American-Marsh Pumps v. Ramachandran Chand

Filing 30

ORDER granting 7 Motion to Dismiss for Failure to State a Claim; denying 24 Motion for Joinder as MOOT. Signed by Judge Samuel H. Mays, Jr on 7/14/2014.

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION

J-LINE PUMP CO., INC.
AMERICAN-MARSH PUMPS,

d/b/a )
)
)
Plaintiff,
)
)
v.
)
)
MOHAN CHAND a/k/a RAMACHANDRAN )
M. CHAND,
)
)
)
Defendant.
)
)
)

No. 13-2842

ORDER GRANTING DEFENDANT’S MOTION TO DISMISS

On
(“AMP”)
Chand

September
filed

a

(“Chand”)

Tennessee,

for

27,

2013,

Complaint
in
the

the

against
Chancery

Thirtieth

(Compl., ECF No. 1-1.)

Plaintiff

American

Defendant
Court

Judicial

of

Marsh-Pumps

Ramachandran
Shelby

District

at

M.

County,
Memphis.

Plaintiff alleges that Chand breached

his duties of loyalty, fidelity, care, competence, and diligence
owed to AMP, which resulted in AMP’s pleading guilty to making a
false statement to the United States Government.
24.)

(Id. ¶¶ 23-

Chand removed the case to this Court under 28 U.S.C. §§

1441 and 1446.

(Not. of Rem., ECF No. 1.)

Before the Court is
Dismiss

or,

in

the

Chand’s

Alternative,

November 1, 2013 Motion to
for

Summary

Judgment

(the

“Motion”).

(Mot., ECF No. 7.)

AMP responded on November 27,

2013.

(Resp. to Mot., ECF No. 9.)

2013.

(Reply, ECF No. 14.)

merits

of

the

Motion

on

Chand replied on December 9,

Because the Court can determine the
the

Pleadings

and

the

underlying

documents to which they refer, the Court construes the Motion as
a Motion to Dismiss.

For the following reasons, the Motion is

GRANTED.
I.

Background
AMP markets, sells, and distributes industrial water pumps

and accessories internationally.

AMP alleges that Chand worked

at AMP as Director of International Sales from May 1, 1996 to
January 1, 2009.

(Compl. ¶ 3.)

In that position, Chand was

allegedly responsible for all international sales made by AMP.
(Id. ¶ 4.)

Part of those responsibilities included ensuring

that all international sales were done in strict compliance with
all applicable laws, rules, and regulations.

(Id. ¶ 5.)

On or about March 5, 2008, an Egyptian importer, Flowtech
for

Consulting

&

Engineering

Works

(“Flowtech”),

ordered

12

large industrial pumps from AMP to use in a project on the Nile
River.

(Id. ¶ 12.)

The total purchase price for the 12 pumps

and related spare parts and services was $640,000.00.

(Id.)

AMP alleges that Chand assisted Flowtech in arranging funding
for

the

purchase

through

USAID,

international aid organization.

the

United

(Id. ¶¶ 13, 15.)
2

States’

leading

USAID funded the pumps through its Commodity Import Program
(“CIP”).

As a condition for CIP funding, AMP was required to

certify to USAID that the pumps met USAID’s source and origin
requirements.

(Id.)

Chand, who was not an officer of AMP,

allegedly filled out the certification paperwork.

(Id.)

AMP

alleges that Chand misrepresented to AMP his knowledge about
USAID’s

sourcing

requirements,

incorrectly

advising

AMP’s

officers that the pumps were in compliance because 50% of their
sales price was attributable to activities in the United States.
(Id. ¶¶ 15, 16.)

According to AMP, the pumps violated USAID’s

sourcing requirements because significant component parts were
manufactured outside the United States.

(Id. ¶ 15.)

AMP’s

Vice President, Michael Florio (“Florio”), signed the sourcing
certification on behalf of AMP, allegedly in reliance on Chand’s
representations.

(Id. ¶ 17.)

