ROBINSON v. WINGATE INNS INTERNATIONAL, INC. et al

Filing 43

OPINION. Signed by Judge Claire C. Cecchi on 6/30/15. (sr, )

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

RONALD J. ROBINSON,

Civil Action No.: 13-cv-2468 (CCC)

Plaintiff,
OPINION
V.

WINGATE INNS INTERNATIONAL, INC.
and WYNDHAM HOTELS AND RESORTS,:
LLC,
Defendants.

CECCHI, District Judge.

This is the Court’s third Opinion & Order at the pleading stage of the proceedings. The
Court previously issued an Opinion & Order on December 20, 2013 dismissing the first, Fourth,
Fifth, and Sixth counts of the Complaint. [ECF Nos. 13-14.1 After an amended complaint and
further briefing, the Court issued another Opinion & Order on September 24, 2014 dismissing
Plaintiffs second count against Defendant Wyndham, third count against Defendant Wingate, and
fourth count against Defendant Wyndham.

[ECF Nos. 22-23.]

Now before the Court is

Defendants’ Motion to Dismiss Plaintiffs second amended complaint (“SAC”). [ECF No. 26.]
The Court decides this matter without oral argument pursuant to Rule 78 of the Federal Rules of
Civil Procedure. For the reasons set forth below, Defendants’ motion is granted.
I.

BACKGROUND

The Court’s previous Opinions discussed the background of this case extensively.
Accordingly, this Opinion focuses on the facts relevant to the pending motion. This dispute stems

from two failed hotel business ventures. Plaintiff entered into two separate hotel franchise
agreements, one with each Defendant. (SAC

¶J

11, 30). Evidently, Plaintiff was unable to obtain

financing to build either franchised hotel, and Plaintiffs business failed. (SAC

¶ 25).

Thereafter,

Plaintiff filed this action.
Plaintiff brings three causes of action against Wingate: (1) breach of contract; (2) breach
of the covenant of good faith and fair dealing; and (3) fraud. As a basis for his breach of contract
claim, Plaintiff asserts that Wingate did not provide the services it was required to provide as
specified in Sections 3 & 4 of the Wingate Agreement, and that Wingate did not offer him the
financing it touted in its Uniform Franchise Offering Circular (“UFOC”). (SAC ¶ 15, 40-44.) As
a basis for his breach of covenant claim, Plaintiff essentially asserts that Wingate did not assist
him in obtaining the financing required to maintain his obligations under the Wingate Agreement.
(SAC

¶J 17-24).

Finally Plaintiff alleges that Wingate committed fraud because Wingate did not

provide financing in accordance with the representations made in its UFOC. (FAC ¶ 6 1-78).
Similarly, against Wyndham, Plaintiff alleges (1) breach of the covenant of good faith and
fair dealing and (2) fraud. Plaintiff bases both these claims on the allegation that Wyndham sold
him a franchise knowing that it would fail. (SAC ¶J 51, 80-83).
Defendants move to dismiss all counts of the SAC, save for the breach of contract claim
and breach of covenant claim against Wingate.
II.

LEGAL STANDARD

For a complaint to survive dismissal pursuant to Rule 12(b)(6), it “must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Ati. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
In evaluating the sufficiency of a complaint, the Court must accept all well-pleaded factual
2

allegations in the complaint as true and draw all reasonable inferences in favor of the non-moving
party. See Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008). However, the
“[f]actual allegations must be enough to raise a right to relief above the speculative level.”
Twombly, 550 U.S. at 555.
III.

DISCUSSION
A.

Breach Of The Covenant Of Good Faith And Fair Dealing Against

Wyndham (Count 2)

In New Jersey, “[e]very party to a contract, including one with an option provision, is
bound by a duty of good faith and fair dealing.” Brunswick v. Route 18 Shopping Ctr., 864 A.2d
387, 395 (N.J. 2005). This duty governs conduct in performance and enforcement of a contract; it
does not govern good faith in contract formation. Restatement (Second) of Contracts
comment c (“This Section.

.

.

