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Dingxi Longhai Dairy, Ltd. v. Becwood Technology Group, LLC: US District Court : CONTRACT - no allegation of price difference for damages; no allegation of knowledge of falsity for fraud

Civil No. 08-762(DSD/SRN)
Dingxi Longhai Dairy, Ltd.,
a China Company incorporated
in the Province of Gansu, China,
Becwood Technology Group, L.L.C.,
a U.S. Company incorporated in
The State of Minnesota, USA,
Delin Qu, Esq., Qu Law Offices, 821 Raymond Avenue, Suite
240, St. Paul, MN 55114, counsel for plaintiff.
Jason A. Lien, Esq. and Maslon, Edelman, Borman & Brand,
90 South Seventh Street, Suite 3300, Minneapolis, MN
55402, counsel for defendant.
This matter is before the court on defendants motion for
partial dismissal. Based upon a review of the file and record, the
proceedings herein, and for the following reasons, the court grants
defendants motion.
This matter arises out of a February 27, 2007, contract
between defendant Becwood Technology Group, LLC (Becwood) and
plaintiff Dingxi Longhai Dairy, Ltd. (Dingxi). Under the terms
of the contract, Dingxi, a Chinese supplier, agreed to ship 612
metric tons of organic kosher Inulin to Becwood, a Minnesota-based
distributer. Dingxi shipped the Inulin in four separate shipments.
Becwood received shipments 1 and 2 and paid for shipment 1 in full,
but after determining that the shipments were nonconforming,
Becwood informed Dingxi that it was rejecting the shipments because
they were contaminated with mold. Dingxi responded by recalling
shipments 3 and 4 before they reached their destination port.
On March 18, 2008, Dingxi filed this action against Becwood
alleging breach of contract and misrepresentation. In its breach
of contract claim, Dingxi seeks to recover the full price for
shipments 2, 3 and 4 with interest and attorneys fees. On April
15, 2008, Becwood moved for partial dismissal of the breach of
contract claim as to shipments 3 and 4 and complete dismissal of
the misrepresentation claim.
I. Breach of Contract
Pursuant to Federal Rule of Civil Procedure 8(a)(2), a
complaint must contain a short and plain statement of the claim
showing that the pleader is entitled to relief. This statement
does not require detailed factual allegations so long as it
give[s] the defendant fair notice of what the ... claim is and the
grounds upon which it rests. Conley v. Gibson, 355 U.S. 41, 47
(1957). However, a court will dismiss a complaint pursuant to
Federal Rule of Civil Procedure 12(b)(6) for failing to state a
1 The CISG is a self-executing agreement between the United
States and other signatories, including China, that applies to
contracts of sale of goods between parties whose places of business
are in different States ... when the States are Contracting
States. CISG art. 1, Apr. 11, 1980, 1489 U.N.T.S. 3.
claim upon which relief can be granted if, after taking all facts
alleged in the complaint as true, those facts fail to raise a
right to relief above the speculative level. Bell Atl. Corp. v.
Twombly, 127 S.Ct. 1955, 1965 (2007).
The parties agree that Dingxis contract claim is governed by
the United Nations Convention on Contracts for the Sale of
International Goods (CISG).1 Under CISG, a plaintiff must plead
the traditional four elements of a breach of contract claim:
formation, performance, breach and damages. See Magellan Intl
Corp. v. Salzgitter Handel GmbH, 76 F.2d 919, 924 (N.D. Ill. 1999).
Becwood argues for dismissal of Dingxis claim as related to
shipments 3 and 4 because Dingxi cannot show damages. Pursuant to
CISG article 73(2), in the case of a contract for delivery of goods
by installments, if one partys failure to perform any of his
obligations in respect of any instalment gives the other party
grounds to conclude that a fundamental breach of contract will
occur with respect to future instalments, he may declare the
contract avoided for the future, provided that he does so within a
reasonable time. After receiving the allegedly contaminated
goods, Becwood invoked article 73 to avoid the contract on the
remaining shipments. Shipment 2 arrived as scheduled, but Dingxi
2 CISG article 74 states:
Damages for breach of contract by one party consist of a
sum equal to the loss, including loss of profit, suffered
by the other party as a consequence of the breach. Such
damages may not exceed the loss which the party in breach
foresaw or ought to have foreseen at the time of the
conclusion of the contract, in light of the facts and
matters of which he then knew or ought to have known, as
a possible consequence of the breach of contract.
recalled shipments 3 and 4 before they arrived at their
destination. Dingxi argues that CISG article 74 governs the amount
of damages it can recover on shipments 3 and 4.
