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De Lage Landen Financial Services, Inc. v. Rasa Floors

March 5, 2009


The opinion of the court was delivered by: Baylson, J.


Presently before the Court is De Lage Landen's ("DLL" or "Plaintiff") Motion to Dismiss the Counterclaim for failure to state a claim under Fed. R. Civ. P. 12(b)(6). This suit arises from a dispute over a series of contracts entered into by DLL, Rasa Floors ("Rasa" or "Defendant"), and several third parties for the provision of telephone services and equipment.For the following reasons, the Court will deny in part and grant in part, with leave to amend.

I. Factual Background

A. Complaint

The facts of this case were previously outlined in some detail in the Memorandum and Order of this Court, (Doc. 32), denying Rasa's motion to dismiss for improper venue. See De Lage Landen Fin. Servs. v. Rasa Floors, LP, 2008 WL 4822033, at *1-2 (E.D. Pa. Nov. 4, 2008). In summary, DLL, a Pennsylvania corporation, sued Rasa, a Texas company, for breach of a "Rental Agreement," under which DLL allegedly agreed to lease telephone equipment to Rasa. (Compl. ¶¶ 6, 18). Before entering into the Rental Agreement, Rasa contracted for the provision of telephone services with third-party Defendant and Defendant on the Counterclaim, Capital 4, Inc. ("Capital 4") pursuant to a "Customer Agreement." (Compl. ¶¶ 8-9). Under those Agreements, Rasa only made payments to DLL, which would then "pass through" part of the payments to Capital 4 for the services Capital 4 provided to Rasa. (Compl. ¶¶ 10-11).

However, Capital 4 became insolvent in September 2007 and was no longer able to provide the telephone services it had promised to Rasa, so DLL allegedly reduced Rasa's monthly payments by the amount of the pass through. (Compl. ¶ 12-13). Rasa then stopped making any payments to DLL. (Compl. ¶ 14). DLL alleges that the Rental Agreement contained a specific clause that obligates Rasa to continue the payments to DLL regardless of the whether it received services from Capital 4. Specifically, DLL alleges that this clause provided that DLL was not responsible for providing maintenance and/or service for the equipment; that Rasa's claims for service and maintenance must be made to the supplier or manufacturer; and that such claims could not affect Rasa's obligations under the Rental Agreement. (Compl. ¶ 8; Ex. A).

DLL sued for breach of contract, asserting that Rasa was obligated to make its payments to DLL despite the loss of services provided by Capital 4. (Compl. ¶¶ 8, 18-20). The Rental Agreement contained a choice-of-law provision selecting Pennsylvania law to govern any issues arising under that contract, as well as a forum selection clause also choosing Pennsylvania as the proper jurisdiction. (Compl. Ex. A)

B. Counterclaim

Rasa has brought counterclaims against DLL as well as claims against Capital 4 and another party, 3Com Corporation ("3Com), the manufacturer of the communication equipment allegedly provided under the Rental Agreement.

In the fifty-six page, one-hundred and fifty-one paragraph "Facts" section of its Counterclaim, Rasa provides an extremely detailed account of the Agreements into which it entered and the relationships among the various parties involved. In that account, Rasa alleges that Capital 4 developed a program for selling telecommunication services to small business, which it branded the "Power of $Zero Program." (Countercl. ¶ 55). Pursuant to a Customer Agreement, participants were promised telephone services for a set number of years at a fixed rate and either free telephone equipment, a cash rebate, or a combination of both. (Countercl. ¶¶ 55(b)-(c); 56(a)-(b)). Under the Program, Capital 4 would allegedly arrange for a customer to borrow money from an equipment leasing company, such as DLL, and the customer would repay the borrowed money with interest, pursuant to a Rental Agreement with the leasing company.*fn1

(Countercl. ¶ 55(f)). The leasing company paid the borrowed money to Capital 4, which in turn used the money to provide the telephone services for the customers. (Countercl. ¶ 55(f)).

Rasa further alleges that Capital 4 would make a small payment to either 3Com for any equipment provided to the customer or to the customer, if the customer chose the cash bonus option rather than the equipment option. (Countercl. ¶ 55(h)). Capital 4 would also pay the value-added reseller for selling the program. (Countercl. ¶ 55(i)). The customer would make monthly payments to the leasing company to repay its loan, and the leasing company would then "pass through" a portion of those monthly installments to Capital 4 as "deferred maintenance" for the phone services. (Countercl. ¶ 55(k)).

