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applying Indiana law and holding that an allegation that a party to a contract negligently performed a contractual duty is a claim for breach of contract
Summary of this case from Ball v. Versar, Inc., (S.D.Ind. 2002)Opinion
IP 01-0186-C-M/S
June 19, 2001
ORDER ON DEFENDANT'S MOTION TO DISMISS
This cause is now before the Court on defendant's, Centennial Healthcare Corporation's ("Centennial's"), motion to dismiss certain claims brought against them by plaintiff, Sheridan Health Care Center, Inc. ("Sheridan"). Centennial alleges that Counts I, III and IV should be dismissed for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) ("Rule 12(b)(6)").
The issues have been fully briefed by the parties and are ripe for ruling. For the reasons discussed herein, the Court GRANTS in part and DENIES in part Centennial's motion to dismiss Counts I and IV, and the Court DENIES Centennial's motion to dismiss Count III.
I. FACTUAL PROCEDURAL BACKGROUND
The facts in the light most favorable to Sheridan follow. Sheridan is the owner of certain real estate located in Danville, Indiana. Compl., at 1, ¶ 1. There is a building on the real estate suitable for operation of a ninety-nine bed nursing care facility (the "facility"). Id. ¶ 2. On or about April 27, 1989, Sheridan entered into a lease agreement (the "lease") with Cardinal Development Company, Inc. ("Cardinal") for the nursing facility. Id. ¶ 3; id. Exh. B, Lease Agreement, Apr. 27, 1989 ("Lease Agreement"). The lease agreement was amended in writing on two separate occasions. Compl. at 1, ¶ 3.
The facts presented here are taken primarily from the defendant's brief in support of its motion to dismiss. The plaintiff has not objected to the facts as stated and the defendant has provided adequate citation to the complaint to satisfy the Court. However, the Court will cite to the complaint or its attachments for purposes of clarity.
On or about November 1, 1993, Cardinal assigned its interest in the lease to Transitional Health Partners, Inc. d/b/a Transitional Health Services ("THS"). Id. at 2, ¶ 5. Effective December 31, 1995, THS merged with WELCARE Transitional Acquirors ("WTA"), a subsidiary of WELCARE International, Inc. ("WCI"). Id. at 2-3, ¶ 8. Sheridan consented to the assignment of the lease from THS to WTA and WCI, which occurred as a result of the merger. Id. at 3, ¶ 8-9. WCI subsequently changed its name to Centennial, the defendant. Id. ¶ 10. The initial term of the lease commenced on April 27, 1989 and extended for a period of ten years. Id., Count I, ¶ 4. The lease, as amended, expired on its terms on October 31, 1999. Id. Count II, ¶ 2.
However, Centennial remained on the premises on a month-to-month basis in accordance with Section 2.4 of the lease. Id. Count I, ¶ 5. Although the parties apparently attempted to negotiate a new lease, by letter dated September 16, 1999, Centennial informed Sheridan that it planned to vacate the premises on October 31, 1999. Id.; id. Exh. G, Letter, From Jay Michael Brodey, Attorney at Law to Steve Gilleland, Centennial Health Care [sic], Sept. 13, 1999; id. Exh. H, Letter, From Alan Dahl, Exec. Vice President, Centennial HealthCare to James Guttman, Sheridan Health Care Center, Inc., Sept. 16, 1999.
Sheridan filed the instant law suit against Centennial on January 11, 2001, in the Hendricks County Circuit Court. The complaint alleges that Centennial breached the lease in at least four ways:
1. Centennial failed to properly maintain the premises, the facility and leased equipment;
2. Centennial failed in its responsibilities with respect to replacement and renewal; and
3. Centennial allowed the premises and facility to deteriorate.
Id. Count I, ¶ 8. Sheridan also alleges that Centennial breached the contract in bad faith, engaged in a pattern of conduct intended to defraud Sheridan, and such pattern of conduct interfered with Sheridan's future business opportunities, all of which should support exemplary or punitive damages. See id. ¶¶ 9-13; 14-16. The complaint's Count II avers that Centennial breached an additional, continuing agreement between the companies in bad faith, when Centennial refused to pay rent in November 1999, December 1999, and January 2000. Id. Count II, ¶¶ 2-6. Count III alleges that Centennial improperly removed leased equipment from the premises in violation of the lease agreement and in so doing, Centennial has committed the crime of conversion, for which Sheridan may collect damages pursuant to Indiana Code § 34-24-3-1. Id. Count III, ¶¶ 1-3. Finally, Count IV alleges that Centennial was negligent in its duty to "secure and maintain appropriate levels of reimbursement as a reasonable and prudent operator of the facility" and was negligent in its duty "to properly repair and maintain" the facility and the leased equipment. Id. Count IV, ¶¶ 1-4. Sheridan alleges it was damaged as a proximate result of Centennial's negligence. Id. ¶ 5.
On February 9, 2001, Centennial timely removed the suit to this Court. Centennial was granted an initial enlargement of time to answer the complaint. It filed the current motion to dismiss on March 5, 2001. The Court will now recite the standards that will govern its decision.
II. STANDARD
The Court notes that numerous documents supplement the complaint. Where documents are attached to the complaint, they are considered part of that complaint. See Fed.R.Civ.P. 10(c); see also Levenstein v. Salafsky, 164 F.3d 345, 347 (7th Cir. 1998). Therefore, the usual standards for a motion to dismiss will apply unless otherwise stated.
When ruling on a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), the Court accepts as true all well-pleaded factual allegations in the complaint and the inferences reasonably drawn from them. See Baxter by Baxter v. Vigo County Sch. Corp., 26 F.3d 728, 730 (7th Cir. 1994). Dismissal is appropriate only if it appears beyond doubt that Sheridan can prove no set of facts consistent with the allegations in the complaint that would entitle it to relief. See Hi-Lite Prods. Co. v. American Home Prods. Corp., 11 F.3d 1402, 1405 (7th Cir. 1993). This standard means that if any set of facts, even hypothesized facts, could be proven consistent with the complaint, then the complaint must not be dismissed. See Sanjuan v. American Bd. of Psychiatry and Neurology, Inc., 40 F.3d 247, 251 (7th Cir. 1995), cert. denied, 516 U.S. 1159 (1996). Sheridan may receive the benefit of hypotheses consistent with the complaint. See id. (citing Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).
Further, Sheridan is "not required to plead the particulars of [its] claim[s]," Hammes v. AAMCO Transmissions, Inc., 33 F.3d 774 (7th Cir. 1994), except in cases alleging fraud or mistake where Sheridan must plead the circumstances constituting such fraud or mistake with particularity. See Fed.R.Civ.P. 9(b); Hammes, 33 F.3d at 778. "Particularity" requires plaintiffs to plead the who, what, when, where, and how of the alleged fraud. See Ackerman v. Northwestern Mut. Life Ins. Co., 172 F.3d 467, 469 (7th Cir. 1999); DiLeo v. Ernst Young, 901 F.2d 624, 627 (7th Cir. 1990). Finally, the Court need not ignore facts set out in the complaint that undermine Sheridan's claims, see Homeyer v. Stanley Tulchin Assoc., 91 F.3d 959, 961 (7th Cir. 1996) (citing American Nurses' Ass'n v. Illinois, 783 F.2d 716, 724 (7th cir. 1986)), nor is the Court required to accept the plaintiff's legal conclusions. See Reed v. City of Chicago, 77 F.3d 1049, 1051 (7th Cir. 1996); Gray v. Dane County, 854 F.2d 179, 182 (7th Cir. 1988).
III. DISCUSSION
Centennial has moved to dismiss three out of Sheridan's four counts. The Court will address each count in turn.
