# Stonewater Roofing Ltd Co L L C v. Merryton Bossier L L C

> District Court, W.D. Louisiana · September 3, 2024

URL: https://www.frixlaw.com/law-library/cases/10648927

## Case

- **Court:** District Court, W.D. Louisiana
- **Decided:** September 3, 2024
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
SHREVEPORT DIVISION

STONEWATER ROOFING, LTD. CO., LLC CIVIL ACTION NO. 22-1048

VERSUS JUDGE S. MAURICE HICKS, JR.

MERRYTON, LLC, ET AL MAGISTRATE JUDGE HORNSBY

MEMORANDUM RULING

Before the Court is a Motion to Dismiss Fraud Claim filed by the Defendants,
Merryton Bossier, LLC (“Merryton”), Grace Chiao (“Chiao”), and Hui Ping Li (aka James
Lee Monkhouse) (“Monkhouse”) (collectively “Defendants”). See Record Document 71.
Defendants contend that Plaintiff Stonewater Roofing, Ltd. Co., LLC’s (“Stonewater”)
fraud claim in its Fourth Amended and Supplemental Complaint (Record Document 64)
should be dismissed because Stonewater has failed to plead the requisite elements under
Rule 9(b). See id. Stonewater opposes the motion. See Record Document 76.
Defendants replied. See Record Document 77.1 For the reasons that follow, the Motion
to Dismiss Fraud Claim is DENIED.
BACKGROUND
This suit concerns a roofing company, Stonewater, who agreed to perform repairs
on motel properties owned by Merryton after they suffered storm damage in early 2020.
See Record Document 64 at 2. After obtaining an initial award from their insurer,

1 In its reply brief, Defendants state that because Stonewater’s opposition brief was untimely filed, the Court
should disregard it. See Record Document 77 at 3. The Court declines Defendants’ invitation to disregard
Plaintiff's brief. While Plaintiff's Brief is untimely, the Court will consider it in the interests of deciding the
Motion on the merits. See Miller v. Am. Int'l Grp., Inc., No. 04-1417, 2006 WL 740936, at *1 n.1 (N.D. Tex.
Mar. 14, 2006) (“While Plaintiff’s Brief is untimely, the Court will consider it in the interests of deciding the
Motions on the merits. Defendants filed a Reply on January 3, 2006.”); see also S. Snow Mfg. Co., Inc. v.
SnoWizard Holdings, Inc., 921 F.Supp.2d 548, 563 (E.D. La. 2013) (considering untimely motion for
summary judgment because “a minor delay should not be dispositive of the motion, especially where the
Court will ... have to decide the issues presented on virtually the same record as that presented here”).
Scottsdale Insurance Company (“Scottsdale”), Merryton engaged Stonewater to perform
an inspection and then make all needed repairs on Merryton’s roof, as formalized in an
agreement (“the Stonewater Proposal”) entered on March 26, 2021. See id. at 3-4. The
Stonewater Proposal contained an assignment from Merryton to Stonewater of all rights

and proceeds that Merryton may obtain from Scottsdale after resolution of the insurance
dispute. See id. at 4.
Because there was a discrepancy between Scottsdale’s initial award under the
insurance policy and Stonewater’s assessment of the roof damage, an independent
appraiser and later an “umpire” both provided new estimates for the roof replacement.
See id. at 4-6. When Scottsdale continued to dispute the amount needed to make roof
repairs, Merryton, Stonewater, and Scottsdale agreed to mediate the matter on December
27, 2021. See id. at 7. As a result of this mediation, Stonewater alleges an agreement
(“the Mediation Agreement”) was reached whereby the appraisal award was set at
$1,500,000; however, this agreement was never signed by the parties. See id. (Ex. E

Settlement Agreement p.7-8). Despite the mediation, Stonewater alleges it has yet to
receive the insurance proceeds or any payment for the repair work it has performed. See
id. at 7. Thus, on April 20, 2022, Stonewater filed suit against Merryton, Chiao,
Monkhouse, and Scottsdale, alleging breach of contract, quantum meruit, detrimental
reliance, and fraud. See Record Document 1; 38.
Defendants filed a previous Motion to Dismiss (Record Document 22), and the
Court dismissed Stonewater’s quantum meruit and detrimental reliance claims with
prejudice. See Record Document 44. The Court denied the motion as to Stonewater’s
breach of contract claims and fraud claim. See id. The Court granted Stonewater’s
request for leave to amend its complaint “to correct any pleading deficiencies” to allow it
to plead with more particularity any additional allegations that may satisfy the heightened
standard required for fraud. Record Document 43 at 11. Defendants filed the instant
motion after Stonewater filed its Fourth Supplemental and Amended Complaint. See

