Case Information
UNITED STATES DISTRICT COURT WESTERN DISTRICT OF LOUISIANA LAFAYETTE DIVISION LINDSAYCA INC CASE NO. 6:20-CV-01122 VERSUS JUDGE JUNEAU CUSTOM PROCESS EQUIPMENT MAGISTRATE JUDGE HANNA L L C ET AL
REPORT AND RECOMMENDATION
Before the court is a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) or, alternatively, for more definite statement pursuant to Fed. R. Civ. P. 12(e) filed by defendants Custom Process Equipment, LLC (“CEP”) and Louisiana Machinery Company, LLC (“LMC”) (collectively “Defendants”). (Rec. Doc. 8). The motion was referred to the undersigned magistrate judge for review, report, and recommendation in accordance with the provisions of 28 U.S.C. § 636 and the standing orders of this Court. Considering the evidence, applicable law, and the arguments of the parties, and for the reasons fully explained below, it is recommended that Defendants’ motion be GRANTED in part and DENIED in part. Defendants’ alternative motion for more definite statement pursuant to Fed. R. Civ. P. 12(e) is DENIED.
Factual Background
On or about April 16, 2014, Plaintiff, Lindsayca, Inc. (“Plaintiff” or “Lindsayca”) ordered two (2) electrostatic treaters (“treaters”), a specialized type of oilfield equipment, to be fabricated by CPE. (Rec. Doc. 1 at ¶ 11). CPE completed fabrication of the treaters on or about February 3, 2015. Lindsayca and CPE completed a factory acceptance test, verifying that the treaters were complete and in working order. (Id. at ¶ 12). Following completion, the project for which Lindsayca ordered the treaters was put on hold and, as a result, Lindsayca and CPE executed a “Change Order” whereby CPE agreed to move the treaters “outside of the shop work area” in the “storage area” and store them until Lindsayca was ready to receive them. (Id. at ¶¶ 13-14). The Change Order further obligated CPE to preserve and protect the treaters’ openings and to clean the treaters prior to shipment for a fee of $3,000.00 per month of storage. (Id. at ¶ 14).
On May 15, 2015, a CPE employee sent an email to Lindsayca entitled “Lindsayca Treaters Preservation” in which CPE proposed to shrink wrap the treaters as a means of providing adequate protection from exposure to the weather. The email recommended shrink wrap based on the “very expensive instruments installed” in the treaters. (Id. at ¶ 15). Lindsayca agreed with CPE’s recommendation and, accordingly executed a “Shrink Wrap Agreement” wherein it agreed to pay CPE the sum of $8,098.00 in exchange for CPE’s shrink wrapping of the treaters. (Id. at ¶ 16). On or about June 26, 2015, CPE sent Lindsayca photographs of the newly shrink-wrapped treaters. (Id. at ¶ 17).
Citing unpaid storage fees, CPE sent Lindsayca notice of “Termination of Storage Agreement” on April 30, 2020 and advised that it would invoke its rights under La. R.S. 10:7-210, pertaining to a warehouseman’s lien if Lindsayca failed to pay the delinquent fees. (Id. at ¶ 18). Nearly a month later, the parties executed an “Agreement” compromising the outstanding storage fees. (Id. at ¶ 19). Under the fee settlement agreement, CPE was obligated to wire two payments totaling $100,000.00 to LMC. (Id. at ¶¶ 20-21).
On or about June 11, 2020, Lindsayca inspected the treaters at CPE’s storage area. Lindsayca asserts that, on that date, the treaters displayed no shrink wrapping and had visible damage from water intrusion and appeared to be missing some of their specialized instrumentation, later found to be stored separate from the treaters and without protection. (Id. at ¶¶ 27-29).
