IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
CH ASSOCIATES XI, LLC ) ) Plaintiff, ) ) v. ) ) C.A. No. N24C-09-260 FWW 1102 WEST STREET, LP, ) GF MANAGEMENT, LLC, and ) individually and in her official capacity, ) HARRIETT CICCONE, ) ) Defendants. )
Submitted: January 24, 2025 Decided: March 3, 2025
Upon Defendant Harriett Ciccone’s Motion to Dismiss Pursuant to Rule 12(b)(2) DENIED.
Upon Defendant Harriett Ciccone’s Motion to Dismiss Pursuant to Rule 12(b)(6) GRANTED.
Upon Defendant 1102 West Street, LP’s Motion to Dismiss Pursuant to Rule 12(b)(6) GRANTED.
MEMORANDUM OPINION AND ORDER
Scott G. Wilcox, Esquire, GIORDANO, DELCOLLO, WERB & GAGNE, LLC, 1007 N. Orange Street, Suite 446, Wilmington, DE 19801, Attorney for Plaintiff CH Associates XI, LLC.
Melissa N. Donimirski, Esquire, STEVENS & LEE, P.C., 919 N. Market Street, Suite 1300, Wilmington, DE 19801; Jason P. Rudloff, Esquire, STEVENS & LEE, P.C., 555 City Avenue Suite 1170, Bala Cynwood, PA 19004, Attorneys for Defendants 1102 West Street, LP and Harriett Ciccone.
WHARTON, J. I. INTRODUCTION
Before the Court are Defendant Harriett Ciccone’s (“Ciccone”) Motions to
Dismiss Pursuant to Rule 12(b)(2) and Rule 12(b)(6)1 and Defendant 1102 West
Street, LP’s (“1102 West”) Motion to Dismiss Pursuant to Rule 12(b)(6).2 Plaintiff
CH Associates XI, LLC (“CH Associates”) has submitted Answering Briefs in
Opposition to each.3 The Defendants have replied.4 For the reasons set out below,
Ciccone’s Motion to Dismiss Pursuant to Rule 12(b)(2) is DENIED. Her motion
pursuant to Rule 12(b)(6) is GRANTED. 1102 West’s Motion to Dismiss pursuant
to Rule 12(b)(6) is GRANTED. Counts I and II of the Complaint against Ciccone
are DISMISSED with prejudice. Count III against her is DISMISSED without
prejudice. Counts I and III of the Complaint against 1102 West are DISMISSED
without prejudice.
II. FACTS AND PROCEDURAL HISTORY
On September 27, 2024, Plaintiff CH Associates brought claims for breach
1 Def. Ciccone’s Mot. to Dismiss Pursuant to Rule 12(b)(6), D.I. 9. 2 Def. 1102 West Street, LP’s Mot. to Dismiss Pursuant to Rule 12(b)(6), D.I. 10. 3 Pl.’s Ans. Br. in Opp. to Def. Ciccone’s Mot. to Dismiss Pursuant to Rule 12(b)(2), D.I. 22; Pl.’s Ans. Br. in Opp. to Def. Ciccone’s Mot. to Dismiss Pursuant to Rule 12(b)(6), D.I. 21; Pl.’s Ans. Br. in Opp. to Def. 1102 West Street, LP’s Mot. to Dismiss Pursuant to Rule 12(b)(6), D.I. 20. 4 Def. Harriet Ciccone’s Reply in Support of Mot. to Dismiss Pursuant to Rule 12(b)(2), D.I. 25; Def. Harriett Ciccone’s Reply in Support of Mot. to Dismiss Pursuant to Rule 12(b)(6), D.I. 26; Def. 1102 West Street, LP’s Reply in Support of Mot. to Dismiss Pursuant to Rule 12(b)(6), D.I. 24. 2 of contract and fraud in a three-count Complaint against 1102 West and Ciccone in
connection with the purchase by CH Associates of a hotel located at 1102 West
Street in Wilmington (the “Property”).5 The Complaint alleges that the Defendants
breached the contract of sale by failing to correct deficiencies related to a fire pump 6
and by failing to adjust the purchase price based upon certain post-closing
prorations for material counts and services.7 The fraud count relates to alleged
misrepresentations of facts regarding the fire pump.8
III. CICCONE’S MOTION TO DISMISS PURSUANT TO RULE 12(b)(2)
A. The Parties’ Contentions.
Ciccone seeks to have the Complaint dismissed against her because this
Court does not have personal jurisdiction over her. She presents two reasons. First,
she claims CH Associates has alleged no jurisdictional facts against her.9 Second,
she argues that Delaware’s long-arm statute does not authorize personal jurisdiction
over her in light of the fiduciary shield doctrine.10 In support of her position, she
has attached to her motion, her Declaration.11 In her Declaration, she represents
5 Compl., D.I. 1. 6 Id. at ⁋⁋ 25-33. 7 Id. at ⁋⁋ 34-39. 8 Id. at ⁋⁋ 40-51. 9 Def. Ciccone’s Op. Br. in Support of Mot. to Dismiss Pursuant to Rule 12(b)(2), at 3, D.I. 8. 10 Id. at 4-6. 11 Id. at Ex. B. 3 that: (1) she is a resident of Pennsylvania;12 (2) she has never resided in Delaware;13
(3) the only relevant contacts she has with Delaware pertain exclusively 1102
West’s sale of the Property to Canon Hospitality Management, LLC, who assigned
it rights to CH Associates;14 and (4) any and all conduct she undertook regarding
the negotiation or execution of the Purchase and Sale Agreement (“PSA”), the due
diligence process, the closing, or in any other way with respect to the sale, were
done on behalf of and in her role as the Vice president of Marcourt Inc.
(“Marcourt”), a Pennsylvania corporation that is not a party to this litigation.15 She
concludes that not only has CH Associates not pled any jurisdictional facts against
her but her status as an officer of Marcourt, but the fiduciary shield doctrine protects
her from personal jurisdiction for acts done in her capacity as a corporate officer.16
CH Associates opposes the Motion. First, it argues the Complaint does allege
jurisdictional facts.17 It states that, “During the sale process, Defendants (including
Mrs. Ciccone) misrepresented matters relating to the fire pump at the Property. The
Defendants breached the contract and committed fraud in the Sale of the Property
12 Id. at Ex. B, ⁋ 2. 13 Id. at Ex. B, ⁋ 3. 14 Id. at Ex. B, ⁋⁋ 1-10; Complaint at ⁋ 7, D.I. 1. 15 Id. at B, ⁋⁋ 4-10; Ex. A, ⁋ 26. 16 Id. at Ex. B, ⁋⁋ 4-5. 17 Pl.’s Ans. Br. in Opp. to Def. Ciccone’s Mot. to Dismiss Pursuant to Rule 12(b)(2), at 6, D.I. 22. 4 through several emails and statements.”18 In CH Associates’ view, this Court can
exercise personal jurisdiction over all Defendants because the transaction occurred
in Delaware and because the PSA, at paragraph 14.3, confers jurisdiction on
Delaware.19 Second, CH Associates questions the scope and continuing viability
of the fiduciary shield doctrine, citing a recent decision of this Court and an earlier
one from the United States District Court for the District of Delaware.20 It also
justifies personal jurisdiction over Ciccone because the Complaint alleges that she
participated in a civil conspiracy to defraud it.21
Ciccone’s Reply first notes that CH Associates simply “lumps [her] in with
1102 West Street LP, entirely failing to point to acts by her within the State of
Delaware that would permit this Court to exercise long arm jurisdiction over her in
the face of the fiduciary shield doctrine.”22 It acknowledges that, while this Court
has questioned the validity of the “broadest scope” of that doctrine in dicta,23
nevertheless, the doctrine remains good law in Delaware.24 Here, according to
18 Id. (internal citation omitted). 19 Id. 20 Id. at 6-7. 21 Id. at 7-8. 22 Def. Ciccone’s Reply in Support of Mot. to Dismiss Pursuant to Rule 12(b)(2), at 1, D. I. 25 23 Id. at 2 (citing Tolliver v. Qlarant Quality Solutions, Inc. 2022 WL 17097602, at *7 (Del. Super. Ct. Nov. 21, 2022) 24 Id. (citing, e.g., Marketing Products Management, LLC, v. HealthhandBeautyDirect.com, Inc., 2004 WL 249581, at *3 (Del. Super. Ct. Jan. 28, 2004); Kelly v. McKesson HBOC, Inc., 2002 WL 88939, at * 17 (Del. Super. 5 Ciccone, the facts support application of the fiduciary shield doctrine – she was not
a party to the PSA and was acting in her corporate capacity as Vice President of
Marcourt, a non-party to this litigation, as is evident from the PSA.25 Further, an
allegation of civil conspiracy cannot be a basis for asserting personal jurisdiction
because civil conspiracy was not pled in the Complaint.26 Finally, the PSA provides
no basis for personal jurisdiction because Ciccone was not a party to it.27
B. Standard of Review
On a motion to dismiss pursuant to Superior Court Rule 12(b)(2) for lack of
personal jurisdiction over a defendant, “A plaintiff bears the burden of showing a
basis for a trial court’s exercise of jurisdiction over a nonresident defendant.”28 “In
ruling on a Rule 12(b)(2) motion, the Court may consider the pleadings, affidavits,
