Haarslev, Inc. v. Muir et al

MEMORANDUM DECISION AND O RDER – 1
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
HAARSLEV, INC,
Plaintiff,
v.
JEFF MUIR; JLM MANAGEMENT, LLC
Defendants.
Case No. 4:24-cv-00278-AKB
MEMORANDUM DECISION AND
ORDER
Pending before the Court is Defendants’ Motion to Dismiss Haarslev’s First Amended
Complaint (Dkt. 34). The Court finds oral argument would not significantly aid its decision-
making process and decides the motions on the parties’ submissions. Dist. Idaho Loc. Civ.
R. 7.1(d)(1)(B); see also Fed. R. Civ. P. 78(b) (“By rule or order, the court may provide for
submitting and determining motions on briefs, without oral hearings.”). For the reasons discussed,
the Court will grant in part and deny in part the motion to dismiss without leave to amend.
I. 	BACKGROUND
The Court set forth the factual background for this case in its prior Memorandum Decision
and Order (Dkt. 32). In brief, Plaintiff Haarslev, Inc., designs, manufactures, sells, and installs
equipment for food, food by-products, and pet food industries (Dkt. 33 at ¶ 1). Haarslev employed
Michael Chapple (Chapple) as the project manager on a manufacturing and installation project
known as the DemKota Project, and he also worked on another project in Augusta, Georgia, known
as the FPL Foods project (id. at ¶¶ 2–3, 45).
Defendant JLM Management, Inc., provides consulting and management services, and
Defendant Jeff Muir is JLM’s sole member and owner (Dkt. 14-1 at 2). Before working for
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Haarslev, Chapple worked in Idaho and formed a connection with Muir through Muir’s
employment at various companies including Christensen Machine, Inc (CMI) (Dkt. 33 at ¶¶ 4, 6).
In March 2022, CMI terminated Muir’s employment for alleged misconduct (id. at ¶¶ 6–8).
Haarslev alleges that Chapple and Muir conspired to defraud Haarslev through various
schemes involving inflated invoices from CMI and Industrial Metal Enterprises, LLC (IME).
According to Haarslev, while Muir was employed at CMI, he altered invoices to increase amounts
owed, causing Haarslev to pay for work that was not completed (Dkt. 33 at ¶¶ 13–21). Later,
Chapple allegedly directed that IME increase its invoices to Haarslev by additional percentages,
with portions of these inflated amounts being paid to Muir and JLM (id. at ¶¶ 22–50).
On January 21, 2025, this Court issued a Memorandum Decision and Order granting
Defendants’ motion to dismiss all claims and providing Haarslev leave to amend its complaint
(Dkt. 32). On February 20, Haarslev filed its First Amended Complaint, adding a new fraud claim
and dropping its tortious interference with contract claim (Dkt. 33). Defendants now move to
dismiss all claims in the Amended Complaint (Dkt. 34).
II. 	LEGAL STANDARD
To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), “a
complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is
plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). A pleading that merely pleads “labels and conclusions” or a
“formulaic recitation” of the elements of a cause of action, or “naked assertions” devoid of “further
factual enhancement” will not suffice. Id. “Determining whether a complaint states a plausible
claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its
judicial experience and common sense.” Id.
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Under Rule 12(b)(6), the court must accept the plaintiff’s factual allegations as true and
grant all reasonable inferences in the plaintiff’s favor. Manzarek v. St. Paul Fire & Marine Ins.
Co., 519 F.3d 1025, 1030-31 (9th Cir. 2008). On the other hand, the Court is “not bound to accept
as true a legal conclusion couched as a factual allegation.” Iqbal, 556 U.S. at 678. In sum, to
survive a 12(b)(6) motion to dismiss, the non-conclusory factual allegations, and reasonable
inferences from those allegations, must state a claim to relief that is plausible on its face. Moss v.
U.S. Secret Serv., 572 F.3d 962, 969, 972 (9th Cir. 2009).
