United States District Court, S.D. Georgia, Waycross Division
GODBEY WOOD, JUDGE
before the Court is Defendant Terex USA, LLC d/b/a Terex
Environmental Equipment's ("Defendant") Motion
for Partial Judgment on the Pleadings (Dkt. No. 33) . The
motion has been fully briefed and is now ripe for decision.
For the reasons stated below, the Motion for Partial Judgment
on the Pleadings (Dkt. No. 33) will be DENIED.
is a Connecticut-based company which sells industrial wood
chippers. Plaintiffs are both residents of Georgia. On or
around September 6, 2012, Plaintiff Row Equipment, Inc.
("Row") entered into a financing contract with
Terex Financial Services, Inc. ("Terex
Financial") to purchase an industrial wood chipper
("Chipper 1") manufactured by Defendant. Dkt. No.
15 ¶ 8. Plaintiff John James ("James")
personally guaranteed the contract. Id. ¶ 9.
Plaintiffs allege that Chipper 1 was defective. Row later
purchased another industrial wood chipper ("Chipper
2") from Defendant over a year later. Id.
¶ 15. James also personally guaranteed this contract.
Plaintiffs allege that Chipper 2 was also defective.
Plaintiffs allege that Defendant knew that both Chipper 1 and
Chipper 2 were defective and assured Row that Defendant would
repair the defects. Id. ¶¶ 19, 42.
Plaintiffs now bring this action as a result of
Defendant's contracts and promises to fix the chippers.
Id. ¶ 29.
deciding a Rule 12(c) motion for judgment on the pleadings, a
Court may consider only the pleadings-in this case, the
Complaint and Answer. See Fed.R.Civ.P. 12(c). A
motion for judgment on the pleadings under Rule 12(c) is
governed by the same standards as a motion to dismiss under
Rule 12(b)(6). The main difference between them is that a
motion for judgment on the pleadings is made after an answer
and that answer may also be considered in deciding the
motion. Judgment on the pleadings under Rule 12(c) is
appropriate when there are no material facts in dispute and
the moving party is entitled to judgment as a matter of law.
Mergens v. Dreyfoos, 166 F.3d 1114, 1116-17 (11th
Cir. 1999). A district court must accept as true the facts as
set forth in the complaint and draw all reasonable inferences
in the plaintiff's favor. Randall v. Scott, 610
F.3d 701, 705 (11th Cir. 2010). Although a complaint need not
contain detailed factual allegations, it must contain
sufficient factual material "to raise a right to relief
above the speculative level." Bell Atl. Corp. v.
Twombly, 550 U.S. 54 4, 555 (2007) . At a minimum, a
complaint should "contain either direct or inferential
allegations respecting all the material elements necessary to
sustain a recovery under some viable legal theory."
Fin. Sec. Assurance, Inc. v. Stephens, Inc., 500
F.3d 1276, 1282-83 (11th Cir. 2007) (per curiam) (quoting
Roe v. Aware Woman Ctr. for Choice, Inc., 253 F.3d
678, 683 (11th Cir. 2001)).
seeks dismissal of the Plaintiffs' fraudulent inducement
claim. Specifically, Defendant relies on Georgia's
economic loss rule under O.C.G.A. § 51-1-11. Under
Georgia law, "if 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." O.C.G.A. § 51-1-11.
However, Georgia courts and federal courts in this
jurisdiction have repeatedly recognized an exception to the
economic loss rule for fraudulent inducement claims.
Holloman v. D.R. Horton, Inc., 524 S.E.2d 790, 797
(Ga.Ct.App. 1999) ("The economic loss rule is
inapplicable in the presence of passive concealment or
fraud."); Manhattan Constr. Co. v. McArthur Elec,
Inc., No. 1:06-CV-1512, 2007 WL 295535, at *11-12
(N.D.Ga. Jan. 30, 2007) (denying a motion to dismiss a
conversion claim under the "misrepresentation
exception" to Georgia's economic loss rule where the
complaint alleged that defendant "willfully and
wrongfully violated [plaintiff's] statutory
rights"); see also Rakip v. Paradise Awnings
Corp., 514 F.App'x 917, 921 (11th Cir. 2013)
(finding that Florida courts have consistently held that the
Florida economic loss rule does not bar a claim for civil
theft or conversion).
appears to acknowledge this exception. Dkt. No. 37 pp. 1-2.
However, Defendant points to a number of cases that indicate
that the economic loss rule may still be applicable when a
plaintiff makes a fraudulent inducement claim based upon the
same conduct and asserting the same damages as a breach of
contract/warranty claim. For instance, the Georgia Supreme
Court has explained that the law of warranties, rather than
tort law, is the appropriate mechanism to litigate a
purchaser's disappointed expectations when a product
fails to perform properly. Vulcan Mater. Co., Inc. v.
Driltech, Inc., 306 S.E.2d 253, 256-57 (Ga. 1983).
Indeed, some courts have applied the economic loss rule when
a plaintiff asserts that a tort occurred based on the
same conduct as the plaintiff's breach of
contract claim. Foxworthy, Inc. v. CMG Life Servs.,
Inc., No. 1:11-CV-2682, 2012 WL 1269127 (N.D.Ga. Apr.
16, 2012). In Foxworthy, the plaintiff alleged
negligent misrepresentation and breach of contract based upon
an alleged failure to comply with a specific provision in the
agreement. Id. at *3. The court found that since the
negligent misrepresentation claim was based on a failure to
live up to terms promised in the agreement, the economic loss
rule applied. Id. Therefore, the court dismissed all
tort claims based on the breach of the agreement.
asserts that the holding in Foxworthy indicates that
Plaintiffs' fraud claims are essentially the same as
their breach of contract claims, just repainted with the
brush of tort law, and therefore the economic loss rule
applies. Dkt. No. No. 37 pp. 2-3. This is not so. It is
certainly arguable that Plaintiffs' fraud claim must be
dismissed to the extent it "is not independent of
[their] breach of contract claim." Foxworthy,
2012 WL 1269127, at *3. But Plaintiffs sufficiently allege
conduct which is independent from that associated with their
breach of contract claim. Defendant seems to focus on the
argument that any inducement to enter the contract for the
wood chippers is barred by the economic loss rule because
Plaintiffs also sue for breach of those very contracts. This
may well be, but this is not what Plaintiffs allege.
breach claim asserts that they were sold defective wood
chippers, while their fraudulent inducement claim is based on
later assertions that Defendant would fix the
defective chippers. Dkt. No. 15 ¶¶ 41-48. Indeed,
it is possible that the damages are entirely different as
well. As such, Plaintiffs' fraudulent inducement claim is
based upon post-contractual conduct that may reveal
independent damages, rather than pre-contractual conduct that
essentially constitutes the same action as their breach of
contract claim. Therefore, the economic loss rule does not
apply to this action, and Defendant's motion will be
reasons set forth above, Defendant Terex USA, LLC d/b/a Terex
Environmental Equipment's Motion for Partial Judgment on
the Pleadings (Dkt. No. 33) is hereby