Persaud Companies, Inc. v. The IBCS Group, Inc. et al

Filing 165

MEMORANDUM OPINION re: Plaintiff's and Defendants' Cross Motions for Summary Judgment. (see Order for details) Signed by District Judge Gerald Bruce Lee on 4/5/10. (tfitz, )

IN THE FOR THE

UNITED

STATES

DISTRICT

COURT

EASTERN DISTRICT

OF VIRGINIA

ALEXANDRIA DIVISION

Persaud Companies,

Inc.

Plaintiff,
v.

Case No.
Inc., and

l:09cv94(GBL)

The

IBCS Group,

Edmund Scarborough,

Steven Golia, Defendants.

MEMORANDUM OPINION

THIS MATTER is before the Court on Plaintiff's and Defendants' Cross Motions for Summary Judgment. Persaud Companies, Inc.'s Inc. This case

concerns Plaintiff

("Persaud") ("IBCS") falsely

allegations that Defendant IBCS Group,

represented its refund policy to induce Persaud into purchasing

its bonds and that IBCS,

along with Defendants Edmund
falsely advertised IBCS's refund

Scarborough and Steven Golia,

policy with the intent to induce the public into purchasing IBCS
bonds. There are three issues before the Court. The first

issue is whether IBCS materially misrepresented its refund

policy to procure a contract with Persaud,

such that Persaud

relied on the misrepresentations and was induced by them to enter into the contract. The second issue is whether IBCS's

marketing brochure

constitutes

false advertising

in violation of

sections

18.2-216 of

the Virginia Code.

The

third issue

is

whether Defendants acted with reckless disregard in procuring
IBCS's contract with Persaud.

The Court grants

summary judgment

in favor of Persaud on

Count I

(fraud in the inducement)

because

there are no genuine

issues of material fact as

to whether IBCS misrepresented its
Indemnity
summary

refund policy to Persaud to secure the General
Agreement and bond premium. The Court

also grants

judgment in favor of Persaud on Count III

(false advertising)

because there are no genuine issues of material fact as to
whether IBCS, by disseminating its marketing brochure, violated

Virginia's false advertising statute.

Finally,

the Court grants (punitive

summary judgement in favor of Defendants on Count IV damages) because Defendants'

misrepresentations concerning
are insufficient to create a

IBCS's refund policy,

without more,

genuine issue for trial as to whether Defendants'
actual malice.
I. BACKGROUND

acted with

Persaud Companies,

Inc.

is a construction contracting

company that sought surety bonds

from IBCS Group,

Inc.,

a

bonding company.

(Andy Persaud Decl.

1 3.)

Persaud wanted

bonds to guarantee a subcontract from general contractor JACO &

MCC Joint Venture LLP
Mr.

("JMJV").
in the

(Andy Persaud Decl.
business of

HI 7,9.)
an

Edmund Scarborough is

acting as

individual surety and is

the owner of

IBCS.

He provides payment

and performance bonds to general contractors and subcontractors. (Scarborough Dep. 12:1-12, 24:14-17, Oct. 7, 2009.) Mr. Steven

Golia is an Executive Vice President of
60:21-61:5, Oct. 6, 2009.) Mr.

IBCS.

(Golia Dep.
Persaud's

Mark Congdon is

bonding agent.
Admis. to IBCS

(Andy Persaud Dep.
66.)

46:3-9,

Nov.

5,

2009;

Persaud

Beginning in November 2008,

Persaud and IBCS engaged in

discussions concerning the bonds Persaud needed to secure its
contract with JMJV to construct a Texas border fence. (Andy

Persaud Decl.
emailed Mr.

Hf 5,

6.)

On November 17,

2009,

Mr.

Congdon

Golia about IBCS's refund policy in case JMJV (Andy Persaud Decl.
2009.) Mr.

rejected the bonds.
31:17-32:7, Nov. 6,

% 16;

Congdon Dep.

Golia responded by directing Mr.

Congdon to IBCS's marketing brochure,
website,

then available on its

which stated in relevant part:

Q. What happens if a bond is rejected by an obligee? A. We intend to pre-qualify all bonding requests to minimize the possibility of bond rejection.
However, we will reverse a transaction if a bond is promptly rejected.

(Brochure,

Am.

Compl.

Ex.

A.)

Mr.

Golia also told Mr.

Congdon

that Persaud could get a refund within fifteen days if JMJV

rejected the bonds,

and encouraged Mr.
(Defs.' Mem.

Congdon to get the bonds
J. Ex. 3.)

pre-approved by JMJV.

Opp'n Suitim.

On December 29, General Agreement of

2008,

Persaud and IBCS ("GAI")

entered into a

Indemnity

which governed the

parties'

relationship concerning the bonds.

