McCash v. Tamir Biotechnology, Inc.

Filing 38

OPINION. Signed by Chief Judge Jose L. Linares on 8/18/17. (sr, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT Of NEW JERSEY

JAMES 0. MCCASH,

Civil Action No.: 17-272 1 (JLL)

Plaintiff,

OPINION

v.

TAMIR BIOTECHNOLOGY, INC.,
Defendant.

LINARES, Chief Distnct Judge.
This matter comes before the Court by way of a Motion to Dismiss this action filed on
behalf of Defendant Tamir Biotechnology, Inc. (“the Company”). (ECF No. 2 1-1). Plaintiff James
0. McCash has opposed the Motion.

(ECF No. 30).

Defendant has replied to Plaintiffs

Opposition. (ECF No. 32). The Court decides this matter without oral argument pursuant to
Federal Rule of Civil Procedure 7$. for the reasons set forth below, the Court grants Defendant’s
Motion to Dismiss.
I.

Background’

Plaintiff James 0. McCash is a resident of the State of Michigan. (ECF No. 1, Complaint,
“Compi.” ¶ 1). Defendant Tarnir Biotechnology, Inc. is a Delaware corporation with its principal

The facts as stated herein are taken as alleged by Plaintiff in the Complaint. (ECF No. 1). For pcirposes of this
Motion to Dismiss, these allegations are accepted by the Cocirt as true. See Phillips i’. County ofAlleghenv, 515 F.3d
224, 234 (3d Cir.2008) (“The District Court. in deciding a motion [to dismiss under Rulel I 2(b)(6), was required to
accept as true all factual allegations in the complaint and draw all inferences from the facts alleged in the light most
favorable to [the plaintiff].”).

place of business in New Jersey (Id.
Company. (Id.

¶ 2).2

Plaintiff is a former investor in and shareholder of the

¶ 6).

In October 2009, Plaintiff provided financing to Defendant to initiate a Phase II trial of the
drug Onconase “in relation to the treatment of patients with Non-Squamous, Non-Small Cell Lung
Cancer.” (Id.

1

7). Thereafter, Defendant shifted its efforts to the development of an anti-viral use

for Onconase. (Id.

‘

8). Plaintiff alleges that this shift in focus both was contrary to the express

purpose of his financing of Onconase and ultimately resulted in the cancellation of the Phase II
trial in early 2011. (Id.). In the months that followed, Defendant agreed to entertain potential
partners and buyers for the Onconase platform. (Id.

¶

9). Defendant notified Plaintiff that if he

was interested in buying the platform, he should submit a proposal detailing, inter ct/ia, an asset
valuation. (Id.).
Plaintiff alleges that, in or around March or April 2011, Defendant refused to negotiate
with Plaintiff in good faith and failed to give Plaintiff the necessary information for him to provide
a sufficient proposal or valuation. (Id.

¶J

10, 11). Plaintiff further alleges that during this same

period, due to storage and other related costs, Defendant notified Plaintiff that it would destroy
certain components of and materials related to its Onconase inventory and cease making
governrnnt agency filings. (Id.

¶

11). Plaintiff objected to the destruction of these assets, citing

them as part and parcel of the Onconase platform Plaintiff sought to obtain. (Id.

¶

12). Plaintiff

further alleges that handwritten notes indicate that Defendant told Plaintiff “anything he want{ed]
to hear” so that Plaintiff would continue to finance the Company. (Id.

2

¶

13).

Plaintiff’s Complaint alleges that Defendants principal place of business is San Diego, Calilbrnia. (Compl. 2).
However, the Honorable RobertJ. Jonker, U.S.D.J. of the Western District of Michigan. Southern Division, previously
stated that “jijt is undisputed that Tamirs place of incorporation is Delaware and its principal place of business is in
New Jersey.” (ECE No. 16 at 4). This Court sees no reason to disturb Judge Jonkers finding.

7

Against the above facts, Plaintiff fiLed a lawsuit against Defendant on June 26, 2012 in the
Circuit Court of Cook County, Illinois, alleging fraud and breach of fiduciary duty (“2012
Lawsuit”). (Id. ¶ 36). Bettveen the initiation of the 2012 Lawsuit and September 18, 2012, Plaintiff
and his anticipated business

partner,

Michael Hawotte (“Mr. Hawotte”). engaged in negotiations

with Defendant through interim CEO and CFO Larry Kenyon (“Mr. Kenyon’). (Id.

