Rehabcare Group East, Inc. v. Future Focus of U-City, LLC

Filing 18

MEMORANDUM AND ORDER IT IS HEREBY ORDERED that Plaintiff RehabCare Group East, Inc.s Partial Motion to Dismiss Counterclaim (ECF No. 10) is GRANTED. 10 Signed by District Judge Jean C. Hamilton on 11/30/12. (CLA)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION

REHABCARE GROUP EAST, INC., d/b/a
REHABCARE GROUP THERAPY
SERVICES, INC.,
Plaintiff(s),
vs.
FUTURE FOCUS OF U-CITY, LLC, d/b/a
ACKERT PARK SKILLED CARE
COMMUNITY f/k/a SUNSHINE MANOR,
Defendant(s).

)
)
)
)
)
)
)
)
)
)
)
)
)

Case No. 4:12CV1509 JCH

MEMORANDUM AND ORDER
This matter is before the Court on Plaintiff RehabCare Group East, Inc.’s Partial Motion to
Dismiss Counterclaim (“Motion to Dismiss”), filed on October 9, 2012. (ECF No. 10). This motion
is fully briefed and ready for disposition.
BACKGROUND1
Plaintiff RehabCare Group East, Inc. (“Plaintiff” or “RehabCare”) is in the business of
providing therapy services to residents of long-term care and nursing facilities. (Complaint, ¶ 2).
Defendant Future Focus of U-City, LLC (“Defendant” or “Future Focus”) entered into a written
agreement with Plaintiff on or about January 19, 2010.

(Id., ¶ 7). Pursuant to the agreement,

Plaintiff would provide therapy services to patients at Defendant’s Sunshine Manor facility. (Id.).
According to Plaintiff, Defendant would pay for these services and be reimbursed by Medicare for
all or a large portion of the fees paid to Plaintiff. (Id., ¶¶ 8, 16). Plaintiff alleges that “Defendant

1

The Court takes its background information directly from Plaintiff’s Complaint (ECF No.
1) and Defendant’s Answer and Counterclaim (ECF No. 6).

failed to pay for services provided and invoiced . . . despite RehabCare’s repeated demands for the
sums due.” (Id., ¶ 10).
Plaintiff filed this action in this Court on August 23, 2012, on the basis of diversity jurisdiction
under 28 U.S.C. § 1332. Plaintiff’s Complaint contains four counts: breach of contract, promissory
estoppel, unjust enrichment, and account stated. On September 20, 2012, Defendant filed an Answer
to Plaintiff’s Complaint. Defendant also filed a Counterclaim containing six counts: Counts I through
V alleged various breaches of contract, and Count VI alleged fraud. As indicated above, Plaintiff
filed its Motion to Dismiss on October 9, 2012, alleging that Defendant’s fraud claim fails to state
a claim upon which relief may be granted under Rule 12(b)(6) of the Federal Rules of Civil
Procedure. Plaintiff argues that Defendant has failed to plead its fraud claim with sufficient
particularity, that Defendant’s fraud claim is untenable under Missouri law, and that Defendant’s
fraud claim is barred because the basis of Defendant’s fraud claim is the alleged breach of Plaintiff’s
contractual obligations.
STANDARD
A complaint “must contain ... a short and plain statement of the claim showing that the pleader
is entitled to relief.” FED. R. CIV. P. 8(a). To avoid dismissal, a complaint must include “enough facts
to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
570 (2007). “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). “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.” Benton v. Merrill Lynch & Co., Inc., 524 F.3d 866,

-2-

870 (8th Cir. 2008) (quoting Twombly, 550 U.S. at 555). In reviewing a motion to dismiss, the court
assumes the facts alleged in the complaint are true and draws all reasonable inferences from those
facts in the plaintiff’s favor. Monson v. Drug Enforcement Admin., 589 F.3d 952, 961 (8th Cir.
2009).
DISCUSSION
As an initial matter, the Court notes that the Federal Rules of Civil Procedure apply in an
action in federal district court, even if state law provides the elements of the cause of action. See
Mecklenburg Farm, Inc. v. Anheuser-Busch, Inc., No. 4:07CV1719, 2008 WL 2704481, at * 2 (E.D.
Mo. July 2, 2008). “Thus, the applicable pleading standard is established by Federal Rule of Civil
Procedure 9(b).” Id. (citing Sayre v. Musicland Group, Inc., 850 F.2d 350, 352 (8th Cir. 1988)
(federal courts apply the Federal Rules of Civil Procedure to matters of procedure when considering
non-federal questions in a diversity action); 2 James Wm. Moore, et al., Moore’s Federal Procedure
§ 9.03[1][e] (3rd ed. 2007) (“[I]n an action in federal district court, even if state law provides the
elements of fraud, claimants must plead the circumstances constituting the fraud with particularity
under Rule 9(b).”)).2
Rule 9(b) requires that “[i]n alleging fraud or mistake, a party must state with particularity
the circumstances constituting fraud or mistake.” FED. R. CIV. P. 9. The Eighth Circuit Court of
Appeals recently explained the burden placed on a party alleging fraud:
Under Rule 9(b), a plaintiff must plead “such matters as the time, place and contents
of false representations, as well as the identity of the person making the
misrepresentation and what was obtained or given up thereby.” Abels v. Farmers
Commodities Corp., 259 F.3d 910, 920 (8th Cir. 2001) (quoting Bennett v. Berg, 685
F.2d 1053, 1062 (8th Cir. 1982), adhered to on reh’g, 710 F.2d 1361 (8th Cir. 1983)

