UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
17 Outlets, LLC
v.
Healthy Food Corporation, d/b/a Frozurt, and Tai H. Pham Civil No. 15-cv-101-JD Opinion No. 2016 DNH 072 v.
ThurKen III, LLC and Richard E. Landry, Jr.
O R D E R
17 Outlets, LLC brought suit against Healthy Food
Corporation, d/b/a Frozurt, (“HFC”) and Tai H. Pham after HFC
failed to pay rent due under a lease for commercial space in
Merrimack, New Hampshire, that is subject to a guaranty signed
by Pham. HFC brought a third-party complaint against ThurKen
III, LLC and ThurKen’s manager, Richard E. Landry, Jr., arising
from the original lease agreement with ThurKen. ThurKen and
Landry move to dismiss the claims against them.
In response to the motion to dismiss, HFC has voluntarily
dismissed its claims for breach of contract and promissory
estoppel, Counts I and III of the Third Party Complaint. HFC
objects to the motion to dismiss the claim against ThurKen and
Landry for fraudulent misrepresentation, Count II. Standard of Review
In considering a motion to dismiss for failure to state a
claim under Federal Rule of Civil Procedure 12(b)(6), the court
assumes the truth of the properly pleaded facts and takes all
reasonable inferences from the facts that support the
plaintiff’s claims. Mulero-Carrillo v. Roman-Hernandez, 790
F.3d 99, 104 (1st Cir. 2015). Conclusory statements in the
complaint that merely provide the elements of a claim or a legal
standard are not credited for purposes of a motion under Rule
12(b)(6). Lemelson v. U.S. Bank Nat’l Assn., 721 F.3d 18, 21
(1st Cir. 2013). Based on the properly pleaded facts, the court
determines whether the plaintiff has stated “a claim to relief
that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007).
Background
Beginning in October of 2011, HFC was in the business of
selling frozen yogurt products at retail outlets. In February
of 2012, HFC contacted Dustin Burke, Jr., president of American
Commercial Real Estate, LLC, about leasing a retail location for
its frozen yogurt business in Westford, Massachusetts. Burke
responded that the Westford location was not available.
Burke contacted HFC in April of 2012 about leasing space at
a proposed strip mall that would be built by ThurKen in
2 Merrimack, New Hampshire. The financing for the mall required
ThurKen to have signed leases for all four spaces in the mall.
By early April, ThurKen had signed leases with Starbucks, Qdoba
Mexican Grill, and Digital Credit Union.
On April 18, 2012, Burke, on behalf of ThurKen, sent a
letter of intent to HFC to rent space at the mall. The letter
proposed a “triple net lease” with an initial term of fifteen
years, base yearly rent of $80,000 for the first five years, and
other charges. HFC responded that it could not afford the space
under the terms of the lease, particularly the fifteen year
term. Either Burke or Landry on behalf of ThurKen told HFC that
the bank required the fifteen year lease term. Landry also told
HFC that if HFC could not pay the rent, the space easily could
be leased to other tenants.
HFC signed the lease on June 1, 2012. HFC agreed to the
lease terms “based on Landry’s assurances that meant the most it
would lose if it defaulted on the lease would be the cost to fit
up the space to conduct its frozen yogurt business.” ThurKen
bought the property to build the mall on June 1, 2012.
ThurKen sold the mall to 17 Outlets on April 17, 2014. In
October of 2014, 17 Outlets served HFC with an eviction notice
for failure to pay rent. 17 Outlets also brought this action
against HFC to recover damages for breach of the lease.
3 Discussion
In the fraud claim, HFC alleges that ThurKen and Landry
falsely represented to it that the fifteen-year lease term was
required to obtain bank financing and that HFC could terminate
the lease at any time “without any further adverse economic
consequence.” HFC asserts that those representations were false
and that it relied on those representations in signing the
lease, which has resulted in the action by 17 Outlets seeking
damages from HFC. ThurKen and Landry move to dismiss the fraud
claim on the ground that the alleged misrepresentations are
contrary to the terms of the lease, making any reliance
unreasonable.
A. Fraud
A claim for fraud requires proof that the defendant
intentionally or with conscious indifference made a
misrepresentation to induce the plaintiff to act or refrain from
acting. Tessier v. Rockefeller, 162 N.H. 324, 331-32 (2011).
The plaintiff must also prove that its reliance on the
misrepresentation was justifiable. Id. The standard for
justifiable reliance is subjective, “‘based on the plaintiff’s
own capacity and knowledge.’” Trefethen v. Liberty Mut. Group,
Inc., 2013 WL 2403314, at *7 (D.N.H. May 31, 2013) (quoting
Smith v. Pope, 103 N.H. 555, 559 (1961)).
4 ThurKen and Landry contend that any reliance by HFC on the
alleged misrepresentations was not justified because the lease
contradicted any such expectations.1 ThurKen and Landry rely on
the integration clause in the lease that provides the lease
constituted the parties’ entire agreement which could not be
changed except in writing signed by the party against whom
enforcement is sought.
The alleged misrepresentation that the lease term of
fifteen years was required by the bank apparently was made to
induce HFC to sign the lease without negotiating the length of
the lease term. HFC, allegedly, relied on that
misrepresentation to agree to the fifteen-year term, accepting
the representation that no shorter term was available. ThurKen
and Landry have not explained how the integration clause
precludes reliance on Landry’s representation about the lease
term.2
1 In the motion to dismiss, ThurKen and Landry challenge only whether HFC’s reliance on the alleged misrepresentations was justifiable in light of the lease and do not argue that the alleged misrepresentations were not material to inducing HFC to sign the lease agreement. See Tessier, 162 N.H. at 333-34. Therefore, the court does not consider the materiality of the representation for purposes of the motion to dismiss.
2 In addition, under New Hampshire law, neither a general integration clause nor disclaimers in an agreement are necessarily sufficient to bar a fraud-in-the-inducement claim. See Van Der Stok v. Van Voorhees, 151 N.H. 679, 682 (2005).
5 Thurken and Landry also do not explain how the integration
clause precludes justifiable reliance on the alleged
misrepresentation that failure to pay rent would not cause
adverse consequences. Although not discussed by ThurKen or
Landry, the lease does provide consequences for default at Part
II, Section 17. That section, however, recognizes the
landlord’s duty to mitigate damages and reduces liquidated
damages by the rents “collected on account of re-letting of the
Premises for each month of the period which would otherwise have
constituted the remainder of the then-current term.” The
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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
17 Outlets, LLC
v.
Healthy Food Corporation, d/b/a Frozurt, and Tai H. Pham Civil No. 15-cv-101-JD Opinion No. 2016 DNH 072 v.
ThurKen III, LLC and Richard E. Landry, Jr.
O R D E R
17 Outlets, LLC brought suit against Healthy Food
Corporation, d/b/a Frozurt, (“HFC”) and Tai H. Pham after HFC
failed to pay rent due under a lease for commercial space in
Merrimack, New Hampshire, that is subject to a guaranty signed
by Pham. HFC brought a third-party complaint against ThurKen
III, LLC and ThurKen’s manager, Richard E. Landry, Jr., arising
from the original lease agreement with ThurKen. ThurKen and
Landry move to dismiss the claims against them.
In response to the motion to dismiss, HFC has voluntarily
dismissed its claims for breach of contract and promissory
estoppel, Counts I and III of the Third Party Complaint. HFC
objects to the motion to dismiss the claim against ThurKen and
Landry for fraudulent misrepresentation, Count II. Standard of Review
In considering a motion to dismiss for failure to state a
claim under Federal Rule of Civil Procedure 12(b)(6), the court
assumes the truth of the properly pleaded facts and takes all
reasonable inferences from the facts that support the
plaintiff’s claims. Mulero-Carrillo v. Roman-Hernandez, 790
F.3d 99, 104 (1st Cir. 2015). Conclusory statements in the
complaint that merely provide the elements of a claim or a legal
standard are not credited for purposes of a motion under Rule
12(b)(6). Lemelson v. U.S. Bank Nat’l Assn., 721 F.3d 18, 21
(1st Cir. 2013). Based on the properly pleaded facts, the court
determines whether the plaintiff has stated “a claim to relief
that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007).
Background
Beginning in October of 2011, HFC was in the business of
selling frozen yogurt products at retail outlets. In February
of 2012, HFC contacted Dustin Burke, Jr., president of American
Commercial Real Estate, LLC, about leasing a retail location for
its frozen yogurt business in Westford, Massachusetts. Burke
responded that the Westford location was not available.
Burke contacted HFC in April of 2012 about leasing space at
a proposed strip mall that would be built by ThurKen in
2 Merrimack, New Hampshire. The financing for the mall required
ThurKen to have signed leases for all four spaces in the mall.
By early April, ThurKen had signed leases with Starbucks, Qdoba
Mexican Grill, and Digital Credit Union.
On April 18, 2012, Burke, on behalf of ThurKen, sent a
letter of intent to HFC to rent space at the mall. The letter
proposed a “triple net lease” with an initial term of fifteen
years, base yearly rent of $80,000 for the first five years, and
other charges. HFC responded that it could not afford the space
under the terms of the lease, particularly the fifteen year
term. Either Burke or Landry on behalf of ThurKen told HFC that
the bank required the fifteen year lease term. Landry also told
HFC that if HFC could not pay the rent, the space easily could
be leased to other tenants.
HFC signed the lease on June 1, 2012. HFC agreed to the
lease terms “based on Landry’s assurances that meant the most it
would lose if it defaulted on the lease would be the cost to fit
up the space to conduct its frozen yogurt business.” ThurKen
bought the property to build the mall on June 1, 2012.
ThurKen sold the mall to 17 Outlets on April 17, 2014. In
October of 2014, 17 Outlets served HFC with an eviction notice
for failure to pay rent. 17 Outlets also brought this action
against HFC to recover damages for breach of the lease.
