Hiller & Associates, LLC v. Garden Fresh Restaurants LLC

Filing 72

REPORT AND RECOMMENDATIONS re 34 MOTION to Preclude filed by Garden Fresh Restaurants LLC and 22 MOTION to Dismiss Defendant's Counterclaims filed by Hiller & Associates, LLC. The court recommends that the district court GRAN T plaintiff's motion to dismiss defendant's counterclaims, D.I. 22 , and DENY as MOOT defendant's motion to preclude, D.I. 34 . Please note that when filing Objections pursuant to Federal Rule of Civil Procedure 72(b)(2), briefing c onsists solely of the Objections (no longer than ten (10) pages) and the Response to the Objections (no longer than ten (10) pages). No further briefing shall be permitted with respect to objections without leave of the Court. Objections to R&R due by 8/23/2018. Signed by Judge Mary Pat Thynge on 8/9/2018. (fms) (Main Document 72 replaced on 8/9/2018) (fms).

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
HILLER & ASSOCIATES, LLC,
Plaintiff,
v.
GARDEN FRESH
RESTAURANTS, LLC,
Defendant.

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C. A. No. 18-152-VAC-MPT

REPORT AND RECOMMENDATION
I.

INTRODUCTION
On January 28, 2018, Hiller & Associates (“plaintiff” or “Hiller”) brought this action

against Garden Fresh Restaurants, LLC (“defendant” or “Garden Fresh”), alleging
breach of contract. 1 Defendant answered the Complaint on February 16, 2018, and
alleges counterclaims for: breach of contract, fraudulent inducement, and negligent
misrepresentation. 2
Presently before the court is plaintiff’s motion to dismiss defendant’s
counterclaims pursuant to Federal Rule of Civil Procedure 12(b)(6), 3 and defendant’s
motion to preclude D.I. 29, a declaration attached to plaintiff’s reply brief on the motion
to dismiss. 4 The court has jurisdiction under 28 U.S.C. § 1332, as the parties are
residents of different states, and the amount in controversy exceeds $75,000. 5 For the
reasons that follow, the court recommends that the district court grant plaintiff’s motion
to dismiss and deny as moot defendant’s motion to preclude.
1

D.I. 2.
D.I. 14 at ¶ 26 at 15–¶ 48 at 17.
3 D.I. 22.
4 D.I. 34.
5 D.I. 2 at ¶ 5 at 3. This court has personal jurisdiction over defendant, which is
organized under Delaware law. Id. at ¶ 2 at 2. Venue is proper under 28 U.S.C.
§ 1391(b)(1).
2

A.

Background
1.

Factual background

The following facts are alleged by Hiller in the Complaint or are included in
documents attached to the Complaint. 6
Garden Fresh is a Delaware limited liability company, with headquarters in
California. 7 Garden Fresh “operates a chain of approximately 100 fast casual
restaurants[.]”8 In October 2016, Garden Fresh sought Chapter 11 bankruptcy
protection in the United States Bankruptcy Court for the District of Delaware. 9 In early
2017, as part of its exit from Chapter 11, Garden Fresh investigated the potential to
negotiate a new beverage contract with Coca-Cola, its contracted soft-drink provider at
the time. 10 At the time, the CEO of Garden Fresh was Mr. Gene Baldwin (“Baldwin”). 11
Hiller “is [] in the business of consulting restaurants in connection with the
negotiation of beverage sales agreements with major soft drink suppliers[.]” 12 In March
2017, the parties signed a “Beverage Consulting Agreement” (the “Beverage Consulting
Agreement”). 13 The contract states in part:
RECITALS
Whereas, [Hiller] is engaged in the business of providing soft
drink consulting services to customers; and
Whereas, the services provided by [Hiller] include an
assessment of [Garden Fresh]’s current beverage program,
and

6

D.I. 2; D.I. 2-1, ex. A; D.I. 2-2, ex. B; D.I. 2-3, ex. C; D.I. 2-4, ex. D. Although
defendant challenges the authenticity of documents attached to plaintiff’s motion to
dismiss, e.g. D.I. 26 at 5, defendant does not challenge the aforementioned exhibits A–
D.
7 Id. at ¶ 2 at 2.
8 Id. at ¶ 4 at 2.
9 Id. at ¶ 10 at 3.
10 Id. at ¶ 11 at 4–¶ 12 at 4.
11 Id. at ¶ 12 at 4.
12 Id. at ¶ 1 at 2.
13 D.I. 2-1, ex. A.
2

Whereas, [Garden Fresh] desires to utilize [Hiller]’s expertise
and services with respect to establishing and/or modifying
the soft drink program of [Garden Fresh]’s business.
Now, therefore, it is mutually agreed as follows:
SERVICES
[Garden Fresh] hereby grants [Hiller] the right and authority
to provide expertise and services to support [Garden Fresh]
in the establishment and/or modification of its soft drink
program(s). [Garden Fresh] agrees to provide [Hiller] with all
relevant information including, but not limited to, all
information regarding [Garden Fresh]’s current soft drink
products, any funding provided for said products, as well as
support premiums, marketing programs, etc.
COMPENSATION
[Hiller] shall be paid for its services as follows (a) if a new
Coke contract is chosen by [Garden Fresh], $65,000 in onetime fixed compensation plus discretionary bonus potential
of up to $10,000 that is fully controlled by [Garden Fresh] OR
(b) if [Garden Fresh] decides to accept a new agreement
with Pepsi, variable compensation calculated at the rate of
20% of all improvement above the per gallon total deal value
of [Garden Fresh]’s current Coke master beverage program
($6.24 per gallon) times the total contracted gallonage. The
current total deal value and improvement in the new program
total deal value shall include all contracted compensation
including but not limited to marketing, meeting, equipment,
service, early renewal, and any other contracted funding. 14
Hiller claims that, prior to signing the contract, it obtained “detailed information
from Garden Fresh regarding its beverage program with Coca-Cola, including historical
and projected gallons of Coca-Cola product used at Garden Fresh’s restaurants,
historical and projected number of locations operated by Garden Fresh, and the dollar
value of the funding that Coca-Cola had agreed to pay Garden Fresh.” 15
Specifically prior to signing the Beverage Consulting Agreement, in February
2017, Hiller alleges that it “conducted an analysis of the current and likely future value of
14
15

