Miller et al v. Strudwick et al

Filing 75

MEMORANDUM OPINION. Signed by Judge George Levi Russell, III on 9/28/2018. (jnls, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
CHRISTOPHER MILLER, et al.,
Plaintiffs,

:
:

v.

:

MARTIN BARRY STRUDWICK, et al.,

:

Defendants.

Civil Action No. GLR-14-2303

:
MEMORANDUM OPINION

THIS MATTER is before the Court on: (1) Plaintiffs Christopher Miller and
Kathleen Miller’s (the “Millers”) Motion for Partial Summary Judgment (ECF No. 70);
and (2) Defendants Martin Barry Strudwick (“Strudwick”), Stacey Murray, Stephanie
Green, Strudwick Management, LLC, Strudwick & Associates, Inc. (“S&A”), Monterey
Del Pacifico Partners, LLLP1 (“Monterey Del Pacifico”), Grupo Del Pacifico
Development, LLC, Del Pacifico Sales, LLC, Grupo Del Pacifico Development Venture
Sociedad Anonima (“Grupo Venture”), and Monterey De Playa Sociedad Anonima’s
(“Monterey De Playa”) Motion for Partial Summary Judgment (ECF No. 72). This
action arises from the Millers’ purchase of real estate in Costa Rica for just over a quarter
of a million dollars and subsequent inability to resell the property in accordance with the
terms of the underlying purchase and sale agreement. The parties’ Motions are ripe for
disposition, and no hearing is necessary. See Local Rule 105.6 (D.Md. 2016). For the
reasons outlined below, the Court will grant in part and deny in part both Motions.
The docket names this defendant as “Monterey Del Pacifico Partners, LLP.” The
Court will direct the Clerk to amend the docket to reflect this defendant’s proper name:
“Monterey Del Pacifico Partners LLLP.”
1

I.

BACKGROUND2

In 2008, Defendants piqued the Millers’ interest in both S&A’s investment
advisory services and an opportunity to invest in real estate in Del Pacifico at Esterillos
(the “Del Pacifico Project”), located in Puntarenas, Costa Rica. (Compl. & Demand Jury
Trial [“Compl.”] ¶¶ 16–27, ECF No. 1). The Del Pacifico Project was described to the
Millers as a “hard asset investment with a solid floor,” with emphasis that investors could
expect a “guaranteed 40% return” on their investment. (Id. ¶¶ 18–21). After visiting the
Del Pacifico Project in April 2008, the Millers formalized their relationship with
Defendants. (Strudwick Aff. ¶¶ 13–18, ECF No. 72-3).
In early March 2009, the Millers entered into an Investment Advisory Agreement
(“IA Agreement”) with S&A. (Compl. ¶ 27; Inv. Advisory Agreement [“IAA”], ECF
No. 70-3). The Agreement establishes a fiduciary relationship between the Millers and
S&A, with Strudwick acting as the latter’s representative. (Compl. ¶ 27).
Two months later, on May 13, 2009, the Millers entered into a Purchase and Sale
Agreement (“P&S Agreement”) to purchase Lot 11 of the Del Pacifico Project for
$265,000.00. (Id. ¶ 31; Purchase & Sale Agreement [“PSA”], ECF 70-9). The P&S
Agreement indicates that the Millers are the “Buyer” and Monterey De Playa and
“affiliated companies,” “represented by [Strudwick],” are the “Seller.”

(PSA at 1).

Strudwick signed the P&S Agreement on Monterey De Playa’s behalf, in his capacity as

2

Unless otherwise noted, the facts outlined here are set forth in the Millers’
Complaint (ECF No. 1). To the extent the Court discusses facts not alleged in the
Complaint, they are uncontroverted, and the Court views them in the light most favorable
to the party opposing the particular motion for summary judgment.
2

President. (Id. at 8). Under the terms of the P&S Agreement, the Millers purchased Lot
11 by buying 100% of the shares in “White Cloud View W.C. Once S.A.” (“White
Cloud”), a registered Costa Rican business that was the “legal and sole owner of Lot 11,”
which, in turn, was owned by Monterrey De Playa. (Compl. ¶¶ 31–32; PSA at 1). The
Repurchase Provision, located at paragraph 5 of the P&S Agreement, provides the
Millers with two options in the event that they chose not to construct a residence on the
lot. (Compl. ¶ 36; PSA at 2). The Millers selected the second option, “Option B.”
(Compl. ¶ 37). It states that, should the Millers exercise Option B within sixty months of
the closing date—that is, by May 12, 2014—Grupo Venture, the named third-party
“Repurchaser,” would be obligated to repurchase from them 100% of the shares of White
Cloud for $371,000.00. (Id. ¶¶ 35–37; PSA at 2). The repurchase price under Option B
amounts to a “40% appreciation” of the price the Millers initially paid for the White
Cloud shares. (Compl. ¶ 38; see PSA 1−2).
Over the next five years, correspondence between the parties tapered off.
Approximately four and a half years later, in December 2013, Strudwick informed the
Millers that Grupo Venture was on the “brink of failure” and would not be able to fulfill
its repurchase obligation under the P&S Agreement. (Compl. ¶¶ 44, 50–51). On May
12, 2014, the Millers contacted Strudwick, requesting that Grupo Venture honor the
repurchase obligation. (Id. ¶ 53). Strudwick informed the Millers that he was seeking
new investors to fund the Del Pacifico Project, but that “no return was ever guaranteed.”
(Id.).

3

On July 18, 2014, the Millers sued Defendants. (ECF No. 1). They filed an eightcount Complaint alleging: breach of the P&S Agreement (Count I); breach of the IA
Agreement (Count II); breach of fiduciary duty (Count III); misrepresentation (Count
IV); conversion (Count V); violation of N.H. Rev. Stat. Ann. §§ 358-A:1 et seq. (2018)
(Count VI), and conspiracy to violate the same (Count VII); and unjust enrichment
(Count VIII). (Compl. ¶¶ 56−96). The Millers seek double or treble damages and their
attorney’s fees and costs. (Id. ¶¶ A−C).
On November 15, 2017, the Millers filed a Motion for Partial Summary Judgment
as to Counts I, III, VI, and VII. (ECF No. 70). On December 4, 2017, Defendants filed
an Opposition (ECF No. 72-1), along with a Motion for Partial Summary Judgment (ECF
No. 72) seeking judgment: (1) in their favor as to Counts II−VII; and (2) in favor of all
Defendants other than Grupo Venture with respect to Counts I and VIII. On December
18, 2017, the Millers filed an Opposition to Defendants’ Motion. (ECF No. 74). To date,
the Court has no record that the parties have filed Replies.
II.
A.