¶

17). Plaintiff

alleges that the Parties ultimately reached an agreement to resolve the issues surrounding the 2012
Lawsuit.

(Id.).

Plaintiff alleges that the agreement between Plaintiff and Defendant is

memorialized in various documents “including but not limited to the Confidential Offer executed
in September2012 (attached as Exhibit A).” (Id.

¶

19, Exhibit A). The document most salient to

this case is the Confidential Offer to Acqciire the Oncology Rights to Onconase (“Confidential
Offer”). which Plaintiff alleges set forth the material terms of the alleged agreement.3 (Id.

¶ 20,

Exhibit A).
According to the express terms of the Confidential Offer, Plaintiff was allegedly required
to withdraw the 2012 Lawsuit and convert five (5) promissory notes made by Defendant into Tamir
common stock. (Id.

¶J 21).

Plaintiff alleges that he complied with these obligations. (Id.

¶J 25).

Plaintiff further alleges that per the Confidential Offer, Defendant agreed to (1) grant Plaintiff the
exclusive license for the development, manufacturing, marketing, and sale of Onconase; (2) grant
Plaintiff the exclusive license to all intellectual property related to the oncological use of

According to the Complaint, the details of the Confidential Offer were discussed and negotiated by Mr. Hawotte and
Mr. Kenyon via email and telephone between late JLlne 2012 and September 18, 2012. (Id. ¶f 20). Ptaintiff alleges
that during this time, various drafts and markups of the Confidential Offer, containing material terms of the
Agreement, were exchanged. (id.) However, Plaintiff has failed to submit to the Court—by way of an additional
attachment or otherwise—any documents regarding the Agreement other than the Confidential Offer. (Compi. at
Exhibit A). Not\vithstanding Plaintiffs continued reference in the Complaint to a separate “Agreement’ and
“Confidential Offer” (Id. V 17, 19). for purposes of clarity, the Court considers the Confidential Offer to be
representative of any alleged agreement reached between Plaintiff and Defendant regarding Plaintiffs dismissal 01’
the 2012 Lawsuit. Further. for the reasons discussed below, the Cocirt finds that this Confidential Offer does not
constitute a legally-binding agreement.

3

Onconase; (3) turn over to Plaintiff all finished product, a portion of both active pharmaceutical
ingredient (‘API”) inventory and raw materials, all oncology regulatory files, and all oncology
manufacturing files for Onconase; and (4) provide Plaintiff with a warrant to purchase 23,700,000
shares in Tarnir at a price of $0.01 per share. (Id.

¶ 22).

Following Plaintiffs signing of the Confidential Offet, Plaintiff moved forward with plans
to advance the Onconase platform. (Id.

¶

28). Specifically, Plaintiff formed partnerships with

third-parties to assist in the management and financing of a 60-patient trial. (Id.). Plaintiff also
engaged in discussions centered around the use of Onconase and related clinical trial research
opportunities with the Mayo Clinic of Rochester, Minnesota. (Id.). Plaintiff alleges that as a result
of Defendant’s delay in providing the items required under the Confidential Offer, the Mayo Clinic
and other third-parties abandoned efforts and discussions regarding the Onconase platform. (Id.

¶

30).
According to the Complaint, Plaintiff received inconsistent correspondence from
Defendant regarding both the existence of items Plaintiff alleges he was due under the Confidential
Offer, and Defendant’s alleged obligations

pursuant to

the Confidential Offer. (Id.

¶I

32-34).

Plaintiff alleges that, on May 28, 2013, the President of the Company, Dr. Jamie Sulley (“Dr.
Stilley”) confirn-ied by written correspondence the terms of the Confidential Offer. (Id.

¶

32).

