Command Consulting Group, LLC v. Neuraliq, Inc.

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
COMMAND CONSULTING GROUP, :
LLC, :
:
Plaintiff, : Civil Action No.: 09-0219 (RMU)
:
v. : Re Document No.: 15
:
NEURALIQ, INC., :
:
Defendant. :
MEMORANDUM OPINION
GRANTING THE PLAINTIFF’S MOTION TO DISMISS COUNTS III AND IV
OF THE DEFENDANT’S AMENDED COUNTERCLAIMS
I. INTRODUCTION
This matter is before the court on the plaintiff’s motion to dismiss Count III
(“Interference with Prospective Business Advantage”) and Count IV (“Breach of Fiduciary
Duty”) of the defendant’s Amended Counterclaims pursuant to Federal Rule of Civil Procedure
12(b)(6). Because neither count states a claim for which relief can be granted, the court grants
the plaintiff’s motion to dismiss.
II. FACTUAL & PROCEDURAL BACKGROUND
In December 2007, the plaintiff, a consulting firm specializing in government contracts,
entered into a consulting services agreement with the defendant, a software technology firm.
Pl.’s Compl. ¶¶ 6-8; Def.’s Am. Countercl. ¶¶ 1-2. Under the terms of the agreement, the
plaintiff agreed to assist the defendant in its efforts to develop business opportunities within the
federal government’s defense procurement process. Pl.’s Compl. ¶ 7; Def.’s Am. Countercl. ¶ 1.
In return, the defendant agreed to pay the plaintiff a monthly consulting fee. Pl.’s Compl. ¶ 7;
Def.’s Am. Countercl. ¶ 2.
On February 4, 2009, the plaintiff commenced this action against the defendant, alleging
that the defendant failed to pay tens of thousands of dollars in consulting fees to the plaintiff as
required by the consulting services agreement. Pl.’s Mot. at 2. On March 5, 2009, the defendant
submitted its initial Counterclaims, in which it asserted claims for breach of contract,
interference with prospective business advantage and breach of fiduciary duty. See generally
Def.’s Countercl. On April 16, 2009, after the plaintiff moved to dismiss the initial
Counterclaims, the defendant filed Amended Counterclaims, in which it supplemented the
factual allegations regarding the three claims lodged in its initial Counterclaims and asserted an
additional claim for breach of the implied covenant of good faith and fair dealing. See Def.’s
Am. Countercl. ¶¶ 6-22; Pl.’s Mot. at 2. More specifically, in its Amended Counterclaims, the
defendant alleges that the plaintiff failed to provide the consulting services required under the
agreement and used confidential information belonging to the defendant to interfere with the
defendant’s business operations. Id. ¶¶ 6-8, 18-20. The plaintiff now moves to dismiss Counts
III and IV of the Amended Counterclaims, which assert claims for interference with a
prospective business advantage and breach of fiduciary duty, under Federal Rule of Civil
Procedure 12(b)(6). Pl.’s Mot. at 5-9.
III. ANALYSIS
A. Legal Standard for a Rule 12(b)(6) Motion to Dismiss
A Rule 12(b)(6) motion to dismiss tests the legal sufficiency of a claim. Browning v.
Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002). The complaint need only set forth a short and plain
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statement of the claim, giving the party served fair notice of the claim and the grounds upon
which it rests. Kingman Park Civic Ass’n v. Williams, 348 F.3d 1033, 1040 (D.C. Cir. 2003)
(citing FED. R. CIV. P. 8(a)(2) and Conley v. Gibson, 355 U.S. 41, 47 (1957)). “Such simplified
notice pleading is made possible by the liberal opportunity for discovery and the other pre-trial
procedures established by the Rules to disclose more precisely the basis of both claim and
defense to define more narrowly the disputed facts and issues.” Conley, 355 U.S. at 47-48(internal quotation marks omitted). It is not necessary for the claimant to plead all elements of
his prima facie case in the pleading, Swierkiewicz v. Sonoma N.A., 534 U.S. 506, 511-14 (2002),
or “plead law or match facts to every element of a legal theory,” Krieger v. Fadely, 211 F.3d
134, 136 (D.C. Cir. 2000) (internal quotation marks and citation omitted).
Yet, the claimant must allege “any set of facts consistent with the allegations.” Bell Atl.