A dismissal without leave to amend is improper unless it is beyond doubt that the complaint
“could not be saved by any amendment.” Harris v. Amgen, Inc., 573 F.3d 728, 737 (9th Cir. 2009).
The Ninth Circuit has held that “in dismissals for failure to state a claim, a district court should
grant leave to amend even if no request to amend the pleading was made, unless it determines that
the pleading could not possibly be cured by the allegation of other facts.” Cook, Perkiss & Liehe,
Inc. v. N. Cal. Collection Serv., Inc., 911 F.2d 242, 247 (9th Cir. 1990). The issue is not whether
plaintiff will prevail but whether it “is entitled to offer evidence to support the claims.” Diaz v.
Int’l Longshore & Warehouse Union, Loc. 13, 474 F.3d 1202, 1205 (9th Cir. 2007) (citation
modified).
III. 	ANALYSIS
A. 	Fraud (Count I)
In Count I, Haarslev alleges Muir made false representations of material fact when it
inflated CMI invoices, resulting in Haarslev paying the inflated amount (Dkt. 33 at ¶¶ 69–79).
Defendants argue this new fraud claim is untimely and should be dismissed because the new claim
exceeds the scope of the amendment the Court permitted in its decision granting leave to amend
and because Haarslev did not otherwise seek leave of the Court under Rule 15(a) of the Federal
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Rules of Civil Procedure to amend the pleadings to add new claims (Dkt. 34-1 at 9). Haarslev’s
argument misstates the Court’s order, which merely granted Haarslev leave to amend its complaint
(Dkt. 32 at 9–10). There was no limitation—express or implied—that leave was granted solely to
address the deficiencies in its original complaint. Rather, the Court explained that it was granting
leave to amend because it found Haarslev may be able to remedy many of the deficiencies
identified in its decision (id. at 9). That it used this leave to allege a new claim does not
automatically make the new claim improper.
Haarslev alleges facts supporting all of the elements of a fraud claim under Idaho law.
Those elements include: “(1) a representation; (2) its falsity; (3) its materiality; (4) the speaker’s
knowledge of its falsity or ignorance of its truth; (5) his intent that it should be acted on by the
person and in the manner reasonably contemplated; (6) the hearer’s ignorance of its falsity; (7) his
reliance on the truth; (8) his right to rely thereon; and (9) his consequent and proximate injury.”
Aspiazu v. Mortimer, 82 P.3d 830, 832 (Idaho 2003). Under Rule 9(b) of the Federal Rules of Civil
Procedure, “the circumstances constituting fraud” must be pled “with particularity,” meaning
Haarslev must identify “the who, what, when, where, and how of the misconduct charged,” as well
as “what is false or misleading about the purportedly fraudulent statement, and why it is false.”
Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (citation
modified).
There is no dispute that the invoices were material; Muir knew the contents of the invoices;
Muir intended Haarslev to rely on the invoices; Haarslev in fact relied on them; Haarslev was
entitled to rely thereon; and Haarslev suffered approximately $532,282.00 in damages. Thus, the
Court finds elements three, four, five, seven, eight, and nine are met. Defendants, however, take
issue with the first, second, and sixth elements of fraud (Dkt. 34-1 at 12). First, Defendants argue
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that because Muir generated and reviewed the CMI invoices in his capacity as a CMI employee,
they were not his representations (id. at 11). In its complaint, Haarslev alleges Muir “altered the
CMI invoices [] by increasing the amounts owed so that Haarslev would pay for more than it
received” (Dkt. 33 at ¶ 70). While it acknowledges that Muir was a CMI employee during his
alleged fraudulent conduct, it also notes that (1) Muir used the inflated invoices to pay his salary
and commission (id. at ¶ 78); and (2) CMI terminated Muir for misconduct (id. at ¶¶ 6–12).
Whether or not Muir was actually acting in his capacity as a CMI employee is not relevant at the
motion to dismiss stage. Haarslev has sufficiently pled facts that reasonably infer that Muir
exceeded the scope of his employment with CMI when he allegedly altered the CMI invoices.