Plaintiff filed the instant suit on August 28, 2020, seeking damages for CPE’s alleged breach of the warehouseman’s duty under La. R.S. 10:7-204, as well as the various agreements executed among the parties. (Id. at ¶¶ 35). Plaintiff named both CPE and LMC, asserting that these entities should be deemed a single business enterprise under Louisiana law and, thus, judgment against both entities is appropriate as a matter of law. (Id. at ¶¶ 22-25, 35). In response, Defendants filed the instant motion, seeking dismissal of all claims under the Louisiana Warehouseman’s Act or Louisiana contract law. Defendants aver that Lindsayca fails to adequately allege facts in support of a claim against them under the single business enterprise theory, necessitating dismissal of LMC. Alternatively, Defendants ask that Lindsayca be compelled to file a more definite statement of its claims.
Applicable Standard
When considering a motion to dismiss for failure to state a claim under
F.R.C.P. Rule 12(b)(6), the district court must limit itself to the contents of the
pleadings, including any attachments and exhibits thereto.
Collins v. Morgan Stanley
Dean Witter
, 224 F.3d 496, 498 (5 th Cir.2000);
U.S. ex rel. Riley v. St. Luke's
Episcopal Hosp.,
To survive a Rule 12(b)(6) motion, the plaintiff must plead “enough facts to
state a claim to relief that is plausible on its face.”
Bell Atlantic
,
A claim meets the test for facial plausibility “when the plaintiff pleads the
factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal
,
Analysis
Application of the Louisiana Uniform Warehouse Receipts Act Defendants’ motion disputes Plaintiff’s claim that CPE is a “warehouse” within the meaning of Louisiana’s Uniform Warehouse Receipts Act (“Act”), La. R.S. 10:7-201 et seq. Plaintiff points out that CPE’s own notice of termination of storage threatened to invoke the Act’s lien provision, belying Defendants’ current argument for dismissal. Despite Defendants’ prior assertions, Louisiana law is settled in its view of what constitutes a “warehouse” under the Act. La. R.S. 10:7- 102(a)(13), applicable to the Act, defines a “warehouse” as “…a person engaged in the business of storing goods for hire.” La. R.S. 54:113 requires that any proprietor operating as a public warehouse must obtain a certificate from the district court or civil district court in the parish in which the warehouse is located verifying the posting of the proper bond pursuant to La. R.S. 54:114. Plaintiff does not allege CPE is a licensed and bonded public warehouse under Louisiana law, [1] nor does Plaintiff demonstrate that CPE is “in the business of storing goods for hire.” CPE is not a “warehouse” under the Act, as storing goods that you sell does not convert your business into a warehouse. This is true even when the goods at issue are already sold and awaiting transport to their destination. Allen v. Travelers Ins. Co. , 124 So.2d 367 (La. App. 1 Cir. 1960) citing Fields v. General Casualty Co. , 36 So. 2d 843 (La. App. 1 Cir. 1948), inter alia . Accordingly, Plaintiff’s claims against Defendants under the Act should be dismissed for failure to state a claim upon which relief may be granted.
Breach of Contract Claims
Defendants’ motion asserts that Plaintiff fails to adequately state claims for breach of the Change Order and Shrink Wrap Agreement executed between the Lindsayca and CPE. Specifically, Defendants point out that Plaintiff’s complaint alleges “CPE breached its standard of care as a warehouseman under the Storage Agreement.” (Rec. Doc. 1 at ¶ 31).
This Court has carefully reviewed Plaintiff’s Complaint and finds that, given
our finding as to the application of the Act, Plaintiff fails to state a cognizable claim
for breach of contract in this case. Each allegation of breach of contract found in
Plaintiff’s Complaint is based on allegations arising from CPE’s alleged status as a
warehouse. Plaintiff cites no specific contractual provisions allegedly violated by
CPE, as required under applicable Louisiana law.
Louque v. Allstate
,
Application of Single Business Enterprise Doctrine
Defendants’ motion seeks dismissal of LMC from this suit on the basis that
Plaintiff’s Complaint is insufficient to state a plausible claim against LMC under the
single business enterprise theory. “Louisiana’s single business enterprise
doctrine…is a ‘theory for imposing liability where two or more business entities act
as one.’”
Energy Coal v. CITGO Petroleum Corp.
