Reefer Systems, Inc. et al v. Southard Financial, LLC et al

Filing 39

MEMORANDUM AND ORDER as to Motion to Dismiss for Failure to State a Claim 23 . The Finnell defendants' motion to dismiss is granted in part and denied in part. The Finnell defendants' motion to dismiss plaintiffs' breach of contr act claim is granted. Plaintiffs' breach of contract claim is dismissed. The Finnell defendants' motion to dismiss plaintiffs' professional malpractice claim is denied. The Finnell defendants' motion to dismiss plaintiffs' ; negligent misrepresentation claim is denied. The Finnell defendants' motion to dismiss plaintiffs' fraudulent concealment claim is denied. The Finnell defendants' motion to dismiss pursuant to Federal Rule 12(b)(7) is denied. Ordered by Senior Judge Lyle E. Strom. (GJG)

IN THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF NEBRASKA
REEFER SYSTEMS, INC., and
WILLIAM WILLETT,

)
)
)
Plaintiffs,
)
)
v.
)
)
SOUTHARD FINANCIAL, LLC,
)
KELLY FINNELL, and EXECUTIVE )
FINANCIAL SERVICES, INC.,
)
)
Defendants.
)
______________________________)

8:16CV93

MEMORANDUM AND ORDER

This matter is before the Court on the motion of
defendants, Kelly Finnell and Executive Financial Services, Inc.
(“EFS”) (hereinafter collectively the “Finnell defendants”),
dismiss (Filing No. 23).
the parties.

to

The matter has been fully briefed by

See Filing Nos. 23-1, 30, and 33.

After review of

the motion, the parties’ briefs, and the applicable law, the
Court finds as follows.
BACKGROUND
This case arises out of “the creation, implementation,
valuation, and application” of an employee stock ownership plan
(“ESOP”) on behalf of the plaintiff, William Willett’s
(“Willett”) company, Reefer Systems, Inc. (“Reefer”) (Filing No.
1 at 1).

In the early part of 2009, Kelly Finnell spoke to

Willett about establishing an ESOP for Reefer (Id. at 3).

On

January 21, 2010, Reefer hired Southard Financial, LLC
(“Southard”), at the recommendation of the Finnell defendants, to
perform “valuation and financial advisory services” for Reefer
and “the yet-to-be formed ESOP.”

(Id.); see also id. at 4

(stating EFS would assist in finding “a valuation expert
(appraiser)”).
Three months later, on April 21, 2010, Reefer and EFS
entered into a contract whereby EFS would provide various
consulting services “including, without limitation:

assisting

with the creation and coordination of the ‘ESOP team’ . . .
drafting the ESOP document and [s]ummary [p]lan [d]escription and
submitting the ESOP to the IRS requesting a [f]avorable
[d]etermination [l]etter.”

(Id.)

EFS drafted the ESOP, the

trust agreement, and the stock purchase agreement (Id.)
On December 17, 2010, the ESOP was executed (Id. at 45).

The trust, set up for the ESOP, under the direction of

Daniel Bracht as trustee, paid $10 million for 30% of Reefer’s
stock.

See id. at 5.

That same day, Southard issued a fairness

opinion stating that “the stock sale of the ESOP of 30% of
[Reefer] for $10 million d[id] not exceed the fair market value
of [Reefer] as of December 17, 2010.”

(Id.)

About eight months later, on August 26, 2011, Southard
sent Kelly Finnell an email stating:
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I am in the process of providing
Reefer Systems (Midland Carrier
Transicold) with an update
valuation as of December 31, 2010.
I am running into the same type of
issue we had with Security Seed,
where we valued [t]he company on a
control basis for a minority
purchase under the assumption that
the plan would specify that all
future valuations would be on the
same level.
Doug and I were just looking at the
plan document and it does not say
that.
Is this something you can help us
with?
We would prefer not to have to
change the valuation methodology
since that would result in a
significant drop in value.
(Id.)

Three days later on August 29, 2011, Finnell answered the

email and allegedly sent, “what purported to be a page from the
ESOP [p]lan [d]ocument . . . .”