Thus, the first element is satisfied.
Defendants argue the second element—falsity—is not satisfied because Haarslev “does not
allege what the invoice amounts were supposed to be; how they were allegedly inflated; or how
this alleged inflation was improper” (Dkt. 34-1 at 12). Haarslev does, however, allege that it paid
four invoices to CMI relating to Purchase Order #15795 for forty-three screw conveyors, one raw
material bin, one feed bin, platforms, stairs and miscellaneous chutes totaling $1,132,281.61
(Dkt. 33 at ¶¶ 13–14). Yet, all it received was one of the forty-three screw conveyers (id. at ¶ 19).
It also describes a scheme wherein “CMI would prepare an invoice, then Muir would revise the
invoice to increase the total price before sending the invoice to Chapple,” who would subsequently
approve it (id. at ¶¶ 15–16). Haarslev further alleges that Muir’s inflated invoices resulted in
Haarslev paying over $532,282.00 in goods it never received (id. at ¶ 17). These alleged facts
support a reasonable inference that the four invoices did not accurately reflect the production
progress. Accordingly, Haarslev has sufficiently pled facts indicating that the invoices were false
or at a minimum misleading.
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MEMORANDUM DECISION AND O RDER – 6
Finally, Defendants maintain that Haarslev cannot satisfy the sixth element—hearer’s
ignorance of its falsity—because the involvement of one of its own employees in the scheme
imputes knowledge on the employer (Dkt. 34-1 at 11). Generally, an agent or employee’s
knowledge is imputed on the principal when the knowledge is acquired in the course of his
employment. Temperance Ins. Exch. v. Coburn, 379 P.2d 1024, 1026 (Idaho 1963). That general
rule, however, does not apply “when the agent is engaged in committing an independent fraudulent
act upon his own account, and the knowledge sought to be imputed is of facts which relate to that
act, and which, if communicated, would prevent the consummation of the fraud.” Smith v. Wallace
Nat’l Bank, 150 P. 21, 24 (Idaho 1915) (explaining that an agent’s knowledge is not imputed to
principal if agent exceeds his authority); see also Temperance, 379 P.2d at 1026 (noting the
“general rule which imputes an agent’s knowledge” does not apply when third party knows “the
agent will not advise his principal”). “The rule is intended to protect those who exercise good faith,
and not as a shield for unfair dealing.” Temperance, 379 P.2d at 1026 (quoting Mut. Life Ins. Co.
of N.Y. v. Hilton-Green, 241 U.S. 613, 623 (1916)). Here, Haarslev makes clear in its amended
complaint that Chapple conspired with Muir to defraud Haarslev on the DemKota project by
inflating the CMI invoices (Dkt. 33 at ¶¶ 2–3, 14–16, 20). Haarslev further alleges that it did not
know that the invoices were false (id. at ¶ 74).
Based on these allegations, it can be reasonably inferred that Haarslev was not aware of
Chapple’s involvement in the invoice scheme and that, had it known, it would have attempted to
“prevent the consummation of the fraud.” Smith, 150 P. at 24. This inference is further bolstered
by the fact that Haarslev has a separate case pending against Chapple in which it alleges that
Chapple conspired with Muir to defraud Haarslev on this same project (Dkt. 35 at 6 n.1). To impute
Chapple’s knowledge onto Haarslev would likely weaponize the general rule into “a shield for
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MEMORANDUM DECISION AND O RDER – 7
unfair dealing.” Temperance, 379 P.2d at 1026. At this stage, it is sufficient that Haarslev alleges
that it did not know the invoices were false.
Therefore, Haarslev has successfully alleged a claim for fraud.
