Fiamma Partners Llc v. Morningstar et al

Motion to Dismiss for Failure to State a Claim

N.D. Tex.December 30, 2016

______________________________________________________________________________ PLAINTIFF’S MOTION TO DISMISS DEFENDANTS’ AMENDED COUNTERCLAIM AND BRIEF IN SUPPORT PAGE 1 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION FIAMMA PARTNERS, LLC, a Texas Limited Liability Company Plaintiff, vs. DAVID G. MORNINGSTAR, CAROLINE D. MORNINGSTAR, HILARY B. RADOLEC, EMPLOYER ASSURANCE SOLUTIONS, LLC, a Maryland Limited Liability Company and MORNINGSTAR BENEFITS SOLUTIONS, LLC, a Maryland Limited Liability Company Defendants. § § § § § § § § § § § § § § § CIVIL ACTION NO. 3:16-cv-1402 PLAINTIFF’S MOTION TO DISMISS FIRST AMENDED COUNTERCLAIM, MOTION FOR MORE DEFINITE STATEMENT, AND BRIEF IN SUPPORT Pursuant to FEDERAL RULE OF CIVIL PROCEDURE 12(b)(6), Fiamma Partners, LLC (“Fiamma”), Plaintiff and Counter-Defendant herein, moves the Court to dismiss Defendants’ First Amended Counterclaim [Doc. 46], for failure to state a claim. Alternatively, Fiamma moves this Court to require Defendants to amend their First Amended Counterclaim with a more definite statement, pursuant to FEDERAL RULE OF CIVIL PROCEDURE 12(e). I. DEFENDANTS’ AMENDED COUNTERCLAIM IS STILL DEFICIENT Fiamma brought this action seeking to recover damages and losses caused by the misconduct of its erstwhile business partners. Through blatant misrepresentations, failure to live up to contractual agreements, and refusal to turn over moneys owed to Fiamma, all of the Defendants have worked together to deprive Fiamma of commissions and business opportunities. After this Court denied [Doc.41] Defendants’ motion to dismiss [Doc. 17], Defendants Case 3:16-cv-01402-K Document 50 Filed 12/30/16 Page 1 of 11 PageID 379 ______________________________________________________________________________ PLAINTIFF’S MOTION TO DISMISS DEFENDANTS’ AMENDED COUNTERCLAIM AND BRIEF IN SUPPORT PAGE 2 filed their “Answer to Plaintiff’s First Amended Complaint and Counterclaim and Jury Demand” [Doc. 42]. The Defendants’ counterclaim included four causes of action: unjust enrichment, promissory estoppel, open account, and abuse of legal process; the counterclaim also included a demand for punitive damages, not clearly connected to any specific cause of action. Fiamma moved to dismiss such counterclaim, [Doc. 44] and Defendants responded in part by repleading, filing their First Amended Counterclaim [Doc. 46] (“Amended Counterclaim”), to which this Motion is directed. Defendants’ First Amended Counterclaim asserts new causes of action for breach of contract and “tortious interference with economic advantage,” as well as adding additional, if formulaic, language to the previous causes of action for unjust enrichment and promissory estoppel, and to Defendants’ request for punitive damages. The Amended Counterclaim still fails to state claims upon which relief can be granted, and since Defendants have already availed themselves of amending their claim, Fiamma requests that the Court dismiss Defendants’ entire Amended Counterclaim, or at least those portions which Defendants have already made two attempts to adequately plead. II. LEGAL STANDARD A. MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM UNDER RULE 12(b)(6) The Court has authority to dismiss a suit for failure to state a claim upon which relief can be granted if the complaint does not provide fair notice of the claim and does not state factual allegations showing that the right to relief is plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). To avoid dismissal under RULE 12(b)(6), a plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Ashcroft, 556 U.S. at 678; Twombly, 550 U.S. at 570. The pleading must set forth “more than labels and conclusions, and a formulaic recitation of the elements of a cause Case 3:16-cv-01402-K Document 50 Filed 12/30/16 Page 2 of 11 PageID 380 ______________________________________________________________________________ PLAINTIFF’S MOTION TO DISMISS DEFENDANTS’ AMENDED COUNTERCLAIM AND BRIEF IN SUPPORT PAGE 3 of action will not do.” Twombly, 550 U.S. at 555. The “[f]actual allegations of [a complaint] must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Id. (internal quotation marks, citations and footnote omitted). In other words, Defendants’ counterclaim must allege sufficient factual content to nudge their claim “across the line from conceivable to plausible.” Ashcroft, 550 U.S. at 