Bush Truck Leasing, Inc. v. Cummins, Inc.

BUSH TRUCK LEASING, INC., Plaintiff, v. CUMMINS, INC., et al., Defendants.

Case No. 1:18-cv-871

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO WESTERN DIVISION - CINCINNATI

July 9, 2020

Judge Matthew W. McFarland

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS (DOC. 16)

This case is before the Court on the Motion to Dismiss for Failure to State a Claim (Doc. 3) filed by Defendants Knight-Swift Transportation Holdings Inc., Swift Leasing Co. LLC, and Interstate Equipment Leasing, LLC (collectively, "Swift"). For the reasons stated below, the Motion is GRANTED in part and DENIED in part.

BACKGROUND

Plaintiff Bush Truck Leasing, Inc. ("BTL") alleges as follows, all of which is taken as true for purposes of this motion. Over the span of two years (July 2015—July 2017), BTL spent over $9,000,000 purchasing 149 trucks from Swift. Each truck, however, came pre-equipped with a Cummins ISX engine manufactured by the co-defendant, Cummins, Inc. According to BTL, Swift made representations during purchase negotiations that the trucks were "reliable, in good condition, and free from defect." (Doc. 1 at ¶ 18.) But in April 2017, BTL discovered that some of the trucks' engines were defective, rendering the trucks inoperable. (Doc. 1 at ¶ 20.)

BTL subsequently filed this lawsuit on December 10, 2018, alleging seven counts against Cummins, Inc., and four counts against Swift. The four counts against Swift are: Count Eight for Fraud/Intentional Misrepresentation; Count Nine for Negligent Misrepresentation; Count Ten for Breach of Express Warranty; and Count Eleven for Unjust Enrichment. (Id.) In response, Swift filed a Motion to Dismiss for Failure to State a Claim (Doc. 16). BTL filed a Response in Opposition (Doc. 23), to which Swift filed a Reply (Doc. 24), making this matter ripe for the Court's review.

Although Swift's motion to dismiss is supported on various grounds, the Court need only address two of Swift's arguments to rule on the motion. First, Swift argues that BTL has not asserted its fraud and negligent misrepresentation claims with the particularity required under Federal Rule of Civil Procedure 9(b) ("Rule 9(b)"). (Doc. 16.) And second, Swift argues that the disclaimer contained in the invoice issued for the purchase of all 149 engines bars BTL's claims as a matter of law. (Id. at fn. 2.) Swift attached a copy of the invoice (the "Invoice") as an exhibit to its motion to dismiss. (Doc. 16-1.)

ANALYSIS

When considering a Rule 12(b)(6) motion to dismiss, the Court accepts all allegations of material fact as true and construes them in the light most favorable to the non-moving party. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 554-55 (2007). The Courtneed not accept as true, however, "a legal conclusion couched as a factual allegation." Id. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)).

To survive a motion to dismiss, a complaint must contain "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). "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." Id. "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (quoting Twombly, 550 U.S. at 556).

When making this determination, the court may consider the "Complaint and any exhibits attached thereto, public records, items appearing in the record of the case and exhibits attached to the defendant's motion to dismiss, so long as they are referred to in the Complaint and are central to the claims contained therein." Bassett v. Nat'l Collegiate Athletic Ass'n, 528 F.3d 426, 430 (6th Cir. 2008).

I. Count Eight - Fraud/Intentional Misrepresentation

In Count Eight of its Complaint, BTL alleges that Swift committed fraud when it represented that its trucks were "reliable, in good condition, and free from defect" even though Swift allegedly knew that the Cummins' engines were defective. (Doc. 1 at ¶¶ 18, 28.) Swift makes several arguments why Count Eight should be dismissed. (Doc. 16.) Most notably, Swift argues that BTL's fraud claim is not stated with sufficient particularity to meet the heightened pleading requirements of Fed. R. Civ. P. 9(b). (Id. at p. 6.) Swift further argues that BTL's fraud claim should be dismissed because the"as is" clause contained in the Invoice vitiates the necessary element of "justifiable reliance," and that any claim for fraud is barred by the economic loss doctrine. The Court will first address whether BTL satisfied Rule 9(b)'s heightened pleading standard.