Record Document 71.
LAW AND ANALYSIS
Rule 8(a)(2) of the Federal Rules of Civil Procedure governs the pleading standard
to state a claim for relief, requiring that a pleading contain “a short and plain statement of
the claim showing that the pleader is entitled to relief.” The standard for the adequacy of
all complaints under Rule 8(a)(2) is now a “plausibility” standard found in Bell Atlantic
Corp. v. Twombly and its progeny. 550 U.S. 544, 127 S. Ct. 1955 (2007). Under this
standard, “[f]actual allegations must be enough to raise a right to relief above the
speculative level . . . on the assumption that all the allegations in the complaint are true
(even if doubtful in fact).” Id. at 555, 127 S. Ct. at 1965 (citations omitted). If a pleading

only contains “labels and conclusions” and “a formulaic recitation of the elements of a
cause of action,” the pleading does not meet the standards of Rule 8(a)(2). Ashcroft v.
Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949 (2009) (citation omitted).
Federal Rule of Civil Procedure 12(b)(6) allows parties to seek dismissal of a
party's pleading for “failure to state a claim upon which relief can be granted.” Courts must
accept all factual allegations in the complaint as true. See Iqbal, 556 U.S. at 678, 129 S.
Ct. at 1949. However, courts do not have to accept legal conclusions as facts. See id. A
court does not evaluate a plaintiff’s likelihood for success, but instead determines whether
a plaintiff has pleaded a legally cognizable claim. See Thompson v. City of Waco, 764
F.3d 500, 503 (5th Cir. 2014). Courts considering a motion to dismiss under Rule 12(b)(6)
are only obligated to allow those complaints that are facially plausible under the Iqbal and
Twombly standard to survive such a motion. See Iqbal, 556 U.S. at 679, 129 S. Ct. at
1950. If the complaint does not meet this standard, it can be dismissed for failure to state

a claim upon which relief can be granted. See id.
“The elements of an action for fraud are 1) a misrepresentation of a material fact,
2) an intent to deceive (fraudulent intent), and 3) justifiable reliance and resulting
damages.” Tureau v. Hess Corp., No. 13-2969, 2015 WL 1542508, at *3 (W.D. La. Apr.
2, 2015). “A plaintiff bringing a fraud claim must ‘specify the statements contended to be
fraudulent, identify the speaker, state when and where the statements were made, and
explain why the statements were fraudulent.’” Thomas v. Barclays Cap. Inc., No. 18-0257,
2019 WL 113778, at *3 (W.D. La. Jan. 4, 2019) (quoting ABC Arbitrage v. Tchuruk, 291
F.3d 336, 350 (5th Cir. 2002)). “The standard for pleading fraud is, therefore, a higher
standard than the standard for pleading other claims that must only comply with the Rule

8(a)(2) standard.” Id.
In its ruling on the previous Motion to Dismiss, the Court concluded that the
pleadings in Stonewater’s Third Amended Complaint regarding its fraud claim “identify
the speakers, as required, but are lacking in detail concerning the exact statements made,
as well as when and where they were made.” Record Document 43 at 11. Defendants
argue that the new allegations in Stonewater’s Fourth Supplemental and Amended
Complaint are no less conclusory than those in its Third Amended Complaint. See Record
Document 71-1 at 6. Specifically, Defendants state that Stonewater fails to state the “who,
what, when, and where” components required by the Fifth Circuit. See Record Document
71-1 at 6. In response, Stonewater contends that the Defendants simply repeat their prior
arguments without any deference to the Court’s ruling and the specific factual allegations
added to the Fourth Amended and Supplemental Complaint. See Record Document 76
at 7.