DISCUSSION

Standard of Review
In reviewing a motion for summary judgment, the Court views the facts in a light

most favorable to the nonmovant, drawing all justifiable inferences in that party’s favor.
Ricci v. DeStefano, 557 U.S. 557, 586 (2009); Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 255 (1986) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158–59 (1970)).
Summary judgment is proper when the movant demonstrates, through “particular parts of
materials in the record, including depositions, documents, electronically stored
4

information, affidavits or declarations, stipulations . . . admissions, interrogatory answers,
or other materials,” that “there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a), (c)(1)(A).
Significantly, a party must be able to present the materials it cites in “a form that would
be admissible in evidence,” Fed.R.Civ.P. 56(c)(2), and supporting affidavits and
declarations “must be made on personal knowledge” and “set out facts that would be
admissible in evidence,” Fed.R.Civ.P. 56(c)(4).
Once a motion for summary judgment is properly made and supported, the burden
shifts to the nonmovant to identify evidence showing there is a genuine dispute of
material fact. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–
87 (1986). The nonmovant cannot create a genuine dispute of material fact “through
mere speculation or the building of one inference upon another.”

Othentec Ltd. v.

Phelan, 526 F.3d 135, 141 (4th Cir. 2008) (quoting Beale v. Hardy, 769 F.2d 213, 214
(4th Cir. 1985)).
A “material fact” is one that might affect the outcome of a party’s case.
Anderson, 477 U.S. at 248; see also JKC Holding Co. v. Wash. Sports Ventures, Inc., 264
F.3d 459, 465 (4th Cir. 2001) (citing Hooven-Lewis v. Caldera, 249 F.3d 259, 265 (4th
Cir. 2001)).

Whether a fact is considered to be “material” is determined by the

substantive law, and “[o]nly disputes over facts that might affect the outcome of the suit
under the governing law will properly preclude the entry of summary judgment.”
Anderson, 477 U.S. at 248; accord Hooven-Lewis, 249 F.3d at 265. A “genuine” dispute
concerning a “material” fact arises when the evidence is sufficient to allow a reasonable
5

jury to return a verdict in the nonmoving party’s favor. Anderson, 477 U.S. at 248. If the
nonmovant has failed to make a sufficient showing on an essential element of her case
where she has the burden of proof, “there can be ‘no genuine [dispute] as to any material
fact,’ since a complete failure of proof concerning an essential element of the nonmoving
party’s case necessarily renders all other facts immaterial.” Celotex Corp. v. Catrett, 477
U.S. 317, 322–23 (1986).
When the parties have filed cross-motions for summary judgment, the court must
“review each motion separately on its own merits to ‘determine whether either of the
parties deserves judgment as a matter of law.’” Rossignol v. Voorhaar, 316 F.3d 516,
523 (4th Cir. 2003) (quoting Philip Morris Inc. v. Harshbarger, 122 F.3d 58, 62 n.4 (1st
Cir. 1997)). Moreover, “[w]hen considering each individual motion, the court must take
care to ‘resolve all factual disputes and any competing, rational inferences in the light
most favorable’ to the party opposing that motion.” Id. (quoting Wightman v. Springfield
Terminal Ry. Co., 100 F.3d 228, 230 (1st Cir. 1996)). This Court, however, must also
abide by its affirmative obligation to prevent factually unsupported claims and defenses
from going to trial. Drewitt v. Pratt, 999 F.2d 774, 778–79 (4th Cir. 1993). If the
evidence presented by the nonmovant is merely colorable, or is not significantly
probative, summary judgment must be granted. Anderson, 477 U.S. at 249–50.

6

B.

The Millers’ Motion
1.

Count I – Breach of the Purchase Agreement

To prevail on a breach-of-contract claim under Maryland law, 3 a plaintiff must
show: (1) “a contractual obligation”; and (2) “a material breach of that
obligation.” Chubb & Son v. C & C Complete Servs., LLC, 919 F.Supp.2d 666, 678
(D.Md. 2013) (quoting Cowan Sys. LLC v. Ocean Dreams Transp., Inc., WDQ-11-366,
2012 WL 4514582, at *3 (D.Md. Sept. 27, 2012)). A breach is material if “it renders any
subsequent performance ‘different in substance from that which was contracted for,’” or
“alters the purpose of the contract in a vital way.” Wright Sols., Inc. v. Wright, CBD-12178, 2013 WL 1702548, at *3 (D.Md. Apr. 18, 2013) (quoting Jay/Dee Mole Joint
Venture v. Mayor of Balt., 725 F.Supp.2d 513, 516 (D.Md. 2010)). The issue of
“[w]hether a breach of contract is material is normally a question of fact, unless the issue
is so clear that it may be decided as a matter of law.” White Marlin Open, Inc. v.
Heasley, 262 F.Supp.3d 228, 253 (D.Md. 2017) (quoting Whiting-Turner Contracting Co.
v. Capstone Dev. Corp., WDQ-12-3730, 2013 WL 5423953, at *8 (D.Md. Sept. 26,
2013)).

3

Because this case arises under the Court’s diversity jurisdiction, the Court will
apply federal procedural law and state substantive law. See Hartford Fire Ins. Co. v.
Harleysville Mut. Ins. Co., 736 F.3d 255, 261 n.3 (4th Cir. 2013). Here, with respect to
the breach-of-contract claim, the parties’ briefs cite almost exclusively to decisions of
Maryland state courts. Accordingly, unless otherwise noted, the Court applies Maryland
law in resolving the parties’ Motions.
7

a.