and discovery of record.”29 The Court applies a two-pronged analysis, first
considering whether Delaware’s Long-Arm statute is applicable, and then
determining whether subjecting the nonresident defendant to jurisdiction in
Ct. Jan. 17, 2002)). 25 Id. at 3-4. 26 Id. at 4-5. 28 Id. at 5-6. 28 AeroGlobal Capital Management, LLC v. Cirrus Industries, Inc., 871 A.2d 428, 437 (Del. 2005). 29 Economical Steel Building Technologies, LLC v. E. West Construction, Inc., 2020 WL 1866869, at *1 (Del. Super. Ct. Apr. 14, 2020) (quoting Ryan v. Gifford, 935 A.2d 258, 265 (Del. Ch. 2007)). 6 Delaware violates the Due Process clause of the Fourteenth Amendment.30
C. Discussion
1. Jurisdictional Facts
Ciccone’s first argument is that the Complaint simply fails to set out any basis
at all for this Court to exercise personal jurisdiction over her. In fact, Ciccone’s
name appears only twice in the Complaint – first in the caption and second in the
opening paragraph, “Plaintiff CH Associates XI, LLC (“CH Associates”) bring this
Complaint against Defendants 1102 West Street, LP, Harriet Ciccone based on the
following allegations:”31 No allegation in the Complaint specifically identifies who
she is, what her relationship to any of the parties is, or what she in particular is
alleged to have done. CH Associates argues that its allegations against the
“Defendants” generically is sufficient to establish personal jurisdiction. The word
“Defendants” is asked to bear the entire burden of establishing personal jurisdiction.
Were the Complaint the only source of information the Court had about Ciccone,
30 Biomeme, Inc. v. McAnallen, 2021 WL 5411094, at *2 (Del. Super. Nov. 10, 2021). 31 Complaint at 1, D.I. 1. Although the caption lists a third defendant, GF Management, LLC, that entity is never mentioned by name in the body of the Complaint, nor does the opening paragraph identify it as a defendant against whom the Complaint is brought. The Praecipe requested long-arm service on GF Management, LLC (D.I. 1), and a writ was issued (D.I. 2), but no affidavit of service appears in the record. 7 that burden would have been too great. But, from Ciccone’s motion under Rule
12(b)(2), the Court gets some notion who Ciccone is and how she fits into the sale
of the Property.32 She is the Vice-President of Marcourt, the General Partner in
1102 West and she signed the PSA in that capacity.33
2. The Fiduciary Shield Doctrine
Considering that additional information, the question now becomes whether
the fiduciary shield doctrine protects Ciccone from this Court’s personal
jurisdiction. The doctrine first manifested itself in Delaware case law in Plummer
& Co. Realtors v. Crisafi.34 Prior to Plummer, no Delaware cases delt directly with
the issue of personal jurisdiction over an individual acting in a fiduciary capacity.35
To summarize the fiduciary shield doctrine, Plummer quoted the United States
Court of Appeals for the Second Circuit in Marine Midland Bank, N.A. v. Miller:
The teachings of the courts of this Circuit and of New York is that there is a dichotomy between the principles governing the personal liability of corporate agents for torts committed in their corporate roles and the principles governing the amenability of such agents to personal jurisdiction solely on the basis of those acts. [Citing cases.] These cases have recognized that if an individual has contact with a particular state only by virtue of his acts as a fiduciary of the corporation, he may be shielded from the exercise, by that state, of jurisdiction over him personally on the basis of that conduct. Thus, his conduct,
32 Def. Ciccone’s Op. Br. in Support of Mot. to Dismiss Pursuant to Rule 12(b)(2). 33 Id. at Ex. A. 34 533 A.2d 1242 (Del. Super. Ct. 1987). 35 Id. at 1246. 8 although it may subject him to personal liability, may not form the predicate for the exercise of jurisdiction over him as an individual. The underpinning of this fiduciary shield doctrine is the notion that it is unfair to force an individual to defend a suit brought against him personally in a forum with which his only relevant contacts are acts performed not for his own benefit but for the benefit of his employer.36
In Mobil Oil Corp. v. Advanced Environmental Recycling Technologies, Inc.37 the
United States District Court for the District of Delaware raised a red flag as to the
viability of the fiduciary shield doctrine. Based on evolving case law, it concluded
“the Supreme Court of Delaware would not recognize the fiduciary shield as an
absolute bar to personal jurisdiction over a corporate employee.38
Whether the District Court’s prediction will prove true is unknown as the
Delaware Supreme Court has not addressed the issue. In fact, since Plummer, very
few cases, perhaps as few as seven, have even mentioned the doctrine in either this
Court or the Court of Chancery. In none of them did the Court expressly uphold
