Heravi v. Gaming Network Solutions LLC
Filing
20
MEMORANDUM OPINION, ORDER granting in part and denying in part re 17 MOTION to Dismiss for Failure to State a Claim filed by Gaming Network Solutions, LLC. Signed by Judge Paul W. Grimm on 7/13/2016. (kw2s, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
Southern Division
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BABAK HERAVI,
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Plaintiff,
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v.
Case No.: PWG-15-1178
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GAMING NETWORK SOLUTIONS, LLC,
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Defendant.
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MEMORANDUM OPINION AND ORDER
Plaintiff Babak Heravi co-founded Defendant Gaming Network Solutions, LLC, (“GNS”)
and has brought a ten-claim complaint against GNS in a dispute relating to certain equity that he
previously held in GNS and alleged fraud on the part of GNS for its use of his social security
number to receive payments. Heravi claims that this equity stake, which he initially paid for
with debt, was subsequently part of his compensation under an employment agreement.
Separately, he also claims that GNS violated an operating agreement with respect to certain
financial disclosures that it was obligated to make.
GNS disputes the existence of the
employment agreement, denies any fraudulent misconduct, challenges the sufficiency of his
pleadings with respect to the breach of the operating agreement claim, and has filed a motion to
dismiss. Def.’s Mot., ECF No. 17.1
1
Accompanying GNS’s motion to dismiss is a memorandum of law, Def.’s Mem., ECF
No. 17-1. Heravi has filed an opposition, Opp’n, ECF No. 18, and GNS has filed a reply, Reply,
ECF No. 19. A hearing is unnecessary in this case. See Loc. R. 105.6.
I will grant in part and deny in part GNS’s motion to dismiss. Because I find that Heravi
has pleaded sufficient facts to establish the existence of an employment agreement between him
and GNS, I will deny GNS’s motion to dismiss with respect to his breach of contract and implied
contract claims. Based on this finding, I also will deny GNS’s motion to dismiss with respect to
Heravi’s promissory estoppel and equitable estoppel claims. I will also deny GNS’s motion to
dismiss with respect to the breach of contract claim relating to GNS’s operating agreement
because he has pleaded sufficient facts to support this claim. Because Maryland law does not
recognize independent claims in these circumstances for breach of the covenant of good faith and
fair dealing, accounting, and fiduciary duty, I will grant GNS’s motion to dismiss with respect to
these claims. Further, given that Heravi has not demonstrated that monetary damages are an
insufficient remedy, I will dismiss Heravi’s claim for specific performance. Finally, due to
Heravi’s failure to allege with sufficient particularity that GNS made its statement about the use
of his social security number in conjunction with the PayPal and Facebook accounts with the
intent to defraud him, I will grant GNS’s motion to dismiss with respect to his fraud count but
will permit Heravi to amend his complaint again to include a negligent misrepresentation claim
based on GNS’s use of these accounts.
I.
BACKGROUND
Heravi co-founded GNS in 2012. Am. Compl. ¶ 8, ECF No. 13. GNS is “a developer,
provider and operator of online and mobile interactive multi-layer game applications and turnkey solutions participating in the worldwide market.”
Id. ¶ 5.
During the course of his
employment relationship with GNS, Heravi received certain equity (the “Equity Stake”) in GNS
by exercising an option under a February 1, 2012, Professional Services Agreement. Id. ¶¶ 17–
19. Heravi paid for this option through a loan from GNS pursuant to a four-year note. Id.
2
In late 2012, Heravi’s professional relationship with GNS appeared to have soured, which
led to the termination of his Professional Services Agreement in February 2013. Following the
termination of the Professional Services Agreement, Heravi received an email from GNS’s other
co-founder, William Wade, about Heravi continuing his work for GNS. Id. at ¶¶ 8, 25. On June
13, 2013, Wade emailed Heravi as follows2:
Bobby,
I discussed our conversation from mid May with John and further got some input
from Patrick. As you may be aware, Michael D’Arrigo, a very experience
engineer and product manager was brought on late last year. Michael has been
driving the fixes to our system, the audit with GLI, and readying the company for
real money launch.
He has done an excellent job under John and Patricks counsel, and has brought
together a real sense of teamwork and productivity that did not exist prior to his
joining the company. Real money play and the add of a call center in Manila have
gone into production and the product was launched live last weekend for real
money play.
I exposed your interest to remain involved with GNS with John and Patrick. I
think under the current team culture, an “on call” availability is agreeable, so long
as we do not have disruption to the new culture and smooth operations enjoyed by
the team executing the business plan today.
As we discussed, the board supports the decisions and actions of John and I do not
want to undermine his authority and executive control of the company. I was able
to get John and the board to agree upon a compromise to avail an availability in
the future of your past knowledge and experience, if it is needed and as a informal
collaborative engagement. In exchange, we are willing to waive any further
payment requirements for the purchased equity for you to be available as needed
as a special consultant. The shares would remain in escrow during this informal
time horizon and we would have no termination right to the engagement other
than the right to not collaborate if the energy did not prove to be a value for the
company. In effect, you will be connected to the company as a special advisor and
the note payments would be booked as compensation whether you provided any
services or not.
2
Because GNS believes that the determination of whether a contract exists requires
viewing the entire email, I have included the full text verbatim with any spelling and
grammatical errors as existed in the original.
3
If we find that the engagement becomes more than periodic sound boarding, we
can re-evaluate the engagement and move to a more formal process
I think this enables us to put behind the past and move forward as engaged
shareholders all seeking success and shareholder distributions when we reach
profitability. Certainly that’s why I’ve supported this financially with no
payments to date for any energy I’ve invested dating back to 2005, and I’d
assume as a significant shareholder, your in it for the same.
Glad to discuss this further when we have our monthly call this week
All the best.
Bill Wade
Jt. Rec. 3, ECF No. 19-1. That same day, Heravi responded by stating:
First of all I am glad that I am still part of the family and I am happy that now we
have someone who can get things done the way its desired. I gladly accept this
proposal regarding my relationship with the company and thank you for making
this happen. I know, going forward, I will show myself more and more useful and
will be on the side that I love and enjoy also you, John and Patrick and of course
the rest of the team’s side. As I am writing these lines, I assure you, with my
honor, that I do not have any problem what so ever with anybody in the company
and my only intention is to be at service.
Regarding the compensation, I can only say thank you, as I did not have any
intention to be paid and my old offer also a $1 per month would have subside too.
I am not saying this, because I do not need money, but because, I feel that helping
at this time is more important than money. I have friends there that are worth
more than any money in the world to me and they have already put a lot to make
this happen.
Please lets talk tomorrow to work out the details so we all are on the same page
and know what are the requirements and time frames. Again thanks for your, as
always positive and supportive, efforts and I am so happy that I have you in my
life as my close friend.
Best wishes
Bobby Heravi
Id. at 2. On June 14, 2013, Wade replied with the following:
Bobby,
Still sick as a dog with Officemax breathing down my neck. So sorry.
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Thanks for the response, glad we can move forward this way. I’ve sent Patrick
and John and email requesting areas that they think your insights and help could
be contributing. Waiting for their response. Everyone is thrilled we are making
this shift in a positive direction. Fred also excited.
I’m hoping this cold will run its course. Hate to push another day but if you have
time, lets to it tomorrow without other distractions and a voice that is gruffy and
scorched.
Love you brother,
Bill
Id. Following this exchange, Heravi received a new email address and performed certain tasks
on behalf of GNS. Am. Compl. ¶ 30. Heravi also received credit towards the monthly note
payment, as explained in an email from GNS’s CEO, John Cramp, which stated that Heravi
received “the equivalent of your monthly note payment” as wages and that Heravi’s 1099-MISC
reflected these payments. Jt. Rec. 5. In late 2013 and early 2014, the relationship between
Heravi and GNS, specifically Cramp, appears to have soured again over a dispute regarding a
new employment agreement. See Am. Compl. ¶ 34–37. In December, GNS declared that Heravi
was in default of his note relating to the Equity Stake. See id. ¶ 41; see also Jt. Rec. 8. GNS
then executed a “closed auction” whereby the Equity Stake was sold for a net price of $49,290.
Am. Compl. ¶ 49. Heravi valued the Equity Stake in excess of $545,000. Id. ¶ 48.
With respect to the payments that Heravi received from GNS corresponding to Heravi’s
monthly obligations on the note for the Equity Stake, Cramp stated in a January 9, 2015, email
that
[w]hen [the original 1099-MISC] was prepared, it was assumed you were going to
execute the revised GNS Services Agreement as presented to you in October
2013. Since you decided not to execute this agreement, $2,536.40 (eight note
payments) of the total $20,485.25 reported income as no longer correct. A
corrected 2013 1099-M has been prepared in the amount of $17,948.55,
(attached). This corrected statement will also be filed with the [the Internal
Revenue Service (“IRS”)].
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Jt. Rec. 9.
Separately, as part of his work for GNS’s predecessor DG Holdings, “Heravi opened a
PayPal account and a Facebook account” so that DG Holdings could “collect money generated
from its online games” through these accounts.
Compl. ¶ 58.
Heravi used his personal
information for these accounts, including his social security number. Id. After GNS acquired
DG Holdings’s assets, Heravi gave his log-in credentials to Cramp to oversee the accounts. Id.
Cramp represented that all of Heravi’s personal information would be removed from the
accounts. Id. ¶ 59. GNS used accounts with Heravi’s social security number for some of its
business transactions and received income associated with his social security number, resulting
in tax deficiencies that Heravi owed the IRS. See id. at ¶¶ 59–61.
II.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6) provides for “the dismissal of a complaint if it
fails to state a claim upon which relief can be granted.” Velencia v. Drezhlo, No. RDB-12-237,
2012 WL 6562764, at *4 (D. Md. Dec. 13, 2012). This rule’s purpose “‘is to test the sufficiency
of a complaint and not to resolve contests surrounding the facts, the merits of a claim, or the
applicability of defenses.’” Id. (quoting Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th
Cir. 2006)). To that end, the Court bears in mind the requirements of Fed. R. Civ. P. 8, Bell
Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009),
when considering a motion to dismiss pursuant to Rule 12(b)(6). Specifically, a complaint must
contain “a short and plain statement of the claim showing that the pleader is entitled to relief,”
Fed. R. Civ. P. 8(a)(2), and must state “a plausible claim for relief,” as “[t]hreadbare recitals of
the elements of a cause of action, supported by mere conclusory statements, do not suffice,”
Iqbal, 556 U.S. at 678–79. See Velencia, 2012 WL 6562764, at *4 (discussing standard from
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Iqbal and Twombly). “A claim has facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Iqbal, 556 U.S. at 678. I must accept the facts as alleged in Plaintiffs’
complaint as true. See Aziz v. Alcolac, 658 F.3d 388, 390 (4th Cir. 2011).
Plaintiff’s fraud allegations must meet the “heightened pleading standard under Rule
9(b).” Piotrowski v. Wells Fargo Bank, N.A., No. DKC-11-3758, 2013 WL 247549, at *5 (D.
Md. Jan. 22, 2013).
Rule 9(b) states that “in alleging a fraud or mistake, a party must state with
particularity the circumstances constituting the fraud or mistake. Malice, intent,
knowledge, and other conditions of a person’s mind may be alleged generally.”
Such allegations [of fraud] typically “include the ‘time, place and contents of the
false representation, as well as the identity of the person making the
misrepresentation and what [was] obtained thereby.’” In cases involving
concealment or omissions of material facts, however, meeting Rule 9(b)’s
particularity requirement will likely take a different form. The purposes of Rule
9(b) are to provide the defendant with sufficient notice of the basis for the
plaintiff's claim; to protect the defendant against frivolous suits; to eliminate fraud
actions where all of the facts are learned only after discovery; and to safeguard the
defendant's reputation.
Id. (citations omitted); see Spaulding v. Wells Fargo Bank, N.A., 714 F.3d 769, 782 (4th Cir.
2013).
When reviewing a motion to dismiss, “[t]he court may consider documents attached to
the complaint, as well as documents attached to the motion to dismiss, if they are integral to the
complaint and their authenticity is not disputed.” Sposato v. First Mariner Bank, No. CCB-121569, 2013 WL 1308582, at *2 (D. Md. Mar. 28, 2013); see CACI Int'l v. St. Paul Fire & Marine
Ins. Co., 566 F.3d 150, 154 (4th Cir. 2009); see also Fed. R. Civ. P. 10(c) (“A copy of a written
instrument that is an exhibit to a pleading is a part of the pleading for all purposes.”). Moreover,
where the allegations in the complaint conflict with an attached written instrument, “the exhibit
prevails.” Fayetteville Investors v. Commercial Builders, Inc., 936 F.2d 1462, 1465 (4th Cir.
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1991); see Azimirad v. HSBC Mortg. Corp., No. DKC-10-2853, 2011 WL 1375970, at *2–3 (D.