Article 74 details the measure of damages for a breach of
contract governed by CISG.2 Damages that follow avoidance,
however, are governed by CISG article 76, which provides:
If the contract is avoided and there is a
current price for the goods, the party
claiming damages may, if he has not made a
purchase or resale under article 75, recover
the difference between the price fixed by the
contract and the current price at the time of
avoidance as well as any further damages
recoverable under article 74.
Becwood avoided the contract as to shipments 3 and 4 by promptly
notifying Dingxi, and Dingxi acknowledged the avoidance by
retaining possession of the shipments. Accordingly, Dingxis
recovery is governed by CISG article 76 - not article 74 - and is
limited to the difference between the current price of the goods
and the price fixed by its contract with Becwood. Pursuant to
article 76, the current price is the price prevailing at the place
where delivery of the goods should have been made . . . or the
price at such other place as serves as a reasonable substitute.
Dingxi has alleged no difference between the current market price
and the contract price for the goods. Therefore, Dingxi has failed
to assert cognizable damages on shipments 3 and 4, and the court
grants Becwoods motion to dismiss as to those shipments.
II. Fraud
Under Rule 9(b), the circumstances constituting fraud ...
shall be stated with particularity. This particularity
requirement demands a higher degree of notice than that required
for other claims, and is intended to enable the defendant to
respond specifically and quickly to the potentially damaging
allegations. United States ex rel. Costner v. URS Consultants,
Inc., 317 F.3d 883, 888 (8th Cir. 2003) (citing Abels v. Farmers
Commodities Corp., 259 F.3d 910, 920-21 (8th Cir. 2001)). To
satisfy the particularity requirement of Rule 9(b), the complaint
must plead such facts as the time, place, and content of the
defendants false representations, as well as the details of the
defendants fraudulent acts, including when the acts occurred, who
engaged in them, and what was obtained as a result. United States
ex rel. Joshi v. St. Lukes Hosp., Inc., 441 F.3d 552, 556 (8th
Cir. 2006). In other words, the complaint must identify the who,
what, where, when, and how of the alleged fraud. Costner, 317
F.3d at 888 (citing Parnes v. Gateway 2000, Inc., 122 F.3d 539, 550
(8th cir. 1997)).
To establish fraudulent misrepresentation in Minnesota, a
plaintiff must demonstrate that:
(1) there was a false representation by a
party of a past or existing material fact
susceptible of knowledge; (2) made with
knowledge of the falsity of the representation
or made as of the partys own knowledge
without knowing whether it was true or false;
(3) with the intention to induce another to
act in reliance thereon; (4) that the
representation caused the other party to act
in reliance thereon; and (5) that the party
suffered pecuniary damage as a result of the
Hoyt Props., Inc. v. Prod. Res. Group, L.L.C., 736 N.W.2d 313, 318
(Minn. 2007) (citing Specialized Tours, Inc. v. Hagen, 392 N.W.2d
520, 532 (Minn. 1986)).
Dingxi argues that Becwood committed fraud by promising to pay
for all four shipments but failing to do so. Dingxis allegation
of fraud, however, relates to a future event - the promise of
payments to be paid - and not a past or existing material fact.
More important, Dingxi has made no showing of Becwoods knowledge
of the statements falsity at the time they were made or intent to
induce reliance. Accordingly, Dingxi has failed plead the
essential elements of fraud, and in turn has not satisfied the
particularity requirements of Rule 9(b). For these reasons, the
court grants Becwoods motion to dismiss Dingxis fraud claim.
Therefore, IT IS HEREBY ORDERED that Becwoods motion for
partial dismissal [Doc. No. 4] is granted.
Dated: July 1, 2008
s/David S. Doty
David S. Doty, Judge
United States District Court


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