CMR Construction & Roofing LLC v. The Orchards Condominium Association, Inc.

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

FORT MYERS DIVISION

CMR CONSTRUCTION & ROOFING

LLC,

Plaintiff,

v. Case No: 2:20-cv-422-FtM-29MRM

THE ORCHARDS CONDOMINIUM

ASSOCIATION, INC.,

Defendant.

THE ORCHARDS CONDOMINIUM

ASSOCIATION, INC.,

Plaintiff,

v. Case No: 2:20-cv-564-FtM-29MRM

EMPIRE INDEMNITY INSURANCE

COMPANY and CMR CONSTRUCTION

& ROOFING LLC,

Defendants.

OPINION AND ORDER

This matter comes before the Court on review of defendant The

Orchards Condominium Association, Inc.’s Motion to Dismiss (Doc.

#24) filed on September 22, 2020. Plaintiff CMR Construction and

Roofing, LLC filed a Response In Opposition (Doc. #28) on October

6, 2020. For the reasons set forth below, the motion is denied.

I.

Defendant The Orchards Condominium Association, Inc. (The

Orchards) is a residential condominium association in Naples,

Florida. (Doc. #16, ¶ 5.) The Orchards was issued an insurance

policy by Empire Indemnity Insurance Company (Empire) providing

insurance on thirty-one buildings. (Id. ¶ 11, 21.) In September

2017, The Orchards sustained significant roof and exterior damage

caused by wind and rain from Hurricane Irma, which loss was timely

reported to Empire. (Id. ¶ 12, 21.) In April 2018, The Orchards

entered into a Contract for Services with plaintiff CMR

Construction and Roofing, LLC (CMR) to provide roofing repairs.

(Id. ¶¶ 13-14.) The Orchards also provided CMR with an Assignment

of Benefits (the Assignment) which assigned to CMR all of its

rights to the Empire insurance benefits relating to the roof

repair. (Id. ¶ 13; Doc. #16-4, p. 187.) Both the Services

Agreement and the Assignment were signed by The Orchards’

president, Mark Johnson (Johnson). (Doc. #16, ¶ 15.)

CMR, pursuant to its rights under the Assignment, advised

Empire of a replacement cost value estimate, but Empire failed to

acknowledge coverage for all the damages sustained by The Orchards.

In September 2018, CMR filed a one-count breach of contract

complaint against Empire in the Circuit Court for the Twentieth

Judicial Circuit in and for Collier County. (Id. ¶ 26-27; Doc.

#16-4, p. 98.) The case was removed to federal court, and Empire

was granted summary judgment in April 2020. (Doc. #16, ¶ 28; CMR

Construction & Roofing, LLC v. Empire Indem. Ins. Co., 2020 WL

1557887 (M.D. Fla. Apr. 1, 2020). CMR timely filed a notice of

appeal, and the appeal remains pending in the Eleventh Circuit

Court of Appeals. (Doc. #16, ¶ 29.)

In May 2020, over two years after assigning the pertinent

rights and benefits of the Empire insurance policy to CMR, The

Orchards notified CMR that it was revoking the Assignment and

ordered CMR to cease all negotiations and work on the property.

(Id. ¶¶ 30-32; Doc. #16-6, pp. 189-90.) The Orchards asserted

that the Assignment was invalid because The Orchards’ Declaration

of Condominium prohibited such an assignment. (Doc. #16, ¶ 33;

Doc. #16-7, p. 217.)

CMR initiated this lawsuit in June 20201 and filed an Amended

Complaint against The Orchards and Johnson on September 8, 2020.