On December 14, 2011, a federal grand jury indicted AMP and
two of its corporate officers, Florio and James Rae, for making
false

representations

“Indictment”).

to

the

United

States

(Indict., ECF No. 7-3.)

in the Indictment.

(See id.)

Government

(the

Chand is not mentioned

AMP pled guilty to one count of

making a false statement to the United States Government in
violation of 18 U.S.C. § 1001, agreeing to a criminal forfeiture
of

$529,750.

(Plea

Agreement,

3

ECF

No.

7-5

at

2.)

Terry

Kerbough

(“Kerbough”),

President

of

AMP,

signed

the

Plea

Agreement, which certified that:
the individual signing . . . on behalf of AMP . . .
has the power to bind the corporation and acknowledges
that he has read [the] agreement, has discussed it
with defendant’s attorney and understands it.
(Id. at 3-4.)
prosecution’s

During the plea colloquy, the court heard the
case

and

what

it

would

(Plea Hearing, ECF No. 11-2 at 15.)

have

proven

at

trial.

The court inquired about

AMP’s understanding of the plea agreement and the voluntariness
of the plea.

(Id. at 36-37, 40.)

The court asked Kerbough

whether the charge was true: “and as far as the corporation is
concerned

the

corporation

was

involved

in

the

incident

and

admits it’s [sic] involvement, its guilt?” Kerbough responded,
“Yes, sir.”

(Id. at 35.)

AMP now seeks indemnification from Chand for AMP’s criminal
forfeiture

and

defense

costs,

in

the

amount

of

$895,645.33.

(Compl. ¶ 25.)
II.

Jurisdiction and Choice of Law
This Court has diversity jurisdiction under 28 U.S.C. §

1332.

District courts have “jurisdiction of all civil actions

where the matter in controversy exceeds the sum or value of
$75,000, exclusive of interest and costs, and is between . . .
citizens of different states.”

28 U.S.C. § 1332(a)(1).

AMP is

a Tennessee Corporation with its principal place of business in

4

Collierville, Tennessee.

(Compl. ¶ 1.)

citizen.

AMP

(Id.

$895,645.33.

¶

2.)

(Id. ¶ 25.)

seeks

Chand is a California

damages

in

the

amount

of

The parties are completely diverse,

and the amount-in-controversy requirement is satisfied.
In a diversity action, state substantive law governs.

See

Brocklehurst v. PPG Indus., Inc., 123 F.3d 890, 894 (6th Cir.
1997)

(citing

(1938)).

Erie

When

R.R.

the

Co.

parties

v.

Tompkins,

agree

that

304
a

U.S.

certain

64,

78

state’s

substantive law applies, the court will not conduct a “choice of
law” analysis sua sponte.

GBJ Corp. v. Eastern Ohio Paving Co.,

139 F.3d 1080, 1085 (6th Cir. 1998).

The parties agree that

Tennessee

The

substantive

law

applies.

Court

will

apply

Tennessee substantive law to AMP’s tort claims.
III.

Standard of Review
In addressing a motion to dismiss for failure to state a

claim under Federal Rule of Civil Procedure 12(b)(6), the court
must construe the complaint in the light most favorable to the
plaintiff and accept all well-pled factual allegations as true.
League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523,
527

(6th

Cir.

2007).

A

plaintiff

can

support

a

claim

“by

showing any set of facts consistent with the allegations in the
complaint.”
(2007).

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 563

This standard requires more than bare assertions of

legal conclusions.

Bovee v. Coopers & Lybrand C.P.A., 272 F.3d
5

356, 361 (6th Cir. 2001).

“[A] formulaic recitation of the

elements of a cause of action will not do.”
at 555.

Twombly, 550 U.S.

Any claim for relief must contain “a short and plain

statement of the claim showing that the pleader is entitled to
relief.”
curiam).

Erickson

v.

Pardus,

551

U.S.

89,

93

(2007)

(per

“Specific facts are not necessary; the statement need

only ‘give the defendant fair notice of what the . . . claim is
and the grounds upon which it rests.’”