,
1. corporations with identity or substantial identity of ownership, that is, ownership of sufficient stock to give actual working control;
2. common directors or officers;
3. unified administrative control of corporations whose business functions are similar or supplementary; directors or officers of one corporation act independently in the interest of the corporation; corporation financing another corporation; inadequate capitalization;
corporation causing the incorporation of another affiliated corporation;
corporation paying the salaries and expenses or losses of another corporation;
receiving no business other than that given to it by its affiliated corporations;
corporation using the property of another corporation as its own;
noncompliance with corporate formalities; common employees;
services rendered by the employee of one corporation on behalf of another corporation;
common offices;
centralized accounting;
undocumented transfers of funds between corporations;
unclear allocation of profits and losses between corporations;
unclear allocation of profits and losses between corporations; and excessive fragmentation of a single *10 Case 6:20-cv-01122-MJJ-PJH Document 15 Filed 02/18/21 Page 10 of 15 PageID #:
enterprise into separate corporations. Green, 577 So.2d at 257-258.
This list is illustrative and no one factor is determinative.
Id
., at 259. Courts
must consider the totality of the circumstances in each case where it is asked to make
a single business entity finding.
Bona Fide Demolition & Recovery, LLC v. Crosby
Construction Co. of Louisiana
,
Plaintiff’s complaint alleges the following in support of its single business entity theory: (1) that CPE and LMC share a manager, Robert D. Webb, Jr.; (2) that both companies are domiciled at the same address (3799 W. Airline Highway, Reserve, Louisiana 70084); (3) that LMC provided financing to CPE; (4) that CPE is inadequately capitalized; that CPE is the “alter ego, agent, tool, and/or instrumentality” of LMC; and (5) that payment for the storage fees negotiated between Lindsayca and CPE in the Storage Fee Settlement were directed to be paid to LMC. (Rec. Doc. 1 at ¶¶ 21-25). Thus, Plaintiff may fairly said to have pled facts in support of factors 2 and 14. Plaintiff’s alleges, in its opposition to the motion, that it is now aware that CPE and LMC share a Chief Financial Officer, a fact for which it asks leave to plead, should this Court determine its allegations insufficient. (Rec. Doc. 10 at p. 10).
This Court is limited to consideration of the complaint and any attached documents or exhibits in the context of a Rule 12(b)(6) motion. Rodriguez v. Rutter ,
Case 6:20-cv-01122-MJJ-PJH Document 15 Filed 02/18/21 Page 11 of 15 PageID #:
310 Fed. Appx. 623 (5 th Cir. 2009). Having thoroughly reviewed Plaintiff’s
complaint, this Court finds the allegations of the complaint insufficient to state a
claim for application of single business enterprise doctrine to CPE and LMC.
Plaintiff’s allegations regarding common directors and shared office space are
adequate, while allegations regarding undercapitalization and control are merely
unsupported, conclusory legal opinions.
Ashcroft v. Iqbal
, 556 U.S. 662, 677-78
(2009). Without factual support for assertions that CPE is undercapitalized, or that
LMC provided financing to CPE, this Court is not required to accept these
allegations as true for the purposes of this motion.
Id.
Given that Plaintiff’s
complaint contains sufficient allegations as to only 2 of the 18 factors, it fails to state
a claim.
Compare
,
Jackson v. Tanfoglio Giuseppe, S.R.L.
,
Case 6:20-cv-01122-MJJ-PJH Document 15 Filed 02/18/21 Page 12 of 15 PageID #:
under the single business enterprise theory where seven of the eighteen Green factors were pled).
Motion for More Definite Statement
Fed. R. Civ. P. 12(e) provides for the opportunity to request a more definite statement when the complaint “is so vague or ambiguous that the party cannot reasonably prepare a response.” The disfavored remedy contemplated by Rule 12(e) is intended to relieve demonstrable prejudice caused to the defendant because of excessively vague and ambiguous allegations. Rule 12(e) is not meant to supplant the notice pleading requirement of Fed. R. Civ. P. 8(a)(2), which merely requires a short and plain statement providing defendant notice of the nature and basis of plaintiff’s claims. Mitchell v. E-Z Way Towers, Inc. , 269 F.2d 126, 132 (5 Cir. 1959).