Grupo Venture’s Liability

The Millers contend that Grupo Venture’s breach of the Purchase and Sale
Agreement establishes liability. The Court agrees.
In their briefs, the Millers assert that Grupo Venture was contractually obligated to
purchase 100% of the White Cloud shares from them for $371,000 in May 2014 under
the P&S Agreement. (Mem. Support Pl.’s Mot. Partial Summ. J. [“Pl.’s Mem.”] at 17,
ECF No. 70-1). They further assert that Grupo Venture breached the obligation by
refusing, and continuing to refuse, to pay any portion of the funds owed.

(Id.)

Defendants concede these assertions. (Answer ¶¶ 57−59, ECF No. 36; Defs.’ Mem.
Opp’n Pl.’s Mot. Partial Summ. J. & Support Defs.’ Mot. Partial Summ. J. [“Defs.’
Mem.”] at 20, ECF 72-1). Accordingly, the Court will grant the Millers’ Motion to the
extent it seeks summary judgment against Grupo Venture as to Count I.
b.

Monterey De Playa and Monterey Del Pacifico’s Liability

The Millers seek to impose liability for breach of the P&S Agreement against
Monterey De Playa and Monterey Del Pacifico.4

The Millers acknowledge that,

“generally, a party who is not a signatory to a contract cannot be held liable for a breach
of the contract.”

(Pls.’ Mem. at 18). They nevertheless contend that “Strudwick’s

control and ownership of [Monterey De Playa] (a party to the P&S Agreement) and

4

In their Complaint, the Millers only allege liability against Grupo Venture and
the “Strudwick defendants.” Defendant Monterey De Playa is not named as a “Strudwick
defendant.” Because the Millers therefore have not alleged that Monterey De Playa is
subject to any civil liability, the Court will order the Millers to show good cause why
Monterey De Playa should not be dismissed within fourteen (14) days of the date of the
corresponding Order.
8

Monterey Del Pacifico . . . compel the conclusion that those entities should aslo [sic] be
held liable for breach of the repurchase obligation, as should Strudwick.” (Id. at 19).
Maryland courts do not “pierce the corporate veil between a parent and a
subsidiary corporation if the subsidiary has some independent reason for its existence,
other than being under the complete domination and control of another legal entity
simply for the purpose of doing its act and bidding.” Kriesler v. Goldberg, 478 F.3d 209,
213 (4th Cir. 2007) (quoting Mylan Labs., Inc. v. Akzo, N.V., 2 F.3d 56, 62 (4th Cir.
1993)).
Here, Monterey Del Pacifico only owns 80% of Monterey De Playa. (Pls.’ Mot.
Partial Summ. J. [“Pls.’ Mot.”] Ex. 24 at 1−2, ECF No. 70-26). The remaining 20% is
owned by Monterey Park—an entity which, based on Defendants’ 103.3 Corporate
Disclosure, Strudwick likely owns in full. (Id. at 2; Local Rule 103.3 & FRCP 7.1
Disclosure at 1, ECF No. 37). The parties have not presented evidence that demonstrates
Monterey De Playa is under the complete dominion of Monterey Del Pacifico. Monterey
De Playa was formed to purchase and hold a 350-acre farm in Costa Rica, and to
periodically subdivide the farm and sell parcels and lots. (Monterey De Playa Answers
Interrogs. at 3, ECF No. 70-10). And in keeping with this purpose, Monterey De Playa
has completed two major sales since its inception—to Villas del Pacifico Esterillos Sun
S.A. and Del Pacifico Shopping Center S.A. (Id. at 5−7). Accordingly, the Court will
not grant summary judgment in Plaintiff’s favor as to Monterey Del Pacifico.

9

c.

Strudwick’s Liability Under Alter Ego Doctrine

Next, the Millers advance theories of fraud and paramount equity under
Maryland’s alter ego doctrine as grounds for piercing the corporate veil and imposing
personal liability against Strudwick. The Court addresses each theory in turn. At bottom,
the Court finds that a genuine dispute of material fact exists as to Strudwick’s personal
liability.
i.

Fraud

Under Maryland law, the corporate entity will not be disregarded except “when
necessary to prevent fraud or to enforce a paramount equity.” Dixon v. Process Corp.,
382 A.2d 893, 899 (Md.Ct.Spec.App. 1978).
In Maryland, fraud is established when:
(1) the defendant made a false representation to the plaintiff, (2) the falsity
of the representation was either known to the defendant or the
representation was made with reckless indifference to its truth, (3) the
misrepresentation was made for the purpose of defrauding the plaintiff, (4)
the plaintiff relied on the misrepresentation and had the right to rely on it,
and (5) the plaintiff suffered compensable injury as a result of the
misrepresentation.
Hoffman v. Stamper, 867 A.2d 276, 292 (Md. 2005).
“[M]aking a promise as to a matter material to the bargain with no intention to
fulfill it is an actionable fraud.” Gross v. Sussez Inc., 630 A.2d 1156, 1161–62 (Md.
1993). The party seeking to pierce the corporate veil based on acts of fraud bears the
burden of establishing the fraud. Ramlall v. MobilePro Corp., 30 A.3d 1003, 1010
(Md.Ct.Spec.App. 2011) (quoting Starfish Condo. Ass’n v. Yorkridge Serv. Corp., Inc.,
458 A.2d 805, 816 (Md. 1983)), and must do so with “clear and convincing evidence,”
10

Balt. Line Handling Co. v. Brophy, 771 F.Supp.2d 531, 553 (D.Md. 2011) (quoting
Residential Warranty Corp. v. Bancroft Homes Greenspring Valley, Inc., 728 A.2d 783,
790 (Md.Ct.Spec.App. 1999)). Fraud cases typically “are not suited for disposition by
way of a motion for summary judgment because of the need for factual
development.” Abt Assocs., Inc. v. JHPIEGO Corp., 104 F.Supp.2d 523, 536 (D.Md.
2000). State law claims of fraud generally must also comply with Federal Rule of Civil
Procedure 9(b)’s heightened pleading requirements. Spaulding v. Wells Fargo Bank,
N.A., 714 F.3d 769, 782 (4th Cir. 2013).
Defendants contend that the Millers failed to satisfy Rule 9(b)’s heightened
pleading requirements,

and failed

to

pinpoint any

instances

of

intentional

misrepresentation. The Millers counter that any Rule 9(b) argument has been waived,
and that Defendants fraudulently misrepresented their intentions regarding the Del
Pacifico Project.