3 Discussion
In the fraud claim, HFC alleges that ThurKen and Landry
falsely represented to it that the fifteen-year lease term was
required to obtain bank financing and that HFC could terminate
the lease at any time “without any further adverse economic
consequence.” HFC asserts that those representations were false
and that it relied on those representations in signing the
lease, which has resulted in the action by 17 Outlets seeking
damages from HFC. ThurKen and Landry move to dismiss the fraud
claim on the ground that the alleged misrepresentations are
contrary to the terms of the lease, making any reliance
unreasonable.
A. Fraud
A claim for fraud requires proof that the defendant
intentionally or with conscious indifference made a
misrepresentation to induce the plaintiff to act or refrain from
acting. Tessier v. Rockefeller, 162 N.H. 324, 331-32 (2011).
The plaintiff must also prove that its reliance on the
misrepresentation was justifiable. Id. The standard for
justifiable reliance is subjective, “‘based on the plaintiff’s
own capacity and knowledge.’” Trefethen v. Liberty Mut. Group,
Inc., 2013 WL 2403314, at *7 (D.N.H. May 31, 2013) (quoting
Smith v. Pope, 103 N.H. 555, 559 (1961)).
4 ThurKen and Landry contend that any reliance by HFC on the
alleged misrepresentations was not justified because the lease
contradicted any such expectations.1 ThurKen and Landry rely on
the integration clause in the lease that provides the lease
constituted the parties’ entire agreement which could not be
changed except in writing signed by the party against whom
enforcement is sought.
The alleged misrepresentation that the lease term of
fifteen years was required by the bank apparently was made to
induce HFC to sign the lease without negotiating the length of
the lease term. HFC, allegedly, relied on that
misrepresentation to agree to the fifteen-year term, accepting
the representation that no shorter term was available. ThurKen
and Landry have not explained how the integration clause
precludes reliance on Landry’s representation about the lease
term.2
1 In the motion to dismiss, ThurKen and Landry challenge only whether HFC’s reliance on the alleged misrepresentations was justifiable in light of the lease and do not argue that the alleged misrepresentations were not material to inducing HFC to sign the lease agreement. See Tessier, 162 N.H. at 333-34. Therefore, the court does not consider the materiality of the representation for purposes of the motion to dismiss.
2 In addition, under New Hampshire law, neither a general integration clause nor disclaimers in an agreement are necessarily sufficient to bar a fraud-in-the-inducement claim. See Van Der Stok v. Van Voorhees, 151 N.H. 679, 682 (2005).
5 Thurken and Landry also do not explain how the integration
clause precludes justifiable reliance on the alleged
misrepresentation that failure to pay rent would not cause
adverse consequences. Although not discussed by ThurKen or
Landry, the lease does provide consequences for default at Part
II, Section 17. That section, however, recognizes the
landlord’s duty to mitigate damages and reduces liquidated
damages by the rents “collected on account of re-letting of the
Premises for each month of the period which would otherwise have
constituted the remainder of the then-current term.” The
default provision, therefore, does not necessarily contradict
the alleged misrepresentation that if HFC could not pay the rent
the space easily could be rented to another tenant to avoid harm
to HFC.
ThurKen and Landry have not shown that the fraud claim must
be dismissed for lack of justifiable reliance on the alleged
misrepresentations.
B. Application of RSA Chapter 304-C
To the extent Landry asserts immunity from liability for
the fraud claim under RSA chapter 304-C:23 and 25, that defense
lacks merit. RSA 304-C:25 provides that New Hampshire law
governs limited liability companies and the liability of a
limited liability member or manager.
6 Under RSA 304-C:23,I(a), a limited liability corporation is
solely responsible for its debts, obligations, and liabilities.
See Chao-Cheng Teng v. Bellemore, 2013 WL 3322340, at *5 (D.N.H.
July 1, 2013). RSA 304-C:23, I(b) provides that “[n]o member or
manager of a limited liability company shall be obligated
personally for any such debt, obligation, or liability of the
limited liability company solely by reason of being a member or
acting as a manager of the limited liability company.” While a
manager of a limited liability company (“LLC”) is not liable for
the torts or contractual obligations of the LLC, a member or
manager is liable when he “commits or participates in the
commission of a tort, whether or not he acts on behalf of his
LLC.” Mbahaba v. Morgan, 163 N.H. 561, 565 (2012). “Therefore,
an LLC member is liable for torts he or she personally commits
because he or she personally committed a wrong, not ‘solely’
because he or she is a member of the LLC.” Id. (internal
quotation omitted).
If Landry intentionally, or with conscious indifference,
made material misrepresentations to HFC to induce HFC to sign
the lease and HFC justifiably relied on those misrepresentations
to its detriment, Landry, personally, committed the tort of
fraud. In that event, RSA 304-C:23 would not apply to shield
Landry from liability.
7 Conclusion
For the foregoing reasons, the defendants’ motion to
dismiss (document no. 27) is moot as to Counts I and III and is
otherwise denied.
SO ORDERED.
__________________________ Joseph DiClerico, Jr. United States District Judge
March 30, 2016
cc: James F. Laboe, Esq. Christopher P. Mulligan, Esq. David K. Pinsonneault, Esq. Lisa Snow Wade, Esq.