the fiduciary shield doctrine in the face of a direct challenge to its viability. In only
one – Marketing Products Management, LLC v. HealthandBeautyDirect.com, Inc.39
– did the Court identify it as a rationale for granting a motion to dismiss, and then,
36 Id. (quoting Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 902 (2d Cir. 1981). 37 833 F.Supp 437 (D. Del. 1993). 38 833 F.Supp. 443. 39 2004 WL 249581, at *2-3 (Del. Super. Ct. Jan. 28, 2004) 9 only as one of several. Another, Kelly v. McKesson HBOC, Inc.,40 cited it in a
footnote as a second reason to decline personal jurisdiction. While the doctrine was
mentioned in Murphy v. Pentwater Capital Management, LP,41 it was cited only as
an additional argument offered by defendants against personal jurisdiction. It
appears the case was decided on long-arm statute grounds.42 In EBP Lifestyle
Brands Holdings, Inc. v. Boulbain,43 the Court questioned whether the doctrine
even existed in Delaware, but ultimately neither affirmed, nor rejected it in reaching
its decision. Similarly, in Tolliver v. Qlarant Quality Solutions, Inc,44 the Court
noted a split of authority on the vitality of the fiduciary shield doctrine, but based
its decision on other factors. Two other cases were more critical, rejecting its
application. In Sample v. Morgan,45 the Court refused to allow fiduciaries to use
the fiduciary shield doctrine to protect themselves against allegations they abused
their fiduciary duties. Instead, the Court assessed the question of personal
jurisdiction under Delaware’s long-arm statute – “Put simply, the use of § 3104 to
serve the moving defendants is entirely consistent with the language and evident
40 2002 WL 88939, at n.70 (Del. Super. Ct. Jan. 17, 2002). “It would also seem that the fiduciary shield doctrine would prevent personal jurisdiction over Hawkins.” 41 2017 WL 5068572, at *4 (Del. Super. Ct. Oct. 31, 2017). 42 Id. at *5. 43 2017 WL 3328363, at *5 (Del. Ch. Aug. 4, 2017) (“With that said, I need not determine whether the fiduciary shield doctrine is (or ever was) Delaware law…”) 44 2022 WL 17097602, at *7 (Del. Super. Ct. Nov. 21, 2022). 45 935 A.2d 1046, 1058-60 (Del. Ch. 2007). 10 purpose of the statute, and with precedent interpreting it.”46 Finally, the Court in
Metro Storage International LLC v. Harron, took a similar approach analyzing the
personal jurisdiction question under Delaware’s long-arm statute, rather than
applying the fiduciary shield doctrine, which it found to be in conflict with the
statute.47
When viewed from the forgoing perspective, there appears to be very little
support for the fiduciary shield doctrine. If it is not dead, it is at best on life support.
Certainly its status as “good law” is in considerable doubt. Accordingly, the Court
approaches the issue of whether Delaware has personal jurisdiction over Ciccone
from the perspective of the legislatively created long-arm statute rather than the
judicially created fiduciary shield doctrine.
3. The Long-Arm Statute
Delaware’s long-arm statute identifies six scenarios in which Delaware
Courts may exercise personal jurisdiction over a nonresident defendant. Those are
that the nonresident:
(1) Transacts any business or performs any character of work or service in the State;
(2) Contracts to supply services or things in this State;
(3) Causes tortious injury in the State by an act or omission in this State;
46 Id. at 1062. 47 2019 WL 328613, at *25. (Del. Ch. Jul. 19, 2019) 11 (4) Causes tortious injury in the State or outside of the State by an act or omission outside the State if the person regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from services, or things used or consumed in the State;
(5) Has an interest in, uses or possesses real property in the State; or
(6) Contracts to insure or act as surety for, or on, any person, property, risk, contract, obligation or agreement located, executed or to be performed within the State at the time the contract is made, unless the parties otherwise provide in writing.48
The first step in the long-arm analysis is to identify, which, if any, scenarios
under § 3104 are present here. CH Associates relies on § 3104(c)(1): “[A] court
may exercise personal jurisdiction over any nonresident, or personal representative,
who in person or through an agent: (1) Transacts any business or performs any
character of work or service in the State…”49 In her Declaration, Ciccone states
that she executed the PSA, albeit as Vice President of Marcourt, the general partner
of 1102 West and that she undertook acts and conduct with respect to the sale of the
Property, “including, but not limited to the negotiation or execution of the PSA, the
due diligence process, the closing, and other activities…”50 The Court finds that
48 10 Del. C. § 3104(c). 49 10 Del. C. § 3104(c)(1). 50 Def. Ciccone’s Op. Br. in Support of Mot. to Dismiss Pursuant to Rule 12(b)(2), 12 Ciccone transacted business within the State.
