Moore v. Town North Automotive Inc et al
Filing
13
MEMORANDUM OPINION AND ORDER granting 5 Motion to Dismiss filed by Town North Automotive Inc, Max Wedell, Donny Bobo, Scott Wedell and granting plaintiff leave to replead. (Ordered by Chief Judge Sidney A Fitzwater on 7/11/2014) (Chief Judge Sidney A Fitzwater)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
CONOR MOORE,
Plaintiff,
VS.
TOWN NORTH AUTOMOTIVE, INC.
d/b/a TOWN NORTH MAZDA, et al.,
Defendants.
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§ Civil Action No. 3:14-CV-1215-D
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MEMORANDUM OPINION
AND ORDER
In this removed action, plaintiff Conor Moore (“Moore”) sues defendant Town North
Automotive, Inc. d/b/a Town North Mazda (“Town North”), and defendants Max Wedell
(“Max”), Scott Wedell (“Scott”), and Donny Bobo (“Bobo”) (collectively, the “Individual
Defendants”), under the Fair Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. § 201 et
seq., state law, and the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18
U.S.C. § 1961 et seq. Defendants move to dismiss under Fed. R. Civ. P. 12(b)(6) for failure
to state a claim on which relief can be granted, and under Rule 9(b) for failure to allege fraud
with sufficient specificity. For the reasons that follow, the court grants defendants’ motion,
raises sua sponte that the court lacks subject matter jurisdiction over one of Moore’s statelaw claims, raises sua sponte that Moore has failed to state another state-law claim on which
relief can be granted, and allows Moore to replead.
I
According to Moore’s petition,1 he was a car salesman for Town North; he signed an
express contract with Town North at the time he was hired; the contract provided that he
would be paid a guaranteed commission percentage for each car sold; and the amount of the
commission was based at least in part on the profit that Town North made on each sale. The
petition alleges that, after Moore discovered that Bobo had reduced one of his commission
checks by $150, Moore confronted Bobo, who stated that he routinely reduced large
commissions by altering deal documents. After Bobo allegedly told employees that he would
continue reducing commissions in this way, Moore quit his job at Town North.
Moore then filed this lawsuit in Texas state court, alleging federal-law claims under
the FLSA and RICO and state-law claims for breach of contract, fraud, and for a violation
of 40 Tex. Admin. Code § 821.29 (2014) (Tex. Workforce Comm’n, Wage Advances)
(regulating process for recouping wage advances). Moore alleges that Town North is
vicariously liable for torts committed by the Individual Defendants acting within the scope
of their employment with Town North. Defendants removed this case to this court, and they
now move under Rule 12(b)(6) and Rule 9(b) to dismiss Moore’s state-law claims for breach
1
In deciding defendants’ Rule 12(b)(6) motion, the court construes Moore’s petition
in the light most favorable to him, accepts as true all well-pleaded factual allegations, and
draws all reasonable inferences in his favor. See, e.g., Lovick v. Ritemoney Ltd., 378 F.3d
433, 437 (5th Cir. 2004). “The court’s review [of a Rule 12(b)(6) motion] is limited to the
complaint, any documents attached to the complaint, and any documents attached to the
motion to dismiss that are central to the claim and referenced by the complaint.” Lone Star
Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010).
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of contract and fraud, and his civil RICO claim.
II
“In deciding a Rule 12(b)(6) motion to dismiss, the court evaluates the sufficiency of
plaintiff[’s] . . . complaint by ‘accepting all well-pleaded facts as true, viewing them in the
light most favorable to the plaintiff.’” Bramlett v. Med. Protective Co. of Fort Wayne, Ind.,
855 F.Supp.2d 615, 618 (N.D. Tex. 2012) (Fitzwater, C.J.) (quoting In re Katrina Canal
Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (internal quotation marks and alteration
omitted)). To survive a motion to dismiss under Rule 12(b)(6), a plaintiff must plead
“enough facts to state a claim to relief that is plausible on its face.” Bell Atl. 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).
