Shaughnessy, Kniep, Hawe Paper Company v. Fettergroup, et al

Filing 15

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Defendants Fetter Printing Company and John Roos' Motion to Dismiss (Doc. 10 ) is GRANTED in part. Plaintiff's negligent misrepresentation claim (Count II) is DISMISSED with prejudice. Signed by District Judge John A. Ross on 3/30/15. (JWD)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
SHAUGHNESSY, KNIEP, HAWE
PAPER COMPANY,
Plaintiff,
vs.
FETTERGROUP d/b/a FETTER
PRINTING COMPANY and
JOHN J. ROOS,
Defendants.

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Case No. 4:14-CV-00233-JAR

MEMORANDUM AND ORDER
This matter is before the Court on Defendants Fetter Printing Company and John
Roos' Motion to Dismiss (Doc. 10).

The motion is fully briefed and ready for

disposition. For the following reasons, the motion will be GRANTED in part.
I.

Motion to Dismiss Standard of Review

In ruling on a motion to dismiss, the Court must view the allegations in the
Complaint liberally in the light most favorable to the plaintiff. Eckert v. Titan Tire Corp.,
514 F.3d 801, 806 (8th Cir. 2008) (citing Luney v. SGS Auto Servs., 432 F.3d 866, 867
(8th Cir. 2005)). Additionally, the Court "must accept the allegations contained in the
complaint as true and draw all reasonable inferences in favor of the nonmoving party."

Coons v. Mineta, 410 F.3d 1036, 1039 (8th Cir. 2005) (citation omitted). To survive a
motion to dismiss, a complaint must contain "enough facts to state a claim to relief that is
plausible on its face." Bell At/. Corp. v. Twombly, 550 U.S. 544, 570 (2007). While a
complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual
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allegations, a plaintiffs 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." Twombly, 550 U.S. at 555; Huang v. Gateway Hotel
Holdings, 520 F.Supp.2d 1137, 1140 (E.D. Mo. 2007).
II.

Background

Plaintiff Shaughnessy, Kniep, Hawe Paper Company ("Shaughnessy") prints and
distributes various paper products (Doc. 1 at

~9).

Defendant Fetter Printing Company

("Fetter"), one of Plaintiffs former clients, sells printed labels to companies in the
painting and coating industry (Id. at

~~10,

11). Defendant John J. Roos ("Roos") is

Fetter's Chief Financial Officer (Id. at ~14).
Beginning in April 2005 and continuing for more than eight (8) years,
Shaughnessy provided Fetter with specially manufactured paper (the "Custom Paper") 1
~11).

(Id. at

On April 15, 2005, Fetter executed a credit application (the "Credit

Application") and delivered it to Shaughnessy (Id. at

~12).

In relevant part, the Credit

Application reads as follows:
In consideration of the extension of credit by [Shaughnessy] to [Fetter], [Fetter]
agrees to promptly pay all bills in accordance with the terms expressed on the
invoice. [Fetter] agrees that [Shaughnessy] shall retain a purchase money security
interest in all goods and services purchased by us until payment in full has been
received by [Shaughnessy]. [Fetter] further agrees that if the goods and services
ordered by [Fetter] or any other designated person shall remain unpaid past the
invoice due date, any balance so remaining unpaid shall bear interest at the lesser
of the rate of 1314 % per month or the maximum rate permitted by applicable law,
until paid. In the event that any suit or action is instated to collect amount due on
our account, whether principle [sic] interest or both, [Fetter] agrees to pay, in
1

Shaughnessy alleges that the Custom Paper was specially manufactured for Shaughnessy
because Fetter required the Custom Paper to be manufactured in a unique size, using coated one-side
paper, "among other characteristics." Id. at i!13.