The second step in the personal jurisdiction analysis is for the Court to
determine if subjecting Ciccone to the jurisdiction of Delaware violates the Due
Process Clause of the 14th Amendment. The United States Supreme Court has held
that it is constitutionally permissible to exercise personal jurisdiction over a non-
resident defendant when that defendant should have “reasonably anticipated ...that
his...actions might result in the forum state exercising personal jurisdiction over him
in order to adjudicate disputes arising from those actions.”51 To satisfy this test, the
defendant need not have ever entered the forum state physically because the
Supreme Court has rightly focused the test on the more relevant question of whether
the defendant has engaged in such conduct directed toward the forum state that
makes it reasonably foreseeable that conduct could give rise to claims against the
defendant in the forum state's courts. Here, based on Ciccone’s extensive
involvement in the sale of the Property, she should have reasonably anticipated that
Delaware would exercise personal jurisdiction over her if something went amiss.
IV. CICCONE’S MOTION TO DISMISS PURSUANT TO Rule 12(b)(6)
A. The Parties’ Contentions
Ciccone also moves to dismiss pursuant to Rule 12(b)(6) for failure to state
Ex. B, at ⁋⁋ 9, 10, D.I. 8. 51 World Wide Volkswagen, Corp. v. Woodson, 444 U.S. 286, 292 (1980). 13 a claim upon which relief can be granted, both as to the breach of contract claims
in Counts I and II, and as to the fraud claim in Count III.52 Regarding the breach of
contract claims, Ciccone’s argument is simple – she was not a party to the PSA and
may not be sued in her individual capacity for alleged breaches of it.53 As to the
fraud count, Ciccone argues that CH Associates has failed to plead any factual
allegations against her.54 Further, it has failed to identify who made the allegedly
false statements, and, in particular, any false statement made by her.55 Finally,
Ciccone argues that the Complaint fails to allege that: (1) she was aware that any
false statements were made; (2) she had knowledge of the allegedly false statements
at issue; and (3) she intended to induce CH Associates to rely on any allegedly false
statements.56
In its response, CH Associates acknowledges that Ciccone “properly
challenges Counts I and II in the Complaint asserting claims of breach of contract
against her.”57 It now asserts those two claims only against 1102 West.58
CH Associates does contest Ciccone’s attempt to dismiss the fraud count,
52 Def. Ciccone’s Op. Br. in Support of Mot. to Dismiss Pursuant to Rule 12(b)(6), D.I. 9. 53 Id. at 4. 54 Id. at 6. 55 Id. 56 Id. 57 Pl.’s Ans. Br. in Opp. to Def. Ciccone’s Mot. to Dismiss Pursuant to Rule 12(b)(6), at 5, D.I. 21. 58 Id. 14 however. It disputes her contention that the Complaint failed to identify the time,
place, and contents of the false statements made by the Defendants, citing six such
statements.59 It also cites to paragraphs in the Complaint where it alleges that the
false statements were made knowingly by the Defendants, intending to induce CH
Associates to close on the Property, which it justifiably did in reliance on the
inducements, and as a result suffered damages.60
In her Reply, Ciccone points out that CH Associates never specifically
identified, either in its Complaint or in its Answering Brief the contents, time, place,
or manner of any alleged misrepresentations by her specifically.61 The Complaint
fails to identify any misrepresentation Ciccone made, let alone any in her individual
capacity, nor does it allege she was aware of any misrepresentations.62
A motion to dismiss for failure to state a claim pursuant to Superior Court
Rule 12(b)(6) will not be granted if the “plaintiff may recover under any reasonably
conceivable set of circumstances susceptible of proof under the complaint.”63 The
Court's review is limited to the well-pled allegations in the complaint.64 In ruling
59 Id. at 6-7. 60 Id. at 7-8. 61 Def.. Ciccone’s Reply in Support of Mot. to Dismiss Pursuant to Rule 12(b)(6), at 3, D.I. 26. 62 Id. at 3-4. 63 Browne v. Robb, 583 A.2d 949, 950 (Del. 1990). 64 Doe v. Cahill, 884 A.2d 451, 458 (Del. 2005). 15 on a 12(b)(6) motion, the Court “must draw all reasonable factual inferences in
favor of the party opposing the motion.”65 Dismissal is warranted “only if it appears
with reasonable certainty that the plaintiff could not prove any set of facts that
would entitle him to relief.”66 However, the Court will “ignore conclusory
allegations that lack specific supporting factual allegations.”67 The Court may,
“despite allegations to the contrary,” dismiss a complaint “where the unambiguous
language of documents upon which the claims are based contradict the complaint’s
allegations.”68
1. Counts I and II – Breach of Contract
CH Associates acknowledges that Ciccone properly challenges Counts I and
II alleging breach of contract against her.
