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Price v. Foremost Industries, Inc.

United States District Court, E.D. Pennsylvania

December 22, 2017

DAVID PRICE, ET AL.
v.
FOREMOST INDUSTRIES, INC., ET AL.

          MEMORANDUM RE: MOTION TO STRIKE & MOTION TO DISMISS

          Baylson, J.

         I. Introduction

         At issue in this diversity case is whether this Court should grant two motions filed by Defendants Daniel Gordon and GLD Holdings, LLC (“Moving Defendants”): (1) a motion to dismiss, pursuant to Fed.R.Civ.P. 12(b)(6); and (2) a motion to strike, pursuant to Fed.R.Civ.P. 12(f).

         II. Relevant Factual[1] and Procedural History

         According to their Amended Complaint (“Am. Compl., ” ECF 11), Plaintiffs David and Maria Price began to meet with representatives of Defendant Foremost Industries, Inc. (“Foremost”) in early 2015 to arrange for Foremost's development and construction of a modular home for Plaintiffs. (Am. Compl. ¶ 7). In April, 2015, Plaintiffs found a parcel of land in Middletown, Virginia on which the development and construction would proceed. (Id. ¶ 8) During this time period, Plaintiffs were verbally quoted a three-month timeframe for construction. (Id. ¶ 9).

         In late May, 2015, Defendant Daniel Gordon, “through his majority shareholder status in, and acting through [Defendant] GLD Foremost Holdings, caused GLD Foremost to purchase the entirety of stocks of Foremost Industries.” (Id. ¶ 10). Plaintiff alleges “upon information and belief” that this purchase pertained to all assets and liabilities of Foremost, making GLD Foremost Holdings (“GLD”) a “successor in interest” of Foremost. (Id. ¶ 11).

         In September, 2015, Plaintiffs entered into a sales agreement with Foremost for the design, development, and construction of a modular home for the purchase price of $175, 690.07. (Id. ¶ 12). They allege, again upon information and belief, that in September, 2015, Defendants were already taking steps to cease operations. (Id. ¶ 15). In December, 2015, Plaintiffs secured a construction loan from their bank, which was a contractual condition precedent to the design and construction of the modular home. (Id. ¶ 16). Plaintiffs then paid a series of down-payments, but experienced months of unexcused delays. (Id. ¶¶ 17, 20, 22, 25-26). This culminated in Plaintiffs' never receiving the home for which they entered into a contract. (Id. ¶ 28). In fact, Plaintiffs allege upon information and belief that “construction of the home was never even commenced.” (Id.).

         In September, 2016, Plaintiffs commenced this action by filing a Writ of Summons in the Court of Common Pleas, Philadelphia County. In December, 2016, Plaintiffs filed a Complaint, and in January, 2017, the case was removed to this Court. (ECF 1). Defendants Gordon and GLD filed a motion to dismiss the Complaint on January 26, 2017, after which Plaintiffs decided to file an Amended Complaint. (ECF 10). Plaintiffs filed an Amended Complaint in this Court on September 6, 2017 (ECF 11).

         The Amended Complaint alleges five causes of action: (I) breach of contract against all Defendants; (II) unjust enrichment against all Defendants; (III) violation of Pennsylvania's Unfair Trade Practices Consumer Protection Law (“UTPCPL”) against all Defendants; (IV) fraudulent misrepresentation against all Defendants; and (V) piercing of the corporate veil against Defendant Gordon.

         Presently before the Court are Moving Defendants' Motion to Dismiss Plaintiffs' Amended Complaint and Motion to Strike Paragraphs 5, 6, 10, 11, 14, and 15 of Plaintiffs' Amended Complaint (ECF 13). Plaintiffs filed a Response on October 10, 2017 (ECF 15), GLD and Gordon filed a Reply on October 27, 2017 (ECF 16), and Plaintiffs filed a Surreply (after the Court granted their Motion to File a Surreply) on November 19, 2017 (ECF 19).

         III. Summary of Parties' Contentions

         The Motion to Dismiss and Strike contains eight primary contentions:

(1) Defendants GLD and Gordon cannot be liable for breach of contract and unjust enrichment (Counts I and II) because they were not parties to the modular home sales agreement that Plaintiffs allege was breached.
(2) Defendants GLD and Gordon cannot be liable for breach of contract and unjust enrichment (Counts I and II) by virtue of an agency relationship because the Amended Complaint does not adequately plead the elements of agency to connect the actual party to the agreement (Foremost) with its purported agents (Gordon and GLD).
(3) Defendants GLD and Gordon cannot be liable for the fraud claims (Counts III and IV) because none of the purported misrepresentations by the alleged “sales representatives” are attributable to them.
(4) Defendants GLD and Gordon cannot be liable for the fraud claims (Counts III and IV) because Plaintiffs have no alleged that the representations were made falsely, made with knowledge of their falsity (or recklessness as to whether the representations were true or false), or made with the intent of misleading Plaintiffs into relying on them.
(5) Defendants GLD and Gordon cannot be liable for false advertising under UTPCPL (Count IV) because representations by individual employees or agents do not qualify as advertising.
(6) Defendant Gordon cannot be liable under a “veil-piercing” theory (Count V) because Plaintiffs have not adequately alleged he was “in control” of Foremost.
(7) Paragraphs 5, 6, 10, and 11 of the Amended Complaint should be stricken because Plaintiffs have not presented any evidence that Defendant Gordon served as a principal, employee, or agent of, or had any ownership interest in, GLD or Foremost.
(8) Paragraphs 14 and 15 of the Amended Complaint should be stricken because they contain unsupported and unrelated allegations from other pending litigations.

