Mero v. City Segway Tours of Washington Dc, LLC , 826 F. Supp. 2d 100 ( 2011 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
____________________________________
)
NORMAN MERO, )
)
Plaintiff, )
)
v. ) Civil Action No. 11-0817 (ABJ)
)
CITY SEGWAY TOURS OF )
WASHINGTON DC, LLC, et al., )
)
Defendants. )
____________________________________)
MEMORANDUM OPINION
Plaintiff Norman Mero brings this action against defendants City Segway Tours of
Washington D.C., LLC (“CST DC”), and City Segway Tours (“CST”) alleging that their
negligence, breach of contract, and unfair trade practices culminated in a collision in which he
was injured. Defendants have moved to dismiss Counts II (breach of contract) and III (unfair
trade practices) for failure to state a claim, or in the alternative, for summary judgment on those
claims. Defendants have also moved to dismiss all claims against defendant CST under the
theory that CST is not a proper legal entity that can be sued.
Since plaintiff has not alleged the existence of an enforceable contract, the Court will
grant defendants’ motion as to Count II, but it will deny it as to Count III. The Court will also
deny defendants’ motion to dismiss defendant CST from the remaining counts at this time.
FACTUAL BACKGROUND
On May 21, 2010, plaintiff participated in one of the defendants’ guided tours of
Washington, D.C., in which visitors traverse the city while riding on Segway personal
transportation vehicles. This action arises out of a collision between plaintiff and another tour
participant that left plaintiff with a fractured right arm.
Plaintiff, a resident of Ontario, Canada, signed up to take a tour with CST DC during a
visit to Washington. Am. Compl. ¶ 1. He received an email that confirmed his tour reservation,
which included the meeting point for the tour, directions, tips, the cancellation policy, and a
section titled “Important Information.” Id. ¶ 2. The “Important Information” section contained
the following statement: “Your safety is always our highest priority; therefore, we begin each
tour with a very thorough orientation of the Segway and its use before going out to enjoy
Washington DC!” Id.
Plaintiff alleges that he appeared for the scheduled tour, signed a liability waiver form,
and received instructions about how to use the Segway from a CST DC tour guide. Id. ¶¶ 1, 2, 5,
10. He states that the instructions lasted approximately 10 to 15 minutes. Id. ¶ 6. He also
alleges that at some point, he noticed that a control key was missing from his Segway.
According to plaintiff, when he brought that circumstance to his tour guide’s attention, the guide
assured him that it was “not important.” Id. ¶¶ 44–47. Plaintiff also alleges that defendants
“knew or should have known about some of the not so obvious characteristics of Segways and
how they operate.” Id. ¶ 42.
The amended complaint claims that after the tour was underway, the guide directed the
group to pair up in a “buddy buddy” arrangement, which had not previously been demonstrated
to the group. Id. ¶¶ 9–11. While plaintiff was attempting to maneuver in this fashion, his
Segway collided with another, and he was “thrown violently to the hot asphalt pavement.” Id. ¶
14. He sustained compound fractures to his arm and endured a number of complications due to
2
follow-up treatments. Id. ¶¶ 18–20. Plaintiff attributes the accident to a “violent and unexpected
machine reaction.” Id. ¶ 15.
Plaintiff instituted this lawsuit in the Superior Court for the District of Columbia on April
11, 2011. Defendants subsequently removed the case to this Court on grounds of diversity
jurisdiction [Dkt. # 1], and on June 24, 2011 plaintiff filed his amended complaint in this Court
[Dkt. # 17]. Count I alleges negligence, Count II alleges breach of contract, and Count III
alleges unfair trade practices under the DC Consumer Protection Procedures Act, D.C. Code §
28-3904, et. seq. (2006) (“CPPA”). Since defendants have not moved to dismiss Count I,
discovery is underway.
STANDARD OF REVIEW
I. Motion to Dismiss
“To survive a [Rule 12(b)(6)] 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.” Ashcroft v.
Iqbal, --- U.S. ---, 129 S. Ct. 1937, 1949 (2009) (internal quotation marks omitted); accord Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). In Iqbal,the Supreme Court reiterated the two
principles underlying its decision in Twombly: “First, the tenet that a court must accept as true
all of the allegations contained in a complaint is inapplicable to legal conclusions.” Ashcroft,
129 S. Ct. at 1949. And “[s]econd, only a complaint that states a plausible claim for relief
survives a motion to dismiss.” Id. at 1950.