(Andy Persaud Decl.

U 20;

IBCS Admis.

24; Golia Dep.

219:18-20,

Oct.

6,

2009.)

The

GAI contained a

"FEES AND CHARGES" provision which stated that

the

"full initial fee is fully earned upon execution of the BOND

and will not be refunded,
(GAI, Mr. Am. Compl. Ex. F.)

waived or cancelled for any reason."
Before Persaud paid the bond premium, Golia in January 2009 about IBCS's Congdon to

Congdon again emailed Mr. to which Mr.

refund policy,

Golia again directed Mr.

the marketing brochure and suggested that Persaud get the bonds
pre-approved by JMJV. (Andy Persaud Decl. Ex. H at U 22; Golia

Admis.

20-22;

IBCS Admis.

15.)

In fact, Supp.

Persaud never got the Summ. J. 7.)

bonds pre-approved.

(Defs.'

Mem.

Shortly after entering into the GAI,

Persaud paid a bond

premium of $121,557 and IBCS issued the bonds.
226:8-11, Oct. 6, 2009.) However,

{Golia Dep.
2009, JMJV

on January 12,

rejected the bonds because they came from an individual surety

instead of a corporate surety.
2009.)

(Golia Dep.

101:4-9,

Oct.

6,

JMJV's email to Persaud stated in relevant part: this letter is to express
issued by an

The purpose of

[our]
individual

concern that the bonds are

surety versus

the

standard Corporate

Surety

Company.

Therefore,

[we],

by this Inc.,

letter,

[are]

rejecting these bonds,

forwarding

the originals
will be issuing

back to Persaud Companies,

a negative change order for the bond premium, and subsequently issuing joint Companies Inc. and its checks to Persaud second tier

subcontractors/suppliers.

(PL's Mem.

Supp.

Summ.

J.

Ex.

L.)

Upon notice,
but again,

IBCS reissued
JMJV rejected

the bonds on forms provided by JMJV,

them on January 19,

2009.

(Answer H 20.)

Subsequently,

JMJV

withdrew its demand for the bonds and reduced the size of
Persaud's contract by an amount equal to the bond premium,

thereby allowing Persaud to proceed under the subcontract.

(Defs.'

Mem.

Supp.

Summ.

J.

14,

15.)

Within twenty-four hours
emailed

of receiving JMJV's rejection,
IBCS a copy of JMJV's

Persaud notified IBCS,

rejection letter,

and requested a full

refund of the bond premium.

(Andy Persaud Decl.

Ex.

M at 1

29;

Golia Admis. However,

35-43;

Golia Dep.

230:8-14,

Oct.

6,

2009.)

in his reply email,

Mr.

Golia wrote,

"as stated in the
(PL's Mem.

General Indemnity Agreement,
Supp. Summ. J. Ex. N.)

no refund is due."

Unable to reclaim its bond premium,

Persaud filed suit

against IBCS,

Mr.

Scarborough and Mr.
Count I

Golia alleging the

following five counts: IBCS); Count II

(fraud in the inducement against Edmund Scarborough, and

(fraud against IBCS,

Steven Golia);
Scarborough,

Count

III

(false advertising against
Count IV

IBCS,

Edmund

and Steven Golia);

(punitive damages

against

IBCS,

Edmund Scarborough,

and Steven Golia);

and Count V

(unfair competition against Golia). Dismiss, Defendants

IBCS,

Edmund Scarborough,

and Steven

then filed a Motion to Strike,

Motion to After

and Motion for a More Definite Statement. from all parties,

hearing oral arguments

the Court denied and Motion for a

Defendants Motion to Strike,

Motion to Dismiss,

More Definite Statement as
Defendants'

to Counts I,

III and IV,
II and V.

and granted
The

Motion to Dismiss as

to Counts

parties now file cross Motions for Summary Judgment on Counts I,
III and IV. II. STANDARD OF REVIEW

Under Federal Rule of Civil grant summary judgment if

Procedure 56,

the Court must

the moving party demonstrates that

there is no genuine issue as to any material fact,

and that the

moving party is entitled to judgment as a matter of law.
Civ. P. 56(c). In reviewing a motion for summary judgment,

Fed. R.
the

Court views the facts in a light most favorable to the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

255

(1986).

Once a motion for summary judgment is properly made
the opposing party has the burden of showing that

and supported,

a genuine dispute exists.

Matsushita Elec.

Indus.

Co.

v.

Zenith

Radio of

Corp.,

475

U.S.

574,

586-87

(1986).

