United States District Court, D. Maryland, Northern Division
WILLIAM D. QUARLES, Jr., District Judge.
Fidelity & Guaranty Life Insurance Co. ("Fidelity") sued United Advisory Group, Inc. d/b/a Qintera Financial Group ("Qintera"), Joseph Roosevans, and James Stoddard, (collectively, the "defendants") for, inter alia, breach of contract and fraud. ECF No. 1. Pending are Roosevans's motion to dismiss for failure to state a claim and Fidelity's motion for leave to amend the complaint. ECF Nos. 29, 48. No hearing is necessary. Local Rule 105.6 (D. Md. 2011). For the following reasons, Roosevans's motion will be denied as moot, and Fidelity's motion will be granted in part and denied in part.
This case arises from an alleged contractual relationship between Fidelity and the defendants, under which Qintera was authorized to sell Fidelity's insurance products. See ECF Nos. 48-1 ¶ 1, 48-5 at 2, 48-8 at 10. On or about June 21 and 22, 2012, Fidelity representatives met with Stoddard and Roosevans,  "part of the group from Defendant Qintera, " in Baltimore, Maryland to negotiate the terms of a development loan agreement (the "Loan"). ECF No. 48-1 ¶¶ 16, 21. During these negotiations, at which Stoddard and Roosevans allegedly "represent[ed] themselves as well as Defendant Qintera, " Stoddard and Roosevans "prepared and presented" to Fidelity a "Business Plan Executive Summary' and an Implementation Plan' for Defendant Qintera." Id. ¶¶ 24, 29. The Executive Summary stated that Qintera will leverage its affiliation with Financial Resources of America, Inc. ("FRA") so that it will not "start from scratch" in selling Fidelity's products. See id. ¶ 30 (internal quotations omitted). For example, the Implementation Plan stated that Qintera would use many of FRA's policies and resources in its day-to-day operations. See id. ¶ 37. The Executive Summary also stated that FRA would fund $250, 000 of Qintera's start-up expenses. Id. ¶ 45.
The Executive Summary described Stoddard's qualifications as President of Qintera, and the Implementation Plan assigned "numerous tasks" for Stoddard to complete for Qintera. Id. ¶¶ 40-41. By these statements, Qintera and Roosevans allegedly "misrepresented that Defendant Stoddard would have a major role in Defendant Qintera despite knowing that they intended to terminate Defendant Stoddard's participation in Defendant Qintera." Id. ¶ 42. Stoddard's participation in Qintera was a "critical factor" in Fidelity's decision to enter the Loan agreement. Id. ¶ 44.
The Executive Summary also "contained detailed representations regarding projected revenue and expenses for 2012 through 2017." Id. ¶ 45. The defendants were allegedly aware that these "financial projections were false as to the potential revenues and expenses of Defendant Qintera, " or "had a reckless disregard" for their truth or falsity. Id. ¶¶ 46-47. Fidelity relied on these representations in deciding to enter the Loan agreement. Id. ¶ 48.
The Loan was "made" as of August 1, 2012. ECF No. 48-3 at 2. Under the agreement, Fidelity agreed to lend Qintera $500, 000, and the defendants, "jointly and severally, " agreed to repay that amount with interest on or before the "maturity date." ECF Nos. 48-1 ¶ 2, 48-3 at 2. Paragraph 1(a) of the Loan Agreement defined "Maturity Date" as "12/31/2014, or such earlier date as the Note may become due by acceleration or demand." ECF No. 48-3 at 2. Under paragraph 1(f), "[t]ermination" of Qintera provided Fidelity an "automatic right to accelerate or demand full payment of the loan." Id. at 3. Further, Fidelity's failure to "exercise any rights" as to any uncured default or Qintera's termination "shall not be considered a waiver of any of [Fidelity's] rights under this Agreement." Id.
Also on August 1, 2012, Stoddard signed a producer/agency form (the "Producer Form") on Qintera's behalf, which acknowledged that he had "received, read and agree[d] to be bound by the terms of [Fidelity's] Producer Agency/Agreement." ECF Nos. 48-1 ¶¶ 17-18, 48-7 at 2. By its terms, the producer/agency agreement (the "Producer Agreement") was "made and entered into" in the State of Maryland and was to be governed by Maryland law. ECF No. 48-5 at 8.
On August 23, 2012, Fidelity wired $500, 000 to Qintera's account at Midland State Bank in Effingham, Illinois. ECF No. 48-1 ¶ 3. Between October 11 and December 14, 2012, Qintera made "certain interest payments" on the loan. Id. ¶ 4. However, "[t]he entire principal balance remains outstanding." Id.