Federal Circuits take different approaches to waiver of Rule 9(b)

claims. Compare Olson v. Fairview Health Servs. of Minn., 831 F.3d 1063, 1073 (8th
Cir. 2016) (“Rule 9(b)’s pleading standard is not an affirmative defense that is waived by
a defendant’s failure to raise it.”), with CSS INC., v. Fibernet, L.L.C., No. 6:07-CV00505, 2007 WL 6965365 (S.D.W.Va. Nov. 28, 2007) (holding that a defendant’s failure
to raise a Rule 9(b) argument either contemporaneous to or before its answer waives the
argument).
The United States Court of Appeals for the Fourth Circuit has not clearly weighed
in on this issue, so this Court follows the weight of persuasive authority and concludes
that Rule 9(b) is governed by the same timing and waiver rules as Rule 12(b). See, e.g.,
11

In re U-Fill’Er-Up, Inc., No. CIV 2:95CV95, 1996 WL 33676773, at *3 (D.NC. March 1,
1996) (“The same time limits that apply to motions under 12(b) have been held to apply
to those under Rule 9(b).”); Fed.R.Civ.P. 12(h)(1). Because Defendants did not raise
their Rule 9(b) arguments either contemporaneous with or prior to their responsive
pleading, these arguments have been waived.
Here, the Millers allege substantial evidence of fraud.5 First, the Millers suggest
that the P&S Agreement was intentionally structured so that neither Monterey De Playa
(“the Seller”) nor Grupo Venture (“the Repurchaser”) could be held liable for breach of
contract. (Pls.’ Mot. at 20–21, ECF No. 70-1). Under the terms of the P&S Agreement,
Monterey De Playa has no repurchase obligation. (PSA at 2). And while the repurchase
clause obliges Grupo Venture to repurchase 100% of White Cloud shares after five years,
Grupo Venture never signed the contract. (Id.).6 Further, none of the profits from the
Millers’ purchase of Lot 11 went to either Monterey De Playa or Grupo Venture.

5

The Millers pled misrepresentation—Count IV—rather than “fraud.” (Compl. ¶¶
71–77). But under Maryland law, a claim of intentional misrepresentation is coextensive
with a claim of fraud. See Miller v. Fairchild Indus., Inc., 629 A.2d 1293, 1304 (1993)
(referring to the “fraud/deceit/intentional misrepresentation claim”); SpinCycle, Inc. v.
Kalender, 186 F.Supp.2d 585, 590 (D.Md. 2002) (concluding that the same elements
define “fraud/intentional misrepresentation” under Maryland law). Additionally, the
Fourth Circuit has long adhered to the federal policy in favor of resolving cases on their
merits. See Sirona Dental Sys., LLC v. Stevenson Grp., Inc., No. CIV. CCB-12-1253,
2013 WL 3875325, at *4, n.4 (D.Md. July 25, 2013) (holding fraud sufficiently pled even
though the separate claim for fraud was dropped when plaintiffs amended their complaint
because “the amended complaint still contains the same factual allegations of fraud”).
6

A handwritten note on the P&S Agreement states that Stacey Murray, an S&A
and Grupo Venture employee, told the Millers that Strudwick would initial the
repurchase clause, presumably, as a Grupo Venture representative. (Id.). But he never
did. (Id.).
12

(Strudwick Answers Interrogs. at 9, ECF No. 70-29). Instead, Monterey Del Pacifico
received 80% of the profits, and Monterey Park S.A. received the remaining 20%. (Id.).
Finally, Grupo Del Pacifico—by all appearances, the standard “repurchaser” for sales of
land in the Del Pacifico Project—has never owned land.

(Grupo Venture Answers

Interrogs. at 7, ECF No. 70-7).
The Millers have also presented evidence that after the sale of Lot 11, Defendants
took affirmative steps to hide Grupo Venture’s economic woes.

Grupo Venture

documents, drafted by Strudwick, reveal that the Del Pacifico Project faced “horrible
market” conditions, and asked investors whether they should consider “liquidating at a
price below the ‘break even’ point.” (Pls.’ Mot. Ex. 21 at 1, 8, ECF No. 70-23). Yet, on
October 29, 2013, when Strudwick filled out a Fair Market Valuation form for the
Millers, he listed both the purchase price and the current asset value of Lot 11 as
$250,000.00, seemingly ignoring the dire economic straits he previously described. (Pls.’
Mot. Ex 40, ECF No. 70-42). And confoundingly, the Millers paid $265,000.00 for Lot
11, (Pls.’ Mot. Ex. 7, ECF No. 70-9), not $250,000.00. A jury might therefore infer that
Strudwick mistakenly believed the Millers had paid $250,000.00, and, intending to
convey that the investment had not lost any value, mechanically listed its current asset
price as $250,000.00. Further, when the Millers ultimately confronted Strudwick about
Grupo Del Pacifico’s illiquidity in October 2013, he responded “no return was ever
guaranteed.” (Pls.’ Resp. Opp’n Defs.’ Mot. J. Pleadings [“Pls.’ Resp. Opp’n”] Ex. K,
ECF No. 64-11).

13

For their part, Defendants have presented no evidence that Grupo Venture
intended to fulfill its repurchase obligations at the time the P&S Agreement was
executed, or that Grupo Venture was ever in a financial position to fulfill its repurchase
obligations. Instead, they deny “that any misrepresentation was intentional,”
(Answer ¶ 75), and maintain that in 2014, at the time Millers exercised Option B, Grupo
Venture could not fulfill its repurchase obligations because of the economic downturn of
2008. (Defs.’ Mem. & Mot. at 9, ECF No. 72-1; Pls.’ Mot., Ex. 8, ECF No. 72-10).
This Court therefore finds that the Millers’ evidence allows for substantial
inferences of fraud. Because the Court must resolve all rational inferences in the light
most favorable to the nonmoving party, the question of fraud is left for the jury.
ii.

Paramount Equity

At bottom, the Court finds that whether or not the facts establish a paramount
equity that justifies piercing the corporate veil is a close question that would be best
resolved by the jury.
What rises to the level of “paramount equity” has defied easy definition, but it
must be an equity “paramount to the ordinary expectation of limited liability on the part
of the shareholder.” Starfish Condo., 295 Md. at 714.

