White v. Pitman
156 N.E.3d 1026
Ohio Ct. App.2020Background
- Bryan White invested in multiple domain-related ventures managed by Aaron Pitman and entities he controlled (notably AutoinsuranceNow, Personalinjury.org, Digital Asset Brokerage Group, and Cool Country Group); ownership and investment amounts were pleaded (e.g., $125,000; $50,000; $200,000; $750,000).
- White alleges Pitman represented sellers were disinterested third parties and sales would be arms-length, but in fact sellers (Goldschmidt and Hammons) were Pitman’s associates and prices were grossly inflated; White says Pitman had undisclosed pecuniary interests in the transactions.
- Parties executed two post-transaction sale/buyback agreements that included broad mutual releases; White received roughly $92,500 across those transactions but alleged the releases were fraudulently obtained and that he had received no valid consideration for the release terms.
- Plaintiffs sued for fraud, breach of fiduciary duty of loyalty, violation of the Ohio Limited Liability Act and Securities Act, breach of contract, and sought to pierce the corporate veil; case transferred to Hamilton County.
- Trial court granted defendants’ Civ.R. 12(B)(6) motion, concluding the releases barred all claims, fraud was not pled with particularity, fiduciary and contract claims were insufficiently pleaded, and that piercing the veil is not a standalone cause of action.
- The appellate court affirmed dismissal only as to the purported independent claim to pierce the corporate veil, and reversed dismissal of the other claims: it held fraud was pled with particularity, the releases could be challenged on the complaint’s allegations (so dismissal on release grounds was improper), and fiduciary-duty and breach-of-contract claims survived the motion to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Were fraud allegations pled with the particularity required by Civ.R. 9(B)? | White alleges specific misrepresentations, dates, amounts, identities of sellers, concealment of Pitman’s ties and pecuniary interest; reliance and damages identified. | Defendants argued plaintiffs’ fraud allegations were conclusory and lacked specific facts to meet Rule 9(B). | Court: Fraud met Rule 9(B); dismissal on that ground was erroneous. |
| Do the mutual releases in the buyback agreements bar the claims? | White argues the releases were procured by fraud in the inducement/factum and that complaint alleges no valid consideration, so releases cannot foreclose claims at dismissal. | Defendants contend releases are broad and absolute; plaintiffs failed to tender back consideration and thus cannot attack releases. | Court: Trial court erred — complaint plausibly alleges fraudulent inducement and lack of consideration; at 12(B)(6) releases do not bar claims as pleaded. |
| Did plaintiffs adequately plead breach of fiduciary duty of loyalty between LLC members? | White cites formation of LLCs and statutory duties (R.C. 1705.281), alleges misrepresentations, concealment, undisclosed pecuniary interest, and failure to market domains. | Defendants rely on operating-agreement language that limits liability and argue no statutory or factual basis for fiduciary duty pled. | Court: Allegations plus statutory duties plausibly state a breach-of-loyalty claim; dismissal was erroneous. |
| Is ‘‘piercing the corporate veil’’ a standalone cause of action? | Plaintiffs pleaded veil-piercing as a separate count seeking to hold individuals liable. | Defendants argued veil-piercing is not an independent claim. | Court: Veil piercing is a remedy, not a separate cause of action; dismissal of that standalone count was proper. |
Key Cases Cited
- 134 N.E.3d 1185 (Ohio 2019) (sets out elements of fraud claim)
- 552 N.E.2d 207 (Ohio 1990) (release may be attacked for fraud in the factum or inducement; tender rule for inducement claims)
- 146 N.E.3d 1266 (1st Dist. 2019) (fraud pleading particularity; veil-piercing is a remedy, not a standalone claim)
- 111 N.E.3d 452 (1st Dist. 2016) (elements of breach of fiduciary duty claim)
- 124 N.E.3d 893 (1st Dist. 2019) (standard of review and pleading assumptions on Civ.R. 12(B)(6))
- 99 N.E.3d 1189 (1st Dist. 2017) (12(B)(6) standard quoted regarding no set of facts rule)
- 112 N.E.3d 978 (2d Dist. 2018) (elements of breach of contract)
- 945 N.E.2d 511 (Ohio 2011) (distinguishing dismissals on the merits vs. otherwise for appealability)
- 93 N.E.3d 212 (9th Dist. 2017) (treatment of dismissals as with prejudice when the entry is silent)