B. 	Tortious Interference with Business Expectancy (Count II)
Haarslev’s second cause of action for tortious interference with business expectancy fails
for substantially the same reasons identified in the Court’s prior order. To state a claim for
intentional interference with a prospective business expectancy, Haarslev must plead facts
showing: “(1) the existence of a valid economic expectancy, (2) knowledge of the expectancy on
the part of the interferer, (3) intentional interference inducing termination of the expectancy,
(4) the interference was wrongful by some measure beyond the fact of the interference itself, and
(5) resulting damage to the plaintiff whose expectancy has been disrupted.” Wesco Autobody
Supply, Inc. v. Ernest, 243 P.3d 1069, 1081–82 (Idaho 2010).
Despite having leave to amend, Haarslev has still not alleged facts specifying any valid
business expectancy that was terminated or that Defendants intentionally interfered to induce the
termination of the expectancy by some measure beyond the alleged interference itself. Haarslev’s
attempt to address the deficiencies by alleging it had to refund money and “spend resources” to
rectify relationships (Dkt. 33 at ¶¶ 89–90) does not address the fundamental requirement that a
prospective business relationship be terminated.
Haarslev’s allegations, when viewed as a whole, describe its employee, Chapple, making
business deals that Haarslev now regrets and that led to disputes with customers. These allegations
describe ordinary business realities and cost overruns—not tortious interference with business
expectancy. See Syringa Networks, LLC v. Idaho Dep’t of Admin., 305 P.3d 499, 509 (Idaho 2013)
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(“The mere pursuit of one’s own business purposes is not sufficient to support an inference of an
improper motive to harm the plaintiff.”).
Haarslev’s reliance on In re Ivie, 587 B.R. 729 (Bankr. D. Idaho 2018), is misplaced. That
case involved a defendant with knowledge of a continuing economic expectancy based on
historical relationships and past projects. id. at 739. Here, Haarslev has not alleged such historical
relationships or that Defendants had knowledge of any valid economic expectancy that was
subsequently terminated. Therefore, the Court finds that Haarslev has failed to state a plausible
claim for intentional interference with business expectancy.
C. 	Unjust Enrichment (Count III)
Haarslev’s unjust enrichment claim suffers from the same fatal deficiency identified in the
Court’s prior order. To state a claim for unjust enrichment in Idaho, the plaintiff must allege
“(1) there was a benefit conferred upon the defendant by the plaintiff; (2) appreciation by the
defendant of such benefit; and (3) acceptance of the benefit under circumstances that would be
inequitable for the defendant to retain the benefit without payment to the plaintiff for the value
thereof.” Lincoln Land Co., LLC v. LP Broadband, Inc., 408 P.3d 465, 469 (Idaho 2017).
As this Court previously explained, a plaintiff cannot “cut out the middleman [that had
conferred the benefit on the defendant] and directly recover from [the defendant] for unjust
enrichment.” Stevenson v. Windermere Real Est./Cap. Grp., Inc., 275 P.3d 839, 842 (Idaho 2012).
Despite having leave to amend, Haarslev has not cured this core deficiency. Haarslev continues to
allege that “Haarslev conferred a benefit on [Defendants] by paying CMI and IME’s invoices”
(Dkt. 33 at ¶ 96), and that “Haarslev paid Muir’s full year salary and commission twice, through
both CMI ($46,153) and IME ($128,000)” (id. at ¶ 99) (emphasis added). These allegations
demonstrate that CMI and IME—not Haarslev—conferred a benefit on Defendants.
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Haarslev seemingly acknowledges this flaw but urges the Court to adopt Washington’s
“misleading act” exception to the middleman rule, which applies in unjust enrichment cases when
the defendant is not merely an incidental beneficiary from a third-party transaction (Dkt. 35 at 8).
