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holding that the alleged fraudulent communications satisfy the "causes tortious injury by an act or omission in this state" portions of the Ohio long-arm statute
Summary of this case from Vlach v. YapleOpinion
Case No. 3:01 CV 7533
September 4, 2002
ORDER
Plaintiff FRC International, Inc. brings this action against Taifun Feuerloschgeratebau und Vertriebs GmbH ("Taifun") and Lothar Georg Gudemann for common law fraud, civil violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. ("RICO") and O.R.C. §§ 2923.32 and 2923.34, and breach of contract. Pending is defendants' motion for dismiss pursuant to Fed.R.Civ.P. 12(b)(2), (4), (5), and (6). For the following reasons, defendants' motion shall be granted as to Count II and denied as to Counts I, III, and IV.
BACKGROUND
Plaintiff is a Delaware corporation with its principal place of business in Ohio. Taifun is a German company with its principal place of business in Germany. Gudemann is a German citizen and owner of Taifun.
In July, 1995, plaintiff entered into a contract with the Defense Logistics Agency ("DLA") of the United States to provide to DLA 1,650,000 pounds of reclaimed bromotrifluoromethane. Bromotrifluoromethane is an ozone depleting substance subject to a confiscatory excise tax. Reclaimed bromotrifluoromethane is not, however, subject to this tax.
On August, 14, 1996, plaintiff solicited reclaimed bromotrifluoromethane by proposals faxed to international sources. On August 15, 1996, plaintiff received a preliminary offer of sale for four hundred metric tons of reclaimed bromotrifluoromethane from defendants. Plaintiff's president, Richard M. Marcus ("Marcus"), traveled to Frankfurt, Germany to meet with Gudemann. Plaintiff alleges that Gudemann verbally assured Marcus that the bromotrifluoromethane was recycled and not virgin. Gudemann also stated this in writings transmitted by mail and interstate wire services. Gudemann took Marcus to the site from which the reclaimed bromotrifluoromethane would be shipped.
On August 28, 1996, plaintiff submitted a purchase order to defendants for four hundred metric tons of reclaimed bromotrifluoromethane. On September 12, 1996, Taifun accepted the order through telephone, mail, or both.
On August 30, 1996, plaintiff provided the DLA with a confirmation of availability of supplies. On November 14, 1996, plaintiff submitted another purchase order, which following revisions on November 15, 1996, became the final agreement. Taifun agreed to supply plaintiff with forty-eight metric tons of reclaimed bromotrifluoromethane. Plaintiff engaged German counsel to advise plaintiff on German law regarding exportation of reclaimed bromotrifluoromethane. Taifun agreed to arrange for importation of the reclaimed bromotrifluoromethane in accordance with United States laws.
On November 14, 1996, plaintiff submitted an application to the United States Environmental Protection Agency to import forty-eight metric tons of reclaimed bromotrifluoromethane from Taifun. On December 11, 1996, the EPA issued a non-objection notice to the import petition, authorizing importation of the forty-eight metric tons of reclaimed bromotrifluoromethane from Germany through Taifun. Plaintiff then made arrangements to ship the reclaimed bromotrifluoromethane from Germany to the United States through an international carrier contracted for by defendants.
At some time prior to December 31, 1996, defendants determined that they would not or could not deliver any of the reclaimed bromotrifluoromethane. Plaintiff alleges that defendants made a plan to smuggle virgin bromotrifluoromethane into Germany from China. Defendants subsequently engaged in other communications with plaintiff assuring plaintiff that Taifun would deliver reclaimed bromotrifluoromethane. On October 21, 1996, defendants ordered forty-eight metric tons of virgin bromotrifluoromethane from China to be substituted for the reclaimed bromotrifluoromethane promised to plaintiff. Plaintiff alleges that defendants never disclosed this substitution to plaintiff. Defendants made three shipments of virgin bromotrifluoromethane to the United States under the agreement with plaintiff during March, April, and June, 1997. The material supplied to plaintiffs was delivered to the DLA.
In March, 2001, a United States Attorney informed plaintiff that the Department of Justice, the Environmental Protection Agency, and Customs Service suspected that the material plaintiff supplied to the DLA was virgin bromotrifluoromethane from China.
Plaintiff filed this action on October 5, 2001, alleging common law fraud against both defendants, a civil RICO violation against both defendants, another civil RICO violation against Gudemann, and breach of contract against Taifun.
Defendants have filed a motion to dismiss under Fed.R.Civ.P. 12 on the basis of several arguments: 1) insufficiency of process and service of process; 2) failure to state a fraud claim; 3) failure to state a RICO claim; 4) failure to state a breach of contract claim; 5) lack of personal jurisdiction; and 6) lack of standing.
DISCUSSION I. Personal Jurisdiction
Defendants argue that this court does not have personal jurisdiction over either defendant. As the party asserting jurisdiction, the plaintiff bears the burden of showing that personal jurisdiction exists. Suarez Corp. Indus. v. McGraw, 71 F. Supp.2d 769, 774 (N.D.Ohio. 1999) (citing CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1261-62 (6th Cir. 1996); Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991)). A plaintiff generally must prove jurisdiction by a preponderance of the evidence. Suarez, 71 F. Supp.2d at 774 (citing Dean v. Motel 6 Operating L.P., 134 F.3d 1269, 1272 (6th Cir. 1998)).
"A district court ruling on a Rule 12(b)(2) motion without conducting an evidentiary hearing must consider the pleadings and affidavits in a light most favorable to the plaintiff." Suarez, 71 F. Supp.2d at 774 (citing Dean, 134 F.3d at 1272 (citing CompuServe, 89 F.3d at 1272)); see also Welsh v. Gibbs, 631 F.2d 436, 438-39 (6th Cir. 1980) (On a motion to dismiss for lack of personal jurisdiction, the court treats the allegations contained in plaintiff's complaint, affidavits, and depositions as true, and any factual disputes are resolved in the favor of the plaintiff.). The plaintiff can defeat a motion to dismiss for lack of personal jurisdiction by making a prima facie showing of jurisdiction. Suarez, 71 F. Supp.2d at 774 (citing Dean, 134 F.3d at 1272); Glasstech, Inc. v. TGL Tempering Sys., Inc., 50 F. Supp.2d 722, 725 (N.D.Ohio. 1999).
