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Shroyer Bros., Inc. v. Nichols

United States District Court, S.D. Indiana, Indianapolis Division

December 28, 2016

SHROYER BROS., INC., Plaintiff,
v.
CRAIG NICHOLS, TERRY WHITT BAILEY, JAMES LEE, DOUG MARSHALL, AARON WOOD, BRAD KING, and DEBRA MALITZ, Defendants.

          ORDER

          Hon. Jane Magnus-Stinson, Chief Judge.

         Plaintiff Shroyer Bros., Inc. (“Shroyer”) is a corporation engaged in the demolition contracting business in Delaware County, Indiana. Defendants Craig Nichols, Terry Whitt Bailey, James Lee, Doug Marshall, Aaron Wood, Brad King, and Debra Malitz all hold various positions with the City of Muncie, Indiana. This action stems from two separate incidents: (1) Shroyer performed demolition on a Budget Inn, discovered a concrete slab, and Defendants allegedly refused to perform a final inspection on the property and retained a portion of the owner's bond that Shroyer alleges it is entitled to; and (2) Shroyer contracted with the City of Muncie to perform demolition on a residential structure, had to stop mid-demolition due to a court order, was told after the order was lifted to resume demolition, but by then was working on another project and could not resume demolition that day so Defendants allegedly hired another entity to complete the project.

         Shroyer asserts claims against Defendants for violation of 42 U.S.C. § 1983, conversion, and business defamation. Presently pending before the Court are several motions, including: (1) Shroyer's Application for Judgment by Default, [Filing No. 51]; (2) Defendants' Motion to Dismiss Amended Complaint Pursuant to Fed.R.Civ.P. 12(b)(6), [Filing No. 54]; (3) Shroyer's Motion to Strike Immaterial and Surplus Matter from Defendants' Motion to Dismiss for Failure to State a Claim, [Filing No. 58]; (4) Shroyer's Motion for Leave to Reply to Defendant's Response in Support of Dismissal, [Filing No. 66]; and (5) Shroyer's Request for Oral Argument, [Filing No. 69].

         I.

         Motion for Default Judgment

         A. Background

         Shroyer filed its initial Complaint in this matter on April 1, 2016, [Filing No. 1], and Defendants acknowledged that they received the Complaint on April 2, 2016, through Waivers of Service, [Filing No. 11; Filing No. 12; Filing No. 13; Filing No. 14; Filing No. 15; Filing No. 16; Filing No. 17.] Sixty days later, on June 1, 2016, Defendants filed a Motion to Dismiss. [Filing No. 26.] On August 31, 2016, the Court granted in part and denied in part Shroyer's Motion for Leave to Amend, requiring Shroyer to file an Amended Complaint within five days of the Order. [Filing No. 40.] Shroyer filed its Amended Complaint on September 2, 2016, [Filing No. 41], and Defendants filed their responsive pleading - the pending Motion to Dismiss - on September 19, 2016, [Filing No. 54].

         B. Discussion

         In its Motion for Default Judgment, Shroyer argues that Defendants were required to respond to the Amended Complaint within fourteen days of service or the balance of their original 60 days to respond to the initial Complaint, whichever was longer. [Filing No. 51 at 1-2.] Shroyer contends that the 60-day period to respond to the initial Complaint had expired on June 1, 2016, so Defendants had fourteen days to respond to the Amended Complaint under Fed.R.Civ.P. 15(a)(3). [Filing No. 51 at 2.] It asserts that the fourteen-day period expired on September 16, 2016, but Defendants did not file their Motion to Dismiss until September 19, 2016. [Filing No. 51 at 2.] Shroyer requests a money judgment in its favor of $60, 000 against Defendants Nichols, Lee, Marshall, Wood, Malitz, and King; a money judgment in its favor of $10, 545 against Defendant Bailey; judgment on the issue of liability against Ms. Bailey; an injunction prohibiting Defendants from “depriving [Shroyer] of the compensation already due it and the right to be treated equally with other demolition contract bidders, under applicable law, including an Order requiring the Plaintiff be regarded as a responsive bidder so long as it meets objective and applicable statutory or regulatory criteria”; and a judgment declaring that Defendants are liable to Shroyer “for financial losses resulting from treatment more onerous than other demolition contractors with which the City of Muncie contracts….” [Filing No. 51 at 2-3.]

         Defendants respond that September 19, 2016 (the day they filed the Motion to Dismiss) was actually the deadline for filing their responsive pleading to the Amended Complaint because they were afforded three additional days since they were “responding to a pleading via the Court's CM/ECF system.” [Filing No. 53 at 2 (citing and discussing Fed.R.Civ.P. 5).]