(Doc. #1; Doc. #16.) The ten-count Amended Complaint contains the

following claims: (1) declaratory judgment (against The Orchards)

with regard to the Assignment; (2) declaratory judgment (against

The Orchards) with regard to the Contract for Services; (3) breach

of the Contract for Services (against The Orchards); (4) fraud in

1 In July 2020, The Orchards filed a complaint against Empire

and CMR in the Circuit Court for the Twentieth Judicial Circuit in

and for Collier County, which was subsequently removed to this

Court and consolidated with this case.

the inducement (against The Orchards) with regard to the

Assignment; (5) fraud in the inducement (against Johnson) with

regard to the Assignment; (6) fraudulent misrepresentation

(against The Orchards) with regard to the Assignment; (7)

fraudulent misrepresentation (against Johnson) with regard to the

Assignment; (8) negligent misrepresentation (against The Orchards)

with regard to the Assignment; (9) negligent misrepresentation

(against Johnson) with regard to the Assignment; and (10) unjust

enrichment (against The Orchards). (Doc. #16, pp. 11-28.) The

Orchards now seeks dismissal of Counts Four, Six, and Eight of the

Amended Complaint.

II.

A. Legal Standards

Under 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.” Fed. R. Civ. P. 8(a)(2).

This obligation “requires more than labels and conclusions, and a

formulaic recitation of the elements of a cause of action will not

do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)

(citation omitted). To survive dismissal, the factual allegations

must be “plausible” and “must be enough to raise a right to relief

above the speculative level.” Id. at 555; see also Edwards v.

Prime Inc., 602 F.3d 1276, 1291 (11th Cir. 2010). This requires

“more than an unadorned, the-defendant-unlawfully-harmed-me

accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(citations omitted).

In deciding a Rule 12(b)(6) motion to dismiss, the Court must

accept all factual allegations in a complaint as true and take

them in the light most favorable to the plaintiff, Erickson v.

Pardus, 551 U.S. 89, 94 (2007), but “[l]egal conclusions without

adequate factual support are entitled to no assumption of truth,”

Mamani v. Berzain, 654 F.3d 1148, 1153 (11th Cir. 2011) (citations

omitted). “Threadbare recitals of the elements of a cause of

action, supported by mere conclusory statements, do not suffice.”

Iqbal, 556 U.S. at 678. Factual allegations that are merely

consistent with a defendant’s liability fall short of being

facially plausible. Chaparro v. Carnival Corp., 693 F.3d 1333,

1337 (11th Cir. 2012) (citations omitted). Thus, the Court engages

in a two-step approach: “When there are well-pleaded factual

allegations, a court should assume their veracity and then

determine whether they plausibly give rise to an entitlement to

relief.” Iqbal, 556 U.S. at 679.

B. Analysis

The Orchards seeks dismissal of three similar claims relating

to the Assignment. Count Four alleges The Orchards made

misrepresentations of material facts to induce CMR to enter into

the Assignment. (Doc. #16, ¶¶ 83-92.) Count Six alleges The

Orchards intentionally made fraudulent misrepresentations of

material facts regarding its authority and capacity to enter into

the Assignment in order to induce CMR to act and enter into the

Assignment. (Id. ¶¶ 105-13.) Finally, Count Eight alleges The

Orchards negligently made material misrepresentations to induce

CMR to enter into the Assignment. (Id. ¶¶ 125-32.) As relief for

these claims, CMR seeks “all damages, including loss [sic] profits,

attorneys’ fees and costs and for such other and further relief as

this Court deems just and proper as a matter of law.” (Id. pp.

20, 23, 26.) The Orchards argues that all three claims must be

dismissed pursuant to Florida’s independent tort doctrine. (Doc.

#24, pp. 6-9.)

Defendant’s argument is premised on the remnants of Florida’s

economic loss rule. “Simply put, the economic loss rule is a

judicially created doctrine that sets forth the circumstances

under which a tort action is prohibited if the only damages

suffered are economic losses.” Tiara Condo. Ass’n, Inc. v. Marsh

& McLennan Companies, Inc., 110 So. 3d 399, 401 (Fla. 2013).

General application of this rule proved problematic, and in 2013

the Florida Supreme Court limited it to products liability cases.

Id. at 407 (“[W]e now take this final step and hold that the

economic loss rule applies only in the products liability context.