In assessing paramount equity,

courts consider:
(1) whether the corporation is adequately capitalized, fails to observe
corporate formalities, fails to issue stock or pay dividends, operates
without a profit, (2) whether there is commingling of corporate and
personal assets, (3) whether there are non-functioning officers or directors,
(4) whether the corporation is insolvent at the time of the transaction, and
(5) the absence of corporate records.
14

Hildreth v. Tidewater Equip. Co., 838 A.2d 1204, 1210 (Md. 2003).
Piercing the corporate veil in Maryland has been described as a “herculean task.”
Dixon, 382 A.2d at 894–95. And, only recently has a court found that, as a matter of law,
a paramount equity justified casting aside the corporate shield. See Aldmyr Sys., Inc. v.
Friedman, 215 F.Supp.3d 440, n.33 (D.Md. 2016) (paramount equity justified piercing
corporate veil when husband brought baseless suit against wife to confound ongoing,
parallel divorce proceedings), aff’d, 679 F.App’x. 254 (4th Cir. 2017).
Here, the Millers allege substantial evidence of paramount equity. First, they note
that Strudwick used a complex network of corporate organizations to shield himself from
personal liability: Strudwick owns 100% of Strudwick Management, LLC; 100% of
S&A; 1.5% of Monterey Del Pacifico; 100% of Grupo Del Pacifico Development, LLC;
100% of Del Pacifico Sales, LLC; 100% of Grupo Venture; and 20% of Monterrey Del
Playa, and Strudwick was the Corporate Secretary of White Cloud at the time the
Purchase Agreement was executed. (Answer ¶ 3; Pls.’ Mot. Ex. 26, ECF No. 70-28;
Local Rule 103.3 Disclosure at 1). Several of these corporations—Monterey Del Pacifico
(Pls.’ Mot. Ex 25 at 4, ECF No. 70-27), Monterey Del Playa (Id. Ex. 8 at 4, ECF No. 7010), and Strudwick Management, LLC (Id. Ex. 29 at 4, ECF No. 70-31)—have no
employees.
Further, the Millers contend that Strudwick’s position as their financial advisor
and his abuse of this position in inducing their investment in the Del Pacifico Project
distinguish the present case from past cases where courts have declined to find a
paramount equity.

(Pls.’ Resp. Opp’n Defs.’ Mot. Summ. J. at 4, ECF No. 74). The
15

Millers have presented evidence that demonstrates Strudwick gave financial advice
regarding their investment in Costa Rica: Strudwick gave tax advice regarding the
investment (Pls.’ Resp. Opp’n. Ex. R at 1, ECF No. 64-18); he advised the Millers on
how they could execute their purchase of Lot 11 (Id. Ex. Q at 1, ECF No. 64-17). For
their part, Defendants argue that the Millers were informed from the start that
Strudwick’s work as their financial advisor did not extend to his involvement in the Del
Pacifico Project. (Defs.’ Mot. at 7–8, ECF No. 72). A genuine dispute therefore exists
regarding whether Strudwick, acting as the Millers’ financial advisor, encouraged their
investment in Lot 11.
Because the paramount equity inquiry is inherently fact-based, and the facts of this
case are unique in pitting the state’s interest in a corporation’s limited liability against the
state’s interest in the sanctity of fiduciary relationships, the existence of a paramount
equity is a question best left for the jury.
2.

Count III – Breach of Fiduciary Duty

“Maryland does not recognize a separate tort action for breach of fiduciary duty.”
Int’l Brotherhood of Teamsters v. Willis Corroon Corp. of Md., 802 A.2d 1050, 1051 n.1
(2002). Instead, “the breach of a fiduciary duty may give rise to one or more causes of
action, in tort or in contract.” Id. Because the Millers’ allegations of breach of fiduciary
duty are premised on a breach of contract claim, the Court merges the breach of fiduciary
duty claim into the claim of breach of the IA Agreement. See In re Council of Unit
Owners of 100 Harborview Drive Condo., 584 B.R. 639, (Md.Br.Ct. 2018) (citing
Vinogradova v. Suntrust Bank, Inc., 875 A.2d 222, 231 (Md.Ct.Spec.App. 2005)
16

(“[U]nder Maryland law, the two separately pleaded claims in [the Plaintiff”s] complaint
condense to only one: the claim based on the tort of negligence.”)).
The Court, therefore, will deny the Millers’ Motion as to Count III.
3.

Counts VI and VII – Violation of and Conspiracy to Violate N.H. Rev.
Stat. Ann. §§ 358-A:1 et seq.

New Hampshire’s Consumer Protection Act states, “It shall be unlawful for any
person to use any unfair method of competition or unfair or deceptive act or practice in
the conduct of any trade or commerce within this state.” N.H. Rev. State. Ann. § 358A:2.

Under the Act, a “person” refers to “natural persons, corporations, trusts,

partnerships, incorporated or unincorporated associations, and any other legal entity.”
§ 358-A:1. “Trade” and “commerce” refers to “the advertising, offering for sale, sale, or
distribution of any services and any property, tangible or intangible, real, personal or
mixed, and any other article, commodity, or thing of value wherever situated,” including
“any trade or commerce directly or indirectly affecting the people of this state.” Id. The
Act governs real estate transactions. See Snierson v. Scruton, 761 A.2d 1046, 1051 (N.H.
2000).
Defendants argue that the Court should grant summary judgment as to Counts VI
and VII because the Millers fail to meet Rule 9(b)’s heightened pleading requirement,
and because Defendants have not engaged in practices that fall within the Act’s reach.
The Court considers each argument in turn.
As discussed in relation to fraud, this Court finds that Rule 9(b) arguments are
waived if not raised contemporaneous with or prior to a party’s responsive pleading.