Id. (quoting Twombly,

550 U.S. at 555).
Nonetheless, to survive a motion to dismiss, a complaint
must contain sufficient facts “to ‘state a claim to relief that
is plausible on its face.’”
1949

(2009)

(quoting

plausibility

standard

Ashcroft v. Iqbal, 129 S. Ct. 1937,

Twombly,
is

550

not

U.S.

akin

at

to

570).

a

“The

‘probability

requirement,’ but it asks for more than a sheer possibility that
a defendant has acted unlawfully.”
U.S. at 556).
of

action,

Id. (citing Twombly, 550

“Threadbare recitals of the elements of a cause

supported

by

mere

conclusory

statements,

do

not

suffice.”

Id. at 1949 (citation omitted).

A plaintiff with no

facts

“armed

conclusions”

and

with

nothing

more

“unlock the doors of discovery.”

than

cannot

Id. at 1950.

“[W]hen a document is referred to in the pleadings and is
integral to the claims, it may be considered without converting
a motion to dismiss into one for summary judgment.”
6

Commercial

Money Ctr., Inc. v. Illinois Union Ins. Co., 508 F.3d 327, 33536

(6th

Cir.

2007).

The

Court

“retains

the

discretion

to

consider or exclude [] extrinsic evidence presented with a Rule
12(b) motion.”

Notredan, LLC v. Old Republic Exch. Facilitator

Co., No. 11-2987-STA-tmp, 2012 U.S. Dist. LEXIS 48976, at *13
(W.D.

Tenn.

Republic

Apr.

Exch.

6,

2012),

Facilitator

aff’d
Co.,

by,

No.

Notredan,

12-5852,

LEXIS 15879 (6th Cir. July 29, 2013).

LLC

2013

v.

U.S.

Old
App.

Because the Indictment,

Plea Agreement and Plea Hearing are referenced in the pleadings
and

central

to

AMP’s

claims,

the

Court

considers

them

in

deciding the Motion to Dismiss.
IV.

Analysis
Chand argues that AMP has failed to state a claim for a

tort violation because AMP is judicially estopped from arguing
that Chand caused the injuries AMP alleges.
Chand’s

alleged

misrepresentations

to

Florio

AMP argues that
about

USAID’s

source requirements resulted in Florio’s falsely certifying on
behalf of AMP that the pumps met the source requirements.
A. Agent Liability
Under Tennessee law, agency negligence claims require:
(1) A duty of care owed by the defendant to the
plaintiff; (2) conduct falling below the applicable
standard of care amounting to a breach of that duty;
(3) an injury or loss; (4) causation in fact; and (5)
proximate, or legal cause.
Bradshaw v. Daniel, 854 S.W.2d 865, 869 (Tenn. 1993).
7

An agent’s duty is “to be careful, skillful, diligent and
loyal in the performance of his principal’s business.”

Gay &

Taylor, Inc. v. Am. Cas. Co. of Reading, Pa., 53 Tenn.App. 120,
213 (Tenn. Ct. App. 1963).

The agent-principal relationship is

“fiduciary in nature,” obliging the agent to “make full and
complete disclosure of facts that will benefit his principal.”
Marshall v. Sevier Cnty., 639 S.W.2d 440, 446 (Tenn. Ct. App.
1982) (quoting Heard et al. v. Miles, 32 Tenn.App. 410 (1949)).
A “skilled agent” owes a duty to his principal:
to act with the care, competence, and diligence
normally exercised by agents in similar circumstances.
Special skills or knowledge possessed by an agent are
circumstances to be taken into account in determining
whether an agent acted with due care and diligence. If
an
agent
claims
to
possess
special
skills
or
knowledge, the agent has a duty to the principal to
act with the care, competence, and diligence normally
exercised by agents with such skills or knowledge.
Restatement (Third) Of Agency § 8.08 (2006).

See also Gay &

Taylor, 53 Tenn.App. at 123.
An

agent

breaches

his

duty

“by

exceeding

[the

agent’s]

authority or positive misconduct, or by negligence or omission
in the proper function of his agency, or in any other manner.”
Marshall, 639 S.W.2d at 446 (citing Gay & Taylor, 53 Tenn.App.
at 124).
When

breach

occurs,

the

agent

is

liable

for

damages

“naturally and proximately flowing from the breach of duty.”