Md. Apr. 12, 2011). If the documents that the Court considers exceeds this scope, the Court
must treat the motion as a motion for summary judgment. Fed. R. Civ. P. 12(d); Syncrude
Canada Ltd. v. Highland Consulting Group, Inc., 916 F. Supp. 2d 620, 623 (D. Md. 2013). In
considering GNS’s motion to dismiss, I have only looked at those exhibits attached to Heravi’s
pleadings or those exhibits attached to the parties’ filings with respect to this motion that are
integral to the amended complaint and the authenticity of which has not been disputed. See Jt.
Rec.
III.
DISCUSSION
As an initial matter, Heravi pleads a number of claims relating to GNS’s sale of his
equity stake, some of which are contradictory.3 “A party may state as many separate claims or
defenses as it has, regardless of consistency.” Fed. R. Civ. P. 8(d)(3). See also Swedish Civil
Aviation Admin. v. Project Mgmt. Enters., 190 F. Supp. 2d. 785, 792 (D. Md. 2002) (“[A]lthough
[the plaintiff] may not recover under both contract and quasi-contract theories, it is not barred
from pleading these theories in the alternative where the existence of a contract concerning the
subject matter is in dispute.”). As a result, I need not decide at this stage of the litigation whether
certain of Heravi’s claims preclude others on the basis of the consistency of his claims.
The focus of GNS’s argument to dismiss Heravi’s claims relies on its contention that no
contract existed between Heravi and GNS with respect to the Equity Stake. As a result, I will
3
For example, a breach of contract claim requires the existence of a contract and a
promissory estoppel claim allows for recovery in the absence of relevant contract where there
exists a contractual relationship. See Whiting-Turner Contracting Co. v. Liberty Mut. Ins. Co.,
912 F. Supp. 321, 343–44 (D. Md. 2012).
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first address whether Heravi’s breach of contract and implied contract claims should be
dismissed before proceeding to GNS’s arguments with respect to Heravi’s other claims.4
A. Counts 2 and 3: Breach of Contract and Implied Contract
A breach of contract is “a failure without legal excuse to perform any promise which
forms the whole or part of a contract . . . .” In re Ashby Enters., Ltd., 250 B.R. 69, 72 (Bankr. D.
Md. 2000) (quoting Conn. Pizza, Inc. v. Bell Atl.-Wash., D.C., Inc., 193 B.R. 217, 225 (Bankr. D.
Md. 1996) (quoting Weiss v. Sheet Metal Fabricators, Inc., 110 A.2d 671, 675 (Md. 1955))
(quotation marks omitted)). “The elements of a claim for breach of contract include ‘contractual
obligation, breach, and damages.’” Tucker v. Specialized Loan Servicing, LLC, 83 F. Supp. 3d
635, 655 (D. Md. 2015) (quoting Kumar v. Dhanda, 198 Md.App. 337, 17 A.3d 744, 749 (Md.
Ct. Spec. App. 2011)). GNS has not challenged the breach or damages element; GNS instead
contends that there is no contractual obligation between it and Heravi regarding its payment of
his debt used to finance the purchase of the Equity Stake.
“Under Maryland law, ‘[t]he formation of a contract requires mutual assent (offer and
acceptance), an agreement definite in its terms, and sufficient consideration.’” Spaulding, 714
F.3d at 777. “It is axiomatic that for a contract to be valid, both parties must mutually assent to
be bound by it.” NeighborCare Pharmacy Servs., Inc. v. Sunrise Healthcare Ctr., Inc., No. JFM05-1549, 2005 WL 3481346, at *2 (D. Md. Dec. 20, 2005). However, the parties’ signatures are
not necessary; “[t]he manifestation of assent may be made wholly or partly by written or spoken
words or by other acts or by failure to act.” See id. (quoting 17A Am. Jur. 2d Contracts § 34
(2004)). A contract may either be express or implied. See Spaulding, 714 F.3d at 777. “An
4
For ease of reference, I will refer to Heravi’s claims in his amended complaint as counts.
For example, I will refer to Heravi’s “Second Claim” as “Count 2.”
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agreement implied in fact is founded upon a meeting of minds, which, although not embodied in
an express contract, is inferred, as a fact, from conduct of the parties showing, in the light of the
surrounding circumstances, their tacit understanding.” Id. (citations omitted) (internal quotation
marks omitted).
