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Morasch Meats, Inc. v. Frevol HPP, LLC

United States District Court, D. Oregon, Portland Division

March 22, 2018

MORASCH MEATS, INC., Plaintiff,
v.
FREVOL HPP, LLC, fka FRESHER EVOLUTION HPP, L.L.C., et al., Defendants.

          OPINION AND ORDER

          Honorable Paul Papak United States Magistrate Judge.

         Plaintiff Morasch Meats, Inc. brings this action asserting claims for breach of contract and fraud against Defendants Frevol HPP, LLC (Frevol); All Natural Freshness, Inc. (ANF); and Gerald Ludwick (Ludwick).[1] Plaintiff, which agreed to purchase a high-pressure pasteurization (HPP) machine from Defendants for $1, 550, 000, alleges that Defendants breached the parties' agreement by failing to install an operational HPP machine, and that Defendants knowingly misrepresented their expertise in manufacturing HPP machines, and their financial resources, to induce Plaintiff to purchase the HPP machine. Plaintiff also alleges that Defendant Ludwick controls Frevol and ANF, the other two defendants, and that Ludwick failed to adequately capitalize Frevol and ANF and milked them of their assets, justifying piercing the corporate veil as to Plaintiffs claims.

         Plaintiff now moves for partial summary judgment on its theory of piercing the corporate veil, and on the existence and terms of the parties' contract. Defendants move to dismiss Plaintiffs fraud claim as untimely, and move for summary judgment on (1) Plaintiffs claim for breach of contract against ANF; (2) Plaintiffs claim that Frevol is responsible for failing to meet the deadline for installing the HPP machine; (3) Plaintiffs claim for fraud; and (4) Plaintiffs assertion of a piercing the corporate veil theory.

         After the hearing on these motions, counsel notified the court that the parties had reached stipulations on several of the disputed issues. Defendants stipulate to the following:

(1) granting summary judgment on Plaintiffs motion to remove the statute of frauds affirmative defense from the case;
(2) granting summary judgment on Plaintiffs motion to adjudge the October 14, 2014 Contract (the Contract), without modification, to be the operative contract between Plaintiff and Frevol;
(3) granting summary judgment on Plaintiffs motion to adjudge the contract terms listed in Plaintiffs Motion for Partial Summary Judgment, at 30-31, ECF No. 137, as the relevant terms of the Contract between Plaintiff and Frevol, although Defendants may assert affirmative defenses at trial;
(4) withdrawing Defendants' request for summary judgment on requested modifications to the Contract, while preserving the right to argue these facts at trial as they relate to the parties' course of performance; and
(5) withdrawing Defendants' request for summary judgment on whether the Contract's provisions setting the delivery date and commissioning deadline of December 31, 2014, were rendered moot, while leaving this court free to adjudge any other term of the Contract.

         Plaintiffs stipulate to dismissing ANF from the breach of contract claim, and to dismissing ANF as to the piercing the corporate veil theory on the breach of contract claim.

         In light of these stipulations, the parties seek this court's rulings on Defendants' motion to dismiss Plaintiffs fraud claim as untimely; Defendants' motion for summary judgment on Plaintiffs fraud claim; and the parties' cross-motions for summary judgment as to Plaintiffs piercing the corporate veil theory. For the following reasons, as to the remaining issues in dispute, I deny Defendants' motions to dismiss and for summary judgment, and I grant Plaintiffs motion for partial summary judgment on its theory of piercing the corporate veil.

         DISCUSSION

         I. Defendants' Motion to Dismiss Fraud Claim Based on the Statute of Limitations

         Defendants move to dismiss Plaintiffs fraud claim, contending that Plaintiff brought the claim after Oregon's two-year statute of limitations for fraud claims had run. I deny Defendants' amended motion to dismiss.

         A. Background

         Plaintiff alleges that in April 2013, Eric Lockovitch, vice president of ANF, emailed Michael Morasch, Plaintiffs president and one of its owners, introducing Frevol's "newest HPP equipment line, " This was the beginning of the parties' negotiations on Plaintiffs purchase of Defendants' HPP machine. Second Am. Compl. ¶ 7. Plaintiff alleges that during the parties' negotiations over the next 18 months, Defendants made material, false representations that induced Plaintiff to purchase the HPP machine. Id. ¶ 44. Plaintiff alleges five categories of fraudulent assertions made by Defendants: (1) that Defendants could deliver an HPP machine that complied with federal and state rules, including certification from the American Society of Mechanical Engineers (ASME); (2) that Defendants were supported by a team of highly qualified professionals, although Ludwick worked alone and knew the workers he would recruit for the HPP machine project were not highly qualified professionals; (3) that Defendants had previously provided customers with an "incredible value" although Defendants had supplied at least one customer with an HPP machine that could not be ASME certified; (4) that Defendants could honor warranties, fully indemnify Plaintiff for costs incurred, honor a one-year guarantee against defects, and were adequately capitalized by the financial resources of Ludwick and his wife; and (5) that Defendants could provide spare parts for two years. Second Am. Compl, ¶ 44(a)-(e).

         Plaintiff contends that Defendants' alleged false representations played a material role in its decision on September 16, 2014, to make a $1 million down payment towards the purchase of an HPP machine, and its subsequent decision on October 15, 2014, to enter into the Contract with Frevol to purchase an HPP machine for $1, 550, 000. ECF No. 125-1 (the Contract). Plaintiff contends that until it sent Defendants the $1 million down payment, the parties had not "made any commitment to each other, and the Parties were in no way obligated to take any action regarding the potential HPP Machine purchase." Pl.'s Resp. 4, ECF No. 142.

         After Plaintiff agreed to purchase the HPP machine, Ludwick spent more than a year attempting unsuccessfully to install the HPP machine at Plaintiffs Portland facility. By letter dated February 14, 2016, Ludwick terminated the Contract. The next day, Plaintiff filed its initial complaint in this action.

         In their motion to dismiss, Defendants contend that Plaintiffs fraud claim is time-barred because Plaintiff should have discovered the alleged fraud before February 15, 2014. Defendants do not dispute that the fraud claim Plaintiff asserts in the Second Amended Complaint relates back under Federal Rule of Civil Procedure 15 to the filing date of Plaintiff s initial complaint. See Defs.' Reply 2, ECF No. 143.

         B. Legal Standards for Motions to Dismiss for ...


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