CHASE v. MERSON et al

Filing 84

DECISION AND ORDER ON CLOUTIER DEFENDANTS' MOTION TO DISMISS granting 61 Motion to Dismiss for Failure to State a Claim and 61 Motion for Costs, Motion for Attorney Fees, the application shall be made in accordance with Local Rule 54.2. By JUDGE D. BROCK HORNBY. (jib)

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
JOHN F. CHASE,
PLAINTIFF
V.

ARTHUR MERSON,

ET AL.,

DEFENDANTS

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CIVIL NO. 2:18-CV-165-DBH

DECISION AND ORDER ON CLOUTIER DEFENDANTS’
MOTION TO DISMISS
The plaintiff filed this federal lawsuit alleging RICO violations, breach of
contract, fraudulent inducement, negligent misrepresentation, conversion, and
unfair trade practices against a number of defendants. Pl.’s Compl. at 16-23
(ECF No. 1). In general, he alleges that certain defendants fraudulently told him
that for every $250,000 he invested in standby letters of credit, he would obtain
a return of approximately $10,000,000 within 7 to 12 days. Id. at 1. He invested
$500,000, and lost it all.
He has sued several of the defendants in Count IV for breach of contract
based upon an “Irrevocable 17.5% Success Fee Participation & Payorder
Agreement” that he attaches to his Complaint. Ex. 1 (ECF No. 1-1.) Two of those
defendants, Mark Cloutier and Robert Cloutier, have moved to dismiss the

plaintiff’s claim against them, which is limited to that asserted breach of
contract.1 Defs.’ Mot. at 3 (ECF No. 61). I GRANT the motion.2
With respect to the Cloutier defendants and the alleged breach of contract,
the Complaint states:
III. The Irrevocable 17.5% Success Fee
Participation & Payorder Agreement
32.
Defendants Merson and Roy explained to
Attorney Abbondanza [the plaintiff’s lawyer] that in exchange
for introducing Mr. Chase to the opportunity, they, Endeavor
Project Consultants, and Defendants Patch, Mark Cloutier,
and Robert Cloutier (collectively, the “Consultants”) would
require a collective fee equal to 17.5% of Mr. Chase’s
proceeds from the transaction.
33.
The Consultants in late March 2017 presented
Mr. Chase with an Irrevocable 17.5% Success Fee
Participation & Payorder Agreement (the “Success Fee
Agreement”), which they said memorialized their entitlement
to a collective 17.5% fee for introducing Mr. Chase to the
standby letter of credit opportunity. See Success Fee
Agreement, attached as Exhibit 1.
34.
The Success Fee Agreement stated that “All
payments hereunder shall be made pursuant to the above
transaction via S.W.I.F.T., or other appropriate and direct
wire of funds transfer mechanism . . . .”
35.
The Success Fee Agreement further provided
that Defendant Patch would sign a note and mortgage in the
amount of $250,000 secured by real estate he owned in
Arizona. In fact, Mr. Patch’s real estate in Arizona was worth
only approximately $110,000.
36.
Mr. Chase and the Consultants entered the
Success Fee Agreement on March 29, 2017.

Pl.’s Compl. at 7-8.

The plaintiff has not asserted any of the other claims against the Cloutier defendants.
Under the applicable standard of review for a Rule 12(b)(6) motion, I can consider the
documents attached to the complaint without converting the 12(b)(6) motion to one for summary
judgment. See, e.g., Foley v. Wells Fargo Bank, N.A., 772 F.3d 63, 73 (1st Cir. 2014).
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COUNT IV
BREACH OF CONTRACT
(Defendants Merson, Endeavor Project Consultants, LLC,
Roy, Patch, Mark Cloutier, and Robert Cloutier

128. Mr. Chase repeats and realleges the allegations
set forth in the preceding paragraphs as if fully set forth
herein.
129. On March 29, 2017, Mr. Chase and the
Consultants entered the Success Fee Agreement.
130. The purpose of that agreement was for the
Consultants to introduce Mr. Chase to individuals who
would facilitate a lucrative and low-risk standby letter of
credit investment in exchange for Mr. Chase’s payment of a
fee to the Consultants.
131. The Consultants breached the Success Fee
Agreement by failing to place Mr. Chase with the type of
investment opportunity they had promised.
132. The Consultants placed Mr. Chase with an
investment which, upon information and belief, each
Consultant knew was part of a fraudulent scheme that would
deprive Mr. Chase of a return of even his initial investment.
133. As a result of the Consultant’s breach of the
Success Fee Agreement, Mr. Chase suffered significant
financial loss.

Pl.’s Compl. at 20-21.
The contract upon which the plaintiff bases his claims against the Cloutier
defendants also calls itself a “Profit Participation, Non-Circumvention, NonDisclosure & Working Agreement.” Ex. 1 at 1. It is a bizarre document, with
several nonsensical provisions. It states: “The purpose of this instrument is to
establish an internationally recognized Non-Circumvention Non-Disclosure, and
working Agreement between the participating Parties.