A district court sitting in diversity must apply the law of the forum state when determining whether personal jurisdiction exists over a defendant. Welsh, 631 F.3d at 439. Personal jurisdiction exists over a defendant if the defendant's conduct meets the requirements of the Ohio long-arm statute and the due process requirements of the Fourteenth Amendment to the United States Constitution. Compuserve, 89 F.3d at 1263. In Cole v. Mileti, 133 F.3d 433, 436 (6th Cir. 1998), the Sixth Circuit recognized that the Ohio Supreme Court held the Ohio General Assembly did not intend for Ohio's long-arm statute to extend to the limits of due process. "Nevertheless, in evaluating whether personal jurisdiction is proper under Ohio's long-arm statute, [the Sixth Circuit has] consistently focused on whether there are sufficient minimum contacts between the nonresident defendant and the forum state so as not to offend 'traditional notions of fair play and substantial justice.'" Bird v. Parsons, 289 F.3d 865, 871 (6th Cir. 2002) (citing Calphalon Corp. v. Rowlette, 228 F.3d 718, 721 (6th Cir. 2000) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)); Cole, 133 F.3d at 436).
Depending on the nature of the contacts that a defendant has with Ohio, personal jurisdiction can be general or specific. Bird, 289 F.3d at 873 (citing Conti v. Pneumatic Prods. Corp., 977 F.2d 978, 981 (6th Cir. 1992)).
General jurisdiction arises when "a defendant's contacts with the forum state are of such a continuous and systematic nature that the state may exercise personal jurisdiction over the defendant even if the action is unrelated to the defendant's contacts with the state." Third Nat'l Bank in Nashville v. WEDGE Group, Inc., 882 F.2d 1087, 1089 (6th Cir. 1989)).
Plaintiff does not contend that this court has general personal jurisdiction over Taifun or Gudemann, so the inquiry is limited to whether there is specific personal jurisdiction over Taifun and Gudemann so that exercise of jurisdiction meets due process requirements.
Specific personal jurisdiction arises when the suit arises out of or is related to a defendant's contacts with Ohio. Bird, 289 F.3d at 874 (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n. 8 (1984)). In Southern Machine Company v. Mohasco Industries, Inc., 401 F.2d 374, 381 (6th Cir. 1968), the Sixth Circuit established a three-part test for specific personal jurisdiction:
First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the forum state. Second, the cause of action must arise from the defendant's activities there. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable.
The purposeful availment requirement prevents a defendant from being haled into court due to "'random,' 'fortuitous,' or 'attenuated' contacts." Burger King v. Rudzewicz, 471 U.S. 462, 475 (1985) (quoting Keeton v. Hustler Magazine, 465 U.S. 770, 774 (1984)). A defendant purposefully avails himself or herself of Ohio when the defendant's conduct creates a "substantial connection" with Ohio so that the defendant should reasonably anticipate being haled into court in Ohio. Compuserve, 89 F.3d at 1263 (citing Burger King, 471 U.S. at 474-75).
The second requirement mandates examining whether the plaintiff's claims arise from the defendant's contacts with Ohio. Bird, 289 F.3d at 875. The Sixth Circuit has stated, "If a defendant's contacts with the forum state are related to the operative facts of the controversy, then an action will be deemed to have arisen from those contracts." Compuserve, 89 F.3d at 1267; see also Third Nat'l Bank, 882 F.2d at 1091 ("[T]he cause of action [need not] formally 'arise from' defendant's contacts with the forum; rather, this criterion requires only 'that the cause of action, of whatever type, have a substantial connection with the defendant's in-state activities.'") (quoting Mohasco, 401 F.2d at 384 n. 27).
The third requirement examines whether the exercise of jurisdiction is reasonable in view of the connection between a defendant and Ohio. Bird, 289 F.3d at 875. "An inference arises that the third factor is satisfied if the first two requirements are met." Id. (citing Compuserve, 89 F.3d at 1268). The Sixth Circuit uses several factors to determine this requirement: "the burden on the defendant, the interest of the forum state, the plaintiff's interest in obtaining relief, and the interest of other states in securing the most efficient resolution of controversies." Compuserve, 89 F.3d at 1268.
A. Taifun
Plaintiff argues that Taifun's actions meet several provisions of Ohio's long-arm statute, including the provision allowing exercise of personal jurisdiction over a person who "caus[es] tortious injury by an act or omission in this state." O.R.C. § 2307.382. Plaintiff alleges fraud against Taifun and alleges the fraud occurred through mail and facsimile communications transmitted to plaintiff in Holland, Ohio. Doc. 22 at 37. Plaintiff alleges, "[D]efendants intended to and did commit fraudulent acts in Ohio on an ongoing, repetitive and continuous basis over a substantial period of time, and did transact business in this judicial district in Ohio." Doc. 22 at 37.These allegations suffice under Ohio's long-arm statute to establish jurisdiction over Taifun as a defendant who caused tortious injury by an act in Ohio.
If the exercise of personal jurisdiction also meets due process requirements, jurisdiction may be extended, under the long-arm statute, to the breach of contract claim against Taifun because Taifun meets one of the provisions of the long-arm statute. U.S. Sprint Comms. Co. v. Mr. K's Foods, Inc., 68 Ohio St.3d 181, 185 (1994) ("We hold that once an Ohio court acquires personal jurisdiction over a nonresident defendant for claims arising in Ohio, Civ.R. 18(A) permits joinder of related claims that do not arise in Ohio, as long as granting jurisdiction for all claims does not deprive defendant of the right to due process of law.").
I find that Taifun meets the due process requirements established in Mohasco, 401 F.2d at 381. Taifun purposefully availed itself of the privilege of acting in Ohio or caused a consequence in Ohio. Taifun's contact with Ohio was not random, fortuitous, or attenuated. Plaintiff alleges that Taifun entered into a contract with plaintiff and consequently sent many communications relating to the contract to Ohio. "[M]aking phone calls and sending facsimiles into the forum, standing alone, may be sufficient to confer jurisdiction on the foreign defendant where the phone calls and faxes form the bases for the action." Neal v. Janssen, 270 F.3d 328, 332 (6th Cir. 2001) (citations omitted). Thus, "[w]hen the actual content of the communications into the forum gives rise to an intentional tort action, that alone may constitute purposeful availment."Id. The communications between Taifun and plaintiff form the bases of the fraud and breach of contract actions. Taifun therefore purposefully availed itself Ohio because Taifun's conduct created a "substantial connection" with Ohio so that Taifun reasonably should have anticipated being haled into court in Ohio.
Plaintiff's cause of action arises from Taifun's activities in Ohio. Taifun "did not make just one phone call to plaintiff in [Ohio] in an effort to solicit business from [it]. The undisputed facts demonstrate that [Taifun] engaged in a course of conduct over a period of time that involved a single business transaction . . . with plaintiff, conducted by [mail] and fax." Neal, 270 F.3d at 332. The fact that Taifun physically was not present in Ohio does not prevent personal jurisdiction because "when a foreign defendant purposefully directs communications into the forum that cause injury within the forum, and those communications form the 'heart' of the cause of action, personal jurisdiction may be present." Id. at 333. Such is the case here: Taifun's contacts with Ohio relate directly to the operative facts of the controversy.
