Esprit Health LLC v. University of Delaware et al
Filing
11
MEMORANDUM OPINION re 8 MOTION to Dismiss the Amended Complaint. Signed by Judge Richard G. Andrews on 12/19/2013. (nms) (Main Document 11 replaced on 12/19/2013) (nms).
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
ESPRIT HEALTH, LLC,
Plaintiff,
Civil Action
v.
No. 1:13-cv-01385-RGA
UNIVERSITY OF DELAWARE and
STEVEN J. STANHOPE,
Defendants.
MEMORANDUM OPINION
JeffreyS. Cianciulli, Esq., WEIR & PARTNERS LLP, Wilmington, DE
Attorney for Plaintiff Esprit Health, LLC
William E. Manning, Esq., SAUL EWING LLP, Wilmington, DE; James D. Taylor, Esq., SAUL
EWING LLP, Wilmington, DE.
Attorneys for Defendants University of Delaware and Steven J. Stanhope.
December
a
2013
'
.
~~
ANDREWS, U.. DISTRICT JUDGE:
Esprit Health, LLC initiated this action against the University of Delaware and Dr.
Steven J. Stanhope (collectively, the "Defendants") on August 2, 2013. (D.I. 1). On
September 4, 2013, Esprit filed an amended complaint asserting six causes of action:
breach of contract and implied duty of good faith and fair dealing against the University;
fraud against the University and Dr. Stanhope; unjust enrichment against the University
and Dr. Stanhope; negligent misrepresentation against the University and Dr. Stanhope;
promissory estoppel against the University; and third party beneficiary against the
University. (D.I. 6). The Defendants filed the instant motion to dismiss Counts Two, Three,
and Four ofthe amended complaint. (D.I. 8). For the reasons that follow, the Court will
deny the Defendants' Motion to Dismiss.
I.
BACKGROUND
The amended complaint tells the following story.
In April 2010, the United States Department of Defense sought bids to provide it with a
product that would provide better outcomes to wounded military service members by
assembling research and expertise on physical trauma. (D.I. 6, 1f 13). The University
wanted to submit a bid for this Department of Defense project. (D.I. 6, 1f 14). Dr. Stanhope
was a professor at the University at the time. (D.I. 6,
1f 4).
Realizing that the project would require a research IT infrastructure, Dr. Stanhope
contacted Esprit's president, Frank Pierce, in July 2010. (D.I. 6, 1f 1f 15, 17). Dr. Stanhope
hoped that Esprit would be able to provide the University with eSphere™ as the IT
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infrastructure in its proposal to the Department of Defense. (D.I. 6, ~ 17). eSphere TM is a
system that uses meta-data to model research protocols. (D.I. 6,
~
9).
Esprit expected that it would require considerable cost, time, and effort to integrate
eSphere™ into the University's proposal. (D.I. 6, ~ 18). Stanhope promised that the
University would use eSphere™ if it was awarded the Department of Defense Contract and
agreed to pay Esprit approximately $1,200,000. (D.I. 6, ~ ~ 18, 19).
In reliance on the promises made by Stanhope, Esprit invested 200 days of man-labor
to prepare the proposal by: providing descriptive materials to be included in the proposal,
integrating eSphere™ into the product, developing necessary models, installing the
software on a University computer, educating University employees about preimplementation issues, assisting the University in certification programs, and making
presentations to the Department of Defense. (D.I. 6, ~ ~ 20, 21, 22). Esprit estimated that
such labor amounted to $600,000 in time and expenses. (D.I. 6, ~ 21). To meet Dr.
Stanhope's demands, Esprit forewent other opportunities and maintained a larger
workforce than was otherwise necessary. (D.I. 6,
~~
23, 24).
The University ultimately submitted a proposal to the Department of Defense which
specifically named Esprit as the provider of IT infrastructure. (D.I. 6,
~
26).
Dr. Stanhope told Pierce that a formal written contract was not necessary. (D.I. 6, ~ 28).
Instead, Dr. Stanhope confirmed verbally to Pierce that Esprit had been awarded a contract
with the University. (D.I. 6, ~ 28). Dr. Stanhope made other promises of additional
business between Esprit and the University. (D.I. 6, ~ 32). On October 10, 2010, Dr.
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Stanhope emailed that eSphere™ had been chosen for inclusion in the University's
proposal. (D.I. 6, -,r 29).
On March 1, 2011, Dr. Stanhope informed Pierce that the University's proposal,
including Esprit's function, had been accepted by the Department of Defense. (D.I. 6, -,r 33).
