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C. Norris Manufacturing LLC v. BRT Heavy Equipment LLC

United States District Court, N.D. Ohio, Eastern Division

March 30, 2017

C. NORRIS MANUFACTURING, LLC., Plaintiff,
v.
BRT HEAVY EQUIPMENT, LLC. et al., Defendants.

          MEMORANDUM OPINION & ORDER

          GEORGE J. LIMBERT UNITED STATES MAGISTRATE JUDGE.

         This matter is before the Court upon a motion for partial summary judgment filed pursuant to Rule 56 of the Federal Rules of Civil Procedure by Plaintiff/Counterclaim Defendants Christopher Norris, (“Mr. Norris”) Robert Rogers (“Mr. Rogers”), and International Barge & Steel, LLC, (“IBS”) (collectively “Counterclaim Defendants”) against amended counterclaims filed against them by Defendants/Counterclaim Plaintiffs BRT Heavy Equipment, LLC., doing business as Beelman Heavy Equipment, LLC. and Beelman River Terminals, Inc.'s (“BRT”)(collectively “Counterclaim Plaintiffs”). ECF Dkt. #82. Plaintiff/Counterclaim Defendant C. Norris Manufacturing (“CNM”) has filed a separate motion for summary judgment incorporating the same facts, law and arguments asserted by Counterclaim Defendants against the same amended counterclaims made by Counterclaim Plaintiffs. ECF Dkt. #83.

         For the following reasons, the Court GRANTS IN PART AND DENIES IN PART Counterclaim Defendants' and Counterclaim CNM's motions for partial summary judgment. ECF Dkt. #s 82, 83.

         I. FACTUAL AND PROCEDURAL HISTORY

         On December 19, 2015, BRT removed to this Court a complaint filed in the Stark County Court of Common Pleas against it by CNM alleging a breach of contract and promissory estoppel. ECF Dkt. #1-1. Upon removal, Counterclaim Plaintiffs thereafter filed an answer to the complaint and alleged counterclaims against Mr. Norris, CNM, Mr. Rogers and IBS. ECF Dkt. #38. Counterclaim Defendants moved to dismiss several of the counterclaims for failure to state claims upon which relief can be granted pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure and the Court denied the motions as moot on December 10, 2015 after Counterclaim Plaintiffs filed an amended counterclaim that is the subject of the instant motions for partial summary judgment against Counterclaim Defendants. ECF Dkt. #s 47, 49, 59.

         In the amended counterclaim, Counterclaim Plaintiffs averred that BRT uses work barges in its operations at various port facilities and it decided to procure spud barges to increase its capacity to handle additional materials and other products at in-land port facilities in Illinois. ECF Dkt. #59 at 9. They alleged that Mr. Norris, a representative of CNM, contacted Mr. Beelman, a representative of BRT, and inquired about submitting a proposal to design and construct the additional spud barges. Id.

         Counterclaim Plaintiffs further alleged that Mr. Norris had no experience in designing and manufacturing barges, but he advised Mr. Beelman that he knew Mr. Rogers and Mr. Rogers had “extensive experience” in the barge industry. ECF Dkt. #59 at 3. They averred that Mr. Norris told Mr. Beelman that he and Mr. Rogers would form or had formed IBS to design and manufacture spud barges and Mr. Rogers had experience with barges for use in salt water applications even though he had not designed or constructed this type of inland-river barge. Id. Counterclaim Plaintiffs alleged that Mr. Norris and Mr. Rogers formed IBS on August 22, 2014 and on that same date, Mr. Norris vouched to Mr. Beelman about Mr. Rogers' competence and capacity to perform and guaranteed his performance. Id.

         Counterclaim Plaintiffs further averred that on or about August 22, 2014, in order to induce Mr. Beelman into the barge contract, Mr. Norris and Mr. Rogers told Mr. Beelman that Mr. Rogers had “extensive experience” with barges and that IBS would “be hiring the necessary people to design and build the contemplated barges.” ECF Dkt. #59 at 3. They further alleged that also as an inducement into the contract, Mr. Norris and Mr. Rogers promised Mr. Beelman that they would work with a professional engineer to develop the barge designs and all designs would be stamped and approved by that engineer. Id. at 3.