205,

does not deal with good faith in the formation of a contract”); see

also Brunswick 864 A.2d at 395 (relying on

§ 205). In discussing the duty of good faith, the New

Jersey Supreme Court has stated that good faith conduct is “conduct that does not violate
community standards of decency, fairness or reasonableness.” Id. This means that “neither party
shall do anything which will have the effect of destroying or injuring the right of the other party
to receive the fruits of the contract.” Sons of Thunder, Inc. v. Borden, Inc., 690 A.2d 575, 587
(N.J. 1997). However, “{w]ithout bad motive or intention, discretionary decisions that happen to
result in economic disadvantage to the other party are of no legal significance.” Wilson v. Amerada
Hess Corp., 773 A.2d 1121, 1130 (N.J. 2001).
The New Jersey Supreme Court has noted that there is no bright line rule for what
constitutes bad faith. Brunswick, 864 A.2d at 396. However, summarizing principles taken from
its prior opinions it has noted that a claim under the covenant may lie where “reasonable
3

expectations are destroyed when a defendant acts with ill motives and without any legitimate
purpose” or “if [a plaintiff] relies to its detriment on a defendant’s intentional misleading
assertions.” Id.
Plaintiff bases his good faith and fair dealing claim on the averment that Wyndham entered
into a franchise agreement with him knowing that his franchise would be unsuccessful. (SAC

¶ 51.)

The Court previously held that Plaintiff stated a plausible breach of covenant claim against

Wingate, but dismissed the breach of covenant claim against Wyndham without prejudice
“because Plaintiff’s allegations are directed towards the formation of his agreement with
Wyndham and not to Wyndham’s performance or enforcement”. EECF No. 22.] Subsequently,
Plaintiff amended his complaint to allege that “Wyndham’s actions and inactions subsequent to
the execution of the Wyndham agreement as to the support required to open his hotel prevented
Plaintiff from opening his hotel.” (SAC ¶ 54.) Defendants argue that this amendment again fails
to state a plausible claim because it does not identify the nature of Wyndham’s alleged actions or
inactions and because Plaintiff does not allege bad faith or ill motive by Wyndham. (Defs.’ Br. at
4-5.)
The Court agrees with Defendants that Plaintiff has again failed to state a claim against
Wyndham for breach of the covenant of good faith and fair dealing. As Defendants point out, the
cursory assertion of alleged “actions and inactions subsequent to the execution of the Wyndham
agreement” does not provide a plausible inference that Wyndham has “violate[d] community
standards of decency, fairness or reasonableness.” See Brunswick 864 A.2d at 395. Other than
this blanket assertion, there is no mention of the actions or inactions by Wyndham that constituted
a breach of its duty of good faith and fair dealing.

Such “[t]hreadbare recitals” and “mere

conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678.
4

Moreover, Defendants are correct in noting that the SAC does not adequately plead any
bad faith on Wyndham’s part. $ç Brunswick $64 A.2d at 396 (“Proof of ‘bad motive or intention’
is vital to an action for breach of the covenant.”); Wilson, 773 A.2d at 1130 (“Bad motive or
intention is essential, for

[]

contract law does not require parties to behave altruistically toward

each other”. (citation omitted)). Unlike Plaintiff’s claim against Wingate, there is no claim that
Wyndham “lied to Robinson, failed to provide the support promised to Robinson, required
Robinson to expend unnecessary funds, [or] refused to assist or provide financing.” (See SAC

¶ 50.)

Accordingly, there are no facts in the SAC from which the Court may infer that Wyndham

acted in bad faith and Plaintiff’s claim against Wyndham for breach of the covenant of good faith
and fair dealing must therefore be dismissed.
B.

Fraud Against Wingate (Count 3) And Wyndham (Count 4)

In order to allege fraud in New Jersey a plaintiff must plead “(1) a material
misrepresentation of a presently existing or past fact; (2) knowledge or belief by the defendant of
its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance thereon by the
other person; and (5) resu1ting damages.” Banco Popular No. Am. v. Gandi, $76 A.2d 253, 260
(N.J. 2005).
Rule 9(b) requires that “a plaintiff alleging fraud must state the circumstances of the alleged
fraud with sufficient particularity to place the defendant on notice of the precise misconduct with
which it is charged.” Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir. 2007). “To satisfy
this standard, the plaintiff must plead or allege the date, time and place of the alleged fraud or
otherwise inject precision or some measure of substantiation into a fraud allegation.” j This
heightened pleading requirement applies to state law claims of fraud. Petruska v. Gannon Univ.,
462 f.3d 294, 310 (3d Cir. 2006) (citing Christidis v. first Penn. Mortg. Trust, 717 f.2d 96, 99
5

(3dCir. 1983)).
Under New Jersey law, the statute of limitations for fraud is six years. N.J. Stat.

§ 2A: 14-

1; Nobile v. Ford Motor Co., 2011 WL 90019 *4 n.2 (D.N.J. 2011). The fraud allegations against
each Defendant are addressed in turn.
1.