On May 10, 2011, Dr. Stanhope presented eSphere™ as the IT infrastructure for the project
to military representatives responsible for the project. (D.I. 6, -,r 35). On September 30,
2011 the University was actually awarded the contract by the Department of Defense. (D.I.
6, -,r 37).
Dr. Stanhope directed Esprit to continue implementation and customization of the
infrastructure for incorporation into the final product. (D.I. 6, -,r 37). Esprit trained
University employees on how to use eSphere™, customized eSphere™ for known
specifications, developed eSphere™ for implementation, and made presentations to
University employees. (D.I. 6, -,r -,r 34, 38, 39, 40).
On December 9, 2011, Stanhope directed the final implementation of eSphere™ into the
project. (D.I. 6, -,r 42). In March 2012, both Stanhope and a senior officer for the military
researchers confirmed that eSphere™ was the IT infrastructure to be used in the project.
(D.I. 6, -,r 43).
In July 2012, Dr. Stanhope told Pierce that the University would no longer use
eSphere™ in the project. (D.I. 6, -,r 44). Instead, the University decided to use a free IT
infrastructure alternative. (D.I. 6, -,r 44).
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II.
LEGAL STANDARD
In evaluating a motion to dismiss for failure to state a claim under Rule 12(b)(6), the
court must accept the plaintiffs well-pleaded allegations as true and draw all reasonable
inferences in its favor. Phillips v. County ofAllegheny, 515 F.3d 224, 231 (3d Cir. 2008). The
complaint's "factual allegations must be enough to raise a right to relief above the
speculative level." Bell At/. Corp. v. Twombly, 550 U.S. 544, 555 (2007). To survive a motion
to dismiss under Rule 12 (b) (6), a plaintiff must allege facts sufficient to "nudge its claims
across the line from conceivable to plausible." /d. at 570.
When determining whether dismissal is appropriate, the Court conducts a two-part
analysis. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). First, the factual and
legal elements of a claim are separated. /d. The Court must accept all of the complaint's
well-pleaded facts as true, but may disregard any legal conclusions. /d. at 210-11. Second,
the Court must determine whether the facts alleged in the complaint are sufficient to show
that the plaintiff has a "plausible claim for relief." /d. at 211. A claim is facially plausible
when its factual content allows the Court to draw a reasonable inference that the defendant
is liable for the misconduct alleged. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
III.
DISCUSSION
Defendants do not challenge the sufficiency of the allegations to state the various
claims. Rather, they argue that the various claims are, essentially, mutually inconsistent,
and cannot all be pursued at the same time. In short, I do not believe this is the appropriate
time to decide the consequences of pleading alternative theories that under Delaware law,
if proven, cannot all be the basis of remedies. Thus, at the most basic level, while Plaintiff
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claims breach of contract, it is not an undisputed fact that there was a contract. (The
amended complaint makes it pretty clear that, in Plaintiffs view at least, there was no
written contract.) Once Defendants have answered the amended complaint, the viability of
the various theories will probably be clearer.
A. Count Two (Fraud) and Count Four (Negligent Misrepresentation)
In Counts Two and Four of its amended complaint, Esprit alleges fraud and
negligent misrepresentation, respectively. To establish a claim for fraud, a plaintiff must
prove: "(1) defendant made a false representation; (2) with knowledge or belief of its
falsity or with reckless disregard for the truth; (3) with an intent to induce the plaintiff into
acting or refraining from acting; (4) plaintiff reasonably relied upon the misrepresentation;
and (5) plaintiff was damaged as a result of the reliance." Segovia v. Equities First Holdings,
LLC, 2008 WL 2251218, *21 (Del.Super. May 30, 2008). In its amended complaint, Esprit
alleges that the University and Stanhope made false misrepresentations and omissions
with knowledge of their falsity and with the intent of misleading Esprit into relying on
them. (D.I. 6,
~~56,
57). Despite actual representations by Stanhope that Esprit would be
the party to provide the IT infrastructure, the University chose another IT infrastructure
provider for its Department of Defense contract. (D.I. 6,
~
55).