We thus recede from our prior rulings to the extent that they have

applied the economic loss rule to cases other than products

liability.”) In a concurring opinion Justice Pariente explained

that this limitation of the economic loss rule to products

liability cases did not upset certain common-law principles,

including that the tort must be independent of any breach-of-

contract claim. Id. at 408. Thus, the rule remains that “[w]here

a contract exists, a tort action will lie for either intentional

or negligent acts considered to be independent from acts that

breached the contract.” HTP, Ltd. v. Lineas Aereas Costarricenses,

S.A., 685 So.2d 1238, 1239 (Fla. 1996) (citations omitted).

Florida law distinguishes between “fraud in the inducement (a

false representation is made and relied upon in forming the

contract) and fraud in the performance (a party to the contract

claims to have performed but has actually just tricked the other

party into believing that they have).” Prewitt Enters., LLC v.

Tommy Constantine Racing, LLC, 185 So. 3d 566, 569 (Fla. 4th DCA

2016). Generally, misrepresentations relating to the breaching

party’s performance of a contract do not give rise to any

independent cause of action in tort, while pre-contractual

representations may constitute an independent tort. E.g., Sun

Life Assurance Co. of Canada v. Imperial Premium Fin., LLC, 904

F.3d 1197, 1223 (11th Cir. 2018); Global Quest, LLC v. Horizon

Yachts, Inc., 849 F.3d 1022, 1031 (11th Cir. 2017); Prewitt, 185

So. 3d at 571. A fraudulent inducement claim must still be

independent of a breach of contract claim. Global Quest, 849 F.3d

at 1031. A tort action based on fraud is not barred if the fraud

alleged does not relate to an act of performance under the contract

but instead relates to a term in the agreement. Brown v. Chamax,

LLC, 51 So. 3d 552, 556 (Fla. 2d DCA 2010) (citing Allen v. Stephan

Co., 784 So.2d 456, 457 (Fla. 4th DCA 2000)).

As in Global Quest, “that minimal requirement is readily met

here—the fraud allegations are separate and distinct from

defendants’ performance under the contract.” 849 F.3d at 1031.

The fraud allegations concern representations about the Assignment

and the authority to enter into an assignment, not performance of

the Contract for Services. The Contract for Services contains no

statements about either. Such fraud and negligence claims

therefore could not form the basis of a breach of contract claim,

and are not barred under Florida law. See Brown, 51 So. 3d at

556.

The Orchards argues, however, that the fraudulent inducement,

fraudulent misrepresentation, and negligent misrepresentation

claims must be dismissed “because the damages that CMR seeks under

these three counts is [sic] identical to those sought under the

breach of contract count of its Amended Complaint.” (Doc. #24,

pp. 6-7.) The Orchards essentially argues that the three tort

claims are seeking the same damages sought in the breach of

contract claim, and that those damages relate to the insurance

proceeds. (Id. p. 8.)

In a breach of contract action, “[a] non-breaching party is

entitled to recover the benefit of its bargain under a contract.

. . . [T]he goal of damages is to place the injured party in the

same position in which it would have been had the breach not

occurred.” Perera v. Diolife LLC, 274 So. 3d 1119, 1124 (Fla. 4th

DCA 2019) (citations omitted). There are two standards for

measuring damages in an action for fraud, and either may be used

depending upon the circumstances. Martin v. Brown, 566 So. 2d

890, 891-92 (Fla. 4th DCA 1990) (describing the “benefit of the

bargain” rule and the “out-of-pocket” rule).

Defendant’s argument is misplaced. The breach of contract

claim seeks damages caused by the breach of the Contract for

Services, and does not seek damages relating to the Assignment of

insurance benefits. (Doc. #16, pp. 17-18.) Second, while the

measure of damages may overlap, damages are not necessarily

coterminous. For example, it seems clear from the allegations in

the Amended Complaint that CMR relied upon the Assignment to engage

in litigation against Empire on The Orchards behalf, which resulted

in the expenditure of funds. While double recovery is not allowed,

there is no basis to dismiss the three counts.

Accordingly, it is now

ORDERED:

Defendant The Orchards Condominium Association, Inc.’s Motion

to Dismiss (Doc. #24) is DENIED.

DONE AND ORDERED at Fort Myers, Florida, this 26th day of

October, 2020.

Z tkivol

JGH E. STEELE

5 IOR UNITED STATES DISTRICT JUDGE

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