Wadley Crushed Stone Co., LLC v. Positive Step, Inc.

          MEMORANDUM OPINION AND ORDER

          STEPHEN M. DOYLE, UNITED STATES MAGISTRATE JUDGE

         Wadley Crushed Stone Company, LLC, (“Plaintiff”) filed a Fourth Amended Complaint against Positive Step, Inc. d/b/a 1st Quality Equipment Company (“1st Quality”) and Thomas W. Curley (“Curley”) (collectively “Defendants”) for breach of contract and misrepresentation. (Doc. 67). Before the Court is Defendants' Motion to Dismiss Plaintiff's Fourth Amended Complaint (Doc. 68). For the reasons that follow, Defendants' Motion to Dismiss is due to be GRANTED in part and DENIED in part.

         I. STATEMENT OF FACTS^[1]

         Plaintiff is an Alabama corporation doing business as a granite rock quarry. (Doc. 67, ¶¶ 1, 5). Defendant Positive Step is a Georgia corporation that holds itself out as having experience in the aggregate business helping customers increase productivity, reduce costs, and maintain high production through the selection of the highest quality new and used equipment. Id. ¶¶ 2, 19. Defendant Curley is a citizen of Georgia and the owner of Defendant 1st Quality. Id. ¶ 3.

         In 2012, Defendant 1st Quality executed a contract with Plaintiff for a “500 TPH Portable Granite Plant” (“the Plant”) to be located on Plaintiff's property in Wadley, Alabama. Id. ¶ 21; (Doc. 69-1) at 2. The Plant was to consist of three separate areas: (1) the primary section; (2) the secondary section; and (3) the rail loading system. (Doc. 67) at 3-4. Prior to executing the contract, Plaintiff advised Defendants that the Plant needed to produce 500 tons-per-hour of merchantable granite rock that consisted of 60% railroad quality ballast capable of being loaded directly into railcars at 2, 000 tons-per-hour. Id. at ¶ 22. These specific requirements were needed so that Plaintiff could satisfy its commitment to a railroad company and to its other customers. Id. at ¶ 23. Plaintiff advised Defendants that it did not have adequate expertise to determine what size or types of equipment or the configuration of the equipment that would need to meet the required production, specification, yield, and loading capabilities. Id. at ¶ 25.

         As part of their contract with Plaintiff, Defendants specified all of the equipment needed and hired engineering consultants to engineer, design, and recommend the layout for the granite plant so that it would meet Plaintiff's specified production, specification, yield, and loadout requirements. Id. ¶ 26. Because Defendant First Quality was not licensed as a general contractor in Alabama, it recommended Plaintiff hire Gaston Construction (“Gaston”) to build the Plant, which Plaintiff did. Id. at 30. Gaston paid Defendants a 10% commission, and Defendants advised Gaston on the proper placement, installation, and operation of the various components of the Plant while updating Plaintiff on the course of construction and making recommendations for changes along the way. Id. at ¶¶ 31, 32. The Plant was completed and put into operation in late 2012. Id. ¶ 33. During and after the completion of the Plant, Defendants provided training to Plaintiff's employees as to the best practices for operation of the Plant and its various components. Id. at 34.

         Prior to entering the contract, Defendants represented to Plaintiff that the Plant had “a 20-year useful life.” Id. ¶ 35. After installation, however, some of the individual components of the Plant that had been recommended by Defendants were found to be incapable of producing the represented production, specification, yield, and loadout requirements. Id. at ¶ 36. When confronted with the production problems, Defendants, by and through their employees, represented to Plaintiff that the production problems were not caused by deficient engineering, design, or equipment, but were the fault of quarry management, operators, or other elements beyond their control and not related to the Plant engineered, designed, specified, and constructed under the supervision of Defendants. Id. at ¶ 39.

         Plaintiff purchased additional equipment from Defendants and other vendors in an attempt to address these issues and delayed replacing the equipment originally specified. Id. ¶ 41. Ultimately, Plaintiff ceased using the equipment and layout provided by Defendants and replaced it with alternative equipment because of the insufficiencies with the equipment specified by Defendants and the engineering/design/layout provided by Defendants' engineers and subcontractors. Id. ¶ 42. As a result, Plaintiff suffered financial damages due to loss of sales and additional operating costs. Id. ¶ 43. Plaintiff also was unable to meet its minimum commitments to the railroad company in 2013, 2014, and 2015. Id. at ¶ 44. Plaintiff ultimately borrowed $5 million to replace the components of the primary section. Id. at ¶ 47.