Finally, Taifun's acts or their consequences had a substantial enough connection with Ohio so that the exercise of jurisdiction over Taifun is reasonable. Taifun does not argue that defending this action in Ohio will be overly burdensome. Taifun is an international business. Ohio has an interest in having the litigation continue here. Plaintiff clearly has an interest in obtaining relief. The facts that Taifun engaged in a business relationship with plaintiff, hoped to benefit financially from it, and allegedly defrauded plaintiff, make it reasonable for Ohio to exercise personal jurisdiction over Taifun. Id. Defendants' motion to dismiss for lack of personal jurisdiction shall be, therefore, denied as to Taifun.
B. Gudemann
Plaintiff argues that Gudemann's actions meet several provisions of Ohio's long-arm statute, including the provision allowing exercise of personal jurisdiction over a person who "caus[es] tortious injury by an act or omission in this state." O.R.C. § 2307.382. Plaintiff alleges fraud against Gudemann and alleges the fraud occurred through mail and facsimile communications transmitted to plaintiff in Holland, Ohio. Doc. 22 at 37. Plaintiff alleges, "[D]efendants intended to and did commit fraudulent acts in Ohio on an ongoing, repetitive and continuous basis over a substantial period of time, and did transact business in this judicial district in Ohio." Doc. 22 at 37. I find that these allegations meet Ohio's long-arm statute allowing jurisdiction over Gudemann as a defendant who caused tortious injury by acts in Ohio.
Defendants initially argue that Gudemann is shielded from personal jurisdiction because he was acting as Taifun's officer and agent. This argument is not well taken. The Sixth Circuit has stated that a corporate agent can be amenable to personal jurisdiction under certain circumstances. Balance Dynamics Corp. v. Schmitt Indus., Inc., 204 F.3d 683, 698 (6th Cir. 2000). The Sixth Circuit stated:
While it is true that "jurisdiction over the individual officers of a corporation cannot be predicated merely upon jurisdiction over the corporation," . . . we hold that the mere fact that the actions connecting defendants to the state were undertaken in an official rather than personal capacity does not preclude the exercise of personal jurisdiction over those defendants.
Id. (citing Weller v. Cromwell Oil Co., 504 F.2d 927, 929 (6th Cir. 1974)).
An out-of-state agent can be amenable to suit when that agent actively and personally is involved in the conduct which is the basis for the claim and the exercise of personal jurisdiction meets traditional notions of fair play and substantial justice. Id.
Plaintiff alleges that its president traveled to Germany and met with Gudemann to review terms and conditions of the agreement. Plaintiff further alleges:
On numerous occasions, Gudemann, acting on behalf of Taifun and with actual and apparent authority, verbally assured [plaintiff's president] that the agent was not virgin, but reclaimed material. Gudemann later committed said representation to writings which were issued to plaintiff both through the United States mail and by interstate wire transmission, and received by plaintiff at its corporate headquarters in Holland, Ohio.
Doc. 22 at ¶ 9.
Plaintiff further alleges, "Defendants caused three (3) shipments of the substituted virgin bromotrifluoromethane to be transported to the United States, through the port of Detroit, Michigan, for delivery to plaintiff in Holland, Ohio, and plaintiff received the shipments in March, April, and June, 1997." Doc. 22 at ¶ 29. Plaintiff alleges, "Gudemann's mail and wire fraud continued for a number of months, included numerous individual correspondence, and victimized plaintiff, EPA, and WESCO." Doc. 22. at ¶ 68.
Plaintiff attached several exhibits to the first amended complaint which illustrate Gudemann's activities. These exhibits include confirmation of shipment of reclaimed bromotrifluoromethane and are signed by Gudemann. Doc. 19 at Exs. F-1, F-2, F-3. Treating the allegations contained in plaintiff's second amended complaint and exhibits as true and resolving any factual disputes in the favor of plaintiff, I find that Gudemann actively and personally was involved in the conduct which is the basis for plaintiff's claims. So long as the exercise of personal jurisdiction meets due process requirements, this court has jurisdiction over Gudemann.
Because I find that the exercise of personal jurisdiction over Gudemann meets the requirements set forth in Mohasco, I decline to address plaintiff's argument that RICO and the national contacts test, a broader test for personal jurisdiction, mandate the exercise of personal jurisdiction. See, e.g., Suarez Corp. v. McGraw, 71 F. Supp.2d 769, 777 (N.D.Ohio. 1999) ("Thus, RICO permits a broader interpretation of personal jurisdiction than applies in a traditional jurisdictional analysis. This broader jurisdiction is measured by national contacts rather than the traditional test examining minimum contacts with the forum state.").
Gudemann purposefully availed himself of the privilege of acting in Ohio or caused a consequence in Ohio. Gudemann's contact with Ohio was not random, fortuitous, or attenuated. Plaintiff alleges that Gudemann negotiated the agreement between Taifun, and Gudemann consequently sent many communications to Ohio. "The acts of making phone calls and sending facsimiles into the forum, standing alone, may be sufficient to confer jurisdiction on the foreign defendant where the phone calls and faxes form the bases for the action." Neal, 270 F.3d at 332 (citations omitted). The communications between Gudemann and plaintiff form the basis of the fraud and RICO claims. Gudemann therefore purposefully availed himself of Ohio because Gudemann's conduct created a "substantial connection" with Ohio. Gudemann should, accordingly, reasonably have anticipated being haled into court in Ohio.
Plaintiff's cause of action arises from Gudemann's activities in Ohio. Gudemann "did not make just one phone call to plaintiff in [Ohio] in an effort to solicit business from [it]. The undisputed facts demonstrate that [Gudemann] engaged in a course of conduct over a period of time that involved a single business transaction . . . with plaintiff, conducted by [mail] and fax." Neal, 270 F.3d at 332. The fact that Gudemann physically was not present in Ohio does not prevent personal jurisdiction because "when a foreign defendant purposefully directs communications into the forum that cause injury within the forum, and those communications form the 'heart' of the cause of action, personal jurisdiction may be present." Id. at 333. Gudemann's contacts with Ohio are related to the operative facts of the controversy.
Finally, Gudemann's acts or their consequences had a substantial enough connection with Ohio that the exercise of jurisdiction over Gudemann is reasonable. Gudemann does not argue that defending this action in Ohio will be overly burdensome. Ohio has an interest in having the litigation continue here. Plaintiff clearly has an interest in obtaining relief.
