Leisman et al v. Archway Medical, Inc.

Filing 16

MEMORANDUM AND ORDER IT IS HEREBY ORDERED that Defendant's Motion to Dismiss Counts I, IV, V, and VI of Plaintiffs' Petition (ECF No. 7) is DENIED. re: 7 MOTION to Dismiss :Counts I, IV, V, and VI filed by defendant Archway Medical, Inc. Signed by District Judge Ronnie L. White on 10/8/14. (JWJ)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
J. MILES LEISMAN, et al.,

)
)
)
)
)
)
)
)
)

Plaintiffs,
v.

ARCHWAY MEDICAL, INC.,
Defendants.

No. 4:14CV1222 RLW

MEMORANDUM AND ORDER
This matter is before the Court on Defendant' s Motion to Dismiss Counts I, IV, V, and
VI of Plaintiffs Petition. 1 The motion is fully briefed and ready for disposition.
Background

Plaintiffs J. Miles Leisman, Northstar Medical, LLC, Patrick Cramer, and Floyd Schmidt
filed a First Amended Complaint in federal court on August 28, 2014, after Defendant Archway
Medical, Inc. ("Archway") removed the original Petition from the Circuit Court for the City of
St. Louis, Missouri. (First Am. Compl., ECF No. 14; Notice of Removal, ECF No. 1) Plaintiffs
claim that Archway failed to pay them commissions on sales pursuant to a Consulting
Agreement between the parties. (First Am. Compl.

iii! 9-14, ECF No. 14) Specifically, Plaintiffs

sold Tornier products to medical providers in both Missouri and Illinois. (Id. at ii 11) Plaintiffs
were supposed to be paid commissions based on the manufacturer' s contracted percentage
commission rate. (Id. at ilil 10, 12-13) However, after Tornier increased the sales commission
1

On August 28, 2014, Plaintiffs filed a First Amended Complaint which joined two additional
Plaintiffs. However, the counts and allegations contained therein remained the same as the
original Petition such that the Amended Complaint did not moot the motion to dismiss.
Defendant filed a Reply Memorandum in Support of its Motion to Dismiss, referencing the
Amended Complaint. Thus, the Court construes the Motion to Dismiss as addressing the First
Amended Complaint.

rate paid to Defendant Archway, Plaintiffs allege that Archway failed to pay Plaintiffs at the
contractually agreed upon commission rate. (Id. at if 14)
Plaintiffs filed a six-count First Amended Complaint, alleging violations of the Missouri
Commission Sales Act (Count I); violations of the Illinois Sales Representatives Act (Count II);
Breach of Contract (Count III); Quantum Meruit (Count IV); Promissory Estoppel (Count V);
and Unjust Enrichment (Count VI). On July 14, 2014, Defendant filed a Motion to Dismiss
Counts I, IV, V, and VI under Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which
relief may be granted. Plaintiffs filed their Response in Opposition on July 24, 2014, and
Defendant filed a Reply Memorandum on September 8, 2014.

Standard for Ruling on a Motion to Dismiss
A complaint must be dismissed under Federal Rule 12(b)(6) for failure to state a claim
upon which relief can be granted if the complaint fails to plead "enough facts to state a claim to
relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 570 (2007)
(abrogating the "no set of facts" standard set forth in Conley v. Gibson, 355 U.S. 41, 45-46
(1957)). While the Court cautioned that the holding does not require a heightened fact pleading
of specifics, "a plaintiffs obligation to provide the ' grounds' of his 'entitle[ment] to relief
requires more than labels and conclusions, and a formulaic recitation of the elements of a cause
of action will not do." Id. at 555. In other words, " [f]actual allegations must be enough to raise
a right to relief above the speculative level .... " Id. This standard simply calls for enough facts
to raise a reasonable expectation that discovery will reveal evidence of the claim. Id. at 556.
Courts must liberally construe the complaint in the light most favorable to the plaintiff
and accept the factual allegations as true. See Id. at 555; see also Schaaf v. Residential Funding
Corp. , 517 F.3d 544, 549 (8th Cir. 2008) (stating that in a motion to dismiss, courts accept as
2

true all factual allegations in the complaint); Eckert v. Titan Tire Corp., 514 F .3d 801, 806 (8th
Cir. 2008) (explaining that courts should liberally construe the complaint in the light most
favorable to the plaintiff). Further a court should not dismiss the complaint simply because the
court is doubtful that the plaintiff will be able to prove all of the necessary factual allegations.