Heravi has pleaded sufficient facts in his amended complaint, in conjunction with the
attached email exchange between him and Wade, to survive GNS’s motion to dismiss. The
email exchange shows an offer by Wade, an acceptance by Heravi, and Wade’s affirmative
reply. See Jt. Rec. 2–3. The arrangement provided for Heravi to “be available as needed as a
special consultant” and GNS retained “no termination right to the engagement other than the
right to not collaborate if the energy did not prove to be a value for the company. . . . the note
payments would be booked as compensation whether you provided any services or not.” Id. at 3.
The availability of Heravi to work on behalf of GNS and the waiver of the note payments related
to the Equity Stake represent consideration. The email exchange demonstrates a “meeting of the
minds” between Heravi and Wade regarding the services that Heravi would performance and the
compensation that he would receive for these services.
Even if Heravi did not plead facts sufficient to support an express contract, the conduct of
the parties would be sufficient to support a finding that an implied contract existed between
Heravi and GNS.
Specifically, GNS admitted, through Cramp, that Heravi received “the
equivalent of [his] monthly note payment” as wages. Id. at 5. This conduct, in conjunction with
the work that Heravi states he performed for GNS under the agreement, supports the existence of
an implied agreement. GNS’s effort to recharacterize Heravi’s income through an amended
1099-MISC is unpersuasive. See id. at 9.
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For these reasons, GNS’s motion to dismiss with respect to Counts 2 and 3 will be
denied.
B. Count 1: Specific Performance
Under Maryland law, “[s]pecific performance is considered an extraordinary equitable
remedy which may be granted, in the discretion of the chancellor, where more traditional
remedies, such as damages, are either unavailable or inadequate.” Archway Motors, Inc. v.
Herman, 37 Md. App. 674, 681, 378 A.2d 720, 724 (1977). Maryland courts have recognized
that specific performance may be the appropriate remedy where “the value of the stock is
difficult to ascertain, and cannot be obtained elsewhere.” Ryan v. McLane, 46 A. 340, 344 (Md.
1900).
However, Heravi has not pleaded any facts supporting his position that specific
performance—as opposed to monetary damages—is the necessary remedy, nor has he shown
why specific performance is appropriate in his filings beyond the conclusory statement that
“specific performance is an appropriate potential remedy. . . .” See Opp’n 21. For these reasons,
I will grant GNS’s motion to dismiss with respect to Count 1, specific performance, as it relates
to Heravi’s breach of contract claim.
C. Count 4: Breach of Covenant of Good Faith and Fair Dealing
“Maryland recognizes that every contract imposes a duty of good faith and fair dealing in
its performance. However, Maryland courts have not explicitly recognized a separate cause of
action for breach of this duty.” Abt Associates, Inc. v. JHPIEGO Corp., 104 F. Supp. 2d 523,
534 (D. Md. 2000), aff’d, 9 Fed. App’x 172 (4th Cir. 2001) (internal citations omitted). The duty
of good faith and fair dealing “is merely a part of an action for breach of contract,” and to the
extent that a plaintiff has already stated a claim for a breach of contract, a duplicative claim for
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breach of the duty of good faith and fair dealing should be dismissed. See Swedish Civil Aviation
Admin. v. Project Mgmt. Enters., 190 F. Supp. 2d 785, 794 (D. Md. 2002). Heravi’s claim under
Count 4 is the same as his claim for breach of contract. See Am. Compl. ¶¶ 68 & 69. For this
reason, I will grant GNS’s motion to dismiss with respect to Count 4.5
D. Count 5: Promissory Estoppel
Under Maryland law, promissory estoppel consists of
(1) a clear and definite promise; (2) a reasonable expectation by the defendant that
the offer will induce action or forbearance on the part of the plaintiff; (3) actual
and reasonable action or forbearance by the plaintiff; and (4) detriment to the
plaintiff which can only be avoided by the enforcement of the promise.
Abt Assoc., 104 F. Supp. 2d at 536 (citing Pavel Enter., Inc. v. A.S. Johnson Co., Inc., 674 A.2d
521, 533 (Md. 1996)); see also Newton v. Kenific Grp., 62 F. Supp. 3d 439, 444 (D. Md. 2014).
Because I find Heravi has pleaded facts sufficient to support his breach of contract claim, I also
find that he has pleaded facts sufficient in the alternative to establish GNS promised him that it
would waive note payments related to the debt on the Equity Stake. GNS has only challenged
Heravi’s promissory estoppel claim on the basis of “the existence of an enforceable contract.”
