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L.R. Mccoy & Company, Inc. v. David S. Beiler

March 16, 2011

L.R. MCCOY & COMPANY, INC.
v.
DAVID S. BEILER, ET AL.



The opinion of the court was delivered by: O'neill, J.

MEMORANDUM

Plaintiff L.R. McCoy has filed a nine count complaint against defendants,*fn1 alleging claims of breach of contract, fraud, conversion, unjust enrichment, action on book account and action on an account stated. On May 11, 2010, defendants filed a motion to dismiss the complaint.*fn2 Presently before me are defendant's motion and supporting brief and plaintiff's brief in opposition to the motion. For the reasons that follow, I will grant in part and deny in part defendants' motion to dismiss.

BACKGROUND

Plaintiff is in the business of selling fencing materials. On April 1, 1991, defendant Beiler, acting on behalf of defendant Millcreek, submitted an application for a line of credit with plaintiff. Shortly thereafter, plaintiff and Millcreek entered into a contract pursuant to which plaintiff would sell fencing material to Millcreek. As part of that contract, Beiler agreed to be personally liable for "any and all debt owed by Millcreek to [plaintiff]." Compl. ¶ 35. The contract also provided that Millcreek would incur a finance charge on all unpaid balances of 1.5% per month and would be liable for any attorney's fees incurred "in the event that it was necessary for [plaintiff] to hire an attorney to collect under the [c]ontract." Compl. ¶ 34. The parties operated under the terms of this contract until October 28, 2009. At some point, however, Millcreek stopped paying plaintiff for the fencing materials it had received.

Plaintiff's business relationship with defendant Keystone was slightly different. On March 4, 2008, Beiler and defendant Eberly, on behalf of Keystone, submitted an application for a line of credit with plaintiff. Shortly thereafter, the parties agreed that plaintiff would consign fencing materials to Keystone. Both Beiler and Eberly agreed to be held personally liable for "any and all debt owed by Keystone to [plaintiff]." Compl. ¶ 17. The contract with Keystone, like the contract with Millcreek, provided that Keystone would incur a finance charge on all unpaid balances of 1% per month and would be liable for any attorney's fees incurred "in the event that it was necessary for [plaintiff] to hire an attorney to collect under the [c]ontract." Compl. ¶ 16. The parties operated under the terms of this contract from August 12, 2009 through October 28, 2009. At some point, however, Keystone stopped paying plaintiff for the consigned materials it had sold. Because Keystone, Beiler and Eberly repeatedly promised that the invoices would be paid, plaintiff continued to consign fencing materials to those defendants. Despite defendants' promises, plaintiff never received payment for the consigned materials.

STANDARD OF REVIEW

Federal Rule of Civil Procedure 12(b)(6) permits a court to dismiss all or part of an action for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Typically, "a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations," though plaintiff's obligation to state the grounds of entitlement to relief "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). "Factual allegations must be enough to raise a right to relief above the speculative level on the assumption that all of the allegations in the complaint are true (even if doubtful in fact)." Id. (citations omitted). The complaint must state "'enough facts to raise a reasonable expectation that discovery will reveal evidence of' the necessary element." Wilkerson v. New Media Tech. Charter School Inc., 522 F.3d 315, 321 (3d Cir. 2008), quoting Twombly, 550 U.S. at 556. The Court of Appeals has recently made clear that after Ashcroft v. Iqbal, --- U.S. ---, 129 S. Ct. 1937, 1955, 173 L. Ed. 2d 868 (2009), "conclusory or 'bare-bones' allegations will no longer survive a motion to dismiss: 'threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.' To prevent dismissal, all civil complaints must now set out 'sufficient factual matter' to show that the claim is facially plausible." Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009), quoting Iqbal, 129 S. Ct. at 1949. The Court also set forth a two part-analysis for reviewing motions to dismiss in light of Twombly and Iqbal: "First, the factual and legal elements of a claim should be separated. The District Court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. Second, a District Court must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a 'plausible claim for relief.'" Id. at 210-11, quoting Iqbal, 129 S. Ct. at 1950. The Court explained, "a complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to 'show' such an entitlement with its facts." Id., citing Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234-35 (3d Cir. 2008). "Where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged--but it has not 'show[n]'--'that the pleader is entitled to relief.'" Iqbal, 129 S. Ct. at 1949.

ANALYSIS

Defendants move to dismiss the complaint on a variety of grounds. They argue that: (1) plaintiff has not pled sufficient facts to support its fraud claims and in any event that the gist of the action doctrine precludes such fraud claims; (2) the economic loss doctrine bars plaintiff's conversion claims; (3) Beiler and Eberly cannot be held personally liable for any claims that do not arise out of the personal guarantees they signed; (4) plaintiff has not alleged facts giving rise to liability on the part of Beiler and Eberly for the "non-contract claims;" (5) neither Millcreek nor Keystone can be held liable under an unjust enrichment theory for the other's contractual obligations; (6) plaintiff is not entitled to attorney's fees or more than six percent per annum in financing charges; (7) plaintiff has not alleged facts that, if proven, would entitle it to punitive damages. Before I proceed to the merits of defendants' arguments, I must decide whether Pennsylvania or Massachusetts law applies to this case.

I. Choice of Law

The parties disagree as to which law applies to this case. Defendant argues that Pennsylvania law applies while plaintiff argues that Massachusetts law applies. Pennsylvania choice of law rules apply when a district court sits in diversity. Specialty Surfaces Intern., Inc. v. Cont'l Cas. Co., 609 F.3d 223, 229 (3d Cir. 2010).

A. Choice of Law Provision

At the outset, I note that the agreement between Keystone and plaintiff includes a choice of law provision that provides "[t]he contract for sale of the Goods shall be governed by the laws of the Commonwealth of Massachusetts." Compl. Ex. A. I disagree with plaintiff's contention that this provision put defendants on notice that "the law of Massachusetts would apply to all business dealings between the parties." Pl.'s Br. at 5. Even where a choice of law provision governs contractual claims, such a provision "do[es] not govern tort claims between contracting parties unless the fair import of the provision embraces all aspects of the legal relationship." Jiffy Lube Intern., Inc. v. Jiffy Lube of Pa., Inc., 848 F. Supp. 569, 576 (E.D. Pa. 1994). In order to determine the fair import of the provision, I must analyze the provision to "determine, based on [its] narrowness or breadth, whether the parties intended to encompass all elements of their association." Id., citing Composiflex, Inc. v. Advanced Cardiovascular Sys., Inc., 795 F. Supp. 151, 157 (W.D. Pa. 1992). The Jiffy Lube Court considered a choice of law provision that provided "[t]his Agreement shall be construed, interpreted and enforced in accordance with the laws of the State of Maryland." Id. The Court held that because the terms of the provision were limited to "this agreement," it did not govern tort claims raised by the parties. Id.; accord Smith v. Lincoln Ben. Life Co., No. 08-01324, 2009 WL 789900, at *7-8 (W.D. Pa. Mar. 23, 2009); Am. Hearing Aid Assocs., Inc. v. GN Resound N. Am., 309 F. Supp. 2d 694, 704 (E.D. Pa. 2004); Coram Healthcare Corp. v. Aetna U.S. Healthcare, Inc., 94 F. Supp. 2d 589, 593 (E.D. Pa. 1999). Because there is no legally significant difference between the choice of law language considered by the Jiffy Lube Court and the language at issue in this case, I find that the choice of law provision here dictates only that Massachusetts law applies to plaintiff's breach of contract claim against Keystone, Eberly and Beiler. I must undertake additional choice of law analysis to determine what law applies to the remainder of plaintiff's claims.

B. Choice of Law Principles

Pennsylvania employs a two-part approach in deciding what law to apply. Hammersmith v. TIG Ins. Co., 480 F.3d 220, 229-30 (3d Cir. 2007). First, I must determine whether there is an actual conflict between the possibly applicable laws. Id. at 230. If I find that an actual conflict exists, I must then "classify the conflict as a 'true,' 'false,' or an 'unprovided-for' situation." Id. A true conflict is one ...


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