Twombly, 550 U.S. at 556. However, "[w]here the allegations show on the face of the complaint
there is some insuperable bar to relief, dismissal under Rule 12(b)(6) is appropriate." Benton v.

Merrill Lynch & Co., 524 F.3d 866, 870 (8th Cir. 2008) (citation omitted).
Discussion
Upon review of the Defendant's Motion to Dismiss and related memoranda, the
undersigned finds that dismissal is not warranted. Defendant first argues that Plaintiffs' claim
under the Missouri Commission Sales Act ("MCSA") should be dismissed because the
Consultant Agreement states that Illinois law controls. Thus, Defendant reasons that Plaintiffs
may bring a claim only under the Illinois Sales Representative Act ("IRSA"). Defendant asks
this Court to perform a choice of law analysis under Missouri law and then conclude that Illinois
law applies. Plaintiffs, on the other hand, contend that Defendant's motion is premature because
the factual details required to perform a choice of law analysis are not yet in the record. The
undersigned finds that a choice oflaw analysis is not appropriate at this stage of the litigation.
The parties agree that this Court must apply Missouri choice of law principles. See

Bomkamp v. Hilton Worldwide, Inc., No. 4:13-CV-1569 CAS, 2014 WL 897368, at *9 (E.D. Mo.
March 6, 2014) ("[F]ederal courts sitting in diversity apply the forum state's choice oflaw
principles."). "Missouri courts generally recognize that parties may choose the state whose law
will govern the interpretation of their contractual rights and duties .... Missouri courts will
honor the parties' choice of law provision ifthe application of the law is not contrary to a

3

fundamental policy of Missouri." Davidson & Assoc. , Inc. v. Internet Gateway, Inc., 334 F.
Supp. 2d 1164, 1175 (E.D. Mo. 2004) (internal and external citations omitted). Before reaching
the conclusion that a choice of law determination is required, the Court must determine whether
the Missouri and Illinois laws differ with respect to Plaintiffs' claims. See Whitney v. Guys, Inc.,
700 F.3d 1118, 1123 (8 1h Cir. 2012) (stating that the first step in a choice oflaw analysis
"requires examination of whether the different states' laws actually present a conflict").
For claims concerning payment of commissions, Missouri allows "actual damages
sustained by the sales representative and an additional amount as if the sales representative were
still earning commissions calculated on an annualized pro rata basis from the date of termination
to the date of payment," as well as attorney' s fees and costs to the prevailing party. Mo. Rev.
Stat.§ 407.913. The Illinois law allows exemplary damages not to exceed three times the
amount of commissions owed to the sales representative, along with reasonable attorney's fees
and court costs. 820 ILCS 120/3. Because the two Acts conflict with regard to the measure of
damages, the Court should perform a choice of law analysis.
Here, § 187 of the Restatement (Second) of Conflict of Laws (1971) governs the validity
of a choice of law provision in a contract. That section provides:
(1) The law of the state chosen by the parties to govern their contractual rights
and duties will be applied if the particular issue is one which the parties could
have resolved by an explicit provision in their agreement directed to that issue.
(2) The law of the state chosen by the parties to govern their contractual rights
and duties, will be applied, even if the particular issue is one which the parties
could not have resolved by an explicit provision in their agreement directed to
that issue, unless either
(a) the chosen state has no substantial relationship to the parties or the
transaction and there is no other reasonable basis for the parties ' choice, or
(b) application of the law of the chosen state would be contrary to a
fundamental policy of a state which has a materially greater interest than
4

the chosen state in the determination of the particular issue and which,
under the rule of§ 188, would be the state of the applicable law in the
absence of an effective choice of law by the parties.
Restatement (Second) of Conflict of Laws§ 187 (1971).
Plaintiffs claim that the Court may not consider the Consultant Agreements without
converting the motion to dismiss to one for summary judgment because the Agreements are
outside the pleadings. However, Plaintiffs rely upon those Agreements and the language
contained therein to support their contentions that Defendant violated the Sales Acts of both
Missouri and Illinois, as well as breached those Agreements. "Documents that are necessarily
embraced by the pleadings are not 'matters outside the pleadings' for purposes of Rule 12(d)."