2

The Court also rejects Defendant’s argument that Plaintiff has waived the right to
challenge the specificity of Defendant’s fraud allegations by failing to file a motion for more
definite statement. See Mecklenburg Farm, 2008 WL 2704481, at *4 n.1.
-3-

(en banc)). In other words, the party must typically identify the “who, what, where,
when, and how” of the alleged fraud. United States ex rel. Costner v. URS
Consultants, Inc., 317 F.3d 883, 888 (8th Cir. 2003). This requirement is designed
to enable defendants to respond “specifically, at an early stage of the case, to
potentially damaging allegations of immoral and criminal conduct.” Abels, 259 F.3d
at 920. The level of particularity required depends on, inter alia, the nature of the
case and the relationship between the parties. Payne v. United States, 247 F.2d 481,
486 (8th Cir. 1957). “Conclusory allegations that a defendant’s conduct was
fraudulent and deceptive are not sufficient to satisfy the rule.” Commercial Property
Investments Inc. v. Quality Inns Int’l Inc., 61 F.3d 639, 644 (1995). Rule 9(b) should
be read “in harmony with the principles of notice pleading.” Schaller Telephone Co.
v. Golden Sky Sys., Inc., 298 F.3d 736, 746 (8th Cir. 2002) (quoting Abels, 259 F.3d
at 920).
BJC Health Sys. v. Columbia Cas. Co., 478 F.3d 908, 917 (8th Cir. 2007). This standard has been
consistently applied in this District and by this Court when the sufficiency of a fraud claim is at issue
under Rule 9(b). See Mecklenburg Farm, 2008 WL 2704481; Graham Construction Servs., Inc. v.
Hammer & Steel, Inc., No. 4:11CV1316, 2012 WL 685459 (E.D. Mo. Mar. 2, 2012).
This Court’s decision in Hammer & Steel is instructive. In that case, the defendant filed a
motion to dismiss a fraud claim because “[the plaintiff] d[id] not attribute the alleged false assurances
to a particular H & S employee, nor d[id] it state what facts were allegedly represented by H & S that
constituted assurances . . . . H & S further maintain[ed] [the plaintiff] allege[d] neither where nor how
the alleged representations were made, nor to whom.” Hammer & Steel, 2012 WL 685459, at *4
(internal quotations and citation omitted). In light of this litany of Rule 9(b) deficiencies, this Court
granted the motion to dismiss the fraud claim and stated that “by failing to provide such basic
information as the identity of the H & S employee(s) making the alleged representations, the content
of such representations, and the manner in which they allegedly were untrue, Graham . . . deprived
H & S of the opportunity to prepare an effective defense.” Id.
Here, the same deficiencies are found in Count VI of Defendant’s Counterclaim. Defendant’s
Counterclaim does not identify an employee to whom the alleged false representations complained

-4-

of may be attributed. Defendant simply avers that “RehabCare represented to Future Focus on
several occasions that it would continue to provide the same level of services until completion of the
Agreement.” (Counterclaim, ¶ 39). Also, while stating that Plaintiff assured the “same level of
services,” the Counterclaim provides insufficient facts under Rule 9(b) as to what was actually
represented. Again, “[c]onclusory allegations that a defendant’s conduct was fraudulent and
deceptive are not sufficient to satisfy the rule.” Commercial Property, 61 F.3d at 644. As in Hammer
& Steel, 2012 WL 685459, at *4, Defendant “alleges neither where nor how the alleged
representations were made, nor to whom.” Thus, from the face of the Counterclaim, it is clear that
the pleading standard of Rule 9(b) has not been met.
Additionally, Plaintiff correctly notes that “the mere failure to perform a contract cannot serve
as the basis of tort liability.” State ex rel. William Ranni Assoc., Inc. v. Hartenbach, 742 S.W.2d 134,
140 (Mo. 1987); Titan Const. Co. v. Mark Twain Kansas City Bank, 887 S.W.2d 454, 459 (Mo. Ct.
App. 1994). Missouri law states that “[t]o ascertain whether an action is premised on contractual or
tort liability, it is necessary to determine the source of the duty claimed to have been violated, and
when the duty alleged to have been breached stems from a contract, the breach does not amount to
a tort.” Titan Const. Co., 887 S.W.2d at 459.
Here, Count VI of Defendant’s Counterclaim restates the several preceding breach of contract
claims as a fraud claim. Defendant’s allegation that “RehabCare represented to Future Focus on
several occasions that it would continue to provide the same level of services until the completion of
the Agreement” creates no duty on the part of Plaintiff that is independent from Plaintiff’s contractual
duties. “The mere breach of a promise or failure to perform does not constitute a misrepresentation
of fact . . . or create an action for fraud.” Titan Const. Co., 887 S.W.2d at 459. Thus, amending the
fraud claim contained in Count VI of the Defendant’s Counterclaim would be futile, as Defendant

-5-

cannot sustain a fraud claim based on an underlying contractual obligation. See U.S. ex rel. Lee v.
Fairview Health Sys., 413 F.3d 748, 749 (8th Cir. 2005) (“Futility is a valid basis for denying leave
to amend.”). For this reason, the Court dismisses Count VI of Defendant’s Counterclaim and
declines to grant Defendant leave to amend its Counterclaim.
CONCLUSION
Accordingly,
IT IS HEREBY ORDERED that Plaintiff RehabCare Group East, Inc.’s Partial Motion to
Dismiss Counterclaim (ECF No. 10) is GRANTED.

Dated this 30th day of November, 2012.

/s/Jean C. Hamilton
UNITED STATES DISTRICT JUDGE

-6-