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Faust Printing, Inc. v. Man Capital Corp.

June 16, 2006

FAUST PRINTING, INC. AND FAUST PRINTING PLAINTIFFS
v.
MAN CAPITAL CORP., ET AL. DEFENDANTS.



The opinion of the court was delivered by: Judge Joan B. Gottschall

MEMORANDUM OPINION AND ORDER

Faust Printing, Inc. and Faust Printing (collectively "Faust") sued MAN Capital Corporation ("MAN Capital"), MAN Roland, Inc. ("MAN Roland"), MAN AG ("MAN"), MAN Roland Druckmaschinen AG ("MAN AG"), and Roes 1 through 100 for fraud related to the sale and financing of a printing press. This court's jurisdiction is based on diversity.*fn1 MAN Capital, MAN Roland, and MAN and MAN AG have filed motions to dismiss. For the reasons that follow, MAN Roland's and MAN Capital's motions to dismiss are denied, and MAN's and MAN AG's motion to dismiss for lack of personal jurisdiction is granted.

I. Background

From September 1997 to January 1998, Faust negotiated with MAN Roland for the purchase of a new printing press. MAN Roland proposed to sell Faust a Roland 700 series offset printing press with various options. Faust considered other manufacturers' presses which were less expensive, but MAN Roland representatives told Faust that the MAN Roland press would be a more economical choice because it could produce a higher output and was more efficient than competitors' presses. Faust then prepared a list of performance criteria for the press, and these criteria were incorporated into the subsequent contract between Faust and MAN Roland. Faust also told MAN Roland that installation time and training were important considerations. MAN Roland representatives told Faust that the press would take about four weeks to install and that Faust's employees would be fully trained by the time installation was complete.

On January 23, 2003, Faust entered into the Machinery Contract with MAN Roland.*fn2

Under this contract, Faust agreed to purchase a Roland 700 series offset printing press with various options for $2,569,317. The performance criteria and tests to be performed at the completion of installation were attached to the Machinery Contract as Addendum A. Faust alleges that it was fraudulently induced to enter into the Machinery Contract by MAN Roland's false representations that (1) the press was new, (2) the press could meet the performance criteria, and (3) the press could be installed and Faust's employees trained in the time represented.

At the time of the purchase, Faust sought to finance the purchase of the press through MAN Roland. Faust alleges that MAN Roland representatives stated that MAN Roland had an "in-house" financing department that could provide financing. Faust alleges that MAN Roland and MAN Capital*fn3 represented that they were same company. On January 22, 1998, Faust alleges, it received a lease approval letter from Richard Pierzchala, signing as "General Manager" of MAN Roland. On January 30, 1998, Faust alleges it received a letter from David Zwolinski, Order Administrator at MAN Roland, indicating that financing had been approved and that there existed an assignment by MAN Roland to MAN Finance of the monthly payments due under the Machinery Contract. A Master Lease Agreement ("Lease Agreement") was subsequently executed on February 24, 1998 by Faust and Pierzchala.

Shortly thereafter, on February 27, 1998, Faust received new signature pages to the Lease Agreement from Pierzchala. According to Faust, Pierzchala claimed he had discovered a "typographical error" and requested that Faust sign the new signature pages. Faust claims that Pierzchala told it that if the new pages were not signed, installation of the press would be halted. Faust alleges that the typographical error was in fact a substitution of MAN Finance for MAN Roland as the lessor of the press. Faust alleges that the substitution of MAN Finance as the lessor resulted in the lessor not being subject to the performance criteria of the Machinery Contract. Faust wanted the purchase and lease to be from the same entity, it alleges, so that if the performance standards were not met, it would not be liable for the lease payments. Faust alleges that it was fraudulently induced to enter into the Lease Agreement by MAN Roland and MAN Capital's representations that the same company was providing the press as well as the financing.*fn4

Installation of the press was completed in September 1998. However, Faust alleges, the press failed to perform to specifications, producing substandard quality printings. Despite numerous complaints, Faust alleges that defendants were never able to make the press conform to the performance requirements of the Machinery Contract. Faust also alleges that the press was not new as represented by MAN Roland, but had in fact been previously sold to another company in 1996. During the installation of the press at Faust's facility, it alleges, a MAN Roland employee altered the serial number plate on the press to conceal the age of the press from it.

On November 21, 2001, MAN Capital filed a complaint in Rancho Cucamonga Superior Court in California seeking money damages from Faust and possession of the press because Faust failed to make payments on the lease. Faust filed a cross-complaint alleging fraud. MAN Roland filed a Motion to Dismiss or Stay the Cross-Complaint based on forum non conveniens; the court stayed all proceedings in California and suggested that Faust file an action in Illinois.

On December 27, 2002, Faust filed the instant suit. Faust's original complaint alleged fraud, breach of express warranty, breach of implied warranty, and rescission and breach of contract. On March 25, 2004, this court granted MAN Roland's and MAN Capital's motions to dismiss. The court held that Faust had failed to plead the fraud claim with particularity as required by Federal Rule of Civil Procedure 9(b), and that the remaining claims were time-barred because the suit was initiated after the limitations period in the Machinery Contract had expired.

Faust then obtained leave from the court to file an amended complaint. The amended complaint alleged a single count of fraud against all defendants. Defendants moved to dismiss, and on August 29, 2005, the court granted the motions to dismiss and required that Faust comply with Federal Rule of Civil Procedure 10(b) by "setting forth each alleged act of fraud in a separate count specifically identifying the alleged fraudulent behavior of each individual defendant."

Faust filed a second amended complaint in accordance with the court's order. The second amended complaint alleged fraudulent inducement to enter into the purchase contract against MAN Roland (Count I), fraudulent inducement to enter into the finance transaction against MAN Roland and MAN Capital (Count II), liability as an alter ego against MAN Roland and MAN Capital (Count III), liability as an alter ego against MAN and MAN AG (Count IV). Defendants filed motions to dismiss the second amended complaint. The court dismissed that complaint because it failed adequately to allege the citizenship of Faust Printing, a general partnership. Subsequently, Faust filed a third amended complaint correcting the prior pleading deficiency. Defendants then moved to reinstate their previously filed motions to dismiss, and the court granted the motions to reinstate.

II. Discussion

In reviewinga motion to dismiss for failure to state a claim under Rule 12(b)(6), the court reviews all facts alleged in the complaint and any reasonable inferences drawn from those facts in the light most favorable to the plaintiff. Marshall-Mosby v. Corporate Receivables, Inc., 205 F.3d 323, 326 (7th Cir. 2000). The court will grant the motion only if it appears that the plaintiff cannot prove any set of facts that would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). Furthermore, when a complaint alleges fraud or mistake, the circumstances must be stated with particularity; a plaintiff must plead with specificity the who, what, where, and when of the alleged fraud or mistake. Fed. R. Civ. P. 9(b); Slaney v. Int'l Amateur Athletic Federation, 244 F.3d 580, 597 (7th Cir. 2002).

As an initial matter, Faust did not attach the Machinery Contract or the Lease Agreement to the Third Amended Complaint ("TAC"). MAN Roland attached the Machinery Contract to its motion to dismiss, and MAN Capital attached the Lease Agreement to its motion to dismiss. In determining whether to grant the motions to dismiss, the court may properly consider these contracts because Faust refers to them in the ...


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