Federal Judiciary

Motion to Dismiss for Failure to State a Claim Granted in Class Action

By Michael Smith

Today was certainly the day to be a defendant in Marshall!  After transferring a patent case to Delaware Judge Ward today granted the defendant's motion to dismiss the plaintiff's class action complaint for failure to state a claim in Oden v. Vanguard, 2:07cv261. 
This putative class action case challenges the defendant?s contractual provisions governing refueling of rental vehicles. The defendant moved to dismiss the complaint for failure to state a claim.  Judge Ward granted the motion, but granted Plaintiff leave to file an amended complaint "if she is able" to state a valid claim under Texas law within fourteen (14) days from the date of this order.
Vanguard?s principal argument (articulated by my brilliant cocounsel James L. Kincaid and Michael R. Pacewicz of the Crowe & Dunlevy firm out of Tulsa) was that the Texas UCC provisions do not create an affirmative cause of action for ?penalty? under the alleged facts. Rather, under the Texas UCC, an argument that a liquidated damages provision is a penalty or is substantively unconscionable is an affirmative defense to its enforcement in a suit on the lease contract. Further, Vanguard contended that the plaintiff has not sufficiently stated a claim for breach of contract or unjust enrichment.
This is one of the first opinions I have seen from an Eastern District judge citing (albeit in boilerplate) the Supreme Court's recent opinion in Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955 (2007) on the standards applicable to motions to dismiss.  Judge Ward wrote that "[t]he complaint is construed in favor of the plaintiff, and all facts pleaded in the complaint are accepted as true. (internal citation omitted) To survive a motion to dismiss, the plaintiff th must plead enough facts to state a claim to relief that is plausible on its face. In re Katrina Canal Breaches Litigation, 495 F.3d 191, 205 (5th Cir. 2007); see also Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955 (2007)."  While the motion didn't turn on what Twombly does or does not mean, it is interesting to see what the Court is (and is not) citing it for.
After extensive analysis of other cases on the issue presented, Judge Ward held that "under the Texas UCC, there is no affirmative cause of action for penalty or an unconscionable term in a lease contract. Rather, those matters are defenses that may be raised against enforcement of the contract."  Nor did the facts constitute a breach of contract.or a claim for money had and received and unjust enrichment under Texas law.  Accordingly, the complaint was dismissed, with leave to replead to state a claim under Texas law, if the Plaintiff can under the Court's ruling.

Full post as published by Eastern District of Texas Federal Court Practice on March 31, 2008 (boomark / email).