         Plaintiffs' Response opposes the above contentions as follows:

(1) The breach of contract claim (Count I) is adequately pled because, although Defendants GLD and Gordon were not parties to the sales agreement, they assumed the obligation to perform the contract through their full acquisition of the actual party to the agreement, i.e., Foremost.
(2) The unjust enrichment claim (Count II) is adequately pled because, by acquiring Foremost, Defendants GLD and Gordon became the parties who benefitted from Plaintiffs' down-payments.
(3) The UTPCPL claim (Count III) is adequately pled because: (A) a false advertising claim can be premised on an “other agency” relationship; (B) the facts show the plausibility that Defendants GLD and Gordon were the only parties in full ownership and control of Foremost; and (C) the “catchall” provision of the UTPCPL captures Plaintiffs' claim by prohibiting actions that have a mere likelihood or reasonable possibility of misleading or confusing the consumer.
(4) The fraudulent misrepresentation claim (Count IV) is adequately pled because the sales representatives that misrepresented facts were agents of Defendants GLD and Gordon by virtue of GLD's acquisition of Foremost.
(5) The veil piercing claim (Count V) is adequately pled because Plaintiffs allege that Defendant Gordon executed the stock purchase agreement on behalf of GLD, an entity that bears the initials of Defendant Gordon in reverse order.
(6) Paragraphs 5, 6, 10, and 11 of the Amendment Complaint should not be stricken because they reflect allegations arising logically from the fact that Defendant Gordon signed the agreement memorializing GLD's acquisition of Foremost.
(7) Paragraphs 14 and 15 of the Amended Complaint should not be stricken because the separate litigations mentioned therein are matters of public record.

         Defendants GLD and Gordon's Reply does not make any legal assertions. Instead, an affidavit from Daniel Gordon is attached, disputing several factual allegations in the Amended Complaint.

         Plaintiffs' Surreply asserts that this Court should not consider Defendants' Reply when ruling on the present Rule 12(b)(6) Motion to Dismiss.

         IV. Subject Matter Jurisdiction

         Though not raised by either party, this Court has an obligation to examine its own subject matter jurisdiction, and may do so sua sponte. Nesbit v. Gears Unlimited, Inc., 347 F.3d 72, 76 (3d Cir. 2003). Here, Moving Defendants removed from the Court of Common Pleas for Philadelphia County, asserting Diversity Jurisdiction under 28 U.S.C. § 1332(a). To invoke diversity jurisdiction, a controversy must be between citizens of different states and the amount in controversy must exceed $75, 000. 28 U.S.C. § 1332(a). There is some question here as to whether the amount in controversy exceeds the jurisdictional amount, as the Notice of Removal states only that alleged damages equal “over $50, 000.” Courts discern the amount in controversy for jurisdictional purposes by consulting the face of the complaint and accepting plaintiff's good faith allegations. Frederico v. Home Depot, 507 F.3d. 188, 194 (3d Cir. 2007); Grand Union Supermarkets of the V.I., Inc. v. H.E. Lockhart Mgmt., 316 F.3d 408, 410 (3d Cir. 2003). In removal cases, the analysis begins with an examination of the complaint filed in state court - if that complaint is silent or ambiguous, courts look to the notice of removal. Frederico, 507 F.3d at 196-97. Where a case has been removed, and the complaint does not specifically aver that the amount sought by Plaintiffs is less than the jurisdictional minimum, the case must be remanded only if it appears to a legal certainty that the plaintiff cannot recover the jurisdictional amount Id. at 197.

         Plaintiffs' Complaint states $54, 669.97 in specific damages, references additional injury suffered, and does not expressly limit the amount in controversy to less than $75, 000. Specifically, for their breach of contract claim, Plaintiffs cite “numerous financial expenditures made in anticipation of receiving a home . . . including opportunity cost, time value of money, and loan interest.” Compl. ¶ 37. In addition, Plaintiffs' UTPCPL claims carry the possibility of treble damages. ECF 1, at 4; see also 73 Pa. Cons. Stat. § 209-9.2. As it is not a legal certainty that Plaintiffs cannot recover $75, 000 or more, the jurisdictional requirement has been met.

         V. Motion to Strike A. Legal Standard for Motion to Strike

         Defendants bring a Motion to Strike portions of Plaintiffs' Complaint pursuant to Fed.R.Civ.P. 12(f). Rule 12(f) states, “[t]he court may strike from a pleading an insufficient defense or any ...


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