"[T]he

mere

existence not

some alleged

factual

dispute between the parties

will

defeat an otherwise properly supported motion for summary

judgment;
material

the requirement
fact." Anderson, fact" Id.

is

that there be no genuine issue of
at 247-48. the outcome Wash. Sports

477 U.S.

A "material of

is a at

fact that might affect 248; JKC Holding Co. (4th Cir. v.

a party's case. Inc., 264

Ventures,

F.3d 459,

465

2001).

Whether a

fact is considered to be substantive law,

"material"

is determined by the that might

and "[o] nly disputes over facts
the

affect the outcome of

suit under the governing law will summary judgment."
249 F.3d 259,

properly preclude the entry of
U.S. at 248; Hooven-Lewis v.

Anderson,
265 (4th

All

Caldera,

Cir.

2001).

A "genuine"

issue concerning a

"material"

fact

arises when the evidence is sufficient to allow a reasonable jury to return a verdict in the nonmoving party's
Anderson, All U.S. at 248. Rule 56(e) requires

favor.

the nonmoving or

party to go beyond the pleadings and by its own affidavits,

by the depositions,
on file,

answers to interrogatories,

and admissions

designate specific facts showing that there is a

genuine issue for trial.
317, 324 (1986).

Celotex Corp.

v.

Catrett,

All U.S.

III.

ANALYSIS

A.

Count

I

(fraud in

the

inducement) in favor of Persaud on

The Court grants

summary judgment

Count

I because

there are no genuine issues of material

fact as

to whether IBCS misrepresented its refund policy to Persaud in

order to secure the GAI and bond premium.

To prevail on a fraud (1) that the

in the inducement claim a plaintiff must prove

defendant made a material misrepresentation for the purpose of procuring a contract, misrepresentation and
contract, Brame v. and (4)

(2) (3)

the plaintiff relied on the was induced by it to enter into the

the plaintiff suffered damage as a result. Co., Inc., et al., 124 S.E. 477, 481

Guarantee Finance

(Va.
turn.

1924).

The Court addresses each of the four elements in

1.

Material misrepresentation

IBCS materially misrepresented its refund policy based on

the information supplied by its marketing brochure and Mr.

Golia's representations.

A misrepresentation is

"material when when it

it influences a person to enter into a contract, deceives him to act,
not have occurred."
350, 355 (Va. 1986)

or when without it the transaction would
J.E.Robert Co. v. J.Robert Co., 343 S.E.2d
95

(quoting Packard Norfolk v.

Miller,

S.E.2d 207,

211-12

(Va.

1956)(citation omitted))(finding the car

dealer's

statements

regarding its automobile material because

they substantially affected the buyer's
the automobile).

interest in purchasing

Here,

there

is no factual dispute as

to whether IBCS made a

material misrepresentation because both the marketing brochure and Mr. Golia's representations were contrary to the GAI--the IBCS's refund policy-and influential in
On its face, IBCS's

true embodiment of

Persaud's decision to pay the bond premium.

marketing brochure expressly stated,

"we will reverse a

transaction if a bond is promptly rejected."
Compl. Ex. A.) Moreover,
Mr.

(Brochure,

Am.

each time Mr.

Congdon inquired about

IBCS's refund policy,

Golia directed him to the marketing

brochure. Summ.
20-22;

{PL's Mem.

Supp.

Summ.

J. Ex.

H 26;

Defs.'

Mem.

Opp'n

J.

at 2; Andy Persaud Decl.
15.)

H at H 22;

Golia Admis.
the

IBCS Admis.

While encouraging Persaud to get

bonds pre-approved,

Mr.

Golia also promised Mr.

Congdon that

IBCS would provide a refund within fifteen days if JMJV rejected

the bonds. the GAI's
"the full

(Defs.'

Mem.

Opp'n Summ.

J.

at 2,

3.)

In contrast,

"FEES and CHARGES" provision states unequivocally,
initial fee is fully earned upon execution of the BOND

and will not be refunded,

waived or cancelled for any reason."

{GAI,

Am.

Compl.,

Ex.

F.)

At no time during their discussions
Golia disclose to Mr. Congdon

and email correspondence did Mr.

that

the

GAI

governed

IBCS's

refund policy.

(Congdon Dep.

95:14-96:7,

Nov.

6,

2009.)

Yet when Persaud sought a refund of

its bond premium, CHARGES"

IBCS denied the request based on the

"FEES and

provision,

which contradicts both the marketing language and Mr. Golia's representations.

brochure's express (PI.'s Mem. Supp.

Summ.

J.

Ex.

N.) Mr. Golia's oral and written

Under the circumstances, representations

influenced Persaud's decision to enter into the

GAI and pay the bond premium.

Mr.

Congdon inquired about IBCS's

refund policy on more than one occasion.

Concerned with JMJV's

possible rejection of the bonds,

Mr.