Defendants' motion to dismiss for lack of personal jurisdiction shall be, therefore, denied as to Gudemann.
II. Service of Process
Defendants contend that the complaint must be dismissed under Rules 12(b)(4), for insufficiency of process, and 12(b)(5), for insufficiency of service of process. Defendants argue that process and service of process were insufficient because plaintiff did not comply with the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters.
Fed.R.Civ.P. 4(h)(2) requires that foreign corporations be served in the same manner as individuals in a foreign country under Fed.R.Civ.P. 4(f). Rule 4(f)(1) provides that individuals in a foreign country may be served "by any internationally agreed means reasonably calculated to give notice, such as those means authorized by the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents." I thus must look to the Hague Convention to determine whether both process and service of process were sufficient.
Article 3 of the Hague Convention provides, "The authority or judicial officer competent under the law of the State in which the documents originate shall forward to the Central Authority of the State addressed a request conforming to the model annexed to the present Convention, without any requirement of legalisation or other equivalent formality." Article 5 provides:
The Central Authority of the State addressed shall itself serve the document or shall arrange to have it served by an appropriate agency, either —
(a) by a method prescribed by its internal law for the service of documents in domestic actions upon persons who are within its territory, or
(b) by a particular method requested by the applicant, unless such a method is incompatible with the law of the State addressed. Subject to sub-paragraph (b) of the first paragraph of this article, the document may always be served by delivery to an addressee who accepts it voluntarily.
If the document is to be served under the first paragraph above, the Central Authority may require the document to be written in, or translated into, the official language or one of the official languages of the State addressed.
That part of the request, in the form attached to the present Convention, which contains a summary of the document to be served, shall be served with the document.
To serve process via the Hague Convention rules, a plaintiff, through a requesting authority, sends a request to serve process to the Central Authority of a country. The Central Authority reviews the request for conformance with the model annexed to the Hague Convention and its other provisions. If the request does not conform, the Central Authority informs the plaintiff. If the request conforms, the Central Authority will effect service through the method chosen by the plaintiff and indicated on the request.
Each signatory to the Hague Convention may require that a request and accompanying document be translated into the official language of that country. Germany requires this translation. Pennsylvania Orthopedic Assoc. v. Mercedes-Benz, 160 F.R.D. 58, 60 (E.D.Pa. 1995) ("The German resolution enacting the Hague Convention states, 'Formal Service (paragraph 1 of Article 5 of the Convention) shall be permissible only if the document to be served is written in or translated into, the German language.'") (citing Federal Civil Judicial Procedure and Rules at 42).
A. Taifun
Defendants contend service of process was insufficient as to Taifun because only an "authority or judicial officer competent under the law of the state in which the documents originate" could serve plaintiff's complaint on the Central Authority of Germany, which would forward the complaint to defendants. Doc. 26 at 15.
Plaintiff contends that a private attorney is competent under the Hague Convention for service of process. Plaintiff further argues that only the German Central Authority may object to a Request for Service.
Defendants' argument is not well taken.
In Greene v. Le Dorze, No. CA 3-96-CV-590-R, 1998 U.S. Dist. LEXIS 4093, at *5-6 (E.D.Pa. Mar. 24, 1998), the defendants argued that the person who forwarded process to the French Ministry of Justice, the entity designated as France's Central Authority, was not an "authority or judicial officer competent under the law of the State in which the documents originate." Alan Crowe, of Crowe Foreign Services, forwarded the process. Id. at *2. The court held that anyone eligible to serve process under Fed.R.Civ.P. 4(c)(2) properly could serve process to a Central Authority. Id. at *7. The court stated,
A party is "competent" to forward process for purpose of the Hague Convention if it is "competent" to serve such documents in the country where the documents originate. Because Mr. Crowe was authorized to serve process in the United States, he was competent to forward documents originating in the United States to the French Ministry of Justice.
Id.
In Marschhauser v. Travelers Indemnity Co., 145 F.R.D. 605, 608-09 (S.D.Fla. 1992), the defendants challenged service of process to the Israeli Central Authority. The court stated a private attorney qualifies to serve process on a Central Authority. Id. at 608. The court stated, "Article 3, expressly states that the authority or judicial officer must be competent in the state in which the documents originate, not the recipient state." Id.
Anyone who qualifies to serve process in the United States under Fed.R.Civ.P. 4(c), therefore, qualifies to serve process on the German Central Authority. Counsel for plaintiff served the request on the German Central Authority and could serve process under Rule 4(c). Doc. 35 at 15. Service of process thus was not insufficient as to Taifun.
B. Gudemann
Defendants again argue service of process was insufficient as to Gudemann because plaintiff failed to make a proper request for service through a competent officer required by Article 3. Plaintiff again contends that a private attorney is competent under the Hague Convention to accept service of process. Plaintiff further argues that only the German Central Authority may object to a Request for Service.
Defendants' argument that service of process was insufficient because plaintiff failed to make a proper request for service through a competent officer again is not well taken for the same reasons discuss supra. Anyone who qualifies to serve process in the United States under Fed.R.Civ.P. 4(c) qualifies to serve process on the German Central Authority. Counsel for plaintiff served the request on the German Central Authority and could serve process under Rule 4(c). Doc. 35 at 15. Service of process thus was not insufficient as to Gudemann because plaintiff's counsel served the request to the Central Authority.
Defendants further argue that process was insufficient as to Gudemann because the documents were not translated into German. Defendants argue that service of process was insufficient because the process was insufficient.
Plaintiff argues that translation of all documents whose service is requested is not necessary when service is obtained by voluntary acceptance of the recipient.
In Pennsylvania Orthopedic Assoc. v. Mercedes-Benz, 160 F.R.D. 58, 60 (E.D.Pa. 1995), the plaintiffs submitted their request for service and did not translate the summons into German. The court found that the plaintiffs did not comply with the German requirements and the Hague Convention. Id. The court stated,
Upon receipt of the request and attached documents, the German Central Authority checked the box on the request titled "the document has not been served, by reason of the following facts," and wrote (translated from German) "because of missing translations, only informal delivery [Hague Convention art. 5, P 2] through acceptance of service by addressee was a possibility. The addressee was not willing to accept service."
Id.
The court held, "Because Plaintiffs did not comply with the Hague Convention and Defendant did not voluntarily accept service, we conclude that service of process has not been effected upon the Defendant." Id. (emphasis added). The translation requirement, therefore, effectively could be waived if the defendant had accepted service voluntarily.
If Gudemann accepted service of process voluntarily, the translation requirement, and plaintiff's failure to comply with it, would not render process insufficient.