A claim is facially plausible when the pleaded factual content “allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.” Id. at 1949.
“The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a
sheer possibility that a defendant has acted unlawfully.” Id. A pleading must offer more than
3
“labels and conclusions” or a “formulaic recitation of the elements of a cause of action,” id.,
quoting Twombly, 550 U.S. at 555, and “[t]hreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not suffice,” id.
When considering a motion to dismiss under Rule 12(b)(6), the complaint is construed
liberally in plaintiff’s favor, and the Court should grant plaintiff “the benefit of all inferences that
can be derived from the facts alleged.” Kowal v. MCI Commc’ns Corp., 16 F.3d 1271, 1276
(D.C. Cir. 1994). Nevertheless, the Court need not accept inferences drawn by the plaintiff if
those inferences are unsupported by facts alleged in the complaint, nor must the Court accept
plaintiff’s legal conclusions. See id.; Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002).
In ruling upon a motion to dismiss for failure to state a claim, a court may ordinarily consider
only “the facts alleged in the complaint, documents attached as exhibits or incorporated by
reference in the complaint, and matters about which the Court may take judicial notice.”
Gustave-Schmidt v. Chao, 226 F. Supp. 2d 191, 196 (D.D.C. 2002) (citations omitted).
II. Motion for Summary Judgment
Summary judgment is appropriate “if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). The party seeking summary judgment bears the “initial responsibility of informing the
district court of the basis for its motion, and identifying those portions of the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the affidavits, if
any, which it believes demonstrate the absence of a genuine issue of material fact.” Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986) (internal quotation marks omitted). To defeat
summary judgment, the non-moving party must “designate specific facts showing there is a
genuine issue for trial.” Id. at 324 (internal quotation marks omitted). Merely identifying a fact
4
in dispute is not enough to preclude summary judgment, Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 247–48 (1986); a dispute is “genuine” only if a reasonable fact-finder could find for
the non-moving party, and a fact is only “material” if it is capable of affecting the outcome of the
litigation. Id. at 248; Laningham v. U.S. Navy, 813 F.2d 1236, 1241 (D.C. Cir. 1987). In
assessing a party’s motion, “[a]ll underlying facts and inferences are analyzed in the light most
favorable to the non-moving party.” N.S. ex rel. Stein v. District of Columbia, 709 F. Supp. 2d
57, 65 (D.D.C. 2010), citing Anderson, 477 U.S. at 247.
ANALYSIS
I. Plaintiff fails to state a claim for breach of contract.
a. Plaintiff fails to allege sufficient facts to show that the email
confirmation is an enforceable contract.
Under District of Columbia law, “[t]he party asserting the existence of an enforceable
contract . . . bears the burden of proving that the parties entered into an enforceable contract.”
Ponder v. Chase Home Fin., LLC, 666 F. Supp. 2d 45, 48 (D.D.C. 2009) (citations omitted). 1
The essential elements of a contract are “competent parties, lawful subject matter, legal
consideration, mutuality of assent and mutuality of obligation.” Id. at 48 (citations omitted); see
also Jack Baker, Inc. v. Office Space Dev. Corp., 664 A.2d 1236, 1238 (D.C. 1995) (citations
1 The District of Columbia’s choice-of-law rules, which this Court must follow when
exercising diversity jurisdiction, require the Court to consider “the governmental policies
underlying the applicable law and determine[] which jurisdiction’s policy would be the most
advanced by the application of its law to the facts of the case, taking into consideration (1) the
place where the injury occurred; (2) the place where the conduct causing the injury occurred; (3)
the domicile, residence, nationality, place of incorporation and place of business of the parties;
and (4) the place where the relationship is centered.” Radosti v. Envision EMI, LLC, 717 F.
Supp. 2d 37, 59 (D.D.C. 2010). The parties agree that District of Columbia law applies in this
case. See Am. Compl. ¶ 22; Def.’s Mem. at 4. The Court also agrees that application of these
factors directs that outcome.
5
omitted) (“[F]or an enforceable contract to exist, there must be both (1) agreement as to all
material terms; and (2) intention of the parties to be bound.”).
