United States District Court, N.D. Alabama, Southern Division
MEMORANDUM OPINION AND ORDER
ABDUL
K. KALLON, UNITED STATES DISTRICT JUDGE
Norfolk
Southern Railway Company asserts claims against multiple
corporate and individual defendants[1] arising from an alleged
scheme involving the sale of improperly and fraudulently
treated railway ties. The court previously dismissed the
RICO, negligence, and fraudulent misrepresentation claims
against the Boatright Defendants. This action is presently
before the court on Norfolk Southern's motion for
reconsideration and for leave to amend, doc. 70, and Jimmy
Watt's motion for judgment on the pleadings, doc. 52, and
motion to strike, doc. 66. The motions are fully briefed and
ripe for review. See Docs. 52; 60; 64; 65; 66; 69;
70; 73; and 75. After careful consideration, and for the
reasons explained below, Norfolk Southern's motion to
reconsider and for leave to amend is due to be granted in
part. Specifically, Norfolk Southern may file an amended
complaint to plead a RICO claim against John Bookout and
Shane Boatright. Watt's motion judgment on the pleadings
and his motion to strike are due to be denied.
I.
STANDARD OF REVIEW
The
court has discretion to reconsider any order that
“adjudicates fewer than all the claims or the rights
and liabilities of fewer than all the parties . . . .”
See Fed. R. Civ. P. 54(b); Chapman v. A1
Transport, 229 F.3d 1012, 1023 (11th Cir. 2000) (en
banc) (reviewing the denial of a motion to reconsider only
for abuse of discretion). Although the court's
“power to reconsider, revise, alter, or amend [an]
interlocutory order is not subject to the limitations of Rule
59, ” Toole v. Baxter Healthcare Corp., 235
F.3d 1307, 1315 (11th Cir. 2000) (quotation omitted),
“[i]n the interests of finality and conservation of
scarce judicial resources, reconsideration of an order is an
extraordinary remedy and is employed sparingly, ”
Gougler v. Sirius Prods., Inc., 370 F.Supp.2d 1185,
1189 (S.D. Ala. 2005). Generally, “[a] motion to
reconsider is only available when a party presents the court
with evidence of an intervening change in controlling law,
the availability or new evidence, or the need to correct
clear error or manifest injustice.” Summit Med.
Ctr. Of Ala., Inc. v. Riley, 284 F.Supp.2d 1350, 1355
(M.D. Ala. 2003).
Next,
courts generally “should freely give leave [to amend a
complaint] when justice so requires.” Fed.R.Civ.P.
15(a)(2). However, “a motion to amend may be denied on
‘numerous grounds, such as undue delay, undue prejudice
to the defendants, and futility of the amendment.”
Carruthers v. BSA Advert., Inc., 357 F.3d 1213, 1218
(11th Cir. 2004) (quoting Maynard v. Bd. of Regents of
Univs. of Fla. Dep't of Educ., 342 F.3d 1281, 1287
(11th Cir. 2003)).
II.
FACTUAL AND PROCEDURAL BACKGROUND[2]
Norfolk
Southern owns and operates an extensive interstate rail
network. Doc. 32 at 1-2. To maintain this network, Norfolk
Southern purchased railroad ties from the Boatright entities,
and it required Boatright to specially prepare and treat the
ties in order to prevent premature degradation. Id.
at 4-5. Allegedly, Messrs. Bookout and Boatright instructed
Boatright's employees to stop treating railroad ties
according to Norfolk Southern's specifications, and
instead to use cheap substances to make the railroad ties
black without considering whether these substances impacted
the preservation of the ties. Id. at 5-6. Norfolk
Southern contends that Boatright enlisted Stephens Oil
Company, Inc. to obtain “inexpensive petroleum
products, such as asphalt flux and LUWA (typically used for
road paving), on Boatright's behalf and at
Boatright's direction to further the ‘make it
black' scheme.” Doc. 64-3 at 7. Allegedly, Stephens
Oil's participation allowed Boatright “to purchase
large volumes of petroleum-based products, which have no
legitimate role in tie treatment, without detection or
significant suspicion.” Id. at 8. Stephens Oil
then enlisted Avista Oil Refining and Trading to formulate a
new chemical compound called AFDO-50 for Boatright's use
in the “make it black” scheme. Id.