Fraud Allegations Against Wingate

Wingate argues that Plaintiffs fraud claim does not allege fraud with particularity and, in
any event, is barred by the statute of limitations. (Defs.’s Br. at 6-7.) Plaintiff counters that
Defendants’ fraud continued through 2010 and is therefore not barred by the statute of limitations.
(Pl.’s Opp’n at 8-9.)
Even assuming that Plaintiffs claim is not time barred, he has not adequately pled that
Wingate made a material misrepresentation of presently existing or past fact in its UFOC. Plaintiff
argues that his claim is supported by various paragraphs in his SAC. (Pl.’s Opp’n at 10 n. 2$.) It
is not. These paragraphs state that Wingate represented in its UFOC that it provided development
incentives for new construction, including financing arranged with General Electric Franchise
Finance Corporation.

(See SAC

¶ 18-20.) However, they do not allege that this was a

misrepresentation of a presently existing or past fact but, instead, merely state that Plaintiff did not
receive the offered financing.’ Nowhere is this more evident than in paragraph 50 of the SAC,
which notes that Wingate “failed to provide the support promised to [Plaintiff]”. As previously
discussed, future promises cannot support a claim of fraud. This is fatal to Plaintiffs fraud claim
against Wingate.

Elsewhere in the SAC, Plaintiff states that “Wingate lied.” However, without specific allegations of what the lie was
and when it was told, this statement does not satisfy the Rule 9(b) pleading standards for the material misrepresentation
element. Christidis v. first Penn. Mortg. Trust, 717 F.2d 96, 99 (3d Cir. 1983).

6

2.

Fraud Allegations Against Wyndliam

In the Court’s prior Opinions, the Court found that Plaintiff had failed to allege any
cognizable material misrepresentations by Wyndham.

Plaintiff has again failed to cure this

deficiency because, although Plaintiff’s added paragraphs allege that there were “material and
substantial misrepresentations”, they provide very little detail as to what the alleged
misrepresentations were.
The closest Plaintiff comes to satisfying Rule 9(b) are paragraphs 88-89 of the SAC. These
state:
8$. Wyndham made material misrepresentations of presently
existing and past facts as to financing, items listed in the estimated
expenses listed in Item 7 (Initial Investment) of Wingate’s Uniform
franchise Offering Circular and items listed in this Second
Amended Complaint.
89. Wyndham made material misrepresentations of presently
existing and past facts as to financing, items listed in the estimated
expenses in Item [sic] of Wingate’s Uniform franchise Offering
Circular and items listed in this Second Amended Complaint in its
Uniform franchise Offering Circular.
However, this again fails to state a claim under Rule 9(b) for two reasons. First, these paragraphs
allege that Wyndham made material misrepresentations in the UFOC provided by Wingate.
Indeed, Plaintiff alleges in another part of his SAC that “Wyndham did not provide a Uniform
Franchise Offering Circular to Robinson prior to his execution of the Wyndham Agreement”. So,
the Court is forced to ask: how could Wyndham have made material representations in either a
UFOC that did not exist, or a UFOC provided by a different company?

Clearly these

contradictions belie any plausible claim of fraud. Second, even if the Court were to overlook the

7

aforementioned paradox,2 Plaintiff provides no indication of “the date, time and place of the
alleged fraud”; nor does he “otherwise inject precision or some measure of substantiation into a
fraud allegation.” See Frederico, 507 f.3d at 200. There is no indication of which “items listed
in Item 7” of the Wingate UFOC, or supposedly identified in the SAC, were misrepresented.
Both the Court and Defendants are forced to sift through various documents3 and pleadings to look
for any items that may conform to Plaintiffs generalized allegations of fraud. This does not meet
the command of Rule 9(b). Accordingly, the claim will be dismissed.
IV.

CONCLUSION

The Court will grant Defendants’ motion to dismiss with respect to Count 2 (against
Wyndham only), Count 3 (against Wingate), and Count 4 (against Wyndham). Given that Plaintiff
has filed three successive, yet insufficient pleadings, the Court finds that any further amendment
would be futile. Accordingly, the above-mentioned claims will be dismissed with prejudice and
Plaintiff may proceed on his breach of contract claim against Wingate (Count 1) and breach of
covenant claim against Wingate (Count 2).

DATED: Efjv

E

2o S

-

CLAIRE C. CE CCIII, U.S.D.J.

2
Perhaps, for example, “Wingate’s Uniform Franchise Offering Circular” may be a typographical error that should
read: “Wyndham’s Uniform Franchise Offering Circular”. Even if the Court were to construe the SAC in this
manner, Plaintiffs claim would nonetheless fail for the reasons stated above. See Frederico, 507 F.3d at 200 (Rule
9(b) requires that “a plaintiff alleging fraud must state the circumstances of the alleged fraud with sufficient
particularity to place the defendant on notice of the precise misconduct with which it is charged.”)

The Court never received a copy of the Wingate UFOC.

$