“The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than
a sheer possibility that a defendant has acted unlawfully.” Id. (quoting Twombly, 550 U.S.
at 556); see also Twombly, 550 U.S. at 555 (“Factual allegations must be enough to raise a
right to relief above the speculative level[.]”). “[W]here the well-pleaded facts do not permit
the court to infer more than the mere possibility of misconduct, the complaint has
alleged—but it has not ‘shown’—‘that the pleader is entitled to relief.’” Iqbal, 556 U.S. at
679 (quoting Rule 8(a)(2)) (alteration omitted). “Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do not suffice.” Id. at 678.
“Rule 9(b) imposes a heightened pleading standard for fraud claims and requires that
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a party state with particularity facts supporting each element of fraud.”
Turner v.
AmericaHomeKey Inc., 2011 WL 3606688, at *2 (N.D. Tex. Aug.16, 2011) (Fitzwater, C.J.)
(citing Benchmark Elecs., Inc. v. J.M. Huber Corp., 343 F.3d 719, 724 (5th Cir. 2003)), aff’d,
514 Fed. Appx. 513 (5th Cir. 2013). “At a minimum, Rule 9(b) requires allegations of the
particulars of time, place, and contents of the false representations, as well as the identity of
the person making the misrepresentation and what he obtained thereby.” Id. (quoting
Benchmark Elecs., 343 F.3d at 724) (internal quotation marks omitted). More colloquially,
plaintiffs must plead the “who, what, when, where, and how” of the fraud. Williams v. Bell
Helicopter Textron, Inc., 417 F.3d 450, 453 (5th Cir. 2005) (quoting United States ex rel.
Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997)). Because
Rule 9(b) must be “read in conjunction with [Rule] 8 which requires only a short and plain
statement of the claim showing that the pleader is entitled to relief,” “punctilious pleading
detail” is not required. Steiner v. Southmark Corp., 734 F. Supp. 269, 273 (N.D. Tex. 1990)
(Fitzwater, J.) (quoting Landry v. Air Lines Pilots Ass’n Int’l AFL-CIO, 892 F.2d 1238, 1264
(5th Cir. 1990)) (internal quotation marks omitted). “The court’s key concern in assessing
a complaint under Rule 9(b) is to determine whether the plaintiff seeks to redress specific
wrongs or whether the plaintiff instead seeks the opportunity to search out actionable
wrongs.” Garcia v. Boyar & Miller, P.C., 2007 WL 2428572, at *4 (N.D. Tex. Aug. 28,
2007) (Fitzwater, J.) (quoting FDIC v. Gaubert, No. 3-90-1196-D, slip op. at 7 (N.D. Tex.
Sept. 4, 1990) (Fitzwater, J.)).
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III
The court considers first whether Moore has stated a plausible claim for breach of
contract.
Under Texas law, Moore’s breach of contract claim requires proof of four elements:
(1) the existence of a valid contract; (2) Moore performed his duties under the contract; (3)
defendants breached the contract; and (4) Moore suffered damages as a result of the breach.
See, e.g., Hoffman v. L & M Arts, 774 F.Supp.2d 826, 832 (N.D. Tex. 2011) (citing Lewis v.
Bank of Am. NA, 343 F.3d 540, 544-45 (5th Cir. 2003)).
Defendants contend that Moore has not alleged the existence of a valid contract
between himself and the Individual Defendants. The court agrees. Under Texas law, officers
and employees of a corporation are not personally liable for the breach of a contract between
the corporation and a third party. See Covington v. Aban Offshore Ltd., 650 F.3d 556, 558-59
(5th Cir. 2011) (reaching this conclusion under Texas and federal law). Moore has not
alleged that the Individual Defendants were parties to the contract. They are therefore
entitled to dismissal of his breach of contract claim.