Plaintiff further alleges that Dr. Sulley both confirmed the existence of the regulatory files, eggs,
and canisters of API, and acknowledged Defendant’s obligation to turn them over to Plaintiff
pursuant to the Confidential Offer. (Id.).
On July 19, 2013, Plaintiff received correspondence from Lois B. Voelz (“Ms. Voelz”), an
attorney representing Defendant, informing Plaintiff that the Investigational New Drug
Application was “inactive.” (Id.

¶J

33-34). According to the Complaint, Ms. Voelz would not

4

indicate whether the regulatory files, eggs, and canisters of API still existed. (Id.

¶ 34).

Ms. Voelz

also asserted, in reference to a prior telephone call on June 20, 2013, that the Confidential Offer
“did not properly state the terms under negotiation” and that the Parties would be required to make
a “fresh start with a new and comprehensive term sheet.” (Id.

¶ 35).

Plaintiff alleges that Ms. Voelz’s correspondence was vague and that Plaintiff disagreed
with the statements contained therein. (Id.
with Defendant. (Id.

¶

¶

36). Nevertheless, Plaintiff continued to negotiate

37). Plaintiff reviewed several iterations of Defendant’s proposed term

sheet and continued to inquire as to whether Defendant was in possession of the items Plaintiff
believed he was due under the Confidential Offer. (Id.). Plaintiff alleges that during the course of
this due diligence, the question remained whether Defendant was in possession of the items
Plaintiff believed he was due pursuant to the Confidential Offer. (Id.

¶

3$). After asking Ms.

Voelz whether these items were still in Defendant’s possession, Plaintiff received written
correspondence from Ms. Voelz, dated August 24, 2014, indicating that ‘the Company [would]
notentertain [his] extraneous demands concerning company assets.” (Id.

¶ 38-39).

Against this backdrop, Plaintiff initiated the present action against Defendant in the United
States District Court for the Western District of Michigan, Northern Division on December 30,
2016. (ECF No. 1). On April 19, 2017, this matter was transferred to this Court pursuant to 2$
U.S.C.

§

1404(a). (ECF No. 16). Plaintiff’s Complaint contains six claims: Breach of Contract

(Count I); Unjust Enrichment (Count II); “Intentional” Misrepresentation (Count III); Promissory
Estoppel (Count IV); Negligent Misrepresentation (Count V); and Innocent Misrepresentation
(Count VI). (Compl.

¶ 41-81).

The Court construes Plaintiff’s claim for ‘intentionaI misrepresentation” as a claim for fraudulent misrepresentation.

5

Defendant moved to dismiss Plaintiffs Complaint oti May 12, 2017 for failure to state a
claim

upon

which relief can be granted.

(ECF No. 21).

Defendant argues that because the

Confidential Offer was made by a fictitious entity that never came into existence, Plaintiffs claims
should be dismissed as Plaintiff is not a real party in interest under Federal Rule of Civil Procedure
17(a). (ECF No. 21-1 at 2, 12). Further, Defendant argues that the language of the Confidential
Offer is indicative of an absence of legal significance and is reflective of the document’s non
binding nature. (Id. at 10). Defendant asserts that the Confidential Offer existed as a letter of
intent and that the terms contained therein required other agreements and due diligence before the
Parties could reach a binding contract. (Id.). Plaintiff has opposed Defendant’s Motion (ECF No.
30), and this mailer is now
II.

ripe

for the Courts adjudication.

Le%aI standard

Federal Rule of Civil Procedure 8(a) requires that a Complaint set forth “a short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). The
plaintiffs short and plain statement of the claim must “‘give the defendant fair notice of what the
•

.

.

claim is and the grounds upon which it rests.” Be//Atlantic Corp. v Twonth[, 550 U.S. 544,

545 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). For a complaint to survive
dismissal, it “must contain sufficient factual matter, accepted as trite, to ‘state a claim to relief that
is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting

Two,nbly,

550 U.S.

at 570).
In evaluating the sufficiency of a complaint, a court must “accept all well-pleaded factual
aLlegations in the complaint as true and draw all reasonable inferences in favor of the non-moving
party.’

Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir.2008) (quotations omitted).

“factual allegations must be enough to raise a right to relief above the speculative level.”

6

Thvombly, 550 U.S.at 545.