17

Because Defendants first raised this argument in their Motion for Judgment on the
Pleadings on November 28, 2016, more than nine months after they filed their Answer,
these arguments are waived.
Defendants also argue that they did not engage in trade or commerce within New
Hampshire. But this statute only requires that the offending conduct occur within New
Hampshire. See Environamics Corp. v. Ferguson Enters., Inc., No. 00-579-JD, 2001 WL
1134727 (D.N.H. Sept. 24, 2001) (holding § 358-A applied to the shipment of a
contaminated pump to New Hampshire because the deceptive act of misrepresenting the
pump’s condition “occurred in New Hampshire when the [party] received the pump and
its allegedly false documentation.”).

Because Defendants sent countless letters and

emails to the Millers in New Hampshire, some of which form the bases for the Millers’
claims of misrepresentation, (Pls. Mot. Ex. 40; Id. Ex. 10, ECF No. 70-12; Id. Ex. 3, ECF
No. 70-5; Id. Ex. 4, ECF No. 70-6), the Act’s geographic requirements have been
satisfied.
A closer question arises as to whether the defendants’ acts—the same acts which
underlie the Millers’ alter ego and misrepresentation arguments—rise to the level of an
“unlawful act” under the Act. The Statute delineates a non-exhaustive list of “prohibited
practices.”

N.H. Rev. Stat. Ann § 358-A:2.

And the Millers have argued that

Defendants’ conduct likely falls under either of two categories of actionable conduct: (1)
“causing likelihood of confusion or of misunderstanding as to the source, sponsorship,
approval, or certification of goods or services”; or (2) “causing likelihood of confusion or
of misunderstanding as to affiliation, connection or association with, or certification by
18

another.”

(Pls.’ Resp. Opp’n at 22).

The Millers further emphasize that even if

Defendants’ conduct is not proscribed under one of the Act’s explicit categories of
prohibited conduct, the Act also penalizes conduct that falls within the rascality test
deployed by the New Hampshire Supreme Court. See id.; C.Y. Assets Invs. v. Kuhn, No.
05-E-544, 2008 WL 6630066 (N.H.Sup.Ct. July 31, 2008). “Under the rascality test, the
objectionable conduct must attain a level of rascality that would raise an eyebrow of
someone inured to the rough and tumble of the world of commerce.” Id.
Deploying the rascality test, New Hampshire courts have found that knowing
misrepresentations violate the Act. See, e.g., C.Y. Assets, 2008 WL 6630066 (real estate
broker’s willful misrepresentations to buyer violated the Act). Because the Court finds
that the existence of misrepresentation is a question best left for the jury, as discussed
below, the Court cannot find that no genuine dispute as to a material fact exists or
conclude that either party is entitled to judgment as a matter of law on either Count VI or
Count VII.
This Court, therefore, will deny the Millers’ Motion as to Counts VI and VII.
C.

Defendants’ Motion
1.

Count I – Breach of the Purchase Agreement

Defendants contend that Grupo Venture is the only party that had an obligation
under the P&S Agreement to purchase the Millers’ shares in White Cloud. Defendants
further contend that the Millers’ theory of alter ego liability must fail as a matter of law.
As previously discussed, the Millers have submitted evidence of fraud and paramount
equity. Because the Court must draw all inferences in favor of the nonmoving party, it
19

cannot hold that as a matter of law that Defendants are entitled to summary judgment.
Accordingly, the Court will deny Defendants’ Motion as to Count I.
2.

Count II – Breach of the IA Agreement

At bottom, this Court finds that a genuine dispute of material fact exists as to the
scope of the IA Agreement as to Defendants Strudwick and S&A.
The parties agree that the IA Agreement created a fiduciary relationship between
S&A and the Millers.

(Answer ¶ 27).7

The IA Agreement states, “The Advisor

represents that it is registered as an investment advisor under the Investment Advisor Act
of 1940.” (IAA at 3).8 Defendants admit that the IA Agreement required S&A, acting
through Strudwick, to provide “independent investment advice,” (id. ¶ 27), but contest
that it required S&A to “act solely” for the Millers’ benefit (id. ¶ 65).
The parties contest the scope of this fiduciary relationship. The Millers argue that
the Del Pacifico Project investment fell within this relationship, whereas Defendants
contend that the Del Pacifico Project exceeded the relationship’s scope. Specifically,
Defendants contend that S&A “limited its advice to marketable securities and refrained
from advising the Millers regarding Costa Rican real estate.” (Pls.’ Resp. Opp’n at 9).

7

There is, however, a factual dispute as to when this relationship commenced. The
Millers signed the Agreement on March 6, 2009. (Compl. ¶ 27; Pls.’ Mot. Ex. 1 at 4).
But S&A produced internal notes that indicate that Strudwick discussed forming an
advisory relationship with the Millers on March 16, 2009. (Defs.’ Mot. Ex. 3, ECF No.
72-5). And Strudwick’s affidavit states that he had a call with the Millers on March 18,
2009 to discuss forming an advisory relationship. (Strudwick Aff. ¶ 15).
8
The Millers have presented evidence, however, that shows S&A’s registration
expired on October 15, 2012, though it continued to serve as the Millers’ financial
advisor through February 3, 2014. (Pls.’ Resp. Opp’n at 7).
20

But the Millers have presented evidence suggesting that S&A advised the Millers
on various aspects of their purchase of Lot 11.

Using his S&A email, Strudwick

provided the Millers tax advice regarding Lot 11, (Pls.’ Resp. Opp’n Defs.’ Mot. Ex. R),
he advised the Millers on how they could formally execute their purchase of Lot 11, (Id.
Ex. Q), and he advised them on how to set up a self-directed IRA for the Lot 11
investment, (Compl. ¶ 33; Miller Aff. ¶ 5, ECF No. 64-22). Strudwick also filled out a
Fair Market Valuation form for the Millers’ self-directed IRA custodian, Equity Trust
Company, that estimated Lot 11’s current value. (Pls.’ Mot. Ex. 40).9
And the Millers contend that the line between S&A’s advisory work and the
involvement of its employees in the Del Pacifico venture was consistently blurred.
Stacey Murray, an S&A employee who did “incidental work” for Grupo Venture, (Defs.’
Mot. ¶ 40, ECF No. 63-3), sent the Millers a letter on S&A letterhead that stated, “Barry
and I . . . hope you will be joining us in Costa Rica.” (Pls.’ Mot. Ex. 2, ECF No. 70-4).
From her S&A email, and with an S&A signature block, Murray also provided the
Millers with instructions for making a deposit on Lot 11. (Pls.’ Resp. Opp’n. Ex. S, ECF
No. 64-19). And after the Millers purchased Lot 11, Murray provided the Millers with a
proof of ownership letter that stated the investment “guaranteed a buy-back plan within a
term of 5 years at 40% profit.” (Pls.’ Mot. Ex. 10). Additionally, S&A’s website

