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Killough v. Monkress

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

April 17, 2019

DOUG KILLOUGH and TECHNICAL CONSULTING SOLUTIONS, INC., Plaintiffs,
v.
PHIL MONKRESS and ALL POINTS LOGISTICS, LLC, Defendants.

          MEMORANDUM OPINION AND ORDER

          ABDUL K. KALLON UNITED STATES DISTRICT JUDGE.

         This action arises from the alleged breach of a purported oral agreement between Doug Killough, the owner of Technical Consulting Solutions, Inc. (“TCS”), and Phil Monkress, the owner and CEO of All Points Logistics, LLC (“APL”). Doc. 41. The court previously dismissed the fraud claims and gave Killough and TCS leave to amend those claims. Doc. 39. Killough and TCS have complied. Doc. 41. Monkress and APL have now moved to dismiss the repleaded fraud claims, doc. 42, contending that the plaintiffs fail to allege fraud with particularity and that the promissory fraud claim is not sufficiently distinct from the breach of contract claim. See doc. 42. For the reasons explained below, the motion is due to be granted solely as to the promissory fraud claim.

         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, fraud claims 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 “(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.”).

         II. FACTUAL AND PROCEDURAL BACKGROUND [1]

         Killough worked at Booz Allen Hamilton and led a team that provided engineering services to Boeing and Northrop Grumman for their missile defense contracts. Doc. 41 at 3-4. When Booz Allen pulled out of that market, Killough started TCS and began discussions with Boeing and Northrup Grummon about having TCS service their missile defense contracts. Id. at 4. An employee at Boeing suggested that Killough and TCS partner with a larger company, and suggested that Killough contact Monkress to discuss partnering with APL. See Id. at 4-5. Killough and Monkress then negotiated an agreement under which Killough would work for APL to service the Boeing and Northrup Grummon contracts and other contracts brought to APL by Killough (the “TCS-related contracts”). Id. at 5. In addition, the parties reached an oral agreement “under which Killough would receive 50% of the profits from the TCS-related contracts, [and] APL also agreed that it would eventually subcontract the work to TCS once TCS was ready to service the TCS-related contracts by itself.” Id. at 6. When the parties learned that APL could not subcontract the work, Killough and APL agreed that APL would transfer the contracts to TCS when TCS was ready. Id. at 7.

         According to TCS, Killough received profit-sharing payments each quarter that APL and Monkress represented were equal to half of the profit from the TCS-related contracts. Id. at 8. Although it was not required by the parties' agreement, APL and Monkress also provided Killough with profit statements that outlined the income and costs associated with the contracts. Id. at 8. According to TCS and Killough, the APL-generated profit statements overstated the fringe benefits, overhead costs, and general and administrative costs associated with the TCS- related contracts. Id. at 12. The statements also reflected a higher “WRAP rate” than the “rate provided to contracts to procure the TCS-related contracts.” Id.[2] Killough and TCS allege that they learned of the purported misrepresentations in the profit statements after learning that APL kept a second set of books “that more accurately detailed the costs and income for the TCS-related contracts” and after talking with APL's office manager about the costs associated with the contracts. Id. at 10-11. By overstating the costs, Monkress and APL kept more than their share of the profits they were entitled to under the parties' Agreement. Id. at 13.

         Killough and TCS also allege that when Killough decided to exercise his right to have the TCS-related contracts transferred to TCS, Monkress discharged Killough. Id. at 14. However, after employees and customers expressed anger about the termination, Monkress offered to rehire Killough and “on behalf of APL, and reoffered to pay Killough 50% of the profits from the TCS-related contracts . . . .” See Id. at 15. Killough accepted the offer to return, but Monkress and APL did not make the allegedly agreed-upon profit sharing payments to Killough. Id. at 16. In addition, Monkress discharged Killough again in September 2015 without transferring the contracts to TCS. Id. at 17. This action followed.

         III. ANALYSIS

         In the Third Amended Complaint, Killough asserts claims against APL and Monkress for fraudulent misrepresentation and fraudulent suppression, and Killough and TCS assert a promissory fraud claim against the defendants. See doc. 41 at 19, 22, 25, n. 3-7. The defendants contend that these claims do not satisfy Rule 9, and have moved to dismiss them. Doc. 42 at 3-4. Rule 9(b) requires a party “alleging fraud . . . [to] state with particularity the circumstances constituting fraud.” Fed.R.Civ.P. 9(b). This entails alleging “(1) precisely what statements were made in what documents or oral representations or what omissions were made, (2) the time and place of each such statement and the person responsible for making (or, in the case of omissions, not making) same, (3) the content of such statements and the manner in which they misled the plaintiff, and (4) what the defendants obtained as a consequence of the fraud.” Ziemba v. Cascade Int'l, Inc., 256 F.3d 1194, 1202 (11th Cir. 2001) (quoting Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d 1364, 1371 (11th Cir. 1991)).

         A. Fraudulent Misrepresentation and Suppression Claims

         To state a claim for fraudulent misrepresentation, Killough must allege facts showing that (1) APL and Monkress made a false representation (2) about a material fact, (3) Killough relied on the false representation, and (4) Killough suffered actual damage as a result of his reliance. Spooner v. State Farm Mut. Auto. Ins. Co., 709 So.2d 1157, 1160 (Ala. 1997) (quotation omitted). And, to state a claim for fraudulent suppression, Killough must allege that (1) the defendants suppressed an existing, material fact, (2) the defendants had a duty to disclose, (3) the defendants had knowledge of the fact, (4) Killough's lack of knowledge induced him to act, and (5) Killough suffered actual damages as a result. Hardy v. Blue Cross & Blue Shield of Alabama, 585 So.2d 29, 32 (Ala. 1991) (citations omitted). The defendants contend that Killough failed to allege a false representation or suppression of a material fact, detrimental reliance, or that he suffered an actual injury from the alleged misrepresentation or suppression apart from the damages caused by the breach of the alleged oral contract. Doc. 42 at 4-12. The court addresses these contentions in turn.

         1. Whether Killough has pleaded a false representation or ...


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