A. COUNT I: BREACH OF CONTRACT EXEMPLARY DAMAGES
Centennial argues that to the extent Sheridan seeks exemplary or punitive damages in Count I, it does not state a claim for an independent tort. Specifically, Centennial alleges that Sheridan has failed to state a claim for fraud, breach of the duty of good faith and fair dealing or intentional interference with business relations. Therefore, Sheridan is not entitled to seek exemplary or punitive damages.
Sheridan counters that it need not plead all the elements of an independent tort to recover exemplary or punitive damages in a suit based on breach of contract. Sheridan argues that Centennial has been put on notice of the allegations that could potentially lead to punitive damages in this case; therefore, additional allegations are unnecessary. The Court agrees with Sheridan that it has pleaded its breach of contract claim with clarity.
However, the Court agrees with Centennial that Sheridan has failed to state a claim for an independent tort that would entitled it to exemplary or punitive damages. The Indiana Supreme Court in Miller Brewing Co. v. Best Beers of Bloomington, Inc. stated that the rule in Indiana, without exception, is that "punitive damages are not allowed in a breach of contract action." 608 N.E.2d 975, 981 (Ind. 1993). In order to recover punitive damages, Sheridan "must plead and prove the existence of an independent tort of the kind for which Indiana law recognizes that punitive damages may be awarded." Id. at 984 (emphasis added). There is no leeway; the plaintiff must plead the independent tort to survive a motion to dismiss.
The case that Sheridan relies upon, Epperly v. Johnson, 734 N.E.2d 1066 (Ind.Ct.App. 2000), does not hold differently. The Epperly court was looking at an issue completely removed from the one in the case at bar; the issue in Epperly was whether the evidence supported a jury verdict for punitive damages. Id. at 1077. The Epperly court found that the evidence in that case was insufficient to support a finding of fraud or constructive fraud; therefore, the jury's award of punitive damages was in error. Id.
Further, it is clear that the Epperly court would only consider the jury's punitive damage award proper if the jury had predicated it on a finding of fraud or constructive fraud independent from the breach of contract. Id. at 1073 (stating that "[t]here was no evidence of damage from [the defendant's] misrepresentation independent of the damage [the plaintiff] suffered from [the defendant's] breach of the oral contract"). Epperly does not hold that a court should wait until all the evidence is in to determine if a party that claims breach of contract can also claim conduct arising from the breach that would support an independent cause of action in tort to support punitive damages. Such a rule is a distortion of the Federal Rules of Civil Procedure and would hinder a court's duty to manage properly its docket.
Even reading Sheridan's complaint liberally, as the Court must, Sheridan has failed to plead all of the elements of either fraud or intentional interference with business relationships. The elements of fraud are: 1) a false statement of past or existing material fact; 2) made with knowledge it was false or made recklessly without knowledge of its truth or falsity; 3) made for the purpose of inducing the other party to act upon it; 4) upon which the other party did justifiably rely and act; and 5) proximately resulting in injury to the other party. Id. at 1073. See also Guarantee Trust Life Ins. Co. v. Palsce, 641 N.E.2d 1266, 1269 (Ind.Ct.App. 1994). Moreover, Sheridan must plead the elements of fraud with particularity. See Fed.R.Civ.P. 9(b); Hammes v. AAMCO Transmissions, Inc., 33 F.3d 774, 778 (7th Cir. 1994). Meaning, Sheridan is required to plead the who, what, when, where, and how of the alleged fraud. See Ackerman v. Northwestern Mut. Life Ins. Co., 172 F.3d 467, 469 (7th Cir. 1999); DiLeo v. Ernst Young, 901 F.2d 624, 627 (7th Cir. 1990).
