Rushaid et al v. National Oilwell Varco, Inc. et al
Filing
56
MEMORANDUM AND ORDER GRANTING 25 MOTION for More Definite Statement (Signed by Judge Keith P Ellison) Parties notified.(sloewe)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
RASHEED AL RUSHAID, et al.,
§
§
Plaintiffs,
§
§
v.
§ CIVIL ACTION NO. H-11-3390
§
NATIONAL OILWELL VARCO, INC., et §
al.,
§
§
Defendants.
§
§
MEMORANDUM AND ORDER
Pending before the Court is Defendants’ Motion for More Definite Statement, or,
Alternatively, for Dismissal of Fraud and Conspiracy Claims. (Doc. No. 25.) After
considering the motion, all responses thereto, and the applicable law, the Court
determines that the motion must be GRANTED.
I. Background
A. Factual Background
Rasheed Al Rushaid, Al Rushaid Petroleum Investment Corporation (“ARPD”),
and Al Rushaid Parker Drilling Ltd. (collectively, the “Plaintiffs”) claim to have been
harmed by actions taken by Defendants National Oilwell Varco, Inc.; National Oilwell
Varco LP; NOW Oilfield Services, Inc.; and National Oilwell Varco Norway
(collectively, the “NOV Defendants”); as well as Grant Prideco LP; and Grant Prideco
Holdings LLC (collectively, the “Grant Prideco Defendants”). Plaintiffs allege that the
NOV Defendants and the Grant Prideco Defendants (collectively, the “Defendants”)
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acted in concert with former, corrupt employees of ARPD (the “corrupt employees”).
According to Plaintiffs, ARPD contracted with Defendants to aid ARPD in procuring
equipment and services for the purpose of performing ARPD’s contracts with a third
company, Saudi Aramco (“Aramco”). Plaintiffs allege that, unbeknownst to ARPD and
its Plaintiff owners, Defendants conspired with the corrupt employees to “control and
operate ARPD for their own benefit . . . ultimately destroying ARPD . . . and causing
massive damage to it and its Plaintiff owners.” (Pl. Am. Pet., Doc. No. 1-5 ¶ 27.)
Specifically, Plaintiffs allege that Defendants bribed the corrupt employees in an effort to
fraudulently induce ARPD to enter into overpriced contracts and pay inflated invoices.
(Id. ¶ 29.) When Defendants failed to perform on their contracts with ARPD, the corrupt
employees allegedly protected Defendants “from sanctions that were otherwise available,
including termination of the contracts, replacement by other vendors, civil litigation, and
criminal charges.” (Id. ¶ 31.) Defendants’ failures to perform on contracts with ARPD led
Plaintiffs to fall short on their contracts with Aramco, which resulted in Plaintiffs paying
Aramco “tens of millions of dollars in liquidated damages.” (Id. ¶ 37.) Plaintiffs assert
claims against Defendants for aiding and abetting breach of fiduciary duties, civil
conspiracy, fraud by non-disclosure, fraud, and breach of contract. (Id. ¶¶ 94-157.)
B. Procedural Background
Plaintiffs filed their Original Petition in state court on June 17, 2011. (Pl. Pet.,
Doc. No. 35-2.) Plaintiffs then filed an Amended Original Petition on August 17, 2011
(Pl. Am. Pet.), after which Defendants filed Special Exceptions on September 2, 2011
(Doc. No. 1-6 at 12-17). Defendants filed an Answer on September 8, 2012, which,
though it was filed weeks after Plaintiffs’ Amended Petition, stated that it was an Answer
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to Plaintiffs’ Original Petition. (Def. Answer, Doc. No. 1-6 at 18-20.) Defendants
removed the case to this Court on September 16, 2011, pursuant to 9 U.S.C. § 203 and 28
U.S.C. § 1331. (Doc. No. 1.) On October 17, 2011, Plaintiffs moved to remand the case
to state court. (Doc. No. 6.) The Court denied Plaintiffs’ motion on December 6, 2011.