(Id.)

The email stated: “When

‘valuing the assets comprising the Trust Fund at their fair
market value, ‘the Trustee shall not apply a ‘minority interest
discount’ or ‘discount for lack of marketability’ when valuing
[Reefer’s] Stock.”

(Id. at 5-6).

On October 30, 2013, “the United States Department of
Labor (“DOL”) . . . sent Reefer an audit letter notifying it of
an audit of Reefer’s ESOP . . . .”
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(Id. at 6).

Then in August

of 2015, plaintiffs allege that they “learned that the DOL was
taking the position that the initial valuation established by
Southard . . . was overstated by millions of dollars.”

(Id.)

Plaintiffs filed the instant action on February 24,
2016, alleging various causes of action against Southard and the
Finnell defendants.

See generally Filing No. 1 at 6-12.

Plaintiffs’ claims against the Finnell defendants include:
professional malpractice, negligent misrepresentation, fraudulent
concealment, and breach of contract.

(Id. at 9-12).

Plaintiffs specifically allege with respect to the
professional malpractice claim, that “Finnell and EFS failed to
obtain a [f]avorable [d]etermination [l]etter from the IRS and
upon information and belief . . . knew the valuation and fairness
opinion provided by Southard . . . was unlawful and incorrect and
failed to inform [p]laintiffs of this fact.”

(Id. at 9).

With

respect to the negligent misrepresentation claim plaintiffs
allege “Finnell and EFS supplied [p]laintiffs with false
information that was intended for their guidance . . . [and]
failed to exercise reasonable care and competency in supplying
information regarding the ESOP.”

(Id. at 10).

With respect to

the fraudulent concealment claim, plaintiffs allege “[i]n effort
to conceal their overstatement of the initial valuation relating
to the ESOP, [d]efendants conspired to create a false document
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and fraudulently concealed the fact that the initial valuation
was overstated and not consistent with the ESOP plan documents.”
(Id.)

Finally, with respect to the breach of contract claim,

plaintiffs allege “Finnell and EFS breached the agreement in the
ways identified above.”

(Id. at 11).

Through plaintiffs’ brief

the Court understands the breach of contract claim to be based on
the Finnell defendants’ failure to obtain a favorable
determination letter from the IRS.

See Filing No. 30 at 18

(claiming “[p]laintiffs have clearly put the Finnell [d]efendants
on notice that they are claiming they failed to obtain a
[f]avorable [d]etermination [l]etter and have clearly alleged a
breach of contract although the Finnell [d]efendants disagree
with such a claim.”).
On April 20, 2016, the Finnell defendants filed the
instant motion to dismiss (Filing No. 23).

The Finnell

defendants argue plaintiffs’ causes of action should be dismissed
pursuant to Federal Rules of Civil Procedure 12(b)(6), 12(b)(7),
and 9(b).

(Id.)

STANDARDS OF REVIEW
A. 12(b)(6)
Determining whether a complaint states a plausible
claim for relief is “a context-specific task” that requires a
court “to draw on its judicial experience and common sense.”
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Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir.
2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 677-78, 129 S.
Ct. 1937, 173 L. Ed. 2d 868 (2009)).

Federal Rule of Civil

Procedure 8 requires a complaint to present “a short and plain
statement of the claim showing that the pleader is entitled to
relief.”

Fed. R. Civ. P. 8(a)(2).

“[A] complaint must contain

sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face.”

Braden, 588 F.3d at 594

(quoting Iqbal, 556 U.S. at 677-78) (citing Bell Atlantic Corp.
v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929
(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.”

Iqbal, 556 U.S. at 678.

When considering a motion to dismiss under Rule
12(b)(6), well-pled allegations are considered to be true and are
viewed in the light most favorable to the plaintiff.
F.3d at 591, 595.

Braden, 588

In viewing the facts in this light, the Court

must determine whether the complaint states any valid claim for
relief.

Jackson Sawmill Co. v. United States, 580 F.2d 302, 306

(8th Cir. 1978).