Sheridan's claim of fraud lists the following allegedly fraudulent conduct: that Centennial deceived Sheriden into believing that Centennial would make a long-term commitment to Sheridan or purchase the property, that Centennial misrepresented to Sheridan that it would not jeopardize the safety or welfare of the facility's residents, that Centennial attempted to evade its responsibilities to the residents and to Sheridan, that Centennial coerced Sheridan into accepting full responsibility to the residents, and that Centennial attempted to erect barriers to transaction between Sheridan and a prospective new tenant. Compl. ¶¶ 14-15. Sheridan does not provide the who, where, when and how of the alleged fraud for any of these alleged misrepresentations or fraudulent conduct. Moreover, Sheridan has not pleaded specifically how it was damaged by Centennial's alleged fraud.
With respect to the intentional interference with business relations claim, Sheridan has failed to state a claim upon which relief may be granted. The elements for intentional interference with business relations in Indiana are: 1) the existence of a valid relationship; 2) the defendant's knowledge of the existence of the relationship; 3) the defendant's intentional interference with that relationship; 4) the absence of justification; 5) the defendant's activity is illegal; and 6) damages resulting from defendant's wrongful interference with the relationship. Levee v. Beeching, 729 N.E.2d 215, 222 (Ind.Ct.App. 2000) (citing Bradley v. Hall, 720 N.E.2d 747, 751 (Ind.Ct.App. 1999)). Any attempt on Sheridan's part to plead intentional interference with a business relationship fails.
Sheridan alleges that Centennial attempted to erect impermissible barriers to a transaction between Sheridan and Corazon, Inc. But, Sheridan does not assert that any activity by Centennial in connection with the lease or Centennial's alleged breach thereof was illegal. Further, Sheridan does not assert that Centennial knew of the relationship between Sheridan and Corazon or that Sheridan was damaged as a result of Centennial's alleged interference. For these reasons, Sheridan's attempt to claim the tort of intentional interference with a business relationship fails.
In addition to Sheridan's attempts to recover punitive damages on the basis of an independent tort, Sheridan appears to assert it is entitled to such damages because Centennial breached the duty of good faith and fair dealing. See Compl. Count I, ¶ 14(e) (stating that Centennial "[i]ntentionally violat[ed] the covenant of good faith dealing"). Indiana law is clear: "[T]he duty of good faith is applied in contract law only under limited circumstances such as those involving insurance contracts; however, a duty of good faith may apply to a contract where the terms of the contract are ambiguous or where the terms expressly apply such a duty." Lake County Trust Co. v. Wine, 704 N.E.2d 1035, 1039 (Ind.Ct.App. 1998) (internal citations omitted). In the instant case, Sheridan makes only a single, unsupported reference to the duty of good faith dealing. It makes no allegations that the contract terms are ambiguous or that the lease expressly applies a duty of good faith dealing; nor did the Court find any such reference upon its review of the lease. In light of these deficiencies, the Court cannot allow Sheridan to proceed with a breach of the duty of good faith and fair dealing claim.
In summary, although Count I clearly sets forth a claim for breach of contract, Sheridan is not entitled to exemplary or punitive damages as alleged in Count I because it has failed to plead the elements of any tort that would support such damages that is independent of its breach of contract claim. Sheridan has failed to allege all of the elements of either the tort of fraud or the tort of intentional interference with a business relationship. Further, Sheridan has not pleaded a claim for breach of the duty of good faith and fair dealing because it has not alleged the special circumstances necessary to support such a claim. Therefore, Centennial's motion to dismiss Count I is GRANTED in part and DENIED in part.
B. COUNT III: CONVERSION
Count III of Sheridan's complaint alleges that certain items of equipment entrusted to Centennial under the terms of the lease, including a piano, were converted by Centennial in violation of Indiana Code § 35-43-4-3. Sheridan seeks damages for Centennial's allegedly illegal conduct pursuant to Indiana Code § 34-24-3-1. Centennial argues that Sheridan's claim is inseparable from a claim that Centennial breached Section 1.3 of the lease. Therefore, Sheridan's claim is simply one for breach of contract. Further, Centennial avers that Sheridan's remedy for Centennial's alleged breach of the contract should be limited to compensatory damages.