(Doc. No. 15.) On February 2, 2012, Defendants filed the pending Motion for More
Definite Statement, or, Alternatively, for Dismissal of Fraud and Conspiracy Claims.
(Doc. No. 25.)
II. Legal Standard
Federal Rule of Civil Procedure 8(a) requires that a plaintiff’s pleading include “a
short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.
R. Civ. P. 8(a)(2). If a plaintiff fails to satisfy Rule 8(a), a defendant may file a motion to
dismiss the plaintiff’s claims under Federal Rule of Civil Procedure 12(b)(6) for “failure
to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6); see also Bank
of Abbeville & Trust Co. v. Commonwealth Land Title Ins. Co., 2006 WL 2870972, at *2
(5th Cir. Oct. 9, 2006) (citing 5 Charles Alan Wright & Arthur R. Miller, Federal Practice
and Procedure § 1203 (3d ed. 2004)).
“To survive a Rule 12(b)(6) motion to dismiss, a complaint ‘does not need
detailed factual allegations,’ but must provide the plaintiff’s grounds for entitlement to
relief—including factual allegations that when assumed to be true ‘raise a right to relief
above the speculative level.’” Cuvillier v. Taylor, 503 F.3d 397, 401 (5th Cir. 2007)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). That is, “a complaint
must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly,
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550 U.S. at 570). 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.” Id. (citing Twombly, 550 U.S. at 556). The plausibility standard is
not akin to a “probability requirement,” but asks for more than a sheer possibility that a
defendant has acted unlawfully. Id. A pleading need not contain detailed factual
allegations, but must set forth 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
(citation omitted).
Ultimately, the question for a court to decide is whether the complaint states a
valid claim when viewed in the light most favorable to the plaintiff. Shandong Yinguang
Chem. Indus. Joint Stock Co., Ltd. v. Potter, 607 F.3d 1029, 1032 (5th Cir. 2010) (citing
In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007)). The court must
accept well-pleaded facts as true, but legal conclusions are not entitled to the same
assumption of truth. Iqbal, 556 U.S. at 679. The court should not “‘strain to find
inferences favorable to the plaintiffs’” or “accept ‘conclusory allegations, unwarranted
deductions, or legal conclusions.’” R2 Investments LDC v. Phillips, 401 F.3d 638, 642
(5th Cir. 2005) (quoting Southland Sec. Corp. v. Inspire Ins. Solutions, Inc., 365 F.3d
353, 361 (5th Cir. 2004)).
Allegations of fraud must meet the stricter standards of Federal Rule of Civil
Procedure 9(b), which provides that, “[i]n alleging fraud or mistake, a party must state
with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b).
“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
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misrepresentation and what he obtained thereby.” Benchmark Elec., Inc. v. J.M. Huber
Corp., 343 F.3d 719, 724 (5th Cir. 2003) (quoting Tel-Phonic Servs., Inc. v. TBS Int’l,
Inc., 975 F.2d 1134, 1139 (5th Cir. 1992)) (internal quotation marks omitted). The Fifth
Circuit has explained that “Rule 9(b) requires ‘the who, what, when, where, and how’ [of
the alleged fraud] to be laid out.” Id. (quoting Williams v. WMX Techs., Inc., 112 F.3d
175, 179 (5th Cir. 1997)). A claim that a fraud allegation is insufficiently particular under
Rule 9(b) is properly raised by a Rule 12(b)(6) motion to dismiss for failure to state a
claim. United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 186 n. 8 (5th Cir. 2009);
Carter v. Nationwide Property and Cas. Ins. Co., 2011 WL 2193385, at *1 (S.D. Tex.
