Luigino's Int'l, Inc. v. Miller Int'l Foods, Inc. , 311 F. App'x 289 ( 2009 )

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 08-13663 FEBRUARY 11, 2009
________________________ THOMAS K. KAHN
CLERK
D. C. Docket No. 07-01379-CV-ODE-1
LUIGINO'S INTERNATIONAL, INC.,
a Florida corporation,
Plaintiff-Appellant,
versus
JAMIR MILLER,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
_________________________
(February 11, 2009)
Before BIRCH and BARKETT, Circuit Judges, and KORMAN,* District Judge.
PER CURIAM:
*
Honorable Edward Korman, United States District Judge for the Eastern District of New
York, sitting by designation.
Appellant Luigino’s International, Inc. (“Luigino’s”), a Florida frozen food
corporation, appeals the district court’s order dismissing with prejudice its fraud
claim against Jamir Miller (“Miller”), the Chairman and Chief Executive Officer of
Miller International Foods, Inc. (“Miller International”), a Georgia frozen food
company. The district court held that Luigino’s fraud claim was barred under
Florida’s economic loss rule, which prohibits claims in tort for damages which are
the same as those for breach of contract. On appeal, Luigino’s argues that: (1) the
district court should have applied Georgia law instead of Florida law, (2) the
economic loss rule does not apply, and (3) Luigino’s should be permitted to amend
its complaint. We agree with the district court that Florida law governs but
disagree with its ruling that the economic loss rule bars Luigino’s fraud claim.
Because Luigino’s was not in a contractual relationship with Miller and because
the fraud alleged was in the inducement and not in the performance, the economic
loss rule does not apply under Florida law. Accordingly, we AFFIRM in part and
VACATE and REMAND in part for further proceedings.
I. BACKGROUND
On 26 March 2007, Luigino’s signed a written lease agreement with Miller
International whereby Luigino’s would lease space in a large food production
facility (“the plant”) located in Lithonia, Georgia that was purportedly owned by
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Miller International. See R1-1, Exh. F at 1, 11. Miller was not a named party to
the contract but signed the agreement on behalf of the corporation, Miller
International, as its Chairman and CEO. Id. at 10.
In June 2007, Luigino’s sued Miller International and Miller in the Northern
District of Georgia.1 See R1-1. Counts one and two of the complaint were claims
for specific performance and breach of contract against Miller International only.
Id. at 11-15. Count three was a claim for fraud against both Miller International
and Miller. Id. at 15-18. Specifically, count three alleged that Miller International
and Miller knowingly made numerous false statements of material fact regarding
their intention to honor the lease agreement and Miller International’s ownership of
the plant. Although both Miller and the lease agreement stated that Miller
International owned the plant, the plant was in fact owned by another company
controlled by Miller called JM Real Estate Holdings, LLC. Id. at 17. Luigino’s
alleged that Miller International and Miller made these false representations in
order to “extort a partnership with Luigino’s” and “with the express intent and
purpose that Luigino’s would rely upon such misrepresentations.” Id. Luigino’s
claimed that its damages included in part the multiple contracts and commitments
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Luigino’s previously filed suit against Miller International and Miller in the Middle
District of Florida but the action was dismissed for lack of personal jurisdiction. See Luigino’s’s
Int’l, Inc. v. Miller Int’l Foods, Inc., No. 6:07-cv-769-Orl-31KRS, 2007 WL 1576363, at *3
(M.D. Fla. May 30, 2007).
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that it had made with customers, suppliers, manufacturers, and distributors relating
to the lease agreement. Id. at 18.
On 4 October 2007, the district court granted Miller International and
Miller’s partial motion to dismiss the counts of specific performance and fraud for
failure to state a claim for relief under Federal Rule of Civil Procedure 12(b)(6).
See R1-21. With respect to the fraud claim, the court held that Florida’s economic
loss rule barred the claim and that the exception of fraudulent inducement did not
apply. Id. at 11-13. This was because the court found that Luigino’s primary
claim – that Miller International and Miller lied about ownership of the plant – was
directly related to Miller International’s ability to lease the plant. Id. at 12-13. The
district court concluded that Luigino’s fraud allegations were so “inextricably tied
to Defendant’s performance under the Lease Agreement, that a claim in tort would
essentially duplicate [Luigino’s] claim for breach of contract.” Id. at 13.
Accordingly, the court dismissed Luigino’s fraud claim against both Miller
International and Miller. Id.
The only remaining claim was for breach of contract against Miller
International – the only putative contracting party among the defendants. On 27
May 2008, the district court entered final judgment for Luigino’s against Miller
International for a total of $6,526,821, including attorneys’ fees. See R1-41 at 1-2.
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Based on the court’s October 2007 order, the court dismissed Luigino’s claims
against Jamir Miller with prejudice and ordered that Luigino’s shall take nothing
against Miller individually. Id. at 2.
Luigino’s then filed this appeal from the district court’s final judgment
dismissing with prejudice the fraud claim against Miller. Miller International is
not a party to this appeal.