Count III of Sheridan's complaint can be characterized as one for civil conversion. Indiana Code § 34-24-3-1 allows a person who suffers a pecuniary loss as the result of a violation of Indiana's criminal conversion statute to recover its losses and other costs and fees. Ind. Code §§ 35-24-3-1(1) to (3).
Sheridan must prove the elements of criminal conversion by a preponderance of the evidence to succeed in its claim. NationsCredit Commercial Corp. v. Grauel Enters., Inc., 703 N.E.2d 1072, 1078 (Ind.Ct.App. 1998). Indiana's criminal conversion statute provides in pertinent part: "A person who knowingly or intentionally exerts unauthorized control over property of another person commits criminal conversion. . . ." Ind. Code § 35-43-4-3. Although Sheridan's claim for civil conversion is relatively light on factual aversions, taking its allegations as true, the Court finds that Count III adequately states a claim. Taken at face value, Sheridan's complaint states that Centennial "knowingly and intentionally" exerted "unauthorized control" over leased "property" that belonged to Sheridan, most particularly, a piano. Centennial avers that Sheridan's claim amounts to nothing more than a breach of contract claim.
Specifically, Centennial points to the provision of the lease for requiring maintenance of the leased equipment on the premises. The lease provides that "the Lease [sic] shall return and deliver all of such property to Lessor in as good order and condition as when received hereunder, reasonable wear and tear and damage by Acts of God or insurable perils excepted." Compl., Exh. B, Lease Agreement, Sec. 1.3.
But, there are at least two Indiana cases that have dealt with a similar claim for civil conversion when there was a contract between the parties, Gilliana v. Paniaguas, 708 N.E.2d 895 (Ind.Ct.App. 1999), and NationsCredit Commercial v. Grauel Enter., 703 N.E.2d 1072 (Ind.Ct.App. 1998). Neither court found dispositive the existence of a contract between the parties. Both courts looked to the evidence of the individual elements of the claim to reach its decision. See Gilliana, 708 N.E.2d at 899-900; NationsCredit Commercial, 703 N.E.2d at 1078-79. In particular, the courts stressed that unlike the "innocent breach of contract" action, in a civil conversion action, the party alleging the conversion must prove the criminal intent element. Gilliana, 708 N.E.2d at 899-900; NationsCredit Commercial, 703 N.E.2d at 1078-79. It is this mens rea element that differentiates a breach of the lease from civil conversion in this case.
Sheridan has alleged that Centennial "knowingly or intentionally" exerted "unauthorized control" over the leased "property" that belongs to Sheridan, including a piano. At this stage of the litigation, the Court cannot require more. Therefore, Centennial's motion to dismiss Count III is DENIED.
C. NEGLIGENCE
Count IV of Sheridan's complaint alleges that Centennial was negligent in its repair and maintenance of the facility and leased equipment under the lease, and that it was negligent in securing and maintaining appropriate levels of reimbursement as a reasonable and prudent operator of the facility. Compl. Count IV, ¶¶ 2-4. Sheridan alleges that it suffered damages as a proximate result of Centennial's negligence.
Centennial avers that Sheridan's claim for negligence should be dismissed in its entirety. With respect to Sheridan's claim that Centennial negligently repaired and maintained the facility and equipment, Centennial argues that the complete non-performance of a duty in a contract, or nonfeasance, is actionable only by breach of contract. Def.'s Mem. in Supp. at 7-8 (citing Foster v. Evergreen Healthcare, Inc., 716 N.E.2d 19, 28 (Ind.Ct.App. 1999); Orkin Exterminating Co. v. Walters, 466 N.E.2d 55, 58 (Ind.Ct.App. 1984); Strong v. Commercial Carpet Co., 322 N.E.2d 387, 390-91 (Ind.Ct.App. 1975)).