Defendants also argue that Moore has not identified any provision of the contract that
defendants breached. Moore alleges that his commission percentage was guaranteed by the
express terms of the contract, and that Bobo reduced commissions by altering deal
documents. But Moore has failed to allege that the contract precluded Town North from
altering deal documents or that he was paid less than the commission percentage to which
he was entitled under the contract’s terms. Moore has therefore failed to plausibly allege that
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Town North breached the contract. Cf. Innova Hosp. San Antonio, L.P. v. Blue Cross & Blue
Shield of Ga., Inc., ___ F.Supp.2d ___, 2014 WL 360349, at *8 (N.D. Tex. Feb. 3, 2014)
(O’Connor, J.) (granting Rule 12(b)(6) motion where plaintiffs failed to identify provisions
of contract that were breached or to provide factual allegations about terms of contracts).
Accordingly, the court grants defendants’ Rule 12(b)(6) motion as to Moore’s breach
of contract claim.
IV
Defendants move to dismiss Moore’s claim under § 821.29. Although defendants
predicate their argument on Rule 12(b)(6), “this court is obligated, sua sponte if necessary,
to note a lack of subject matter jurisdiction.” Hayes v. MBNA Tech., Inc., 2004 WL 1283965,
at *2 (N.D. Tex. June 9, 2004) (Fitzwater, J.) (citing In re Bowman, 821 F.2d 245, 246 (5th
Cir. 1987)). The court therefore raises sua sponte that it lacks jurisdiction over Moore’s
claim under § 821.29.
A federal district court does not have jurisdiction over a removed claim if the state
court would not have had jurisdiction over it. See City of Clarksdale v. BellSouth
Telecomms., Inc., 428 F.3d 206, 210 n.6 (5th Cir. 2005). The Texas Workforce Commission
(“TWC”) promulgated § 821.29 pursuant to its authority to interpret and enforce Texas Labor
Code §§ 61.001-61.104 (West 2006) (the “Payday Law”). See 40 Tex. Admin. Code § 821.1
(2014) (Tex. Workforce Comm’n, Title and Purpose) (“The purpose of these rules is to
implement and interpret the provisions of the Texas Labor Code, Chapter 61, Payment of
Wages.”); see also Tex. Lab. Code Ann. § 61.002 (stating that the TWC would administer
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and implement the statute). The Payday Law “establishes an administrative system vesting
authority in the [TWC] to govern the payment of wages by employers.” Holmans v.
Transource Polymers, Inc., 914 S.W.2d 189, 190 n.1 (Tex. App. 1995, writ denied). To file
a claim under the Payday Law, an employee must “file a wage claim with the [TWC] . . . in
a manner and on a form prescribed by the commission.” Tex. Lab. Code Ann. § 61.051(a)(b) (West Supp. 2013). The Texas Legislature intended that this administrative process be
an alternative to traditional litigation. See Igal v. Brightstar Info. Tech. Grp., Inc., 250
S.W.3d 78, 87 (Tex. 2008) (stating that the “Legislature intended the Payday Law to provide
employees with a vehicle for relief when a traditional lawsuit proved too arduous”),
superseded by statute on other grounds, Tex. Lab. Code Ann. § 61.051(c) (West Supp.
2013). In short, Texas law is clear that claims under § 821.29 must be filed with the TWC.
Moore does not cite any statute or court decision authorizing a court to entertain a
claim under § 821.29. Moore has therefore failed to establish that the Texas state court or
this court has jurisdiction to consider his § 821.29 claim. Accordingly, the court dismisses
Moore’s § 821.29 claim sua sponte for lack of subject matter jurisdiction. Cf. Campbell v.
City of Fort Worth, 69 Fed. Appx. 657, 2003 WL 21355854, at *1 (5th Cir. May 20, 2003)
(per curiam) (unpublished table decision) (holding that court had no jurisdiction to consider
appeal where Texas law only authorized administrative appeal).
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V
The court considers next whether Moore’s petition pleads a fraud claim with the
particularity that Rule 9(b) requires.