Recitations of elements of a cause of action

with mere conclusory statements fail to meet Rule 8’s pleading
requirements.

Iqbal, 556 U.S. at 678.
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However, a plaintiff may

use legal conclusions to provide the framework of a complaint, so
long as factual allegations support those legal conclusions.
at 678-79.

Id.

Thus, a dismissal is likely “only in the unusual case

in which a plaintiff includes allegations which show on the face
of the complaint that there is some insuperable bar to relief.”
Jackson Sawmill, 580 F.2d at 306.
B. 12(b)(7)
“When deciding a motion to dismiss under Federal Rule
of Civil Procedure 12(b)(7) for ‘failure to join a party under
Rule 19,’ Fed. R. Civ. P. 12(b)(7), the Court must first
determine if the party is a ‘necessary party’ under Rule
19(a)(1).”

Rayeman Elements, Inc. v. Masterhand Milling, LLC,

No. 8:15CV89, 2015 WL 3658529, at *2 (D. Neb. June 12, 2015)
(citing Baker Group, L.C. v. Burlington N. & Santa Fe Ry. Co.,
451 F.3d 484, 490 (8th Cir. 2006) (citing Fed. R. Civ. P.
19(a))).

Under Rule 19 a party is “necessary” if:
(A) in that person's absence, the
court cannot accord complete relief
among existing parties; or
(B) that person claims an interest
relating to the subject of the
action and is so situated that
disposing of the action in the
person's absence may:
(i) as a practical matter impair or
impede the person's ability to
protect the interest; or
(ii) leave an existing party
subject to a substantial risk of
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incurring double, multiple, or
otherwise inconsistent obligations
because of the interest.
Fed. R. Civ. P. 19(a)(1).

If the Court determines that “the

party is ‘necessary,’ subject to service of process, and joinder
would not deprive the Court of subject matter jurisdiction, then
‘the court must order that the person be made a party.’”

Rayeman

Elements, 2015 WL 3658529, at *3 (quoting Fed. R. Civ. P.
19(a)(2)).

“If the party is necessary’ but joinder is not

feasible because the party is not subject to service of process
or joinder would ‘deprive the Court of subject matter
jurisdiction,’ Fed. R. Civ. P. 19(a)(1), then the Court must
determine under Rule 19(b), if ‘in equity and good conscience,
the action should proceed among the existing parties or should be
dismissed.’”

Rayeman Elements, 2015 WL 3658529 at *3 (quoting

Fed. R. Civ. P. 19(b)); see also Baker Group, 451 F.3d at 490
(citing Fed. R. Civ. P. 19(b); Ranger Transp., Inc. v. Wal–Mart
Stores, 903 F.2d 1185, 1187 n.2 (8th Cir. 1990) (citing Fed. R.
Civ. P. 19(b))).

Rule 19(b) provides factors a court may

consider when deciding if an action should proceed without the
“necessary” party or be dismissed.

The factors courts consider

include:
(1) the extent to which a judgment
rendered in the person's absence

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might prejudice that person or the
existing parties;
(2) the extent to which any
prejudice could be lessened or
avoided by:
(A) protective provisions in the
judgment;
(B) shaping the relief; or
(C) other measures;
(3) whether a judgment rendered in
the person's absence would be
adequate; and
(4) whether the plaintiff would
have an adequate remedy if the
action were dismissed for
nonjoinder.
Fed.R.Civ.P. 19(b).
C. 9(b)
Rule 9(b) of the Federal Rules of Civil Procedure
provides that “a party must state with particularity the
circumstances constituting fraud.”

This means the complaint must

plead the who, what, when, where, and how of the fraud.

Accurate

Communications, LLC v. Startel Corp., No. 4:05CV3286, 2006 WL
488717, at *4 (D. Neb. Feb. 28, 2006); see also Parnes v. Gateway
2000, Inc., 122 F.3d 539, 549–50 (8th Cir. 1997).
DISCUSSION
The Court finds that the Finnell defendants’ motion to
dismiss should be granted in part and denied in part.

