Opinion
CIV-03-1624 PHX JWS.
April 13, 2004
DeCONCINI McDONALD YETWIN LACY, P.C., Shelton L. Freeman, Phoenix, Arizona, Attorneys for Plaintiff.
Kaja-Anne Jezycki, Attorney at Law, Phoenix, AZ, Attorney for Defendant Barons Financial Group.
ORDER FROM CHAMBERS [Re: Motion at Docket 30]
I. MOTION PRESENTED
At docket 30, defendant Barons Financial Group, Inc. ("Barons") moves to dismiss plaintiff Aventis Technologies' ("Aventis") fraud and negligent misrepresentation claims pursuant to Federal Rule of Civil Procedure 12(b)(6). Aventis opposes the motion and requests an opportunity to amend its complaint if the motion to dismiss is granted. Oral argument was heard on April 13, 2004.
II. BACKGROUND
Aventis is a Canadian corporation. It is a marketing support company which processes billing transactions for telemarketing clients in Canada and the United States. On or about January 16, 2003, Aventis entered into discussions with a Delaware corporation which does business in Arizona, the Barons Financial Group, regarding the possibility that Barons might provide check processing services to Aventis. Aventis alleges that in the course of these discussions, Barons suggested Aventis contact J.P. Morgan as a reference to Barons' professionalism, history, and experience in providing check processing services. Aventis' complaint alleges that a representative of J.P. Morgan, Mr. Kevin Flynn, was contacted on or about January 17, 2003. J.P. Morgan disputes that Mr. Flynn was an employee of JP Morgan at that time. Aventis claims that it informed Flynn that it had no prior dealings with Barons and inquired whether Barons would be able to perform the check processing services required. Aventis claims Flynn indicated that Barons had been in business for several years, that JP Morgan had been doing business with Barons for over a year, that JP Morgan had performed a due diligence investigation of Barons that yielded positive results, and that Barons would be able to provide the required check processing services to Aventis. Aventis claims that based upon the representations of Flynn, it entered into a written contract with Barons on or about January 24, 2003, in which Baron's agreed to provide check processing services to Aventis.
Docket 1 at 2.
Id. at 2.
Id. at 3.
Id.
Doc. 15 at 3.
Doc. 1 at 3.
Id. at 3-4.
Id. at 4.
Pursuant to the contract between Aventis and Barons, Aventis submitted approximately $377,000.00 in checks to be processed by Barons. Barons contacted Aventis on or about February 6, 2003, and informed Aventis that it had been processing its checks through Bank of America, and informed Aventis that its bank accounts had been frozen. Aventis claims that Barons breached the contract by failing to remit payment for the submitted checks and filed a complaint against Barons alleging breach of contract, fraud, negligent misrepresentation, and breach of the implied covenant of good faith and fair dealing. Aventis also filed a complaint against JP Morgan alleging negligent misrepresentation, which was dismissed. Jurisdiction arises under 28 U.S.C. § 1332.
Doc. 1 at 5; Doc. 15 at 2.
Doc. 15 at 2; Doc 1 at 4.
Doc. 1 at 8.
III. STANDARD OF REVIEW
A motion to dismiss for failure to state a claim made pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the claims in the complaint. A dismissal for failure to state a claim can be based on either "the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." In reviewing a 12(b)(6) motion, "[a]ll allegations of material fact in the complaint are taken as true and construed in the light most favorable to the nonmoving party." The court is not required to accept every conclusion asserted in the complaint as true; rather, the court examines "whether conclusory allegations follow from the description of facts as alleged by the plaintiff." A claim should only be dismissed if "it appears beyond doubt that a plaintiff can prove no set of facts in support of his claim which would entitle him to relief."
Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990).
Vignolo v. Miller, 120 F.3d 1075, 1077 (9th Cir. 1997).
Holden v. Hagopian, 978 F.2d 1115, 1121 (9th Cir. 1992) (quoting Brian Clewer, Inc. v. Pan Am. World Airways, Inc., 674 F. Supp. 782, 785 (C.D. Cal. 1986)).
Vignolo, 120 F.3d at 1077 (citation omitted).
IV. DISCUSSION
A. Negligent MisrepresentationTo support its claim for negligent misrepresentation, Aventis must show that: (1) Barons supplied it with false information for use in a business transaction; (2) Aventis suffered pecuniary loss because of its justifiable reliance on the false information; (3) Barons failed to exercise reasonable care in conveying the information; and (4) Barons intended to supply the information for the benefit of Aventis or knew that the recipient of the information would supply it to Aventis. As the Arizona courts have explained: "Negligent misrepresentation requires a misrepresentation or omission of a fact. A promise of future conduct is not a statement of fact capable of supporting a claim of negligent misrepresentation."