Stonewater claims that “Merryton, Grace Chiao, and Hui Ping Li always intended
to use the money received from Merryton’s insurer to pay for other Projects and/or back
taxes owed by their other corporate entities instead of paying Stonewater for the pre-
construction and constructive services performed pursuant to the Contract.” Record
Document 64 at 11-12. It appears that after reading the new allegations set forth in the
Fourth Amended and Supplemental Complaint, Stonewater’s claim is best characterized
as fraudulent inducement, which has the same elements as a basic fraud claim. See U.S.
Fire Pump Co., LLC v. Alert Disaster Control (Middle East) Ltd., No. 19-335, 2021 WL
296073 at *19 (M.D. La. Jan. 28, 2021). Regarding fraudulent inducement, the Fifth
Circuit has explained that:

[G]enerally, there is no inference of fraudulent intent not to
perform from the mere fact that a promise made is
subsequently not performed. However, where substantial
nonperformance is coupled with other probative factors, such
as where only a short time elapses between the making of the
promise and the refusal to perform it, and there is no change
in the circumstances, an intent not to perform when the
promise was made may, in appropriate circumstances, be
properly inferred.

U.S. ex rel. Willard v. Humana Health Plan of Texas Inc., 336 F.3d 375, 386 (5th Cir.
2003) (cleaned up). “[T]he requisite intent must be coupled with prompt, substantial
nonperformance to demonstrate fraud in the inducement. It must be shown that the
defendant promptly followed through on its intent not to perform by substantially failing to
carry out its obligations under the contract.” Id. In its reply, Defendants state that
Stonewater has alleged Merryton’s failure to perform contractual obligations, which is not
fraud. See Record Document 77 at 1
Stonewater alleges that “Merryton knew before entering the Contract with

Stonewater that it would not remit the funds, but fraudulently induced Stonewater into
entering into the Contract and performing pre-construction and construction services on
the Hotel.” Record Document 64 at 12. Stonewater bases this assertion off a purported
conversation with Monkhouse during which he “verbally told Roland Browne, manager
member of Stonewater, that Merryton had already spent the Initial Award owed to
Stonewater to pay for the work performed at the Cheeriton Project and/or to pay back
taxes owed by Cheeriton, LLC.” Id. at 6.
All reasonable inferences must be drawn in favor of the Stonewater, and
Stonewater’s version of the facts is accepted as true unless entirely unsubstantiated.
Taking Stonewater’s allegations as true, Defendants’ nonperformance was prompt, the

nonperformance was “substantial” in that they did not pay Stonewater the initial remitted
funds under the contract for the roof repairs, and no allegations have been set forth that
there was a change in circumstances. Because it is plausible that Defendants never
intended to perform, representations that they would perform were misrepresentations.
The last prong of the fraudulent inducement claim is detrimental reliance, and Stonewater
alleges that it relied on these misrepresentations by contracting with Merryton and its
labor, materials and/or services in connection with Merryton’s building’s roof.
Stonewater’s allegations satisfy the “bare minimum” of Fed. R. Civ. P. 9(b).
“Malice, intent, Knowledge, and other conditions of a person's mind may be alleged
generally,” and Stonewater makes the requisite allegations. Fed. R. Civ. P. 9(b).
Based on these findings, the allegations by Stonewater have met the standard
necessary to state a claim for fraud.?
CONCLUSION
Based on the foregoing analysis, Defendants’ Motion to Dismiss Fraud Claim
(Record Document 71) is DENIED.
An order consistent with the terms of the instant Memorandum Ruling shall issue
herewith.
THUS DONE AND SIGNED, in Shreveport, Louisiana, this 3rd day of September,
2024.

_LLteccsan [pelea
§. MAURICE HICKS, JR.
UNITED STATES DISTRICT JUDGE

2 Defendants additionally argue that Stonewater has failed to state a plausible fraud claim against them
because the Stonewater Proposal never materialized into an enforceable contract. See Record Document
71-1 at 8. Defendants assert that the Stonewater Proposal is subject to a suspensive condition under
Louisiana law that never occurred. See id. at 9. The Court already found that there is a factual dispute as
to why the suspensive condition was never fulfilled when Defendants made this argument regarding
Stonewater’s breach of contract claim. See Record Document 43 at 5.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10648927. Public record. Not legal advice.