Reitz v. Nationstar Mortg. , LLC, 954 F. Supp. 2d 870, 876 (E.D. Mo. 2013). "A court need not
convert a Rule 12(b)(6) motion to dismiss into on[e] for summary judgment under Rule 12(d) if
the matters presented are incorporated by reference, are integral to the claim, or are exhibits
whose authenticity is unquestioned." Id. (citations omitted). In this case, the Agreements are
integral to Plaintiffs' claims and are therefore necessarily embraced by the pleadings. See Gorog

v. Best Buy Co. , Inc., 760 F.3d 787, 791 (8 1h Cir. 2014) (holding that the Agreement upon which
plaintiffs breach of contract claim rested was embraced by the amended complaint, and the
lower court's reliance on the Agreement did not convert the motion to dismiss to a motion for
summary judgment).
Although the Consulting Agreements specify that Illinois law will control, Plaintiffs
argue that the Illinois choice of law contained in the contract is against Missouri public policy
because Chapter 407 of the Missouri Revised Statutes represents a fundamental policy of the
State of Missouri. See Electrical and Magneto Serv. Co. Inc. v. AMBAC Int '/, 941F.2d660, 663
(8th Cir. 1992) (abrogated on other grounds by Baxter Int '/, Inc. v. Morris, 976 F.2d 1189 (8th

5

Cir. 1992)) (finding that Chapter 407 is paternalistic legislation that is fundamental policy); Lift
Truck Lease and Serv., Inc. v. Nissan Forklift Corp. , North America, No. 4: 12-CV-153 CAS,
2013 WL 3092115, at *3-*4 (E.D. Mo. June 18, 2013) (same). In light of Plaintiffs public
policy argument and the fact-intensive nature of a choice of law analysis, the Court finds that
such analysis is better suited for a motion for summary judgment. See Brain & Assoc. , Inc. v.
Genecor Int '!, Inc. , 232 F.R.D. 335, 339 (D.S.D. 2005) (declining to decide whether the choice
oflaw provision applied where facts had not been adequately presented at that stage of the
litigation).
Defendant also contends that Plaintiffs' claims for equitable relief must be dismissed
because Plaintiffs cannot obtain equitable relief when they admittedly entered into an express
contract and because the claims are defective in that they fail to plead essential elements.
Plaintiffs respond that they have pleaded alternate theories of recover, which is allowable under
Fed. R. Civ. P. 8(d)(2). The Court agrees that a party may assert alternative claims for breach of
an express contract and equitable relief. Guarantee Elec. Constr. Co. v. L VC Tech., Inc., No.
4:05CV8949 JCH, 2006 WL 950204, at *2 (E.D. Mo. April 10, 2006).
Further, the Court finds that whether a party may plead in the alternative is procedural in
nature, and thus the Court will apply the law of the forum state. See Superior Edge, Inc. v.
Monsanto Co. , Civil No. 12-2672 (JRT/FLN), 2014 WL 4414764, at *6 (D. Minn. Sept. 8, 2014)
("[T]he Federal Rules of Civil Procedure explicitly allow parties to include in their pleadings
demands for alterative relief .. .");Sargent v. Justin Time Transp., L.L.C., No. 4:09CV596 HEA,
2009 WL 4559222, at *2 (E.D. Mo. Nov. 30, 2009) ("Pleading in the alternative is clearly
allowed under Federal Rule of Civil Procedure 8(e)."). Missouri law does not allow recovery
under both an express contract and equitable theories of relief. Level 3 Commc 'ns, LLC v.

6

fllinois Bell Tel.Co., No. 4:14-CV-1080 (CEJ), 2014 WL 414908, at *6 (E.D. Mo. Feb. 4, 2014)
(citation omitted). However, a plaintiff may plead alternative claims for relief in the complaint.