Further. “[a] pleading that offers ‘labels and conclusions’ or ‘a

formulaic recitation of the elements of a catise of action will not do. Nor does a complaint suffice
if it tenders naked assertion[s]’ devoid of ‘further factual enhancement.” Iqbctl, 556 U.S. at 678
(quoting Twombly, 550 U.S. at 555, 557); Evctncho v. Fisher, 423 F.3d 347, 350 (3d Cir. 2005)
(“[A] Court tieed not credit either ‘bald assertions’ or ‘legal conclusions’ in a complaint when
deciding a motion to dismiss.”). To that end, a Court considering a motion to dismiss must take
account of the elements necessary to plead the claims alleged in the complaint.
III.

Analysis5
A. FederalRule of Civil Procedure 17(a)

Defendant moves to dismiss Plaintiffs complaint for lack of standing pursuant to Federal
Rule of Civil Procedure 17(a), which provides that [a]n action rntist be prosecuted in the name of
the real party in interest.” (ECF No. 21-1 at 12-13; ECF No. 32 at 2-3). Specifically, Defendant
argues that Plaintiff lacks standing because the Confidential Offer was made between Defendant
and a fictitious entity, ‘a Company (name TBD),” which Plaintiff has not officially formed. (Id.).
Therefore, according to Defendant. only “a Company (named TED)” has standing to sue on the
Confidential Offer. (ECF No. 21-1 at 12-13; ECF No. 32 at 2-3). Defendant cites a Fifth Circuit
case, Schctffer v. Universctl Rundle Corp., 397 F.2d 893 (5th Cir. 1968). for “the general rule that
a corporation is the proper party to bring contract and tort claims on its own behalf” (ECF No. 32
at 3).
The Court is not moved by Defendant’s standing
Procedure 17(a)(l) provides that “[am

argument.

Federal Rule of Civil

action must be prosecuted in the name of the real party in

interest.” Rule 17 lists parties that “may sue in their own names without joining the person for

The Parties agree that New Jersey law controls all ofPlaintilis claims. (See ECE No. 21-1 at 11-12; ECE No.30 at
5).

7

whose benefit the action is brotight[.]” Fed. R. Civ. P. 1 7(a)(l). Among those parties is a party
with whom or in whose name a contract has been made for another’s benefit{.]” Fed. R. Civ. P.
1 7(a)( 1 )(f). “The real party in interest ensures that under governing substantive law, the plaintiffs
are entitled to enforce the claim at issue.” H3 General Corp. v. Manchester Partners, L.F., 95
F.3d 1185, 1196 (3d Cir. 1996).
Advisoty Committee Notes to the 1966 Amendment of Rule 17 provides that “the modern
function of the nile in its negative aspect is simply to protect the defendant against a subsequent
action by the party actually entitled to recover, and to ensure generally that the judgment will have
its proper effect as resjudicata.” In this case, Defendant concedes that the “Company” on whose
behalf the Confidential Offer was signed “remains fictitious to date and was never formed.” (ECF
No. 21-1 at 12). Accordingly, this case does not present a risk that Defendant will be sued by
Plaintiff and then again by a non-existent entity. Moreover, the Confidential Offer stated that the
“Company (name TBD)’ is “a private and solely owned entity represented by James 0. McCash
(Compi. at Exhibit A) (emphasis added). Plaintiff is James 0. McCash who also signed the
Confidential Offer. (Id.). Accordingly, the Court rejects Defendant’s argument that Plaintiff lacks
standing.
B. Breach of Contract
Defendant moves to dismiss Plaintiffs claim for breach of contract for failure to state a
claim upon which relief can be granted. (ECF No. 21-1 at 13-16). Defendant argues that the
Confidential Offer expressly stated that it is a non-binding letter of intent indicating an intent not
to be bound thus mak[ing] clear that it has no legal significance.” (Id. at 16). Plaintiff argues
that the Confidential Offer is a valid and enforceable contract because the Confidential Offer sets
out all agreed upon material terms between the Parties and “only perfunctory and routine elements,

8

such as execution of subsequent ‘confidentiality agreements’ and completion of ‘satisfactory’ ‘due
diligence’ remained.”

(ECF No. 30 at 7).