683 (quoting Twombly, 550 U.S. at 570). B. MOTION FOR MORE DEFINITE STATEMENT UNDER RULE 12(e) A motion for a more definite statement is proper when a complaint is so vague or ambiguous that the defendant cannot reasonably prepare a response. FED. R. CIV. P. 12(e); see FED. R. CIV. P. 8(a)(2); Davis v. Coca-Cola Bottling Co. Consol., 516 F.3d 955, 983-84 (11th Cir. 2008). Defendants’ Amended Counterclaim remains vague and ambiguous with respect to the claims set forth therein, such that Fiamma cannot frame a responsive pleading. However, Defendants have already amended once in and attempt to plead their claims for unjust enrichment and promissory estoppel more clearly. Defendants’ Amended Counterclaim with regard to such claims should be dismissed, but if it is not, Fiamma asks the Court to require Defendants to amend whatever portion of the Amended Counterclaim remains with a more definite statement of their claims against Fiamma. III. ARGUMENT & AUTHORITIES FOR DISMISSAL Defendants’ Amended Counterclaim still amounts merely to this: there is a dispute between the parties as to the amount Defendants owe Fiamma. Even Defendants now admit that a contract existed, which they contend was breached. In the alternative, they contend that the Case 3:16-cv-01402-K Document 50 Filed 12/30/16 Page 3 of 11 PageID 381 ______________________________________________________________________________ PLAINTIFF’S MOTION TO DISMISS DEFENDANTS’ AMENDED COUNTERCLAIM AND BRIEF IN SUPPORT PAGE 4 transactions between the parties give rise to unjust enrichment or promissory estoppel. Finally, Defendants allege a claim for “tortious interference with economic advantage,” which is not a cause of action recognized in Texas, and they allege that Fiamma’s actions entitle Defendants to punitive damages. A. BREACH OF CONTRACT (AMENDED COUNTERCLAIM AT 7-8) Defendants allege a claim for breach of contract, claiming that Defendant David Morningstar (“Morningstar”) entered into an enforceable agreement with Fiamma, (Amended Counterclaim, ¶¶ 9 and 33). The factual allegations underlying such breach of contract claim, however, are riddled with inconsistent statements which render the claim too speculative to meet the threshold test for plausibility. For example, the parties to the contract are supposedly Fiamma and Morningstar, as stated both in the general fact section of the Amended Counterclaim, ¶ 9, and in Count One: Breach of Contract, at ¶ 33. Yet Defendants repeatedly state that “Defendants” (defined in the Amended Counterclaim as all Defendants), undertook to carry out the terms of such agreement. (Id. ¶¶ 13 - 15, 17, 34). Defendants allege in one paragraph that “Morningstar assumed the responsibility and costs” (Id. ¶ 14) but later state that “[p]ursuant to the parties’ agreement, Defendants would assumed [sic] the responsibility and costs” (Id. ¶ 34). Foundational to a claim for breach of contract is identification of the parties to such contract, or at least identification of the claimant as a party. The Amended Counterclaim never alleges that any defendant other than Morningstar was a party to the contract, and asserts specifically that “[a] all relevant times, Morningstar complied with his obligations under the parties agreement” (Id. ¶ 36). Yet all Defendants claim to have been damaged, and to be entitled to attorneys’ fees under the claim for breach of contract. (Id. ¶¶ 39 and 40). Case 3:16-cv-01402-K Document 50 Filed 12/30/16 Page 4 of 11 PageID 382 ______________________________________________________________________________ PLAINTIFF’S MOTION TO DISMISS DEFENDANTS’ AMENDED COUNTERCLAIM AND BRIEF IN SUPPORT PAGE 5 If a complaint omits facts concerning pivotal elements of a plaintiff’s claim, a court is justified in assuming the nonexistence of those facts. Ledesma v. Dillard Dept. Stores, 818 F. Supp. 983, 984 (N.D. Tex. 1993). Defendants Caroline Morningstar, Hilary Radolec, Employer Assurance Solutions, LLC, and Morningstar Benefits Solutions, LLC seek relief for breach of a contract to which they have asserted only Morningstar and Fiamma are parties. As such, these Defendants have failed to state a claim for breach of contract upon which relief can be granted, and their breach of contract claim should be dismissed. Further, in light of the foregoing inconsistencies, even David Morningstar’s claim for breach of contract is too implausible to survive Rule 12(b)(6) scrutiny. Did Morningstar perform under the contract, or did the non-party Defendants? How has he been damaged as opposed to the other Defendants? B. UNJUST ENRICHMENT/QUANTUM MERUIT (AMENDED COUNTERCLAIM AT 8-9) A person is unjustly enriched when he obtains a “benefit from another by fraud, duress, or the taking of an undue advantage.” Heldenfels Bros., Inc. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992). The Texas Supreme Court has recognized a cause of action for unjust enrichment only when one party profits at another’s expense. HECI Exploration Co. v. Neel, 982 S.W.2d 881, 891-92 (Tex. 1998). There is no allegation in the counterclaim that plausibly allows a conclusion that Fiamma profited at the expense of Morningstar or any of the other Defendants, nor that there was fraud, duress, or any undue advantage taken by Fiamma. As between the parties, even in Defendants’ version of events, Defendants clearly had control. Defendants had the experience in the insurance industry (Amended Counterclaim ¶¶ 13-15), the contacts with insurance carriers (Id. ¶ 13), and were receiving the commissions (Id. ¶¶ 15 and 20), which they only doled out to Fiamma as they saw fit (Id. ¶¶ 20-21). In determining a Rule 12(b)(6) motion, the Court should not strain to find inferences Case 3:16-cv-01402-K Document 50 Filed 12/30/16 Page 5 of 11 PageID 383 ______________________________________________________________________________ PLAINTIFF’S MOTION TO DISMISS DEFENDANTS’ AMENDED COUNTERCLAIM AND BRIEF IN SUPPORT PAGE 6 favorable to the non-movant, nor should it accept conclusory allegations, unwarranted deductions, or legal conclusions. R2 Invs. LDC v. Phillips, 401 F.3d 638, 642 (5th Cir. 2005). Here, there are no facts alleged as to why, if Defendants (or any of them) advanced commission payments, they were under duress to do so (Amended Counterclaim ¶ 20). Similarly, Defendants complain that they continued servicing and assisting accounts as broker of record, but do not explain how this continued service was induced by Fiamma or how it unjustly enriched Fiamma (Id. ¶ 29). Consequently, Defendants have failed to sufficiently allege a claim upon which relief can be granted, and the Court should dismiss their unjust enrichment claim. To the extent Defendants also attempt to assert a claim for quantum meruit under their second count, such claim should also be dismissed. First, recovery in quantum meruit is not available when, as here, an express contract exists covering the services allegedly furnished. See Truly v. Austin, 744 S.W.2d 934, 936 (Tex. 1988). Defendants have pled that the services furnished were pursuant to an agreement between Fiamma and Morningstar. Second, to the extent Defendants complain that they should be reimbursed for services provided after the contract terminated, their assertion that “Fiamma accepted and benefited from the foregoing money and services from Defendants” (Amended Counterclaim ¶¶ 42-43) is conclusory and formulaic. “[C]onclusory allegations or legal conclusions set forth as factual allegations will not prevent dismissal.” Shabazz v. Tex. Youth Comm’n, 300 F. Supp. 2d 467, 470 (N.D. Tex. 2003). There is no factual assertion plausibly showing that, after the termination of the contract, Fiamma knowingly accepted such services. See Vortt Exploration Co. v. Chevron U.S.A., Inc., 787 S.W.2d 942, 944 (Tex. 1990). C. PROMISSORY ESTOPPEL (AMENDED COUNTERCLAIM AT 9) To state a claim for promissory estoppel under Texas law, four elements must be shown: Case 3:16-cv-01402-K Document 50 Filed 12/30/16 Page 6 of 11 PageID 384 ______________________________________________________________________________ PLAINTIFF’S MOTION TO DISMISS DEFENDANTS’ AMENDED COUNTERCLAIM AND BRIEF IN SUPPORT PAGE 7 “(1) a promise, (2) foreseeability of reliance thereon by the promisor, and (3) substantial reliance by the promisee to his detriment . . . . [and (4)] a definite finding that injustice can be avoided only by the enforcement of the promise.” Zenor v. El Paso Healthcare Sys., Ltd., 176 F.3d 847, 864 (5th Cir. 1999), citing Clardy Manufacturing Co. v. Marine Midland Business Loans, Inc., 88 F.3d 347, 36 (5th Cir. 1996). Dismissal is proper if a pleading lacks an allegation regarding a required element necessary to obtain relief. Kaiser Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982), cert. denied, 459 U.S. 1105 (1983). “[T]he complaint must contain either direct allegations on every material point necessary to sustain a recovery . . . or contain allegations from which an inference fairly may be