Corp. v. Twombly, 127 S. Ct. 1955, 1969 (2007) (abrogating the oft-quoted language from
Conley, 355 U.S. at 45-56, instructing courts not to dismiss for failure to state a claim unless it
appears beyond doubt that “no set of facts in support of his claim [] would entitle him to relief”);
Aktieselskabet AF 21. Nov. 2001 v. Fame Jeans, Inc., 525 F.3d 8, 16 n.4 (D.C. Cir. 2008)
(affirming that “a complaint needs some information about the circumstances giving rise to the
claims”). While these facts must “possess enough heft to ‘sho[w] that the pleader is entitled to
relief,’” a pleading “does not need detailed factual allegations.” Twombly, 127 S. Ct. at 1964,
1966. In resolving a Rule 12(b)(6) motion, the court must treat the pleading’s factual allegations
– including mixed questions of law and fact – as true and draw all reasonable inferences
therefrom in the pleader’s favor. Macharia v. United States, 334 F.3d 61, 64, 67 (D.C. Cir.
2003); Holy Land Found. for Relief & Dev. v. Ashcroft, 333 F.3d 156, 165 (D.C. Cir. 2003);
Browning, 292 F.3d at 242. While many well-pleaded complaints are conclusory, the court need
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not accept as true inferences unsupported by facts set out in the complaint or legal conclusions
cast as factual allegations. Warren v. District of Columbia, 353 F.3d 36, 40 (D.C. Cir. 2004);
Browning, 292 F.3d at 242.
B. Interference with a Prospective Business Advantage
1. Legal Standard for Interference with a Prospective Business Advantage
To survive a motion to dismiss on a claim for interference with a prospective business
advantage under D.C. law,1 the claimant must plead “(1) the existence of a valid business
relationship or expectancy, (2) knowledge of the relationship or expectancy on the part of the
interferer, (3) intentional interference inducing or causing a breach or termination of the
relationship or expectancy, and (4) resultant damages.” Browning, 292 F.3d at 242 (quoting
Bennett Enters. v. Domino’s Pizza, Inc., 45 F.3d 493, 499 (D.C. Cir. 1995)). Valid business
expectancies may include lost future contracts and lost opportunities to obtain customers. See
Nat’l R.R. Passenger Corp. v. Veolia Transp. Servs., Inc., 592 F. Supp. 2d 86, 98 (D.D.C. 2009)
(citing Carr v. Brown, 395 A.2d 79, 84 (D.C. 1978)); Siegel v. Ridgewells, Inc., 511 F. Supp. 2d
188, 195 (D.D.C. 2007). A business expectancy, however, must be “commercially reasonable to
anticipate” in order to satisfy the first element of the claim. Browning, 292 F.3d at 242; see also
Carr, 395 A.2d at 84 (observing that “business expectancies, not grounded on present contractual
relationships but which are commercially reasonable to anticipate, are considered to be property
1
As noted by the plaintiff, the defendant’s Amended Counterclaims fail to specify the location
where the allegedly tortious acts occurred, providing little insight into which substantive law
should apply to the tort counterclaims. See Pl.’s Mot. at 5 n.2; see generally Def.’s Am.
Countercl. Because, however, the underlying agreement contemplates performance in the District
of Columbia, see Pl.’s Compl., Ex. 1 § 1(a), and because the defendant does not dispute the
plaintiff’s reliance on D.C. law, see generally Def.’s Opp’n, the court will apply D.C. law to the
claims for intentional interference and breach of fiduciary duty, see Ideal Elec. Sec. Co. v. Int’l
Fidelity Ins. Co., 129 F.3d 143, 148 (D.C. Cir. 1997) (applying D.C. law to state-law claims
absent argument to the contrary by the parties because on balance the District of Columbia had
the most substantial interest in the dispute).
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and therefore protected from unjustified interference”). Furthermore, the claimant must make a
“strong showing of intent” to disrupt a business relationship or expectancy to establish a claim
for interference. Bennett Enters., 45 F.3d at 499 (noting that “a general intent to interfere or
knowledge that conduct will injure the plaintiff’s business dealings is insufficient to impose
liability”).
2. The Amended Counterclaims Fail to State a Claim For Interference
with a Prospective Business Advantage
The plaintiff contends that the defendant’s Amended Counterclaims fail to state a claim
for intentional interference with a prospective business advantage because they do not specify
any facts on which the claim is premised. Pl.’s Mot. at 5-9. The plaintiff asserts that the
defendant fails to identify a single individual or entity with whom it had a valid business
relationship or expectancy with which the plaintiff interfered. Id. at 6-7. In addition, the
plaintiff asserts that the defendant fails to allege that the plaintiff knew of or intentionally
interfered with any alleged expectancies or relationships. Id. at 7-8. Finally, the plaintiff
contends that the defendant fails to allege facts supporting its allegation that it has been damaged
as a result of the plaintiff’s allegedly tortious conduct. Id. at 9. The defendant responds that its
concise allegations regarding the plaintiff’s interference satisfy the notice pleading requirements
of Federal Rule of Civil Procedure 8(a). Def.’s Opp’n at 4-5 (quoting Def.’s Am. Countercl.