See St. Joseph's Hosp. Med. Ctr. V. Reserve Life Ins. Co., 742 P.2d 808, 813 (Ariz. 1987).
Aventis' complaint alleges that Barons "made false representations and supplied false information to Aventis about Barons' reputation, qualifications, professionalism and ability to perform" its contractual duties. Specifically, Aventis' alleges that Barons made the following representations: (1) that Barons had a strong technical infrastructure and (2) that Barons had a strong banking relationship with J.P. Morgan.
Doc. 1 at 8.
Doc. 1 at 3.
These representations reflect opinion, not fact. The Arizona courts have long recognized that indefinite adjectives such as "good," "sufficient," and "proper" are "too vague to be anything other than reflections of the opinion of the speaker." Barons' representations that it had a "strong" technical infrastructure and "strong" banking relationship with J.P. Morgan are likewise too vague to be anything other than the opinion of the speaker. Consequently, these representations do not support a claim for negligent misrepresentation. Similarly, Barons' alleged representation that it was able to perform its contractual obligations is a promise of future conduct, and is not actionable. Because the only statements Aventis alleges to be false are statements of opinion or promises of future conduct rather than statements of fact, Aventis cannot make out a claim for negligent misrepresentation under Arizona law.
Poley v. Bender, 347 P.2d 696, 699 (Ariz. 1959).
B. Fraud
To support its claim for fraud, Aventis must show: (1) that Barons made a representation; (2) that was false; (3) and material; (4) Barons was aware of the falsity; (5) and intended that Aventis act upon the representation; (6) knowing that Aventis was ignorant of the falsity; (7) and would rely on the representation; (8) Aventis had a right to rely on the representation; and (9) Aventis' reliance resulted in injury. Like negligent misrepresentation, "actionable fraud cannot be predicated on unfulfilled promises, expressions of intention or statements concerning future events unless such were made with the present intent not to perform." An expression of opinion cannot form the basis of an actionable fraud claim.
Moore v. Meyers, 253 P. 626, 628 (Ariz. 1927).
Spudnuts, Inc. v. Lane, 641 P.2d 912, 914 (Ariz. 1982).
Poley, 347 P.2d at 699 (internal citations omitted).
Aventis' complaint alleges that Barons made the following fraudulent misrepresentations: (1) that Barons had the capability to perform its contractual obligations; and (2) that Barons had a strong technical infrastructure. The first statement is clearly a statement concerning a future event, and reflects the opinion of the speaker. Such representations do not generally constitute actionable fraud. However, if Aventis were able to present some evidence suggesting that Barons knew at the time it made the representation that it intended not to perform, Aventis might have an actionable claim. Aventis presents no such evidence at this time. Consequently, the first statement is properly considered a promise of future conduct and is not actionable as fraud. As discussed in the negligent misrepresentation section above, the statement that Barons had a strong technical infrastructure is clearly an opinion. For this reason, the second statement is not actionable as fraud.
Doc. 36 at 5.
See Spudnuts, 641 P.2d at 914.
Aventis' complaint also alleges that Barons fraudulently withheld material facts regarding the agreement between Barons and Aventis. Specifically, Aventis' claims that Barons failed to disclose the following: (1) that Barons had been processing the Aventis transactions through the Bank of America and (2) that Barons knew it lacked the capability to perform its contractual duties and obligations.
Doc 1 at 7.
Id.
Aventis alleges that Barons indicated at the time the agreement was formed that it would process Aventis' checks through J.P. Morgan Bank, and argues that Barons' failure to disclose the fact that it was processing Aventis' checks through the Bank of America constitutes fraud. Aventis' claim fails because Aventis has presented no evidence, other than its unsubstantiated allegation, suggesting that the purported representation was actually made. Aventis' complaint presents no evidence suggesting that Barons agreed to process the transactions through J.P. Morgan at the time the contract was formed, and alleges only that Barons "held itself out to Aventis as a registered ISO/MSP of J.P. Morgan." The written agreement between Aventis and Barons merely establishes the fees charged by Barons to process checks, and makes no reference to which banking institution Barons would utilize. From the facts pled, it appears that J.P. Morgan's only role in this dispute was to serve as a reference to Barons' "professionalism, history and expertise in providing check processing services." Absent a showing of a false representation, there can be no actionable claim for fraud.