8

Gay & Taylor, 53 Tenn.App. at 123-24.

For the agent to be held

liable, damages must be “fairly attributable” to the breach “as
the natural result or just consequence” of it.

Marshall, 639

S.W.2d at 446.
B. Judicial Estoppel
AMP
alleged

is

judicially

breach

of

estopped

fiduciary

from

duties

claiming

that

proximately

Chand’s

caused

AMP’s

injuries because AMP has admitted that it had actual knowledge
of

the

falsity

of

its

origin

certification

to

USAID.

See

Edwards v. Aetna Life Ins. Co., 690 F.2d 595, 598 (6th Cir.
1982).

Judicial estoppel is a federal common law doctrine that

a court may invoke to protect the integrity of the judicial
process by preventing parties from cynically shifting positions
to their advantage.

New Hampshire v. Maine, 532 U.S. 742, 750

(2001); United States v. Renda, 709 F.3d 472, 486 (5th Cir.
2013).

The doctrine:

bars a party from (1) asserting a position that is
contrary to one that the party has asserted under oath
in a prior proceeding, where (2) the prior court
adopted the contrary position either as a preliminary
matter or as part of a final adjudication.
Browning v. Levy, 283 F.3d 761, 775 (6th Cir. 2002).
A

guilty

requirement

of

plea

may

judicial

satisfy

estoppel

accepts the party’s position.

if

the
the

judicial
court

acceptance

addresses

and

See United States v. Hammon, 277

F.App’x 560, 567 (6th Cir. 2008) (citing Lowery v. Stovall, 92
9

F.3d 219, 224-25 (4th Cir. 1996)).
whether

a

court

accepts

the

Several factors indicate

admissions

intrinsic

to

a

plea

bargain: (1) the trial court ensures the plea was understood and
voluntarily made, (2) the trial court has a factual basis for
finding the party guilty, and (3) the trial court is familiar
with the prosecution’s evidence.

See Lowery, 92 F.3d at 225.

Here, AMP is judicially estopped from arguing that it did
not knowingly make false statements that resulted in the damages
AMP alleges.

AMP entered a “voluntary plea of guilty" to making

a false statement to the United States Government in violation
of 18 U.S.C. § 1001.
element

of

that

(Plea Agreement, ECF No. 7-5 at 2.)

crime

is

“knowingly and wilfully.”

that

the

false

See § 1001(a).

statement

be

An
made

By pleading guilty,

AMP admitted that it knew that its sourcing certification to
USAID was false.

See United States v. McCreary-Redd, 475 F.3d

718, 723 (6th Cir. 2007) (“[A] guilty plea is an admission of
all

elements

of

a

formal

criminal

charge.”).

AMP’s

representative also testified under oath before the sentencing
court

that

AMP

was

willfulness element.

guilty

of

the

crime,

which

includes

(Plea Hearing, ECF No. 11-2 at 35.)

the
The

court accepted AMP’s admission, had a factual basis for doing
so, was familiar with the prosecution’s evidence, and ensured
that the plea was voluntary and understood.
AMP is bound to its admission.
10

(See id at 36-37.)

Even if Chand negligently or

intentionally
intentional
arising

misled

Florio

misrepresentation

from

Chand’s

and,

by

breaks

alleged

extension,
any

fiduciary

chain

AMP,
of

AMP’s

causation

violations.

See

Marshall, 639 S.W.2d at 446.
Allowing AMP to contradict its admission would undermine
the integrity of the judicial process.

AMP cannot now justly

shift responsibility to another to secure indemnification for
the consequences of its crime.
V.

Conclusion
For the foregoing reasons, Chand’s Motion to

GRANTED.

Dismiss is

Chand’s February 19, 2014 Motion for Joinder is DENIED

as MOOT.
So ordered this 14th day of July, 2014.
s/ Samuel H. Mays, Jr.____ _
SAMUEL H. MAYS, JR.
UNITED STATES DISTRICT JUDGE

11