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Pineda Transportation, LLC v. Fleetone Factoring, LLC

United States District Court, M.D. Tennessee, Nashville Division

May 9, 2018

FLEETONE FACTORING, LLC, et al., Defendants.



         Pending before the court is Defendants' Motion to Dismiss Plaintiffs' Amended Complaint for Failure to State a Claim (Doc. No. 38). For the reasons stated herein, Defendants' Motion will be granted in part and denied in part.


         Plaintiffs Pineda Transportation, LLC (“Pineda”), Pineda Investment Group, LLC, and Gulf Express, LLC, are companies engaged in the trucking industry. Defendants FleetOne Factoring, LLC (“FleetOne”) and WEX Bank are companies engaged in the business of factoring. Plaintiffs assert that FleetOne is a two-member limited liability company whose members are WEX Bank (a corporation operating in Tennessee as “Fleet Fuel”) and TransPlatinum Services (a one-member limited liability company whose sole member is SunTrust Bank). Defendant Sturm is the Chief Credit Officer of FleetOne and of WEX Bank.

         Factoring is the buying of accounts receivable at a discount. Factoring, as described in the First Amended Complaint, involves a company selling its invoices to a third party who immediately pays a percentage of the invoices and then invoices the company's customers and collects the funds. Each of the Plaintiffs alleges that it had a contract with Defendants under which Defendants bought Plaintiffs' invoices for a percentage (90-98.5%) of their face value. Plaintiffs contend that Defendants were supposed to invoice Plaintiffs' customers and collect the payments. Defendants were entitled to collect 1.5% for their service fees and were supposed to place any balance over the face value collected into reserve accounts for the Plaintiffs. Plaintiffs allege that Defendants failed to invoice Plaintiffs' customers; Defendants failed to pay out reserve amounts collected on invoices to Plaintiffs; Defendants failed to process and post payments made by Plaintiffs' customers to Plaintiffs' accounts; and Defendants charged back invoices for amounts greater than Defendants advanced or were due. In the First Amended Complaint, Pineda alleges breach of contract; Pineda and Pineda Investment Group allege fraud (alternatively, constructive fraud), and Pineda, Pineda Investment Group and Gulf Express allege violations of civil RICO.


         For purposes of a motion to dismiss, the court must take all of the factual allegations in the complaint as true. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). 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. Id. 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. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Id. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief. Id. at 1950. A legal conclusion couched as a factual allegation need not be accepted as true on a motion to dismiss, nor are recitations of the elements of a cause of action sufficient. Fritz v. Charter Township of Comstock, 592 F.3d 718, 722 (6th Cir. 2010).


         In Tennessee, a viable claim for breach of contract has three essential elements: (1) the existence of an enforceable contract; (2) nonperformance amounting to a breach of that contract; and (3) damages caused by the breach of contract. Carrigan v. Arthur J. Gallagher Risk Mgmt. Servs., Inc., 870 F.Supp.2d 542, 550 (M.D. Tenn. 2012); Ingram v. Cendant Mobility Fin. Corp., 215 S.W.3d 367, 374 (Tenn. Ct. App. 2006).

         Defendants argue that Plaintiffs have failed to state a claim for breach of contract because they have not identified specific contract language under which Defendants materially failed to perform. Defendants assert that the agreements between them and Plaintiffs contain no time requirements or standards for the billing or collection of invoices. Defendants point out that the sales of accounts to Defendants were “true and actual sales of the accounts, ” and Defendants became the “absolute owners” of those accounts. Plaintiffs, on the other hand, contend that each of these Agreements includes an implied covenant of good faith and fair dealing that was breached by Defendants. Plaintiffs argue that these contracts include an implied duty to invoice the customers, not to charge excessive fees, and to properly pay Plaintiffs' reserve amounts.[1]

         None of the contracts at issue was filed with the original Complaint (Docket No. 1) or the First Amended Complaint (Docket No. 31). Defendants filed three contracts (plus amendments) with their original Motion to Dismiss (Docket No. 27). The first is a December 3, 2013 Accounts Purchase Agreement between FleetOne and Pineda Investment Group d/b/a Pineda Transport. Docket No. 27-1. The First and Second Amendments to that Agreement are also between FleetOne and Pineda Investment Group d/b/a Pineda Transport (Docket Nos. 27-2 and 27-3), but the purported Third and Fourth Amendments to that Agreement (Docket Nos. 27-4 and 27-5) are between WEX Bank and Pineda Investment Group d/b/a Pineda Transport. Defendant Sturm signed the Agreement and the Amendments as Chief Credit Officer for both FleetOne and WEX Bank. The court has found no contract between WEX Bank and any of the Plaintiffs in the court record, and it appears that the parties treated FleetOne and WEX Bank as the same entity.

         The second Accounts Purchase Agreement, dated December 31, 2015, is between FleetOne and Pineda. Docket No. 27-6. Both the First and Second Amendments to that Agreement, however, are between WEX Bank and Pineda. Docket Nos. 27-7 and 27-8. Again, Defendant Sturm signed as Chief Credit Officer of both FleetOne and WEX Bank. Again, it appears that the parties treated FleetOne and WEX Bank as the same entity. Finally, the third Accounts Purchase Agreement is dated May 18, 2015, and is between FleetOne and Gulf Express, LLC. Docket No. 27-9. No. Amendments to this Agreement were filed.

         The contracts at issue are essentially identical. They provide that FleetOne “will forward all invoices to the respective Customer.” Docket Nos. 27-1, 27-6 and 27-9 at § 3.3. The contracts provide that, from the date of purchase until payment in full is received by FleetOne, FleetOne is entitled to a discount fee of 1.50% for the first thirty days and a discount fee of an additional 1.25% for every sixty-day period that the invoice remains unpaid. Id. at § 1.3. Thus, the discount fee received by Defendants increases the longer the invoice goes unpaid. The contracts also provide that, if the invoice remains unpaid or subject to a dispute after ninety days from the date of the invoice, then the amount of the account may be charged back by FleetOne to Plaintiffs. Id. at § 3.2.

         Plaintiffs allege that Defendants have failed to send invoices and then deducted the amounts of those invoices as “charge backs” from Plaintiffs' reserve accounts, even though the accounts were never invoiced. Plaintiffs also contend that, instead of charging back the amounts they advanced, Defendants charged back the full amounts (100% of face value) on the invoices and retained all additional amounts. In other words, Plaintiffs allege that Defendants have benefitted from delaying and not sending the invoices, causing Plaintiffs to lose money. Plaintiffs aver that Defendants are profiting, whether they perform under the contract or not. Plaintiffs allege that Defendants' actions not only prevented Plaintiffs from receiving the reserve ...

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