Doc. 1 at 3.
Agreement, attached as Exhibit A to doc. 1.
Doc. 1 at 3.
Moreover, Aventis has failed to demonstrate that the allegedly fraudulent non-disclosure was in any way material. The Arizona courts have held that, in the context of fraudulent non-disclosure, a material matter "is one to which a reasonable person would attach importance in determining his choice of action in the transaction in question." As noted by Barons, Aventis' complaint "fails to explain how Barons' banking relationship is in anyway material." Aventis presents no argument that it would not have entered the agreement had it known that Barons would use Bank of America's services instead of J.P. Morgan's, and the court is unable to conceive of any reason why Barons' choice of bank would have any bearing on Aventis' decision to enter the agreement. Consequently, Aventis has failed to show that Barons' choice of banking institution was material. Because Aventis has failed to demonstrate the existence of a material misrepresentation, there can be no actionable fraud claim.
Hill v. Jones, 725 P.2d 1115, 1119 (Ariz.App. 1986).
Doc. 30 at 7.
Finally, Aventis alleges that Barons failed to disclose the fact that it knew it lacked the capacity to handle Aventis' check processing needs. As discussed above, Aventis has presented no evidence suggesting that Barons knew at the time it entered the contract that it lacked the capability to perform. Absent a showing that Barons knew it was making a false representation, Aventis has failed to state an actionable claim for fraud.
C. Motion to Amend
Aventis requests leave to amend its complaint pursuant to Federal Rule of Civil Procedure 15(a). Rule 15(a) directs that after a responsive pleading has been filed, a party may amend its complaint by leave of court or by written consent of the adverse party. Rule 15 further instructs that "leave should be freely given when justice so requires." Grant or denial is vested in the trial court's discretion. Ordinarily, leave should be granted unless the amendment follows undue delay, seeks to inject an improper claim, unfairly prejudices the opposing party, or threatens to unduly increase discovery or delay trial. The Ninth Circuit assesses five factors in determining whether amendment should be granted or denied; "(1) bad faith, (2) undue delay, (3) prejudice to the opposing party, (4) futility of amendment, and (5) whether plaintiff has previously amended his complaint."
6 CHARLES ALAN WRIGHT, ET AL., FEDERAL PRACTICE AND PROCEDURE, § 1484, at 594-96 (2d ed. 1990) ("WRIGHT").
WRIGHT, § 1487 at 613.
Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990) (citations omitted).
Aventis' desire to amend does not appear to be motivated by bad faith or by an intention of causing undue delay. Thus, the first two factors favor amendment. Barons has not asserted that it would be prejudiced if Aventis were allowed to amend, so the third factor also seems to favor amendment. Because Aventis has not previously amended its complaint, the final factor also favors amendment.
While Aventis failed to file a motion seeking leave to amend, its response to the motion to dismiss repeatedly requests leave. Barons' reply raises no objections to amendment.
The fourth factor, futility of the amendment, requires a more detailed analysis. While Aventis has failed to include a copy of the proposed amended complaint, it has supplemented its response with facts which were not presented in the original complaint, and indicates that it wishes to incorporate these new allegations in its amended complaint. In sum, Aventis seeks to incorporate the following facts: (1) that Barons represented it could easily process $1,000,000 in check transactions per month; (2) that Barons represented it had handled that volume before; (3) that Barons informed Aventis on February 6, 2003, that it was acquiring a new software program which Barons claimed would eliminate problems encountered in processing the checks; and (4) that Barons' bank accounts with Bank of America were frozen because Barons was unable to handle the volume of Aventis' check processing requirements.
Doc. 36 at 3 n. 1.
Id.
Doc. 36 at 3 n. 2.
Doc. 36 at 8 n. 17.
The first representation is a promise of future performance. As such, it cannot form the basis for a negligent or fraudulent misrepresentation. The second statement, however, is a representation of an actual fact, which could form the basis for a fraudulent misrepresentation claim if, but only if, Aventis is able to establish the existence of the other elements of fraud.
Aventis' request for leave to amend is not sufficiently supported to allow the court to rule on the request. Precisely how Aventis would overcome the shortcomings in its present complaint is not explained. A proposed amended complaint has not been provided. The request will be denied without prejudice to a proper motion to amend. Aventis' counsel is advised to carefully consider Fed.R.Civ.P. 11 before filing such a motion.
V. CONCLUSION
For the reasons stated above, the motion at docket 30 is GRANTED. Aventis' fraud and negligent misrepresentation claims against Barons are dismissed.