Defendants contend that service of process was insufficient as to Gudemann because nothing in the record establishes that Gudemann was served voluntarily. Plaintiff points out that the process server states Gudemann accepted service voluntarily.
The only support for defendants' argument that Gudemann was not served voluntarily is the fact that the acknowledgment of service only is signed by the process server and not by Gudemann. This bald conclusion does not establish involuntariness, especially in light of the process server's form which states that Gudemann was served and accepted service voluntarily. Doc. 35 at Ex. Because Gudemann accepted service voluntarily, the translation was not required.
Both process and service of process were not insufficient as to Gudemann.
III. Adequacy of Pleadings
No complaint shall be dismissed unless the plaintiff has failed to allege facts in support of plaintiff's claim that, construed in plaintiff's favor, would entitle the plaintiff to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). When deciding a motion brought pursuant to Fed.R.Civ.P. 12(b)(6), the inquiry is essentially limited to the content of the complaint, although matters of public record, orders, items appearing in the record, and attached exhibits also may be taken into account. See Yanacos v. Lake County, 953 F. Supp. 187, 191 (N.D.Ohio. 1996). The court must accept all the allegations stated in the complaint as true, Hishon v. King Spalding, 467 U.S. 69, 73 (1984), while viewing the complaint in the light most favorable to the plaintiff. Sheuer v. Rhodes, 416 U.S. 232, 236 (1974). A court, however, is "not bound to accept as true a legal conclusion couched as a factual allegation." Papasan v. Allain, 478 U.S. 265, 286 (1986).
A. Count I: Fraud
Plaintiff claims defendants engaged in common law fraud because they represented that Taifun would and did supply plaintiff with reclaimed bromotrifluoromethane when they knew Taifun would not do so. Plaintiff claims defendants fraudulently failed to disclose that they could not supply plaintiff with reclaimed bromotrifluoromethane and would substitute virgin bromotrifluoromethane.
Defendants contend that Count I must be dismissed because it fails to comply with the pleading requirements of Fed.R.Civ.P. 9(b). Defendants contend, "Plaintiff cannot boldly allege conduct 'upon information and belief,' or based simply on conjecture or by making conclusory statements, offer no factual basis for such belief or statements, yet fulfill its pleading obligations under Fed.Civ.R. 9(b)." Doc. 26 at 27 (citations omitted). Under Fed.R.Civ.P. 9(b), fraud claims must be pleaded with particularity; general allegations of fraud are insufficient. VanDenBroeck v. CommonPoint Mortgage Co., 210 F.3d 696, 701 (6th Cir. 2000). To satisfy this requirement, a "plaintiff must allege specifically times, places, [and] contents . . . of the underlying fraud." Vild v. Visconsi, 956 F.2d 560, 567 (6th Cir. 1992). The Sixth Circuit has stated that Rule 9(b) must be read in conjunction with Rule 8, which calls for short, concise statements. American Town Ctr. v. Hall 83 Assoc., 912 F.2d 104, 109, 113 (6th Cir. 1990).
Failure to plead an essential element of a fraud claim, however, warrants dismissal under Rule 9(b). Craighead v. E.F. Hutton Co., 899 F.2d 485, 491 (6th Cir. 1990). A plaintiff must "at a minimum, . . . allege the time, place, and content of the alleged misrepresentation on which he or she relied; the fraudulent scheme; the fraudulent intent of the defendants; and the injury resulting from the fraud." Advocacy Org. for Patients and Providers v. Auto Club Ins. Ass'n, 176 F.3d 315, 322 (6th Cir. 1999) (quoting Coffey v. Foamex L.P., 2 F.3d 157, 161-62 (6th Cir. 1993)).
Defendants argue that plaintiff's fraud claim does not meet Fed.R.Civ.P. 9(b) for several reasons: 1) the complaint contains conclusory allegations of misrepresentations and concealment, intent, and level of knowledge; 2) failure to allege detrimental reliance; 3) the damages are speculative and time-barred; and 4) the claim is barred by the economic loss doctrine because the fraud claim does not contain damages in addition to damages attributable to plaintiff's breach of contract claim.
Plaintiff's second amended complaint sufficiently pleads fraud under Fed.R.Civ.P. 9(b). The second amended complaint alleges the time, place, and content of the alleged misrepresentations on which plaintiff relied; the fraudulent scheme; the fraudulent intent of the defendants; and the injury resulting from the fraud. Attached to plaintiff's first amended complaint were several exhibits containing the alleged misrepresentations. Doc. 19 at Exs. C-1, C-2, F-1, F-2, F-3. These exhibits contain dates, statements of intent to ship, and statements of actual shipment of reclaimed bromotrifluoromethane. The attachment of these exhibits is sufficient to plead the time, place, and content of the alleged misrepresentations on which plaintiff relied.
Plaintiff's second amended complaint also alleges a fraudulent scheme and defendants' fraudulent intent. The second amended complaint states:
In connection with the Agreement, defendants transmitted to plaintiff in Holland, Ohio via United States mail and facsimile transmission over interstate telecommunications lines a series of correspondence and other writings which, directly or indirectly, constituted written representations from defendants to plaintiff that defendants could supply, would supply or did supply to plaintiff reclaimed bromotrifluoromethane, when in fact defendants knew each of those representations to be false. Defendants fraudulently or recklessly failed to disclose to plaintiff that : (1) defendants had no ability, or alternatively no intention, to supply plaintiff with reclaimed bromotrifluoromethane; and (2) defendant would substitute virgin Halon for reclaimed bromotrifluoromethane for shipment to plaintiff. Copies of all such written correspondence and facsimile transmissions as are in plaintiff's possession or control were attached to the First Amended Complaint as Composite Exhibit G. Collectively, such written correspondence, facsimile or wire transmissions evidence that defendants intended to and did commit fraudulent acts in Ohio on an ongoing, repetitive and continuous basis over a substantial period of time, and did transact business in this judicial district in Ohio.
Doc. 22 at ¶ 37.
These allegations sufficiently plead that defendants engaged in a scheme to substitute virgin bromotrifluoromethane for the reclaimed bromotrifluoromethane that plaintiff believed it was purchasing. These allegations also sufficiently plead defendants' requisite intent.
