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Ochsner Real Estate Limited Partnership I v. T.G. Mercer Consulting Services

United States District Court, D. South Dakota, Northern Division

March 16, 2018

OCHSNER REAL ESTATE LIMITED PARTNERSHIP I, CONCORD GRAIN ELEVATOR COMPANY, Plaintiffs,
v.
T.G. MERCER CONSULTING SERVICES, Defendant.

          ORDER

          CHARLES B. KORNMANN United States District Judge

         BACKGROUND

         Plaintiff Ochsner Real Estate Limited Partnership I ("Ochsner") executed a Material Yard Lease Agreement with T.G. Mercer Consulting Services ("defendant") on January 27, 2015, for the purpose of "maintaining] a temporary construction staging area, pipe off-loading site, and pipe and equipment storage yard. "Ochsner, along with Concord Grain Elevator Company ("CGEC, " together with "Ochsner, " "plaintiffs"), also entered into a Lease and Services Agreement with EVRAZ, Inc. ("EVRAZ") for the purpose of "transloading of pipeline components from railcars to trucks" at CGEC's Aberdeen, South Dakota, facility. Plaintiffs filed a Complaint against defendant for breach of contract, alleging, inter alia, defendant's "failure to comply with loading and unloading requirements" ("Count VIII"). As part of Count VIII, plaintiffs claim that defendant was responsible for "the unloading of rail cars in a timely fashion" and that defendant "failed in these obligations due to [its] acts and omissions which resulted in grain trains being blocked."

         Defendant moved to dismiss this cause of action under Fed.R.Civ.P. 12(b)(6) and 8(a)(2), stating that Count VIII fails to state a claim upon which relief can be granted and that plaintiffs failed to provide defendant fair notice that Count VIII constitutes a breach of contract claim. Defendant moves to dismiss Count VIII of the Complaint with prejudice. Plaintiffs request the motion to dismiss be denied; in the alternative, plaintiffs request leave to amend Count VIII of the Complaint should the motion to dismiss be granted.

         DECISION

          I. Failure to state a claim upon which relief can be granted

         To survive a motion to dismiss for failure to state a claim upon which relief can be granted, a complaint "must show that the plaintiff 'is entitled to relief, ' ... by alleging 'sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Torti v. Hoag, 868 F.3d 666, 671 (8th Cir. 2017) (quoting In re Pre-Filled Propane Tank Antitrust Litis., 860 F.3d 1059, 1063 (8th Cir. 2017) (en banc), Fed. R. Civ. P. 8(a)(2), and Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). Factual allegations are construed in favor of the plaintiff, "even if it strikes a savvy judge that actual proof of those facts is improbable." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007). However, to determine whether a claim is plausible on its face is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Ashcroft v. Iqbal, 556 U.S. at 679 (2009). To avoid dismissal, a "plausible claim must plead 'factual content that allows the court to.draw the reasonable inference that the defendant is liable for the misconduct alleged.'" Torti v. Hoag, 868 F.3d at 671 (internal citations omitted). A complaint must allege "more than labels and conclusions." Id. (citing Twombly, 550 U.S. at 555).

         Plaintiffs' claim in the Complaint that defendant "was responsible for the unloading of rail cars in a timely fashion" is a conclusory statement that does riot provide a basis for determining the source of defendant's obligation. While plaintiffs' brief in opposition to defendant's motion to dismiss Count VIII states that it adequately alleges a claim for breach of contract, the contracts plaintiffs filed as exhibits to the Complaint do not suffice to provide the factual background required to determine that this claim is facially plausible and to reasonably infer that the defendant is liable for the alleged misconduct. Defendant is not a party to the Lease and Services Agreement between EVRAZ and plaintiffs. The Material Yard Lease Agreement to which defendant and plaintiffs are parties contains no obligation for the defendant to unload railcars. It is immaterial that the Material Yard Lease Agreement states that "Time is of the essence in all provisions of the Lease" where there is no provision regarding railcar unloading. Further, there is no provision in the Material Yard Lease Agreement obligating the defendant to schedule railcar activity for EVRAZ. It is a basic tenet of contract law that the intent of the parties to make a contract must be manifest and the intent that defendant be responsible for timely unloading of railcars has not been demonstrated here. See, e.g., Mahan v. Mahan, 121 N.W.2d 367, 369 (S.D. 1963).

         Under the law of South Dakota, the absence of an express contract does not render the existence of a contractual relationship impossible, as an implied contract maybe found following the examination of the course of conduct between the parties. Jurrens v. Lorenz Mfg. Co. of Benson. Minn., 578 N.W.2d 151, 154 (S.D. 1998) (internal citations omitted). According to SDCL 53-3-1, a contract "is either express or implied .. . [a]n implied contract is one, the existence and terms of which are manifested by conduct." However, while a contract may be either express or implied, it may not be both. Weitzel v. Sioux Valley Heart Partners, 714 N.W.2d 884, 892 (S.D. 2006). Moreover, the parol evidence rule bars extrinsic evidence of "all the oral negotiations or stipulations" concerning a contract "which preceded or accompanied the execution of the instrument." SDCL 53-8-5. It is possible that, based on the course of conduct of the parties, an implied contract between plaintiffs, EVRAZ, and defendant could be found that would obligate defendant for the timely unloading of railcars; however, the facts to support a facially plausible claim of such a contract have not been alleged.

         Assuming that plaintiffs did incur "demurrage charges for delays, and mitigation costs due to the blockage of the railcars, " as alleged, plaintiffs may seek to argue that such charges and costs constitute damages to which plaintiff is entitled. However, the Court does not opine on the likely legal sufficiency of such a claim.

         II. Fair notice of entitlement to relief

         Fed. R. Civ. P. 8(a)(2) requires "a short and plain statement of the claim showing that the pleader is entitled to relief." This statement must "provide the defendant with 'fair notice of what the plaintiffs claim is and the grounds upon which it rests.'" Gomez v. Wells Fargo Bank, N.A., 676 F.3d 655, 665 (quoting Eckert v. Titan Tire Corp., 514 F.3d 801, 805 (8th Cir. 2008) (internal citations omitted)). Without "some factual allegation" in the complaint, a claimant is unlikely to satisfy the requirement of providing fair notice. Gomez v. Wells Fargo Bank, 676 F.3d at 665 (quoting Twombly, 550 U.S. at 556 n. 3). Further, "[a] theory of liability that is not alleged or even suggested in the complaint would not put a defendant on fair notice and should be dismissed." Adams v. American Family Mut. Ins. Co., 813 F.3d 1151, 1154 (8th Cir. 2016) (holding that the district court's dismissal of a theory of liability first asserted in response to a motion to dismiss was proper).

         Plaintiffs first allege that Count VIII, "failure to comply with loading and unloading requirements, " falls under a breach of contract theory of liability in their brief in opposition to defendant's motion to dismiss. As decided in Adams v. American Family Mut, Ins. Co., supra, since plaintiffs failed to plead sufficient facts to provide defendant with fair notice of this theory, the complaint does not give defendant fair notice. As such. Count VIII should be dismissed.

         III. Plaintiffs' request ...


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