The Court

will grant the Finnell defendants’ motion to dismiss as to

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plaintiffs’ breach of contract claim and deny the motion as to
the rest of plaintiffs’ claims.
I. Materials to be Considered
As an initial matter, the Court must first decide which
materials can be considered for purposes of this motion.

The

Finnell defendants submitted an index in support of their motion
to dismiss (Filing No. 24).
(Id.)

The index contains eight exhibits

Plaintiffs’ brief in opposition argues the motion to

dismiss “is based . . . on documents outside the pleadings that
. . . [t]he Court may not consider . . . without converting the
[m]otion to [d]ismiss into a motion for summary judgment.”
(Filing No. 30 at 5) (citing Brooks v. Midwest Heart Group, 655
F.3d 796, 799-800 (8th Cir. 2011)).
Federal Rule of Civil Procedure 12(d) provides:
If on a motion under Rule 12(b)(6)
or 12(c), matters outside the
pleadings are presented to and not
excluded by the court, the motion
must be treated as one for summary
judgment under Rule 56. All parties must be given a reasonable
opportunity to present all the material that is pertinent to the
motion.
Fed. R. Civ. P. 12(d).

However, the United States Court of

Appeals for the Eighth Circuit has held that “Rule 12(b)(6)
motions are not automatically converted into motions for summary
judgments simply because one party submits additional matters in

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support of or opposition to the motion.”

State ex rel. Nixon v.

Coeur D’Alene Tribe, 164 F.3d 1102, 1107 (8th Cir. 1999) (citing
Martin v. Sargent, 780 F.2d 1334, 1336-37 (8th Cir. 1985)).
Exceptions exist that allow some extra-pleading materials to be
considered.

See, e.g., Coeur D’Alene Tribe, 164 F.3d at 1107

(determining that materials that are part of the public record or
that do not contradict the complaint can be considered); Piper
Jaffray Companies, Inc. v. Nat’l Union Fire Ins. Co. of
Pittsburgh, Pa., 967 F. Supp. 1148, 1152 (D. Minn. 1997) (stating
that materials that are “necessarily embraced by the pleadings”
are considered under 12(b)(6) motions).
The Eighth Circuit has directed that “‘documents
necessarily embraced by the complaint are not matters outside the
pleading[s]’” under the meaning of Rule 12(d).

Gorog v. Best Buy

Co., Inc., 760 F.3d 787, 791 (8th Cir. 2014) (quoting Ashanti v.
City of Golden Valley, 666 F.3d 1148, 1151 (8th Cir. 2012)
(internal marks and cites omitted)).

Courts may “‘consider . . .

documents whose contents are alleged in a complaint and whose
authenticity no party questions, but which are not physically
attached to the pleading.’”

Kushner v. Beverly Enterprises,

Inc., 317 F.3d 820, 831 (8th Cir. 2003) (quoting In re Syntex
Corp. Sec. Litig., 95 F.3d 922, 926 (9th Cir. 1996)).

Finally,

district courts have “‘complete discretion to determine whether
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or not to accept any material beyond the pleadings that is
offered . . . .’”

Svoboda v. Tri-Con Industries, Ltd., No.

4:08CV3124, 2008 WL 4754647, at *2 (D. Neb. Oct. 27, 2008)
(quoting Stahl v. U.S. Dept. of Agriculture, 327 F.3d 697, 701
(8th Cir. 2003) (internal quotation omitted)) (emphasis added).
Although plaintiffs dispute the Court’s ability to
consider the eight documents in the Finnell defendants’ index
(Filing No. 24), the plaintiffs do not challenge the authenticity
of the documents.

See Filing No. 30 at 5-10.

Furthermore,

several of the exhibits in the Finnell defendants’ index are
referred to in the complaint and thus “necessarily embraced” by
it.

