United States District Court, N.D. Mississippi, Aberdeen Division
MEMORANDUM OPINION GRANTING THIRD-PARTY DEFENDANTS' MOTION TO DISMISS THIRD-PARTY COMPLAINT, DENYING MOTION FOR SANCTIONS, AND DENYING MOTION FOR SUMMARY JUDGMENT AS MOOT
GLEN H. DAVIDSON, Senior District Judge.
Presently before the Court are a motion to dismiss , motion for sanctions , and motion for summary judgment  filed by Third-Party Defendants William H. Shawn and ShawnCoulson, LLP. Upon due consideration, the Court finds that the motion to dismiss  should be granted, the motion for sanctions  should be denied, and the motion for summary judgment  should be denied as moot.
A. Factual and Procedural Background
Plaintiff PowerTrain, Inc. ("PowerTrain") brings this diversity action against Defendant Joyce Ma ("Ma"),  a California citizen. The parties apparently agree that Mississippi law governs the action. PowerTrain alleges that Ma, both individually and as the alter ego of Best Machinery & Electrical, Inc., imported to the United States from China small engines that violated EPA's emission and labeling standards and were not covered by certificates of conformity; PowerTrain purchased 78, 284 of the engines (the "subject engines") from Ma; PowerTrain sold and/or distributed the subject engines to Wood Sales, Inc. for further resale in the United States by Wood Sales, Inc. and/or Tool Mart, Inc.; and the EPA determined that the subject engines violated the Clean Air Act and regulations promulgated thereunder. PowerTrain alleges that as a direct and proximate result of Ma's sale of the subject engines to PowerTrain, the United States filed civil actions against PowerTrain for injunctive relief and the assessment of civil penalties for these violations and a consent decree/judgment was entered against PowerTrain for civil penalties in the amount of $2 million plus interest and ordering PowerTrain to export or permanently destroy the certain engines that were in violation of federal law and implement an emission off-set project. PowerTrain asserts causes of action against Ma for negligence/wantonness, breach of contract, breach of warranty, and piercing-the-corporate-veil/alter ego liability.
In the midst of the proceedings in the instant case, on May 24, 2012, Defendant Ma filed a motion for leave  to file a third-party complaint against William H. Shawn and ShawnCoulson, LLP. Defendant Ma asserted in her motion for leave that the instant case "was spawned from" previous litigation styled Powertrain, Inc., et al., v. American Honda Motor Co., et al., No. 1:03-cv-668, 2007 WL 2254346 (N.D. Miss. Aug. 2, 2007) (the " Honda case"), a case concerning whether PowerTrain and others had illegally copied American Honda Motor Co.'s trade dress. She further asserted that William H. Shawn and ShawnCoulson, LLP had represented both Defendant Ma and PowerTrain in the Honda case, and that "as a proximate result" of this alleged representation, "[PowerTrain was] able to bring this case against [Defendant Ma]" in breach of an agreement between PowerTrain and Defendant Ma that PowerTrain would do no harm to her. Def.'s Mot. Leave  at 1-2. While denying any liability in the instant case, Defendant Ma stated that "if it be shown that she is in fact liable to [PowerTrain] on account of the matters and things alleged in the original [c]omplaint, then... the Defendant [Ma] should be entitled to recover from [William H. Shawn and ShawnCoulson, LLP] the full amount of any" such judgment. Id. at 2. The United States Magistrate Judge assigned to this cause granted the Third-Party Plaintiff's request for leave to file her third-party complaint against the Third-Party Defendants.
On July 3, 2012, the Third-Party Plaintiff/Defendant Ma (the "Third-Party Plaintiff") filed her complaint  against the Third-Party Defendants William H. Shawn and ShawnCoulson, LLP (the "Third-Party Defendants"), invoking the Court's diversity jurisdiction. The third-party complaint asserted the following eight causes of action: breach of contract, conflict of interests, breach of fiduciary duty, fraud, negligent misrepresentation, constructive fraud, negligence, and legal malpractice. The Third-Party Defendants subsequently filed a motion to dismiss  all third-party claims. In an Order  dated September 24, 2013, the Court denied the motion to dismiss  and allowed the Third-Party Plaintiff to amend her complaint.
On October 8, 2013, the Third-Party Plaintiff filed her amended complaint . The amended third-party complaint asserts the following seven causes of action: breach of the duty of loyalty, conflict of interests, breach of fiduciary duty, negligent misrepresentation, constructive fraud, negligence, and legal malpractice. Thereafter, the Third-Party Defendants filed a motion to dismiss  those claims, a motion for sanctions  against the Third-Party Plaintiff and her attorney, and a motion for summary judgment , all of which are fully briefed and ripe for review. The Court addresses first the motion to dismiss and then the motion for sanctions.
