by Mr. Miller in Plaintiffs’ complaint is subject to dismissal for failure to
plead this claim with the specificity required under Fed. R. Civ. P. 9(b).6 As this
Court has explained, Rule 9(b) dictates that a plaintiff must “describe specific
statements, identify the speaker, specify when and where the statements were
made, and explain why the statements were fraudulent,” such that the defendant is
placed on “sufficient notice of the [alleged] misrepresentation[s]” to allow the
plaintiff’s claim of fraud to be “address[ed] in an informed way.” Thill v. Ocwen
Loan Servicing, LLC, 8 F. Supp.3d 950, 956 (E.D. Mich. 2014) (internal quotation
marks and citations omitted). In this case, Plaintiffs have only broadly identified
various representations made by “Defendants” regarding their promised
6
As noted earlier, Defendants raised this Rule 9(b) challenge in their summary
judgment motion, but Plaintiffs wholly failed to address this issue in their response to
Defendants’ motion.
21
performance under their contract with the Plaintiff law firm, (First Amended
Complaint at ¶ 28), without specifying who made these statements or when they
were made.
More importantly, nothing in the complaint suggests that any such alleged
misrepresentations were made to Mr. Miller in particular. Rather, after broadly
describing the nature of the misrepresentations made by Defendants, Plaintiffs
offer only conclusory allegations that simply parrot the elements of a claim of
misrepresentation, asserting (i) that Defendants’ representations regarding the
capabilities of their equipment and services “were false when made,” (ii) that
Defendants either knew these representations were false or made them “recklessly,
without knowing whether or not they were true,” (iii) that Defendants “intended
that Plaintiffs rely on the representations,” and (iv) that Mr. Miller “relied upon
the representations when he agreed to personally guarantee the lease” entered into
by the Plaintiff law firm. (First Amended Complaint at ¶¶ 29-31, 33.) As
explained earlier, such a “formulaic recitation of the elements” of a claim of
misrepresentation does not suffice to avoid dismissal under Rule 12(b)(6), see
Twombly, 550 U.S. at 555, 127 S. Ct. at 1965, nor does it satisfy the requirement
under Rule 9(b) that claims of fraud be pled with particularity. Accordingly, the
fraudulent and innocent misrepresentation claims asserted by Mr. Miller
22
individually are subject to dismissal on these grounds.
IV. CONCLUSION
For the reasons set forth above,
NOW, THEREFORE, IT IS HEREBY ORDERED that Defendants’
February 6, 2015 motion to dismiss counts II and III of Plaintiffs’ first amended
complaint (docket #21) is GRANTED.
s/Gerald E. Rosen
United States District Judge
Dated: March 30, 2016
I hereby certify that a copy of the foregoing document was served upon the parties
and/or counsel of record on March 30, 2016, by electronic and/or ordinary mail.
s/Julie Owens
Case Manager, (313) 234-5135
23
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