Plaintiff further argues that a letter of intent is

enforceable where there is evidence that the Parties intended to be bound. (Id. at 8).
“A contract arises from offer and acceptance, and must be sufficiently definite ‘that the
performance to be rendered by each party can be ascertained with reasonable certainty.” Weichert
Co. Realtors e. Ryan, 128 N.J. 427, 435 (1992) (quoting West Caldwellv. Caldwell, 26 N.J. 9,2425 (1958)); see also Ttibbs v. Northern Am. Title

Agency,

531 fed. Appx. 262, 268-69 (3d Cir.

2013). •‘Therefore[,1 parties create an enforceable contract when they agree on its essential terms
and manifest an intent that the terms bind them.” Baer v. Chase, 392 F.3d 609, 619 (3d Cir. 2004).
Moreover, “[i]t is requisite that there be an unqualified acceptance to conclude the manifestation
of assent.” Johnson & Johnson v. Charmley Drug Co., 11 N.J. 526, 539 (1953); see also Weichert
Co. Realtors, 128 N.J. at 436-37.
Depending on the ultimate intentions of the parties, a letter of intent may or may not bind
the parties. See Ilowite v. Diopsys, No. 04-2368, 2008 WL 305267, at *4 (D.N.J. Jan. 31, 2008)
(finding that “there is ample evidence to show that the parties intended the Letter [of Intent] to
constitute a contract”); Bunky, Inc. v. Hammel, No. MID-L-167-04, 2005 WL 3772487, at *5 (N.J.
Super, Court. App. Div. Feb. 17, 2006) (citing Morales v. Santiago, 217 N.J. Super. 496, 501 (App.
Div. 1987)). Indeed, “[i]f the parties intend to be bound by their preliminary agreement and view
the later written contract as merely a memorialization of their agreement, they are bound by the
preliminary agreement.” Bunicy, Inc., 2005 WL 3772487, at *5 (quoting, in full, Morales, 217 N.J.
Super. at 50 1-02). Otherwise, the parties are not bound by the letter of intent. Id.
Defendant argues that the Confidential Offer is nothing more than a letter of intent and as
such, Plaintiff fails to state a claim upon which relief can be granted for breach of contract. (ECF

9

No. 21-1 at 13-16). Plaintiff relies onllowite v. Diopsys, No. 04-2368, 2008 WL 305267 (D.N.J.
Jan. 31, 2008), for the proposition that a valid contract exists where a letter of intent sets out all
“material terms establishing the rights and obligations of the parties.” (ECF No. 30 at 8). In
Ilowite, the court cited language in the letter of intent indicating that the parties’ intent was for the
letter to be an offer of employment. See Itowite, 2008 WL 305267, at *4.5 Indeed, the letter of
intent contained explicit language that it was an offer of employment, and there was strong
evidence that the parties intended to be bocind by the letter of intent because of the defendant’s
subsequent conduct in naming the plaintiff as an employee listed on its website. See id.
This case is distinguishable from Ilowite. Nowhere did the letter of intent in Ilowite state
that it had no legally binding effect,

see generally Ilowite,

2008 WL 305267, whereas here, the

Confidential Offer explicitly stated that “[t]his offer is an expression of intent and nothing implied
shalt have any legal binding obligation except for breach of confidentiality.” (Compi. at Exhibit
A) (emphasis added). The Confidential Offer further states that “LaJll proposed terms to be agreed
upon after execution

of appropriate confidentiality agreements and completion of satisfactory due

diligence by the undersigned and/or designated agents.” (Id.) (emphasis added). This express
language demonstrates the clear intent of both Parties to not be bound by the Confidential Offer

but rather to narrow negotiations for a future agreement. Moreover, Plaintiff fails to allege any
facts or conduct of Defendant indicating that Defendant intended the Confidential Offer to be
legally binding. As such, the Confidential Offer is not a contract beyond imposing an obligation
of confidentiality. Therefore, the Court will grant Defendant’s motion to dismiss Plaintiffs claim
for breach of contract, and will dismiss that claim without prejudice.
C. Unjust Enrichment