II. DISCUSSION
We review de novo a claim dismissed pursuant to Rule 12(b)(6) for failure
to state a claim for relief. See Glover v. Liggett Group, Inc., 459 F.3d 1304, 1308
(11th Cir. 2006) (per curiam). In deciding whether a complaint survives a motion
to dismiss, the court must assume that “all the allegations in the complaint are true
(even if doubtful in fact).” Bell Atl. Corp. v. Twombly, 550 U.S. 544, ___, 127 S.
Ct. 1955, 1965 (2007). Although the complaint does not need detailed factual
allegations, there “must be enough to raise a right to relief above the speculative
level.” Id. at ___, 127 S. Ct. at 1965.
A. Choice of Law
Under Georgia’s choice of law doctrine of lex loci delictis, the law of the
state where the injury occurred governs the fraud action. See Int’l Bus. Machines
Corp. v. Kemp, 536 S.E.2d 303, 306 (Ga. App. 2000). An exception to this rule is
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where the foreign state’s law contravenes Georgia’s established public policy. See
Alexander v. Gen. Motors Corp., 466 S.E.2d 607, 609 (Ga. App. 1995), rev’d on
other grounds, Alexander v. Gen. Motors Corp., 475 S.E.2d 123, 123-24 (Ga.
1996) (holding that the Court of Appeals correctly stated the public policy
exception but erroneously concluded that the exception did not apply). “The
burden is on the party seeking to establish the public policy exception.”
Alexander, 466 S.E.2d at 609.
Luigino’s does not dispute that the injuries occurred in Florida but it argues
that Florida law should still not apply because Florida’s economic loss rule violates
Georgia’s public policy. We disagree. Both Florida and Georgia have an
economic loss rule which generally prohibits a contracting party from suing in tort
for only economic damages. See Gen. Elec. Co. v. Lowe’s Home Ctrs. Inc., 608
S.E.2d 636, 637 (Ga. 2005) (“The ‘economic loss rule’ generally provides that a
contracting party who suffers purely economic losses must seek his remedy in
contract and not in tort.”); Indem. Ins. Co. of N. America v. American Aviation,
Inc., 891 So. 2d 532, 536 (Fla. 2004) (tort action to recover solely economic
damages is barred where parties are in contractual privity). The policy
considerations underlying both rules are the same – to prevent a plaintiff from
recovering duplicative damages for the same wrongdoing. See Gen. Elec. Co., 608
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S.E.2d at 639 (economic loss rule “avoids the unfairness to defendants that would
come with duplicative liability for the same damage”); American Aviation, 891 So.
2d at 536 (“‘Where damages sought in tort are the same as those for breach of
contract a plaintiff may not circumvent the contractual relationship by bringing an
action in tort.’”) (citation omitted).
Further, as the district court pointed out, both Georgia and Florida law
recognize an exception to the economic loss rule for injuries that occur
independently of the contract. See O.C.G.A. § 51-1-11(a) (2000) (“[I]f the tort
results from the violation of a duty which is itself the consequence of a contract,
the right of action is confined to the parties and those in privity to that contract,
except in cases where the party would have a right of action for the injury done
independently of the contract . . . ."); American Aviation, 891 So. 2d at 537(“Although parties in privity of contract are generally prohibited from recovering
in tort for economic damages, we have permitted an action for . . . torts committed
independently of the contract breach, such as fraud in the inducement.”). Contrary
to Luigino’s contention, Georgia law does not unequivocally “hold persons making
fraudulent statements in business settings liable, despite contractual relationships.”
Appellant’s Brief at 20; see, e.g., ServiceMaster Co., L.P. v. Martin, 556 S.E.2d
517, 523 (Ga. App. 2001) (fraud claim properly dismissed because the alleged
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fraudulent statements did not induce plaintiff to provide any services and therefore
could not “convert a claim in contract into a discrete claim in tort”).
Given the similarities between Georgia and Florida law, the district court
correctly concluded that Florida’s economic loss rule does not contravene
Georgia’s public policy and that Florida law should apply under the doctrine of lex
loci delictis. Accordingly, we affirm that aspect of its judgment.
B. Application of Florida’s Economic Loss Rule
Although the district court correctly determined that Luigino’s fraud claim is
governed by Florida law, it erred in applying the economic loss rule with respect to
Miller. The Supreme Court of Florida has expressly limited the economic loss rule
to situations “where the parties are either in contractual privity or the defendant is a
manufacturer or distributor of a product, and no established exception to the
application of the rule applies.” American Aviation, 891 So. 2d at 534. In
American Aviation, the parties were not in contractual privity and the defendant
was neither a manufacturer nor distributor of a product. Id. Accordingly, the
plaintiff’s negligence action was not barred by the economic loss rule. Id.Here, there is no contractual privity between Luigino’s and Miller because
the only named parties to the lease agreement are Luigino’s and Miller
International. Luigino’s complaint does not aver that it had a contractual
8
relationship with Miller and it did not file its claims for specific performance and
breach of contract against Miller personally. In the absence of contractual privity
between Luigino’s and Miller, Florida’s economic loss rule does not apply. See
id.; accord Advisor’s Capital Investments Inc., v. Cumberland Cas. & Sur. Co., No.