drawn that evidence on these material points will be introduced at trial.” Campbell v. City of San Antonio, 43 F.3d 973, 975 (5th Cir. 1995). A statement of fact that merely creates a suspicion that the pleader might have a right of action is insufficient. See id. The first element of a claim for promissory estoppel is “a promise”. In the portion of Defendants’ counterclaim regarding promissory estoppel, Defendants now state: “Defendants provided the forgoing [sic] advances and services to the accounts even after Fiamma had wrongfully terminated the parties’ relationship ... based upon numerous representations and assurances from Fiamma that they would be reimbursed.” (Amended Counterclaim, ¶¶ 49-50). These allegations are insufficient to demonstrate that any promise existed which would support a claim for promissory estoppel. For purposes of promissory estoppel, the promise relied upon must be “sufficiently certain so as to enable the court to determine the rights of the parties,” Gilmartin v. KVTV- Channel 13, 985 S.W.2d 553, 558-59 (Tex. App.-San Antonio 1998, no writ), citing Gillum v. Case 3:16-cv-01402-K Document 50 Filed 12/30/16 Page 7 of 11 PageID 385 ______________________________________________________________________________ PLAINTIFF’S MOTION TO DISMISS DEFENDANTS’ AMENDED COUNTERCLAIM AND BRIEF IN SUPPORT PAGE 8 Republic Health Corp., 778 S.W.2d 558, 570 (Tex. App.--Dallas 1989, no writ). Commitments to “upgrade the hospital's facilities,” “make the level of patient care rise,” and “build a new addition to the hospital facility” were held to be too indefinite to permit a cause of action for estoppel. Gillum, 778 S.W.2d at 570. “Numerous representations and assurances” of “reimbursement” are not sufficiently certain to support Defendants’ claim. In addition to failing to sufficiently allege a promise, Defendants’ Amended Counterclaim contains no allegations of fact, as opposed to conclusory statements, regarding the next two elements of promissory estoppel: foreseeability of reliance and substantial reliance by the claimant. Paragraph 51 merely states that “Defendants reasonably relied on these promises,” but Defendants also allege that they continued performing even after Fiamma’s so-called wrongful termination. How was such reliance reasonable? Finally, the counterclaim fails to allege sufficient facts to show that injustice can only be avoided by the enforcement of the promise. Instead, Defendants merely plead the conclusory allegation that “equity mandates that Fiamma be forced to account for and repay Defendants for the fair value of the foregoing money and services,” which does not provide the basis for concluding that a plausible claim exists. How is Fiamma to “account for” services that Defendants supposedly provided, or money that Defendants claim to have spent? Defendants have pled none of the elements of promissory estoppel with sufficient facts to raise their right to relief above the speculative level, and the Court should therefore dismiss this claim. D. TORTIOUS INTERFERENCE WITH ECONOMIC ADVANTAGE (AMENDED COUNTERCLAIM AT 10) Texas recognizes a cause of action for tortious interference with prospective business relations, which may be analogous to Defendants’ fourth cause of action. See Small Business Case 3:16-cv-01402-K Document 50 Filed 12/30/16 Page 8 of 11 PageID 386 ______________________________________________________________________________ PLAINTIFF’S MOTION TO DISMISS DEFENDANTS’ AMENDED COUNTERCLAIM AND BRIEF IN SUPPORT PAGE 9 Corp. v. Clear Channel Broadcasting, Inc., 210 F.3d 278, 280 n.1 (5th Cir. 2010). The elements of tortious interference with prospective business relations are (1) a reasonable probability that the claimant would have entered into a business relationship, (2) an independently tortious or unlawful act by the defendant that prevented the relationship from occurring, (3) the defendant did such act with a conscious desire to prevent the relationship from occurring or the defendant knew the interference was certain or substantially certain to occur as a result of the conduct; and (4) the claimant suffered actual harm or damages as a result of the defendant’s interference. abuse of process. (4) the claimant suffered actual harm or damages as a result of the defendant's interference. See Baty v. ProTech Ins. Agency, 63 S.W.3d 841, 860 (Tex. App.-Houston [14th Dist.] 2001, pet. denied) (citing Ash v. Hack Branch Distrib. Co., 54 S.W.3d 401, 414-15 (Tex. App.