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addition to the amount owed, all legal fees and collection agency fees incurred,
including a reasonable sum for attorney's fees.
(Id.). In the course of their regular dealings, every Monday Shaughnessy would send

Roos a document titled "Fetter Customer Held" (the "Inventory Statement") that was a
then-current listing of the Custom Paper that Shaughnessy was holding for Fetter's
purchase (Id. at ~~14, 15). Based on this Document, Roos would then place an order of
the Custom Paper (Id. at

~16).

Monthly, a representative of Shaughnessy would meet

with Roos to review the current Inventory Statement and request Shaughnessy purchase
additional Custom Paper (Id. at

~~17-19).

Based on these representations, Shaughnessy

would order the Custom Paper (Id. at ~20). Given the levels of Custom Paper requested
by Fetter, Shaughnessy was required to procure Custom Paper with a twelve-week lead
time (Id. at ~21 ).
In January 2013, Roos notified Shaughnessy that Fetter had reached an agreement
with Fort Dearborn Company ("Fort Dearborn") whereby the paint label segment of
Fetter's business would be sold to Fort Dearborn (Id at

~23).

During this conversation,

Roos informed Shaughnessy that Fetter would continue to perform under the established
course of dealing until the sale of Fetter's business to Fort Dearborn was complete (Id. at
~25)

(hereinafter the "First Representation"). Roos also told Shaughnessy that Fetter and

Fort Dearborn had agreed that, upon the sale of Fetter's printing business, the remaining
Custom Paper inventory held by Shaughnessy would be purchased by Fort Dearborn (Id.
at

~26)

(hereinafter the "Second Representation").

Beginning on March 4, 2013,

Shaughnessy included Fort Dearborn's Procurement Director on the distribution list for
the Inventory Statements (Id at ~27).
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In or about June of 2013, Fetter notified Shaughnessy that it would no longer

purchase the Custom Paper from Shaughnessy (Id. at

~28).

Further, Fetter told

Shaughnessy that Fort Dearborn would not be purchasing the remaining Custom Paper
inventory (Id. at ~29). At the time of this conversation, the dollar value of Shaughnessy's
Custom Paper inventory totaled $371,426.12 (Id. at

~30).

In support of this statement,

Shaughnessy provides an inventory statement as an attachment to the complaint (Doc. 11).

On February 2, 2014, Shaughnessy filed this action alleging Breach of Contract
against Fetter (Count I) and Negligent Misrepresentation against Fetter and Roos (Count
II). Shaughnessy alleges that the course of dealing together with the credit application,
Inventory Statements and other writings, constitute an enforceable contract for the sale of
specially manufactured goods (Id. at 22). Defendants move to dismiss the Complaint
pursuant to Rule 12(b)(6) because (1) Fetter was not legally obligated to purchase the
inventory in question and (2) Shaughnessy's complaint does not state a claim for
negligent misrepresentation.

III.
A.

Analysis

Count I: Breach of Contract
Defendants assert that the written Credit Application controls the relationship

because, under Missouri law, a course of dealing cannot be interpreted to contradict a
written agreement. The Credit Application provides that Fetter is only required to pay for
the inventory it actually orders. In the alternative, Defendants argue that the course of
dealing in this case also only obligated Fetter to purchase goods from Shaughnessy after
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placing an order. Therefore, because Shaughnessy has not alleged that Fetter ordered the
inventory at issue, Defendants argue that the Court should dismiss this claim.
Plaintiff responds asserting that Defendants argument for dismissal of Plaintiffs
complaint pursuant to Rule 12(b)(6) relies on deliberate misinterpretations and omissions
of several material facts pied by Plaintiff. Specifically, Plaintiff argues that the Credit
Application alone does not govern the Parties' relationship. Instead, pointing to the
language from its Complaint, Plaintiff states that ''the Credit Application, together with
the course of dealing . . ., the Inventory Statements, and other writings, constitutes a
contract for the sale of specially manufactured goods" (Doc. 13 at 5). Plaintiff also
argues, in response to Fetter's claim that Plaintiff has failed to plead that Fetter ordered
the Custom Paper inventory at issue, that Fetter's monthly request that Shaughnessy
increase its Custom Paper inventory by specific quantities is a vital component of the
routine course of dealing.
For the purposes of this motion, the Parties have agreed that Missouri Law applies
to this claim (Doc. 10-1 at 5). Under Missouri law, a breach of contract action includes
the following essential elements: (1) the existence and terms of a contract; (2) that
plaintiff performed or tendered performance pursuant to the contract; (3) breach of the
contract by the defendant; and (4) damages suffered by the plaintiff. Keveney v. Missouri
Military Academy, 304 S.W.3d 98, 104 (Mo. 2010). "A contract for the sale of goods