See Def.’s Mot. 16–17. Accordingly, I will deny GNS’s motion to dismiss Count 5.
E. Count 6: Equitable Estoppel
5
Heravi appears to argue in his opposition that Count 4 relates to his claims for both
breach of the employment agreement and breach of the Operating Agreement. See Opp’n 12 n.4.
However, the allegations in his amended complaint referenced in Count 4 only deal with the
breach of the employment agreement, see Am. Compl. ¶ 68 (“Mr. Heravi repeats and re-alleges
each and every allegation contained in Paragraphs 1 through 67 of this Complaint, as if fully set
forth herein.”); his allegations concerning GNS’s breach of the Operating Agreement do not
occur until Paragraphs 80–83. As a result, even if I did not dismiss Count 4 on the grounds
stated above, Heravi’s breach of covenant of good faith and fair dealing claim would be
dismissed as it relates to GNS’s alleged breach of the Operating Agreement.
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“[T]he essential elements of equitable estoppel are [1] voluntary conduct or
representation, [2] reliance, and [3] detriment.” Markov v. Markov, 758 A.2d 75, 81 (Md. 2000)
(citations omitted) (internal quotation marks omitted). Because I find Heravi has pleaded facts
sufficient to support his breach of contract claim, I also find that he has pleaded facts sufficient
in the alternative to establish GNS promised him that it would waive note payments related to the
debt on the Equity Stake and that he relied on this promise to his detriment when GNS declared
him in default with respect to the debt on the Equity Stake. Accordingly, I will deny GNS’s
motion to dismiss Count 6.
F. Count 7: Accounting
“In Maryland, a claim for an accounting is available when one party is under [an]
obligation to pay money to another based on facts and records that are known and kept
exclusively by the party to whom the obligation is owed, or where there is a [confidential or]
fiduciary relationship between the parties . . . .” Goldstein v. FDIC, No. ELH-11-1604, 2012
WL 1819284, at *14 (D. Md. May 16, 2012) (alteration to restore accurate quotation of original
source) (citations omitted) (internal quotation marks omitted).
It is unclear from Heravi’s
amended complaint on what basis GNS would be under the obligation to pay him money except
to the extent that the payments on the debt related to the Equity Stake constituted payments to
Heravi. Regardless,
“Because the relief sought in an accounting claim is access to information,
discovery is the remedy given to plaintiffs who prove they are entitled to an
accounting.” In short, when a plaintiff properly pleads another cause of action
that will entitle the plaintiff to discovery, the remedy of accounting is generally
superfluous.
Id. (quoting Golub ex rel. Golub v. Cohen, 772 A.2d 880, 889 (2001)) (internal citation omitted).
In limited circumstances, Maryland courts have recognized “a freestanding claim for accounting”
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where remedies at law are not sufficient and a confidential or fiduciary relationship exists
between the parties in a manner where one party has to duty to provide an account to the other
party. See id. (citing P.V. Props., Inc., v. Rock Creek Village Assocs. Ltd. P’ship, 549 A.2d 403,
409 (1998)).
However, claims for accounting have not survived “where ‘discovery was
otherwise available.’” See id.
Heravi states that, as a result of GNS’s conduct, he has suffered losses relating to the
value of the Equity Stake because “GNS appropriated Mr. Heravi’s [Equity Stake] for its own
account, and for the account of the third party GNS insiders, in an amount that Mr. Heravi is
unable to determine without an accounting with respect to the true value of his [Equity Stake].”
Am. Compl. ¶ 77. Because Heravi’s breach of contract claim and other related claims survive
this motion to dismiss, his claim for accounting is superfluous. As a result of these surviving
claims, discovery will be available for Heravi to determine the value of the Equity Stake, who
bought it, and the process by which it was sold. Accordingly, GNS’s motion to dismiss Count 7
will be granted.
G. Count 8: Fraud
To state a claim for fraud under Maryland law, Plaintiff
must allege five elements with particularity: (1) the defendant made a false
statement of fact; (2) the defendant knew the statement was false or acted with
reckless disregard for the truth of the statement; (3) the defendant made the
statement for the purpose of defrauding the plaintiff; (4) the plaintiff reasonably
relied on the false statement, and (5) the plaintiff was damaged as a result.