As evidenced by Defendants’ motion to dismiss, Defendants are fully apprised
of the nature and basis of Plaintiff’s claims against them and demonstrate no
prejudice to their ability to defend such claims. Indeed, the factual support for
Plaintiff’s claims may be within Defendants’ own knowledge and, in such cases, the
remedy of a more definite statement is even less favored by courts.
Babcock &
Wilcox Co. v. McGriff, Seibels & Williams, Inc.
,
Accordingly, Defendants’ alternative motion for a more definite statement will be denied.
Motion for Leave to Amend
Plaintiff’s response in opposition to Defendants’ motion incorporates an
alternative motion for leave to amend its complaint if this Court deems its complaint
to be insufficient to state a claim pursuant to Fed. R. Civ. P. 12(b)(6). (Rec. Doc. 10
at p. 8). Leave to amend should be freely given when justice so requires. Fed. R.
Civ. P. 15(a)(2). Given the aim of courts to decide cases on their merits, rather than
on procedural shortcomings, at least one amendment is generally granted,
particularly when requested.
Great Plains Trust Co. v. Morgan Stanley Dean Witter
& Co.
,
In this case, no undue delay, inexcusable neglect or prior fruitless attempts at
amendment weigh against a grant of leave.
Great Plains
,
Conclusion
*14 Case 6:20-cv-01122-MJJ-PJH Document 15 Filed 02/18/21 Page 14 of 15 PageID #:
This Court finds that Defendants demonstrated that Louisiana’s Uniform Warehouse Receipts Act does not apply to them and, for that reason, Plaintiff can plead no facts that would state a claim for relief under the Act. Accordingly, Defendants’ motion to dismiss should be GRANTED as to all claims by Plaintiff against Defendants arising out of the Act.
This Court also finds that Plaintiff’s complaint fails to state a claim for relief regarding the application of the single business enterprise doctrine and breach of contract in this case. Given the potential for discovery of information that may lead to additional facts giving rise to viable claims for breach of contract and application of the single business enterprise doctrine and the applicable standards for amendment, Defendants’ motion to dismiss should be DENIED as to all remaining claims against LMC. Additionally, Plaintiff’s alternative motion for leave to amend should be GRANTED as to such claims.
Finally, this Court finds that Defendants’ alternative motion for a more definite statement should be DENIED based Defendants’ failure to demonstrate prejudice caused by the alleged vagueness of Plaintiff’s complaint.
Under the provisions of 28 U.S.C. §636(b)(1)(C) and Fed. R. Crim. P. 59(b), parties aggrieved by this recommendation have fourteen days from service of this report and recommendation to file specific, written objections with the Clerk of Court. A party may respond to another party’s objections within fourteen days after *15 Case 6:20-cv-01122-MJJ-PJH Document 15 Filed 02/18/21 Page 15 of 15 PageID #:
being served with of a copy of any objections or responses to the district judge at the time of filing.
Failure to file written objections to the proposed factual findings and/or the proposed legal conclusions reflected in the report and recommendation within fourteen days following the date of its service, or within the time frame authorized by Fed. R. Crim. P. 59(b) shall bar an aggrieved party from attacking either the factual findings or the legal conclusions accepted by the district court, except upon grounds of plain error. See Douglass v. United Services Automobile Association , 79 F.3d 1415 (5 Cir. 1996) ( en banc ), superseded by statute on other grounds , 28 U.S.C. §636(b)(1).
THUS DONE in Chambers, Lafayette, Louisiana on this 18th day of February, 2021.
____________________________________ PATRICK J. HANNA UNITED STATES MAGISTRATE JUDGE
Notes
[1] La. R.S. 54:111(1) defines “public warehouse” as “a structure or receptacle of any kind in which goods of any kind are deposited and stored for profit and for which a receipt for goods is issued to the owner.”