Congdon emailed Mr.

Golia

in November 2008 about the likelihood of receiving a full

refund.
6, 2009.)

(Andy Persaud Decl.

H 16;

Congdon Dep.
Mr.

31:17-32:7,

Nov.

Less than two months later,

Congdon made the same

inquiry.

(Andy Persaud Decl.
15.)

Ex.

Hat f 22;

Golia Admis.
from Mr.

20-22;

IBCS Admis.

Only after receiving assurances

Golia,

on both occasions,

that a full refund would be provided

with prompt notice did Persaud enter into the GAI and pay the bond premium. (Defs.' Mem. Opp'n Summ. J. Ex. 3; Andy Persaud

Decl.
6,

U 20;

IBCS Admis.
Thus,

24; Golia Dep.
Mr.

101:4-9,

219:18-20,

Oct.

2009.)

at the very least,

Congdon's repeated
Golia's

inquiries indicate the materiality of Mr.

misrepresentations concerning IBCS's refund policy.
10

2.

Reliance Persaud's reliance on the marketing brochure and Mr.

Golia's representations was both reasonable and justifiable.

A basic tenet of

fraud is that

the misrepresentation was relied
addressed. The reliance,

on by the party to whom it was

however,
Potocska,

must be both reasonable and justified.
589 F.Supp.2d 631, 652 (E.D. Va. 2008)

See White v.
(holding that

reliance is unreasonable if
excite his suspicions,

the party

"had enough information to

and he was therefore under a duty to

ascertain the true condition for himself.")

Where reasonable

reliance requires looking to what a prudent person would do
under the circumstances, justifiable reliance does not require

that a person conform his conduct to the standard of the
reasonable man. Field v. Mans, 516 U.S. 59, 63, 71 (1995).

Simply put,

justifiable reliance is less demanding than
"a matter of the qualities and

reasonable reliance because it is
characteristics of

the particular plaintiff,

and the

circumstances of

the particular case,

rather than of the

application of a community standard of conduct
71 (citation omitted).
On these facts, Persaud's

..."

Id.

at

reliance on IBCS's

misrepresentations was both reasonable and justified even in light of the GAI. Relying on Potocska,
11

58 9 F.Supp.2d at 650,

and Scheduled Airlines 180 F.3d 583, 589

Traffic Offices, 1999), IBCS

Inc.

v.

Objective, Persaud for

Inc.,

(4th Cir.

faults

failing to discover the GAI's contradictory language. Mem. Supp. Summ. J. 11, 12.) The facts of Potocska and

(Defs.'

Objective,
contrast

however,

do not parallel the facts of
where defendants

this case.

In

to Potocska,

alleged plaintiffs

fraudulently misrepresented certain documents financial services

in the sale of a

firm after months of negotiation in which

both parties were involved in drafting specific exhibits,

there

was insufficient information here to arouse Persaud's suspicion
concerning IBCS's true refund policy. 589 F.Supp.2d at 639.

IBCS alone drafted the marketing brochure and GAI.
GAI, Am. Compl. Ex. A, F.)

(Brochure,

Although Persaud had access and

possession of

the GAI beginning on December 29,

2008,

Mr.

Golia

actively misdirected Mr.

Congdon to the marketing brochure and

made contradictory statements beginning in early November 2008 and even after the parties entered into the GAI. (Andy Persaud

Decl.

Ex. H at U 22; Golia Admis.
In Objective,

20-22;

IBCS Admis.

15.)

defendant software development

firm agreed to

produce a travel software system for plaintiff but failed to complete the task when problems made the software inoperable.
180 F.3d 583. Confronted with a breach of contract and breach

of warranty complaint,

defendant counterclaimed for fraud and

12

argued that

it was

induced

to

enter

into

a

low

fee

contract

based on guarantees of
There, the

exposure and visibility.
statements

Id.

at

589.

court deemed plaintiff's

as mere

expressions of opinion about what defendant

could gain from the

parties'

agreement.

Id.

In contrast,

the statements contained

in IBCS's marketing brochure and Mr.

Golia's emails were not

opinions but assurances that Persaud would issue a full refund if prompt notice of JMJV's rejection is provided.
Opp'n Summ. J. Ex. 3; Andy Persaud Decl. Ex. H at 1

(Defs.'
22;

Mem.

Golia

Admis.

20-22;

IBCS Admis.

15.)

In further contrast, in Potocska made ..." Id. "no

the Fourth

Circuit found that the plaintiff

misrepresentation of a material fact
we

Whereas here,

cannot deny that IBCS materially misrepresented its refund

policy.

Mr.