In this case, plaintiff has difficulty putting his finger on the precise contract involved, and
the complaint fails to specify any of the material terms of the alleged contract. While it is true
that “[a]ll agreements have some degree of indefiniteness and some degree of uncertainty,”
EastBanc, Inc. v. Georgetown Park Assocs. II, L.P., 940 A.2d 996, 1002 (D.C. 2008), the
contract must “be sufficiently definite as to its material terms (which include, for example,
subject matter, price, payment terms, quantity, quality, and duration) that the promises and
performances to be rendered by each party are reasonably certain.” Virtual Def. & Dev. Int’l,
Inc. v. Republic of Mold., 133 F. Supp. 2d 9, 17 (D.D.C. 2001) (internal citations omitted); see
also EastBanc, 940 A.2d at 1002 (“[T]he terms of the contract must be clear enough for the court
to determine whether a breach has occurred and to identify an appropriate remedy.”).
Here, while plaintiff begins Count II with an assertion that he “was owed a number of
contractual based duties which were created expressly and by implication,” Am. Compl. ¶ 30,
that paragraph of the amended complaint goes on to substitute a string of legal citations for
factual allegations setting forth the nature of any promises made or the acts to be performed. Id.
In the next paragraph, plaintiff seems to allege that it was the email confirmation he received that
constitutes the actionable contract, but even that assertion is quite vague: “[p]laintiff was
promised contractually adequate and appropriate training by the Defendants. See for example
the text of the confirming email.” Am. Compl. ¶ 31.
Plaintiff points to the sentence in the “Important Information” section of the email:
“Your safety is always our highest priority; therefore, we begin each tour with a very thorough
orientation of the Segway and its use before going out to enjoy Washington DC!” Am. Compl. ¶
6
2. Notwithstanding the unspecific nature of this promotional statement, plaintiff contends that
defendants entered into a contract to provide adequate and appropriate Segway training and to
properly disclose known risks. Id. ¶¶ 33–41. He alleges that defendants breached their
contractual obligation by failing to provide proper training and adequate staffing. Id. ¶¶ 8, 31–
41. He further maintains that defendants violated the contractual promise because the Segway
instructions lasted only 10–15 minutes “and were not the 30 minutes as represented.” 2 Id. ¶ 6.
Finally he asserts that defendants failed to provide a properly functioning Segway in breach of
this contract. Id. ¶¶ 38, 40.
But plaintiff’s amended complaint fails to allege the facts necessary to show that the
email is an enforceable contract. The amended complaint does not allege mutuality of assent to
specific terms, mutuality of obligation, or legal consideration. See Ponder, 666 F. Supp. 2d at
48. Terms such as “very thorough” are not sufficiently clear or definite to create an enforceable
contractual duty. Virtual Def. & Dev. Int’l, Inc., 133 F. Supp. 2d at 17; EastBanc, Inc., 940 A.2d
at 1002. Plaintiff does not identify any facts that demonstrate a promise made by defendants to
provide any particular training regimen for any particular duration. Jack Baker, Inc., 664 A.2d at
1238. Plaintiff was provided with an opportunity to amend his complaint after the defendants
filed their initial motion to dismiss, see Minute Entry for proceedings on June 16, 2011, but he
has yet to identify any reasonably certain terms that could constitute an enforceable contract
between the parties. Therefore, Count II will be dismissed with prejudice for failure to state a
claim for breach of contract.
2 Although plaintiff asserts that the Segway instructions “were not the 30 minutes as
represented,” the Court finds nothing in the amended complaint alleging that defendants
promised plaintiff a 30-minute orientation. The amended complaint simply alleges that the
confirmation email promise “a very thorough orientation.” Am. Compl. ¶ 2 (emphasis added).
7
b. Plaintiff fails to allege facts sufficient for a breach of the implied
covenant of good faith and fair dealing
Count II further alleges that defendants violated the implied covenant of good faith and
fair dealing. Am. Compl. ¶ 30. All contracts contain an implied covenant of good faith and fair
dealing, which prevents either party from “do[ing] anything which will have the effect of
destroying or injuring the right of the other party to receive the fruits of the contract.” Nugent v.
Unum Life Ins. Co. of Am., 752 F. Supp. 2d 46, 56 (D.D.C. 2010), citing Allworth v. Howard
Univ., 890 A.2d 194, 201 (D.C. 2006). “If the party to a contract evades the spirit of the
contract, willfully renders imperfect performance, or interferes with performance by the other
party, he or she may be liable for breach of the implied covenant of good faith and fair dealing.”
