United States District Court, M.D. Tennessee, Nashville Division
W. SILVER RECYCLING, INC., Plaintiff,
PROTRADE STEEL COMPANY, LTD., Defendant/Third-Party Plaintiff,
SOUTHERN RECYCLING, LLC, Third-Party Defendant.
RICHARDSON UNITED STATES DISTRICT JUDGE.
the Court is Third-Party Defendant Southern Recycling,
LLC's Motion to Dismiss the Third-Party Complaint (Doc.
No. 22, “the Motion”), supported by an
accompanying brief (Doc. No. 23). Third-Party Plaintiff,
ProTrade Steel Company, Ltd., filed a response (Doc. No. 27).
Thereafter, the Court directed the parties to the
Motion to file, and they did file, additional
briefing on the following issue(s): Whether the Uniform
Commercial Code governs the allegedly breached contract, and
if so, how the applicability of the Uniform Commercial Code
affects the analysis of the Third-Party Defendant's
Motion to Dismiss. (Doc. Nos. 36, 39). For the below stated
reasons, the Motion will be denied.
Steel Company, Ltd. (“ProTrade”) is in the metals
brokerage business and frequently enters into contracts to
purchase scrap metal from a company, planning to sell the
material it purchases to other companies in need of such
metal. (Doc. No. 13 at ¶¶ 1-2 (“Third-Party
Compl.”)). Southern Recycling, LLC
(“Southern”) operates metal processing facilities
in Nashville, Tennessee and Bowling Green, Kentucky, as well
as a barge loading facility in Clarksville, Tennessee.
(Id. at ¶¶ 3-4).
entered into a contract with W. Silver Recycling, LLC
(“W. Silver”), which provided ProTrade would
purchase from W. Silver the contents of Barge # AEP 7232
(“the barge”), approximately 1, 302.27 gross tons
of scrap metal, at a price of $335 per gross ton.
(Id. at ¶ 9). The scrap metal consisted
primarily of metal busheling, which previously had been
rejected by a steel mill in Mobile, Alabama. (Id. at
¶ 10). Before attempting to find its own buyer for the
scrap metal, ProTrade inquired as to the reason for the steel
mill's rejection of the scrap metal. (Id. at
¶ 11). W. Silver informed ProTrade that the steel mill
rejected the scrap metal only because some of the busheling
was “oversized.” (Id.).
August 29, 2017, ProTrade entered into a contract
(“8/29 Sale Contract”) with Southern for ProTrade
to sell to Southern the contents of the barge (purchased from
W. Silver) at a price of $365 per gross ton delivered.
(Id. at ¶ 8). By selling the materials
purchased from W. Silver to Southern for a higher price,
ProTrade expected to profit approximately $9, 168.03.
(Id. at ¶ 9). The 8/29 Sale Contract
incorporated ProTrade's Terms and Conditions.
(Id. at ¶ 15). The Terms and Conditions warrant
only that the material will conform to the description on the
face of the contract “with variations in size,
composition, and quality consistent with norms in the
trade.” (Id. at ¶ 16). The Terms and
Conditions specifically disclaim any other implied
the 8/29 Sale Contract was entered into, ProTrade proceeded
to transport the barge from Mobile, Alabama to Clarksville,
Tennessee. (Id. at ¶ 18). While the barge was
in transit, the market price for metal busheling fell by
approximately $40 per gross ton. (Id. at ¶ 20).
The barge arrived in Clarksville on September 22, 2017.
(Id. at ¶ 21). On September 28, 2017, Southern
informed ProTrade that it was rejecting the scrap metal
materials on the barge. (Id. at ¶ 22). ProTrade
inspected the materials and informed Southern that it
believed its rejection was improper. (Id.). Southern
indicated that it would be willing to pay $260 per gross ton,
instead of the original contract price of $365.
barge of scrap metal was accruing daily additional demurrage
charges as it sat in Clarksville, Tennessee. (Id. at
¶ 23). Due to Southern's refusal to pay the original
contract price of $365 per gross ton, and W. Silver's
refusal to reduce its sale price, ProTrade opted to exercise
its rights under the contract with W. Silver to downgrade the
materials and paid W. Silver $265 per gross
(Id.). ProTrade also accepted payment of $270 per
gross ton from Southern, the most Southern would willingly
pay under the circumstances. (Id.). Another
document, also entitled “Sale Contract, ” was
issued (apparently on or after November 1, 2017) (“11/1
Sale Contract”) to reflect the change in price. (Doc. No.