Congdon's written and oral inquiries were

repeatedly met with the same response--to look to IBCS's

marketing brochure and if notice of a rejection is given within

fifteen days,
Opp'n Summ. J.

IBCS would refund the bond premium.
at 2, 3; Andy Persaud Decl. Ex. H at

(Defs.'
H 22;

Mem.
Golia

Admis.

20-22;

IBCS Admis.

15.)

Persaud had no reason to doubt,
a decade old company

based on Mr.

Golia's assurances that IBCS,

dealing with clients engaging in contracts with the Department
of Defense, would publish a marketing brochure or make

representations containing false information regarding its

13

services.

Thus,

Persaud could

therefore

reasonably and

justifiably rely on all that Mr.
IBCS contends

Congdon's inquiries revealed.
for

that Persaud's reliance was unreasonable

three reasons.

First,

Persaud failed to protect

itself by

getting the bonds pre-approved as
Supp. Summ. J. at 5-7; Defs.' Mem.

IBCS suggested.
Opp'n Summ. J.

(Defs.'
at 6, 7.)

Mem.

Second,

because JMJV not only rejected the bonds but also waived thereby allowing Persaud to proceed under

the bond requirement,
the subcontract,

the circumstance was one which neither party

anticipated,

and contrary to the marketing brochure's language.

(Defs.'

Mem.

Supp.

Summ.

J.

13,

14.)

The brochure only stated

that IBCS would reverse a transaction if a bond is promptly

rejected,

not when there is a waiver of the bond requirement.

(Brochure,

Am.

Compl.

H 13,

Ex. A.)

Consequently,

Persaud could

not rely on representations concerning a situation which neither
party considered or discussed, and was not stated in the

marketing brochure.

Finally,

Persaud should have made specific

inquiries regarding the inconsistencies between its claimed
understanding of the alleged representations and the GAI's
express terms. {Defs.' Mem. Supp. Summ. J. 11, 12.)

The Court is unpersuaded by IBCS's arguments.
on the marketing brochure's language,

First,

based

pre-qualification was not

a condition precedent to receiving a refund of the bond premium.
14

"We

intend to pre-qualify all bonding requests

to minimize the

possibility of bond rejection,"
requirement. (Brochure, Am.

is language of
Ex. A.) A

intent,
literal

not
reading

Compl.

of

the marketing brochure indicated that However,

IBCS,

not Persaud,

would pre-qualify the bonds.

IBCS

took no action to

satisfy its obligation and instead encouraged Persaud to prequalify the bonds. (Defs.' Mem. Opp'n Summ. J. at 2-5; Golia

Admis.

20-22;

IBCS Admis.

15.)

Second,

JMJV's decision to waive

the bond requirement did not change the fact that it first
rejected the bonds Ex. L.) issued by IBCS. 2009 (PL's Mem. for Summ. JMJV J.,

By its January 19,

letter to Persaud,

unequivocally stated,

n[we are]

rejecting these bonds,

forwarding the originals back to Persaud issuing joint checks to Persaud Companies

.

.

.

and subsequently and its second

Inc.

tier subcontractors/suppliers."

(PL's Mem.

for Summ.

J.,

Ex.

L.)

Any decision thereafter to waive the bond requirement was a
earlier rejection. Whether Persaud

separate act from JMJV's

relied on representations concerning an unanticipated eventJMJV's waiver of the bond requirement--is irrelevant.

Finally,

IBCS cannot use Persaud's negligence as an excuse

where IBCS's misrepresentations diverted Persaud from
discovering that it would not receive a refund.
Ins. Co. v. Patterson, 331 S.E.2d 490, 492 (Va.

See Nationwide
1985)

15

(concluding

that

when a party fraudulently induces

another to

enter into a contract,

he cannot

then

"escape

liability by

saying that the party to whom the misrepresentation was made was negligent in failing to learn the truth"); see also Cerriglio v.

Pettit,

75 S.E.

303,

308

(Va.

1912)

{finding that one cannot
"( [i]t is true that I, but by

defend an action for fraud by saying, fraud and deceit,

induced you to enter into the contract, that

you were negligent in not finding out and, therefore,

I was deceiving you, (citation

guilty of negligence in believing me'"

omitted)).

At the time of its representations,

IBCS knew,

as

the drafting party,

that while the marketing brochure stated a
no such

full refund of the bond premium would be available,

refund was due under the GAI's terms.

Nonetheless,

Mr.

Golia

continued to direct Mr.

Congdon to the marketing brochure every

time the latter raised a question about IBCS's refund policy.

(PL's Mem.
Golia Adtnis.
conceal

for Summ.
20-22;

J.

H 33; Andy Persaud Decl.
15.) Mr.

Ex.

H at j 22;

IBCS Admis.
from Mr.