A. BTL Fails to Plead its Fraud Claim with the Particularity Required Under Rule 9(b)'s Heightened Pleading Standard

Due to the "high risk of abusive litigation," Twombly, 550 U.S. at 569 n. 14, parties alleging fraud or misrepresentation are held to a heightened pleading standard. Fed. R. Civ. P. 9(b) ("In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, or other conditions of a person's mind may be alleged generally."). Under Rule 9(b), "allegations of fraudulent misrepresentation must be made with sufficient particularity and with a sufficient factual basis to support an inference that they were knowingly made." Coffey v. Foamex L.P., 2 F.3d 157, 162 (6th Cir. 1993). "The threshold test is whether the complaint places the defendant on sufficient notice of the misrepresentation [to allow] the defendants to answer, addressing in an informed way [the] plaintiffs claim of fraud." Id. (internal citations omitted). And while intent can be pled generally, the factual allegations still must be sufficient to support a plausible inference of the requisite intent. See Republic Bank & Trust Co. v. Bear Stearns & Co., 683 F.3d 239, 247 (6th Cir. 2012); Rheinfrank v. Abbot Labs., No. 1:13-CV-144, 2013 WL 4067826, at *4 (S.D. Ohio Aug. 12, 2013) ("Scienter may be alleged generally, but there must be factual allegations to make scienter plausible.").

The Sixth Circuit has interpreted Rule 9(b) to mean that—at minimum—a plaintiff must: "(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent." William Beaumont Hosp. Sys. v. Morgan Stanley & Co., LLC, 677 F. App'x 979, 983 (6th Cir. 2017) (citing Frank v. Dana Corp., 547 F.3d 564, 569-70 (6th Cir. 2008)). Rule 9(b) applies with equal force to fraud claims premised on an omission or a failure to disclose. Id. Lastly, "a district court need not accept claims that consist of no more than mere assertions and unsupported or unsupportable conclusions." Sanderson v. HCA-The Healthcare Co., 447 F.3d 873, 876 (6th Cir. 2006) (citing Kottmyer v. Maas, 436 F.3d 684, 688 (6th Cir.2006)).

BTL fails to meet the heightened pleading standard of Rule 9(b) for several reasons. The bulk of BTL's factual allegations in support of its fraud claim are all contained in one paragraph of the Complaint, which states—in its entirety—that:

During purchase negotiations, Swift represented that its trucks were reliable, in good condition, and free from defect. For example, representatives of Swift, including, but not limited to, James Ramage and Erek Starnes, represented that all recalls on the trucks were up-to-date and that all maintenance service had been completed. Based on those representations, BTL purchased 149 trucks from Swift.

(Doc. 1 at ¶ 18.) The only other substantive allegation BTL pleads in support is that "[u]pon information and belief, given the volume of trucks Swift purchased with Cummins engines and given Swift's authorization to do Cummins warranty work, Swift knew about, but failed to inform BTL of, the engine defect and also failed toforward to BTL the communications that Swift received from Cummins regarding the engine defect." (Id. at ¶ 28.)

As an initial matter, the Sixth Circuit has held that "[g]eneralized, subjective terms like 'quality' and 'reliability' are plainly self-serving opinions, puffery on which no buyer would reasonably rely." Morris Aviation, LLC v. Diamond Aircraft Indus., Inc., 536 F. App'x 558, 564 (6th Cir. 2013) (quoting Corley v. Rosewood Care Ctr., Inc. of Peoria, 388 F.3d 990, 1009 (7th Cir.2004) ("A generic promise to provide 'high quality' services cannot therefore be the basis of a mail fraud claim."); and Summit Tech., Inc. v. High-Line Med. Instruments, Co., 933 F. Supp. 918, 931 (C.D.Cal.1996) ("The word 'reliable' is inherently vague and general in common parlance akin to a statement that the machine is 'fine.'"); see also Bobb Forest Prod., Inc. v. Morbark Indus., Inc., 151 Ohio App. 3d 63, 2002-Ohio-5370, 783 N.E.2d 560, ¶ 50 (7th Dist.) ("For example, statements that a car 'performed fine,' was 'good on gas,' or was a 'good choice' are mere sales talk and, therefore, are merely puffing." (internal citations omitted)). The only actionable statement BTL therefore alleges is that Swift represented that the engines were "free from defect." (Doc. 1 at ¶ 18.) Yet the only factual allegation BTL pleads in support of this claim is that "James Ramage and Erek Starnes, represented that all recalls on the trucks were up-to-date and that all maintenance service had been completed." (Doc. 1 at ¶ 18.) But stating that all "recalls are up-to-date and all maintenance has been completed" is not the same as promising that the trucks are "free from defect."

Even if the analytical gap between BTL's allegations and its contention that Swift committed fraud were small enough for the Court to hurdle—it is not—BTLadditionally fails to allege that Swift's representations were in fact false. Mr. Ramage and Mr. Starnes' statements—that all...