Derby City Capital, LLC v. Trinity HR Services
2013 WL 2470900
W.D. Ky.2013Background
- Plaintiffs Derby City Capital and Derby Capital J0B filed an amended complaint naming multiple defendants including Trinity/Delaware, Trinity/Kentucky, Wagenseller, Schroering, LEED, and others; the court addresses nine counts spanning contract, fraud, estoppel, RICO, and securities-law claims.
- The Old Contract involved a 70% interest in Trinity/Delaware and stock as the sole asset, alleged to be breached by Trinity/Delaware; only Trinity/Delaware was a party to this contract.
- The New Contract allegedly required Trinity/Delaware to purchase Plaintiffs’ 70% interest for $750,000, with LEED’s and others’ related agreements referenced via a Pledge Agreement.
- Defendants moved to dismiss under Rule 12(b)(6), arguing that non-parties to the contracts could not be liable for breach and that the promises to pay were not pled with sufficient particularity.
- The court adopts Twombly/Iqbal pleading standards, requiring plausible claims and heightened pleading for fraud claims under Rule 9(b).
- Ultimately, the court grants in part and denies in part the Wagenseller and Schroering Defendants’ motions, dismissing most counts as to most defendants but allowing Trinity/Delaware to remain liable on the Old Contract claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of the Old Contract against non-parties | Plaintiffs assert liability through agency and veil-like theories. | Only Trinity/Delaware was a party to the Old Contract. | Count I dismissed against non-parties; Trinity/Delaware remains liable. |
| Breach of the New Contract against non-parties | New Contract binds multiple defendants via alleged promises. | Only Trinity/Delaware was a party to the New Contract. | Count II dismissed against non-parties; Trinity/Delaware remains liable. |
| Fraudulent inducement and causation | Defendants induced contract with misrepresentations of funding capacity. | No viable misrepresentation beyond contract terms; economic loss rule may apply. | Count III dismissed; Count II’s breach controls; economic loss rule discussed but overall dismissal. |
| Promissory estoppel viability | Promissory estoppel independently supports Plaintiffs’ claims. | Existence of enforceable contracts bars estoppel recovery. | Count IV dismissed as a matter of law. |
| RICO and Rule 10b-5 viability | RICO and 10b-5 claims against multiple defendants. | Pleadings fail to allege a viable predicate acts, pattern, reliance, or ultimate authority. | Count VIII (RICO) and Count IX (10b-5) dismissed with prejudice as to Wagenseller/Schroering and related defendants. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plaintiff must plead plausible claims; not mere conclusory statements)
- Twombly, 550 U.S. 544 (U.S. 2007) (pleadings must contain plausible claims supported by facts)
- Janus Capital Grp., Inc. v. First Derivative Traders, 131 S. Ct. 2296 (U.S. 2011) (maker of a statement is the one with ultimate authority over content)
- Mario’s Pizzeria, Inc. v. Fed. Sign & Signal Corp., 379 S.W.2d 736 (Ky. 1964) (fraud cannot rest on mere nonperformance of a contract; misrepresentation must be independent)
- Westlake Vinyls, Inc. v. Goodrich Corp., 518 F. Supp. 2d 955 (W.D. Ky. 2007) (economic loss doctrine bars fraud claims that are intertwined with contract)
- Gonzalez v. Imaging Advantage, LLC, 2011 WL 6092469 (W.D. Ky. 2011) (promissory estoppel not available where contract governs the same performance)