The Court finds that the ESOP (Exhibit 2), the trust

agreement (Exhibit 3), the application for a favorable IRS
determination letter (Exhibit 4), and the draft valuation
(Exhibit 8) are all necessarily embraced by the complaint.
Accordingly, in determining the present motion in accordance with
Rule 12(d),1 the Court will consider these materials as well as

1

The restriction that the Court not consider materials
outside the pleadings applies only to motions brought pursuant to
Rule 12(b)(6) and 12(c). See Fed. R. Civ. P. 12(d). As the
Finnell defendants’ motion was brought pursuant to Rules 12(b)(7)
and 9(b) in addition to Rule 12(b)(6), the restriction that the
Court not consider materials outside the pleadings will impact
only the Court’s determination of the 12(b)(6) portion of the
motion.
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the complaint itself and the exhibits attached thereto (Filing
Nos. 1-1, 1-2, and 1-3).
II. Choice of Law Analysis
The contract executed between plaintiffs and the
Finnell defendants, attached to the complaint as exhibit 2,
provides that the agreement “shall be governed by the substantive
law of the state of Tennessee.”

(Filing No. 1-2 at 2).

“In

determining whether a choice of law provision in the parties’
agreement will be given effect, a federal court sitting in
diversity looks to the choice of law principles of the forum
state . . . .”

Florida State Bd. of Admin. v. Law Eng’g and

Envtl. Servs., Inc., 262 F. Supp. 2d 1004, 1012 (D. Minn. 2003)
(internal citations omitted).

See also John T. Jones Constr. Co.

v. Hoot Gen. Constr. Co., Inc., 613 F.3d 778, 782 (8th Cir. 2010)
(“We apply the choice-of-law rules of the forum state in a
diversity action.”).
Nebraska follows the Restatement (Second) of Conflict
of Laws § 187.
37 (Neb. 2011).

See Am. Nat. Bank v. Medved, 801 N.W.2d 230, 236Section 187 of the Restatement (Second) of

Conflict of Laws 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
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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 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 Law § 187 at 561 (1971).
The Court finds that under Nebraska’s choice of law
rules, the parties’ choice of law provision in the contract
should govern.

The Court also finds the exceptions outlined in

§ 187 inapplicable.

The Finnell defendants have a substantial

relationship to Tennessee and the Court finds the existence of a
reasonable basis for the parties’ choice of law.
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In addition,

neither party contends that application of Tennessee state law
would be contrary to a fundamental policy of Nebraska law.

The

Court likewise finds application of Tennessee law to not be
contrary to any fundamental policies of Nebraska state law.
Accordingly, the Court will apply Tennessee law to plaintiffs’
claims for purposes of this motion.
III. Motion to Dismiss Pursuant to Rule 12(b)(6)
A. Professional Malpractice Claim
The Court will deny the Finnell defendants’ motion to
dismiss plaintiffs’ professional malpractice claim.

The Finnell

defendants contend the exculpatory provision in the agreement,
and/or the applicable statute of limitations bar(s) plaintiffs’
claim for professional malpractice.

See Filing No. 23 at 1-2.

In addition, the Finnell defendants argue “[p]laintiffs failed to
allege sufficient facts to state a plausible claim against EFS
and Mr. Finnell . . . [t]herefore, pursuant to Fed. R. Civ. P.
12(b)(6), the claims should be dismissed.”

(Id. at 2) (citing

Iqbal, 556 U.S. at 679).
Under Tennessee law, “[a]s a general rule . . .
‘subject to certain exceptions, parties may contract that one
shall not be liable for his negligence to another.’”

Russell v.

Bray, 116 S.W.3d 1, 5 (Tenn. Ct. App. 2003) (quoting Crawford v.
Buckner, 839 S.W.2d 754, 756 (Tenn. 1992)).
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An exculpatory

clause “will be enforced by the courts so long as it does not
extend to liability for willful or gross negligence and does not
offend public policy.”

Perez v. McConkey, 872 S.W.2d 897, 904

(Tenn. 1994) (citing Crawford v. Buckner, 839 S.W.2d 754, 759-60
(Tenn. 1992); Olson v. Molzen, 558 S.W.2d 429, 430 (Tenn. 1977)).
Tennessee courts also analyze “whether there [is] evidence of
fraud or negligent misrepresentation” in determining whether or
not to enforce an exculpatory agreement.