10

Defendant moves to dismiss Plaintiffs claim for

unjust

enrichment for failure to state a

claim upon which relief can be granted. (ECF No. 21-1 at 20). Defendant argues that the express
language of the Confidential Offer runs contrary to any reasonable inference that Plaintiff expected
any sort of remuneration from any alleged benefit conferred on Defendant. (Id. at 2 1-22). Plaintiff
argues that the Confidential Offer was binding, that he fulfilled its terms, and that he expected
remuneration. (ECF No. 30 at 14).
“To establish unjust enrichment, a plaintiff must show both that defendant received a
benefit and that retention of that benefit without payment would be unjust.” VRG Corp. v. GKAT
Realty Corp., 135 N.J. 539, 554 (1994)). In addition, Plaintiff must have “expected remuneration
from the defendant at the time it performed or conferred a benefit on defendant and that the failure
of remuneration enriched defendant beyond its contractual rights.”

Id.; see also Callctno v.

Oah’ood, 91 N.J. Super. 105, 109 (App. Div. 1966).
Plaintiff argues that it would be unjust to not receive restitution from Defendant after
Plaintiff dropped the 2012 Lawsuit against Defendant and converted five promissory notes into
Tamir common stock under the terms of the Confidential Offer.

(Compi.

¶J

21, 25, 46-50).

However, by the mere fact that the Confidential Offer stated that it was not legally binding (Cornpl.
at Exhibit A), Plaintiff could not have expected remuneration. As such, Plaintiffs claim for unjust
enrichment is dismissed without prejudice, as to allow Plaintiff an opportunity to amend his
deficient pleading.
B. Promissory Estoppel

Defendant moves to dismiss Plaintiffs claim for promissory estoppel for failure to state a
claim upon which relief can be granted.

(ECF No. 21-1 at 20).

Defendant argues that the

Confidential Offer was a letter of intent and that Plaintiff could not have reasonable relied upon

11

an expression of a future intention because those do not constitute sufficiently definite promises.
(Id. at 19-20).

Plaintiff

argues

that

the Confidential Offer “ratified the promises and

representations made therein.” (ECF No. 30 at 13). As such, Plaintiff argues that he reasonably
relied on the terms of the Confidential Offer. (Id.).
Under New Jersey law, “[t]he elements of promissory estoppel are: ‘1) a clear and definite
promise, 2) made with the expectation that the promisee will rely upon it, 3) reasonable reliance
upon the promise, 4) which results in definite and substantial detriment.’”

Newark Cab

Association v. City ofNewark, No. 16-4681, 2017 WL 214075, at *7 (D.N.J. Jan 18, 2017) (quoting
E. Orange 3d. of Ethtc. v. N.J Sc/i. Const. Corp., 405 N.J. Super. 132, 148 (App. Div. 2009)).
Reasonable reliance does not exist where it is based on “a mere expression of future intention

.

because such expressions do not constitute a sufficiently definite promise.” Del Sontro v. Cendant
Corp., Inc., 223 F. Supp 2d 563, 576 (D.N.J. 2002) (quoting In re Phi/tips Petroleum Sec. Litig.,
881 F.2d 1236, 1250 (3d Cir. 1989)).
Plaintiffs Complaint alleges that the Confidential Offer constituted a promise, that
Defendant reasonably expected that it would induce action by Plaintiff, and that Plaintiff was
reasonable to rely on it as a promise. (Compi.

¶ 60-63).

However, this argument fails because

the Confidential Offer stated, “[tihis offer is an expression of intent and nothing implied shall have
any legal binding obligation except for breach of confidentiality.”

(Compl. at Exhibit A)

(emphasis added). In other words, the Confidential Offer existed as a letter of intent to negotiate
future terms. Reasonable reliance does not exist when based solely on future intentions “because
such expressions do not constitute a sufficiently definite promise.” Del Sontro, 223 F. Supp. 2d at
576 (quoting In re Phillips Petroleum Sec. Litig., 881 F.2d at 1250). Accordingly, Plaintiffs claim

12

for promissory estoppel is dismissed without prejudice, as to allow Plaintiff an opportunity to
amend his deficient pleading.
E. Fraudulent Misrepresentation

