United States District Court, E.D. Tennessee, Winchester
RUSSELL BARNETT FORD OF TULLAHOMA, INC., Plaintiff/Counter-Defendant,
H&S BAKERY, INC. d/b/a H&S BAKERY and JONBER ASSOCIATES, INC., Defendants/Counter-Plaintiff.
Steger, Magistrate Judge.
L. COLLIER, UNITED STATES DISTRICT JUDGE
dispute arises out of a commercial-vehicle sale gone awry.
Unbeknownst to the seller and buyer, a third party hacked
into the seller's email account and sent fraudulent
wiring instructions to the buyer. The buyer then wired the
purchase money to the hacker's account, instead of the
seller's account. The Plaintiff seller, Russell Barnett
Ford of Tullahoma, Inc. (“Plaintiff”), has sued
the two parties it characterizes as the buyer, seeking to
recover the purchase money. (Doc. 1 [Compl.].) Defendants,
H&S Bakery, Inc. d/b/a H&S Bakery (“H&S
Bakery”) and Jonber Associates, Inc.
(“Jonber”; collectively with H&S Bakery,
“Defendants”), have moved for partial dismissal
of the Complaint. (Doc. 22.) H&S Bakery moves to dismiss
all of the claims against it on the grounds that it was not a
party to the sale. Jonber concedes it was the buyer and moves
to dismiss only the tort claims against it. Plaintiff has
responded in opposition to the motion (Doc. 28), and
Defendants have replied. (Doc. 29.) For the reasons set out
below, the Court will GRANT the motion for
operates a vehicle dealership in Tullahoma, Tennessee. (Doc.
1 [Compl.] ¶ 7.) H&S Bakery operates a bakery and
delivery service in Baltimore, Maryland. (Id. ¶
9.) In 2016, Plaintiff contracted with H&S Bakery for the
construction and sale of seven bread trucks. (Id.
¶ 12.) H&S Bakery received the trucks in February
2017 and paid Plaintiff by check. (Id.)
December 2017, Bob Trewyn, an employee of Plaintiff, prepared
a Customer Proposal (the “Proposal”) to H&S
Bakery for the construction and sale of forty-eight
additional bread trucks for $55, 433.70 per vehicle, or a
total of $2, 660, 817.60. (Id. ¶¶ 8,
14-15; Doc. 1-1 [Proposal] at 9.) The bottom of each
substantive page of the Proposal contains the following
disclaimer: “Prices and content availability as shown
are subject to change and should be treated as estimates
only. Actual base vehicle, package and option pricing may
vary from this estimate because of special local pricing,
availability or pricing adjustments not reflected in the
dealer's computer system.” (Doc. 1-1 [Proposal] at
Proposal states that it was prepared for Chuck Paterakis of
H&S Bakery. (Id. at 1.) Paterakis, who is Vice
President of Logistics for H&S Bakery, signed the
Proposal on January 10, 2018. (Doc. 1 [Compl.] ¶¶
10, 15; Doc. 1-1 [Proposal] at 9-10.) Paterakis asked,
however, that the sale be made to H&S Distribution LLC
(“H&S Distribution”), not H&S Bakery.
(Doc. 1 [Compl.] ¶ 16.) The name and address of H&S
Distribution are handwritten on the Proposal. (Id.;
Doc. 1-1 [Proposal] at 9.)
and H&S Distribution later agreed to split the
transaction into two deliveries of twenty-four vehicles each
in April and May of 2018 (the “April Purchase”
and “May Purchase, ” respectively). (Doc. 1
[Compl.] ¶ 17; Doc. 1-4 [April 2, 2018 Letter].) This
was confirmed in a letter from Trewyn addressed to Paterakis
for H&S Distribution. (Doc. 1-4 [April 2, 2018 Letter].)
The per-vehicle price was $55, 733.70, three hundred dollars
more per vehicle than had been stated in the Proposal.
(Compare Doc. 1-4 [April 2, 2018 Letter]
with Doc. 1-1 [Proposal] at 7.) Each of the two
purchases was to be for $1, 337, 608.80. (Doc. 1 [Compl.]
met with Paterakis in Baltimore on April 4, 2018.
(Id. ¶ 21.) On that day, they executed purchase
documents for each of the forty-eight trucks, consisting of a
Bill of Sale, an Automobile Sales Order, a National Vehicle
Service Contract Application, two Certificates of Origin, and
an Odometer Disclosure Statement for each vehicle.
(Id. ¶¶ 18, 21 & n.2.)
April 6, 2018, Trewyn received an email from Eric Hiemstra,
Corporate Finance Manager for H&S Bakery, asking that the
purchase documents be changed to show the purchaser as
Jonber, rather than H&S Distribution. (Id.
