C.A. No. 3571-VCP, (March 18, 2009) (Parsons, V.C.)
This case involves plaintiff’s investments in several oil and gas explorations projects with the defendants. The Court summarized this complex dispute as the “interrelationship of several written contracts each purporting to integrate fully the agreement among the parties with the terms of notes that were described in summary fashion in informal documents, but never formally issued.” Six of the defendants moved to dismiss claims for breach of contract, breach of guaranties, fraud and equitable fraud, breaches of fiduciary duty, promissory estoppel, unjust enrichment, and for equitable relief, including specific performance, an accounting, a constructive or resulting trust, and an equitable lien. The Court granted the motion to dismiss only with respect to the breach of fiduciary duty claim. The key holdings of the Court are summarized below.
In denying defendants’ motion to dismiss the breach of contract claims, the Court engaged in a fact-intensive inquiry of the circumstances surrounding the various investment agreements between the parties. The Court first held that the investment agreements were not integrated and, therefore, extrinsic evidence could be considered to interpret their meaning. In making this determination, the Court found that the contracts were not carefully and formally drafted, the contracts failed to address questions that would naturally arise out of the subject matter, and there were significant questions as to whether the contracts expressed the final intentions of the parties. Based on the extrinsic evidence, the Court held that genuine issues existed regarding the parties respective obligations under the contracts.
For the fiduciary duty claim against one of the defendants, the Court found that plaintiff failed to allege the existence of a fiduciary relationship for several reasons, including (1) plaintiff represented in the investment agreements that he was an “accredited or institutional investor,” that he conducted an independent investigation, and that did not rely on any statements of the so-called “lead-purchasers”; (2) defendant did not occupy a position of superior knowledge or expertise to the plaintiff; and (3) bargained-for commercial relationships between sophisticated parties do not give rise to fiduciary duties.
For the fraud and equitable fraud claims, the Court held that plaintiff’s allegations provided sufficient notice to defendants for purposes of defending the fraud claim and, therefore, satisfied the particularized pleading requirements of Rule 9(b). The Court next addressed whether the contractual language barred any claim for fraud. The Court found that the contracts did not contain a clear anti-reliance clause and, combined with the allegations that the defendants lied about the transaction, the fraud claims should be allowed to proceed.
With respect to the claims for unjust enrichment and promissory estoppel, which were pled in the alternative, the Court allowed both claims to proceed. As plaintiff’s complaint alleged certain conduct that may not have been governed by the contract, the Court held that plaintiff stated a claim for unjust enrichment. For the promissory estoppel claim, the Court found that plaintiff could show the existence of a promise by defendant(s) upon which he reasonably relied.
The full opinion is available here.