13-2). The 11/1 Sale Contract is substantially similar to the
8/29 Sale Contract, but the 11/1 Sale Contract includes the
addition, “11/1: PRICE UPDATED FROM $365 TO $270”
and elsewhere reflects the change of price to $270 per gross
ton. (Id.). Southern's improper rejection of the
goods caused ProTrade to accept a reduced price.
(Id. at ¶ 24).
31, 2019, W. Silver filed a lawsuit against ProTrade,
asserting breach of contract, breach of implied contract,
negligent misrepresentation, and unjust enrichment. (Doc. No.
1). On October 30, 2019, ProTrade filed the Third-Party
Complaint against Southern, alleging breach of contract and
equitable indemnity. (Doc. No. 13). On December 6, 2019,
Southern then filed a Motion to Dismiss the Third-Party
Complaint (Doc. No. 22) and ProTrade responded (Doc. No. 27).
Now that the above-referenced supplemental briefing has been
filed, the Motion is ripe for adjudication.
purposes of a motion to dismiss, the Court must take all of
the factual allegations in the complaint as true, as the
Court has done above. Ashcroft v. Iqbal, 556 U.S.
662, 678 (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 679. A legal conclusion, including one couched as a
factual allegation, need not be accepted as true on a motion
to dismiss, nor are mere recitations of the elements of a
cause of action sufficient. Id. at 678; Fritz v.
Charter Twp. of Comstock, 592 F.3d 718, 722 (6th Cir.
2010); Abriq v. Hall, 295 F.Supp.3d 874, 877 (M.D.
Tenn. 2018). Moreover, factual allegations that are merely
consistent with the defendant's liability do not
satisfy the claimant's burden, as mere consistency does
not establish plausibility of entitlement to relief
even if it supports the possibility of relief.
Iqbal, 556 U.S. at 678.
determining whether a complaint is sufficient under the
standards of Iqbal and its predecessor and
complementary case, Bell Atlantic Corp. v. Twombly,
550 U.S. 544 (2007), it may be appropriate to “begin
[the] analysis by identifying the allegations in the
complaint that are not entitled to the assumption of
truth.” Iqbal, 556 U.S. at 680. Identifying
and setting aside such allegations is crucial, because they
simply do not count toward the plaintiff's goal of
showing plausibility of entitlement to relief. As suggested
above, such allegations include “bare assertions,
” formulaic recitation of the elements, and
“conclusory” or “bald” allegations.
Id. at 681. The question is whether the remaining
allegations - factual allegations, i.e., allegations
of factual matter - plausibly suggest an entitlement to
relief. Id. If not, the pleading fails to meet the
standard of Fed.R.Civ.P. 8 and thus must be dismissed
pursuant to Rule 12(b)(6). Id. at 683.
general rule, matters outside the pleadings may not be
considered in ruling on a motion to dismiss under Federal
Rule of Civil Procedure 12(b)(6) unless the motion is
converted to one for summary judgment under Rule 56.
Fed.R.Civ.P. 12(d). However, when a document is referred to
in the pleadings and is integral to the claims, it may be
considered without converting a motion to dismiss into one
for summary judgment. Doe v. Ohio State Univ., 219
F.Supp.3d 645, 652-53 (S.D. Ohio 2016); Blanch v. Trans
Union, LLC, 333 F.Supp.3d 789, 791-92 (M.D. Tenn. 2018).
Choice of law
determining whether ProTrade's third-party claims survive
Southern's Motion to Dismiss, the Court must first
address the applicable choice of law. See, e.g., Pa.
Emp., Benefit Trust Fund v. Zeneca, Inc., 710 F.Supp.2d
458, 466 (D. Del. 2010) (noting that before addressing a
motion to dismiss, “the Court must first resolve the
choice-of-law question to determine the applicable law
relevant to each [claim]”). In cases where federal
courts have diversity jurisdiction pursuant to 28 U.S.C.
§ 1332, federal courts apply the choice-of-law rules of
the forum state. Klaxon Co. v. ...