Judge Wallace Dismisses Fraudulent Inducement Claims Where Damages Duplicated Breach of Contract Claim

April 11, 2017

Publication

In EZLinks Golf LLC v. PCMS Datafit, Inc., C.A. No. N16C-07-080-PRW-CCLD, Judge Wallace granted the defendant’s partial motion to dismiss. The plaintiff, EZLinks Golf LLC (“EZLinks”), initiated a breach of contract and fraud action against the defendant, PCMS Datafit, Inc. (“PCMS”). EZLinks claimed that PCMS fraudulently induced EZLinks into entering a reseller agreement and then breached the agreement.

PCMS filed a motion to dismiss arguing that the plaintiff’s fraudulent inducement claim and breach of contract claim were redundant. Specifically, PCMS argued that EZLinks’ fraudulent inducement claim alleged false statements by PCMS that simply were based on its alleged failures to perform under the agreement. Judge Wallace disagreed, finding that EZLink sufficiently pled two distinct claims for fraudulent inducement and breach of contract. The Court also held that EZLinks met the heightened pleading standard for its fraud claim.

Judge Wallace nonetheless dismissed the fraudulent inducement claims because the damages sought for those claims were the same as the expectation damages claimed for breach of contract. Since the damages were identical for both claims, Judge Wallace dismissed the fraudulent inducement claim as redundant.

Analysis: The CCLD is rapidly becoming a preferred venue for fraudulent inducement claims, and a significant body of case law has developed regarding how to properly plead such claims. See, e.g., Trueblue, Inc. v. Leeds Equity Partners IV, LP, N14C-12-112 WCC CCLD; McCann Aerospace Machining, LLC v. John W. McCann, C.A. No. N16C-02-164 EMD CCLD; ITW Global Investments Inc. v. American Industrial Partners Capital Fund IV, L.P., N14C-10-236 JRJ CCLD. In this case, Judge Wallace addressed the plaintiff’s argument that the CCLD’s prior decision in ITW Global controlled and found that the damages at issue in ITW Global were separate and distinct because “rescission and rescissory damages for money paid to defendants under the contract are not ‘barred as a rehash’ of the Complaint’s breach of contract damages.” In contrast, the damages allegations for fraud and breach of contract in the instant case were nearly identical. Judge Wallace found: “Notably, EZLink’s count for fraud in the inducement pleads neither for rescission or rescissory damages as did the ITW Complaint.” This case highlights the level of detail that must be pled when alleging both fraud and breach of contract claims.