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Sonju Industrial, Inc. v. Precise Solutions Corp.

United States District Court, District of Montana, Missoula Division

April 4, 2014



Dana L. Christensen, Chief District Judge

Defendant Precise Solutions Corporation, d/b/a Eurotech Elite, moves to dismiss Counts III and V-X of Plaintiff's complaint. Defendant also seeks dismissal of Plaintiff SI Defense, Inc. because it was not a party to the contract in dispute or a third-party beneficiary. Plaintiffs Sonju Industrial, Inc. and SI Defense respond that under Montana law, their tort claims survive and SI Defense is a third-party beneficiary to the contract. Defendant’s motion will be granted as to SI Defense regarding Counts I-IV and denied as to dismissal of Plaintiffs’ tort claims.

I. Background

Sonju Industrial and SI Defense are Montana corporations and Eurotech is a Michigan corporation with its principal place of business in Florida. A minimum of $98, 866 is at stake, so diversity jurisdiction exists pursuant to 28 U.S.C. § 1332. Sonju Industrial is an aerospace manufacturer that manufactures parts for the military, commercial aviation, firearms, medical, oil and gas, and semiconductor industries. Sonju Industrial developed sister corporation SI Defense in 2008 to produce rifles and related accessories and components. Sonju Industrial contracted with Eurotech to buy a Model B44SY2 Trofeo 11-Axis Universal Turning/Milling Center (“machine”) on February 6, 2013. The machine was intended to assist in production of .223 and .308 caliber bolts and bolt components. The contract was governed by Eurotech’s standard terms and conditions, an express warranty, and a guarantee. Sonju agreed to pay $494, 033 for the machine with 20% down, 50% upon delivery, and 30% upon completion of “turnkey.” The parties agree that there were delays in the delivery and set-up of the machine and that the machine was never “turnkey” as contractually agreed upon. The parties also agree that Plaintiff SI Defense is not a named party to the contract, but Plaintiffs contend that it is a third-party beneficiary because both parties understood that the agreement was to benefit SI Defense.

Sonju made a down payment of $98, 866, but did not make the second or third payments. After two Eurotech engineers failed to get the machine running, Sonju formally rejected the machine by letter and email, arranging to have Eurotech remove the machine from Sonju’s facility. Plaintiffs contend that Eurotech issued them a refund check once the machine was on the moving truck and out of Plaintiffs’ facility at 4:00 p.m. on October 25, 2013. Eurotech then sent Sonju an email at 4:19 p.m. that same day, stating that the refund check was for the wrong amount, so it was going to cancel the check and send a new check by October 29, 2013. However, instead of sending a corrected check, Eurotech sent Sonju an invoice for $77, 681.01 on October 29, 2013.

Plaintiffs filed their complaint in Flathead County on November 21, 2013, alleging the following: Count I Breach of Contract; Count II Breach of Express Warranty; Count III Third-Party Beneficiary Breach of Contract; Count IV Breach of Implied Covenant of Good Faith and Fair Dealing; Count V Negligent Misrepresentation; Count VI Constructive Fraud; Count VII Actual Fraud; Count VIII[1] Negligence; Count IX Tortious Interference with Contractual or Business Relations; and Count X Punitive Damages. Defendant removed the action to this Court on January 3, 2014, and moved to dismiss various counts of the complaint and SI Defense as a party on January 10, 2014.

II. Standard of Review

To survive a motion to dismiss for failure to state a claim, a complaint must allege sufficient facts “to state a claim for relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Commonly known as notice pleading, the standard for pleadings set by the Federal Rules dictates that, in order to be entitled to the presumption of truth, “a complaint . . . may not simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to give fair notice to enable the opposing party to defend effectively.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). Courts generally limit their considerations to the allegations in the complaint. Twombly, 550 U.S. at 555-559. Those allegations are accepted as true and viewed in a light most favorable to the plaintiff. Lazy Y Ranch Ltd. v. Behrens, 546 F.3d 580, 588 (9th Cir. 2008).

When “matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.” Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). However, a court may consider material properly submitted as part of the complaint without converting the motion to one for summary judgment. United States v. Corinthian Colleges, 655 F.3d 984, 999 (9th Cir. 2011). The Court may also consider “unattached evidence on which the complaint ‘necessarily relies’ if: (1) the complaint refers to the document; (2) the document is central to the plaintiff's claim; and (3) no party questions the authenticity of the document.” Id.

III. Discussion

A. Third Party Beneficiary

Defendant argues SI Defense should be dismissed from the complaint because it was not a third party beneficiary to the contract. The parties agree that Florida law applies to the contract claims, Counts I-IV of the complaint. The parties disagree on what evidence the Court may consider in determining whether SI Defense is a third party beneficiary.

“If the intent of the contracting parties is not clear from the contract, the Court may consider extrinsic evidence of the parties’ intent. Such evidence must establish that the parties to the contract actually and expressly intended to benefit the third party; it is not sufficient to show only that one of the contracting parties unilaterally intended some benefit to the third party.” Rebman v. Follett Higher Educ. Group, Inc., 248 F.R.D. 624, 631 (M.D. Fla. 2008). The intent of the parties “is the key to determining whether a third party is an intended (i.e. donee or creditor) or only an incidental beneficiary.” Id. at 630. Intent is generally specific and clearly expressed in the contract granting the third party contractual rights. Id. However, a third party need not necessarily be named in the contract to infer intent. Steadfast Ins. Co. v. Corporate Protection Sec. Group, Inc., 554 F.Supp.2d 1335, 1338 (S.D. Fla. 2008). If a third party not named in the contract is a member of the limited class intended to benefit from the contract, the third party may be a legal beneficiary.

When the precontract dealings and the allegations in the complaint show that the breach of contract deprives a third party of the benefit of the contract, the third party has a valid cause of action as an intended third party beneficiary. Warren v. Monahan Beaches Jewelry Center, Inc., 548 So.2d 870, 872 (Fla. App. 1989). In Warren, a woman who received an engagement ring that turned out to be a cubic zirconia stone instead of a diamond was held to be a third party beneficiary of the contract between her fiancée and the jewelry store because the salesperson knew the ring was for her and she brought the ring into the store after she received it. Id. Thus, the Florida Appellate Court held that the district court improperly granted the jewelry store’s motion to dismiss the fiancée because she was an intended third party beneficiary of the contract. Id.

Similarly, when “the precontract dealings, the contract itself, and the subsequent dealings between the parties show that the clear intent and purpose of the contract was to directly and substantially benefit” the third party, it is an intended beneficiary to the contract. Goodell v. K.T. Enterprises, Ltd., 394 So.2d 1087, 1089 (Fla. App. 1981). In Goodell, the contract indicated that the beneficiary and contracting party decided that the contracting party should take title, and also ...

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