D.I. 2-1, ex. A at 1.
D.I. 2 at ¶ 12 at 4.
3

Garden Fresh’s current deal with Coca-Cola, which included an analysis of the
projected number of gallons of Coca-Cola product that Garden Fresh was likely to use
from 2018 to 2021.”16 According to Hiller, Garden Fresh “confirmed [its] calculations.”17
After signing the Beverage Consulting Agreement, Hiller “engaged both Pepsi
and Coca-Cola in a competitive bid process.” 18 In April 2017, “Garden Fresh’s
executive team made the decision to move forward with Pepsi as their new beverage
supplier.” 19
In May 2017, based upon the “historical and estimated figures provided to it by
Garden Fresh[,]” Hiller negotiated a “deal in principle with Pepsi that would pay Garden
Fresh at least 54% more ‘funding’ per gallon than Coca-Cola had paid Garden Fresh [in
its prior contract], which represented millions of dollars of incremental revenue to
Garden Fresh over the life of the agreement.” 20
In June 2017, facing a potential acquisition by a restaurant group with an
established relationship with Coca-Cola, Garden Fresh asked Hiller “to negotiate a dealin-principle with Coca-Cola that would be signed if the acquisition occurred[.]”21 The
Coca-Cola “proposal . . . had a total deal value that would have been approximately
28% less, on a dollars-per-gallon basis, than the agreement in principle that Hiller [] had
negotiated with Pepsi, even though the proposed Coca-Cola agreement would have
lasted twice as long[.]” 22 The acquisition did not transpire, and Garden Fresh returned
to its plans with Pepsi. 23

16

Id. at ¶ 13 at 4.
Id. at ¶ 13 at 4.
18 Id. at ¶ 18 at 5.
19 Id.
20 Id. at ¶ 19 at 5–6.
21 Id. at ¶ 20 at 6.
22 Id. at ¶ 20 at 6.
23 Id. at ¶ 22 at 7.
17

4

Garden Fresh signed a beverage sales agreement with Pepsi in August 2017. 24
The agreement was substantially the same as the agreement-in-principle that Hiller had
negotiated in May. 25 With the exception of Dr. Pepper, 26 Garden Fresh agreed to
purchase soft drinks exclusively from Pepsi “[i]n exchange for substantial per gallon
‘funding’ and other pecuniary value paid by Pepsi[.]”27 The term of the Pepsi deal is “at
least five years or until Garden Fresh use[s] a specified number of gallons of ‘post-mix
products,’ i.e., fountain soft drink syrup, whichever [i]s longer.” 28
In determining the volume commitments to Pepsi, Hiller alleges that “[t]he
specified number of syrup gallons in the Pepsi contract was calculated and agreed to by
all parties involved and was based on gallonage information provided by Garden
Fresh.” 29 According to Hiller, the parties factored in “the closure of several Garden
Fresh restaurants in 2016 and 2017 and [] the recent trend of Americans consuming
fewer carbonated soft drinks.” 30 As a result, in the Pepsi contract, Garden Fresh
committed to a number of syrup gallons per year that was “over 10% lower than the
average number of committed gallons per year in the final five years of Garden Fresh’s
prior Coca-Cola agreement.” 31
After Garden Fresh signed the Pepsi deal, Garden Fresh asked Hiller to submit
an invoice and to agree to payment over six months. 32 Hiller agreed to the payment
terms and submitted an invoice for $485,268 payable at $80,878 monthly. 33 Garden

24

Id. at ¶ 23 at 7.
Id.
26 According to Garden Fresh’s contract with Pepsi, Garden Fresh is allowed to
sell Dr. Pepper in its restaurants. D.I. 23-6, ex. 6 at 2.
27 D.I. 2 at ¶ 23 at 7.
28 Id.
29 Id. at ¶ 24 at 7.
30 Id.
31 Id.
32 Id. at ¶ 26 at 8; D.I. 2-3, ex. C at 3 of 5.
33 D.I. 2 at ¶ 26 at 8; D.I. 2-4, ex. D.
25

5

Fresh paid the first two monthly installments in August and September. 34 During this
time, Garden Fresh and Pepsi each contacted Hiller to raise issues with the conversion
from Coca-Cola—Hiller agreed to work with Garden Fresh and Pepsi “to address some
of these implementation issues.”35 “During this same time period, Hiller [] also
negotiated a separate agreement between Dr. Pepper and Garden Fresh for no
additional compensation.” 36
In September 2017, Garden Fresh was sold to new owners who installed a new
CEO, Mr. John W. Haywood (“Haywood”). 37 On September 13, 2017, Haywood
approached Hiller to “discuss a renegotiation of [its] fee[]” and for the possibility that
Hiller could “negotiate a potential ‘exit’ from the Pepsi agreement on Garden Fresh’s
behalf.” 38 Garden Fresh did not pay Hiller in October 2017 or thereafter. 39 In response
to subsequent requests by Hiller, Garden Fresh has refused to pay and has sought to
renegotiate payments under the Beverage Consulting Agreement. 40 Hiller filed the
present action on January 26, 2018, alleging that Garden Fresh breached the contract
between the parties by refusing to pay the money it allegedly owes Hiller. 41
(a)

Answer and Counterclaim

Defendant answered the Complaint on February 16, 2018. 42 In the Answer,
Defendant alleges counterclaims for: breach of contract, fraudulent inducement, and
negligent misrepresentation. 43

34

D.I. 2 at ¶ 28 at 9.
Id. at ¶ 27 at 9.
36 Id.
37 Id. at ¶ 29 at 9–10.
38 Id.
39 Id. at ¶ 30 at 10.
40 Id.
41 D.I. 2.
42 D.I. 14.
43 D.I. 14 at ¶ 26 at 15–¶ 48 at 17.
35

6

(i)

Counterclaims

Garden Fresh alleges the following in its Counterclaims. Hiller allegedly
represented in the Beverage Consulting Agreement that “the services it would provide
would include ‘an assessment of [Garden Fresh’s] current beverage program.’” 44 Based
upon this representation, Garden Fresh contends that it “expected Hiller’s assessment
of Garden Fresh’s soft drink program would include, at a minimum, a rigorous and
careful examination and analysis . . . of the historic beverage data, as well as to include
consideration of Garden Fresh’s current and anticipated future needs, and market
trends.”45 Garden Fresh contends:
Hiller could not, in good faith, negotiate a new beverage
contract for Garden Fresh without first evaluating Garden
Fresh’s existing beverage program, considering how factors
such as Garden Fresh’s Dr. Pepper soft drink program would
impact its overall soft drink needs, and ensuring that any
gallon commitment figure in a Pepsi or Coca-Cola
agreement accurately reflected Garden Fresh’s needs over
five years. 46
Specifically, Garden Fresh alleges that Hiller did not “account for how Garden Fresh’s
Dr. Pepper usage would impact Garden Fresh’s overall beverage program.” 47 Garden
Fresh alleges that “Hiller rotely applied historical volume data that included Dr. Pepper
product, as well as [Coke] product.”48 As a result, Garden Fresh avers Hiller’s deal for
Garden Fresh paints far too rosy of a picture, because Hiller “overstated the amount of