Nugent, 752 F. Supp. 2d at 56, quoting Hais v. Smith, 547 A.2d 986, 987–88 (D.C. 1988). In
order to survive a motion to dismiss for breach of the implied covenant of good faith and fair
dealing, plaintiff must allege facts to show that defendant “has taken steps, or refused to take
steps, which ultimately had the effect of destroying or injuring the right to receive the fruits of
the contract.” Nugent, 752 F. Supp. 2d at 56, quoting Hais, 547 A.2d at 987 (internal quotation
marks omitted).
The Court has already determined that plaintiff fails to allege the existence of an
enforceable contract at all, and the absence of a contract alone is sufficient to defeat the implied
covenant claim. See, e.g., Steele v. Isikoff, 130 F. Supp. 2d 23, 33 (D.D.C. 2000) (refusing to
recognize the covenant of good faith and fair dealing where no valid contract existed between the
parties). But, even if the amended complaint could be read to allege that the parties entered into
some reasonably definite, enforceable contract, plaintiff still fails to allege sufficient facts to
support a claim that defendants breached the implied covenant of good faith and fair dealing.
See Nugent, 752 F. Supp. 2d at 56. The amended complaint merely states that the implied
8
covenant of good faith is inherent in every contract and that defendants breached it. Am. Compl.
¶¶ 30, 33, 41. This conclusory allegation, which does not specify how defendants evaded the
spirit of the contract, willfully rendered imperfect performance, or interfered with performance
by plaintiff, does not suffice to state a claim under the standard set forth in Twombly and Iqbal.
Accordingly, and because Plaintiff was provided with an opportunity to amend his complaint
after the defendants filed their initial motion to dismiss, see Minute Entry for proceedings on
June 16, 2011, but he has yet to identify how defendants breached the covenant of good faith,
the Court will dismiss Count II with prejudice for failure to state a claim.
II. Plaintiff alleges facts sufficient for a claim based on unfair trade practices.
Under the CPPA, a corporation may not “misrepresent as to a material fact which has a
tendency to mislead,” “whether or not any consumer is in fact misled, deceived or damaged
thereby[.]” D.C. Code § 28-3904(e). A consumer bringing a claim under section 28-3904(e)
“need not allege or prove intentional misrepresentation to prevail on a claimed violation [but]
must allege a material fact which has a tendency to mislead.” Grayson v. AT&T Corp., 15 A.3d
219, 251 (D.C. 2011) (citations omitted). “A claim … under the CPPA is properly considered in
terms of how the practice would be viewed and understood by a reasonable consumer.” Whiting
v. AARP, 701 F. Supp. 2d 21, 29 (D.D.C. 2010), citing Pearson v. Chung, 961 A.2d 1067, 1075
(D.C. 2008). However, if “[a]ll statements that [plaintiff] points to as misleading are in fact
either accurate, not misleading to a reasonable consumer, or mere puffery,” there is no actionable
conduct under the CPPA. Id. at 29.
Plaintiff’s complaint quotes liberally from the CPPA, Am. Compl. ¶ 42, and the mere
repetition of those legal provisions does nothing to state a claim. Iqbal, 129 S. Ct. at 1950. But
in the midst of his two page recitation of the terms of the statute, plaintiff does allege one
9
misrepresentation. He claims that: he asked his tour guide about a missing key device on his
Segway, the guide told him that “it was not important,” this representation was misleading, and it
was the lack of a key device that caused his injury. Id. ¶¶ 45, 47. Accepting plaintiff’s factual
assertions as true for purposes of this motion, these allegations are sufficient to state a claim
under section 28-3904(e). See Grayson, 15 A.3d at 251; Hughes v. Abell, 2010 U.S. Dist. LEXIS
121622, at 17–18 (D.D.C. Nov. 16, 2010) (refusing to dismiss a claim under Section 28-3904(e)
where a bank representative told a customer that “he did not need to worry about a loan being an
adjustable-rate mortgage” because the statement could have reasonably misled the consumer
about the potential risks associated with the loan).
Defendants characterize plaintiff’s unfair trade practice claims as conclusory, vague, and
lacking factual support. Def.’s Mem. at 9–11. But the Court is required to resolve any factual
inferences in plaintiff’s favor at this stage of the proceedings, and defendants’ blanket statements
belittling the complaint are not enough to meet their burden to establish that they are entitled to
judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 331 (1986) (“The
burden of establishing the nonexistence of a “genuine issue” is on the party moving for summary
judgment.”). So the Court will deny the motion to dismiss and the motion for summary
judgment on Count III at this time without prejudice to the submission of a properly supported
dispositive motion at the close of discovery.