8:05-CV-404-T-23MAP, 2007 WL 220189, at *2 n.5 (M.D. Fla. Jan. 26, 2007)
(economic loss rule does not bar claims of fraudulent inducement and negligent
misrepresentation because plaintiffs and defendants were not in contractual
privity); McLeod v. Barber, 764 So. 2d 790, 792 (Fla. App. 2000) (“[T]he law is
clear that the economic loss doctrine does not apply to tort claims where there is no
contractual relationship between the parties.”); Williams v. Bear Stearns & Co.,
725 So. 2d 397, 399 (Fla. App. 1998) (economic loss rule does not apply to tort
claims of negligent misrepresentation and breach of fiduciary duty against three
defendants who had no contractual relationship with the complaining party). The
district court therefore erroneously dismissed Luigino’s fraud claim against Miller
on this basis.
We recognize that contractual privity may not be required when a tort action
is barred against a corporation under the economic loss rule and its corporate
employee is being sued for the same tortious conduct. See Vesta Constr. &
Design, L.L.C. v. Lotspeich & Assoc., Inc., 974 So. 2d 1176, 1181 (Fla. Dist. Ct.
9
App. 5 2008); see also Ben-Yishay v. Mastercraft Dev., LLC, 553 F. Supp. 2d
1360, 1370-71 (S.D. Fla. 2008). In Vesta, the Fifth District correctly noted the
distinction in Florida law between misrepresentations which occur during the
performance of the contract and those which are independent of the contract, such
as those made to induce a party to enter the contract on behalf of the company. See
Vesta, 974 So. 2d at 1181-82. In the latter case (misrepresentations made
independent of the contract), the economic loss rule does not apply to bar a tort
claim. See id. at 1182. Because the employee’s alleged misrepresentations in
Vesta occurred during the performance of the contract, however, the economic loss
rule applied to bar a negligence suit against that employee. See id. In Ben-Yishay,
the court concluded that the plaintiffs’ fraudulent inducement claims were not
independent of their breach of contract claims because the alleged
misrepresentations consisted of promises made in the agreement and a merger
clause restricted reliance on prior representations. See Ben-Yishay, 553 F. Supp.
2d at 1370. Accordingly, the court ruled that because the economic loss rule
barred claims of fraudulent misrepresentation against the corporations involved in
the contract, it likewise barred those same claims against an employee of those
companies. See id. at 1371.
Unlike the contract here, however, Vesta and Ben-Yishay involved contracts
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capable of performance. The contract between Luigino’s and Miller International
could not be performed under any circumstances because Miller International did
not own the property purportedly leased. Under Georgia law, which governs
whether Luigino’s was entitled to specific performance of the contract, a court
cannot order “the specific performance of a contract wherein the purported vendor
agrees to sell land which belongs to another.” Viola E. Buford Family Ltd. P’ship
v. Britt, 642 S.E.2d 383, 384 (Ga. Ct. App. 2007) (quotation marks omitted). The
contract was thus totally incapable of performance, which is why the district court
dismissed Luigino’s claim for specific performance. See R1-21 at 3-7. The
district court nevertheless concluded that the economic loss rule applied to Miller
International based on its erroneous finding that Luigino’s fraud claim “relates to
Defendants’ performance of the contract.” See id. at 12-13. Contrary to the
court’s finding, the fraud was manifestly in the inducement into a non-performable
contract – not in its performance. However, that ruling by the district court as to
Miller International is not before us.
Since the fraud in this case was in the inducement, the liability for such
tortious conduct was chargeable jointly and severally to Miller and Miller
International. Application of the economic loss rule to bar Luigino’s fraud in the
inducement claim against Miller individually was error. As noted above, there was
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no privity between Miller and Luigino’s which is a prerequisite to application of
the contractual privity economic loss rule. The district court’s uncontested
erroneous finding of fraud in the performance with respect to Miller International –
which triggers application of the economic loss rule – cannot be used to justify
application of that rule against Luigino’s in its claim of fraud in the inducement (an
exception to the economic loss rule) against Miller individually. Any concern
about a double recovery vis-a-vis Miller individually is satisfied by the hornbook
text rule that “[w]hen payment of the judgment in full is made by the judgment
debtor, there is no doubt that the plaintiff is barred from a further action against
another who is liable for the same damages, or from enforcement of another
judgment against the other.” See Keeton et al., Prosser & Keeton on the Law of
Torts § 48 (5th ed. 1984). Thus, to the extent the damages overlap, Luigino’s
cannot recover twice. In light of our decision, we decline to address at this
juncture Luigino’s argument that it should be permitted to amend its complaint.
III. CONCLUSION
Luigino’s appeals the dismissal of its fraud claim against Miller. We
AFFIRM the district court’s judgment as to the application of Florida law.
However, we conclude that the district court erroneously dismissed this claim
under Florida’s economic loss rule. Given that Luigino’s had no contractual
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relationship with Miller and the fraudulent misrepresentations occurred in the
inducement of the contract, the economic loss rule does not apply to bar Luigino’s
fraud claim against Miller. Accordingly, we VACATE and REMAND for further
proceedings consistent with this opinion on that issue.
AFFIRMED in part; VACATED and REMANDED in part.
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