Golia did not simply

the GAI's

terms

Congdon but actively

misdirected Mr.

Congdon into believing that a full refund would As such,

be available upon timely notice of JMJV's rejection.

Persaud's failure to discover the inconsistencies between IBCS's
representations and the GAI's terms
reliance.

is not a defense to

16

3.

Inducement

The marketing brochure and Mr.

Golia's

representations

induced Persaud to enter into the GAI and pay the bond premium. Misrepresentations under a fraud in the inducement claim must be
made with the intent to
Brawe, 124 S.E. at 481.

induce

formation of
IBCS

the contract.

Admittedly,

used the marketing

brochure as a marketing tool to attract

those

seeking surety

bonds.

(Golia Dep.

134:2-135:8,

Oct.

6,

2009.)

The brochure's

plain language,
GAI on belief

without qualification,

led Persaud to sign the

that a full refund would be provided if JMJV

rejected IBCS's bonds.

(Brochure,

Am.

Compl.

% 13,

Ex.

A.)

IBCS knew its refund policy was not embodied in the Brochure or in Mr. Golia's representations but rather in the GAI's
provision.
Oct. 6,

"FEES AND

CHARGES"

(Golia Dep.
2009;

138:9-139:20,

163:21-164:1,
Oct.

188:15-189:1,

Scarborough Dep.

24:18-25:13,

7,

2009.)

Nonetheless,

IBCS disseminated the marketing brochure
Congdon that a refund would

and Mr.

Golia repeatedly assured Mr.

be available if JMJV rejected the bonds and timely notice is

given.
96:7,

(Golia Dep.
November 6,

143:2-19,

Oct.

6,

2 009;
f

Congdon Dep.
18.) Thus,

95:14IBCS

2009;

Andy Persaud Decl.

knowingly misrepresented its refund policy in order to procure
the GAI with Persaud and the bond premium.

17

But

for IBCS's misrepresentations,

Persaud would not have
Before signing

entered into the GAI and paid the bond premium. the GAI, Mr.

Congdon made numerous oral and written inquiries

regarding IBCS's refund policy and at all times he was directed

to the marketing brochure.

(PL's Mem.

for Summ.

J.

U 33;

Ex.

H

to A.

Persaud Decl.
Mr.

U 22;

Golia Admis.

20-22;

IBCS Admis.

15.)

Additionally,

Golia's statements indicating that there was a

fifteen day review period and a refund would be given if the bonds were rejected within that time provided further incentive
for Persaud to pay the bond premium. (Andy Persaud Decl. Ex. E.

at H 17;

IBCS Admis.

17,

18; Golia Admis.

24,

25.)

IBCS argues

that pressure

from JMJV forced Persaud to

purchase the bonds rather than any act of
therefore, the marketing brochure and Mr.

inducement by IBCS;
Golia's

representations had no effect on Persaud's decision to purchase
the bonds. (Defs.' Mem. Opp'n Summ. J. at 15-20.) However,

whether Persaud faced pressure from JMJV or struggled to obtain the bonds from other bonding companies is irrelevant to IBCS's

misrepresentation of its refund policy.

As an unrelated third
JMJV's

party to the IBCS-Persaud contractual relationship,

actions had no bearing on IBCS's true intention regarding its
refund policy under the GAI.
secure bonds

Similarly,
is

Persaud's ability to
from IBCS's

from other sureties

independent

18

misrepresentations.
on the ground that

Therefore,
Persaud was IBCS

IBCS cannot

avoid responsibility
because of

compelled to contract

circumstances
4. Damages

on which

had no control.

Persaud's reliance on IBCS's marketing brochure and Mr.

Golia's misrepresentations resulted in the loss of the bond
premium. Shortly after entering into the GAI, Persaud paid the

bond premium.

(Answer U 18;

Golia Dep.

Tr.

226:8-11.)

Within

hours of receiving JMJV's rejection,

Persaud notified IBCS,

emailed IBCS a copy of JMJV's rejection letter,
full refund of the bond premium.

and requested a
Ex. M at f

(Andy Persaud Decl.

29; Answer UH 26,
Oct. 6, 2009.)

27;

Golia Admis.

35-41;

Golia Dep.

230:8-14,
thereby

However,

IBCS refused to issue a refund,

causing Persaud to suffer financial $121,557, the value of

loss

in the amount of (Andy Persaud Decl.

the bond premium.

Ex. N at H 31; Answer K 31;
2009.) B. Count III (false

Golia Dep.

232:19-233:19,

Oct.