¶¶ 19-20).
As set forth in its Amended Counterclaims, the defendant’s interference claim rests on
the following allegations: that the plaintiff used confidential information belonging to the
defendant to interfere with the defendant’s “efforts to identify and secure investors, financing,
and business opportunities,” Def.’s Am. Countercl. ¶ 19; and that the plaintiff “interfered with
the relationship between [the defendant] and a certain key shareholder in an improper and
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unlawful attempt to gain control of [the defendant],” id. ¶ 20. With respect to the allegations in
paragraph 19, the court notes that where, as here, an intentional interference claim is premised on
alleged interference with a prospective business advantage, the claimant’s failure to plead the
existence of a valid business expectancy requires dismissal of the claim. See Williams v. Fed.
Nat’l Mortgage Ass’n, 2006 WL 1774252, at *8 (D.D.C. June 26, 2006) (observing that
allegations in which the plaintiff failed to specifically name the third parties with whom she had
a business relationship or expectancy could not support a claim of interference); Kwang Dong
Pharm. Co. v. Han, 205 F. Supp. 2d 489, 496-97 (D. Md. 2002) (dismissing an intentional
interference claim under D.C. law because the plaintiff “has not pointed to any specific
contractual relations that [the defendant] allegedly interfered with”); Sheppard v. Dickstein,
Shapiro, Morin & Oshinsky, 59 F. Supp. 2d 27, 34-35 (D.D.C. 1999) (dismissing an intentional
interference claim because the plaintiff “failed to identify any facts demonstrating any future
business relations or ‘expectancies’ that defendants affected” and presented no evidence of any
specific, future relationship interfered with by the defendants).
The amorphous allegations in paragraph 19 of the Amended Counterclaims do not plead
the existence of a valid business expectancy – rather, they merely outline three broad categories
of relationships that may have been affected by the plaintiff’s conduct. See Kwang Dong
Pharm., 205 F. Supp. 2d at 497 (noting that “vague references” to promising prospective
relationships are not sufficient to support an interference claim). Indeed, the defendant has
offered no facts whatsoever suggesting that any investment, financing or business relationship
referred to in paragraph 19 was “commercially reasonable to expect.” See Wash. Metro. Area
Transit Auth. v. Quik Serve Foods, Inc., 2006 WL 1147933, at *6 (D.D.C. Apr. 28, 2006)
(observing that “[a] valid business expectancy requires a probability of future contractual or
6
economic relationship and not a mere possibility”). Accordingly, the allegations in paragraph 19
of the defendant’s Amended Counterclaims do not plead the existence of a valid business
expectancy and cannot form the basis of a claim for interference with a prospective business
advantage.
The defendant comes somewhat closer to identifying a valid business expectancy in
paragraph 20 of the Amended Counterclaims, in which it alleges that the plaintiff interfered with
the relationship between the defendant and “a certain key shareholder” in an improper attempt to
gain control of the defendant. Def.’s Am. Countercl. ¶ 20. This allegation, however, is entirely
silent with respect to the plaintiff’s intent. In a claim for interference with a business advantage,
“the requisite intent is met if behavior involves egregious conduct, such as libel, slander,
physical coercion, and fraud.” Sheppard, 59 F. Supp. 2d at 34 (dismissing the plaintiff’s claim
for interference because the complaint was silent as to the defendant’s intent). The defendant
offers no allegations regarding the plaintiff’s intent beyond the bald asssertion that its
interference with the relationship between the defendant and its “key shareholder” was
“improper and unlawful,” Def.’s Am. Countercl. ¶ 20, and that the plaintiff “acted willfully and
maliciously . . . and with the intent to harm [the defendant],” id. ¶ 22. These conclusory
assertions, utterly devoid of any factual allegations, are insufficient to plead the requisite intent.
See Gov’t Relations Inc. v. Howe, 2007 WL 201264, at *9 (D.D.C. Jan. 24, 2007) (dismissing the
plaintiff’s intentional interference claims because the “[p]laintiff has not pleaded any facts, but
only broad allegations, regarding [the] Defendant’s conduct, let alone whether or not such
unspecified conduct was egregious”); see also Twombly, 550 U.S. at 555 (observing that “[w]hile
a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual
allegations . . . a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’
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requires more than labels and conclusions, and a formulaic recitation of the elements of a cause
of action will not do”) (internal citations omitted). Therefore, the court concludes that the
allegations on which the defendant relies do not state a claim for interference with a prospective
business advantage. Accordingly, the court grants the plaintiff’s motion to dismiss this claim.