On October 24, 2012, Fidelity terminated its relationship with Qintera by letter and demanded payment of the loan. ECF Nos. 48-1 ¶¶ 7, 27, 48-4 at 2. Fidelity and Qintera entered into negotiations about a repayment schedule. ECF No. 48-1 ¶ 78. During the negotiations, Fidelity sent Roosevans and Stoddard a draft promissory note, listing Qintera and Roosevans "personally as borrowers." Id. Roosevans requested "that the corporate borrower" on the draft note "be changed from Defendant Qintera" to FRA. Id. However, the negotiations were apparently unsuccessful. See, e.g., id. ¶ 8.
On January 4, 2013, Fidelity filed suit in this Court on the basis of diversity jurisdiction. Count One alleged breach of contract against the defendants; Count Two alleged breach of contract against Stoddard and Roosevans individually. See ECF No. 1 at 6-7. Count Two specifically alleged that Stoddard and Roosevans entered into the Loan agreement with "fraudulent intent" by materially misrepresenting Qintera's financial status, as well as their intentions "with respect to the use of the loan proceeds." Id. ¶¶ 35-36. Fidelity alleged entitlement to pierce the corporate veil and obtain relief from Stoddard and Roosevans because of their fraud and role as Qintera's "alter egos." Id. ¶ 40. Count Three alleged unjust enrichment against the defendants. Id. at 9. The amended complaint adds Count Four against FRA, alleging that Fidelity "is entitled to collect the debt owed by Defendant Qintera from Defendant FRA as its alter ego, " because "Qintera had no mind of its own." See ECF No. 48-1 ¶¶ 75, 79.
On January 25, 2013, following a hearing, the Court denied Fidelity's request to preliminarily enjoin the defendants from proceeding against it in litigation in Illinois. ECF Nos. 16, 17. On February 13, 2013, Qintera answered the complaint. ECF No. 23. On February 25, 2013, Stoddard answered the complaint. ECF No. 27.
On March 14, 2013, Roosevans moved to dismiss the complaint. ECF No. 29. On March 28, 2013, the case was referred to Magistrate Judge Susan K. Gauvey for mediation, which was unsuccessful. ECF Nos. 34, 44. On June 18, 2013, Fidelity opposed Roosevans's motion to dismiss and moved to amend the complaint. ECF Nos. 47, 48. On July 26, 2013, Qintera and Roosevans opposed the motion to amend. ECF No. 53. On July 29, 2013, Roosevans replied to Fidelity's opposition to his motion to dismiss. ECF No. 57. On August 20, 2013, Fidelity replied to the opposition to its motion to amend. ECF No. 58.
A. Legal Standards
1. Motion for Leave to Amend
Federal Rule of Civil Procedure 15(a)(2) instructs that leave to amend should be freely given when justice requires. Leave should be denied only when amendment would unduly prejudice the opposing party, amount to futility, or reward the movant's bad faith. Steinburg v. Chesterfield Cnty. Planning Comm'n, 527 F.3d 377, 390 (4th Cir. 2008); Equal Rights Ctr. v. Niles Bolton Associates, 602 F.3d 597, 603 (4th Cir. 2010).
2. Motion to Dismiss
Under Federal Rule of Civil Procedure 12(b)(6), an action may be dismissed for failure to state a claim upon which relief can be granted. Rule 12(b)(6) tests the legal sufficiency of a complaint, but does not "resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006).
The Court bears in mind that Rule 8(a)(2) requires only a "short and plain statement of the claim showing that the pleader is entitled to relief." Migdal v. Rowe Price-Fleming Int'l, Inc., 248 F.3d 321, 325-26 (4th Cir. 2001). Although Rule 8's notice-pleading requirements are "not onerous, " the plaintiff must allege facts that support each element of the claim advanced. Bass v. E.I. Dupont de Nemours & Co., 324 F.3d 761, 764-65 (4th Cir. 2003). These facts must be sufficient to "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
This requires that the plaintiff do more than "plead facts that are merely consistent with a defendant's liability;'" the facts pled must "allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) ( quoting Twombly, 550 U.S. at 557). The complaint must not only allege but also "show" that the plaintiff is entitled to relief. Id. at 679 (internal quotation marks omitted). "Whe[n] the well-pleaded facts do not permit the court to infer more than the mere possibility of ...