2. Fraud – Count III
The Court turns to Count III alleging fraud. Superior Court Civil Rule 9(b)
requires that “[i]n all averments of fraud or mistake, the circumstances constituting
fraud or mistake shall be stated with particularity.”69 The particularity pleading
65 Id. 66 Id. 67 Ramunno v. Cawley, 705 A.2d 1029, 10345 (Del. 1998). 68 Tigani v. C.I.P. Assocs., LLC, 2020 WL 2037241, at v*2 (Del. Apr. 27, 2020) (citing Malpiede v. Townson, 780 A.2d 1075, 1083 Del. 2001). 69 Super. Ct. Civ. R. 9(b). 16 standard requires a party to plead “the time, place and contents of the false
representations.”70 However, “[m]alice, intent, knowledge, and other condition of
a person may be averred generally.”71 The requirement that fraud be pleaded with
particularity “serves to discourage the initiation of suits brought solely for their
nuisance value, and safeguards potential defendants from frivolous accusations of
moral turpitude.”72 In order to survive a motion to dismiss a fraud claim, the party
asserting fraud must allege that: (1) the accused party falsely represented a material
fact or omitted facts that they had a duty to disclose; (2) the accused party knew that
the representation was false or made with a reckless indifference to the truth; (3)
the accused party intended to induce the party asserting the fraud action to act or
refrain from action; (4) the party asserting the fraud acted in justifiable reliance on
the representation; and (5) the party asserting the fraud was injured by its reliance
on the accused party’s representation.73
Here, the Complaint simply fails to identify the “accused party” when it
alleges that person falsely represented facts, with knowledge the representations
were false, intending to induce CH Associates to close on the Property. It is not
70 ITW Glob. Invs. Inc. v. Am. Indus. Partners Capital Fund IV, L.P., No. N14C- 10-236, 2015 WL 3970908, at *5 (Del. Super. Ct. June 24, 2015). 71 Super Ct. Civ. R. 9(b). 72 Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund, II, L.P., 624 A.2d 1199, 1208 (Del. 1993). 73 ITW Glob. Invs. Inc., 2015 WL 3970908, at *5. 17 enough, in the Court’s view, to allege that the Defendants generically did those
things. Rule 9’s particularity mandate requires more – CH Associates must
distinguish between Ciccone and 1102 West when making its allegations. But even
if it did not, Ciccone is entitled to know what she did individually. The Complaint
fails to do that.
V. 1102 WEST’S MOTION TO DISMISS PURSUANT TO RULE 12(b)(6)
A. The Parties Contentions
In its motion under Rule 12(b)(6) 1102 West challenges Count I, breach of
Contract, and Count III, fraud. It does not move to dismiss Count II relating to
prorations. As to the breach of contract claim in Count I regarding the fire pump,
it relies on the language of the PSA that the Property was being sold “As is and
Where Is” and that “the Seller makes no representations or warranties as to the
condition of the Premises or Assets, including without limitation, the operating
condition of the equipment and other tangible property, or the fitness, suitability or
merchantability of use, or otherwise.”74 Additionally, the PSA provides that it may
not be amended or modified without the express signed written consent of both
parties.75 Because CH Associates neither alleged any breach of the PSA, nor any
written modification of the PSA, 1102 West argues the Complaint fails to state a
74 Def. 1102 West’s Op. Br. in Support of Mot. to Dismiss Pursuant to Rule 12(b)(6), at 3 (quoting Ex. A, at §§ 3.1, 5.1.5, 5.5), D.I. 10. 75 Id. at 4 (citing Ex. A, at § 14.1). 18 claim for breach of contract regarding the fire pump in Count I.76
Unlike Ciccone’s motion, 1102 West’s challenge to the fraud count is not
based on Rule 9(b)’s particularity requirements. Instead, it argues that reliance by
CH Associates on claimed misrepresentations is disclaimed in the PSA, making any
reliance unreasonable and unjustified.77 It again cites to the PSA, in which 1102
West acknowledges that it “DISCLAIMS ANY REPRESENTATIONS,
WARRANTIES…PROMISES…OF ANY KIND OR
CHARACTER…CONCERNING…THE CONDITION OF THE PROPERTY…”
and that CH Associates “IS RELYING SOLELY ON ITS OWN INVESTIGATION
OF THE PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO
BE PROVIDED BY THE SELLER…”78 Further, 1102 West contends that CH
Associates was in possession of a report concerning the fire pump during the due
diligence period making it impossible for it to justifiably rely on misrepresentations
concerning the report.79
CH Associates disagrees. First, regarding Count I, it agrees that the PSA
states that the Property is being purchased “As is and Where is” and that 1102 made
no representations or warranties as to the condition of the Property or assets.80 But,
76 Id. 77 Id. at 5. 78 Id. at 5-6 (citing Ex. A at §§ 3.1, 5.1.5, 5.5). 79 Id. at 6. 80 Pl.’s Ans. Br. in Opp. to 1102 West’s Mot. to Dismiss Pursuant to Rule 19 it argues 1102 West is incorrect when it states that there were no written
modifications to the PSA, pointing to an email where the Defendants represented
that “BFPE will be out October 25th to correct all remaining issues.”81 When viewed
in the light most favorable to CH Associates, CH Associates contends the email is
evidence of the parties written modification of the PSA.82
Therefore, the failure to make the repairs to the fire pump constituted a breach.
