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Heravi v. Gaming Network Solutions, LLC

United States District Court, D. Maryland, Southern Division

July 13, 2016

BABAK HERAVI, Plaintiff,

          Babak Heravi, Plaintiff, represented by Melvin White, Berliner Corcoran & Rowe, LLP.

          Gaming Network Solutions, LLC, Defendant, represented by Alain Jeffrey Ifrah, Ifrah PLLC & Rachel Hirsch, Ifrah PLLC.


          PAUL W. GRIMM, District Judge.

         Plaintiff Babak Heravi co-founded Defendant Gaming Network Solutions, LLC, ("GNS") and has brought a ten-claim complaint against GNS in a dispute relating to certain equity that he previously held in GNS and alleged fraud on the part of GNS for its use of his social security number to receive payments. Heravi claims that this equity stake, which he initially paid for with debt, was subsequently part of his compensation under an employment agreement. Separately, he also claims that GNS violated an operating agreement with respect to certain financial disclosures that it was obligated to make. GNS disputes the existence of the employment agreement, denies any fraudulent misconduct, challenges the sufficiency of his pleadings with respect to the breach of the operating agreement claim, and has filed a motion to dismiss. Def.'s Mot., ECF No. 17.[1]

         I will grant in part and deny in part GNS's motion to dismiss. Because I find that Heravi has pleaded sufficient facts to establish the existence of an employment agreement between him and GNS, I will deny GNS's motion to dismiss with respect to his breach of contract and implied contract claims. Based on this finding, I also will deny GNS's motion to dismiss with respect to Heravi's promissory estoppel and equitable estoppel claims. I will also deny GNS's motion to dismiss with respect to the breach of contract claim relating to GNS's operating agreement because he has pleaded sufficient facts to support this claim. Because Maryland law does not recognize independent claims in these circumstances for breach of the covenant of good faith and fair dealing, accounting, and fiduciary duty, I will grant GNS's motion to dismiss with respect to these claims. Further, given that Heravi has not demonstrated that monetary damages are an insufficient remedy, I will dismiss Heravi's claim for specific performance. Finally, due to Heravi's failure to allege with sufficient particularity that GNS made its statement about the use of his social security number in conjunction with the PayPal and Facebook accounts with the intent to defraud him, I will grant GNS's motion to dismiss with respect to his fraud count but will permit Heravi to amend his complaint again to include a negligent misrepresentation claim based on GNS's use of these accounts.

         I. BACKGROUND

         Heravi co-founded GNS in 2012. Am. Compl. ¶ 8, ECF No. 13. GNS is "a developer, provider and operator of online and mobile interactive multi-layer game applications and turnkey solutions participating in the worldwide market." Id. ¶ 5. During the course of his employment relationship with GNS, Heravi received certain equity (the "Equity Stake") in GNS by exercising an option under a February 1, 2012, Professional Services Agreement. Id. ¶¶ 17-19. Heravi paid for this option through a loan from GNS pursuant to a four-year note. Id.

         In late 2012, Heravi's professional relationship with GNS appeared to have soured, which led to the termination of his Professional Services Agreement in February 2013. Following the termination of the Professional Services Agreement, Heravi received an email from GNS's other co-founder, William Wade, about Heravi continuing his work for GNS. Id. at ¶¶ 8, 25. On June 13, 2013, Wade emailed Heravi as follows[2]:

I discussed our conversation from mid May with John and further got some input from Patrick. As you may be aware, Michael D'Arrigo, a very experience engineer and product manager was brought on late last year. Michael has been driving the fixes to our system, the audit with GLI, and readying the company for real money launch.
He has done an excellent job under John and Patricks counsel, and has brought together a real sense of teamwork and productivity that did not exist prior to his joining the company. Real money play and the add of a call center in Manila have gone into production and the product was launched live last weekend for real money play.
I exposed your interest to remain involved with GNS with John and Patrick. I think under the current team culture, an "on call" availability is agreeable, so long as we do not have disruption to the new culture and smooth operations enjoyed by the team executing the business plan today.
As we discussed, the board supports the decisions and actions of John and I do not want to undermine his authority and executive control of the company. I was able to get John and the board to agree upon a compromise to avail an availability in the future of your past knowledge and experience, if it is needed and as a informal collaborative engagement. In exchange, we are willing to waive any further payment requirements for the purchased equity for you to be available as needed as a special consultant. The shares would remain in escrow during this informal time horizon and we would have no termination right to the engagement other than the right to not collaborate if the energy did not prove to be a value for the company. In effect, you will be connected to the company as a special advisor and the note payments would be booked as compensation whether you provided any services or not.
If we find that the engagement becomes more than periodic sound boarding, we can re-evaluate the engagement and move to a more formal process
I think this enables us to put behind the past and move forward as engaged shareholders all seeking success and shareholder distributions when we reach profitability. Certainly that's why I've supported this financially with no payments to date for any energy I've invested dating back to 2005, and I'd assume as a significant shareholder, your in it for the same.
Glad to discuss this further when we have our monthly call this week
All the best.
Bill Wade

         Jt. Rec. 3, ECF No. 19-1. That same day, Heravi responded by stating:

First of all I am glad that I am still part of the family and I am happy that now we have someone who can get things done the way its desired. I gladly accept this proposal regarding my relationship with the company and thank you for making this happen. I know, going forward, I will show myself more and more useful and will be on the side that I love and enjoy also you, John and Patrick and of course the rest of the team's side. As I am writing these lines, I assure you, with my honor, that I do not have any problem what so ever with anybody in the company and my only intention is to be at service.
Regarding the compensation, I can only say thank you, as I did not have any intention to be paid and my old offer also a $1 per month would have subside too. I am not saying this, because I do not need money, but because, I feel that helping at this time is more important than money. I have friends there that are worth more than any money in the world to me and they have already put a lot to make this happen.
Please lets talk tomorrow to work out the details so we all are on the same page and know what are the requirements and time frames. Again thanks for your, as always positive and supportive, efforts and I am so happy that I have you in my life as my close friend.
Best wishes
Bobby Heravi

Id. at 2. On June 14, 2013, Wade replied with the following:

Still sick as a dog with Officemax breathing down my neck. ...

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