-Waco 2001, pet. denied)). Defendants claim to have had a reasonable expectation of continuing to do business with Fiamma’s referrals, (Amended Counterclaim ¶ 56), but do not provide any factual basis for the first element of tortious interference, a “reasonable probability” that such business relationship would have continued. The companies involved were, after all, Fiamma’s corporate referrals. Defendants further have not alleged facts regarding the second and third elements of this claim, regarding tortious or unlawful acts by Fiamma, done with conscious desire to prevent the relationship between Defendants and the corporate referrals from continuing. Instead, Defendants rely on conclusory recitations that “Fiamma maliciously and intentionally interfered with these relationships without any privileged [sic] or justifiable basis. Upon information and belief, Fiamma also made false misrepresentations regarding Defendants. . . .” (Id. ¶57). Without factual support, these bald assertions fail to raise this claim from speculative to plausible, and this Court should dismiss the Defendants’ Count Four. Case 3:16-cv-01402-K Document 50 Filed 12/30/16 Page 9 of 11 PageID 387 ______________________________________________________________________________ PLAINTIFF’S MOTION TO DISMISS DEFENDANTS’ AMENDED COUNTERCLAIM AND BRIEF IN SUPPORT PAGE 10 E. PUNITIVE DAMAGES (COUNTERCLAIM AT 10-11) Defendants’ prayer for punitive damages, and the Counterclaim as a whole, fail to state any claim on which punitive damages can be awarded under Texas law. To be entitled to “punitive damages,” Defendants must meet the requirements set forth in Chapter 41 of the Texas Civil Practice & Remedies Code for exemplary damages. Defendants’ Amended Counterclaim now mentions “actual malice,” as well as reciting “ill-will, spite, evil motive, and intention to injury [sic] Defendants,” but states no facts supporting this conclusory allegation (Amended Counterclaim at 10, ¶ 60). Defendants merely state the “wrongful conduct by Plaintiff” includes “Plaintiff’s tortious interference with Morningstar’s economic advantage and its intentionally defamatory statements.” Id. First, as set forth above, there is no cause of action recognized in Texas for “tortious interference with economic advantage,” and since Defendants have failed to state a claim for tortious interference with prospective business relations, they cannot recover punitive damages. Moreover, Defendants have nowhere pled or alleged a defamation claim, so they have not shown themselves entitled to punitive damages based on “intentionally defamatory statements.” Consequently, Defendants have failed to sufficiently allege a claim upon which punitive damages can be awarded, and the Court should dismiss their request for same. IV. CONCLUSION Based on the foregoing, Plaintiff Fiamma respectfully prays that the Defendants’ Amended Counterclaim be dismissed in its entirety pursuant to Rule 12(b)(6), for failure to state a claim on which relief can be granted, or, in the alternative, that such portions of Defendants’ amended counterclaim which fail to state a claim be dismissed, and that Plaintiff have such other and further relief as may be appropriate. Case 3:16-cv-01402-K Document 50 Filed 12/30/16 Page 10 of 11 PageID 388 ______________________________________________________________________________ PLAINTIFF’S MOTION TO DISMISS DEFENDANTS’ AMENDED COUNTERCLAIM AND BRIEF IN SUPPORT PAGE 11 Respectfully submitted, Macdonald Devin, P.C. By: /s/ Gregory N. Ziegler Gregory N. Ziegler State Bar No. 00791985 gziegler@macdonalddevin.com Attorney-in-Charge Jennifer Duncan Edgeworth State Bar No. 24012561 jedgeworth@macdonalddevin.com Stefanie Klein State Bar No. 11565650 sklein@macdonalddevin.com Weston M. Davis State Bar No. 24065126 wdavis@macdonalddevin.com 3800 Renaissance Tower 1201 Elm Street Dallas, Texas 75270-2130 214.744.3300 Telephone 214.747.0942 Facsimile ATTORNEYS FOR PLAINTIFF CERTIFICATE OF SERVICE I hereby certify that on December 30, 2016, the foregoing pleading was filed with the clerk of the court for the U.S. District Court, Northern District of Texas, using the electronic case filing system of the court. The electronic case filing system sent a “Notice of Electronic Filing” to all attorneys of record who have consented in writing to accept this Notice as service of documents by electronic means. /s/ Gregory N. Ziegler Gregory N. Ziegler Case 3:16-cv-01402-K Document 50 Filed 12/30/16 Page 11 of 11 PageID 389