In support of the fraud count, CH Associates argues that the Complaint
alleges all of the elements of common law fraud and that it was justified in
reasonably relying on 1102 West’s assurances that it would make the repairs
identified in the fire pump report.83 It argues that the representation to fix the fire
pump occurred after the PSA was signed and that the representation amended the
terms of the PSA.84 It insists that there was no reasonable way it could have known
that 1102 West never intended to make the promised repairs. 85 Finally, CH
Associates finds “odd” 1102 West’s argument that there could not have been any
fraud because CH Associates was in possession of the fire pump report before
closing. It is not withholding the report that it alleges constitutes fraud - it is the
12(b)(6), at 7, D.I. 20. 81 Id. (Citing the Complaint at ⁋ 10). 82 Id. at 8. 83 Id. at 8-9 84 Id. at 10. 85 Id. at 9. 20 false representation that the fire pump would be repaired that is fraudulent.86
In reply, 1102 West challenges the notion that “a single line in a vague
cherry-picked email stating, ‘BFPE will be out October 25 to correct all remaining
issues’ constated a valid amendment to the PSA, especially in light of the fact that
the Complaint did not allege that there had been written modification of the PSA.87
Because the PSA was never effectively modified to require 1102 West to replace
the fire pump, the Complaint fails to state a claim for breach of contract.88
1102 West highlights what it considers to be a fatal contradiction in CH
Associates fraud allegation. CH Associates alleges that it closed on the Property
without requiring replacement of the fire pump because 1102 West represented that
there was: (1) no report indicating the pump needed to be replaced; and (2) no need
to replace the pump.89 But, CH Associates also alleged that it was in possession of
a report stating the pump did need to be replaced prior to closing.90 Since CH
Associates already had the report, it was unreasonable as a matter of law for it to
rely of any statements from 1102 West that no such report existed or that the fire
pump did not need to be replaced.
86 Id. at 10. 87 Pl.’s Reply in Support of Mot. to dismiss Pursuant to Rule 12(b)(6), at 1-2, D.I. 24. 88 Id. at 3. 89 Id. at 4 (citing the Complaint at ⁋⁋ 46-48). 90 Id. (citing the Complaint at ⁋⁋ 10, 42). 21 B. Standard and Scope of Review
The Standard and Scope of Review the Court applies here is set out in Section
IV. B, supra.
1. Breach of Contract – Count I
The crux of this issue is whether the PSA was effectively modified in writing.
There is no dispute that the PSA provides that the Property is sold “As is Where is”
and that 1102 West “makes no representations or warranties as to the condition of
the Premises or Assets, including without limitation, the operating condition of the
equipment and other tangible property, or the fitness, suitability or merchantability
of use or otherwise.”91 Similarly, there is no dispute that the PSA also provides it
is the entire agreement between the parties and may not be amended or modified
without the express signed written consent of both parties.92 Therefore, in order to
state a claim for breach of contract, the Complaint must allege that there is a signed
written agreement between the parties to modify the PSA to require 1102 West to
replace the fire pump. Only then would the failure to do so by 1102 West form the
basis of a breach of contract claim. A careful reading of the Complaint shows that
it makes no allegation the PSA ever was modified. Further, the Complaint does not
91 Def. 1102 West’s Mot. to Dismiss Pursuant to Rule 12(b)(6), Ex. A, (quoting §§ 3.1,5,1.5, 5.5). 92 Id. (citing Ex. A, at § 14.1). 22 allege in ⁋ 10 that the representation that “BFPE will be out October 25th to correct
all remaining issues” was in writing, signed by the parties, or that it modified the
PSA.93 Instead, five paragraphs later it alleges that “CH Associated reminded
Defendants of the email where it said BPFE would be correcting all remaining items
on October 23, 2023.”94 It is impossible for the Court to know the context of that
statement, because although integral to the Complaint, it was not an exhibit to it.