         Counterclaim Plaintiffs further alleged that about the same time, Mr. Beelman told Mr. Norris about his distrust and discomfort with doing business with Mr. Rogers and IBS. However, in order to induce Mr. Beelman into signing the Purchase Order that is the contract at issue in this case, Mr. Norris promised Mr. Beelman that the contract would be with CNM and all money paid would be kept in a separate bank account, controlled exclusively by Mr. Norris. ECF Dkt. #59 at 3-4. Counterclaim Plaintiffs averred that on August 26, 2014, Mr. Norris and Mr. Beelman entered in the Purchase Order contract for the design and manufacture of three barges and Mr. Beelman agreed to pay $307, 000.00 as an initial payment. Id. at 4. Counterclaim Plaintiffs alleged that Mr. Beelman wired the payment to Mr. Norris on August 27, 2014, and on or about September 3, 2014, $50, 000.00 of that money was transferred out of the Norris bank account and into an account in the name of IBS. Id. They further alleged that in September and November of 2014, the only transactions made in the IBS bank account were transfers of the initial payment from Norris and transfers into the personal account of Mr. Rogers. Id. at 4-5. They averred that the funds transferred to Mr. Rogers' personal account were used to pay for trips to Nassau, Bahamas, bar tabs, and other expenses wholly unrelated to the barge contract. Id. at 5-6.

         Counterclaim Plaintiffs also averred in their amended counterclaim that as of September 29, 2014, Mr. Norris knew that Mr. Beelman's initial payment money was not being properly used even though Mr. Norris represented to Mr. Beelman on that date that Norris set up a separate bank account for the Purchase Order, his money was “safe, ” and that none of the Purchase Order money would be mixed with “other company” money and would be used solely for expenses relating to the completion of the barges ordered by BRT. ECF Dkt. #59 at 3-4. They alleged that Mr. Norris' statements were false when he made them and furthered the fraudulent scheme to defraud Mr. Beelman and BRT. Id. at 6. They averred that Mr. Norris knew that at least $26, 000.00 of the initial payment was mixed with other Norris Manufacturing Company money and knew or should have known that at least $50, 000.00 was transferred to IBS and then to Mr. Rogers' personal account. Id. Counterclaim Plaintiffs further alleged that Mr. Norris failed to disclose that at least $84, 718.10 of the payment money was already spent on or around September 15, 2014. Id.

         Counterclaim Plaintiffs further alleged that CNM failed to perform as required by the Purchase Order as they submitted the initial drawings on September 16, 2014 when they were due on September 10, 2014. ECF Dkt. #59 at 7. Further, they averred that the drawings that were submitted were deemed deficient and Mr. Beelman's engineer did not approve revised drawings thereafter submitted by CNM. Id. at 7-8.

         Counterclaim Plaintiffs also allege that on November 5, 2014, Mr. Beelman met with Mr. Norris and Mr. Rogers, on behalf of CNM and IBS, and told Mr. Beelman that it would cost an additional $100, 000.00 per barge to complete the design and manufacturing of the three barges. ECF Dkt. #59 at 8. They allege that on November 6, 2014 and November 7, 2014, a representative from IBS called Mr. Beelman and requested information from other companies that provided quotes to him for the barges, including the materials lists, in order to help IBS in the design and engineering of the barges. Id. Counterclaim Plaintiffs allege that due to the untimely submission of the drawings, the repeated submission of barge drawings that were deficient, and the representations and comments from Mr. Norris, Mr. Rogers and representatives of IBS, Mr. Beelman provided a written notice of immediate termination of the Purchase Order to Norris as he concluded that CNM, Mr. Norris, Mr. Rogers and IBS lacked the knowledge and expertise to build inland-river spud barges. Id. They further averred that due to these actions and inactions, as well as the request for price increases, Mr. Beelman lost all confidence in Counterclaim Defendants ability to build the barges and to meet the Purchase Order deadlines. Id. at 9. Counterclaim Plaintiffs further alleged that IBS is a sham company as it was formed to induce and deceive Mr. Beelman into entering into the Purchase Order and although Mr. Norris represented that he and Mr. Rogers would be forming IBS, Mr. Norris' name is not listed on the company, but rather the names of Mr. Rogers and Mr. Norris' wife are listed. Id. at 10. They further alleged that IBS had no formal meetings, no documentation showing its ownership structure, and it commingled its funds with CNM and Mr. Rogers. Id.