Neither Boatright nor Stephens Oil investigated whether
asphalt flux, LUWA, or AFDO-50 was a wood preservative.
Id. The scheme allegedly lasted from 2009 until
2014. See doc. 32 at 7, 14.
Former
Boatright employees subsequently informed Norfolk Southern
about the scheme. Id. at 14. Thereafter, Norfolk
Southern confirmed that ties purchased from Boatright were
not treated according to its specifications and were
degrading more quickly than anticipated. Id. Norfolk
Southern then commenced this action, asserting both
substantive RICO and RICO conspiracy claims against the
Boatright Defendants and Watt, and state law claims for
breach of contract, negligence, fraud, and civil conspiracy.
Doc. 32. The Boatright Defendants moved to dismiss all the
claims, with the exception of the breach of contract claim
asserted against the Boatright entities, docs. 35 and 37, and
the court granted the motions in part, dismissing the RICO,
negligence, and fraudulent misrepresentation claims, doc. 51.
III.
DISCUSSION
Norfolk
Southern asks the court to reconsider the dismissal of the
RICO and fraudulent misrepresentation claims, arguing that
newly discovered evidence requires reconsideration of the
RICO claims and that the court erred by dismissing the
fraudulent misrepresentation claims. Doc. 64. The court will
begin with the contention related to the fraudulent
misrepresentation claim.
A.
Whether Norfolk Southern States Viable Fraudulent
Misrepresentation or Concealment Claims
The
court dismissed the fraudulent misrepresentation claim
against the Boatright Defendants based on the finding that
the claim merely duplicates the underlying breach of contract
claim, and the damages flowing from the fraud are identical
to the breach of contract damages. Doc. 51 at 35-36. Norfolk
Southern argues that the decision is at odds with controlling
precedent. Doc. 64 at 10-11.
As the
court noted in its decision, “[a] mere breach of a
contractual provision is not sufficient to support a charge
of fraud.” Doc. 51 at 31 (quoting Brown-Marx
Assocs., Ltd. v. Emigrant Sav. Bank, 703 F.2d 1361 (11th
Cir. 1983) (citing in turn McAdory v. Jones, 71
So.2d 526, 528 (Ala. 1954)). However, in some circumstances,
“a single transaction can support an award of damages
for both breach of contract and fraud, ” and
“fraudulent concealments after the contract was made .
. . could support both a breach of contract claim and a fraud
claim.” Deupree v. Butner, 522 So.2d 242, 244
(Ala. 1988) (citing Herring v. Prestwood, 414 So.2d
52 (Ala. 1982)). In order to state a claim for fraudulent
concealment based on a transaction also giving rise to a
breach of contract claim, “the fraud claim must be
based on representations [or concealments] independent from
the promises in the contract and must independently satisfy
the elements of fraud.” Dickinson v. Land
Developers Construction Co., 882 So.2d 291, 304 (Ala.
2003) (J. Houston, concurring) (citing Deupree, 522
So.2d at 245). In addition, there must be “damage
due to fraud that is separate from damages that may
result from any subsequent contractual breach.”
Id. at 305 (emphasis in original, quotation
omitted).
Norfolk
Southern alleges that the Boatright Defendants fraudulently
concealed the true nature of the ties it purchased from
Boatright, and that it suffered damages of approximately $50,
000, 000 as a result of the fraud due to the premature
degradation of the fraudulently-treated ties. Doc. 32 at 33.
See also doc. 64-3 at 39. These are the same damages
that Norfolk Southern purportedly suffered as a result of the
alleged breach of contract. See docs. 32 at 28; 64-3
at 35. Thus, Norfolk Southern has not alleged that it
incurred damages from the alleged fraud that are separate
from the alleged breach of contract damages. ...