¶¶ 11, 22.) Hiemsta explained to Trewyn that Jonber
“is the leasing company who will be leasing the trucks
to Independent Operators or [if] we do not go [with the]
independent operator model[, ] they will then be leased to
H&S Distribution, LLC. or. [sic] That is why we have the
distinction.” (Id. ¶ 22; Doc. 1-7 [April
6, 2018 Email from Hiemstra to Trewyn].) In compliance with
this request, Plaintiff prepared new purchase documents
identifying Jonber as the purchaser, shipped the documents to
H&S Bakery, and received them back executed by Paterakis
on behalf of Jonber. (Doc. 1 [Compl.] ¶¶ 24-26;
Doc. 1-2 [April Purchase Documents]; Doc. 1-3 [May Purchase
parties originally expected payment to be by check
(see Doc. 1 [Compl.] ¶¶ 17-18), as it had
been for the 2017 sale to H&S Bakery (see Id.
¶ 12). The day before the meeting in Baltimore, however,
Paterakis called Trewyn and told him a check would not be
ready in time for the meeting. (Id. ¶ 18.)
Instead, Paterakis asked to make the payment by wire transfer
after the purchase documents were signed. (Id.)
Paterakis sent an email to Trewyn the same day, with an
H&S Bakery signature line, asking Trewyn to “resend
the wiring so we can send the money Friday.”
(Id. ¶ 19; Doc. 1-1 [Apr. 3, 2018 Email from
Paterakis to Trewyn].) Trewyn emailed wire instructions for
Plaintiff's bank, Southern Community Bank
(“Southern Community”), to someone at H&S
Bakery on an unspecified date. (Doc. 1 [Compl.] ¶ 20;
Doc. 1-6 [Wire Instruction Form without cover email].)
forwarded Trewyn's wiring instructions to The Columbia
Bank (“Columbia”) in Hagerstown, Maryland. (Doc.
1 [Compl.] ¶ 27.) When Columbia tried to wire the $1,
337, 608.80 for the April Purchase to Plaintiff's account
at Southern Community, Columbia received an error message
that the beneficiary information was not sufficient.
(Id. ¶ 32.) Hiemstra emailed Trewyn about the
error and forwarded Columbia's email as well, asking
Trewyn to pencil in the changes on the form so he could
resubmit it. (Id. ¶¶ 32-33; Doc. 1-10
[Apr. 9-11 Email Chain].)
without Trewyn's or Plaintiff's knowledge, a hacker
was intercepting some of Trewyn's emails. (Doc. 1
[Compl.] ¶ 28.) When Hiemstra emailed Trewyn about the
need to correct the wire instructions, the hacker stopped the
email from entering Trewyn's inbox and then sent false
responses to Hiemstra, purporting to be from Trewyn.
(Id. ¶¶ 33-34.) The hacker sent wiring
instructions for the account of “National Equipment
& Trucking” at SunTrust Bank in Atlanta, Georgia,
with different account and routing numbers from the first set
of instructions. (Id. ¶¶ 33-36; Doc. 1-11
[Hacker Wire Instructions].) The fraudulent instructions were
on a page with fabricated letterhead for “Russell
Barnett Automotive Family D.B.A.: Russell B. National
Equipment & Trucking.” (Doc. 1-11 [Hacker Wire
did not call Trewyn to verify the information. (Doc. 1
[Compl.] ¶ 38.) Hiemstra sent the hacker's wire
instructions to Columbia, and Columbia initiated a transfer
of $1, 337, 608.80 to the hacker's account on April 9,
2018. (Id. ¶¶ 37, 39.) Hiemstra emailed
Trewyn to provide a status update on the wire transfer on
April 10; Trewyn did not receive this email. (Id.
April 11, 2019, having not received any of Hiemstra's
emails about the problem with the wire instructions, Trewyn
called Hiemstra to ask when Plaintiff would receive payment.
(Id. ¶ 41.) Hiemstra told Trewyn the wire
transfer had already been completed. (Id.) Hiemstra
also told Trewyn about the emails that had purportedly gone
to and from Trewyn over the previous two days. (Id.)
This led to the discovery of the hacker's interference in
Trewyn's email account. (See id.)
hacker's account at SunTrust has been frozen.
(Id. ¶ 42.) Thirteen of the vehicles from the
April Purchase were delivered to H&S Bakery, but H&S
Bakery agreed to allow Plaintiff to repossess the vehicles.
(Id. ¶ 43.) Plaintiff stopped delivery of the
remaining eleven vehicles. (Id. ¶ 44.) The
twenty-four vehicles are the subject of a Temporary
Restraining Order (Doc. 41), a motion for preliminary
injunction (Doc. 39), and a motion to vacate the Temporary
Restraining Order (Doc. 43).
asserts causes of action for breach of contract and
negligence against H&S Bakery and Jonber. (Doc. 1
[Compl.].) H&S Bakery moves to dismiss the contract
claims against it, and both Defendants move to dismiss the
tort claims against them. (Doc. 22.)