June 6, 2011). Rule 9(b)’s particularity requirement is “supplemental to the Supreme
Court’s recent interpretation of Rule 8(a) requiring ‘enough facts [taken as true] to state a
claim to relief that is plausible on its face.’” Grubbs, 565 F.3d at 185 (quoting Twombly,
550 U.S. at 570). Thus, Rule 9(b) “requires only ‘simple, concise, and direct’ allegations
of the ‘circumstances constituting fraud,’ which after Twombly must make relief
plausible, not merely conceivable, when taken as true.” Id. at 186 (quoting Williams v.
WMX Techs., Inc., 112 F.3d 175, 178 (5th Cir. 1997)).
A motion for judgment on the pleadings under Rule 12(c) is subject to the same
standard as a motion to dismiss under Rule 12(b)(6). Johnson v. Johnson, 385 F.3d 503,
529 (5th Cir.2004) (citing Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co.,
313 F.3d 305, 313 n. 8 (5th Cir. 2002)). “[T]he central issue is whether, in the light most
favorable to the plaintiff, the complaint states a valid claim for relief.” Hughes v.
Tobacco Inst., Inc., 278 F.3d 417, 420 (quoting St. Paul Mercury Ins. Co. v. Williamson,
224 F.3d 425, 440 n. 8 (5th Cir. 2000)) (internal quotation marks omitted).
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III. Analysis
A. Timeliness of Defendants’ Motion
Plaintiffs contend that Defendants’ motion must fail because it was filed after
Defendants filed an Answer in state court. Pursuant to Rule 12(b), a motion asserting any
defenses under Rule 12(b) “must be made before pleading if a responsive pleading is
allowed.” Fed. R. Civ. P. 12(b). Defendants counter that, because they answered only
Plaintiffs’ Original Petition, and not Plaintiffs’ Amended Petition, their Answer cannot be
considered responsive to the live, Amended Petition.
A number of courts have held that, when a party brings the defense of failure to
state a claim by motion after an answer, the motion becomes one under Rule 12(c) rather
than one under Rule 12(b)(6). See e.g., Edwards v. City of Goldsboro, 178 F.3d 231, 243
(4th Cir. 1999); Republic Steel Corp. v. Pennsylvania Eng’g Corp., 785 F.2d 174, 182
(7th Cir. 1986); Jenkins v. Allied Interstate, Inc., No. 5:08–CV–125–DCK, 2009 WL
3157399, *2 (W.D.N.C. Sept. 25, 2009); Kozloski v. Am. Tissue Servs. Found., 2006 WL
4037589, **2–3 (D. Minn. Dec. 12, 2006); Ketterman v. City of N.Y., 00 CIV. 1678
(NRB), 2001 WL 579757, *5 (S.D.N.Y. May 30, 2001); Pine v. Shell Oil Co., C.A. 920346B, 1993 WL 389396, **1-2 (D.R.I., Aug 23, 1993); see also 5C Charles Alan
Wright & Arthur R. Miller, Federal Practice and Procedure § 1367 (3d ed. 2004). Other
courts have allowed such a motion pursuant to Rule 12(b)(6) when it is filed before a
defendant answers an amended complaint, as here. See Wright v. Int'l Bus. Machines
Corp., 796 F. Supp. 1120, 1124 (N.D. Ill. 1992).
One court in the Southern District of Texas, after considering the procedural
oddities of this situation and reflecting on the propriety of converting a 12(b)(6) motion
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into a 12(c) motion, ultimately did not convert the motion because “pleadings were not
closed when the motion was filed. Therefore, the motion cannot be properly called a
motion for judgment on the pleadings.” In re Morrison, 421 B.R. 381, 388-89 (Bankr.
