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Argent Holdings, LLC v. East El Paso Physicians Medical Center, LLC

United States District Court, W.D. Texas, El Paso Division

January 16, 2018

EAST EL PASO PHYSICIANS MEDICAL CENTER, LLC, d/b/a Foundation Surgical Hospital of El Paso, et al., Defendants.



         On this day, the Court considered “Defendant Stanton Nelson's Motion to Dismiss Defendant East El Paso Physicians' Medical Center, LLC's Crossclaim” (“Motion to Dismiss”) (ECF. No. 62).[1] After reviewing the parties' moving papers and the applicable law, the Court orders that Nelson's Motion to Dismiss is HEREBY GRANTED IN PART AND DENIED IN PART as set forth herein.

         I. BACKGROUND

         On June 28, 2017, Argent filed suit against Defendants East El Paso Physicians' Medical Center, LLC d/b/a Foundation Surgical Hospital of El Paso (“EEPPMC”), Foundation Surgical Hospital Holdings LLC, Randstad Professionals US, LLC d/b/a Tatum, Stanton Nelson, and Justin Bynum (collectively, “Defendants”). (ECF. No. 1). Thereafter, on August 4, 2017, Argent filed its Amended Complaint against Defendants. (ECF. No. 15). Argent asserts various causes of action related to a “Receivables Purchase and Sales Agreement” for the purchase of medical debt. (Id.).

         Subsequently, EEPPMC filed an amended answer containing crossclaims against Justin Bynum, Stanton Nelson, and Foundation Surgical Hospital Holdings and counterclaims against Argent. (ECF. No. 57). Relevant here, EEPPMC asserts claims against Nelson for fraudulent misrepresentation, fraudulent inducement, negligent representation, and conversion. (ECF. No. 57, p. 11-15).


         Rule 8 of the Federal Rules of Civil Procedures requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). To survive a Rule 12(b)(6) motion to dismiss, a complaint must contain “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) (internal quotation marks and citation omitted). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citation omitted). “Factual 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).” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted). Consequently, a complaint requires more than “labels and conclusions, and a formulaic recitation of the elements, ” and must state more than “an unadorned, the-defendant-unlawfully-harmed-me accusation.” Id.; Iqbal, 556 U.S. at 678.

         Moreover, because Plaintiff alleges fraud, those claims must meet the heightened Rule 9(b) standard. Williams v. WMX Techs., Inc., 112 F.3d 175, 177 (5th Cir. 1997); see also In re Enron Corp. Sec., 2010 U.S. Dist. LEXIS 145220, at *75 (S.D. Tex. 2010). Under Rule 9(b) “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). To satisfy Rule 9(b)'s pleading requirements, the Plaintiff 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.” Williams, 112 F.3d at 177-78 (citation omitted). In essence, Rule 9(b) requires “that a plaintiff set forth the ‘who, what, when, where, and how' of the alleged fraud.” United States ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 266 (5th Cir. 2010) (citations omitted).

         III. ANALYSIS

         Nelson argues that: (1) the Economic Loss Rule prevents the immediate litigation;[2] (2) Nelson, as a corporate officer, is not personally liable for the alleged acts; (3) EEPPMC fails to plead the elements of fraud; (4) EEPPMC fails to plead the elements of negligent representation; and (5) EEPPMC fails to plead the elements of conversion, specifically that Nelson had control of the property or personally benefited from its retention. (ECF. No. 62, p. 4-7). EEPPMC responds that: (1) the Economic Loss Rule does not preclude the immediate litigation; (2) corporate officers are personally liable for their tortious conduct; (3) EEPPMC sufficiently pled its fraud claims; (4) EEPPMC sufficiently pled its negligent misrepresentation claim; and (5) EEPPMC sufficiently pled a conversion cause of action because conversion does not have a “personal benefit” element. (ECF. No. 65, p. 5-8).

         a. Economic Loss Rule

         The Court finds that the Economic Loss Rule is inapplicable to EEPPMC's crossclaim. Under the Economic Loss Rule, “[w]hen a party's acts breach a contract and the only alleged injury is economic loss to the subject of the contract itself, the action sounds in contract alone.” Staton Holdings, Inc. v. Tatum, L.L.C., 345 S.W.3d 729, 732 (Tex. App. 2011) (citations omitted). However, the rule “does not bar all tort claims arising out of a contractual setting.” Chapman Custom Homes v. Dallas Plumbing, 445 S.W.3d 716, 718 (Tex. 2014) (per curiam). Specifically, the rule does not bar fraud and negligent misrepresentation causes of action. Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407, 418-419 (Tex. 2011) (listing several tort claims, including fraud and negligent misrepresentation, which are not barred by the Economic Loss Rule in a contractual setting). Here, EEPPMC's crossclaim is based on fraud, negligent misrepresentation, and conversion. Accordingly, the Court finds that the Economic Loss Rule serves as no barrier to these claims. See id.

         b. Personal Liability of Nelson

         The Court finds that Nelson may be personally liable for fraud, negligent misrepresentation, and conversion, if these claims are sufficiently alleged. “The general rule of corporate law is that officers of a corporation are insulated from personal liability arising from their activities performed in the scope of their duties for the corporation.” Portlock v. Perry, 852 S.W.2d 578, 582 (Tex. App. 1993) (citation omitted). However, “[i]t is a longstanding rule in Texas that a corporate agent is personally liable for his own fraudulent or tortious acts, even when acting within the course and scope of his employment.” Cimarron Hydrocarbons Corp. v. Carpenter, 143 S.W.3d 560, 564 (Tex. App. 2004). Consequently, “[o]nce fraud is shown, the court may . . . find an officer personally liable.” United Heritage Corp. v. Black Sea Invs., Ltd., 2005 Tex.App. LEXIS 1280, at *23 (Tex. App. 2005) (citing Walker v. ...

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