44

D.I. 14 at ¶ 8 at 12 (citing D.I. 2-1, ex. A at 1).
Id. at ¶ 11 at 12.
46 Id. at ¶ 12 at 13.
47 Id. at ¶ 17 at 13.
48 Id. at ¶ 18 at 13–14. In the Answer and Counterclaims, Garden Fresh refers to
“historical volume data” for “Pepsi product.” Id. Garden Fresh did not have a
relationship with Pepsi prior to the August 2017 contract; therefore, there would not be
any historical volume data for Pepsi products. The court concludes that this is an
inadvertent error and that Garden Fresh intended to refer to historical data for “Coke
product.”
45

7

Pepsi syrup gallons Garden Fresh would require over the intended five-year life of the
beverage sales agreement.” 49
Garden Fresh avers that, “[h]ad Hiller . . . [done] the contracted-for assessment
and evaluation of the data and other information relating to Garden Fresh’s beverage
program, Hiller necessarily would have negotiated a different Pepsi agreement on
behalf of Garden Fresh[.]” 50
Garden Fresh alleges that it did not discover “Hiller’s gallonage error [until]
October 2017.”51 At approximately the same time, Hiller informed Garden Fresh that it
“would no longer assist Garden Fresh with the Pepsi Contract or any additional
negotiations with Pepsi[,]” and Garden Fresh “had to engage a new consultant to help
renegotiate the flawed Pepsi Contract. . . [at] additional expense[.]” 52 As of February
16, 2018, Garden Fresh stated that “[t]he renegotiations are ongoing.” 53
As to breach of contract, Garden Fresh alleges that Hiller’s failure to perform the
assessment is material, and as a result Garden Fresh suffered damages in the
$162,000 it paid Hiller as well as expectation damages. 54 Garden Fresh’s claims for
fraudulent inducement and negligent misrepresentation are also based on its allegations
that Hiller represented that it would perform the “assessment” that Garden Fresh claims
was either not done or was done improperly. 55
2.

Procedural background

Plaintiff moved to dismiss defendant’s counterclaims on March 23, 2018 (the
“motion to dismiss”). 56 Attached to its opening brief in support of the motion to dismiss,
49

Id.
Id. at ¶ 19 at 14 (emphasis added).
51 Id. at ¶ 22 at 14.
52 Id. at ¶ 24 at 14.
53 Id.
54 Id. at ¶ 30 at 15.
55 Id. at ¶ 33 at 16–¶ 48 at 17.
56 D.I. 22.
50

8

are six documents, which plaintiff contends are described in the Complaint and the
Counterclaims. 57 Defendant opposes the motion to dismiss and argues that all six
documents “are not authenticated and Garden Fresh’s counterclaims are not based on
those documents.” 58 In addition, defendant argues that the court should treat the
motion to dismiss “as one for summary judgment under [Federal] Rule [of Civil
Procedure] 12(d), as to arguments requiring consideration of the attached
documents.” 59 Accompanying its reply brief, 60 plaintiff filed a Declaration by Mr. George
C. Hiller authenticating the three undated documents—exhibits 3–5 (the “Hiller
Declaration”). 61
On April 6, 2018, defendant moved to preclude the Hiller Declaration (the “motion
to preclude”) under Local Rule 7.1.3(c)(2), which proscribes new arguments in reply
briefs. 62 Plaintiff opposes the motion, 63 which was fully briefed on April 27, 2018. 64
II.

STANDARD OF REVIEW
A.

Motion to Dismiss

Federal Rule of Civil Procedure 12(b)(6) governs a motion to dismiss a complaint
for failure to state a claim upon which relief can be granted. The purpose of a motion
under Rule 12(b)(6) is to test the sufficiency of the complaint, not to resolve disputed
facts or decide the merits of the case. 65 “The issue is not whether a plaintiff will
ultimately prevail, but whether the claimant is entitled to offer evidence to support the

57

D.I. 23 at 3 n.1, 11.
D.I. 26 at 5.
59 Id.
60 D.I. 28.
61 D.I. 29.
62 D.I. 34 at 1–2.
63 D.I. 40.
64 D.I. 43.
65 Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993).
58

9

claims.” 66 A motion to dismiss may be granted only if, after “accepting all well-pleaded
allegations in the complaint as true, and viewing them in the light most favorable to the
plaintiff, plaintiff is not entitled to relief.” 67 While the court draws all reasonable factual
inferences in the light most favorable to a plaintiff, it rejects unsupported allegations,
“bald assertions,” and “legal conclusions.” 68
To survive a motion to dismiss, a plaintiff=s factual allegations must be sufficient
to “raise a right to relief above the speculative level . . . .” 69 Plaintiffs are therefore
required to provide the grounds of their entitlement to relief beyond mere labels and
conclusions. 70 Although heightened fact pleading is not required, “enough facts to state
a claim to relief that is plausible on its face” must be alleged. 71 A claim has facial
plausibility when a plaintiff pleads factual content sufficient for the court to draw the

66

In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1420 (3d Cir. 1997)
(internal quotations and citations omitted); see also Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 563 n.8 (2007) (A[W]hen a complaint adequately states a claim, it may not be
dismissed based on a district court’s assessment that the plaintiff will fail to find
evidentiary support for his allegations or prove his claim to the satisfaction of the
factfinder.@).
67 Maio v. Aetna, Inc., 221 F.3d 472, 481-82 (3d Cir. 2000) (citing Burlington, 114
F.3d at 1420).
68 Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997) (citations
omitted); see also Schuylkill Energy Res., Inc. v. Pa. Power & Light Co., 113 F.3d 405,
417 (3d Cir. 1997) (citations omitted) (rejecting Aunsupported conclusions and
unwarranted inferences@); Associated Gen. Contractors of Cal., Inc. v. Cal. State
Council of Carpenters, 459 U.S. 519, 526 (1983) (AIt is not . . . proper to assume
[plaintiff] can prove facts that it has not alleged or that the defendants have violated the .
. . laws in ways that have not been alleged.@).
69 Twombly, 550 U.S. at 555 (citations omitted); see also Victaulic Co. v. Tieman,
499 F.3d 227, 234 (3d Cir. 2007) (citing Twombly, 550 U.S. at 555).
70 See Twombly, 550 U.S. at 555 (citing Papasan v. Allain, 478 U.S. 265, 286
(1986)).
71 Twombly, 550 U.S. at 570; see also Phillips v. County of Allegheny, 515 F.3d
224, 233 (3d Cir. 2008) (AIn its general discussion, the Supreme Court explained that
the concept of a >showing= requires only notice of a claim and its grounds, and
distinguished such a showing from >a pleader’s bare averment that he wants relief and
is entitled to it.=@) (quoting Twombly, 550 U.S. at 555 n.3).
10

reasonable inference that the defendant is liable for the misconduct alleged. 72 Once
stated adequately, a claim may be supported by showing any set of facts consistent
with the allegations in the complaint. 73 Courts generally consider only the allegations
contained in the complaint, exhibits attached to the complaint, and matters of public
record when reviewing a motion to dismiss. 74
B.