But, what is clear is that the quoted portion of the email does not state that it is
intended to modify the PSA. The Court finds these oblique references insufficient
to constitute an allegation that the PSA was modified by the signed written consent
of the parties. Accordingly Count I fails to state a claim for breach of contract.
2. Fraud
In order to survive a motion to dismiss a fraud claim, the party asserting
fraud must allege that: (1) the accused party falsely represented a material fact or
omitted facts that they had a duty to disclose; (2) the accused party knew that the
representation was false or made with a reckless indifference to the truth; (3) the
accused party intended to induce the party asserting the fraud action to act or refrain
from action; (4) the party asserting the fraud acted in justifiable reliance on the
representation; and (5) the party asserting the fraud was injured by its reliance on
93 Complaint, at ⁋ 10, D.I.1. 94 Id. at ⁋ 15. 23 the accused party’s representation.95
The element of fraud at issue here, as identified by 1102 West, is whether CH
Associates’ reliance on 1102 West’s alleged misrepresentations concerning the fire
pump was reasonable.96 Again, 1102 West relies on the language of the PSA to
support its position. In the PSA, 1102 West disclaims any representations or
promises concerning the condition of the Property and CH Associates agreed that it
was relying on its own investigation of the Property and not on any information
provided by 1102 West or to be provided by 1102 West.97 Significantly, prior to
closing, during the due diligence period, 1102 West provided CH Associates with
a report stating, “FIRE PUMP IN NEED OF MAJOR OVERHAUL” at a cost of
$98,735.00.98
The issue for the Court then, is whether in the face of the unmodified
language of the PSA,99 and with knowledge of the fire pump report, whether CH
Associates’ reliance on 1102 West’s representations was justifiable. The Court
finds it was not. When it signed the PSA, CH Associates was aware of that 1102
West disclaimed any promises about the condition of the Property and that it was
95 ITW Glob. Investments Inc., 2015 WL 3970908, at *5. 96 Unlike Ciccone, 1102 West does not make any argument for dismissal predicated on Rule 9(b). The Court declines to delve into that issue sua sponte. 97 Def. 1102 West’s Op. Br. in Support of Mot. to Dismiss Pursuant Rule 12(b)(6) (citing Ex. A, at §§ 3.1, 5.1.5, 5.5), D.I. 10. 98 Complaint, at ⁋⁋ 2, 10. 99 See, § IV. C. 1, supra. 24 relying on its own investigation of the Property. Further, prior to closing, it was
aware that the fire pump needed major overhauling at a cost of $98,35.00. Yet, it
proceeded to closing doing exactly what the PSA proscribed – it relied on 1102
West’s promises and failed to do its own investigation. Certainly, an investigation
would have revealed that the fire pump was not replaced. Finally, CH Associates
describes itself as being “in the business of owning and managing hotels throughout
the East Coast.”100 It does not appear to be a novice in these matters. “[A] party
cannot promise, in a clear integration clause of a negotiated agreement, that it will
not rely on promises and representations outside of the agreement and then shirk its
own bargain in favor of a ‘but we did rely on those other representations’ fraudulent
inducement claim.”101
THEREFORE, for the reasons set out above, Defendant Harriet
Ciccone’s Motion to Dismiss Pursuant to Rule 12(b)(2) is DENIED. Her Motion
to Dismiss Pursuant to Rule 12(b)(6) is GRANTED. Defendant 1102 West Street
LP’s Motion to Dismiss Pursuant to Rule 12(b)(6) is GRANTED as to Count I
alleging breach of contract and as to Count III alleging fraud. Counts I and II of the
Complaint alleging breach of contract against Defendant Harriet Ciccone are
DISMISSED with prejudice. Count III of the Complaint alleging fraud against
Complaint, at ⁋ 1, D.I. 1. 100 101 Abry Partners V, L.P. v F & W Acquisition LLC, 891 nA.2d 1032, 1057 (Del. Ch. 2006). 25 Defendant Harriet Ciccone is DISMISSED without prejudice. Count 1 of the
Complaint alleging breach of contract and Count III alleging fraud against
Defendant 1102 West Street, LP are DISMISSED without prejudice.
Plaintiff CH Associates XI, LLC shall have 30 days from the date of this
Memorandum Opinion and Order to filed an Amended Complaint.
IT IS SO ORDERED.
/s/ Ferris W. Wharton Ferris W. Wharton, J.