6,

advertising)

The Court grants

summary judgment

in favor of Persaud on issues of material fact

Count III because there are no genuine

as to whether IBCS,

by disseminating a brochure which contained
violated

a false statement regarding its refund policy,

Virginia's false advertising statute.
19

It is a misdemeanor for a

person or company who

intends

to

sell

or distribute

any product

or service

to make or distribute

any written advertisement false or misleading

regarding that product,

which contains

statements obligation. Chevrolet,

intended to persuade the public Va. Inc., Code Ann. 254 §§ 18.2-216 67

to enter into an Henry v. R.K.

(West 2009);

S.E.2d 66,

(Va.

1979)(affirming the

trial court's decision that defendant's oral representations did
not violate §§ 18.2-216 because Congress intended the statute to

cover only non-oral advertisements).

Although punishable as a

misdemeanor,

a violation of

§§ 18.2-216 also "subjects the

defendant to an action for damages by any person who suffers loss as a result of
Henry, 254 S.E.2d at

such violation."
67. In dispute

Va.

Code Ann.

§§

59.1-68.3;

is whether the marketing

brochure contained misleading statements which IBCS

intended to

induce the public into purchasing its bonds.
1. Misleading Statement

The marketing brochure and Mr.

Golia's emails contained

misleading statements regarding IBCS's refund policy.
other forms of advertisement,

Like

the marketing brochure was a

marketing tool which IBCS used to promote its surety services.

(Golia Dep.

134:2-19,

Oct.

6,

2009; Andy Persaud Decl.

Ex.

C at

HH 12,

13; Brochure, Am.

Compl.

Ex. A.)

By posting the

marketing brochure on its website,

any member of the public

20

could obtain information about

IBCS's

services

simply by

accessing the World Wide Web to view the brochure.
138:13, 134:2-19, Oct. 6, 2009.) Based on its

(Golia Dep.
a party

language,

that wishes to purchase surety bonds and reads

the brochure
timely notice

would understand that he may receive a refund if

of a rejection is given.
However, that was not

(Brochure,

Am.

Compl.

U

13,

Ex.

A.)

the case as

IBCS

admitted the marketing

brochure did not contain a complete statement of

its refund

policy.
GAI,

(Golia Dep.

138:9-139:20,

Oct.

6,

2009.)

Rather,

the

which expressly forbids refunds for any reason, IBCS's refund policy. (GAI, Am.

is the true Ex. F.)

embodiment of
In sum,

Compl.,

the marketing brochure was not only an incomplete but a false statement of IBCS's refund policy such

statement,

that IBCS will not reverse a transaction if a bond is promptly
rejected.
IBCS argues that there was no misleading statement because

(1)

the marketing brochure made no claims about refunds in the
which was what happened

event bond requirements were waived,

here;

and

(2)

it was Mr.

Congdon,

as Persaud's agent,

who

transmitted the marketing brochure to Persaud which broke any
causal connection between IBCS and Persaud's claimed loss. (Defs.' Mem. Opp'n Summ. J. at 8, 9.) As discussed, JMJV's

decision to waive the bond requirement is irrelevant because it
21

also rejected the bonds.
PL's Mem. Supp. Summ. J.

(Golia Dep.
Ex. L.) As

101:4-9,

Oct.

6,

2009;

to the claim that Persaud is contradicted by

was misled by its own agent,

this argument

the plain fact that IBCS disseminated the marketing brochure to
the public by making it available on its website.
138:13, 134:2-19, Oct. 6, 2009.)

(Golia Dep.

2.

Intent

to Induce

the

Public

IBCS disseminated the marketing brochure with intent to

induce the public to purchase its bonds. written advertisement under §§ 18.2-216.

The brochure was a There is no dispute

it was used to provide members of the public looking to purchase
surety bonds
138:13, Oct.

information about IBCS's
6, 2009.) Specifically,

services.

(Golia Dep.

IBCS hoped the public

would buy IBCS bonds and but for this purpose IBCS would not
have made its marketing brochure available on the World Wide

Web.

(Golia Dep.

134:2-135:8,
is

Oct.

6,

2009.)

Therefore,

the

element of
C. Count

intent to induce
IV

satisfied.

(punitive damages)

The Court grants summary judgment in favor of Defendants

because despite misrepresentations concerning IBCS's refund

policy,

there is no proof Defendants acted with actual malice in
Golia's

disseminating the marketing brochure or based on Mr. representations.

Punitive damages may be recovered in an action

22

for fraud where there actual malice,

is

direct or circumstantial proof of shown by a conscious disregard of the

which is

rights of others.
1978)(reversing the

Jordan v.

Sauve,

247

S.E.2d 739,

741-42

(Va.

trial court's

order denying plaintiff's

claim for punitive damages because defendant withheld documents pertaining to the buyer's right to purchase the automobile). granting punitive damages, plaintiff's loss,
his wrongdoing.

