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County of Grayson v. Ra-Tech Service, Inc.

United States District Court, W.D. Virginia, Roanoke Division

May 29, 2014

THE COUNTY OF GRAYSON, ET AL., Plaintiffs,
v.
RA-TECH SERVICES, INC., ET AL., Defendants.

MEMORANDUM OPINION

GLEN E. CONRAD, District Judge.

This case is presently before the court on the motion to dismiss the plaintiffs' second amended complaint filed by defendants John Spane and RA-Tech Services, Inc. ("RA-Tech"). Specifically, the defendants request that the court dismiss with prejudice all claims against the individual defendants and the fraud in the inducement claim against RA-Tech. For the reasons given below, the motion will be granted.

Background

As described in more detail in the court's previous memorandum opinions, this action arises out of contractual agreements between Carroll County, Grayson County, and RA-Tech providing for the expansion, installation, and maintenance of communications systems used by local law enforcement and emergency services. In their first amended complaint, the plaintiffs asserted that the defendants committed fraud, constructive fraud, fraud in the inducement, and breach of contract in connection with the communications systems agreements. On November 12, 2013, the court dismissed the first amended complaint in its entirety as against the individual defendants, Mr. Spane and Mr. Sutphin. The court also dismissed the fraud and constructive fraud claims against the corporate defendant, RA-Tech. The court ordered the case to proceed only on the claims for fraud in the inducement and breach of contract against RA-Tech.

Shortly thereafter, the plaintiffs filed a Rule 59(e) motion, asking the court to reconsider its ruling with respect to the plaintiffs' fraud in the inducement claim against the individual defendants. On March 12, 2014, the court denied the plaintiffs' motion for reconsideration. Recognizing that a corporation acts only through its agents, the court acknowledged that the same deficiencies in the claim against the individual defendants "have caused the court to question its earlier ruling as to whether the fraud in the inducement claim against the corporate defendant, RA-Tech" should go forward. Mem. Op. 5, Mar. 12, 2014, Docket No. 36. The court granted the plaintiffs an opportunity to "fortify their complaint by alleging specific facts showing that the defendants possessed the requisite state of mind to commit fraud in the inducement." Id . The court also instructed that "[i]n the absence of such specific allegations, it may be appropriate for the court to dismiss the fraud in the inducement claim as against RA-Tech." Id.

Subsequently, the plaintiffs filed a second amended complaint. The defendants moved to dismiss the complaint under Rule 12(b)(6) and Rule 9(b) of the Federal Rules of Civil Procedure, and the plaintiffs responded. Submitted on the pleadings, the matter is ripe for disposition.

Discussion

I. Legal Standards

As the court summarized in its November 12, 2013 memorandum opinion:

A Rule 12(b)(6) motion tests the legal sufficiency of a complaint; it does not "resolve contests surrounding the facts, the merits of the claim, or the applicability of defenses." See Butler v. United States , 702 F.3d 749, 752 (4th Cir. 2012) (quoting Republican Party of North Carolina v. Martin , 980 F.2d 943, 952 (4th Cir. 1992)). When ruling on the defendants' motion to dismiss, this court must accept all facts alleged in the complaint as true, drawing all reasonable inferences in favor of the plaintiffs. See Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009); Erickson [v. Pardus], 551 U.S. [89, ] 94 [(2007)]. However, this court need not accept as true any legal conclusion disguised as a factual allegation. Iqbal , 556 U.S. at 679-81. The plaintiffs' factual allegations need not be detailed, but they must offer more than "labels and conclusions" or a "formulaic recitation of the elements of [the] cause of action." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555 (2007). These facts must "be enough to raise a right to relief above the speculative level." Id.
Fraud claims are subject to a heightened pleading standard under the Federal Rules of Civil Procedure. Rule 9(b) requires that a party "alleging fraud... must state with particularity the circumstances constituting fraud...." Fed.R.Civ.P. 9(b). Under that rule, the claimant must plead with particularity "the time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby." Harrison v. Westinghouse Savannah River Co. , 176 F.3d 776, 784 (4th Cir. 1999). "[L]ack of compliance with Rule 9(b)'s pleading requirements is treated as a failure to state a claim under Rule 12(b)(6)." Id . at 783 n.5.

Mem. Op. 4, Nov. 12, 2013, Docket No. 19.

As the plaintiffs correctly state in their response to the defendants' instant motion to dismiss, Rule 9(b) also provides that, in an action for fraud, "intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed.R.Civ.P. 9(b). "But generally' is a relative term." Iqbal , 556 U.S. at 686. Although Rule 9(b) "excuses a party from pleading[] intent under an elevated pleading standard, ... [i]t does not give him license to evade the less rigid - though still operative - strictures of Rule 8." Id . at 686-87. "Rule 8 does not empower [the plaintiffs] to plead the bare elements of [their] cause of action, affix the label general allegation, ' and expect [the] complaint to survive a motion to dismiss." Id . at 687. The complaint must ...


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