         As a result of these alleged facts, Counterclaim Plaintiffs set forth seven claims for relief: declaratory judgment against CNM to determine the parties' rights and duties under the Purchase Order (Count I), breach of contract against CNM (Count II), fraud/fraudulent inducement against CNM, Mr. Norris, Mr. Rogers, and IBS (Count III), negligent misrepresentation against CNM, Mr. Norris, Mr. Rogers, and IBS (Count IV), conversion against CNM, Mr. Norris, Mr. Rogers, and IBS (Count V), unjust enrichment against CNM, Mr. Norris, Mr. Rogers, and IBS (Count VI), and piercing the corporate veil against Mr. Norris and Mr. Rogers (Count VII). ECF Dkt. #59 at 11-20.

         On January 4, 2016, Counterclaim Defendants filed a motion to dismiss Counterclaim Plaintiff's amended counterclaims for fraud/fraudulent inducement, negligent misrepresentation, conversion, unjust enrichment and piercing the corporate veil. ECF Dkt. #65. Counterclaim Plaintiffs filed a response and Counterclaim Defendants filed reply briefs. ECF Dkt. #s 70, 72. On August 1, 2016, the Court denied Counterclaim Defendants' motion to dismiss. ECF Dkt. #76.

         On December 7, 2016, Counterclaim Defendants Mr. Norris, Mr. Rogers, and IBS filed the instant motion for partial summary judgment, requesting that the Court grant summary judgment in its favor and dismiss as a matter of law Counterclaim Plaintiffs' amended counterclaims of fraud/fraudulent inducement (Count III), negligent misrepresentation (Count IV), conversion (Count V), unjust enrichment (Count VI), and piercing the corporate veil (Count VII). ECF Dkt. #82. On the same date, Counterclaim Defendant CNM filed the instant motion for partial summary judgment to dismiss the same amended counterclaims. ECF Dkt. #s 82, 83.

         On January 20, 2017, Counterclaim Plaintiffs filed a brief in opposition to the motions for partial summary judgment. ECF Dkt. #88. On February 3, 2017, Counterclaim Defendants filed a reply brief. ECF Dkt.#91.

         On March 17, 2017, the Court granted in part and denied in part a motion for summary judgment filed by BRT against CNM, who had asserted claims for breach of contract and promissory estoppel against BRT concerning the Purchase Order. ECF Dkt. #s 1, 84, 96, 97. The Court granted summary judgment and dismissed CNM's claim of promissory estoppel, but denied BRT's motion for summary judgment on CNM's breach of contract claim against BRT. ECF Dkt. #s 96, 97.

         II. LAW AND ANALYSIS

         A. Fraud, Fraudulent Inducement and Negligent Misrepresentation (Counterclaim Counts III and IV)

         Counterclaim Defendants first contend that they are entitled to summary judgment on Counterclaim Plaintiffs' fraud, fraudulent inducement, and negligent misrepresentation claims because Counterclaim Plaintiffs cannot establish all of the elements of those claims. ECF Dkt. #82-1 at 12-24; ECF Dkt. #83-1 at 2-4. They cite to Mr. Beelman's deposition testimony, Ohio law holding that tort claims must fail when they are “factually intertwined” with breach of contract claims, and Ohio law requiring that damages from the alleged fraud must be separate from breach of contract damages. Id.