Defendant moves to dismiss Plaintiffs claim for fraudulent misrepresentation for failure
to state a claim upon which relief can be granted. (ECF No. 21-1 at 16-17). Defendant argues that
“misrepresentation claims cannot be predicated upon statements that are promissory in nattire at
the time they are made and that involve actions to be performed at a future time.” (Id. at 17).
Further, Defendant argues that Plaintiff could not have reasonably relied on the Confidential Offer
when it stated that it was not legally binding. (Id. at 18). In addition, Defendant maintains that
any fraudulent misrepresentation claims alleged outside the Confidential Offer fail the heightened
pleading requirement of federal Rule of Civil Procedure 9(b). (Id. at 18).
Plaintiff, for his part, argues that fraudulent misrepresentations occurred regarding
Defendant’s willingness to enter into an agreement and its ability and intent to fulfill its obligations
had an agreement been reached. (ECF No. 30 at 11). Specifically, Plaintiff argues that there was
a fraudulent misrepresentation when Defendant allegedly confirmed the existence of API and other
materials then later refused to confirm the existence of these materials. (Id. at 12).
Claims sounding in fraud must be pled under the heightened standards of Federal Rule of
Civil Procedure 9(b). Byrnes v. DeBolt Transfei Inc., 741 F.2d 620, 626 (3d Cir. 1984). The
Third Circuit has set forth the following requirements for pleading fraud:
In order to satisfy Rule 9(b), plaintiffs mcist plead with particularity “the
‘circumstances’ of the alleged fraud in order to place the defendants on notice of
the precise misconduct with which they are charged, and to safeguard defendants
against sptirious charges of immoral and fraudulent behavior.” Seville Inchis. Mctch.
Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir.1984). Plaintiffs may
satisfy this requirement by pleading the “date, place or time” of the fraud. or
through “alternative means of injecting precision and some measure of
substantiation into their allegations of fraud.” Id.

13

Lttm v. Bank of Am., 361 F.3d 217, 223-24 (3d Cir. 2004). With this in mind, the Court turns to
New Jersey law. In order to plead a fraud-based claim in New Jersey, a plaintiff must allege: “(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) resulting damages.” Gennctri v. Weichert Co. Realtors, 148
N.J. 582, 610 (N.J. Sup. Ct. 1997). Moreover. [t]he misrepresentation has to be one which is
material to the transaction and which is a statement of fact, found to be false[.]” Id. at 607 (internal
quotations omitted).
Here, Plaintiff has failed to adequately plead a claim for fraudulent misrepresentation.
Plaintiffs general allegation that Defendant intentionally and knowingly made material promises
and representations about the ability or intent to perform does not comply with the heightened
pleading standard for fraud. Fed. R. Civ. P. 9(b). Moreover, Plaintiffs claim is predicated on
alleged promises and representations contained in the Confidential Offer, which stated that “[tJhis

offer is an expression of intent and nothing implied shall have any legal binding obligation except
for breach of confidentiality.” (Compl. at Exhibit A) (emphasis added). This clearly indicates, as
stated above, that the Confidential Offer was a letter of intent and tiuts did not speak to any
‘presently existing or past fact[.J” Gennari, 148 N.J. at 610.
Moreover, with respect to alleged misrepresentations made by the Defendant regarding its
abitity and intent to deliver the necessary products, inventory, materials, and files to Plaintiff,
Plaintiff fails to establish the most basic element of fraud. (Cornpl.

¶J 32,

55). Namely, Plaintiff

fails to allege that Defendant made a material misrepresentation. See Geiznari, 148 N.J. at 610. In
fact, Plaintiff fails to assert that Defendant made any false statement of fact altogether. Plaintiff
appears to allege that there was a fraudulent misrepresentation when Defendant confirmed the

14

existence of API and other materials then later refused to confirm their existence. However,
Plaintiff does not allege that the API and other materials do not exist. Additionally, Ms. Voelz’s
failure to confirm the existence of the regulatory files, eggs, and canisters of API is not a direct
assertion of fact. (Cornpl.

¶ 34).