To establish a claim for negligent misrepresentation a plaintiff must prove: "(1) a
false misrepresentation, usually of fact; (2) with the intent to induce the plaintiff to act or
refrain from acting; (3) which causes justifiable reliance on the misrepresentation; and (4)
damage to the plaintiff as a result of the reliance." State Dept. ofTransp. v. Figg Bridge
Engineers, Inc., 2011 WL 5593163, *4 (Del. Super. Nov. 9, 2011). Esprit alleges in its
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amended complaint that the University's and Dr. Stanhope's representations were false
and misleading and were made negligently in a manner that would mislead Esprit into
relying on the misrepresentations. (D.I. 6, ~ 75). Esprit further alleges that the University
and Stanhope owed a duty to Esprit to disclose that Esprit might not be used to provide the
IT infrastructure despite the University's award of a contract that was based on a proposal
containing Esprit technology. (D.I. 6, ~ 78).
The Defendants counter that Esprit cannot allege fraud or negligent
misrepresentation because the allegations of fraud and negligent misrepresentation are all
substantially related to the Defendants' alleged failed performance under the oral
agreement. (D.I. 8). Notably, the Defendants have cited to only one case in Delaware
standing for the proposition that these tort claims cannot be alleged alongside breach of
contract claims. See Cornell Glasgow, LLC v. La Grange Props., LLC, 2012 WL 2106945, *8
(Del. Super. June 6, 2012). Cornell did not, however, state an absolute rule: "The question
whether ... a tort claim can survive along side a breach of contract claim arising from the
same operative facts can, in many instances, be decided on a motion testing the viability of
a plaintiffs complaint .... This is such a case." /d. I do not, however, think the present case
is "such a case."
In Cornell, the plaintiff asserted an express written agreement governing the parties'
conduct. In this case, the plaintiff asserts an oral agreement which, at best, appears to
leave unstated a significant number of items that I would expect to see in a written
contract. I cannot predict whether Defendants will admit to the existence of any agreement
at all. Defendants may admit an agreement but claim a breach by Esprit. Esprit is entitled
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to plead in the alternative. Federal Rule of Civil Procedure 8(e) (2) provides that a party
may state as many separate claims as the party has, regardless of consistency. While the
Defendants ask this court to use Esprit's breach of contract claim to preclude other tort
claims, a court may not construe a plaintiffs "claim as an admission against another
alternative or inconsistent claim." See Independent Enterprises, Inc. v. Pittsburgh Water and
Sewer Authority, 103 F.3d 1165,1175 (3d Cir.1997) (citation omitted). Defendants'
motion to dismiss Esprit's fraud and negligent misrepresentation claims will therefore be
denied.
B. Count Three - Unjust Enrichment
To establish a claim for unjust enrichment, a plaintiff must prove: "(1) an
enrichment, (2) an impoverishment, (3) a relation between the enrichment and
impoverishment, (4) the absence of justification, and (5) the absence of a remedy provided
by law." Nemec v. Shrader, 991 A.2d 1120, 1130 (Del. 2010). In its amended complaint,
Esprit alleges that the University was enriched when it was awarded the Department of
Defense project at least in part due to the incorporation of Esprit's technology. (D.I. 6,
~
64). Esprit further asserts that it forewent other opportunities and spent 200-man hours
to develop its IT infrastructure for inclusion in the project proposal. (D.I. 6,
~
22). Esprit
claims that due to its development of the IT infrastructure, the University and Dr. Stanhope
will benefit from the profits that the University will earn as a result of the awarded
contract. (D.I. 6, ~ 67).
The Defendants counter that Esprit cannot allege a claim for unjust enrichment
because an unjust enrichment claim cannot be maintained alongside a contract claim. (D.I.
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8). The Defendants cite to one case. In Kuroda, it was clear from the face of the complaint
that the relationship between the plaintiffs and defendants was governed by an express
contract. Kuroda v. SP]S Hldgs., LLC, 971 A.2d 872, 891 (Del. Ch. 2009). The Court stated
that, "if there is a contract that is the measure of [the plaintiffs] right, there can be no
recovery under an unjust enrichment theory independent of it." /d. (citing Wood v. Coastal
States Gas Corp., 401 A.2d 932, 942 (Del. 1979)). I accept that as an accurate statement of
Delaware law.
This case, however, is distinguishable from Kuroda. For essentially the same
reasons as stated in relation to the fraud and negligent misrepresentation claims, this is not
the right time to force Plaintiff to choose amongst its theories. Defendants' motion to
dismiss Count Three will therefore also be denied.
IV.
CONCLUSION
For the reasons set forth above, the Defendants' Motion to Dismiss the Amended
Complaint as to Counts Two, Three, and Four is denied. A separate Order, consistent with
this Memorandum Opinion, will be entered.
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