S.D. Tex. 2009); Cf. Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999) (per curiam)
(upholding a district court’s conversion of a Rule 12(b)(6) motion to a Rule 12(c) motion
when it was filed after an answer when pleadings were closed). This case is factually
distinguishable from Morrison as, in this case, Defendants’ Answer was filed after
Plaintiffs’ Amended Petition, notwithstanding the fact that it stated on its face that it was
an Answer to the Original Petition. Moreover, Defendants’ Answer was filed by five
Defendants who were brought into the case by the Amended Petition, suggesting that the
Answer was, in fact, directed toward the Amended Petition. (Compare Pl. Pet. (suing
only Defendant National Oilwell Varco, Inc.), and Pl. Am. Pet. (suing Defendants
National Oilwell Varco, Inc; National Oilwell Varco, LP; NOW Oilfield Services, LLC;
National Oilwell Varco Norway, AS; Grant Prideco, LP; and Grant Prideco Holding,
LLC), with Def. Answer (stating that “Defendants National Oilwell Varco, Inc., Now
Oilfield Services, LLC, Grant Prideco, LP, and Grant Prideco Holding, LLC file this
Original Answer to Plaintiffs’ Original Petition.”).)
In Norflet v. John Hancock Fin. Servs., Inc., 422 F. Supp. 2d 346 (D. Conn.
2006), the court considered a scenario similar to the one now before this Court. The
defendant in Norflet filed a motion to dismiss after the plaintiff had amended its
complaint, and after the defendant had answered the plaintiff’s original complaint. Id. at
350. Faced with this procedural posture, the Norflet court refrained from construing the
motion as one under Rule 12(b)(6) or one under Rule 12(c). Id. Instead, the court
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concluded that both types of motions yield identical analyses under the same standard of
review, and proceeded to apply that standard, without designating the motion as a Rule
12(b)(6) or Rule 12(c) motion. Id. This Court concludes that the present motion is ripe for
review, despite its procedural quirks. Rule 12(h)(2) explicitly preserves Defendants’
failure to state a claim defense from waiver, and allows it to be raised any time before
trial. In re Morrison, 421 B.R. 381, 389 (Bankr. S.D. Tex. 2009). The Court thus finds it
appropriate to take the Norflet court’s approach, and to consider Defendants’ arguments
regardless of which subsection of Rule 12 is to be applied.
B. Motion for More Definite Statement/to Dismiss Fraud and Conspiracy
Claims
1. Fraud
A plaintiff seeking to prove a claim of fraud by affirmative misrepresentation
must show that (1) the defendant made a representation to the plaintiff; (2) the
representation was material; (3) the representation was false; (4) the defendant made the
representation with knowledge of its falsity, or recklessly and without knowledge of its
truth; (5) the defendant made the representation with the intent to induce reliance; (6) the
plaintiff relied on the representation; and (7) the representation caused the plaintiff injury.
Shandong Yinguang Chem. Indus. Joint Stock Co., Ltd. v. Potter, 607 F.3d 1029, 1032-33
(5th Cir. 2010). Defendants contend both that the misrepresentations in Plaintiffs’
petition fail to allege the required elements with the level of particularity required by
Rule 9(b), and that the allegations are implausible on their face.
The vast majority of Plaintiffs’ response to Defendants’ motion emphasizes the
sufficiency of allegations unrelated to the alleged misrepresentations. For example,
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Plaintiffs explain that their petition “identifies the basic structure of the fraud in that the
Defendants bribed the ‘Corrupted Employees’ to use their authority to approve purchase
orders and invoices which contained overcharges which included the kickbacks and the
excessive profits, and pay said invoices.” (Doc. No. 28 at 4.) This explanation is
inapposite; even comprehensive allegations surrounding the circumstances of the alleged
bribery do not satisfy the requirements that Plaintiffs plead, with particularity, the
purported misrepresentations.
In their Amended Petition, Plaintiffs allege that both the NOV Defendants and the
Grant Prideco Defendants made material, false representations. As to the NOV
Defendants, Plaintiffs state that these representations included “submitting quotations and
other documents setting forth terms and conditions of sale, for equipment and services
requested by the Corrupted employees,” and, in those documents, making a number of
specific “misrepresentations.” (Pl. Am. Pet. ¶ 128.) Because Plaintiffs’ pleading is
imprecise, it is unclear whether Plaintiffs mean to allege that the act of submitting these
documents was itself a misrepresentation; that, when submitting these documents,
Defendants made verbal misrepresentations about the documents; or that the documents
themselves contained misrepresentations. However, Plaintiffs’ response to Defendants’
Motion to Dismiss urges that the makers of the alleged misrepresentations are the NOV
Defendants’ corporate representatives, and that the “when” is the date of the contract.