Moreover, Ms. Voelz’s failure to confirm the existence of these

items is neither inconsistent with Dr. Sulley’s earlier confirmation, nor does it amount to anything
that can be construed as a material misrepresentation of a presently existing or past fact. Therefore,
Plaintiffs claim for fraudulent misrepresentation is dismissed without prejudice, as to allow
Plaintiff an opportunity to amend his deficient pleading.
F. Negligent Misrepresentation

Defendant moves to dismiss Plaintiffs claim for negligent misrepresentation for failure to
state a claim upon which relief can be granted. (ECF No. 21-1 at 16-17). Defendant argues that
‘misrepresentation claims cannot be predicated upon statements that are promissory in nature at
the time they are made and that involve actions to be performed at a future time.” (Id. at 17).
Defendant further argues that Plaintiff could not have reasonably relied on the Confidential Offer
when it stated that it was not legally binding. (Id. at 18). In opposition, Plaintiff argues that
Defendant negligently misrepresented its willingness to enter into an agreement, and its ability and
intent to fulfill its obligations had an agreement been reached. (ECF No. 30 at 11). Specifically,
Plaintiff argues that negligent misrepresentation occurred when Defendant allegedly confirmed
the existence of API and other materials then later refused to confirm their existence. (Id. at 12).
Under New Jersey law, a claim for negligent misrepresentation is the same as fraudulent
misrepresentation, absent the requirement of scienter. See Kaufman v. i-Stctt Corp, 165 N.J. 94,
II 0 (2000). “In particular,

.

.

.

negligent misrepresentation requires a showing that defendant

negligently provided false information and that plaintiff incurred damages proximately caused by

15

its teliance on that information.” Highlands Ins. Co. v. Hobbs Group, LLC., 373 F.3d. 347, 351
(3d Cir. 2004) (citing Kant v. feldman, 119 N.J. 135, 146-47 (1990)). Therefore, “{t]o establish
a claim for negligent misrepresentation, a plaintiff must establish that (1) a false statement, (2) was
negligently made, (3) plaintiff justifiably relied on that statement, and (4) suffered economic loss
or injury because of the reliance.” Eberhart v LG Electronics USA, Inc., 18$ F. Supp. 3d 401,
409 (D.N.J. 2016).
Here, Plaintiffs claim for negligent misrepresentation fails for the same reasons as his
claim for fraudulent misrepresentation.

Plaintiff does not allege facts suggesting any false

statement was made by Defendant. Indeed, the Confidential Offer was a letter of intent and thus
did not speak to any fact constituting an actionable misrepresentation claim. Moreover, Plaintiff
fails to allege that the API and other materials do not exist, or that Defendant inconsistently stated
their existence. As such, Plaintiff fails to satisfy either of the first two elements of a claim for
negligent misrepresentation under New Jersey law.

Id.

Accordingly, Plaintiffs claim for

negligent misrepresentation is dismissed without prejudice, as to allow Plaintiff an opportunity to
amend his deficient pleading.
G. Innocent Misrepresentation
New Jersey law “do{esJ not recognize innocent misrepresentation as an independent cause
of action.” TekDoc Serv., LLC v. 3i-Infotech Inc., No. 09-6573, 2012 WL 3560794, at *11 (D.N.J.
Aug. 16, 2012) (citing Commercial Cast talty Ins. Co. v. Southern Surety Co. ofDes Moines, Iowa,
100 N.J. Eq. 92, 96 (Ch. 1926)). Defendant has raised this issue in its motion, (ECF No. 21-1 at
17), and Plaintiff has conceded that he “intends to pursue only his claims for intentional and
negligent misrepresentation.” (ECF No. 30 at 10). Accordingly, Plaintiffs claim for innocent
misrepresentation is dismissed with prejudice.

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IV.

Conclusion

for the aforementioned reasons. Defendants Motion to Dismiss is granted. Plaintiffs
claims for Breach of Contract (Count I), Unjust Enrichment (Count II), lntentionaI”
Misrepresentation (Count III), Promissory Estoppel (Count IV), and Negligent Misrepresentation
(Count V) are dismissed without prejudice.

Further,

Plaintiffs claim

for Innocent

Misrepresentation (Count VI) is dismissed with prejudice. An appropriate Order accompanies this
Opinion.
IT IS SO ORDERED.
DATED:

August

j, 2017

}6’L. LIARES
%HIEf JUDGE, U.S. DISTRICT COURT

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