Rasa alleges that Capital 4 entered into an agreement with 3Com, called the "Strategic Alliance Agreement," under which Capital 4 would promote and exclusively use 3Com communication equipment in the Program. 3Com, in return, would assist Capital 4 in marketing the Program.*fn2 (Countercl. ¶ 60-61; Ex. 5, Pg.). Rasa further alleges that Capital 4 and 3Com later changed the name of the program to the "3Com Power of Zero Solution" and extended their relationship under a modifying agreement entitled the "Rules of Engagement Addendum." (Countercl. ¶¶ 72-73; Ex. 7). The Addendum allegedly addressed the involvement of DLL, which would remain the sole owner of the leased equipment, and required Capital 4 to notify 3Com of any changes in the Rental Agreement. (Countercl. ¶¶ 73(h)-(i); 74; Ex. 7, Pg. 8). According to Rasa, Capital 4 and 3Com entered into yet another agreement, called the "Go Dark Agreement," obligating 3Com to pay for all communication services required to be provided by Capital 4 under its existing contracts if Capital 4 could not provide those services. (Countercl. ¶ 128; Ex. 3, Pg. 12). Rasa also alleges that DLL and Capital 4 entered into a Business Communications Program Agreement, or master program agreement, a standard form document used to establish financing arrangements for equipment vendors. (Countercl. ¶¶ 62-63; Ex. 6). Rasa alleges that agreement allowed DLL to provide equipment leases in the name of Capital 4. (Countercl. ¶ 64; Ex. 6, § B).

Rasa also describes at length the website maintained by the Program, pursuant to the Rules of Engagement Addendum, which explained the Power of $Zero Partnership and the 3Com Power of $Zero Solution. (Countercl. ¶¶ 75-78; Ex. 7, Pg. 6). Specifically, the website described the relationship between the Customer Agreement and the Rental Agreement, the obligations of the customer under the Agreements, and the responsibilities of Capital 4, 3Com, and DLL under the Agreements. (Countercl. ¶ 75; Ex. 1, Pgs. 11-14). Rasa suggests that this website led it to believe that the Program was maintained by a "partnership" that included 3Com, Capital 4, and DLL. (Countercl. ¶ 101(k))*fn3 . Rasa alleges that the Customer Agreement that it signed with Capital 4 incorporated the "eBrochure" found on the website. (Countercl. ¶ 95; Ex. 1, Pg. 9).

Rasa further alleges that DLL enlisted a number of its existing business equipment vendors to help promote the 3Com Power of $Zero Solution. (Countercl. ¶ 81). One of those vendors, North-central Communications Corporation ("NCC"), allegedly approached Rasa about the Program in December 2005. (Countercl. ¶¶ 92-94). Rasa agreed to the Program, signing the Customer Agreement, which was prepared solely by the alleged partnership and provided by NCC, on December 5, 2005. (Countercl. ¶¶ 94, 97-98). At that time, Rasa alleges Capital 4 faxed a credit to Rasa, which Rasa completed and returned to Capital 4. Capital 4 then allegedly sent the application to DLL. (Countercl. ¶¶ 102, 105). According to Rasa, it did not know the identity of the leasing company (DLL) and was not able to negotiate directly with that company. (Countercl. 112(g)).

Rasa alleges it signed a one-page Rental Agreement, delivered to it in Texas by Capital 4 or NCC, and returned the signed Rental Agreement to Capital 4 on December 5, 2005. (Countercl. ¶¶ 95, 106-108). According to Rasa, NCC returned the next day with a two-page version of the Rental Agreement, which Rasa once again signed and which was counter-signed by DLL on December 16, 2005. (Countercl. ¶¶ 99, 109). Both versions of the Rental Agreement allegedly indicated that the Agreement was with "Capital 4 Financial Services, a program of De Lage Landen Financial Services." (Countercl. ¶¶ 106, 107). Rasa also alleges that it never received any equipment from DLL and that Capital 4 indicated that the Rental Agreement with DLL would only serve as a funding mechanism through which Capital 4 could leverage its costs. (Countercl. ¶¶ 101(l); 113).*fn4