         II. PROCEDURAL BACKGROUND

         Plaintiff initially filed suit against the corporate Defendant on November 15, 2017, in the Circuit Court for Randolph County, Alabama. (Doc. 1-1). Defendant 1st Quality removed the case to this Court, answered, and counterclaimed. (Docs. 1, 7). Plaintiffs filed a First Amended Complaint on December 27, 2017, which Defendant answered on January 11, 2018. (Docs. 10, 13). The Court granted Plaintiff leave to file a Second Amended Complaint to name Defendant Curley, which Plaintiff filed in May 2018. (Docs. 32, 33). The Court also granted Plaintiff leave to file a Third Amended Complaint, which Plaintiff filed in June 2018. (Docs. 43, 46). The Third Amended Complaint asserted breach of contract claims and a claim for misrepresentation against Defendants. (Doc. 46).

         Defendants filed a Motion to Dismiss Plaintiff's Third Amended Complaint, arguing that the breach of contract claims were due to be dismissed because they were barred by the applicable four-year statute of limitations under the UCC.^[2] (Doc. 49). Additionally, Defendant Curley contended that the breach of contract claims were due to be dismissed as to him because those claims failed to allege any facts indicating that he was a party to the contract. (Doc. 49). Defendants further moved to dismiss Plaintiff's misrepresentation claim in the Third Amended Complaint, arguing that it failed to meet the specificity requirement under the Federal Rules of Civil Procedure for pleading fraud. Id.

         Plaintiff responded in opposition to Defendants' Motion, but also filed a Conditional Motion for Leave to Amend (Doc. 53) in the event that the Court determined that Plaintiff's Third Amended Complaint failed to adequately plead the tolling of the statute of limitations and/or Plaintiff's fraud allegations. The United States Magistrate Judge previously assigned to the case held a hearing on Defendants' Motion and determined that it should be granted, but also determined that Plaintiff's Conditional Motion for Leave to Amend (Doc. 53) its Third Amended Complaint should be granted.

         Regarding Defendants' Motion to Dismiss the breach of contract claims, this Court found that the Motion should be granted because the UCC's four-year statute of limitations applied to the breach of contract claims. (Doc. 66). This Court reasoned: “[t]hough not limited to the machinery, the parties' commercial arrangement principally related to physical goods sold and delivered by Positive Step.” Id. at 6. This Court continued: “[a]bsent some countervailing circumstances, such arrangements are treated as the sale of goods subject to the dictates of Article 2 of the Uniform Commercial Code, even if ancillary services are provided and even though some of the goods delivered take on characteristics of fixtures.” Id. This Court then applied the UCC's four-year statute of limitations, noting that by the allegations of the Third Amended Complaint, the contract was entered into in 2012 and the Plant was operational in late 2012, but Wadley did not file suit until November 2017. Id. at 5. Nonetheless, the Court afforded Plaintiff “a final opportunity to allege any additional facts it believes . . . could avoid the application of the statute of limitations.” Id. Plaintiff filed its Fourth Amended Complaint (Doc. 67) on November 14, 2018.

         In its Fourth Amended Complaint, Plaintiff sues Defendant 1st Quality for breach of contract due to (1) its failure to provide a portable granite plant that could produce 500 tons-per-hour (Count I) and (2) its failure to design and provide equipment for a rail ballast loadout system that could load 2, 000 tons of granite per hour (Count II). (Doc. 67) at 15-18. Additionally, Plaintiff sues Defendant 1st Quality and Defendant Curley for misrepresentation (Count III) as to the amount of granite per hour that could be produced by the Plant and the amount of granite that could be loaded per hour into rail cars. Id. at 7-8.

         Similar to their Motion to Dismiss Plaintiff's Third Amended Complaint, Defendants move to dismiss Plaintiff's breach of contract claims because they are barred by the UCC's four-year statute of limitations. (Doc. 69) at 11-23. Defendants also move to dismiss Plaintiff's misrepresentation claim based upon Alabama's two-year statute of limitations for fraud claims. Id. at 24-31.

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