III. Defendants have failed to meet their burden of proving that City Segway
Tours is not a proper party
In his amended complaint, plaintiff alleges that defendant CST licenses its franchise to
defendant CST DC and oversees its management and promotional activities. Am. Compl. ¶ 4.
But in their motion to dismiss, defendants assert that “City Segway Tours is not a viable legal
entity,” Def’s. Mem. at 10, and therefore it is not a proper defendant in this lawsuit. Defendants
10
proffer an affidavit of the President of CST DC, in which he avers: “City Segway Tours is not a
business entity. It is a general term that encompasses City Segway Tours of Washington, DC
LLC” and several other LLCs in other cities, which are all “organized under the laws of
Delaware and have their headquarters in Austin, Texas.” Mebane Aff. ¶ 4. Defendants assert
that the CST office in Texas is simply where all of the high level officers of the individual City
Segway Tours LLCs, including CST DC, sit. Mebane Aff. ¶ 6. The President of the DC LLC
states that he and other officers of CST DC and the other LLC’s “direct, control and coordinate
the companies’ activities from the headquarters, in Texas.” Id.
In response, plaintiff contends that representations on the CST website and the fact that a
“core management group oversees the operations of each of the limited liability corporations”
supply the necessary proof of CST’s existence as a separate legal entity. 3 Pl.’s Opp. at 13. He
points out that defendants have not disclosed any financial statement showing the ownership of
CST DC and, therefore, have not shown that CST is unrelated to CST DC. 4 Pl.’s Opp. at 2–3.
Neither party has provided the Court with any corporate formation documents or state
registration records that would clarify the issue.
A corporation’s capacity to sue or be sued is determined by the law under which it was
organized. Fed. R. Civ. P. 17. This Court “recognizes foreign LLCs and applies the foreign
jurisdiction’s law to their formation, internal affairs, and the liability of their members and
managers.” Ass’n of Merger Dealers, LLC v. Tosco Corp., 167 F. Supp. 2d 65, 72 (D.D.C.
3 Plaintiff also cites a “letter of July 9, 2010 prepared by the supposed non-entity,” but that
letter is not a part of the Court’s record.
4 City Segway Tours of D.C., LLC did file a Certificate of Disclosure pursuant to LCvR
7.1 on May 2, 2011, which states that there are no parent companies, subsidiaries, or affiliates
associated.
11
2001), citing D.C. Code § 29-1052. Under Delaware law, a franchisor may be vicariously liable
for the acts of its franchisee. Billops v. Magness Const. Co., 391 A.2d 196, 197 (Del. 1978)
(holding that a franchisor may be vicariously liable for the acts of a franchisee if they have an
agency relationship); see also Fasciana v. Elec. Data Sys. Corp., 829 A.2d 160, 169 (Del. Ch.
2003) (explaining that under agency liability, the agent must have “the power to act on behalf of
the principal with third persons,” internal quotation marks omitted). Therefore, because the
Court must construe the amended complaint liberally in plaintiff’s favor, the Court finds that the
amended complaint sufficiently alleges that defendant CST is an independent entity that can be
sued and will not dismiss CST from the case under Rule 12(b)(6).
It is possible that this is a matter that is amenable to summary judgment, but to date,
defendants have failed to meet their burden to demonstrate that the issue can be resolved as a
matter of law. At this point, there is a genuine factual dispute over CST’s legal status and its
relationship to CST DC, and neither party has provided the Court with the kind of documentation
that would allow resolution as a matter of law. 5
Therefore, the Court will deny the motion to dismiss or in the alternative for summary
judgment as to CST without prejudice to any future dispositive motions.
5 Examples of documentation that parties might produce in discovery include a certificate
of registration for CST DC or a franchise agreement. See Billops, 391 A.2d at 197–98.
12
CONCLUSION
For the foregoing reasons, the Court will grant with prejudice defendants’ partial motion
to dismiss or in the alternative for summary judgment with respect to Count II, and deny it with
respect to Count III; and will deny defendants’ motion to dismiss defendant City Segway Tours
from the remaining counts. A separate order will issue.
AMY BERMAN JACKSON
United States District Judge
DATE: November 28, 2011
13