These clues suggest that Plaintiffs meant to plead that the documents themselves contain
the alleged misrepresentations.1 Plaintiffs’ Amended Petition then alleges a number of
specific misrepresentations. Defendants’ challenges to each supposed misrepresentation
1
The fact that the Court must search for such clues in Plaintiffs’ response highlights the inadequacy of
Plaintiffs’ pleading.
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are similar; the Court therefore considers, as a representative claim, the first alleged
misrepresentation and Defendants’ challenges thereto. Plaintiffs plead that the NOV
Defendants misrepresented:
[T]hat the quotations included market terms and conditions no more
onerous to Plaintiffs nor more favorable to the NOV Defendants than
would have been quoted absent the conspiracy described above, while
knowing at the time that the terms and conditions were in fact more
onerous to Plaintiffs and more favorable to the NOV Defendants.
(Pl. Am. Pet. ¶ 128(a).) Defendants challenge the adequacy of this alleged
misrepresentation on two grounds. First, they argue, it lacks the specificity required by
Rule 9: there is indication as to the maker, the date on which the representation was
made, the description of how it was communicated, the name of the person who received
it, or how Plaintiffs detrimentally relied on it. Secondly, Defendants emphasize that it is
implausible that a contracting party would assure another party, in a written contract, that
the terms contained in that contract are no more onerous than might be expected in the
absence of a fraud-based conspiracy. The Court takes up these arguments, in turn.
Defendants’ first argument, essentially, is that Plaintiffs’ pleading lacks the
“who,” “when,” “where,” or “how” of the alleged misrepresentation, as is required in the
Fifth Circuit. Benchmark, 343 F.3d at 724. The Court assumes, for the moment, that
Plaintiffs intend to allege that each purported misrepresentation was made in the cited
quotations and documents. Because those documents were allegedly provided to
Plaintiffs from the NOV Defendants, the Court agrees with Plaintiffs that, accepting this
interpretation of Plaintiffs’ Amended Petition, the “who” requirement would be
satisfied—the NOV Defendants provided the documents that purportedly contain this
misrepresentation. As to the “when” question, Plaintiffs contend that, because they list
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the dates of each of the quotations and documents in question, the “when” requirement is
satisfied as to this and all of the alleged misrepresentations. Because Plaintiffs do not
specify which alleged misrepresentation was made in which of the cited quotations and
documents, their explanation can be correct only if Plaintiffs mean to allege that every
purported misrepresentation was written in each one of the cited documents. Giving such
a reading to Plaintiffs’ Amended Petition, the Court agrees that the “when” question is
satisfied.2 Plaintiffs specifically identify, by date, amount and Defendants’ identification
numbers, the contracts and purchase orders which they contend contain these
misrepresentations. (Pl. Am. Pet. ¶¶ 79-81.) The “how” and “where” questions are
addressed less directly; although Plaintiffs may intend to allege that each of the cited
documents contains each of the alleged misrepresentations, they do not say so explicitly,
and they leave Defendants and this Court to attempt to discern, with no guidance from the
pleadings, when and how each purported misrepresentation was made.
More fundamental than Plaintiffs’ satisfaction of the Benchmark factors is
whether Plaintiffs allege actual misrepresentations at all, and, if so, whether those
misrepresentations, as currently alleged, are plausible. In their allegations of the NOV
Defendants’ first specific misrepresentation, quoted above, Plaintiffs seem to suggest
that, within documents provided by the NOV Defendants to Plaintiffs, the NOV
Defendants actually stated that the quotations included terms that were no more onerous
to Plaintiffs or favorable to Defendants than they would be in the absence of a
conspiracy. If Plaintiffs mean to allege that Defendants affirmatively represented as
much, the Court agrees with Defendants that such a representation is implausible. If, on
2
Whether this is the appropriate reading of Plaintiffs’ Amended Petition is a more fundamental question,
addressed below.
