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Invacare Corp. v. Desert Medical Equipment

United States District Court, D. Nevada

January 10, 2017

INVACARE CORPORATION, Plaintiff,
v.
DESERT MEDICAL EQUIPMENT; BRYAN SCHULTZ, Defendants. DESERT MEDICAL EQUIPMENT; BRYAN SCHULTZ, Counterclaimants,
v.
INVACARE CORPORATION, Counterdefendant.

          ORDER

          Gloria M. Navarro, Chief Judge.

         Pending before the Court is the Plaintiff/Counterdefendant Invacare Corporation's (“Plaintiff's”) Motion to Dismiss (ECF No. 12) the Counterclaims (ECF No. 9) filed by Defendants/Counterclaimants Desert Medical Equipment (“Desert Medical”) and Bryan Schultz (“Schultz”) (collectively, “Defendants”). Defendants filed a Response (ECF No. 13), and Plaintiff filed a Reply (ECF No. 14).

         I. BACKGROUND

         This case arises out of an alleged breach of a commercial lease agreement regarding medical equipment. (See Am. Compl., ECF No. 4). On November 25, 2013, Schultz, President of Desert Medical, “entered into a Lease on behalf of Desert Medical with Invacare, agreeing to lease 120 units of Invacare's Leo Model scooters (the “Scooters”) for a term of 36 months” at $3, 609.85 per month (the “Lease”). (Defs.' Ans. & Countercls. 8:2-6, ECF No. 9). Schultz personally guaranteed the Lease. (Id. 8:4 n.1). About a year prior to the execution of the Lease, the United States Food and Drug Administration (“FDA”) issued a recall on the Scooters, about which allegedly Plaintiff knew and Defendants did not. (Id. 8:13-20). Defendants allege that “[s]ometime after the commencement of the Lease . . . it became evident [to them] that the seats on the Scooters were defective.” (Id. 8:7-8). Thereafter, Defendants stopped paying on the Lease. (Id. 9:7-8).

         Plaintiff filed its Complaint in this Court on February 1, 2016. (Compl., ECF No. 1). On the same day, Plaintiff filed its Amended Complaint as a matter of right, alleging the following claims: (1) breach of contract against Desert Medical, (2) breach of guaranty against Schultz, (3) breach of the implied covenant of good faith and fair dealing against both Defendants, and (4) unjust enrichment against Desert Medical. (Am. Compl. 3:16-5:19). On February 29, 2016, Defendants filed their Answer, which also asserted the following Counterclaims: (1) “Fraudulent in the Inducement” and (2) “Unfair Trade Practices pursuant to 73 Pa. Stat. Ann. § 201-3.” (Defs.' Ans. & Countercls. 9:14-10:18). On March 24, 2016, Plaintiff filed the instant Motion to Dismiss Defendants' Counterclaims. (ECF No. 12).

         II. LEGAL STANDARD

         Dismissal is appropriate under Rule 12(b)(6) where a pleader fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A pleading must give fair notice of a legally cognizable claim and the grounds on which it rests, and although a court must take all factual allegations as true, legal conclusions couched as a factual allegations are insufficient. Twombly, 550 U.S. at 555. Accordingly, Rule 12(b)(6) requires “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. “To survive a 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, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. This standard “asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. Rule 12(b)(6) applies equally to a counterclaim. See King County v. Rasmussen, 299 F.3d 1077, 1090 (9th Cir. 2002) (affirming 12(b)(6) dismissal of defendant's counterclaims).

         “Generally, a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion . . . . However, material which is properly submitted as part of the complaint may be considered on a motion to dismiss.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990) (citations omitted). Similarly, “documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6) motion to dismiss” without converting the motion to dismiss into a motion for summary judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994). Under Federal Rule of Evidence 201, a court may take judicial notice of “matters of public record.” Mack v. S. Bay Beer Distrib., 798 F.2d 1279, 1282 (9th Cir. 1986). Otherwise, if the district court considers materials outside of the pleadings, the motion to dismiss is converted into a motion for summary judgment. See Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 925 (9th Cir. 2001).

         If the court grants a motion to dismiss for failure to state a claim, leave to amend should be granted unless it is clear that the deficiencies of the complaint cannot be cured by amendment. DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992). Pursuant to Rule 15(a), the court should “freely” give leave to amend “when justice so requires, ” and in the absence of a reason such as “undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of the amendment, etc.” Foman v. Davis, 371 U.S. 178, 182 (1962).

         III. DISCUSSION

         Plaintiff seeks to dismiss Defendants' first counterclaim, fraudulent inducement, because it is “both time barred and insufficiently pled.” (Pl.'s Mot. to Dismiss Countercls. (“Pl.'s MTD Countercls.”) 4:11-12, ECF No. 12).[1]

         A. Statute of Limitations

         First, the parties do not dispute that the Pennsylvania two-year statute of limitations for fraud applies here. See 42 Pa. Cons. Stat. § 5524(7). “[I]n cases of fraud[, ] the statute [of limitations] runs only from discovery, or from when, with reasonable diligence, there ought to have been discovery.” Deemer v. Weaver, 187 A. 215, 216 (Pa. 1936). “Reasonable diligence is not an absolute standard, but is what is expected from a party who has been given reason to inform himself of the facts upon which his right to recovery is premised.” Fine v. Checcio, 870 A.2d 850, 858 (Pa. 2005). Specifically, “[w]e evaluate the [party's] conduct in terms of what he should have known at a particular time by following a course of reasonable diligence. If a party has the means of discovery within his power but neglects to use them, his claim will still be barred.” Burnside v. Abbott Labs., 505 A.2d 973, 988 (Pa. Super. Ct. 1985). “[T]his question involves a factual determination as to whether a party was able, in the exercise of reasonable diligence, to know of his injury and its cause, ” unless “reasonable minds would not differ in [this] finding.” Fine, 870 A.2d at 858-59. In other words, “[o]nly where the facts are undisputed and lead unerringly to the conclusion that the length of time it took the [party] to discover the injury or its cause was unreasonable may the question be decided as a matter of law on summary judgment.” Burnside, 505 A.2d at 988.

         Here, Defendants' Counterclaim asserts that “[t]o induce Desert Medical to enter into the Lease, Plaintiff purposefully failed to inform Desert Medical of the FDA's recall on the Scooters.” (Defs.' Ans. & Countercls. 9:18-19). Defendants contend that they discovered the Scooters' defects ...


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