C. Procedural History

DLL filed its Complaint for breach of contract on February 1, 2008. (Doc. 1). Rasa then moved to dismiss for lack of personal jurisdiction and improper venue, which this Court denied in the Memorandum and Orderon November 5, 2008. (Doc. 32). On November 18, 2008, Rasa filed its Answer, Affirmative Defenses, and Counterclaim, asserting claims against DLL, as well as 3Com and Capital 4 as third-party Defendants and Defendants on the Counterclaim.(Doc. 34).*fn5 Rasa asserts the following claims against DLL: Count VIII Fraudulent Misrepresentation Count IX Conspiracy to Commit Fraud Count XI Violation of the Texas Consumer Protection Law Count XII Violation of the Federal RICO statute Count XIII Request for Rescission of Contracts Count XIV Violation of Texas Usury law Count XV Violation of Pennsylvania Criminal Usury law DLL has now moved to dismiss all the counterclaims brought against it.(Doc. 38).*fn6

II. Legal Standards

A. Jurisdiction

This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332 because the parties are citizens of different states and the amount in controversy exceeds the sum or value of $75,000, exclusive of interest and costs.

B. Standard of Review

When deciding a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the Court may look only to the facts alleged in the complaint and its attachments. Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1251, 1261 (3d Cir. 1994). The Court must accept as true all well-pleaded allegations in the complaint and view them in the light most favorable to the plaintiff. Angelastro v. Prudential-Bache Sec., Inc., 764 F.2d 939, 944 (3d Cir. 1985). The motion will be granted only when it is certain that no relief could be granted under any set of facts that plaintiff could prove. Ransom v. Marrazzo, 848 F.2d 398, 401 (3d Cir. 1988).

A valid complaint requires only "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). In order to state a valid complaint a plaintiff must make a "showing" that is more than just a blanket assertion that he is entitled to relief. Phillips v. County of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008). The Supreme Court has also cautioned "that without some factual allegation in a complaint, a claimant cannot satisfy the requirement that he or she provide not only 'fair notice' but also 'grounds' on which the claim rests." Id. (citing Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1965 n.3 (2007)).

Furthermore, any allegations of fraud must comply with the standard set out under Federal Rule of Civil Procedure 9(b), which provides that, "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." This requirement of particularity means a plaintiff must plead the circumstances surrounding the alleged fraud in order to put the defendant on notice of the precise misconduct at issue. See Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984).

III. Parties' Arguments

DLL offers several reasons for dismissing the counterclaims brought against it.First, DLL argues that the choice-of-law provision in the Rental Agreement, which selects Pennsylvania law, governs all claims between DLL and Rasa because the Rental Agreement is the only contract to which both Plaintiff DLL and Defendant Rasa are direct parties. DLL further argues that all of Rasa's tort-based claims, including the fraudulent misrepresentation, conspiracy, and RICO claims, must be dismissed due to the Pennsylvania parol evidence rule and gist of the action doctrine. DLL also asserts that the conspiracy and RICO claims are not adequately pled and that the Texas Consumer Protection Law claim and Texas usury claim should be dismissed because only Pennsylvania law applies. Finally, DLL contends that Rasa is barred from bringing a claim under the Pennsylvania criminal usury law because that statute does not provide a private right of action, and even if this Court construes that claim as a civil one, only non-corporate entities may bring civil claims under Pennsylvania law.

Rasa responds that Texas law applies, as the Rental Agreement and Customer Agreement are sufficiently interrelated to be read together as a single contract, and the Customer Agreement contains a choice-of-law clause selecting Texas law. When two inconsistent clauses appear in a single contract, Rasa argues that the first executed provision must prevail. Rasa asserts that the clause from the Customer Agreement, choosing Texas law, was signed first and thus controls over the clause in the Rental Agreement, choosing Pennsylvania law. Rasa argues that the Texas parol evidence rule and gist of the action doctrine do not bar the tort-based claims and that the conspiracy and RICO claims are adequately pled. Furthermore, as Texas law applies, Rasa argues it may bring the claims under the Texas Consumer ...

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