United States District Court, D. Oregon, Portland Division
OPINION AND ORDER
Honorable Paul Papak United States Magistrate Judge.
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). 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.
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.
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
(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.
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.
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.
Defendants' Motion to Dismiss Fraud Claim Based on the
Statute of Limitations
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.
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).
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.
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.
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.
Legal Standards for Motions to Dismiss for ...