Motion to Preclude

Rule 7.1.3(c)(2) of this court’s Local Rules states that “[t]he party filing the
opening brief shall not reserve material for the reply brief which should have been
included in a full and fair opening brief.” 75 Sanctions may be imposed for violations of
the local rules, “at the discretion of the Court, for violations of the Rules, as well as for
violations of the Fed. R. Civ. P. and any order of the Court. Such sanctions may
include, but are not limited to, costs, fines and attorneys’ fees imposed on the offending
party and that party’s attorney.” 76 “In addition . . . [the court may] determin[e] [] the
motion against the offending party.” 77
III.

DISCUSSION
Hiller argues, in its opposition to the motion to preclude, that “there are numerous

bases on which to dismiss all of Garden Fresh’s counterclaims that would not require
the Court to consider the Assessment Documents at all, . . . [t]herefore, the Court has
ample grounds to deny Garden Fresh’s motion [to preclude] as moot.” 78 First, before
the court addresses the motion to preclude, which is effectively exhibits 3–5, it
addresses whether it may consider exhibits 1, 2, and 6. Second, with those documents
72

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556).
Twombly, 550 U.S. at 563 (citations omitted).
74 See, e.g., Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d
1192, 1196 (3d Cir. 1993) (citations omitted).
75 D. Del. LR 7.1.3.
76 D. Del. LR 1.3.
77 Id.
78 D.I. 40 at 3.
73

11

in hand, the court next addresses the motion to dismiss. Third, the court discusses the
motion to preclude.
A.

Exhibits 1, 2, and 6

As a preliminary matter, in its motion to preclude, Garden Fresh seeks to exclude
the Hiller Declaration, which authenticates exhibits 3–5 attached to plaintiff’s motion to
dismiss. 79 The Hiller Declaration does not discuss exhibits 1, 2, or 6, and Garden Fresh
did not move to preclude these documents. 80
Generally speaking, “a court may consider an undisputedly authentic document
that a [moving party] attaches as an exhibit to a motion to dismiss if the [non-moving
party]’s claims are based on the document.”81 In the case at bar, Hiller argues that the
court “may properly consider [these] documents in ruling on th[e] motion to dismiss[,]”
because “[e]xhibits 1–2 and 6 . . . are described in the Complaint and the Counterclaims
and are incorporated by reference therein.”82 Garden Fresh does not dispute the
authenticity of exhibits 1, 2, and 6. 83
In addition, Garden Fresh’s Counterclaims appear to be based, at least in part,
on exhibits 1, 2, and 6. For example, Garden Fresh alleges that it “provided Hiller with

79

D.I. 34; D.I. 29 at¶¶ 2–5 (authenticating exhibits 3–5).
D.I. 29; D.I. 34.
81 Pension Ben. Guar. Corp., 998 F.2d at 1196.
82 D.I. 23 at 3 n.1. For example, “[e]xhibits 1 and 2 . . . are emails between Hiller
and Garden Fresh requesting and receiving information about Garden Fresh’s CocaCola program, [and] are referenced in both the Complaint and the Counterclaims.” Id.
(citing D.I. 2 at ¶ 12 at 4 (Complaint); D.I. 14 at ¶ 9 at 12 (Counterclaims)). In addition,
“[e]xhibit 6, which is the beverage sales agreement between Garden Fresh and Pepsi,
is also referenced in both pleadings.” Id. (citing D.I. 2 at ¶23 at 7-¶ 25 at 8 (Complaint);
D.I. 14 at ¶ 13 at 13 (Counterclaims)).
83 D.I. 26 at 5 (disputing the authenticity of exhibits 3, 4, and 5, “in particular the
emails and spreadsheets constituting Hiller’s supposed ‘assessment.’”). Moreover,
Garden Fresh effectively conceded all opposition to exhibit 6 when it argued that its
“claims arises out of the . . . beverage agreement Hiller negotiated with Pepsi.” Id.
80

12

open access to Garden Fresh’s staff and to the company’s historical beverage data[.]”84
However, according to Garden Fresh, “Hiller overstated the amount of Pepsi syrup
gallons Garden Fresh would require over the intended five-year life of the beverage
sales agreement[,]”85 and as a result, Garden Fresh “enter[ed] into a Pepsi contract with
unfavorable terms, including a longer effective term and substantially reduced cost
savings.” 86
Exhibit 1 is a series of e-mail exchanges from November 2016 and ending on
January 23, 2017 with a request from Hiller to Garden Fresh for information relating to
historical and estimated (for 2017) “Total Garden Fresh system Coke gallons[,]” the
number of “system stores open (at the end of each year please)[,]” and other details. 87
Exhibit 2 is an e-mail exchange from Baldwin to Hiller forwarding an e-mail from Garden
Fresh’s Susan Miille Hoffman, Vice President of Fresh Sourcing and Menu Innovation,
containing a series of documents responding to Hiller’s request, including a spreadsheet
entitled “Coke Information for CR3.xlsx[,]” which includes direct responses to each of
Hiller’s requests. 88 Thus, the court concludes that Garden Fresh’s Counterclaims are
based on exhibits 1 and 2, and the court may consider these documents in the motion
to dismiss.
Similarly, Garden Fresh alleges in the Counterclaims that Hiller negotiated a
contract between Garden Fresh and Pepsi, which reflected an “overstated [] amount of
Pepsi syrup gallons Garden Fresh would require over the intended five-year life of the
beverage sales agreement.” 89 Exhibit 6, is a copy of this contract. 90 Therefore, Garden

84

D.I. 14 at ¶ 9 at 12. In the Answer, Garden Fresh denies that it provided CocaCola projections to Hiller. D.I. 14 at ¶ 12 at 2.
85 Id. at ¶ 18 at 13–14.
86 Id. at ¶ 20 at 14.
87 Id. at 2 of 7 (emphasis in original).
88 D.I. 23-2, ex. 2 at 3.
89 D.I. 14 at ¶ 13 at 13–¶ 19 at 14.
90 D.I. 23-6, ex. 6.
13

Fresh’s Counterclaims are based on exhibit 6, and the court may also consider this
document in the motion to dismiss.
B.