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the other hand, Plaintiffs mean that Defendants, simply by providing these documents,
suggested that they were legitimate and not based on a conspiracy, then such an act likely
would not constitute an affirmative misrepresentation. A third possibility is that Plaintiffs
mean to allege that Defendants provided incorrect market terms and conditions in the
quotations and documents, and that these market terms and conditions were themselves
affirmative misrepresentations. In any event, it is not clear what Plaintiffs intend to
allege, and the allegations therefore are insufficient. In light of the lack of clarity and
precision in Plaintiffs’ pleadings, the Court instructs Plaintiffs to amend their fraud by
affirmative misrepresentation claims as follows:
(1) To the extent that Plaintiffs mean to allege that the NOV Defendants and the
Prideco Defendants made affirmative, written misrepresentations in the
quotations and documents cited in Plaintiffs’ petition, Plaintiffs must specify
as much within their complaint, and must offer more precision as to the nature
of each misrepresentation.3 Plaintiffs must indicate, as to each alleged
misrepresentation, whether that particular misrepresentation was written in all
3
For example, as discussed above, the first alleged misrepresentation reads as follows. “[T]hat the
quotations included market terms and conditions no more onerous to Plaintiffs nor more favorable to the
NOV Defendants than would have been quoted absent the conspiracy described above, while knowing at
the time that the terms and conditions were in fact more onerous to Plaintiffs and more favorable to the
NOV Defendants.” (Pl. Am. Pet. ¶ 128(a).) As the Court has noted, it seems highly unlikely that Plaintiffs
mean to allege that Defendants actually stated, in documents provided to Plaintiffs, that the terms were not
fraudulent. If Plaintiffs mean to allege that the documents included inaccurate information, and that this
inaccurate information was intentionally misrepresented, Plaintiffs must specify as much. Similarly,
another one of Plaintiffs’ allegations states that Defendants misrepresented “that the quoted prices did not
conceal hidden charges to cover kickbacks and wrongfully inflated profits.” (Id. ¶ 128(c).) Again, it is
implausible that Defendants would include, in documents provided to Plaintiffs, a statement that the quoted
prices did not conceal hidden, illegitimate charges. Rather, Plaintiffs may mean to allege that Defendants
misrepresented prices by offering, instead of accurate prices, prices that were inflated to cover kickbacks
and wrongfully inflated profits. If that is the intended meaning, Plaintiffs must specify as much. As
currently pled, a number of the alleged misrepresentations suffer from a similar lack of clarity. (See, e.g.,
Pl. Am. Pet. ¶¶ 128(a), 128(c), and 128(d).)
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of the cited documents, whether it was included in only some of the cited
documents (and, if so, which documents), or whether it was made orally.4
(2) To the extent that any of the alleged misrepresentations were oral, and were
not included in the written contracts, Plaintiffs must provide more information
about when these oral representations were made, and by whom and to whom
they were made.5
2. Conspiracy to Commit Fraud
Plaintiffs also allege that Defendants engaged in conspiracy to commit fraud.
“The elements of a cause of action for civil conspiracy in Texas are (1) two or more
persons; (2) an object to be accomplished; (3) a meeting of the minds on the object or
course of action; (4) one or more unlawful, overt acts; and (5) damages as the proximate
result.” In re Enron Corp. Sec., Derivative & ERISA Litig., 623 F. Supp. 2d 798, 808
(S.D. Tex. 2009) (citing Juhl v. Airington, 936 S.W.2d 640, 644 (Tex. 1990); Tri v.
