Petra Mezzanine Fund LP v. Willis et al
Filing
30
MEMORANDUM OPINION re 15 MOTION to Dismiss Defendants' and Counterclaim Plaintiffs' Counterclaim. Signed by Judge Richard G. Andrews on 11/1/2012. (nms)
I
t
~
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
I
I
PETRA MEZZANINE FUND, L.P.,
Plaintiff,
h
v.
Civil Action No. 1:12-CV-00601-RGA
VINCENT N. WILLIS, HOWARD A.
WILLLIS AND JOSEPH WILLIS,
Defendants.
MEMORANDUM OPINION
Elihu E. Allinson, III, Esq., Wilmington, DE; Samuel P . Funk, Esq., Ryan T. Holt, Esq.,
Nashville, TN, Attorneys for Plaintiff.
Joseph J. Bellew, Esq., Barry M. Klayman, Esq., Damien Nicholas Tancredi, Esq.,
Wilmington, DE, Attorneys for Defendants.
NovemberJ_, 2012
f
I
i
I
l
~s~
Before the court is a motion to dismiss the Willises' counterclaims pursuant to Federal Rule
of Civil Procedure 12(b)( 6) and 9(b). Petra Mezzanine Fund, L.P. filed a breach of contract
complaint based upon a "Contribution Agreement" entered into by all parties to this suit. (D.I.
1). The Willises filed counterclaims against Petra alleging breach of contract based on a
"Subsequent Agreement" as well as fraud. (D.I. 13).
It appears from the Verified Complaint that the Plaintiff, the three Defendants, and a fifth
individual were the owners of a business. The business was sold in 2004. At that time the
parties entered into the Contribution Agreement, which provided that if one of the parties had to
make certain sorts of payments, it could get reimbursement from the other four based on the
respective pro rata shares of ownership. Petra alleges that it made such a payment on December
8, 2011, that it was in excess of its pro rata ownership percentage, that it notified the Defendants
ofthis on December 13,2011, and that the Defendants have refused to comply with the
Contribution Agreement. The Defendants deny most of these allegations.
The Defendants in their counterclaims contend that the December gth payment grew out of a
settlement agreement with a third party. The settlement agreement was discussed during a
mediation conference in September 2011. Petra there offered a new agreement which would
accept a lower contribution amount ($300,000) from the Defendants, as well as more time within
which to tender payment, than would be required by the Contribution Agreement. (D.I. 13, p.9,
~16).
In return for this consideration, Defendants entered into a settlement agreement that they
otherwise would not have endorsed. (D.I. 13, p.7). The basis for the fraud counterclaim derives
from the Defendants' contention that this offer by Petra was meant to induce the signing of the
2
settlement agreement and there was no intention on Petra's part to uphold the agreement to
accept only $300,000 from the Defendants at some later undetermined time. (D.I 13, p.9).
Petra argues that there is no Subsequent Agreement, and that even if there was such an
agreement, it is unenforceable due to the lack of agreement on its material terms.
The issues before the court are whether the counterclaim for breach of contract is subject to
dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6) and whether Federal Rule of Civil
Procedure 9(b) requires the dismissal of the counterclaim for fraud due to the lack of
particularity.
DISCUSSION
To survive a motion to dismiss, a complaint must contain "enough facts to state a claim to
reliefthat is plausible on its face." Bell At/. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "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." !d. at 566.
The basis for the Willises' counterclaim for breach of contract is the Subsequent Agreement
which was entered into orally to modify the previously executed Contribution Agreement. (D.I.
13). The Contribution Agreement includes the following language regarding modification:
This agreement states the entire agreement of the parties hereto with respect to the
subject matter hereof, and may not be modified, amended, or changed, nor any of its
provisions waived, without the express unanimous written consent of the parties hereto.
(D.I. 1). On the face of the claim, the allegations show that the Subsequent Agreement is not a
valid contract as it seeks to modify the Contribution Agreement but is not in writing. For this
I
reason, the counterclaim for breach of contract does not state a claim upon which relief may be
I
based and therefore must be dismissed.
t
3
~
l
I
'
'
Further, even if the Subsequent Agreement were a valid contract, it would be
unenforceable due to a lack of material terms. Delaware law has adopted the Restatement
(Second) of Contracts ยง33 (1981) test to determine the completeness of a contract. "[T]he terms
of a contract are reasonably certain if they provide a basis for determining the existence of breach
and for giving an appropriate remedy." Echols v. Pelullo, 377 F.3d 272, 277 (3d Cir. 2004). The
Subsequent Agreement lacks both a time for when the payment would be tendered as well a
formula for allocating the amount for each party to pay. (D.I. 13). These terms were material to
the Contribution Agreement. (D.I. 1). Due to the lack of any term directing when payment
would be due, there could be no basis for determining when the Willises might be in breach for
non-payment. Due to the lack of any term describing the parties' financial responsibilities, there
could be no basis for determining the amounts owed by the three defendants. The Subsequent
Agreement fails the Restatement test. Thus, for this second reason, the breach of contract
counterclaim fails to state a claim.
The fraud counterclaim must meet the requirements ofFederal Rule of Civil Procedure
9(b):
In alleging fraud or mistake, a party must state with particularity the circumstances
constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a
person's mind may be alleged generally.
The purpose of Rule 9(b) is to provide notice of the precise misconduct alleged, but the date of,
time of and place of the alleged fraud need not be in the complaint when there are other means to
provide notice. See In re FruehaufTrailer Corp., 250 B.R. 168, 198 (D. Del. 2000).
As such, prior oral promises or statements of future intent can be "fraudulent
misrepresentations" sufficient to form the basis of a fraudulent inducement claim only
where the Complaint alleges particularized facts that allow the Court to infer that, at the
4
I
time the promise was made, the speaker had no intention of keeping it.
Microstrategylnc. v. Acacia Research Corp., 2010 WL 5550455, *17 (Del. Ch. 2010.) The
counterclaim for fraud specifies the mediation meeting in September of 2011 as the time the
misrepresentations were made. The counterclaim provides a factual basis for the claim of
fraudulent inducement as it alleges Defendants agreed to the new debt based on the fraudulent
representation that they would not have to pay for it per the Contribution Agreement. It offers
Plaintiffs demand for full payment within a short period of time after settlement as a basis to
infer that Petra had no intention of abiding by the agreements made during the September
mediation meeting. (D. I. 13). The requirement for heightened particularization in the pleading
has been met.
Petra Mezzanine further argues that the fraud counterclaim is barred as it is merely
"bootstrapping" the breach of contract counterclaim.
As a general rule under Delaware law, where an action is based entirely on a breach of the
terms of a contract between the parties, and not on a violation of an independent duty
imposed by law, a plaintiff must sue in contract and not in tort.
Pinkert v. John J. Olivieri, P.A., 2001 U.S. Dist. LEXIS 8133, *16 (D. Del. May 24, 2001). For
the reasons stated above, the Subsequent Agreement was not a valid contract and therefore could
not have been breached. Further, there was no breach of the Contribution Agreement as no debt
was owed by the Willises prior to the alleged inducement.
CONCLUSION
For the reasons set forth above, the court grants the motion to dismiss the Willises'
Counterclaim I and denies the motion to dismiss Counterclaim II. A separate order will be
entered.
5
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?