Plaintiff's second amended complaint sufficiently pleads justifiable reliance. The second amended complaint states, "Plaintiff justifiably and actually did rely upon defendants' misrepresentations of fact, and defendants' concealment and omissions of fact, as aforesaid." Doc. 22 at ¶ 40. Plaintiff's second amended complaint sufficiently alleges injury and damages in the fraud claim. Defendants argue that the fraud claim is barred by the economic loss doctrine. Defendants argue that, because the fraud claim does not contain damages in addition to damages attributable to plaintiff's breach of contract claim, the fraud claim must be dismissed. Defendants rely on Raymac Leasing Corp. v. U.S. Brands Corp., No. 9-4043, 1991 U.S. App. LEXIS 19417, at *10 (6th Cir. Aug. 14, 1991) (quoting Bowman v. Goldsmith Bros. Co., 109 N.E.2d 556 (Ohio Ct.App. 1953)), for the proposition that "[t]he tort liability of parties to a contract arises from the breach of some positive legal duty imposed by law because of the relationship of the parties, rather than from a mere omission to perform a contract obligation."
While defendants are correct in that plaintiff needs to prove more than economic loss to recover on its fraud claim, the court in Raymac decided the issue on a motion for summary judgment. Because this issue comes to the court on a motion to dismiss, I must read the second amended complaint liberally in plaintiff's favor. The second amended complaint sufficiently alleges more than economic loss:
As a direct and proximate result of the fraudulent substitution of smuggled virgin Chinese bromotrifluoromethane for the reclaimed German agent required under the contract, defendants have caused plaintiff to be threatened with both criminal and civil charges by the United States of America, as a result of which plaintiff has incurred substantial legal fees and expenses, well in excess of One Hundred Thousand Dollars ($100,000.00) to date in responding to such investigations and claims.
Doc. 22 at ¶ 42.
Count I cannot, therefore, be dismissed for failure to comply with the pleading requirements of Fed.R.Civ.P. 9(b). Defendants' motion to dismiss Count I shall be denied.
B. RICO
Plaintiff asserts two claims under RICO and Ohio's Pattern of Corrupt Activities Law ("PCA"), O.R.C. §§ 2923.32 and 2923.34. In Count II, plaintiff claims that both defendants devised a scheme to defraud plaintiff and the EPA or to obtain money from plaintiff by fraudulent representations and executed that scheme through mail and wire fraud. In Count III, plaintiff claims that Gudemann devised a scheme to defraud plaintiff and the EPA by representing to plaintiff and the EPA that Taifun would deliver reclaimed bromotrifluoromethane. Plaintiff claims Gudemann executed that scheme through mail and wire fraud.
Because Ohio courts applying the PCA look to federal case law applying RICO, my analysis applies equally to both plaintiff's RICO and PCA claims. U.S. Demolition and Contracting, Inc. v. O'Rourke Constr. Co., 94 Ohio App.3d 75, 83 (1994) ("PCA is patterned after the Racketeering Influenced and Corrupt Organizations Act ('RICO'), Section 1961 et seq., Title 18, U.S.Code. . . . In applying PCA, Ohio courts look to federal case law applying RICO.") (citations omitted).
RICO provides:
It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.18 U.S.C. § 1962(c).
To establish a violation of § 1962(c), plaintiff must prove injury caused by a person who conducts the affairs of an enterprise through a pattern of racketeering activity. 18 U.S.C. § 1962(c). The elements of a RICO claim are: 1) two or more predicate offenses; 2) the existence of an enterprise; 3) a nexus between the pattern of racketeering activity and the enterprise; and 4) resulting injury to business or property. VanDenBroeck v. CommonPoint Mortgage Co., 210 F.3d 696, 699 (6th Cir. 2000) (citing Frank v. D'Ambrosi, 4 F.3d 1378, 1385 (6th Cir. 1993)). In addition, the Sixth Circuit stated in VanDenBroeck, "the Supreme Court has held that in order to be held responsible under the Act, a defendant must have not only participated in the scheme, but must have also participated in the operation or management of the enterprise itself." Id. (citing Reves v. Ernst Young, 507 U.S. 170, 183 (1993)).
Defendants argue that both counts must be dismissed under Fed.R.Civ.P. 12(b)(6) for two reasons: 1) plaintiff failed to allege a pattern of racketeering activity; and 2) while plaintiff alleges common law fraud as the basis for the RICO claims, plaintiff does not meet the fraud pleading requirements of Fed.R.Civ.P. 9(b). Defendants argue that Count II must be dismissed for an additional two reasons: 1) plaintiff failed to allege an enterprise; and 2) plaintiff failed to join an indispensable party under Fed.R.Civ.P. 12(b)(7).
1. Count II: RICO Violations Alleged Against Both Defendants
Under RICO, an enterprise is "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 U.S.C. § 1961(4). The Supreme Court has defined an enterprise as a "group of persons associated together for a common purpose of engaging in a course of conduct." United States v. Turkette, 452 U.S. 576, 583 (1981).
An association-in-fact enterprise is established by showing three factors: "1) that the associated persons formed an ongoing organization, formal or informal; 2) that they functioned as a continuing unit; and 3) that the organization was separate from the pattern of racketeering activity in which it engaged." VanDenBroeck, 210 F.3d at 699 (citing Frank, 4 F.3d at 1386); see also Atlas Pile Driving Co. v. DiCon Fin. Co., 886 F.2d 986, 995 (8th Cir. 1989) ("These characteristics are mandated in order to avoid the danger of guilt by association that arises because RICO does not require a proof of a single agreement as in a conspiracy case, and in order to ensure that criminal enterprises, which are RICO's target, are distinguished from individuals who associate for the commission of sporadic crime.") (internal quotations omitted).
There must be somewhat of an organizational structure amongst the entities forming an association-in-fact. VanDenBroeck, 210 F.3d at 699. "[S]imply conspiring to commit a fraud is not enough to trigger the Act if the parties are not organized in a fashion that would enable them to function as a racketeering organization for other purposes." Id. "'[T]he command system of a Mafia family is an example of the type of structure' that is distinct from the pattern of racketeering activity." United States v. Tocco, 200 F.3d 401, 425 (6th Cir. 2000) (quoting United States v. Bledsoe, 674 F.2d 647, 665 (8th Cir. 1982)). Continuity occurs "'where there is an organizational pattern or system of authority that provides a mechanism for directing the group's affairs on a continuing, rather than ad hoc, basis.'" Tocco, 200 F.3d at 425 (quoting United States v. Kragness, 830 F.2d 842, 856 (8th Cir. 1987)). Plaintiff alleges:
The defendants and T.T. Intertrade, who assisted the defendants in smuggling the virgin bromotrifluoromethane from China to Germany for its eventual delivery to plaintiff and WESCO [a New Jersey company who entered into a similar purchase agreement with Taifun] in the United States in violation of German and federal law, formed an association-in-fact and are, therefore, an enterprise as defined under 18 U.S.C. § 1961(4).
Doc. 22 at ¶ 53.