B. Federal Rule of Civil Procedure 12(b)(6) Motion to Dismiss
Rule 12(b)(6) of the Federal Rules of Civil Procedure allows a party to move for dismissal of a complaint when the plaintiff has failed to state a claim upon which relief can be granted, but such motions "are viewed with disfavor and are rarely granted." Kocurek v. Cuna Mut. Ins. Soc'y, 459 F.App'x 371, 373 (5th Cir. 2012) (citing Gregson v. Zurich Am. Ins. Co., 322 F.3d 883, 885 (5th Cir. 2003)). In ruling on a motion to dismiss brought under Rule 12(b)(6), the Court "must take all of the factual allegations in the complaint as true, " but "[is] not bound to accept as true a legal conclusion couched as a factual allegation." Wood v. Moss, ___ U.S. ___, 134 S.Ct. 2056, 2065 n.5 (May 27, 2014) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted)). "[P]laintiffs must allege facts that support the elements of the cause of action in order to make out a valid claim." Webb v. Morella, 552 F.App'x 238, 241 (5th Cir. 2013) (per curiam) (quoting City of Clinton, Ark. v. Pilgrim's Pride Corp., 632 F.3d 148, 152-53 (5th Cir. 2010)).
Although the plaintiff's allegations "need not pin the plaintiff's claim for relief to a precise legal theory" or present "an exposition of his legal argument, " see Skinner v. Switzer, ___ U.S. ___, 131 S.Ct. 1289, 1296, 179 L.Ed.2d 233 (Mar. 7, 2011), "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face, " Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (internal quotation marks and citation omitted). "A claim is facially plausible if the plaintiff pleads facts that allow a court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'" Boyd v. Farrin, ___ F.App'x ___, 2014 WL 3586661, at *2 (5th Cir. July 22, 2014) (per curiam) (quoting Iqbal, 556 U.S. at 678, 129 S.Ct. 1937). "[C]onclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss." Webb, 522 F.App'x at 241 (quoting Fernandez-Montes v. Allied Pilots Ass'n, 987 F.2d 278, 284 (5th Cir. 1993)).
In filing the present motion to dismiss, the Third-Party Defendants attach several documents filed in the Honda case and ask the Court to take judicial notice of these documents under Rule 201(b) of the Federal Rules of Evidence. "If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56." FED. R. CIV. P. 12(d). However, "a district court may take into account documents incorporated into the complaint by reference or integral to the claim, items subject to judicial notice, matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint whose authenticity is unquestioned." Meyers v. Textron, Inc., 540 F.App'x 408, 409-10 (5th Cir. 2013) (per curiam) (citing Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007); 5B CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 1357 (3d ed. 2014)). See Funk v. Stryker Corp., 631 F.3d 777, 783 (5th Cir. 2011) ("[T]he district court took appropriate judicial notice of publicly-available documents and transcripts... which were matters of public record directly relevant to the issue at hand."). Because all of the attached documents are matters of public record, the Court takes judicial notice of the documents. With all of the foregoing in mind, the Court turns to the Third-Party Plaintiff's claims.
a. Third-Party Plaintiff's Allegations
The Court accepts the following factual allegations from the Third-Party Plaintiff's amended complaint as true for purposes of ruling on the present motion to dismiss. See Warren v. Chesapeake Exploration, L.L.C., ___ F.3d ___, 2014 WL 3511880, at *1 (5th Cir. July 16, 2014). On or about December 19, 2003, PowerTrain and others filed a complaint against American Honda Motor Co. in the Honda case. Shortly thereafter, Oneal Wood, the owner of PowerTrain, informed this Third-Party Plaintiff that PowerTrain needed her help in the Honda case and offered to represent her. The Third-Party Plaintiff informed Oneal Wood that she was afraid of being personally involved in the Honda case. Oneal Wood "offered to [her] that Power[T]rain would do no harm to [her] and represent [her] if [American Honda Motor Co.] were to sue [her] and if Best [Machinery & Electrical Co.] would refuse to pay [her] attorney[']s fees." Third-Party Pl.'s Am. Compl.  ¶ 7. The Third-Party Plaintiff accepted the offer. Third-Party Defendant William H. Shawn, Esquire ("Third-Party Defendant Shawn"), lead counsel for PowerTrain and others in the Honda case, then "prepared [the Third-Party Plaintiff] for and represented [her] in [her] deposition by [American Honda Motor Co.]." Id. ¶ 9. Subsequently,
[w]hile representing [the Third-party Plaintiff] and Power[T]rain, [Third-Party Defendant] Shawn reassured [the Third-Party Plaintiff] that Power[T]rain would do no harm to [her]. However, [Third-Party Defendant] Shawn failed to execute an implied promise, including, but not limited to, putting the terms in writing. [Third-Party Defendant] Shawn acted as the ...