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Killough v. Monkress

United States District Court, N.D. Alabama, Northeastern Division

August 1, 2018

DOUG KILLOUGH, et al., Plaintiffs,
v.
PHIL MONKRESS, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          ABDUL K. KALLON UNITED STATES DISTRICT JUDGE

         This case arises out of the purported breach of an agreement involving engineering support contracts between Technical Consulting Solutions, Inc. (TCS), a corporation owned and operated by Doug Killough, and All Points Logistics, LLC (APL), a corporation owned and operated by Phil Monkress.[1] TCS claims that APL failed to remit, as agreed, half the profits from the contracts TCS serviced on APL's behalf, and that subsequently APL failed to transfer those contracts to TCS upon its request. Accordingly, TCS pleads numerous state law claims against APL including, breach of contract, fraud, conversion, quantum merit, unjust enrichment, negligence, and tortious interference with actual or prospective business relations. APL has filed a motion to dismiss, doc. 22, and that motion is now fully briefed, docs. 34; 37, and ripe for review.[2]

         I. STANDARD OF REVIEW

         Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” “[T]he pleading standard Rule 8 announces does not require ‘detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Mere “‘labels and conclusions'” or “‘a formulaic recitation of the elements of a cause of action'” are insufficient. Id. at 678 (quoting Twombly, 550 U.S. at 555). “Nor does a complaint suffice if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'” Id. (quoting Twombly, 550 U.S. at 557). Additionally, the fraud claims TCS asserts are subject to the heightened pleading standard imposed by Rule 9(b) of the Federal Rules of Civil Procedure. Under Rule 9(b), a plaintiff must allege in her complaint “(1) precisely what statements or omissions were made in which documents . . .; (2) the time and place of each such statement and the person responsible for making . . . them; (3) the content of such statements and the manner in which they misled the plaintiff; and (4) what the defendant obtained as a consequence of the fraud.” FindWhat Inv'r Grp. v. FindWhat.com, 658 F.3d 1282, 1296 (11th Cir. 2011).

         Federal Rule of Civil Procedure 12(b)(6) permits dismissal when a complaint fails to state a claim upon which relief can be granted. When evaluating a motion brought under Rule 12(b)(6), the court accepts “the allegations in the complaint as true and construe[s] them in the light most favorable to the plaintiff.” Hunt v. Aimco Props., L.P., 814 F.3d 1213, 1221 (11th Cir. 2016). However, “[t]o survive a motion to dismiss, a complaint must . . . ‘state a claim to relief that is plausible on its face.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). A complaint states a facially plausible claim for relief “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. In other words, the complaint must establish “more than a sheer possibility that a defendant has acted unlawfully.” Id.; see also Twombly, 550 U.S. at 555 (explaining that “[f]actual allegations [included in the complaint] must be enough to raise a right to relief above the speculative level.”). Ultimately, the line between possibility and plausibility is a thin one, and making such a determination is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679.

         II.FACTS

         Killough worked for Booz Allen Hamilton leading a team of engineers who provided engineering services to Boeing and Northrop Grumman in support of missile defense contracts those companies held with the Federal government. Doc. 20 at 1, 3. When Booz Allen withdrew from this market, Killough and a fellow employee decided to start a new company, TCS, to enable them to continue servicing the Boeing and Northrop Grumman contracts. Id. at 3-4. As part of the transition process, Killough met with Boeing representatives who recommended that TCS partner with a larger company to easily gain access to logistical and administrative support services. Id. at 4. A Boeing employee apparently recommended APL for this purpose and provided Killough with a business card for APL's CEO and owner, Monkress. Id. At the time, APL was a contractor primarily focused on providing various logistical services to the United States. Id.

         Shortly after the recommendation, Killough contacted Monkress and negotiated an agreement to run TCS' engineering contracts through APL. Id. at 5. The agreement specified that APL would receive half the profits from TCS-related contracts, primarily those with Boeing and Northrop Grumman, and that APL would subcontract the work directly to TCS once TCS had the infrastructure in place to service the contracts on its own. Id. However, after realizing that Boeing did not allow for second-tier subcontracts, the parties orally agreed that APL would simply transfer the contracts to TCS at Killough's option. Id.

         Under the agreement, Killough received quarterly profit-sharing payments from APL. Id. at 7. APL certified that these payments reflected Killough's share of the profits generated by the TCS contracts. Id. Although APL was not contractually obligated to provide Killough with a full accounting of quarterly costs and revenues, id., Killough alleges that APL routinely provided profit statements, subject to Monkress' review and approval, containing that information. Id. at 7-8. Killough, who did not have direct access to APL's books, alleges that APL repeatedly assured him that the profit statements were accurate. Id. at 8. Eventually, however, Killough learned about a second set of books which revealed a higher profit margin than what APL reported in 2014, and which purportedly suggested that APL owed Killough, at least, an additional $750, 000. Id. at 9-10.