         Shroyer did not file a reply.

         Rule 55 of the Federal Rules of Civil Procedure sets forth a two-step process for a party seeking default judgment. McCarthy v. Fuller, 2009 WL 3617740, at *1 (S.D. Ind. 2009); see also Lowe v. McGraw-Hill Companies, Inc., 361 F.3d 335, 339 (7th Cir. 2004) (“The Federal Rules of Civil Procedure make a clear distinction between the entry of default and the entry of a default judgment.”). First, the plaintiff must obtain an entry of default from the Clerk. Fed. R. Civ. Pro. 55(a). Second, after obtaining that entry, the plaintiff may seek an entry of default judgment. Fed. R. Civ. Pro. 55(b). The plaintiff “is not permitted to bypass the necessary step of obtaining an entry of default” before seeking an entry of default judgment. Proassurance Indemnity Company, Inc. v. Wagoner, 2016 WL 231315, *1 (S.D. Ind. 2016) (citation and quotation omitted).

         Shroyer has not moved for a Clerk's entry of default pursuant to Federal Rule of Civil Procedure 55(a), and its Motion for Default Judgment can be denied on that basis alone. But the motion also fails substantively. The parties appear to agree that Defendants' responsive pleading was originally due September 16, 2016 under Fed.R.Civ.P. 15(a)(3) (“Unless the court orders otherwise, any required response to an amended pleading must be made within the time remaining to respond to the original pleading or within 14 days after service of the amended pleading, whichever is later”). [SeeFiling No. 51 at 2 (Shroyer arguing that “[t]he fourteen-day period for response under Rule 15(a)(3) expired no later than midnight on Friday, September 16, 2016….”); Filing No. 53 at 1-2 (Defendants arguing that responsive pleading was due three days after original due date, and using September 16, 2016 as original due date).]

         Defendants are correct, however, that they were entitled to an additional three days to file their responsive pleading because the Amended Complaint was served electronically. SeeFed. R. Civ. P. 5(b)(2)(E) (allowing service by “sending it by electronic means if the person consented in writing - in which event service is complete upon transmission, but is not effective if the serving party learns that it did not reach the person to be served”); Fed.R.Civ.P. 6(d) (version of the rule in effect before December 1, 2016 providing that “[w]hen a party may or must act within a specified time after service and service is made under Rule 5(b)(2)(C), (D), (E), or (F), 3 days are added after the period would otherwise expire under Rule 6(a)”).[1] Accordingly, Defendants timely filed their Motion to Dismiss on September 19, 2016 - seventeen days after they received electronic service. Shroyer's Application for Judgment by Default, [Filing No. 51], is DENIED.

         II.

         Miscellaneous Motions

         Before considering the substantive arguments Defendants raise in their Motion to Dismiss, the Court will consider three other motions - Shroyer's Motion to Strike Immaterial and Surplus Matter from Defendants' Motion to Dismiss for Failure to State a Claim, [Filing No. 58], Shroyer's Motion for Leave to Reply to Defendant's Response in Support of Dismissal, [Filing No. 66], and Shroyer's Request for Oral Argument, [Filing No. 69]. This is necessary because the motions relate to the scope of information that the Court could consider in deciding the Motion to Dismiss.

         A. Motion to Strike

         Shroyer moves to strike portions of Defendants' Motion to Dismiss, raising several arguments. First, Shroyer argues that Defendants discuss allegations they made in a state court proceeding, and then contradict themselves through arguments made in this case. [Filing No. 58 at 5.] Second, Shroyer asserts that Defendants “persistently inform the court what [it] must prove at trial, ” and that “the only issue arising under Rule 12(b)(6) is what must be pleaded to state a claim.” [Filing No. 58 at 5-6.] Third, Shroyer argues that in their Motion to Dismiss Defendants rely on facts which contradict the facts pled in the Amended Complaint - which must be accepted as true at the motion to dismiss stage. [Filing No. 58 at 6-7.] Finally, Shroyer contends that Defendants mischaracterize the facts that are pled in the Amended Complaint. [Filing No. 58 at 7-10.]

         In response, Defendants argue that material can only be stricken from a pleading, not a brief, as Shroyer requests here. [Filing No. 65 at 1-2.] They assert that the Motion to Strike simply rehashes arguments that are raised in Shroyer's response to the Motion to Dismiss, and go on to specifically address each of Shroyer's arguments. [Filing No. 65 at 4-9.]