See Roopchan v. ADT

Sec. Sys., Inc., 781 F. Supp. 2d 636, 648 (E.D. Tenn. 2011).
Plaintiffs allege claims of fraudulent concealment and
negligent misrepresentation.

(Filing No. 1 at 10-11).

In

accordance with the motion to dismiss standard, accepting as true
plaintiffs’ factual allegations and drawing all reasonable
inferences in favor of the nonmoving party, the Court finds
plaintiffs have produced evidence of fraud and/or negligent
misrepresentations.

The Court, applying applicable Tennessee law

will therefore reject the Finnell defendants’ argument that the
exculpatory clause in the parties’ agreement bars recovery for
professional malpractice.
The Finnell defendants next argue that plaintiffs’
professional malpractice claim is barred by Nebraska’s two-year
statute of limitations.
Rev. Stat. § 25-222).

See Filing No. 23-1 at 12 (citing Neb.
Plaintiffs’ complaint alleges “[p]rior to
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August 2015, [p]laintiffs did not discover and reasonably could
not have discovered their cause of action against [d]efendants.”
(Filing No. 1 at 6).
Because Tennessee law applies to the substantive law,
Tennessee’s statutes of limitation apply.

See Neb. Rev. Stat.

§§ 25-3203(a), 25-3204 (stating that under the Uniform Conflict
of Laws Limitation Act, Neb. Rev. Stat. §§ 25-3201 through 253207, “[i]f a claim is based on the substantive law of another
state . . . [that] state’s statute of limitations will apply, as
well as [that] state’s accrual and tolling rules.”).
Tennessee employs a one-year statute of limitation for
professional malpractice claims.

Tenn. Code Ann. § 28-3-104.

Based on plaintiffs’ factual allegations, accepted as true for
purposes of the present motion to dismiss, the Court finds that
defendants’ motion to dismiss pursuant to the applicable statute
of limitations should be denied.

In addition, the Court finds

that plaintiffs have alleged sufficient facts to survive
defendants’ motion to dismiss.

Accordingly, defendants’ motion

to dismiss plaintiffs’ professional malpractice claim will be
denied.
B. Breach of Contract Claim
The Court will grant the Finnell defendants’ motion to
dismiss plaintiffs’ breach of contract claim.
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The Finnell

defendants seek dismissal of the breach of contract claim under
Rule 12(b)(6), claiming that the exculpatory provision within the
parties’ agreement, the applicable statute of limitations, as
well as plaintiffs’ failure to allege sufficient facts require
dismissal of the claim (Filing No. 23 at 1-2).
The Court finds, for the reasons outlined above, that
Tennessee law should also govern the plaintiffs’ breach of
contract claim.

Under Tennessee law, in order to make out a

prima facie case for a breach of contract claim, the plaintiff
must satisfy three elements.

The elements are: (1) the existence

of an enforceable contract; (2) the non-performance of a
contractual duty amounting to a breach; and (3) damages caused by
the breach.

Ingram v. Cendant Mobility Fin. Corp., 215 S.W.3d

367, 374 (Tenn. Ct. App. 2006) (internal marks and cites
omitted).
Plaintiffs, in their brief in opposition, seem to admit
that their claim for breach of contract is unenforceable due to
the exculpatory provision within the parties’ agreement.

See

Filing No. 30 at 10 (stating that “[t]he plain language of the
[exculpatory] clause . . . expressly limits it to services
provided under the EFS [a]greement, meaning . . . [the Finnell
defendants] cannot be held liable under the [a]greement (i.e.
breach of contract) . . . .”) (emphasis in original).
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In

addition, plaintiffs’ breach of contract claim is centered on the
contractual provision requiring the Finnell defendants to seek a
favorable determination letter from the IRS.

See id. at 18

(arguing that “[p]laintiffs have clearly put the Finnell
[d]efendants on notice that they are claiming they failed to
obtain a Favorable Determination Letter and have clearly alleged
a breach of contract although the Finnell [d]efendants disagree
with such a claim.”).