9

The Valuation form notes that it must be completed by a “qualified, independent
third party.” (Pls.’ Mot. Ex. 40). That Strudwick—the Millers’ financial advisor, and
100% owner of Grupo Venture, managing/general partner and 1.5% owner of Monterey
Del Pacifico, and managing partner of White Clouds—would complete the form therefore
bolsters the Millers’ contention that his full involvement in the Del Pacifico Project was
not clear to the Millers.
21

highlighted a New York Times article that discussed the Del Pacifico Project and its
guaranteed repurchase plan—the same repurchase plan the Millers ultimately partook in.
(Pls.’ Resp. Opp’n. at 9–10, ECF No. 64).
Defendants maintain that Strudwick told the Millers that S&A’s advisor role did
not extend to Costa Rican real estate. (Strudwick Aff. ¶ 16). Defendants further contend
that by executing the IA Agreement the Millers acknowledged that they had received the
“ADV Form,” which outlines Strudwick’s management position in Monterey Del
Pacifico and states that he allows clients to invest in these related investment partnerships
“based on [the clients’] decision and analysis,” and that S&A’s internal code of ethics is
to “give objective advice and allow the individual to reach his/her own conclusion as to
the potential and the risks of any investments.” (Defs.’ Mem. Ex. 2 at 11, ECF No. 72-4).
The Millers contend that they never received the ADV form and that the form was never
explained to them. (Pls.’ Resp. Opp’n at 16).
Because a genuine dispute exists as to a material fact—whether S&A’s financial
advisor relationship extended to the Millers’ investment in Lot 11—this Court will deny
Defendants’ Motion as to Count II.
3.

Count III – Breach of Fiduciary Duty

As previously discussed, Maryland courts do not recognize a standalone claim for
breach of fiduciary duty. Int’l Brotherhood, 802 A.2d at 1051 n.1. Instead, breach of
fiduciary duty gives rise to a claim in tort or contract law. Id. The Millers’ standalone
claim for breach of fiduciary duty merges with Count II for breach of the IA Agreement.
The Court, therefore, will grant Defendants’ Motion as to Count III.
22

4.

Count IV – Misrepresentation

Under Maryland law, a claim for misrepresentation arises when: “(1) the
defendant made a false representation to the plaintiff, (2) the falsity of the representation
was either known to the defendant or the representation as made with reckless
indifference to its truth, (3) the misrepresentation was made for the purpose of defrauding
the plaintiff, (4) the plaintiff relied on the misrepresentation and had the right to rely on
it, and (5) the plaintiff suffered compensable injury as a result of the misrepresentation.”
Hoffman, 867 A.2d at 292.
The Millers allege four specific misrepresentations: (1) there was a “guaranteed”
repurchase plan for the Del Pacifico Project; (2) Grupo Venture was expecting a letter of
interest from a “major 5 star resort” imminently that would increase demand and prices
within the Del Pacifico Project; (3) representations to third parties concerning the value
of Lot 11; (4) representations of independence and qualification in connection with a
sworn Fair Market Valuation form. (Compl. ¶ 73).
As to the purported misrepresentations regarding the “guaranteed” 40% rate of
return on investments in the Del Pacifico Project, the Millers present evidence that
Murray sent them a letter on December 19, 2008, recapping Strudwick’s description of
the Del Pacifico Project’s “guaranteed” 40% return after five years, (Pls.’ Mot. Ex 3), and
that Strudwick led a conference call on December 30, 2008, which emphasized that
Grupo Venture would “repurchase the lot for a 40% appreciation,” (id.; Pls.’ Mot. Ex. 4).
Defendants have not contested this evidence, but instead argue that Grupo Venture
intended to honor its obligation to repurchase the Millers’ lot for a 40% appreciation, but
23

could not do so because of the 2008 financial downturn. (Strudwick Aff. ¶ 26). Because
Defendants have moved for summary judgment as to this Count, the Court must construe
all inferences in favor of the Millers. In doing so, the Court finds a genuine dispute of
fact with respect to Defendants’ intent. The Court therefore will deny Defendants’
Motion on this ground.
As to the impending partnership with a “major 5 star branded resort/hotel group,”
Defendants present evidence that Strudwick signed a letter of intent with RockResorts
International LLC, an affiliate of Vail Hospitality on February 9, 2009. (Defs.’ Mem. Ex.
9, ECF No. 72-11). Strudwick signed a formal operating agreement with Vail Hospitality
and Resorts on December 13, 2010.

(Id.; Defs.’ Mem. Ex. 12, ECF No. 72-14).

Defendants’ statements to the Millers regarding this planned partnership occurred during
the Fall of 2008, just a few months before the letter of intent with Rock Resorts was
signed. (Pls.’ Mot. Ex. 6, ECF No. 70-8; Pls.’ Resp. Opp’n Ex. P, ECF No. 64-16). The
Millers have not presented any evidence that would debunk Defendants’ contention that
they were negotiating a partnership with a major resort group. This Court therefore
grants Defendants’ Motion for Summary Judgment on this ground.
The

Court turns

now to

the Millers’

claim that

Defendants

made

misrepresentations regarding Lot 11’s value to third parties—the Millers’ bank and
Equity Trust, the custodian of the Millers’ self-directed IRA. In support of this claim, the
Millers present a proof of ownership letter that Murray drafted for the Millers on August
14, 2009, which states that the Millers purchased Lot 11 for $265,000.00 and “guaranteed
a buy-back plan within a term of 5 years at 40% profit,” (Pls.’ Mot. Ex. 10), and a Fair
24

