United States District Court, N.D. Illinois, Eastern Division
June 3, 2005.
MIDWEST GENERATION, LLC, Plaintiff,
CARBON PROCESSING AND RECLAMATION, LLC, Defendant.
The opinion of the court was delivered by: ELAINE E. BUCKLO, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff Midwest Generation, LLC ("Midwest") is an independent power
producer engaged in the production and sale of electricity. Midwest alleges
that defendant Carbon Processing and Reclamation, LLC ("Carbon") has
breached an October 2004 contract ("October contract I"), resulting in over
$300,000 in damages. The October contract I provided for the sale of fuel
oil from Midwest to Carbon, in four shipments or "lifts." (The contract was
later modified to include five lifts.) Midwest claims that Carbon took and
paid for the first three lifts, but took the fourth lift without paying for
it.*fn1 The fourth lift, involving approximately 11,812 barrels of fuel
oil, is valued by Midwest at $300,413.72.
Carbon has brought three counterclaims against Midwest. First,
Carbon alleges that Midwest breached the October contract I by increasing the water content of the oil beyond the level
contemplated by the parties. Second, Carbon alleges that Midwest
misrepresented the water content of the oil in the fourth lift.
Third, Carbon alleges that Midwest has breached a second October
2004 contract ("October contract II") to sell Carbon diesel oil.
Midwest moves to dismiss all three counterclaims for failure to
state a claim, pursuant to Fed.R.Civ.P. 12(b)(6). I grant that
motion in part, and deny it in part, for the reasons stated below.
On a motion to dismiss, I accept all well-pleaded allegations
in the complaint as true, Turner/Ozanne v. Hyman/Power,
111 F.3d 1312, 1319 (7th Cir. 1997), and draw all reasonable
inferences in favor of the plaintiffs. Strasburger v. Bd. of
Educ., 143 F.3d 351, 359 (7th Cir. 1998). I grant the motion
only if the plaintiffs can prove no set of facts to support the
allegations in their claim. Id.
Counterclaim Count I alleges that Midwest breached the October
contract I by raising the water content in the fuel oil sold to
Carbon. Carbon alleges that in the pre-contract communications
between the parties, Carbon informed Midwest that, in order to be
acceptable, the fuel oil could have a water content no higher
than 1.1 percent. Carbon further alleges that on delivery, the
fuel oil in the fourth lift was found to have a water content of
7.5 percent. Midwest argues that Count I must fail, as the
contract contemplates a water content greater than 1 percent. The
contract does specifically contemplate the possibility of a water content
greater than 1 percent. However, the contract is silent as to
whether the water content must be no more than 1.1 percent, as
claimed by Carbon, or could be as high as 7.5 percent, as claimed
by Midwest. Further, an analysis of the oil in the tank used for
the fourth lift, referenced within the contract as representing
the quality of the oil to be sold, states that the percentage of
water by distillation in that tank was 1.10 percent. Accepting as
true, as I must, Carbon's allegations of its negotiations with
Midwest regarding this issue, I cannot say that Carbon could
prove no facts to support this claim.
Midwest also moves to strike Carbon's prayer for damages, to
the extent that Carbon seeks consequential and incidental damages
for Midwest's alleged breach of contract. Midwest argues that a
clause in the October contract I prohibits such damages. Carbon
argues only that it might be able to prove facts rendering the
clause inapplicable, with no suggestion of what those facts might
be. Midwest's motion to dismiss Count I is denied, but the
potential damages under that count are limited to those permitted
by the relevant contractual clause.
Counterclaim Count II alleges that Midwest misrepresented the
water content of the oil in the fourth lift, that Midwest knew or
should have known that the water content was greater than was
represented, and that the water content was material to Carbon's agreement to purchase the oil. Midwest argues that Carbon has
failed to plead its claim with the required specificity, pursuant
to Fed.R.Civ.P. 9(b). This specificity requires a litigant to
plead, at a minimum, "the who, what, where, and when of the
alleged fraud." SEC Design Tech., Inc. v. Adept Tech., Inc.,
No. 02-C-8262, 2003 WL 22050779, at *1 (N.D. Ill. Aug. 29, 2003)
(Bucklo, J.) (citing Ackerman v. Northwestern Mut. Life Ins.
Co., 172 F.3d 467, 469 (7th Cir. 1999)). Carbon has not done
so here. Count II alleges in general terms that the water content
of the oil in question was misrepresented to Carbon prior to the
sale and/or delivery. Carbon only alleges in general terms that
Midwest, or "defendant," made these representations, but not more
specifically who made them, or when, or where. This is not
sufficient. SEC, 2003 WL 22050779, at *1. Midwest's motion to
dismiss Count II is granted.
Counterclaim Count III alleges that Midwest breached the
October contract II by refusing to buy a quantity of diesel oil.
Carbon alleges that a contract to buy that oil was formed in an
email sent from Midwest to Carbon on October 22, 2004. Midwest
argues that no contract to buy diesel oil was ever formed between
the parties, and that the email of October 22, 2004 merely
evidenced ongoing negotiations. Midwest argues that essential
terms of a contract are missing from the email, and that Midwest
had no intention of forming a contract with that email. The purported contract is attached to Carbon's counterclaim pleading.
While the email contains a number of essential terms price,
quality of the oil, time for delivery, time for payment a
factual question remains as to whether the parties intended the
document to seal the deal or merely continue negotiations. See
Cohen Dev. Co. v. JMJ Prop., Inc., 317 F.3d 729, 735 (7th
Cir. 2003). While the email also indicates that the parties will
need to complete a sales order and that "[o]ther additional
details may have to be worked out," it is not clear whether those
additional considerations are merely pro forma or if they
indicate that Midwest did not yet consider itself bound. On the
face of the purported contract, I cannot say that Carbon could
prove no set of facts to support its claim. Midwest's motion to
dismiss Count III is denied.