The opinion of the court was delivered by: David R Herndon Chief Judge United States District Court
Now before the Court is Defendants' Motion to Dismiss Counts 1 and 2 of Plaintiffs' Fourth Amended Complaint, made pursuant to FEDERAL RULES OF CIVIL PROCEDURE 9(b) and 12(b)(6) (Doc. 195). Count 1 of Plaintiffs' Fourth Amended Complaint (Doc. 183) pleads a claim of fraud in the inducement against Defendants and seeks rescission of contracts (Id. at ¶¶ 71-80). Count 2 pleads a claim of promissory fraud against Defendants (Id. at ¶¶ 81-85). Defendants advocate for the dismissal of both Counts 1 and 2 pursuant to Rule 9(b), arguing that Plaintiffs have failed to plead either claim with the requisite particularity.
Defendants further argue that Plaintiffs have failed to state a claim for which relief can be granted, advocating for a dismissal of Counts 1 and 2 pursuant to Rule 12(b)(6) because the allegations do not show Defendants' material misstatements of fact, Plaintiffs' justifiable reliance thereon, Plaintiffs' resultant damages or that Defendants employed a scheme or device to defraud Plaintiffs.
In their Response (Doc. 199), Plaintiffs argue that the allegations in their Fourth Amended Complaint are plead with sufficient particularity required of fraud claims and that they have also plead the necessary elements their fraud in the inducement/rescission claim as well as their promissory fraud claim. Defendants have filed a Reply (Doc. 202) to the Response, which has also been considered in the Court's review of the Parties' briefings. For the reasons discussed herein, the Court finds Plaintiffs' pleadings are sufficient to withstand Defendants' arguments for dismissal at this juncture.
This case centers around two lease agreements concerning the mining rights of coalbed methane ("CBM"), collectively called the "CBM Leases." Plaintiffs' Fourth Amended Complaint (Doc. 183) alleges claims for fraud in the inducement, promissory fraud, breach of contract, and tortuous interference with a contract. Plaintiffs seek recision of certain contracts transferring coal mining rights (or mining options) for their various Illinois properties to Defendants. Additionally, Plaintiffs seek monetary damages for Defendants' alleged breach of the CBM Leases as well as punitive damages for Defendants' alleged fraudulent and tortuous actions.
When ruling on a motion to dismiss for failure to state a claim under FEDERAL RULE OF CIVIL PROCEDURE 12(b)(6), the Court must look to the complaint to determine whether it satisfies the threshold pleading requirements under FEDERAL RULE OF CIVIL PROCEDURE 8. Rule 8 states that a complaint need only contain a "short and plain statement of the claim showing that the pleader is entitled to relief." FED.R.CIV. P. 8(a)(2). The Supreme Court held that Rule 8 requires a complaint to allege "enough facts to state a claim to relief that is plausible on its face" to survive a Rule 12(b)(6) motion. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). In other words, the Supreme Court explained it was "a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' " by providing "more than labels and conclusions," because "a formulaic recitation of the elements of a cause of action will not do . . . ." Id. at 555-56 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)). Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.' Ashcroft v. Iqbal, --- U.S.---, --- 129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 557).
Recently, in Iqbal, the Supreme Court made clear that the federal pleading standard under Rule 8 as discussed in its Twombly opinion applies "for all civil actions." Id. at ---, 129 S.Ct. at 1953. Iqbal identified the "two working principles" underlying the decision in Twombly: (1) "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice;" and (2) "only a complaint that states a plausible claim for relief survives a motion to dismiss." Id. at ---,129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 555-56).In short, a court should only assume to be true a complaint's well-pleaded factual allegations, and not its mere legal conclusions, when determining whether such allegations plausibly give rise to relief. Id. at ---, 129 S.Ct. at 1950.
FEDERAL RULE OF CIVIL PROCEDURE 9(b) requires allegations of fraud or mistake to be plead with particularity by including "'the who, what, when, where and how . . . .'" Windy City Metal Fabricators & Supply, Inc. v. CIT Tech. Fin. Serv., Inc., 536 F.3d 663 (7th Cir. 2008) (quoting DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990)).The purpose of Rule 9(b), in regards to fraud claims, "is to minimize the extortionate impact that a baseless claim of fraud can have on a firm or an individual" because, if a fraud claim is too vague during discovery, the claim "will stand unrefuted, placing what may be undue pressure on the defendant to settle the ...