Dismissal of Garden Fresh’s Counterclaims

The gravamen of Garden Fresh’s Counterclaims is its contention that the
Beverage Consulting Agreement required Hiller to do an “assessment” of Garden
Fresh’s “current beverage program.” Garden Fresh alleges that “Hiller’s assessment of
Garden Fresh’s soft drink program would [have] include[d], at a minimum, a rigorous
and careful examination and analysis . . . of the historic beverage data, as well as to
include consideration of Garden Fresh’s current and anticipated future needs, and
market trends.” 91 According to Garden Fresh, Hiller did not do that assessment,
because it allegedly failed to subtract Dr. Pepper syrup volumes from the data it
received from Garden Fresh and, thus, negotiated a deal with Pepsi that overcommitted Garden Fresh to an unrealistic annual volume of Pepsi syrup. 92
Hiller argues that the assessment discussed in the Beverage Consulting
Agreement is in the recitations and is not a term of the contract. 93 It avers that it was
never obligated to conduct an assessment. 94 In addition, Hiller contends that at no
point was it obligated “to audit Garden Fresh’s gallonage information or to probe
whether ‘Coke gallons’ truly means what it says.” 95 Despite the lack of an obligation in
the Beverage Consulting Agreement, Hiller argues, nonetheless, that it performed an
assessment in February 2017, before it signed the Beverage Consulting Agreement. 96
91

D.I. 14 at ¶ 11 at 12.
Id. at ¶ 18 at 13–¶ 19 at 14.
93 D.I. 23 at 6–7.
94 Id. at 7.
95 Id. at 8–9.
96 Id. at 10–12 (emphasis added); see also D.I. 2 at ¶ 12 at 4. With regard to this
argument, Hiller advocates for the court to consider exhibits 3–5 under the theory that
“the absence of an assessment is ‘integral to’ Garden Fresh’s counterclaims, [and thus]
the documents reflecting Hiller’s assessment should be considered in ruling upon a
motion to dismiss those counterclaims.” Id. at 11 (citation omitted). The court largely
92

14

In order to address the motion to dismiss, the court must first resolve the
question of whether the alleged “assessment” is a term of the Beverage Consulting
Agreement, and if so, whether Garden Fresh has pleaded facts sufficient to establish
claims for breach of contract, fraudulent inducement, and negligent misrepresentation.
1.

The Beverage Consulting Agreement

The Beverage Consulting Agreement includes the following recitals:
Whereas, [Hiller] is engaged in the business of providing soft
drink consulting services to customers; and
Whereas, the services provided by [Hiller] include an
assessment of [Garden Fresh]’s current beverage program,
and
Whereas, [Garden Fresh] desires to utilize [Hiller]’s expertise
and services with respect to establishing and/or modifying
the soft drink program of [Garden Fresh]’s business. 97
Standing alone, the recitals appear to state that the objective of the contract is that Hiller
will use its expertise and services to “establish[] and/or modify[]” Garden Fresh’s soft
drink program. 98 The services that Hiller provides include an “assessment” of Garden
Fresh’s “current beverage program[.]” 99
Garden Fresh argues that the recital of services including an assessment, should
be used to define “services” and should be read into the operative portion of the
contract as an obligation for Hiller. 100 The basis for this, according to Garden Fresh, is
agrees with Hiller that evidence of the assessment could contradict Garden Fresh’s
allegations. However, Hiller ignores the underlying dispute at hand, the authentication
of exhibits 3–5, which Hiller did not bother to address until the reply brief, and not the
implications of their existence.
97 D.I. 2-1, ex. A at 1.
98 Id.
99 Id.
100 D.I. 26 at 9 (citing Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159–60
(Del. 2010)) (“It is clear from the preceding language in the Consulting Agreement that
the ‘expertise and services’ include an ‘assessment of the Customer’s current beverage
program’ and ‘establishing and/or modifying the soft drink program of the Customer’s
business.’”).
15

the premise cited by the Delaware Supreme Court in Osborn ex rel. Osborn v. Kemp
that Delaware courts “will read a contract as a whole and [] will give each provision and
term effect, so as not to render any part of the contract mere surplusage.” 101 However,
there is no evidence that the parties considered the recitals to be “provisions” or “terms”
of the Beverage Consulting Agreement. In addition, Delaware courts take the view that
“[r]ecitals are not a necessary part of a contract and can only be used to explain some
apparent doubt with respect to the intended meaning of the operative or granting part of
the instrument[.]” 102
Viewed in the context of the entire agreement, including the two sections entitled
“services” and “compensation,” there is no doubt about the intended meaning of the
operative part of the Beverage Consulting Agreement. From the language of the
Beverage Consulting Agreement, it is apparent that the parties intended to provide a
mechanism for Hiller to “establish[] and/or modif[y]” Garden Fresh’s “soft drink
program[,]” by negotiating a new contract with either Coke or Pepsi. 103 The court
discusses these three operative components below.
First, under “services,” Garden Fresh “hereby grants [Hiller] the right and
authority to provide expertise and services to support [Garden Fresh] in the
establishment and/or modification of its soft drink program(s).” 104 This is a grant of
express “right and authority” for Hiller to act on Garden Fresh’s behalf, specifically “to
provide expertise and services” with respect to Garden Fresh’s soft drink program. 105
However, as a grant of “right and authority” from Garden Fresh to Hiller, this language
101

Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159–60 (Del. 2010) (citation
and internal quotation marks omitted) (cited by Garden Fresh in D.I. 26 at 9).
102 Stabler v. Ramsay, 30 Del. Ch. 439, 449–50 (1948) (citations omitted); see
also United States v. Chrysler Corp., 1990 WL 127160, at *6 (D. Del. Aug. 28, 1990);
Coca-Cola Bottling Co. of Elizabethtown v. Coca-Cola Co., 654 F. Supp. 1419, 1441–42
(D. Del. 1987)
103 D.I. 2-1, ex. A at 1.
104 Id. (emphasis added).
105 Id.
16

does not define which specific services Hiller is to use, nor does it obligate Hiller to
perform specific tasks. 106
Second, also under “services,” Garden Fresh “agrees to provide [Hiller] with all
relevant information including, but not limited to, all information regarding [Garden
Fresh]’s current soft drink products, any funding provided for said products, as well as
support premiums, marketing programs, etc.” 107 As Garden Fresh alleges in its
Counterclaims, Hiller would need this information in order to negotiate the best possible
deal for Garden Fresh. 108 By making it Garden Fresh’s responsibility to share the
information, this term appears to give Hiller recourse if Garden Fresh does not share the
information and Hiller is, therefore, unable to negotiate a deal for Garden Fresh.
Third, in return, Garden Fresh agreed to pay Hiller a flat fee for a renegotiated
(new) deal with Coke and a variable fee for a Pepsi deal—payment is contingent on
Garden Fresh choosing to sign a deal with either Coke or Pepsi. 109 There is no
obligation for Garden Fresh to pay Hiller in the event that it chose not to accept the
deals with either Coke or Pepsi, and there is no mechanism in the Beverage Consulting
Agreement that requires Garden Fresh to sign any deal. 110 Presumably, Hiller agreed
to this term with the understanding that, in order to get paid, it would likely need to

106

Id.
Id.
108 D.I. 14 at¶ 12 at 13 (“Hiller could not . . . negotiate a new beverage contract
for Garden Fresh without first evaluating Garden Fresh’s existing beverage program[.]”).
109 D.I. 2-1, ex. A at 1 (“[Hiller] shall be paid for its services as follows (a) if a new
Coke contract is chosen by [Garden Fresh] . . . OR (b) if [Garden Fresh] decides to
accept a new agreement with Pepsi[.]”). It is important to note that Hiller cannot bind
Garden Fresh to either contract—signing the contract with Coke or Pepsi is Garden
Fresh’s choice, and Garden Fresh has the ability, as is demonstrated by the facts in the
Complaint, to ask Hiller to negotiate deals with both Coke and Pepsi and to choose one.
110 Id. There is no obligation for Garden Fresh to pay Hiller for negotiating a deal
with Dr. Pepper. Id.
107

17

adjust the negotiated deals to meet Garden Fresh’s changing requirements during the
time from negotiation to signing. 111
Neither party has raised doubt about the intended meaning of the operative
portions of the Beverage Consulting Agreement, including the “right and authority to
provide expertise and services[.]” Absent this doubt, there is no reason for the court to
rely upon the recitals to interpret the Beverage Consulting Agreement. 112 Therefore, the
court concludes that the Beverage Consulting Agreement does not obligate Hiller to
perform an “assessment” of Garden Fresh’s “current beverage program.”
2.

Breach of Contract
(a)

Legal Standard

“In order to survive a motion to dismiss for failure to state a breach of contract
claim, the plaintiff must demonstrate: first, the existence of the contract, whether
express or implied; second, the breach of an obligation imposed by that contract; and
third, the resultant damage to the plaintiff.” VLIW Tech., LLC v. Hewlett-Packard Co.,
840 A.2d 606, 612 (Del. 2003) (footnote and citations omitted).
(b)

Discussion

Garden Fresh’s breach of contract counterclaim is deficient because Garden
Fresh is unable to identify a breach of an obligation imposed by the Beverage
111

The parties appear to have agreed that payment was sufficient motivation for
Hiller to perform on the contract, because there are no operative portions of the
Beverage Consulting Agreement in which Hiller agrees to perform tasks, produce work
product, or deliver an outcome.
112 See supra note 102. Even if the court were to consider the recitals and to
read Hiller’s “services” as including an “assessment of” Garden Fresh’s “current
beverage program[,]” no reading of the grant of “right and authority” to Hiller could
obligate Hiller to specifically perform the “assessment” that Garden Fresh alleges
should have been performed. In addition, Garden Fresh alleges that it expected that
this alleged “assessment . . . would include, at a minimum, a rigorous and careful
examination and analysis . . . of the historic beverage data, as well as to include
consideration of Garden Fresh’s current and anticipated future needs, and market
trends.” D.I. 14 at ¶ 11 at 12. The court does not reach the question of whether Garden
Fresh’s proposed definition satisfies the plain meaning of “assessment.”
18

Consulting Agreement. The counterclaim is based upon reading a term into the
Beverage Consulting Agreement that the parties clearly chose not to include. As a
matter of law, therefore, Garden Fresh’s breach of contract counterclaim is insufficient.
Before moving to Garden Fresh’s other counterclaims, for the sake of completeness,
the court wishes to address Garden Fresh’s factual basis for its claims.
(c)

Garden Fresh’s factual allegations

In several instances, Garden Fresh’s factual allegations in its Counterclaims
contradict statements that Garden Fresh made in the Answer. More importantly, in view
of exhibits 2 and 6, defendant’s allegations in the Counterclaims are self-evidently false.
(i)

Discrepancies between the Answer and
Counterclaims

Garden Fresh contends that it lacks knowledge or information about Hiller’s
specific allegations in the Complaint but then, in the Counterclaims, makes allegations
to the contrary, and represents to the court that its “factual contentions have evidentiary
support or . . . will likely have evidentiary support after a reasonable opportunity for
further investigation or discovery[.]” 113
For example, Hiller alleges in the Complaint that it performed an assessment in
February 2017, before it signed the Beverage Consulting Agreement. 114 In the Answer,
Garden Fresh responded that it “lack[ed] knowledge or information sufficient to form a
belief as to the truth of [this] allegation[.]” 115 Elsewhere, Garden Fresh claimed to “lack
knowledge or information” 116 in response to the allegation that “[t]he specified number of
syrup gallons in the Pepsi contract was calculated and agreed to by all parties involved
and was based on gallonage information provided by Garden Fresh.” 117 Instead,
113

Fed. R. Civ. P. 11(b)(3). Defendant dedicates a substantial portion of its brief
in opposition discussing its need for discovery. D.I. 26 at 4–7.
114 D.I. 2 at ¶ 13 at 4.
115 D.I. ¶ 14 at ¶ 13 at 3.
116 D.I. 14 at ¶ 24 at 5.
117 D.I. 2 at ¶ 24 at 7.
19

