Thursday, May 3, 2007

Metro Ready Mix, Inc. v. Essroc Cement Corp. (Maryland U.S.D.C.)(Not Approved for Publication)

Order Signed April 25, 2006--Judge Catherine C. Blake. Not approved for publication.

Metro Ready Mix, Inc. claims damages in a case arising out of contracts for the supply of cement. Metro initially filed a complaint in this court against Essroc Cement Corp. alleging breach of contract and breach of warranty; subsequently it amended the complaint to add allegations of intentional misrepresentation, intentional concealment, negligence, and negligent misrepresentation and to seek punitive damages. This ruling deals with Essroc's motion to dismiss the added claims.

Metro is in the business of supplying and placing ready mix concrete for construction jobs. Cement is a necessary ingredient in order to mix concrete, and for the years leading up to and including 2004, Metro obtained much of its cement from Essroc. In late 2004, Metro bid for, and was awarded, several large contracts for various projects all requiring high-strength concrete. At unclear times between November 2004 and March 2005, Metro and Essroc allegedly entered into oral contracts for the delivery of cement sufficient to cover Metro's needs for these projects. In December 2004 and January 2005, Metro, using cement supplied by Essroc, created concrete mix designs for its large projects. These mix designs received approval from the contractors and from independent testing agencies, certifying that the concrete met strength and other testing requirements.

Beginning in May 2005, Metro began to receive complaints about the strength of its concrete. In December 2005 and January 2006, Metro had its concrete tested, and the tests revealed that the cement supplied by Essroc was defective. As a result of the defective cement, Metro alleges that its customers began terminating their contracts and charging Metro for remedial costs caused by the problematic concrete. Because of the terminated contracts, Metro had to sell off some equipment at a loss, and pay for the cancellation of other leased equipment. Apparently Metro has since been forced to close its business.

Metro alleges that Essroc made misrepresentations inducing Metro to contract with Essroc. Metro representatives met with Essroc representatives in the fall of 2004 and early 2005. At these meetings, Metro alleges that Essroc stated it could provide Metro with the quality and quantity of cement it needed. Metro alleges that when Essroc made these assurances, however, it knew it was not capable of providing safe and suitable cement.

Metro's complaint included claims for intentional misrepresentation, intentional concealment, negligence, and negligent misrepresentation. Metro alleged that Essroc's two main plants were experiencing severe maintenance and quality control problems in the spring of 2005, which brought Essroc's cement in violation of the standards for cement manufacturing established by the American Society for Testing and Materials (ASTM). In its intentional misrepresentation claims, Metro alleges that in 2004 and February 2005, Essroc falsely represented that it was capable of supplying Metro with suitable cement that would meet ASTM standards, and did so "with actual malice, ill will, and spite towards Metro."

In its intentional concealment claim, Metro alleges that Essroc knew and did not disclose the problems at its manufacturing plants. In its negligence claim, Metro alleges that Essroc had a duty to exercise ordinary care in the production of cement, and breached that duty by selling substandard cement. Lastly, in its negligent misrepresentation claim, Metro alleges that Essroc falsely represented that the cement would be safe and suitable for Metro's needs. Essroc moved to dismiss the added claims.

As to the fraud allegations, the Court found that there appears to be no specific evidence or allegation that Essroc did not believe it could fulfill the contracts at the time they were entered or that it was attempting to deceive or defraud Metro with its representations. Thus, it dismissed Metro's claims for fraudulent misrepresentation and fraudulent concealment for failure to meet the specificity requirements of Rule 9(b). Because Metro did not proffer in its opposition or at the hearing any evidence that would support these claims, the Court ruled that no further leave to amend would be granted.

Because it found that the "application of the somewhat uncertain contours of Maryland law" pertaining to negligence and negligent misrepresentation in the context of a business dispute might be assisted by further factual development, and discovery will be proceeding on the contract claims in any event, Essroc's motion to dismiss the negligence and negligent misrepresentation claims were denied, subject to renewal if warranted as a summary judgment motion at the close of discovery.

Finally, because Metro has not alleged facts to show that Essroc acted with "actual malice," the Court dismissed any claim for an award of punitive damages.

The opinion and order are available in PDF.

No comments: