Bank Midwest v. R.F. Fisher Elec. Co.

BANK MIDWEST, A DIVISION OF NBH BANK, Plaintiff, v. R.F. FISHER ELECTRIC COMPANY, LLC; R.F. FISHER HOLDINGS, INC.; AND G & G LEASING, LLC, Defendants.

No. 19-CV-2560-JAR-GEB

United States District Court, D. Kansas

September 20, 2021

MEMORANDUM AND ORDER

JULIE A. ROBINSON, CHIEF UNITED STATES DISTRICT JUDGE.

Plaintiff Bank Midwest, a division of NBH Bank, filed suit against Defendants R.F. Fisher Electric Company (“Fisher”), R.F. Fisher Holdings, and G &G Leasing (collectively, “Defendants”) due to Defendants' default on loans from Bank Midwest. Plaintiff also sought the emergency appointment of a Receiver, who was appointed in September 2019. International Brotherhood of Electrical Workers Local 124 (“the Union”) filed an Intervenor Complaint asserting several claims and seeking declaratory judgment on a claim.

On March 25, 2021, the Receiver filed a Second Amended Answer and asserted three counterclaims against the Union. The Union is now before the Court seeking dismissal of those claims for failure to state a claim (Doc. 82). For the reasons stated in detail below, the Court denies in part and grants in part the motion. The Court denies the Union's previous motion to dismiss (Doc. 65) as moot.

I. Legal Standard

To survive a motion to dismiss brought under Fed.R.Civ.P 12(b)(6), a complaint must contain factual allegations that assumed to be true, “raise a right to relief above the speculative level”^[1] and must include “enough facts to state a claim to relief that is plausible on its face.”^[2] Under this standard, “the complaint must give the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual support for these claims.”^[3] The plausibility standard does not require a showing of probability that “a defendant has acted unlawfully, ” but it requires more than “a sheer possibility.”^[4] “[M]ere ‘labels and conclusions,' and ‘a formulaic recitation of the elements of a cause of action' will not suffice; a plaintiff must offer specific factual allegations to support each claim.”^[5] Finally, the Court must accept the nonmoving party's factual allegations as true and may not dismiss on the ground that it appears unlikely the allegations can be proven.^[6]

The Supreme Court has explained the analysis as a two-step process. For the purposes of a motion to dismiss, the Court “must take all of the factual allegations in the complaint as true, [but it is] ‘not bound to accept as true a legal conclusion couched as a factual allegation.'”^[7]Thus, the Court must first determine if the allegations are factual and entitled to an assumption of truth, or merely legal conclusions that are not entitled to an assumption of truth.^[8] Second, the Court must determine whether the factual allegations, when assumed true, “plausibly give rise to an entitlement to relief.”^[9] “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”^[10]

II. Facts and Procedural Background

The facts are taken from the Receiver's Second Amended Answer and Counterclaim filed on March 25, 2021. Defendant Fisher was an electrical subcontractor which terminated its operations on September 16, 2019. A Receiver was appointed on September 23, 2019, over Fisher's real and personal collateral. Pursuant to Section 1 of the Order of Appointment, the Receiver is authorized to, among other things, take control of, liquidate, protect and preserve Fisher's assets, including but not limited to, collect account receivables owed to Fisher.

At the time of the Receiver's appointment, the accounts receivable on Fisher's books and records showed customer obligations owed to Fisher for work that was performed under various service contracts, work on new construction contracts, and remodel projects through September 8, 2019. Such contracts were with parties such as property owners, general contractors, and subcontractors and included contractors such as JE Dunn, Citadel, and Kelly. The accounts receivable totaled approximately $5.4 million at that time.^[11]

Fisher and the Union are parties to a collective bargaining agreement (“CBA”).^[12] Under this agreement, certain wages and fringe benefits were payable by Fisher to its inside labor employees for work performed. Fisher employees performed work on various projects that were the subject of contracts between Fisher and JE Dunn, Citadel, and Kelly. The contractually agreed upon amounts owed to Fisher by JE Dunn, Citadel, and Kelly at the time of the Receiver's appointment included costs for labor provided by Fisher's employees who were Union members. Such contractual amounts owed to Fisher at the time of the Receiver's appointment constitute receivership property to be collected by the Receiver and applied as directed in the Order of Appointment.