Marchese v. JPMorgan Chase Bank, N.A., 2013 WL 136427, at *9 (D. Md. Jan. 8, 2013)
(quoting Thompson v. Countrywide Home Loans Servicing, L.P., No. L–09–2549, 2010 WL
1741398, at *3 (D. Md. Apr. 27, 2010) (citing Martens Chevrolet, Inc. v. Seney, 439 A.2d 534
(Md. 1982))). Also, as noted, Plaintiff must meet the “heightened pleading standard under Rule
14
9(b),” by “‘stat[ing] with particularity the circumstances constituting the fraud.’” Piotrowski,
2013 WL 247549, at *5; see Spaulding, 714 F.3d at 782. However, Rule 9(b) permits “intent,
knowledge, and other conditions of a person’s mind [to] be alleged generally.” Fed. R. Civ. P.
9(b).
Heravi has failed to plead all of the necessary elements with sufficient particularity to
survive the heightened pleading standards required by Fed. R. Civ. P. 9(b). Specifically, Heravi
has not alleged with any particularity facts that suggest GNS made the statement that it was
removing all of the personal information from the PayPal and Facebook accounts with the
purpose of defrauding him. Because Heravi has failed to allege that GNS made these statements
for the purpose of defrauding him, I will grant GNS’s motion to dismiss with respect to Count 8.6
However, GNS appears to acknowledge that it continued to use PayPal and Facebook
accounts with Heravi’s social security number, stating that “[t]he continued use of Heravi’s login credentials and passwords . . . may have been the result of a simple oversight rather than
actual fraud” and “[r]ather, it is more plausible that, even if GNS did continue to use Heravi’s
log-in, it did so unbeknownst to it that Heravi’s Social Security number was still associated with
the accounts.” See Def.’s Mot. 23–24. As a result, I will permit Heravi to amend his complaint
solely for the purposes of including a negligent misrepresentation claim with respect to these
allegations, provided there is a good-faith legal and factual basis for this claim.
H. Count 9: Breach of Operating Agreement
With respect to Heravi’s breach of the Operating Agreement, I will apply the same
standard as my analysis of Counts 2 and 3, his breach of contract claims relating to his
6
Because I find that Heravi has failed to satisfy this required element of a fraud claim, I do
not need to determine if Heravi also failed to allege with sufficient particularity the other
required elements of fraud.
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employment agreement with GNS. His pleadings with respect to Count 9 are minimal but
sufficient. I read him as alleging that the operating agreement to which he and GNS were parties
obligated GNS to make certain disclosures to him regarding its financial records and that it failed
to do so. These allegations are sufficient, but just barely, to support Heravi’s claim for breach of
contract. For these reasons, GNS’s motion to dismiss with respect to Count 9 will be denied.
I. Count 10: Breach of Fiduciary Duty
“[T]here is no independent tort for breach of fiduciary duty in Maryland” in cases such as
this when there are “multiple alternative remedies involving the alleged breach available to [the
plaintiff] . . . .” Swedish, 190 F. Supp. 2d at 801. Accordingly, I will grant GNS’s motion to
dismiss with respect to Count 10.
IV.
CONCLUSION
For the reasons stated above, I will grant GNS’s motion to dismiss with respect to Counts
1, 4, 7, 8, and 10, and deny GNS’s motion with respect to Counts 2, 3, 5, 6, and 9.
ORDER
Accordingly, it is this 13th day of July, 2016, hereby ORDERED that Defendant GNS’s
motion to dismiss, ECF No. 17, is GRANTED in part and DENIED in part as follows:
1. Defendant’s motion to dismiss with respect to Plaintiff’s specific performance, breach of
the covenant of good faith and fair dealing, accounting, fraud, and breach of fiduciary
duty claims IS GRANTED;
2. Defendant’s motion to dismiss with respect to Plaintiff’s breach of employment
agreement, implied contract, promissory estoppel, equitable estoppel, and breach of
operating agreement claims IS DENIED; and
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3. Plaintiff will be permitted to amend his complaint for the limited purpose of including a
negligent misrepresentation claim relating to Defendant’s alleged use of Plaintiff’s social
security number in certain PayPal and Facebook account transactions. He must do so
within 21 days of the entry of this Order and comply with Loc. R. 103.6(c) regarding the
“clean” and “redline” version of the amended complaint. Defendant shall file its answer
within 21 days after Plaintiff’s filing.
So ordered.
/S/
Paul W. Grimm
United States District Judge
dpb
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