Centennial argues that Sheridan's language alleging "a scheme artifice, or device" that caused damage to Sheridan because of Centennial's "utter failure to properly maintain the [f]acility and [l]eased [e]quipment," amounts to nonfeasance only. With respect to Sheridan's claim of negligent failure to secure appropriate levels of reimbursement, Centennial argues that Sheridan has failed to plead what duty it was owed by Centennial. Therefore, Sheridan's negligence claim must fail. Id. at 8-9 (citing Webb v. Jarvis, 575 N.E.2d 992, 995 (Ind. 1991); Merchants Nat'l Bank v. Simrell's Sports Bar Grill, 741 N.E.2d 383, 386 (Ind.Ct.App. 2000); Dado v. Jeeninga, 2001 WL 56190, *2 (Ind.Ct.App. Jan. 24, 2001)).
Sheridan counters that it has the option to sue for negligent breach of a contract on both breach of contract grounds and negligence grounds. Pl.'s Resp. at 6 (citing Orkin Exterminating Co., 466 N.E.2d at 55). Further, Sheridan argues that it has alleged that Centennial owed it a duty independent of the contract, to secure and maintain certain levels of reimbursement for the facility, and that Centennial's breach of the duty caused it damages. At this stage, Sheridan avers, nothing else is necessary. Id.
Because both parties rely upon Orkin Exterminating Co. v. Walters, a brief review of that case is warranted. In Orkin Exterminating, a homeowner contracted with an exterminator to rid her home of termites. Id. at 56. The contract specifically limited the exterminator's liability to re-treatment only, and contained an express waiver by the homeowner for termite damage to the home. See id. Even after re-treatments, the homeowner's house had termite damage. See id. The homeowner sued the exterminator for negligent performance of its services and received a judgment in her favor in the trial court. Id. at 56-57. The exterminator appealed arguing that the contract limited its liability for negligent performance of its services. Id. at 57-58. The Indiana Court of Appeals held that even though the homeowner's suit was based in tort, the exterminator's duty and subsequent limitation on liability was based on the contract. Id. at 58.
The court reasoned that there was no finding of unequal bargaining power, unconscionability or public interest that would prevent limiting the parties to the benefits of their bargain. Id. at 59. Further, the court stated: "Indiana law recognizes that [the homeowner] had an option of suing in tort or in contract for the negligent performance of a contractual duty." Id. at 58 (citing Flint Walling Mfg. Co. v. Beckett, 79 N.E. 503 (Ind. 1906); Wilson v. Palmer, 452 N.E.2d 426 (Ind.Ct.App. 1983)). But, the court continued, the homeowner's election to base the suit in tort did not change the fact that the exterminator's duty to her was based on the contract. Id. Finally, the Indiana Court of Appeals agreed with a Georgia court that "`[a]bsent a limiting statute or controlling public policy, parties may contract with one another on whatever terms they wish and the written contract defines the full extent of their rights and duties.'" Id. at 59 (quoting Orkin Exterminating Co. v. Stevens, 203 S.E.2d 587, 592 (Ga.Ct.App. 1973) (citations omitted)).
The Court notes that Indiana law does not make clear when a duty to perform in a "workmanlike" manner is independent from a duty in the contract that is performed negligently. In one line of cases, the duty is apparently independent from the contract and takes on the standard of care that is reasonable in the same or similar circumstances. Flint Walling, 79 N.E. at 505; Raquet v. Thompson, 693 N.E.2d 969, 971 (Ind.Ct.App. 1998); Crum v. AVCO Fin. Servs., 552 N.E.2d 823, 827 (Ind.Ct.App. 1990); Georgie Boy Mfg., Inc. v. Pariso, 550 N.E.2d 111, 112 (Ind.Ct.App. 1990); Wilson v. Palmer, 452 N.E.2d 426, 429 (Ind.Ct.App. 1983); Essex v. Ryan, 446 N.E.2d 368, 370-71, 375 (Ind.Ct.App. 1983). However, in another line of cases, the duty is defined by the contract and the court. See Wells v. Stone City Bank, 691 N.E.2d 1246, 149-50 (Ind.Ct.App. 1998), trans. denied; Orkin Exterminating, 466 N.E.2d at 55. Moreover, although the Flint Walling court specifically states that the breach of a contract duty could form the basis of a breach of duty in tort, the court also discussed the implied responsibility to perform in a workmanlike manner as distinct from a breach of contract. Compare Flint Walling, 79 N.E. at 505 with id. at 506. The Court must make its decision on how to proceed in this case given these seemingly conflicting precedents.