In for

the court seeks not to compensate

but to punish the defendant and warn others of
Id. at 741.

While Defendants were aware that IBCS's refund policy was not as it appeared in the marketing brochure,
not amount

their conduct did
Persaud

to a reckless disregard of Persaud's rights.

sets forth two arguments why IBCS and Mr.

Golia displayed a

conscious disregard of
reckless for not

its rights.

First,

Mr.

Golia was
true refund

informing Persaud that

IBCS's

policy was contained in the GAI when he knew of Persaud's
concern about the refund policy. (PL's Mem. Supp. Summ. J. at

22,

23.)

Additionally,

the fact that IBCS did not incur any

risk or provide any services tends to show a disregard for Persaud's rights, and therefore IBCS should not be allowed to

retain the bond premium.
Persaud's arguments

(PL's Mem.

Supp.

Summ.
First,

J.

at 23,

24.)

are unconvincing.

it is

true

that in securing the GAI and bond premium,

Mr.

Golia made

23

representations Congdon to

contrary

to

the GAI's

terms

and directed Mr. the GAI. (PL's

the marketing brochure rather

than

Mem. to A.

for Summ.

J.

H 26;

Defs.'

Mem.

Opp'n Summ. 20-22;

J.

at 2;

Ex.

H

Persaud Decl.

U 22;

Golia Admis.

IBCS Admis.

15.)
in

However,

IBCS also urged Persaud to pre-qualify the bonds

order to avoid a rejection from JMJV.

(Defs.'

Mem.

Opp'n Summ.

J.

Ex.

3; Andy Persaud Decl. 15.)

Ex.

Hat 1 22;

Golia Admis.

20-22;

IBCS Admis. Mr.

It is more likely that malice would exist had

Golia discouraged Persaud from getting pre-qualification,

which was not the case.
from the GAI's

Mr.

Golia's act of deflecting attention

"FEES AND CHARGES" provision based on his

representations,

though dishonest,

did not amount to a spirit of

mischief or criminal indifference to Persaud's rights.
Second, that IBCS did not point out information in the GAI

which was available to Persaud is not evidence of reckless disregard for Persaud's rights. The question here is whether

sufficient evidence exists to permit the jury to find that IBCS

acted with recklessness by dissemination and directing Persaud to its marketing brochure,
representations,
Persaud's rights

along with Mr.

Golia's

so as to evince a conscious disregard of
to learn of the true refund policy. On

balance,

the Court finds it does not.

Unlike defendant car

salesmen in Sauve who allegedly tampered with the sales order
24

and caused plaintiff

car buyer to obtain

financing at an

unauthorized amount,
terms or concealed

IBCS did not

secretly change

the GAI's
247 S.E.2d

the

relevant provisions.

Sauve,

at

740-41.

Without more,

reckless disregard cannot be

established by the mere services to Persaud.

fact

that

IBCS did not provide any not amount to malice.

Inaction alone does

Therefore,

even where all inferences are drawn in a light most
there was no actual malice by Defendants

favorable to Persaud,

and Persaud may not recover punitive damages.
IV. CONCLUSION

The Court grants summary judgment Count I (fraud in the inducement)

in favor of Persaud on

because there are no genuine

issues of material fact as to whether IBCS misrepresented its
refund policy to Persaud to secure the GAI and bond premium.

The Court also grants Count III

summary judgment in favor of Persaud on because there are no genuine

(false advertising)

issues of material fact as to whether IBCS,
brochure, violated Virginia's

by its marketing

false advertising statute.

Finally,
Count IV

the Court grants summary in favor of Defendants on
(punitive damages) because despite their

misrepresentation concerning IBCS's refund policy,

there is

insufficient evidence to create a genuine issue for trial as to

25

whether Defendants

acted with actual malice.

Accordingly,

it

is

hereby

ORDERED that
GRANTED

Plaintiff's Motion for Summary Judgment
IN PART. It is further

is

IN PART and DENIED

ORDERED
GRANTED

that Defendants'

Motion for Summary Judgment

is

IN PART and DENIED

IN PART.

The Clerk is directed to ENTER JUDGMENT pursuant

to Federal

Rule of Civil Procedure

58.

The Court enters judgment in favor

of Plaintiff Persaud Companies,
IBCS Group, Inc.,

Inc.

and against Defendants
and Steven Golia in the

Edmund Scarborough,

amount of one hundred twenty-one fifty-seven dollars

thousand and

five hundred

($121,557.00).

The Clerk is directed to forward a copy of the Memorandum
Opinion to counsel.

Entered this

& >

day of April,

2010.

Alexandria,

Virginia

Gerald Bruce Lee

J*L

United States District Judge

26