may be made in any manner sufficient to show agreement, including conduct by both
parties which recognizes the existence of such a contract." Mo. REV. STAT. § 400.2-204
(2014). See also Davidson & Associates, Inc. v. Internet Gateway, Inc., 334 F. Supp. 2d
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1164, 1177 (E.D. Mo. 2004). One such manner is through a "course of dealing," defined

as "a sequence of previous conduct between the parties to a particular transaction which
is fairly to be regarded as establishing a common basis of understanding for interpreting
their expressions and other conduct." Mo. REV. STAT. § 400.1-205(1). "The express
terms of an agreement and an applicable course of dealing . . . shall be construed
wherever reasonable as consistent with each other; but when such construction 1s
unreasonable express terms control .... " Mo. REV. STAT.§ 400.1-205(4).
The Court finds that Plaintiff has sufficiently alleged a breach of contract claim.
On the face of the complaint, the alleged course of dealing does not appear inconsistent
with the terms of the Credit Agreement.

Specifically, while the Credit Agreement

includes a provision regarding "goods and services ordered by [Fetter]," a reasonable
inference in the light most favorable to Shaughnessy is that Fetter "ordered" goods when
it made its monthly request for Shaughnessy to increase its Custom Paper inventory by
specific quantities (Doc. 1 at

~12).

If this is the case, then Fetter would be obligated

under the Credit Application to pay for the goods. While all of the nuances of this
relationship are not now before the Court, the issue is whether Plaintiff has sufficiently
stated a breach of contract claim and the Court finds that Plaintiff has met this burden.
B.

Count II: Negligent Misrepresentation
Defendants also assert that Plaintiff fails to state a claim for negligent

misrepresentation. A negligent misrepresentation claim consists of the following six
elements:
(1) the speaker supplied information in the course of his or her business because of
some pecuniary interest, (2) that was false, (3) without exercising reasonable care of
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competence in obtaining or communicating this information, (4) for the guidance of a
limited group of persons in a particular business transaction, (5) and the listener
justifiably relied on the information, (6) and, as a result, suffered a pecuniary loss.
Collins v. Mo. Bar Plan, 157 S. W.3d 726 (Mo. Ct. App. 2005). In other words, to
maintain a claim for negligent misrepresentation, Plaintiff must establish that due to a
failure to exercise reasonable care, Defendants made false statements that Plaintiff
justifiably relied upon to his detriment. Baum v. Helget Gas Products, Inc., 440 F .3d
1019, 1023 (8th Cir. 2006).
In its complaint, Plaintiff alleges that Fetter's representations, the First
Representation and the Second Representation, to Shaughnessy in January 2013 were
negligent and based upon Fetter's failure to exercise reasonable care (Doc. 1 at i!40).
Plaintiff further alleges that it justifiably relied on and was damaged by these
representations when it continued to perform under the Contract between the Parties and
purchased materials at Fetter's request (Id. at i!i!44, 45).
Defendants first assert that Fetter's failure to purchase Shaughnessy's inventory
cannot give rise to an independent claim of negligent misrepresentation when the same
facts are already pied within Plaintiffs breach of contract claim. Plaintiff responds that
the facts and circumstances of the negligent misrepresentation claim, and more
specifically, the First Representation, are sufficiently distinct to support a separate claim
for negligent misrepresentation.