The Court is persuaded that an allegation that a party to a contract negligently performed the contract duty is a claim for breach of contract. As stated by the Orkin Exterminating court, "`[a]bsent a limiting statute or controlling public policy, parties may contract with one another on whatever terms they wish and the written contract defines the full extent of their rights and duties.'" 466 N.E.2d at 59 (quoting Orkin Exterminating Co. v. Stevens, 203 S.E.2d 587, 592 (Ga.Ct.App. 1973) (internal citations omitted)). In the current circumstances, where two corporate entities have entered into a contract that defines the rights and duties of the parties, when one party alleges the other has failed to perform a duty in the contract, the party is claiming a breach, not an independent tort that arises from the relationship between the parties. Public policy in Indiana supports the concept of freedom of contract; in other words, enforcement of the contract as written, rather than unnecessary interference. Harrison v. Thomas, 744 N.E.2d 977, 980 (Ind.Ct.App. 2001) (citing Fresh Cut, Inc. v. Fazli, 650 N.E.2d 1126, 1129 (Ind. 1995)). Therefore, when a contract defines the duties between the parties, an allegation that a party failed to perform pursuant to the contract is a breach of contract, not a tort. Sheridan points to no public policy that would be served if the Court were to find otherwise.
Applying this finding to the allegations in Sheridan's complaint, the Court finds that Sheridan's claim that Centennial failed to repair and maintain the facility and property pursuant to the contract is a claim in contract, not in tort. The contract specifically provides for the lessee to maintain the leased equipment or replace it, see Compl., Exh. B, Lease Agreement, Sec. 1.3, and for the lessee to maintain the premises, the facility and the leased equipment at its own expense, see id. Sec. 6.1. Sheridan's main argument is that Centennial breached its agreement to keep the facility and property in good repair as required by the contract. It's claim is for breach of contract, not negligence. Therefore, Centennial's motion to dismiss Sheridan's claim that Centennial was negligent when it failed to repair and maintain the facility and property is GRANTED.
However, Sheridan's claim that Centennial breached an independent duty to secure appropriate levels of reimbursement fits in the category of claims that arises from the contractual relationship, but is not a duty defined by the contract. Taking the allegations in the complaint as true, as it must at this stage of the litigation, the Court finds that Sheridan states a claim that Centennial was negligent in its duty to secure and maintain appropriate levels of reimbursement as a reasonable and prudent operator of a similar facility would. Therefore, Centennial's motion to dismiss this claim is DENIED.
In summary, the Court finds that Sheridan's claim that Centennial failed to perform under the contract is a claim in contract not in tort; therefore Centennial's motion to dismiss that claim is GRANTED.
However, Sheridan's claim that Centennial breached a duty independent from the contract, a duty to secure and maintain appropriate levels of reimbursement, meets the liberal pleading standards of the Federal Rules of Civil Procedure. Therefore, Centennial's motion to dismiss that claim is DENIED. Consequently, Centennial's motion to dismiss Count IV is GRANTED in part and DENIED in part.
IV. CONCLUSION
Defendant moved to dismiss for failure to state a claim Counts I, III and IV of the plaintiff's, complaint. For the reasons stated herein, the Court finds as follows for each count:
COUNT I: Defendant's motion to dismiss is GRANTED in part and DENIED in part.
COUNT III: Defendant's motion to dismiss is DENIED.
COUNT IV: Defendant's motion to dismiss is GRANTED in part and DENIED in part.
Those claims that are dismissed are dismissed without prejudice.