J.T.T., 162 S.W.3d 552, 556 (Tex. 2005)). Defendants note that there is not a single
4
By way of example, the Court considers how one of the alleged misrepresentations in Plaintiffs’ Amended
Petition could be improved to specify exactly what the misrepresentation was, and in what context it was
made. Paragraph 142 of the Amended Petition currently reads as follows: “Grant Prideco misrepresented,
without limitation, its intent to deliver goods and services as scheduled and specified, while knowing at the
time of making the representations that it did not so intend.” (Pl. Am. Pet. ¶ 142.) An improved allegation
might read: “In XYZ document(s), delivered to Plaintiffs by Grant Prideco on XYZ date, Grant Prideco
specifically stated that it intended to deliver goods and services as scheduled and specified in that
document. This was a misrepresentation, because Grant Prideco knew at the time of making the
representation that it did not so intend.”
5
As the Court has explained, if Plaintiffs mean to allege that all of the purported misrepresentations were in
writing, Plaintiffs must be far more explicit in indicating as much. On the other hand, if they intend to
allege that any of the misrepresentations was oral, they must provide further context, indicating who made
the representation, where it was made, to whom, and under what circumstances. The Fifth Circuit has, as
Plaintiffs note, recognized that the Rule 9 pleading requirements “may be relaxed in certain circumstanceswhen, for instance, the facts relating to the fraud are peculiarly within the perpetrator's knowledge.” United
States ex. rel. Doe v. Dow Chemical Co., 343 F.3d 325, 330 (5th Cir. 2003). However, Plaintiffs’ Amended
Petition is at this point far too vague for the Court even to consider whether this relaxed standard should be
applied, as the Court cannot yet grasp the contours of the alleged misrepresentations.
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allegation in Plaintiffs’ entire Amended Petition of a meeting of the minds between the
allegedly corrupt employees and any Defendant. Similarly, there are no allegations of any
type of communication between said parties through which an agreement could possibly
have been reached. Finally, Plaintiffs fail to identify any employee of any Defendant
entity who could have participated in any such agreement.
Plaintiffs’ response to Defendants’ motion focuses on the overt acts allegedly
taken in furtherance of the conspiracy, and fails adequately to address Defendants’
argument about the absence of an agreement. Plaintiffs note only that “[t]he relationship
of the parties and the commonality of overt acts - bribery and disregard of performance
by the Defendants - with the three ‘Corrupted Employees’ show the existence of a
conspiracy.” (Doc. No. 28 at 7.) Plaintiffs urge that, from this, “[a] reasonable person
could infer that a conspiracy existed and was executed.” (Id.) In support of this
proposition, Plaintiffs cite to Grubbs, 565 F.3d at 193-94.
In Grubbs, the Fifth Circuit considered conspiracy allegations which stated that
two defendants had had a meeting; the allegations provided the specific language alleged
to have been exchanged between the two at the meeting. The Fifth Circuit held that the
specific language attributed to these two defendants at the meeting indicated, or at least
provided a basis from which a reasonable jury could infer, that the two defendants were
in agreement. Id. Thus, unlike here, where no meeting is alleged to have taken place, the
allegations in Grubbs included both a meeting and the specific language exchanged at
that meeting. The Court concludes that the absence of any allegations as to a meeting or
discussion of any sort between the allegedly corrupt employees and Defendants renders
that claim inadequately pled. The Court therefore grants Defendants’ motion. Plaintiffs
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will have the opportunity to replead their conspiracy claim, including allegations of an
agreement.
IV. CONCLUSION
For the foregoing reasons, the Court concludes that Defendants’ motion must be
GRANTED as to the claims discussed herein. Plaintiffs are given leave to file an
Amended Complaint, and must do so no later than June 14, 2012. If no Amended
Complaint is filed, Plaintiffs’ fraud by affirmative misrepresentation and conspiracy
claims will be dismissed.
IT IS SO ORDERED.
SIGNED at Houston, Texas, on this the 1st day of June, 2012.
KEITH P. ELLISON
UNITED STATES DISTRICT JUDGE
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