Korac v. QxC Communications Inc. et al

Filing 29

MEMORANDUM OPINION re 10 MOTION to Dismiss Counts III, IV and V of Defendant's Counterclaims. Signed by Judge Richard G. Andrews on 11/1/2012. (nms)

•

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
CRAIG A. KORAC,
Plaintiff,
v.

Civil Action No. 1:12-CV- 00657- RGA

QxC COMMUNICATIONS, INC., f!k/a
WiBeam Communications, Inc.,
and JOHN VON STEIN,
Defendants.

MEMORANDUM OPINION

David M. Powlen, Esq., Kevin G. Collins, Esq., Barnes & Thornburg, LLP, Wilmington, DE,
Thomas J. Gallo, Esq., Barnes & Thornburg, LLP, Atlanta, GA, Attorneys for the Plaintiff.
Shanti M. Katona, Esq., Polsinelli Shughart, Wilmington, DE, Michael N. Ripani, Esq., Seyfarth
Shaw LLP, Chicago, IL, Attorneys for Defendant.

_1_,

November

2012

...

Before the court is Plaintiff's motion to dismiss the Defendants' counterclaims pursuant
to Federal Rule of Civil Procedure 9(b) and 12(b)(6). (D.I.lO). Craig A. Korac filed a complaint
against QxC Communications, Inc and John Von Stein to recover damages from an employment
contract allegedly entered into by the parties. (D.I. 1). The Defendants contend that no
employment contract existed and asserted counterclaims based upon an "Asset Purchase
Agreement". (D.I. 6). This agreement was entered into between QxC Communications and
Craig Korac as President ofWiBeam, Inc and Nikor Group, Inc. (D.I. 6). QxC
Communications' counterclaims allege fraud, breach of contract and indemnification based on
this agreement. (D .I. 6). The Plaintiff asserts that the requirements ofF ederal Rule of Civil
Procedure 9(b) have not been satisfied by QxC Communications, Inc.'s pleading. (D.I. 11 ).
Korac also argues that the fraud claim must fail as it is barred by the integration clause contained
in the "Asset Purchase Agreement." (D.I. 11). Plaintiff further contends that as he is not a party
to the contract but merely an agent for a disclosed principal and that the contract-based
counterclaims thus fail to state a claim. (D.I. 11).
The issues before the court are whether the counterclaim for fraud is subject to dismissal
pursuant to Federal Rule of Civil Procedure 9(b) or is barred under the integration clause of the
"Asset Purchase Agreement." The issue pertaining to the contract-based counterclaims is
whether pursuant to Federal Rule of Civil Procedure 12(b)(6) the counterclaims should be
dismissed for failure to state a claim as Korac is not a party to the contract.

.

DISCUSSION
Pursuant to Federal 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.

This heightened particularity standard does not require a complaint to list date, place or time in
the pleading when the purpose of Rule 9(b) to serve notice to Defendants is met by sufficient
alternative specifics ofthe alleged misconduct. In re: FruehaufTrailer Corp., 250 B.R. 168, 198
(D.Del.2000).
In Counterclaim III, QxC Communications alleges 14 material misrepresentations of fact

attributed to Korac prior to entering into the "Asset Purchase Agreement." The particulars
provided in the pleading are sufficient to provide notice to Korac and therefore meet the
requirement ofFederal Rule of Civil Procedure 9(b).
Pursuant to Kronenberg v. Katz, 872 A.2d 568, 593 (Del. Ch.2004):
[F]or a contract to bar a fraud in the inducement claim, the contract must contain
language that, when read together, can be said to add up to a clear anti-reliance clause by
which the plaintiff has contractually promised that it did not rely upon statements outside
the contract's four comers in deciding to sign the contract. The presence of a standard
integration clause alone, which does not contain explicit anti-reliance representations and
which is not accompanied by other contractual provisions demonstrating with clarity that
the plaintiff had agreed that it was not relying on facts outside the contract, will not
suffice to bar fraud claims.
The "Asset Purchase Agreement" contains an integration clause in Article 11.4 which
states:
This Agreement represents the entire agreement and understanding of the parties hereto
with reference to the transactions contemplated herein, and no representations, warranties
or covenants have been made in connection with this Agreement other than those
expressly set forth herein, in the Schedules, the Exhibits, or in the Documents delivered
in accordance herewith or therewith. This Agreement supersedes all prior negotiations,
discussions, correspondence, communications, understandings, and agreements between

the parties relating to the subject matter of this Agreement.
(D.I. 11). This appears to be a standard integration clause. There is no anti-reliance language
contained in it, compare Kronenberg, 872 A.2d at 590 (stronger anti-reliance language that was
found sufficient in earlier case), and therefore it does not serve as a bar to the fraud counterclaim.
To survive a motion to dismiss pursuant to Federal Rule of Civil Procedure 12 (b)(6), a
complaint must contain, "enough facts to state a claim to relief that is plausible on its face. Bell

Atl. Corp. v. Twombly, 550 U.S. 544,570 (2007). The basis for QxC Communications'
counterclaim for breach of contract and indemnification is the "Asset Purchase Agreement."
(D.I. 6). Korac executed the agreement as President ofboth the selling companies. (D.I. 11).
Under Delaware law, the established general rule is that an agent entering into a contract on
behalf of a disclosed principal is not liable as a party to the contract. Lawrence Johnson & Co.,

Inc. v. BeadenkopfLeather Company, 132 F. Supp. 391, 393 (D. Del. 1955). 1 For this reason the
motion to dismiss counterclaims IV and V is granted.

CONCLUSION
For the reasons set forth above, the court will deny the motion to dismiss QxC
Communications' Counterclaim III for fraud and will grant the motion to dismiss Counterclaims
IV and V for breach of contract and indemnification.

1

QxC cites Pritzker v. Merrill Lynch, 7 F .3d Ill 0 (3d Cir. 1993 ), but that case does not
involve personal liability of an agent signing a contract for a principal, and has no persuasive
value as applied to the allegation of the counterclaims.