         The parties agree that the elements for a claim for fraud and fraudulent inducement under Ohio law are:

(1) a representation, or where there is a duty to disclose, concealment of a fact, (2) which is material to the transaction at hand, (3) made falsely, with knowledge of its falsity, or with such utter disregard and recklessness as to whether it is true or false that knowledge may be inferred, (4) with the intent of misleading another into relying on it, (5) justifiable reliance upon the representation or concealment, and (6) a resulting injury proximately caused by the reliance.

See C.Norris Manufacturing, LLC. v. BRT Heavy Equipment, LLC., No. 5:14CV2797, 2016 WL 4079752, at *3 (N.D. Ohio 2016), citing HSBC Bank USA, Nat'l Trust Co. v. Teagarden, 6 N.E.3d 678, 2013-Ohio-5816 (Ohio App. Ct. 11th Dist. 2013) (citation omitted); Cohen v. Lamko, Inc., 10 Ohio St.3d 167, 462 N.E.2d 407, 10 O.B.R. (1984), quoting Friedland v. Lipman, 68 Ohio App.2d 255, 429 N.E.2d 456, 22 O.O.3d 422 (1980); ECF Dkt. #82-1 at 6-7; ECF Dkt. #83-1 at 2; ECF Dkt. #88 at 11.

         Counterclaim Defendants assert that Counterclaim Plaintiffs cannot establish that they made false representations to Mr. Beelman in order to induce him into entering the Purchase Order. ECF Dkt. #82-1 at 12-14; ECF Dkt. #83-1 at 2. They cite to Mr. Beelman's deposition testimony where he indicated that prior to the Purchase Order being signed, neither Mr. Norris nor Mr. Rogers lied to him or made any false misrepresentations. Id., citing ECF Dkt. #82-4 at 92-93. In opposing the motion for summary judgment, Counterclaim Plaintiffs cite to other portions of Mr. Beelman's testimony that they assert establishes a genuine issue of material fact as to whether false misrepresentations were made. ECF Dkt. #88 at 12-14. They first cite to parts of Mr. Beelman's testimony where he stated that Mr. Norris and Mr. Rogers told him that they were fully qualified to manufacture and design barges, and Mr. Rogers had extensive barge background and experience and had been around barges his whole life. Id. at 13, citing ECF Dkt. #82-4 at 88-91.

         The Court finds that the assertions alleged by Counterclaim Plaintiffs do not rise to the level of false misrepresentations upon which Mr. Beelman justifiably relied. While Mr. Beelman testified that Mr. Norris mentioned Mr. Rogers as someone who could design and manufacture the barges that Mr. Beelman desired, Beelman also testified that Mr. Norris never suggested prior to the Purchase Order that he, CNM, Mr. Rogers, or IBS could or would design or build the barges that were the subject of the Purchase Order and Mr. Beelman knew prior to entering into the Purchase Order that none of the Counterclaim Defendants would be designing or manufacturing the barges but would be overseeing the project and hiring the necessary people to make sure that the barges were designed and built properly. ECF Dkt. #82-4 at 88-92. Moreover, Mr. Beelman also testified that he did not believe that Mr. Norris or Mr. Rogers lied to him or made false representations to him before he signed the Purchase Order. Id. at 92-93. When counsel asked him at deposition to identify the alleged false misrepresentations that had occurred before he signed the Purchase Order, Mr. Beelman indicated that he misunderstood counsel's question about the misrepresentations, indicating that he did not believe that Mr. Norris or Mr. Rogers “lied” to him prior to signing the Purchase Order. Id. The following testimony was had between Mr. Beelman (“A”) and counsel for Counterclaim Defendants (“Q):

Q. Okay. Did Chris Norris ever tell you anything prior to signing the contract that you believe today is a false representation?
A. Yes.
Q. Okay. Tell me every false representation that you believe Norris made prior to contract.
A. Give me a copy of the contract, please.
Q. The purchase ...

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