919 F. Supp. 2d 666
D. Maryland2013Background
- Plaintiffs are a group of insurance companies, including Chubb & Son as a division of Federal Insurance Company.
- Defendants are Complete, its operations manager King, and president Cornelius; Disaster Kleenup International, LLC is a non-party to the Master Services Agreement.
- In Oct 2008, Disaster entered into a Master Agreement with Chubb & Son to provide disaster services to policyholders, with Disaster contracting with contractors like Complete.
- Plaintiffs allege Complete contracted with Plaintiffs’ insureds to perform services and submitted estimates that allegedly misrepresented costs, leading to overpayments.
- A single work order/estimate involving Disaster, Complete, a Chubb Group insurer, and Lynn Hargis is referenced, plus a spreadsheet of nineteen transactions, with few specifics.
- Plaintiffs filed a 12-count complaint alleging fraud, multiple breaches of contract, unjust enrichment, consumer-protection violations, and civil conspiracy; defendant moved to dismiss related counts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fraud pleadings: sufficiency of particularity | Plaintiffs allege specific time/place; misrepresentations existed. | Fraud claims lack Rule 9(b) particularity and content specifics. | Fraud claims dismissed for lack of particularity. |
| Duty and cognizability of negligent misrepresentation and fraudulent concealment | Plaintiffs allege misrepresentation or concealment by Complete arising from contractual relationships. | No adequate tort duty due to purely economic losses and arm's-length contracting. | Counts 3 and 4 dismissed with prejudice. |
| Breach of Master Agreement viability | Master Agreement with New Jersey law governs; Master Agreement contemplated work orders with Complete. | Insufficient proof of contract formation or breach by Complete. | Count 5 cognizable; breach of Master Agreement stated. |
| Breach of Membership Agreement viability | Disaster-Complete Membership Agreement created duties that Plaintiffs may benefit from as third-party beneficiaries. | Delaware law applies; plaintiffs not third-party beneficiaries; no contract with Plaintiffs. | Count 6 dismissed with prejudice; potential later reconsideration if discovery supports a standalone breach. |
| Breach of work orders with Plaintiffs’ insureds | Work orders, including multiple transactions, were governed by the Master Agreement and violated by Complete. | Content and scope of work orders unclear; some dismissed claims argued by Maryland law. | Count 7 survives; Plaintiffs plausibly state breach of work orders generally; dismissal denied for the remaining transactions. |
| Unjust enrichment viability | Alternative theory valid where contract is disputed; unjust enrichment can coexist with contract claims. | Existence of an express contract bars unjust enrichment. | Count 8 survives; unjust enrichment denied dismissal. |
| Counts 9-11: state consumer protection claims | Claims sounding in fraud alleged under MD, VA, DC statutes. | Fraud-based claims lack particularity; same defects as Count 1. | Counts 9-11 dismissed without prejudice; may amend. |
| Civil conspiracy claim | Conspiracy against King and Cornelius as part of wrongdoing. | Maryland law recognizes no independent civil conspiracy claim absent underlying tort. | Count 12 dismissed; may rely on conspiracy theory if cognizable fraud arises. |
Key Cases Cited
- Iqbal v. Ashcroft, 129 S. Ct. 1937 (U.S. 2009) (pleading must show plausible entitlement to relief)
- Twombly v. Bell Atl. Corp., 550 U.S. 544 (U.S. 2007) (heightened pleading standard requires plausible claims)
- Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (U.S. 1941) (federal court's choice-of-law rules apply)
- Nails v. S&R, Inc., 334 Md. 398 (Md. 1994) (clear and convincing evidence required for fraud; Rule 9(b) particularity)
- Harrison v. Westinghouse Savannah River Co., 176 F.3d 776 (4th Cir. 1999) (fact pleading standards; favorable view of plaintiff's allegations)
- Martens Chevrolet, Inc. v. Seney, 292 Md. 328 (Md. 1982) (duty and breach require contract-based relationships and care)
- Green v. H&R Block, Inc., 355 Md. 488 (Md. 1999) (duty to disclose; economic loss considerations)