“Garden Fresh denie[d] that it provided Hiller with projections of Coca-Cola product
used[,]” 118 and in the Counterclaims, Garden Fresh alleges that it provided Hiller with
“open access” to its staff and “historical beverage data[,]” 119 but that Hiller did an
erroneous assessment based on this information. 120
In the Answer, Garden Fresh essentially claims not to know anything about the
information it shared with Hiller, the analysis Hiller performed, the information Hiller
shared with individuals at Garden Fresh, and any feedback Garden Fresh may have
given Hiller. At the same time, in the Answer, Garden Fresh explicitly denies that it
shared forecast information with Hiller, and in the Counterclaim, Garden Fresh alleges
with specificity that Hiller’s analysis was erroneous, because it allegedly included
historical Dr. Pepper volumes in the forecast for Pepsi commitments.
There are other contradictions as well—Garden Fresh contends that it did not
discover what it contends is Hiller’s material breach, in the form of the “gallonage
error[,]” until October 2017. 121 However, in response to paragraph 29 of the Complaint,
which alleges that Garden Fresh’s Haywood contacted Hiller in September 2017 “to
‘discuss a renegotiation of [Hiller’s] fee[,]’” 122 Garden Fresh admits that Haywood
“sought to discuss [] Hiller’s fee in light of the material breaches and errors made by
Hiller in performing its consulting services and negotiating the beverage sales
agreement.”123 As Hiller notes, these allegations present a factual impossibility—
Garden Fresh’s Haywood could not contact Hiller to discuss the alleged breach in
September, a month before Garden Fresh actually discovered the alleged breach. 124

118

D.I. 14 at ¶ 12 at 2.
Id. at ¶ 9 at 12.
120 D.I. 14 at ¶ 18 at 13–¶ 19 at14.
121 D.I. 14 at ¶ 29 at 6.
122 D.I. 2 at ¶ 29 at 9.
123 D.I. 14 at ¶ 29 at 6 (emphasis added).
124 D.I. 23 at 1.
119

20

(ii)

Exhibits 2 and 6

Exhibits 2, and 6 are documents that relate directly to Garden Fresh’s
Counterclaims. Exhibit 2 shows that, on February 9, 2017, Garden Fresh provided
Hiller with answers to Hiller’s questions about the number of Garden Fresh outlets open
and the number of “Coke gallons” Garden Fresh restaurants consumed historically and
projected—Garden Fresh estimated that it would have 95 outlets by the end of 2017
and would consume 145,000 “Coke gallons” systemwide in 2017. 125 In addition,
Garden Fresh corroborated its own historical data by providing Hiller with “scanned
spread sheets with the detail of each [Coke program] funding by year[.]” 126 Exhibit 2
also includes Garden Fresh’s prior contract with Coke. 127
Exhibit 6 is the contract with Pepsi that Hiller negotiated and that Garden Fresh
signed in August 2017. 128 In the Pepsi contract, Garden Fresh committed to purchase
711,541 gallons of Pepsi syrup (or 142,308 gallons/year) over a five-year period
between June 19, 2017 and August 30, 2022. 129 Taken together, these documents
confirm that Hiller negotiated a contract with Pepsi based upon Garden Fresh’s
historical volumes of “Coke gallons” and Garden Fresh’s own estimate of expected
Coke volume (145,000 gallons) for 2017. The negotiated Pepsi commitment of 142,308
gallons/year was set below this level, despite Garden Fresh’s own projections that it
would grow its number of outlets by 34 stores over the term of the Pepsi contract. 130 In
addition, the new contract represented no apparent change in Dr. Pepper
consumption—Pepsi authorized Garden Fresh to sell Dr. Pepper on one valve of the

125

D.I. 23-2, ex. 2 at 3 (emphasis in original) (“Total Garden Fresh system Coke

gallons”).
126

Id. at 1; see also id. at 57–59.
D.I. 23-2, ex. 2 at 1 (“Attached is the . . . coke contract with amend[]ments.”).
128 D.I. 23-6, ex. 6.
129 Id. at 1.
130 D.I. 23-2, ex. 2 at 3 (projecting the number of “net new stores to be opened
(conservative please)”).
127

21

fountain in each Garden Fresh outlet, 131 which is the same arrangement Garden Fresh
had with Coke in its earlier contract. 132 Based upon the documentary evidence, it is
evident that Garden Fresh’s contract with Pepsi is not based on historical volumes of
Dr. Pepper.
(iii)

Conclusion—factual allegations

In the case at bar, Garden Fresh’s factual allegations supporting its breach of
contract counterclaim are inconsistent with the statements Garden Fresh made in the
Answer. In addition, the documentary evidence contradicts the Counterclaims. Thus,
the Counterclaims present a series of “bald assertions[,]”133 “unsupported conclusions
and unwarranted inferences”134 that the court is not obligated to accept as true.
(d)

Conclusion—Breach of Contract

Garden Fresh’s breach of contract counterclaim is legally insufficient, because it
is based on a term that is not part of the contract. In addition, the facts pleaded by
Garden Fresh in its Answer and Counterclaim are inconsistent and contradictory, and,
therefore, present an alternate ground for dismissal. For these reasons, the court
recommends dismissal of defendant’s Count I—the breach of contract counterclaim. 135

131

D.I. 23-6, ex. 6 at 2 (“Customer may offer Dr Pepper (regular flavor only) on 1
valve of Equipment as a fountain beverage in the Outlets during the Term[.]”).
132 D.I. 23-2, ex. 2 at 5 (“Franchisee may serve Dr Pepper on only one valve per
dispenser[.]”).
133 In re Burlington Coat Factory Sec. Litig., 114 F.3d at 1429 (citations and
internal quotation marks omitted).
134 Schuylkill Energy Res., Inc. v. Pennsylvania Power & Light Co., 113 F.3d 405,
417 (3d Cir. 1997) (“We are not, however, required to accept as true unsupported
conclusions and unwarranted inferences.”); cf. Nami v. Fauver, 82 F.3d 63, 69 (3d Cir.
1996).
135 The parties dispute whether rescission is an available remedy for Garden
Fresh’s breach of contract counterclaim. D.I. 23 at 14–17; D.I. 26 at 12–13; D.I. 28 at
5–7. Having found no basis for a breach of contract claim, the court declines to
consider these arguments.
22

3.