Defendants maintain that Moore’s fraud claim does not satisfy Rule 9(b) because he
has not alleged which, if any, defendant made misrepresentations to him, and when
defendants allegedly made such misrepresentations. Moore responds that his fraud claim
satisfies Rule 8’s fair notice standard, and he asserts that he specifically pleaded fraud as to
Bobo.
Moore’s fraud claim does not satisfy Rule 9(b). Moore alleges, for example, that
“Defendants represented that they would pay [him] in accordance with the commission plan
during 2012 and 2013,” and that this “representation was false because Defendant Bobo, in
the course and scope of his employment with Defendant Town North . . . fraudulently
reduced the commissions owed by altering completed deal documents.” Pet. ¶ 30. Although
Moore alleges misrepresentations, he does not specify any of the other required particulars,
such as which defendants represented that they would pay him in accordance with the
commission plan, when defendants made such representations, and in what context they were
made. See, e.g., Shakeri v. ADT Sec. Servs., Inc., 2013 WL 6498268, at *3 (N.D. Tex. Dec.
11, 2013) (Fitzwater, C.J.) (dismissing fraud claim under Rule 9(b)); cf. Benchmark Elecs.,
343 F.3d at 724 (holding that plaintiff satisfied Rule 9(b) where it alleged specifically who
made misrepresentations, when they made them, and what they said).
The court grants defendants’ Rule 9(b) motion and dismisses Moore’s fraud claim.
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VI
The court now considers whether Moore has pleaded a plausible RICO claim.
A
“RICO makes it unlawful ‘for any person employed by or associated with any
enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to
conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs
through a pattern of racketeering activity.’” Auto-Opt Networks, Inc. v. GTL USA, Inc., 2014
WL 2719219, at *5 (N.D. Tex. June 16, 2014) (Fitzwater, C.J.) (quoting 18 U.S.C. §
1962(c)). “Reduced to their simplest terms, the essential elements of a RICO claim are: (1)
a person who engages in (2) a pattern of racketeering activity (3) connected to the
acquisition, establishment, conduct, or control of an enterprise.” Id. (quoting Orthoflex, Inc.
v. ThermoTek, Inc., 2012 WL 2864510, at *2 (N.D. Tex. July 12, 2012) (Fitzwater, C.J.))
(internal quotation marks omitted). “To establish a pattern of racketeering activity, [Moore]
must allege (1) the predicate acts of racketeering activity, and (2) a pattern of such acts.”
Orthoflex, Inc., 2012 WL 2864510, at *2 (citing In re Burzynski, 989 F.2d 733, 742 (5th Cir.
1993)).2 In addition to alleging the essential elements of a RICO claim, Moore must
plausibly allege that he was “injured in his business or property by reason of a violation of
section 1962.” 18 U.S.C. § 1964(c); see also Gaines v. Tex. Tech Univ., 965 F. Supp. 886,
2
18 U.S.C. § 1961(1)(B) “defines ‘racketeering activity’ according to whether it
constitutes ‘any act which is indictable’ under several specified sections of title 18 of the
United States Code, [two] of which [are] mail fraud [and wire fraud][.]” Trugreen Landcare,
L.L.C. v. Scott, 512 F.Supp.2d 613, 623 (N.D. Tex. 2007) (Fitzwater, J.).
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890 (N.D. Tex. 1997) (Fitzwater, J.) (interpreting “business or property” clause).
Viewed favorably to Moore, his petition alleges that defendants committed predicate
acts of racketeering activity by (1) committing common law fraud against Moore by
changing deal documents, including financing statements; (2) selling cars without disclosing
the applicable warranties, or lack thereof; (3) failing to notify “Spanish” customers in writing
of the warranties, Pet. ¶ 36; (4) mailing title paperwork and closing documents in the mail
that contained material obtained through deceptive practices and/or fraud; and (5) placing tax
returns into the mail that contained material obtained through deceptive practices and/or
fraud, and placing Moore’s 2012 and 2013 W2s into the mail, which contained fraudulent
pretenses and representations. Defendants contend, inter alia, that common law fraud is not
a predicate act of racketeering activity, and that Moore has not adequately alleged causation
and damages under RICO. Moore responds that he has suffered damage, most recently
because defendants committed mail fraud.