This and future

transactions shall be conducted under the guidelines of the International

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Chamber of Commerce.”3 Id. ¶ 11. It purports to be governed by both “the Laws
of the United States of America and the United Kingdom.” Id. ¶ 22. Its preamble
states that it “encompasses any and all introductions; parties present and
future, made by Mr. Arthur Merson, his Associates listed below, and any
business they engage in or contract with as a consultant, asset manager or joint
venture partner for the financial profit of or with: John Chase (client).” Id. at 2.
The document imposes on all parties a duty not to obtain additional business
from sources made available under the agreement; to maintain complete
confidentiality; not to disclose contacts or enter into transactions with such
contacts; and to “not in any way what so ever circumvent each other and/or
attempt such circumvention of each other and/or any of the parties involved in
any of the transactions the parties wish to enter and to the best and proprietary
information established are not altered [sic].” Id. ¶¶ 1-6. Central to the contract
is that the plaintiff, John Chase, “agrees to pay Consultants the agreed upon
percentage of 17.5% (SEVENTEEN AND ONE-HALF PERCENT) of each payout
from Private Placement Profits.”
whatsoever,

at

any

time

Id. ¶ 28.

under

this

But he “is under no obligation
Agreement,

to

pay

TRADER

REPRESENTATIVES4 any money, funds, fees, or compensation of any kind
unless and until Proceeds in the amount of 20MM are generated” (an event that
never happened). Id. at 2. The defendant Cloutiers were each to receive 3.375%
as their share of any such fee payments Chase made. Id. at 1-2. The contract
also had an integration clause: “All of the terms and conditions of this Agreement
The contract provides for binding arbitration, but no party has invoked that provision. Ex. 1
¶ 7 (ECF No. 1-1).
4 This is not a defined term.
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between the parties are contained herein and no representations or inducements
have been made other than those specifically set forth.” Id. ¶ 27.
The plaintiff is unable to point to any specific provision of the contract that
the Cloutier defendants breached. Instead, he says: “It is true that the Success
Fee Agreement does not explicitly require the Cloutiers to do anything for Chase
in exchange for his agreement to pay each of them . . . .” Pl.’s Opp’n at 3 (ECF
No. 76).
Nevertheless, the plaintiff says that he needs extrinsic evidence to find
contractual obligations on the part of the Cloutier defendants, id., and
speculates that all the Consultants, including the Cloutier defendants, were
obliged to provide him “a $500,000 investment that would return $20,000,000,”
id. at 5, and that the existence of the Cloutier defendants’ obligation “is a
reasonable inference,” id. at 6, and a “plausible” reading of the Agreement, id. at
7. He points to nothing in the document that imposes this obligation on the
Cloutier defendants, but he says: “Why else would the Consultants—including
the Cloutiers—be in line to get paid?” Id. at 5. In his Complaint, the plaintiff
asserts that the agreement’s “purpose”5 was for the Consultants to place the
plaintiff with a lucrative and low-risk investment; and that the Cloutiers
breached the agreement by placing him with an investment they “knew was part
of a fraudulent scheme.” Pl.’s Compl. ¶¶ 130-32. Contradictorily, the plaintiff

The document does have a purpose clause, but it is nothing like what the plaintiff asserts. It
states: “The purpose of this instrument is to establish an internationally recognized NonCircumvention Non-Disclosure, and working Agreement between the participating Parties. This
and future transactions shall be conducted under the guidelines of the International Chamber
of Commerce.” Id. ¶ 11.
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also states that he “does not yet have a good faith basis for accusing [the
Cloutiers] of fraud or racketeering.” Pl.’s Opp’n at 2.
In sum, he provides no explanation for the Cloutiers’ role in the agreement,
including whether they are third-party beneficiaries or more active participants.
Instead, he states more than once that he “had no interactions with [the Cloutier
defendants] in the course of his dealings with the other defendants,” id. at 2, 6.
He hints that with discovery he might be able to accuse them of fraud and
racketeering, id. at 6, 8, but that remains speculation. In actuality, there is no
ambiguity in the document about the Cloutier defendants’ obligations. Aside
from the covenants not to do certain things, there are no positive obligations,
although the plaintiff would like to find some.
Obviously, the plaintiff is frustrated in his inability to define what role, if
any, the Cloutiers played in the scheme to which he fell victim. But he simply
does not have enough to claim a breach of this contract under federal pleading
standards. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (“To survive a motion to
dismiss, a complaint must contain sufficient factual matter, accepted as true, to
state a claim to relief that is plausible on its face.”) (internal citations and
quotations omitted). The Cloutier defendants are therefore entitled to have the
contract claim against them dismissed. I express no view on whether the plaintiff
will learn enough from discovery against other defendants to justify bringing the
Cloutier defendants back into the lawsuit on some basis.
The Cloutier defendants also are entitled under the clear language of the
Success Fee Agreement to have their legal fees paid. The Agreement states: “In
the event that either party institutes mediation or [l]egal action for the
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enforcement of any right[,] obligation, provision, or covenant of this Agreement,
the prevailing party shall be entitled to a reasonable attorney’s fee in addition to
costs of suit.” Ex. 1 ¶ 23. The plaintiff argues that if I dismiss his contractbased lawsuit against the Cloutiers, that means “that the contract is illusory,
and thus not binding on either party,” Pl.’s Opp’n at 9, and therefore that the
attorney fee provision cannot be enforced. That conclusion does not follow. The
fact that the plaintiff cannot show that the Cloutiers breached the contract does
not mean that the attorney fee provision is unenforceable. I therefore GRANT the
request for reasonable attorney fees.

The application shall be made in

accordance with Local Rule 54.2.
SO ORDERED.
DATED THIS 6TH DAY OF FEBRUARY, 2019
/S/D. BROCK HORNBY
D. BROCK HORNBY
UNITED STATES DISTRICT JUDGE

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