STANDARD OF REVIEW
may move to dismiss a claim for failure to state a claim upon
which relief can be granted. Fed.R.Civ.P. 12(b)(6). In ruling
on such a motion, a court must accept all of the factual
allegations in the complaint as true and construe the
complaint in the light most favorable to the plaintiff.
Gunasekera v. Irwin, 551 F.3d 461, 466 (6th Cir.
2009) (quoting Hill v. Blue Cross & Blue Shield of
Mich., 49 F.3d 710, 716 (6th Cir. 2005)). The court is
not, however, bound to accept as true bare assertions of
legal conclusions. Papasan v. Allain, 478 U.S. 265,
deciding a motion to dismiss under Rule 12(b)(6), a court
must determine whether the complaint contains “enough
facts to state a claim to relief that is plausible on its
face.” Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 570 (2007). Although a complaint need only contain
a “short and plain statement of the claim showing that
the pleader is entitled to relief, ” Ashcroft v.
Iqbal, 556 U.S. 662, 677-78 (2009) (quoting Fed.R.Civ.P.
8(a)(2)), this statement must nevertheless contain
“factual content that allows the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged, ” id. at 678. Plausibility
as explained by the Court “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). “[W]here the well-pleaded facts do
not permit the court to infer more than the mere possibility
of misconduct, the complaint has alleged-but it has not
‘show[n]'-‘that the pleader is entitled to
relief.'” Id. at 679 (quoting Fed.R.Civ.P.
8(a)(2)). “Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do
not suffice.” Id. at 678.
party presents matters outside the pleadings in connection
with a motion to dismiss, the court must either exclude those
matters from consideration or treat the motion as one for
summary judgment. Fed.R.Civ.P. 12(d). Documents attached to
pleadings are considered part of the pleadings for all
purposes, however, Fed.R.Civ.P. 10(c), and a court's
consideration of documents referred to in a complaint and
integral to the claims does not convert a motion to dismiss
into a motion for summary judgment. Commercial Money
Ctr., Inc. v. Ill. Union Ins. Co., 508 F.3d 327, 335-36
(6th Cir. 2007). Where a written instrument attached to a
pleading contradicts allegations in the pleading, a court
must credit the instrument, rather than the allegations.
Creelgroup, Inc. v. NGS Am., Inc., 518 Fed.Appx.
343, 347 (6th Cir. 2013) (quoting Williams v.
CitiMortgage, Inc., 498 Fed.Appx. 532, 536 (6th Cir.
Court first addresses H&S Bakery's motion for
dismissal of the contract claims against it. H&S Bakery
argues that dismissal of Plaintiff's contract claim
against it is appropriate because H&S Bakery did not
enter into a contract with Plaintiff. (See Doc. 22
at 1.) The Court agrees with H&S Bakery on this point,
and also finds that Plaintiff's request to pierce the
corporate veil should be denied. The Court next turns to
Plaintiff's tort claims. Defendants make four arguments
for dismissal of Plaintiff's tort claims. First, they
argue Tennessee's enactment of the Uniform Commercial
Code (the “UCC”) displaces Plaintiff's
common-law negligence claim. Second, they argue the
economic-loss doctrine bars the claims. Third, they argue
Tennessee does not impose a duty on a party to take any
action to protect someone else unless the party's own
wrongful conduct created the risk of harm. Fourth, H&S
Bakery argues there are no plausible allegations in the
Complaint that H&S Bakery, as a non-party to the
contracts, had a duty to Plaintiff regarding payment for the
April Purchases or caused any damages to Plaintiff regarding
the April Purchases. The first argument disposes of
Plaintiff's tort claim against Jonber, and the fourth
argument disposes of Plaintiff's tort claim against
H&S Bakery. The Court therefore need not address the
proceeding, the Court notes the parties do not dispute the
choice of law in this case, and have both applied Tennessee
law. (See Doc. 23; Doc. 28.) Under the Court's
analysis, it was correct to do so.
Contract Claims Against H&S Bakery
Bakery argues the Complaint lacks any plausible allegations
that H&S Bakery entered into a contract with Plaintiff
for the April Purchase. (Doc. 23.) It argues that the Bills
of Sale demonstrate that the contracts were between Plaintiff
and Jonber, and the Proposal, which did involve H&S
Bakery, was merely an offer to negotiate. (Id.)
Therefore, H&S Bakery argues, Plaintiff has not stated a
contract claim against it on which relief may be granted.
The Contracts Were ...