Because the Court will consider the

application for a favorable determination from the IRS (Filing
No. 24-4), and because the plaintiffs seem to admit that the
exculpatory clause within the parties’ agreement precludes
plaintiffs’ breach of contract claim, the Court finds that the
Finnell defendants have met their burden under Rule 12(b)(6).
The Court finds that plaintiffs have failed to state a valid
claim for relief for their breach of contract claim.
Accordingly, the Court will grant the Finnell defendants’ motion
to dismiss with respect to the plaintiffs’ breach of contract
claim.2

2

Because of the findings explained above, the Court will
forego discussion and determination of the Finnell defendants’
claims that the applicable statute of limitations bars
plaintiffs’ recovery under a breach of contract claim. The Court
will also forego consideration that plaintiffs have failed to
plead facts sufficient enough to allege a breach of contract
claim.
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C. Negligent Misrepresentation Claim
The Court will deny the Finnell defendants’ motion to
dismiss with respect to the plaintiffs’ negligent
misrepresentation claim.

The Finnell defendants seek to dismiss

plaintiffs’ negligent misrepresentation claim under Rule 12(b)(6)
based on the exculpatory provision within the parties’ agreement,
and for failure to allege sufficient facts to establish the cause
of action (Filing No. 23 at 1-2).

As discussed above, the Court

will forego enforcement of the exculpatory clause with respect to
the plaintiffs’ tort claims due to plaintiffs’ allegations and
factual evidence of fraud and/or negligent misrepresentation.
Furthermore, the Court finds that plaintiffs have sufficiently
satisfied Rule 8's pleading standard.

Accordingly, the Finnell

defendants’ motion to dismiss with respect to plaintiffs’
negligent misrepresentation claim will be denied.
D. Fraudulent Concealment Claim
The Court finds that the Finnell defendants’ motion to
dismiss plaintiffs’ fraudulent concealment claim should be
denied.

The Finnell defendants contend the fraudulent

concealment claim should be dismissed due to plaintiffs’ failure
to allege sufficient facts to state a claim and/or plaintiffs’
failure to plead fraud with particularity under Federal Rule of
Civil Procedure 9(b) (Id.)

The Court finds that plaintiffs have
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pled sufficient factual allegations to satisfy both Rule 8's
notice requirement, as well as Rule 9's particularity
requirement.

Accordingly, the Finnell defendants’ motion to

dismiss with respect to plaintiffs’ fraudulent concealment claim
will be denied.
IV. Motion to Dismiss Pursuant to 12(b)(7)
Finally the Finnell defendants contend that dismissal
is proper under Rule 12(b)(7).

Courts utilize a two-step

approach for deciding motions brought pursuant to Rule 12(b)(7).
MeccaTech v. Kiser, No. 8:05CV570, 2006 WL 2690063, at *2 (D.
Neb. Sept. 18, 2006).

The first step is deciding whether the

party to be joined is necessary under Rule 19(a).
2006 WL 2690063, at *2.

MeccaTech,

The Court finds that the trustee of the

ESOP is not a necessary party under Rule 19.

Therefore, the

Court need not proceed to step two of the analysis.

The Finnell

defendants’ motion to dismiss pursuant to Rule 12(b)(7) will be
denied.

Accordingly,
IT IS ORDERED:
1) The Finnell defendants’ motion to dismiss is granted

in part and denied in part.
2) The Finnell defendants’ motion to dismiss
plaintiffs’ breach of contract claim is granted.
3) Plaintiffs’ breach of contract claim is dismissed.
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4) The Finnell defendants’ motion to dismiss
plaintiffs’ professional malpractice claim is denied.
5) The Finnell defendants’ motion to dismiss
plaintiffs’ negligent misrepresentation claim is denied.
6) The Finnell defendants’ motion to dismiss
plaintiffs’ fraudulent concealment claim is denied.
7) The Finnell defendants’ motion to dismiss pursuant
to Federal Rule 12(b)(7) is denied.
DATED this 6th day of September, 2016.
BY THE COURT:
/s/ Lyle E. Strom
____________________________
LYLE E. STROM, Senior Judge
United States District Court

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