B
1
Common law fraud is not a predicate act under RICO. See Tel-Phonic Servs., Inc. v.
TBS Int’l, Inc., 975 F.2d 1134, 1139 (5th Cir. 1992) (citation omitted) (stating that
“[m]isrepresentations that occurred at a meeting do not constitute wire or mail fraud . . . and
thus could not constitute racketeering activity,” and citing Zolfaghari v. Sheikholeslami, 943
F.2d 451, 453 (4th Cir. 1991), for proposition that “common-law fraud does not suffice to
state a RICO violation”). Thus Moore has failed to plead a plausible RICO claim to the
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extent his claim is based on common law fraud.
2
Moore alleges that predicate acts (2)-(5), see supra § VI(A), violate various statutes
and regulatory provisions. The court assumes arguendo that these are predicate acts under
RICO and considers whether Moore has plausibly alleged that these predicate acts injured
him.3 To plausibly allege injury, Moore must show “some direct relation between the injury
asserted and the injurious conduct alleged.” Holmes v. Sec. Investor Prot. Corp., 503 U.S.
258, 268 (1992).
Moore alleges that defendants’ conduct caused him to suffer “actual damages,
including loss of income and attorneys’ fees.” Pet. ¶ 40. He separately requests attorney’s
fees under 18 U.S.C. ¶ 1964(c) (providing for treble damages, including attorney’s fees). See
id. at ¶ 41. The court construes Moore’s petition as seeking attorney’s fees as damages in
addition to seeking such fees under § 1964(c). Assuming that attorney’s fees are recoverable
as damages under RICO,4 Moore must show that the alleged predicate acts injured him by
causing him to incur attorney’s fees. See, e.g., Macauley v. Estate of Nicholas, ___
3
Because the court is assuming arguendo that the acts alleged in (2)-(5) are predicate
acts, the court will refer to them as, for example, “predicate act (2).” Nevertheless, the court
has not decided on the merits whether the acts alleged in (2)-(5) qualify as predicate acts
under RICO.
4
“[T]here is some debate about whether legal fees can ever suffice as ‘injuries’ under
RICO.” Walter v. Palisades Collection, LLC, 480 F.Supp.2d 797, 804 (E.D. Pa. 2007); see
also id. n.11 (collecting cases). The court assumes arguendo that incurring attorney’s fees
can qualify as an injury under RICO.
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F.Supp.2d ___, 2014 WL 1225674, at *7 (E.D. Pa. Mar. 25, 2014). Additionally, the amount
of attorney’s fees incurred must be “clear and definite,” not “premature and speculative.”
LaBarbara v. Angel, 95 F.Supp.2d 656, 663 (E.D. Tex. 2000) (holding that RICO claim for
attorney’s fees was premature where related claim was pending in state court).
Moore’s allegations of damages in the form of attorney’s fees fail in both respects to
the extent they are based on predicate acts (2)-(5). Moore fails to plead any factual
allegations suggesting that predicate acts (2)-(5) caused him to incur attorney’s fees, and he
does not plead any factual allegations that permit the court to draw the reasonable inference
that the amount of his attorney’s fees is clear and definite. His claim appears to be based on
the fees he is accruing in this litigation. Moore has therefore failed to plead a plausible RICO
claim to the extent it is based on predicate acts (2)-(5) and alleged damages in the form of
attorney’s fees.
Moore also seeks actual damages in the form of lost income. As with his claim for
attorney’s fees, Moore must plausibly allege that predicate acts (2)-(5) caused his loss of
income. Moore has not alleged any facts that would enable the court reasonably to infer that
defendants’ failure to disclose warranty information, or to disclose Spanish-speaking
customers in writing of the warranties, caused Moore to lose commissions. Thus his claim
fails to the extent based on predicate acts (2) and (3).