Plaintiff's second amended complaint fails to allege the factors necessary to establish an association-in-fact. Plaintiff never alleges any sort of organizational structure between Taifun and T.T. Intertrade. See, e.g. 800537 Ontario Inc. v. Auto Enter., Inc., 113 F. Supp.2d 1116, 1123 (E.D. Mich. 2000) ("None of the allegations in the amended complaint support a conclusion that the World Imports Defendants and the Auto Enterprises Defendants participated in any type of joint-decisionmaking regarding the alleged enterprise, nor any type of hierarchy beyond their contractual relationship."). Plaintiff never alleges that Taifun and T.T. Intertrade and associated for anything other than the fraud alleged in the second amended complaint. Plaintiff's second amended complaint only alleges that Taifun and T.T. Intertrade "simply conspir[ed] to commit a fraud . . . [and were] not organized in a fashion that would enable them to function as a racketeering organization for other purposes." VanDenBroeck, 210 F.3d at 699.
Because I agree that plaintiff has failed to allege an enterprise in Count II, I decline to address defendants' remaining arguments regarding Count II.
Count II shall, therefore, be dismissed.
2. Count III: RICO Violation Alleged Against Gudemann a. Pattern of Racketeering Activity
Defendants contend that plaintiff failed to allege a pattern of racketeering activity. Plaintiff argues that the second amended complaint alleges that defendants engaged in mail and wire fraud as the regular manner in which they conducted their business of sale of the virgin bromotrifluoromethane instead of reclaimed bromotrifluoromethane.
A plaintiff must plead facts sufficient to establish a pattern of racketeering activity. Vemco, Inc. v. Camardella, 23 F.3d 129, 133 (6th Cir. 1994) (citing Sedima S.P.R.L. v. Imrex Corp., 473 U.S. 479, 496 (1985)). A pattern consists of at least two predicate acts of racketeering activity within ten years of each other. Id. (citing H.J., Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 237-38 (1989)). The acts must demonstrate "relatedness," a relationship between the predicate acts, and "continuity," a threat of continuing criminal activity. Id. (citing H.J., Inc., 492 U.S. at 238). "Relatedness" is established if the acts have "'the same or similar purposes, results, participants, victims, or methods of commission, or are otherwise interrelated by distinguishing characteristics and are not isolated events.'" Id. (citing Vild, 956 F.2d at 566).
"Continuity" is established by three different methods: 1) "the related predicates themselves involve a distinct threat of long-term racketeering activity, either implicit or explicit;" 2)"the predicate acts or offenses are part of an ongoing entity's regular way of doing business;" or 3)"the predicates are a regular way of conducting defendant's ongoing legitimate business." H.J., Inc., 492 U.S. at 242-43. Several factors may be used to determine whether plaintiff can meet the continuity requirement: "(1) the number and variety of predicate acts; (2) the length of time over which the acts were committed; (3) the number of victims; (4) the presence of separate schemes; and (5) the occurrence of distinct injuries." Griffin v. NBD Bank, 43 F. Supp.2d 780, 787 (W.D.Mich. 1999) (citing Olive Can Co., Inc. v. Martin, 906 F.2d 1147, 1151 (7th Cir. 1990) (quoting Morgan v. Bank of Waukegan, 804 F.2d 970, 975 (7th Cir. 1986)); Barticheck v. Fidelity Union Bank, 832 F.2d 36, 39 (3d Cir. 1987)). Plaintiff's second amended complaint alleges:
59. Defendant Gudemann personally and repeatedly represented to plaintiff and to EPA through the United States mail and interstate wire transmissions that the product being delivered by Taifun to plaintiff was reclaimed bromotrifluoromethane as specified in the Agreement and the application to the EPA.
60. Defendant Gudemann personally and repeatedly represented to WESCO and to EPA through the United States mail and wire transmissions that the produce being delivered by Taifun was reclaimed bromotrifluoromethane as specified in their contract and the application to the EPA.
. . . . .
68. Gudemann's mail and wire fraud continued for a number of months, included numerous individual correspondence, and victimized plaintiff, EPA, and WESCO.
Doc. 22. at ¶¶ 59, 60, 68.
Plaintiff's second amended complaint sufficiently alleges the relatedness and continuity of the mail and wire fraud. As to relatedness, plaintiff alleges the acts of mail and wire fraud had the same purpose of defrauding plaintiff and WESCO, had the same result of defrauding plaintiff and WESCO, involved Gudemann, victimized both plaintiff and WESCO, and were committed in the same manner.
As to continuity, plaintiff alleges numerous acts of mail and wire fraud over a span of approximately six months. Plaintiff alleges two different victims requiring two different schemes to defraud. Plaintiff alleges two distinct injuries-one to plaintiff, and one to WESCO. While the time period indeed is limited, I find that the acts were sufficient to establish continuity because the second amended complaint alleges two different fraudulent schemes. Unlike the facts in Vemco, where the court did not find a pattern, there are "allegation[s] that [Gudemann] engaged in similar practices on other contracts involving other parties." 23 F.3d at 135 ("We do not find that a defendant who engages in several different forms of fraud for a single purpose, to defraud a single victim through activities surrounding one construction project, without more, has engaged in more than one criminal scheme."). Plaintiff alleges that Gudemann engaged in different forms of fraud to defraud two different victims through activities surrounding two different contracts.
Count III cannot be dismissed for failure to plead a pattern of racketeering activity.
b. Implications of Fed.R.Civ.P. 9(b)
"Because Plaintiff is alleging fraud to establish racketeering activity, the allegations regarding those predicate acts must be 'stated with particularity.'" Paycom Billing Servs., Inc. v. Payment Res. Int'l, No. 1:01-CV-528, 2002 U.S. Dist. LEXIS 10437, at *9 (W.D.Mich. June 3, 2002) (citation omitted). "Courts have repeatedly held in RICO cases alleging mail fraud and wire fraud as the 'predicate acts,' the underlying fraudulent activities must be pled with particularity." Eby v. Producers Co-op, Inc., 959 F. Supp. 428, 431 (W.D.Mich. 1997) (quoting Berent v. Kemper Corp., 780 F. Supp. 431, 448 (E.D.Mich. 1991)). In Gotham Print, Inc. v. American Speedy Printing Centers, Inc., 863 F. Supp. 447, 458 (E.D.Mich. 1994) (emphasis in original), the court stated:
Courts have been particularly sensitive to FED. R. CIV. P. 9(b)'s pleading requirements in RICO cases in which the "predicate acts" are mail fraud and wire fraud, and have further required specific allegations as to which defendant caused what to be mailed (or made which telephone calls), and when and how each mailing (or telephone call) furthered the fraudulent scheme.