Id.; see also Superior Edge, 2014 WL 4414 764, at *6 (citations omitted) ("In reliance upon the
Rule 8, federal courts in Missouri have consistently denied motions to dismiss quasi-contract
claims even where the pleading also alleges the existence of an express contract."); Guarantee

Elec. Constr. Co., 2006 WL 950204, at *2 (E.D. Mo. April 10, 2006) ("Because a party may set
forth two or more claims alternatively when it does not know upon which precise theory the
evidence may entitle recovery, it is settled law that joining a count based on an expressed
contract with a count based on quantum meruit does not create an inconsistency."). Thus, the
Court will allow Plaintiffs' alternative pleadings.
In addition, the undersigned finds that Plaintiffs have stated claims under equitable
theories that are plausible on their face. With regard to quantum meruit, the essential elements
are: "(1) a benefit conferred upon defendant by plaintiff; (2) appreciation by defendant of the fact
of such benefit; and (3) acceptance and retention by defendant without payment." Guarantee

Elec. , 2006 WL 950204 at *2; see also Ogdon v. Hoyt, 409 F. Supp. 2d 982, 990 (N.D. Ill. 2006)
("The elements of quantum meruit are that: (1) the plaintiff rendered services; (2) the defendant
received the benefit of those services; and (3) the defendant's retention of those services without
giving compensation in exchange would be unjust."). Here, Plaintiffs claim that they conferred a
benefit upon Defendant by performing work; Defendant accepted and retained the benefit; and
Defendant failed to pay the promised commissions. Thus, the Court finds that Plaintiffs have
stated a sufficient claim for recovery under the theory of quantum meruit. Guarantee Elec., 2006
WL 950204 at *2.

7

..
Similarly, Plaintiffs claims for promissory estoppel and unjust enrichment are sufficient
to survive Defendant' s motion to dismiss. Promissory estoppel requires an unambiguous
promise made by defendant to plaintiff; plaintiffs reliance on the promise; reliance that was
expected and foreseeable by defendant; and plaintiffs reliance to his detriment. Ogdon, 409 F.
Supp. 2d at 989; see also 1861 Group, L.L.C. v. Wild Oats Mkts., Inc., 728 F. Supp. 2d 1052,
1059 (E.D. Mo. 2010) ("To prevail on a promissory estoppel claim under Missouri law, a party
must establish the following four elements: (1) a promise; (2) on which plaintiff relied to its
detriment; (3) in a way the promisor expected or should have expected; and (4) the reliance
resulted in an injustice which can be cured only by enforcement of the promise."). Plaintiffs here
contend that Defendant expected to and did induce Plaintiffs to rely on promises pertaining to the
payment of sales commissions and that Plaintiffs relied on these promises to their detriment.
Furthermore, the required elements for unjust enrichment are: (1) that the plaintiff
"conferred a benefit on the defendant; (2) the defendant appreciated the benefit; and (3) the
defendant accepted and retained the benefit under inequitable and/or unjust circumstances."
Burks v. Bi-State Dev. Agency of Mo. - Ill. Metro. Dist. , No. 4:09CV1302 MLM, 2010 WL

2681356, at *5 (E.D. Mo. July 2, 2010) (internal quotation and citations omitted); Williams v.
Nat '! Housing Exch. , Inc. , 949 F. Supp. 650, 652 (N.D. Ill. 1996) (stating that a claim for unjust

enrichment in Illinois requires allegations that the defendant unjustly retained a benefit to the
plaintiffs detriment, and the defendant' s retention of the benefit violated fundamental principles
of justice, equity, and good conscience). In the instant case, Plaintiffs assert that Defendant
obtained benefits from Plaintiffs, yet failed to provide Plaintiffs their due commission, instead
inequitably retaining the benefits.

8

In short, the Court finds that Plaintiffs have stated a claim for equitable relief on the face
of the pleadings, such that dismissal is not warranted at this time. Plaintiffs have alleged enough
facts to raise a reasonable expectation that discovery will reveal evidence of the claim.

Twombly, 550 U.S. at 556. Thus, the Court will deny Defendant' s Motion to Dismiss.

Accordingly,

IT IS HEREBY ORDERED that Defendant' s Motion to Dismiss Counts I, IV, V, and
VI of Plaintiffs' Petition (ECF No. 7) is DENIED.

Dated

this~ Day of October, 2014.
RONNIE L. WHITE
UNITED STATES DISTRICT JUDGE

9