The Receiver alleges that during the course of the receivership, the Union contacted a number of Fisher's former customers, including, but not limited to, owners, general contractors, and subcontractors who had contracted with Fisher to perform requested work and obtained payments directly from such persons. The Receiver contends that those funds represent contract balances and receivables owed to Fisher and constitute property of the receivership estate. Payments obtained by the Union from Fisher's former customers include: (1) $53, 828.43 paid by JE Dunn, (2) $254, 898.41 paid by Citadel, (3) $19, 466.37 paid by Kelly, and (4) $4, 140.56 paid by Kelly. The Receiver calls these funds the “Diverted Fisher Receivables.” The Receiver alleges that the Union had knowledge of the contractual relationships between Fisher and JE Dunn, Citadel, and Kelly and had knowledge that contract balance amounts were due to Fisher for labor and material furnished by Fisher.

The Receiver asserts three claims: (1) conversion, (2) tortious interference with contract, and (3) enforcement of Order of Appointment. The Union now moves for dismissal of all claims asserted against it, asserting that the Receiver fails to state a claim.^[13]

III. Discussion

A. Conversion

The Receiver alleges that Fisher had accounts receivable owed to it from former customers, subcontractors, and contractors, including from JE Dunn, Citadel, and Kelly. Pursuant to the Order of Appointment, the receivables owed to Fisher constituted property of the receivership estate. The Receiver contends that the Union obtained payments from JE Dunn, Citadel, and Kelly in the approximate amount of $330, 000, and thus diverted receivables away from the receivership estate.

“Conversion is the unauthorized assumption or exercise of the right of ownership over goods or personal chattels belonging to another to the exclusion of the other's rights.”^[14] “In an action for conversion, the petition must allege that at the time of the conversion the plaintiff was either in possession, or had a right to the possession, of the property converted.”^[15]

The Union argues that the Receiver fails to allege sufficient facts that the Receiver was entitled to specific payments or a specific identifiable fund and complains that the Receiver's allegations are vague and conclusory. But the Receiver alleges that approximately $330, 000 in accounts receivable from JE Dunn, Citadel, and Kelly was diverted from the receivership estate.^[16] Thus, the Receiver does identify a specific payment or fund.

The Union also appears to argue that the Receiver fails to allege facts regarding an exclusion to accounts receivable because the Receiver is still pursuing such receivables from JE Dunn, Citadel, and Kelly. Yet, the Receiver allegedly does not have access to the full amount of the accounts receivable from JE Dunn, Citadel, and Kelly because the receivables have been diminished due to the diversion of some of those funds to the Union. Here, viewing the counterclaim in the light most favorable to the Receiver, the Court finds that the Receiver specifically alleges that he had the right to possession of the property-the accounts receivable from JE Dunn, Citadel, and Kelly-and that the Union's action in taking these receivables (or at least a portion of them) was unauthorized due to the Order of Appointment. Furthermore, the Receiver alleged that the Union's diversion of the approximate $330, 000 in accounts receivable excluded the Receiver from obtaining it. Thus, the Court finds that the Receiver states a claim for conversion.

B. Tortious Interference with Contract

The Receiver alleges that Fisher had contracts with JE Dunn, Citadel, and Kelly to furnish labor and material. In addition, the Receiver contends that the Union had knowledge of these contracts and knowledge of the Order of Appointment that authorized funds to be collected for the receivership estate. Finally, the Receiver alleges that the Union intentionally caused JE Dunn, Citadel, and Kelly to divert some of the funds from their contracts with Fisher from going to the receivership estate and instead go to the Union.

“Kansas has long recognized that a party who, without justification, induces or causes a breach of contract will be answerable for damages caused thereby.”^[17] In Kansas, the elements of a claim for tortious interference with contract are: “(1) the contract; (2) the wrongdoer's knowledge thereof; (3) his intentional procurement of its breach; (4) the absence of justification; and (5) damages resulting therefrom.”^[18] Tortious interference with contract also requires malicious conduct by the defendant.^[19]

Here the first element is met as the Union concedes that Fisher had contracts with JE Dunn, Citadel, and Kelly. The second element is also met because the Receiver adequately alleges that the Union had knowledge of...