Plaintiff's second amended complaint alleges:
59. Defendant Gudemann personally and repeatedly represented to plaintiff and to EPA through the United States mail and interstate wire transmission that the product being delivered by Taifun to plaintiff was reclaimed bromotrifluoromethane as specified in the Agreement and the application to the EPA.
. . . . .
61. At the times of some or all of the aforesaid representations, Gudemann knew the representations to be false, in that he knew that smuggled virgin bromotrifluoromethane would be, and ultimately was, illegally substituted for the permitted reclaimed bromotrifluoromethane.
Doc. 22.
Plaintiff's first amended complaint also attached exhibits which support the RICO claim. Exhibit F-1 is a letter dated February 28, 1997, states that Taifun will ship reclaimed bromotrifluoromethane to Detroit, Michigan, and is signed by Gudemann. Exhibit F-2 is an invoice dated May 22, 1997, states that Taifun will ship recycled bromotrifluoromethane to Detroit, Michigan, and is signed by Gudemann. Doc. 19 at Exs. F-1, F-2.
The second amended complaint, along with the exhibits, therefore pleads the facts of mail and/or wire fraud with particularity. Count III alleges that Gudemann caused statements or invoices to be transmitted to plaintiff and alleges when and how the mailing or faxing furthered the fraudulent scheme.
Count III cannot, therefore, be dismissed for failure to plead fraud with particularity.
Defendants' motion to dismiss Count III shall be denied.
C. Count IV: Breach of Contract
Plaintiff claims Taifun breached its contract with plaintiff when it allegedly substituted virgin bromotrifluoromethane for the reclaimed bromotrifluoromethane agreed to by the parties. Defendants argue that this claim must be dismissed under Fed.R.Civ.P. 12(b)(6) because plaintiff has not incurred any damages. In response, plaintiff asserts, "[T]he possibility exists that under some set of facts, plaintiff may be entitled to recover something for breach of contract. That is all that is required to be determined, in order to deny defendants' renewed motion for dismissal for failure to state a claim." Doc. 35 at 34-35.
Plaintiff's second amended complaint states:
76. By its conduct aforesaid, including the fraudulent substitution of smuggled Chinese bromotrifluoromethane for reclaimed material, and surreptitiously causing the same to be shipped form Germany into the United States to plaintiff, defendant Taifun has materially breached the terms of the Agreement with plaintiff, or fraudulently induced plaintiff to enter into the Agreement, or both. By virtue of the failure of consideration represented by this substitution, plaintiff's acceptance of the bromotrifluoromethane was obtained by fraud and was and is legally and contractually without effect.
77. As a direct result of defendant Taifun's breach of contract, defendant Taifun is liable to plaintiff for the contract amount of Five Hundred Twenty-Five Thousand One Hundred Twenty Dollars ($525,120.00), plus all consequential and incidental damages, plus pre-judgment and post-judgment interest at the statutory rate, plus attorneys' fees, costs of suit and such other further relief as may be just and equitable.
Doc. 22.
The breach of contract claim cannot be dismissed based on insufficient pleading of damages because plaintiff alleges facts in support of the breach of contract claim that, construed in plaintiff's favor, would entitle plaintiff to relief. Plaintiff adequately alleges that it incurred damages as a result of Taifun's alleged breach of contract.
Defendants' motion to dismiss Count IV shall be, therefore, denied.
IV. Standing
Defendants argue that plaintiff's complaint must be dismissed for lack of standing because plaintiff has not alleged a case and controversy. Defendants argue that plaintiff has yet to incur monetary damages.
Plaintiff asserts that defendants' standing argument is frivolous. Plaintiff contends, "What is important, in the context of a Rule 12(b)(6) motion, is that plaintiff has alleged damages flowing from the challenged conduct." Doc. 35 at 15.
The jurisdiction of federal courts is limited to actual "Cases" and "Controversies" by Article III of the United States Constitution. U.S. Const. art. III, § 2, cl. 1. To satisfy this "case-or-controversy" requirement, "a plaintiff must establish three elements: (1) an injury in fact that is concrete and particularized; (2) a connection between the injury and the conduct at issue-the injury must be fairly traceable to the defendant's action; and (3) [a] likelihood that the injury would be redressed by a favorable decision of the Court." Blachy v. Butcher, 221 F.3d 896, 909 (6th Cir. 2000) (internal quotation marks omitted); Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992).
Under Count I, plaintiff alleges:
As a direct and proximate result of defendants' fraudulent misrepresentations, omissions and concealment, plaintiff has sustained damages in an amount in excess of One Million One Hundred Forty-Seven Thousand Three Hundred and Six Dollars ($1,147,306.00), plus interest, costs, taxes, penalties, attorneys' fees, and may also suffer additional damages in the future, including without limitation, the costs of re-procurement under the contract with the DLA.
Doc. 22 at ¶ 41.
Under Count III, plaintiff alleges:
Defendant Gudemann has violated 18 U.S.C. § 1961, et seq. As a direct and proximate result of the corrupt activity of defendant Gudemann, plaintiff has been injured monetarily, has been placed in positions of substantial financial peril, has had to expend substantial sums and to divert substantial resources to respond to pending investigations and claims triggered by defendant Gudemann's corrupt activities, and has been threatened with civil and criminal liability, all as a result of the deliberate, intentional, and malicious acts of defendant Gudemann, all to plaintiff's damage in an amount not less than Five Million Dollars ($5,000,000.00).
Doc. 22 at ¶ 74.
Under Count IV, plaintiff alleges:
As a direct result of defendant Taifun's breach of contract, defendant Taifun is liable to plaintiff to the contract amount of Five Hundred Twenty-Five Thousand One Hundred Twenty Dollars ($525,120.00), plus all consequential and incidental damages, plus pre-judgment and post-judgment interest at the statutory rate, plus attorneys' fees, costs of suit and such other further relief as may be just and equitable.
Doc. 22 at ¶ 77.
In these portions of plaintiff's second amended complaint, plaintiff alleges an injury in fact regarding its claims and a connection between the injury and the conduct at issue. It furthermore is likely that any injury could be redressed by a favorable decision.
Because Count II shall be dismissed under Fed.R.Civ.P. 12(b)(6), I decline to address plaintiff's standing to assert the claim in Count II.
Defendants' motion to dismiss for lack of standing shall be, therefore, denied.
CONCLUSION
It is, therefore,
ORDERED THAT
1. Defendants' motion to dismiss Counts I, III, and IV be, and hereby is, denied; and
2. Defendants' motion to dismiss Count II be, and hereby is, granted.
So ordered.