Market Valuation form which Strudwick completed that lists the Lot’s current value as
$250,000.00, (Id. Ex. 40). Strudwick denied authorizing the August 14, 2009 letter.
(Strudwick Answers Interrogs. at 9). Murray contends that she does not “recall the
events giving rise to the creation of the letter” but that it is her present understanding that
Kathleen Miller “needed the letter for her bank and specified the letter’s content.”
(Murray Answers Interrogs. at 7–8, ECF No. 70-39). Defendants have not contested that
Strudwick completed the Fair Market Valuation form, and have presented no evidence to
demonstrate what Lot 11’s fair market value was at the time the Fair Market Valuation
form was completed. Without more information regarding Murray’s intent in drafting the
August 14, 2009 letter, or more information regarding the true fair market value of Lot 11
at the time Strudwick completed the Fair Market Valuation form, the Court is unable to
conclude that no genuine dispute of material fact exists. Accordingly, the Court will
deny Defendants’ Motion on this ground.
Finally, the Millers contend that Strudwick made misrepresentations of
qualification and objectivity in completing the Fair Market Valuation form. Defendants
have not presented evidence to demonstrate why Strudwick, the Millers’ financial
advisor, and 100% owner of Grupo Venture, would be in a position to give an
independent valuation of Lot 11’s value. Because a genuine dispute of alleged material
fact exists as to the material misrepresentation, the Court denies Defendants’ Motion on
this ground.

25

5.

Count V – Conversion

Under Maryland law, a conversion is “any distinct act of ownership or dominion
exerted by one person over the personal property of another in denial of his right or
inconsistent with it.” Darcars Motors of Silver Spring, Inc. v. Borzym, 841 A.2d 828,
835 (Md. 2004). Generally, “monies are intangible and, therefore, not subject to a claim
for conversion.” Allied Inv. Corp. v. Jasen, 731 A.2d 957, 966 (Md. 1999). But a claim
of conversion may stand if the party seeks “funds that have been or should have been
segregated for a particular purpose or that have been wrongfully obtained or retained or
diverted in an identifiable transaction,” provided that the transferred money is
“sufficiently identifiable.”

Id. at 966 (citations and quotations omitted).

When a

defendant commingles funds with other money, it “loses its specific identity,” and a
claim of conversion fails. Id. at 967; see also Gibbons v. Bank of Am. Corp., JFM-083511, 2012 WL 94569, at *9 (D.Md. Jan. 11, 2012).
Here, it is uncontested that Defendants deposited 80% of the funds the Millers
paid for Lot 11 in Monterey Del Pacifico’s general operating account, and the remaining
20% in Monterey Park S.A.’s general operating account. (Strudwick Answers Interrogs.
at 9). Because the Millers’ money has been commingled with other funds, their claim of
conversion cannot stand as a matter of law. The Court, therefore, grants Defendants’
Motion as to Count V.

26

6.

Counts VI and VII – Violation of and Conspiracy to Violate New
Hampshire’s Consumer Protection Act

Both Counts related to New Hampshire’s Consumer Protection Act hinge on a
finding of misrepresentation. Because the Court concludes that the issue of
misrepresentation is best left to the jury, the Court cannot find that no genuine dispute
exists as to any material fact or that Defendants are entitled to judgment as a matter of
law as to either of these Counts. The Court, therefore, denies Defendants’ Motion as to
Counts VI and VII.
7.

Count VIII – Unjust Enrichment

Under Maryland law, a claim for unjust enrichment exists when: “(1) a benefit
conferred on the defendant; (2) the defendant knew and appreciated the benefit; and (3)
under the circumstances, the defendant’s acceptance or retention of the benefit would be
inequitable.” Jones v. Pohanka Auto N., Inc., 43 F.Supp.3d 554, 573 (D.Md. 2014).
But this cause of action only lies for quasi-contracts, alternatively termed contracts
implied in law, where there is no meeting of the minds but the law demands “restitution
to the plaintiff of something that came into defendant’s hands but belongs to the plaintiff
in some sense.” Mass Transit Admin. v. Granite Constr. Co., 471 A.2d 1121, 1125
(Md.Ct.Spec.App. 1984).
The general rule is that no quasi-contractual claim can arise
when a contract exists between the parties concerning the
same subject matter on which the quasi-contractual claim
rests. The reason for this rule is not difficult to discern.
When parties enter into a contract they assume certain risks
with an expectation of a return.
Sometimes, their
expectations are not realized, but they discover that under the
contract they have assumed the risk of having those
27

expectations defeated. As a result, they have no remedy
under the contract for restoring their expectations. In
desperation, they turn to quasi-contract for recovery. This the
law will not allow.
Id. at 1126 (quoting Indus. Lift Truck Serv. Corp. v. Mitsubishi Int’l Corp., 432 N.E.2d
999, 1002 (Ill.App.Ct. 1982); see also J. Roland Dashiell & World Publ’ns, Inc., 999
F.Supp. 640, 642 (D.Md. 1998) (“It is settled law in Maryland, and elsewhere, that a
claim for unjust enrichment may not be brought where the subject matter of the claim is
covered by an express contract between the parties.”). A party may, however, plead
breach of contract, and in the alternative, unjust enrichment, if the breach of contract
claim includes an allegation of fraud. See Jones, 43 F.Supp.3d at 573; Kwang Dong
Pharm. Co. v. Han, 205 F.Supp.2d 489, 497 (D.Md. 2002). But a party may not recover
under both theories. Swedish Civil Aviation Admin. v. Project Mgmt. Enters., Inc., 190
F.Supp.2d 785, 792 (D.Md. 2002).
Here, the P&S Agreement covers the same subject matter as the Millers’ claim for
unjust enrichment. Because neither party disputes the validity or enforceability of the
Agreement, and in light of the Court’s prior determination that Grupo Venture is liable
under the P&S Agreement, the Millers’ may not recover on a claim for unjust
enrichment.

Accordingly, the Court will grant summary judgment in favor of all

Defendants except for Grupo Venture as to Count VIII.
III.

CONCLUSION

For the foregoing reasons, the Court will: (1) grant in part and deny in part the
Miller’s Motion for Partial Summary Judgment (ECF No. 70); and (2) grant in part and

28

deny in part Defendants’ Motion for Partial Summary Judgment (ECF No. 72).
separate order follows.

/s/
George L. Russell, III
United States District Judge

29

A