It cites Farwest Steel Corp. v. Mainline Metal Works, Inc., 741 P.2d 58 (Wash. Ct. App. 1987),
and In re Park W. Galleries, Inc., Mktg. & Sales Pracs. Litig., No. 09-2076, 2010 WL 2640237
(W.D. Wash. June 25, 2010), as support. Under that exception, a benefited third party may be
liable under a theory of unjust enrichment if the “case involved some clear act of bad faith by the
defendant resulting in the defendant’s unjust enrichment at the plaintiff’s expense.” Farwest Steel
Corp., 741 P.2d at 65. In the absence of a decision by the Idaho Supreme Court addressing this
question, the Court’s task is to “predict how the highest state court would decide the issue using
intermediate appellate court decisions, decisions from other jurisdictions, statutes, treatises, and
restatements as guidance.” Nat’l Labor Rels. Bd. v. Calkins, 187 F.3d 1080, 1089 (9th Cir. 1999)
(citation modified).
The Idaho Supreme Court has not spoken directly on whether a defendant’s improper
conduct in securing a benefit conferred by another satisfies the requirement that plaintiff directly
confer a benefit upon the defendant. On at least one occasion, however, it has addressed whether
some conduct on behalf of the plaintiff may be sufficient to satisfy the requirement that the plaintiff
confer the benefit on the defendant. Med. Recovery Servs., LLC v. Bonneville Billing &
Collections, Inc., 336 P.3d 802, 806 (Idaho 2014). In Medical Recovery, the benefit conferred to
the third party was the product of a mistake, i.e., checks drawn from the account of another
company (not a party to the case) were accidentally sent by that company to the defendant. Id.
There, the Idaho Supreme Court noted that “it was not the effort of [the plaintiff] in [sending the
checks] that conferred the benefit; it was ultimately [the other company’s] mistake that resulted in
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MEMORANDUM DECISION AND O RDER – 10
the benefit.” Id. This case suggests that the Idaho Supreme Court may be open to adopting the
misleading act exception to resolve the instant motion.
Applying the misleading act exception, Haarslev has sufficiently pled facts alleging
Defendants engaged in fraudulent and misleading acts towards Haarslev to procure the CMI and
IME invoices. For example, Muir allegedly “altered the CMI invoices [] by increasing the amounts
owed so that Haarslev would pay for more than it received” (Dkt. 33 at ¶ 70). Additionally, Muir
allegedly inflated IME invoices and then pocketed the markup (id. at ¶¶ 46–58). While CMI and
IME were the companies that directly conferred a benefit to Defendants, it was Defendants’ own
misconduct that misled Haarslev into overpaying the invoices. Thus, under the Washington rule,
Haarslev has sufficiently pled facts to establish an unjust enrichment claim.
The same result would be reached under Medical Recovery Services because the
involvement of Haarslev’s own employee in the scheme led to CMI and IME conferring the
benefit. As noted above, Haarslev’s amended complaint clearly alleges that Chapple conspired
with Muir to defraud it on the DemKota project by inflating the CMI and IME invoices (Dkt. 33
at ¶¶ 2–3, 14–16, 20, 44, 47, 49). Arguably, Chapple’s efforts to approve the inflated invoices
ultimately led to the invoices being paid to CMI and IME. Whether the fact that Chapple was
acting outside the scope of his employment, and thus not on Haarslev’s “behalf,” alters the analysis
is a question for another day. For now, Haarslev has alleged facts sufficient to demonstrate unjust
enrichment.
D. 	Leave to Amend
Regarding Haarslev’s tortious interference of business expectancy claim, the Court finds
that further leave to amend would be futile. Haarslev has now had two opportunities to state a
viable claim but has been unable to do so. The fundamental deficiencies in Haarslev’s claim—
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MEMORANDUM DECISION AND O RDER – 11
particularly the failure to identify any terminated business expectancy—cannot be cured by further
amendment given the nature of the underlying transactions alleged. Under these circumstances,
the Court concludes that further amendment would not serve the interests of justice.
IV. 	ORDER
IT IS ORDERED:
1. 	Defendants’ Motion to Dismiss Plaintiff’s First Amended Complaint (Dkt. 34) is
GRANTED in part and DENIED in part.
2. 	Count Two of Haarslev’s First Amended Complaint is DISMISSED WITHOUT LEAVE
TO AMEND.
February 18, 2026
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