Tort Claims

Garden Fresh alleges that Hiller fraudulently induced it to enter into the Beverage
Consulting Agreement by misrepresenting that Hiller “would provide information to
Garden Fresh in the form of an assessment[.]” 136 Alternatively, Garden Fresh alleges
that the same facts also amount to negligent misrepresentation. 137
Hiller has moved to dismiss these counterclaims and now argues: (1) Garden
Fresh’s tort claims are “based on the same alleged breach that forms the basis of its
contract claim, and . . . [is] improperly ‘bootstrapped’ under Delaware law, (2) Garden
Fresh could not plausibly have relied on Hiller’s statements about “Garden Fresh’s likely
future beverage needs . . . as statements of present fact or guarantees about the
future[,]” and (3) Garden Fresh’s pleading does not satisfy the particularity required by
Rule 9(b). 138
Under Delaware law, “in order to assert a tort claim along with a contract claim,
the plaintiff must generally allege that the defendant violated an independent legal duty,
apart from the duty imposed by contract.” 139 In the Counterclaims, Garden Fresh
alleges in each of its tort claims that either “[i]n the Beverage Consulting Agreement” 140
or in order “[t]o induce Garden Fresh to enter into and compensate Hiller under the
Beverage Consulting Agreement . . . , Hiller misrepresented that it would provide
information to Garden Fresh in the form of an assessment of Garden Fresh’s beverage
program for Garden Fresh’s use in negotiating a beverage contract with a third party.” 141
In essence, Garden Fresh contends that the objective for Hiller’s alleged

136

D.I. 14 at ¶¶ 33–39 at 16.
Id. at ¶¶ 41–48 at 17.
138 D.I. 23 at 17.
139 Kuroda v. SPJS Holdings, L.L.C., 971 A.2d 872, 889 (Del. Ch. 2009).
140 D.I. 14 at ¶ 33 at 16.
141 Id. at ¶ 42 at 17.
137

23

misrepresentation was for Garden Fresh to enter into the Beverage Consulting
Agreement. 142
In the fraudulent inducement claim, Garden Fresh alleges no other
misrepresentations. As to negligent misrepresentation, Garden Fresh alleges that Hiller
“did not exercise reasonable care in communicating accurate information about Garden
Fresh’s future soft drink needs to Garden Fresh for use in Garden Fresh’s business
transaction with Pepsi. . . . [and i]n the transaction with Pepsi, Garden Fresh justifiably
relied on Hiller’s information.”143 Hiller argues that “[a]ny projection by Hiller about
‘Garden Fresh’s future soft drink needs’ was necessarily a predictive statement of
opinion about what Hiller thought was likely to happen in the future, not a statement of
present fact on which[, under Delaware law,] a misrepresentation claim can be
based.” 144
In response, Garden Fresh makes two contradictory averments. First, Garden
Fresh contends that its “tort claims are based on false information Hiller provided to
Garden Fresh (1) to induce Garden Fresh to enter the [Beverage] Consulting
Agreement, and (2) for use in a business transaction with Pepsi.” 145 Second, Garden
142

This is a confusing set of allegations. For the fraudulent inducement claim,
which requires pleading with particularity, see Fed. R. Civ. P. 9(b), Garden Fresh does
not explain when, how, or in what context Hiller made the statement to Garden Fresh
that was the alleged misrepresentation intended to induce Garden Fresh to sign the
Beverage Consulting Agreement, D.I. 14 at ¶ 33 at 16. Meanwhile, in the negligent
misrepresentation claim, Garden Fresh alleges that the alleged misrepresentation that
caused Garden Fresh to sign the Beverage Consulting Agreement was in the contract
itself. Id. at ¶ 42 at 17.
143 Id. at ¶¶ 44–45 at 17 (emphasis added).
144 D.I. 23 at 19 (citing Great Lakes Chem. Corp. v. Pharmacia Corp., 788 A.2d
544, 554 (Del. Ch. 2051) (footnotes and citations omitted) (“Predictions about the future
cannot give rise to actionable common law fraud. Nor can expressions of opinion.”);
Vichi v. Koninklijke Philips Elecs., N.V., 85 A.3d 725, 775 (Del. Ch. 2014) (footnotes and
citations omitted) (“[T]he misrepresentation forming the basis for the fraud or negligent
misrepresentation claim must be material, and the plaintiff generally cannot rely, for
example, on puffery, expressions of mere opinion, or representations that are obviously
false.”)).
145 D.I. 26 at 15.
24

Fresh also argues that its “claims are not based on opinions or predictions about future
events, but upon Hiller’s [alleged] misrepresentation that it would provide an expert
assessment of Garden Fresh’s beverage program.” 146 Essentially, Garden Fresh tries
to spin the first alleged misrepresentation (that Hiller allegedly would perform an
“assessment”) into a second misrepresentation (that Hiller had allegedly performed an
“assessment” on which Garden Fresh subsequently relied) without addressing the
substance of the alleged assessment that Garden Fresh alleges was flawed in the first
place. Hiller argues that these two positions are a “shell game [that] fails to provide
Hiller [with] adequate notice of what it is accused of, not to mention falling well short of
satisfying Rule 9(b).” 147 The court is inclined to agree. Other than a single statement in
the recitals of the Beverage Consulting Agreement, Garden Fresh has not identified any
other statements by Hiller that comprise the alleged misrepresentations. 148 Therefore,
Garden Fresh’s tort claims do not arise by operation of law and instead originate in the
Beverage Consulting Agreement. 149 For these reasons, the court recommends
dismissal of defendant’s Counts II and III, the fraudulent inducement and negligent
misrepresentation claims.
C.

Motion to Preclude

As discussed in Section III.B above, the court has resolved the motion to dismiss
without considering exhibits 3–5. Therefore, the court recommends that the motion to
preclude be dismissed as moot.
146

Id. at 17.
D.I. 28 at 9; see also Fed. R. Civ. P. 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.”).
148 E.g., D.I. 14 at ¶ 42 at 17 (“In the Beverage Consulting Agreement . . . Hiller
[allegedly] falsely represented . . .”).
149 E.g., Diver v. Miller, 34 Del. 207 (Del. Super. Ct. 1929) (“In order to constitute
a tort there must always be a violation of some duty owed to the plaintiff; but generally
speaking such a duty must arise by operation of law and not by the mere agreement of
the parties.”).
147

25

IV.

CONCLUSION
For the reasons discussed herein, the court recommends that the district court

GRANT plaintiff’s motion to dismiss defendant’s counterclaims, D.I. 22, and DENY as
MOOT defendant’s motion to preclude, D.I. 34.

Pursuant to 28 U.S.C. § 636(b)(1)(B), Fed. R. Civ. P. 72(a), Fed. R. Civ. P. 72
(b)(2), and D. Del. LR 72.1, any objections to the Report and Recommendation shall be
filed within fourteen (14) days limited to ten (10) pages after being served with the
same. Any response shall be limited to ten (10) pages.
The parties are directed to the Court’s Standing Order in Non-Pro Se Matters for
Objections Filed under Fed. R. Civ. P. 72 dated October 9, 2013, a copy of which is
found on the Court’s website (www.ded.uscourts.gov.)

Dated:

August 9, 2018

/s/ Mary Pat Thynge
Chief U.S. Magistrate Judge

26