Nor has he adequately pleaded that the unspecified “paperwork and closing
documents” referred to in his petition caused him to lose income. The specific allegation
follows a reference to “improperly and illegally sell[ing] cars without proper disclosure of
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applicable warranties.” Pet. ¶ 37.5 There is no basis for the court to draw the reasonable
inference that this alleged misconduct caused Moore to lose income.
Finally, predicate act (5) appears to permit only the reasonable inference that Moore
in fact lost income (i.e., his W2 forms for 2012 and 2013 reflect lower commission income
that he should have received), but not to permit the reasonable inference that the documents
themselves caused Moore to lose that income.
Moore has therefore failed to plead a plausible RICO claim to the extent based on
predicate acts (2)-(5) and alleged damages in the form of lost income. Accordingly, the court
grants defendants’ Rule 12(b)(6) motion as to Moore’s RICO claim.
VII
The court raises sua sponte that Moore has failed to state a claim for vicarious
liability, and that the Individual Defendants are entitled to dismissal of this claim under Rule
12(b)(6).
A district court has the authority to consider the sufficiency of a petition and dismiss
an action sua sponte, as long as the procedure it employs is fair. See, e.g., Biggers v. BAC
Home Loans Servicing, LP, 767 F.Supp.2d 725, 733 n.7 (N.D. Tex. 2011) (Fitzwater, C.J.)
5
The pertinent part of ¶ 37 reads:
Collectively, and as agents of Defendant Town North,
Defendants Bobo, Max Wedell and Scott Wedell, while engaged
in interstate commerce did improperly and illegally sell cars
without proper disclosure of applicable warranties. Defendants
placed title paperwork and closing documents in mail with the
intent said documents be delivered.
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(noting that district court has authority to consider sufficiency of complaint and dismiss
action on its own motion as long as procedure employed is fair, raising ground for dismissal
sua sponte, and concluding that procedure was fair because court was granting leave to
replead). Here, because the court is granting Moore leave to replead, it can raise Rule
12(b)(6) dismissal sua sponte.
Moore alleges that he “was injured as a result of a tort or torts committed by
Defendants Bobo, [Max], and [Scott],” and that “Bobo, [Max], and [Scott] commit[t]ed the
tort or torts while acting in the course and scope of their employment with . . . Town North.”
Pet. ¶ 43. Moore does not specify what tort or torts the Individual Defendants committed,
when they committed them, or how he was injured. The court holds that Moore has failed
to state a plausible vicarious liability tort claim against Town North for acts allegedly
committed by the Individual Defendants, and it dismisses this claim accordingly.
VIII
Although the court is granting defendants’ motion to dismiss under Rule 12(b)(6), it
will permit Moore to replead. See, e.g., In re Am. Airlines, Inc., Privacy Litig., 370
F.Supp.2d 552, 567-68 (N.D. Tex. 2005) (Fitzwater, J.) (noting that district courts often
afford plaintiffs at least one opportunity to cure pleading deficiencies before dismissing case,
unless it is clear that defects are incurable or plaintiffs advise court that they are unwilling
or unable to amend in a manner that will avoid dismissal). Because there is no indication that
Moore cannot, or is unwilling to, cure the defects that the court has identified, the court
grants him 28 days from the date this memorandum opinion and order is filed to file an
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amended complaint. Additionally, this procedure will ensure that the court’s dismissal sua
sponte of Moore’s vicarious liability tort claim is fair.
*
*
*
For the reasons explained, the court grants defendants’ motion to dismiss under Rule
12(b)(6) and Rule 9(b), raises sua sponte that the court lacks subject matter jurisdiction over
Moore’s § 821.29 claim, raises sua sponte that Town North is entitled to dismissal under
Rule 12(b)(6) of Moore’s vicarious liability tort claim, and grants Moore leave to replead.
SO ORDERED.
July 11, 2014.
_________________________________
SIDNEY A. FITZWATER
CHIEF JUDGE
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