Specifically, Plaintiff asserts that "[t]he First

Representation was made to Plaintiff in contemplation of Fetter selling the very segment
of its business that used the Custom Paper that Shaughnessy provided solely to Fetter"
(Doc. 13 at 9).
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"The mere failure to perform a contract cannot serve as a basis of tort liability
unless the breach itself is an independent tort." Ryann Spencer Grp., Inc. v. Assurance
Co. of Am., 275 S. W.3d 284, 290 (Mo. Ct. App. 2008). See also Wiles v. Capitol lndem.
Corp., 280 F.3d 868, 870 (8th Cir. 2002). "Attaching additional tort liability to a breach

of contract claim is only allowed when an independent tort has been committed against
the plaintiff' and "[t]he independent tort alleged cannot be dependent on the elements of
the contract claim." Hullverson Law Firm, P.C. v. Liberty Ins. Underwriters, Inc., No.
4:12-CV-1994 CAS, 2013 WL 3802517, at *l (E.D. Mo. July 22, 2013).
The Court finds that Plaintiff cannot bring a separate negligent misrepresentation
claim that relies on the First Representation. In this case, Plaintiff has stated a claim for
negligent misrepresentation that rests almost wholly on Fetter's refusal to pay for the
invoiced Custom Paper. While the negligent misrepresentation claim does include the
additional facts regarding the specific representations made by Roos on behalf of Fetter,
the First Representation is merely a reassurance that Fetter would continue performing
under the alleged contract. Therefore the allegations do not rise to the level of identifying
a separate tort claim as required by Missouri law.
As for the Second Representation, Defendants' assert that Fort Dearborn's
decision to purchase or not to purchase Shaughnessy's remaining paper was outside of
Fetter's control (Doc. 14 at 6).

Plaintiff responds that although the Second

Representation related to the future actions of Fort Dearborn, it constitutes a statement of
Defendants' present intention and concerns matters within Defendants' control. Plaintiff
argues that Defendants represented to Plaintiff that it would be paid for the remaining
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Custom Paper because Defendants had established an agreement with Fort Dearborn
whereby Fort Dearborn would purchase the remaining Custom Paper. Plaintiff further
asserts that the agreement was apparent to Shaughnessy because following the Second
Representation Fort Dearborn's Procurement Director was included on the distribution
lists for the Inventory Statements (Doc. 13 at 8).
In Missouri,
A claim for negligent misrepresentation generally cannot be based on unfulfilled
promises or statements as to future events, unless the statement is a representation
of the speaker's present intention or concerns matters within the speaker's control.
The representation is not actionable if it regards the future actions of an
independent third party. If the third party is independent, the third party would not
be under the control of the speaker, so the speaker would not be liable for any
misrepresentations.
Ryann Spencer, 275 S.W.3d at 291. Even in the light most favorable to the Plaintiff, the

alleged facts cannot be reasonably interpreted to afford Fetter control over the actions of
Fort Dearborn. While Fetter and Fort Dearborn may have entered into an agreement
whereby Fort Dearborn would purchase the remaining Custom Paper, there is no
suggestion that Roos was an agent of Fort Dearborn or had any authority to bind it to the
dealings with Shaughnessy.

Furthermore, a party is not justified in relying on

representations involving the future actions of an independent third party. Ryan Spencer,
275 S.W.3d at 290.
Therefore the Court finds that Plaintiffs negligent misrepresentation claim (Count
II) cannot survive Defendants' motion to dismiss.

IV.

Conclusion
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Accordingly,
IT IS HEREBY ORDERED that Defendants Fetter Printing Company and John
Roos' Motion to Dismiss (Doc. 10) is GRANTED in part.
misrepresentation claim (Count II) is DISMISSED with prejudice.

Dated this 30th day ofMarch, 2015.

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Plaintiffs negligent