         Local Rule 56-1(i) states that “[t]he court disfavors collateral motions - such as motions to strike - in the summary judgment process. Any dispute over the admissibility or effect of evidence must be raised through an objection within a party's brief.” While this rule applies in the summary judgment context, the Court finds it appropriate in the motion to dismiss context as well. The arguments that Shroyer has raised in its Motion to Strike are all arguments it could have - and in some cases, did - raise in response to Defendants' Motion to Dismiss. Shroyer is not entitled to another brief in which to raise arguments against dismissal. Additionally, Shroyer's arguments relate to the facts the Court should consider in deciding the Motion to Dismiss, and in most cases relate to Defendants not following the correct standard. The Court is capable of applying the correct standard to the facts discussed by the parties, and deciding which of those facts are properly considered based on the motion to dismiss standard. It will not nit-pick the way that Defendants have characterized facts through a Motion to Strike, but rather will only consider the well-pled facts in the Amended Complaint when considering the Motion to Dismiss. Shroyer's Motion to Strike Immaterial and Surplus Matter from Defendants' Motion to Dismiss for Failure to State a Claim, [Filing No. 58], is DENIED.

         B. Motion for Leave to File Surreply

         Shroyer also moves to file a surreply to Defendants' reply brief in support of their Motion to Dismiss. [Filing No. 66.] It argues that “the Federal Rules of Civil Procedure neither explicitly require nor prohibit the Plaintiffs' [Surreply], [and] justice demands the Plaintiff be permitted to correct misstatements of law and fact to be found in that Memorandum.” [Filing No. 66 at 1.] Shroyer submits its proposed surreply, which focuses on allegations in the Amended Complaint and argues that those allegations support the claims that Shroyer has asserted. [Filing No. 66-1 at 1-2.]

         Defendants respond that the Local Rules do not provide for a surreply on a motion to dismiss, and that leave to file a surreply should only be given when new matters are argued in a reply brief. [Filing No. 67 at 1.] Defendants argue that Shroyer's proposed surreply does not address new matters raised for the first time in a reply brief. [Filing No. 67 at 1-3.]

         Defendants are correct that the Local Rules do not give the non-movant an opportunity to file a surreply in opposition to a motion to dismiss. And while the Local Rules do provide for a surreply in connection with a motion for summary judgment, one can only be filed “if the movant cites new evidence in the reply or objects to the admissibility of the evidence cited in the response, ” and “must be limited to the new evidence and objections.” L.R. 56-1(d). Here, even if a surreply were permitted in the motion to dismiss context under the same circumstances as it is in the summary judgment context, Shroyer's proposed surreply would still be inappropriate. In the proposed surreply, Shroyer does not address any new matters raised by Defendants in their reply brief - indeed, it makes no attempt to argue that Defendants raised new matters. [Filing No. 66-1.] It appears that Shroyer simply seeks another bite at the apple, to rehash its arguments in opposition to dismissal, and this is not permitted. Shroyer's Motion for Leave to Reply to Defendant's Response in Support of Dismissal, [Filing No. 66], is DENIED.

         C. Request for Oral Argument

         Shroyer's Request for Oral Argument states that “a hearing is the most time-efficient means of resolving disputes on the issues” raised in the Motion to Dismiss. [Filing No. 69.] Defendants oppose the request. [Filing No. 70.]

         The parties' briefs have afforded the Court an adequate basis on which to rule on the pending Motion to Dismiss without the assistance of oral argument. The Court, therefore, DENIES Shroyer's Request for Oral Argument, [Filing No. 69].

         III.

         Defendants' Motion to Dismiss

         A. Standard of Review

         Federal Rule of Civil Procedure 8(a)(2) “requires only ‘a short and plain statement of the claim showing that the pleader is entitled to relief.'” Erickson v. Pardus, 551 U.S. 89, 93 (2007) (quoting Fed.R.Civ.P. 8(a)(2)). “Specific facts are not necessary, the statement need only ‘give the defendant fair notice of what the…claim is and the grounds upon which it rests.'” Erickson, 551 U.S. at 93 (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007)).

         A 12(b)(6) motion to dismiss asks whether the complaint “contain[s] sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). In reviewing the sufficiency of the complaint, the Court must accept all well-pled facts as true and draw all permissible inferences in favor of the plaintiff. See Active Disposal, Inc. v. City of Darien, 635 F.3d 883, 886 (7th Cir. 2011). The Court will not accept legal conclusions or conclusory allegations as sufficient to state a claim for relief. See McCauley v. City of Chicago, 671 F.3d 611, 617 (7th Cir. 2011). Factual allegations must plausibly state an entitlement to relief “to a degree that rises above the speculative level.” Munson v. Gaetz, 673 F.3d 630, 633 (7th Cir. 2012). This plausibility determination is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id.

         B. ...


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