B. Breach of Fiduciary Duty
1. Legal Standard for Breach of Fiduciary Duty
To state a claim for breach of fiduciary duty under D.C. law, the claimant must allege the
existence of a fiduciary duty and a violation of that duty. Shapiro, Lifschitz & Schram, P.C. v.
Hazard, 24 F. Supp. 2d 66, 75 (D.D.C. 1998) (citing Griva v. Davison, 637 A.2d 830, 846-47
(D.C. 1994)); Armenian Genocide Museum & Mem’l, Inc. v. Cafesjian Family Found., Inc., 595
F. Supp. 2d 110, 116 (D.D.C. 2009). Furthermore, claimants “must allege facts from which
proximate cause and injury may be inferred if they seek compensatory damages.” Shapiro, 24 F.
Supp. 2d at 75; Paul v. Judicial Watch, Inc., 543 F. Supp. 2d 1, 5-6 (D.D.C. 2008). Although the
mere existence of a contract generally does not give rise to a fiduciary duty, a fiduciary
relationship may exist “where circumstances show that the parties extended their relationship
beyond the limits of the contractual obligations to a relationship founded upon trust and
confidence.” Paul, 543 F. Supp. 2d at 6 (citing Steele v. Isikoff, 130 F. Supp. 2d 23, 36 (D.D.C.
2000)).
2. The Amended Counterclaims Fail to State a Claim for Breach of Fiduciary Duty
The plaintiff maintains that the defendant has failed to state a claim for breach of
fiduciary duty because its allegations in support of this claim are comprised of nothing more than
broad, conclusory assertions unsupported by any facts. Pl.’s Mot. at 10-11. Furthermore, the
plaintiff contends that because the defendant offers no factual allegations suggesting that the
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defendant suffered injury as a result of the plaintiff’s alleged conduct, its claim for breach of
fiduciary duty should be dismissed.2 Id. at 11-12. The defendant responds that its allegations
provide a short and plain statement of the claim, which is all that Rule 8(a) requires. Def.’s
Opp’n at 2-3.
The defendant’s claim for breach of fiduciary duty rests on the following allegations:
(1) that in its capacity as a consultant to the defendant, the plaintiff was privy to sensitive,
confidential and proprietary information, including financial information, which gave rise to a
fiduciary relationship, Def.’s Am. Countercl. ¶ 14; (2) that the plaintiff used that information “as
part of scheme to disrupt the operation and ownership of [the defendant], with the objective . . .
[of placing] financial pressure on [the defendant] that would force [the defendant] to enter
business deals favorable” to individuals aligned with the plaintiff “and/or [to] gain control of [the
defendant] for the benefit of [the plaintiff] and its co-conspirators,” id. ¶ 16; and (3) that the
plaintiff’s breach of its fiduciary duties to the defendant “caused damages to [the defendant] in
the amount of $250,000,” id. ¶ 16.
But while the defendant alleges that the plaintiff used unspecified confidential
information to pressure the defendant to enter into business deals favorable to the plaintiff and its
co-conspirators, id. ¶ 15, it does not allege that it actually entered into any deals as a result of the
pressure exerted by the plaintiff, or indeed that it suffered any injury at all as a result of that
pressure. Similarly, the defendant offers no allegations suggesting that the plaintiff’s purportedly
improper efforts to gain control of the defendant resulted in any injury to the defendant. Id.
¶¶ 15-17. Indeed, the defendant’s Amended Counterclaims contain no factual allegations
whatsoever suggesting that the plaintiff’s alleged breach of fiduciary duty proximately caused
2
The plaintiff does not contend that the defendant has failed to adequately plead the existence of a
fiduciary relationship between the plaintiff and the defendant. Pl.’s Mot. at 5 n.2.
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any injury to the defendant.3 See generally Def.’s Am. Countercl. Accordingly, the defendant
has failed to state a claim for breach of fiduciary duty. See Shapiro, 24 F. Supp. 2d at 75.
IV. CONCLUSION
For the foregoing reasons, the court grants the plaintiff’s motion to dismiss Counts III
and IV of the defendant’s Amended Counterclaims. An order consistent with this Memorandum
Opinion is separately and contemporaneously issued this 9th day of June, 2009.
RICARDO M. URBINA
United States District Judge
3
While the defendant notes that it has not yet received the benefit of discovery, Def.’s Opp’n at 1,
it fails to explain why it requires discovery to articulate, even in broad terms, the factual basis for
the injury it suffered as a result of the plaintiff’s breach of fiduciary duty.
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