         Additionally, in 2014, when Killough attempted to exercise his option to take over the TCS contracts from APL, Monkress “fired” Killough and refused to turn over the contracts as previously agreed. Id. at 10-11. However, Monkress quickly rescinded the discharge after TCS' clients and employees allegedly expressed their dissatisfaction. Id. at 11-12. At this time, Monkress purportedly orally reaffirmed the parties' agreement to share profits from the TCS-related contracts equally and to transfer the contracts to TCS at Killough's option. Id. at 12. Nonetheless, Monkress purportedly continued to improperly withhold profits, and eventually discharged Killough for a second time, again declining to transfer the contracts to TCS. Id.

         III. DISCUSSION

         TCS raises multiple claims against APL, including (1) breach of contract, (2) fraud/misrepresentation, (3) fraud/suppression, (4) fraud in the inducement, (5) promissory fraud, (6) quantum merit, (7) conversion, (8) unjust enrichment, (9) tortious interference with actual or prospective contractual and/or business relations, and (10) negligence. Because APL moves for the dismissal of each claim, the court will address the claims individually, with the exception of the various fraud claims which the court addresses as a group.[3]

         A. Breach of Contract-Count I

         Under Alabama law, a breach of contract claim requires proof of “(1) the existence of a valid contract binding the parties in the action, (2) [the plaintiff's] own performance under the contract, (3) the defendant's nonperformance, and (4) damages.” S. Med. Health Sys., Inc. v. Vaughn, 669 So.2d 98, 99 (Ala. 1995). APL argues that the complaint fails to adequately allege the existence of a valid contract. Specifically, APL asserts that it entered an agreement solely with Killough and that the agreement did not involve Monkress or TCS. The court is sympathetic to this argument. As discussed in footnote 3, the complaint does not clearly identify the parties involved in particular claims and frequently refers to individual parties and the corporate entities they own and control interchangeably. However, under Federal Rule of Civil Procedure 8(a)(2), a pleading need only contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” “Specific facts are not necessary; the [complaint] need only ‘give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'” Erickson v. Pardus, 551 U.S. 89, 93 (2007) (quoting Twombly, 550 U.S. at 555); see also Brooks v. Ross, 578 F.3d 574, 580-81 (7th Cir. 2009) (explaining that the court in Iqbal was not abandoning notice pleading but instead “admonishing those plaintiffs who merely parrot the statutory language of the claims they are pleading”). In that respect, TCS has sufficiently pleaded the existence of an agreement binding at least two of the parties to this action. Thus, the court declines to dismiss the breach of contract claim on this basis. However, because TCS fails to adequately identify the parties to the alleged agreement, as discussed in footnote 3, TCS must rectify this deficiency by filing a more definite statement pursuant to Rule 12(e).[4]

         APL also argues that the alleged oral contract is void by operation of Alabama's Statute of Frauds. Generally, an oral agreement is void if “by its terms, [it] is not to be performed within one year from the making thereof.” Ala. Code § 8-9-2(1). However, “a contract is not within the Statute of Frauds unless it cannot possibly be performed within a year.” Dean v. Myers, 466 So.2d 952, 954 (Ala.1985) overruled on other grounds by Bruce v. Cole, 854 So.2d 47 (Ala. 2003)). Thus, if there is “a reasonable possibility of performance within a year, ” the Statute of Frauds does not apply. Id. This is precisely the case here, where the plain terms of the oral agreement, i.e. that “APL would ‘novate'/transfer the contracts over to TCS once TCS and Killough felt that TCS was ready, ” do not exclude performance within a year. Doc. 20 at 5. Indeed, the complaint suggests that the parties could complete the necessary arrangements for the transfer in just a few months. Id. at 10-11. Therefore, the Statute of Frauds does not bar TCS' contract claim.

         B. Fraud-Counts II-V

         The complaint also pleads four separate fraud claims: (1) fraudulent misrepresentation, Count II; (2) fraudulent suppression, Count III; (3) fraudulent inducement, Count IV; and (4) promissory fraud, Count V. The fraudulent inducement and promissory fraud claims center on the formation of the parties' contract, alleging that APL never intended to perform its contractual promises and that TCS relied on those promises in entering the agreement. See Id. at 17-20. The misrepresentation and suppression claims, on the other hand, focus on APL's alleged failure to properly remit profits under the contract, and its provision of purportedly misleading financial documents to TCS over the course of its performance. Id. at 14-16. APL challenges all four fraud claims on numerous grounds which the court addresses below.

         1. Whether the Fraud Claims are Barred by the Statute of Limitations

         APL asserts that the fraud in the inducement, Count IV, and the promissory fraud, Count V, claims are barred by Alabama's two year limitations period. See Ala. Code § 6-2-38(1); Bryant Bank v. Talmage Kirkland & Co., 155 So.3d 231, 235-36 (Ala. 2014). A fraud claim accrues when “the aggrieved party discovers or, in the exercise of reasonable care, should have discovered, the facts constituting the fraud.” Wheeler v. George, 39 So.3d 1061, 1081 (Ala. 2009). Although dismissal at the pleading stage based on the statute of limitations is disfavored, it is proper “if noncompliance with the statute of ...


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