Japan Bus Lines, LLC v. H.I.S. Guam, Inc.

Opinion

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2

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4 BY:

5 IN THE SUPERIOR COURT Of GUA1i

7 JAPAN BUS LINES, LLC, Civil Case No. CV0514-20 $ Plaintiff,

9 v. DECISION AND ORDER 10 DENYING PLAINTIFF’S MOTION H.I.S. GUAM, INC., TO DISMISS FIRST CAUSE OF ACTION 11 IN DEFENDANT’S COUNTERCLAIM 12 Defendant.

13 INTRODUCTION 14 This matter came before the Honorable Alberto C. Lamorena, III on June 13, 2022 for 15 hearing on Plaintiff Japan Bus Lines, LLC’s (“Plaintiffs) Motion to Dismiss First Cause of Action 16 in Defendant’s Counterclaim (“Motion”). Attorney Joseph Razzano represents Plaintiff, and 17 Attorney Phillip Torres represents H.I.S. Guam, Inc. (“Defendant”). Having duly considered the

18 parties’ briefs, oral arguments, and the applicable law, the Court now issues the following Decision 19 and Order and DENIES Plaintiffs Motion.

20 BACKGROUND 21 Plaintiff is a company that provides transportation services for both local residents and 22 tourists visiting Guam. Complaint for Breach of Contract (“Complaint”) at 2 (Jul. 23, 2020). 23 Defendant is a tour agent who provides services to foreign tourists visiting Guam. Id. at 2.

24 In December of 2012, the parties entered into a contract in which Plaintiff was to provide 25 bussing services for Defendant’s customers (“the Contract”). Içj, at 2. Under the Contract’s terms,

26 Defendant was to pay Plaintiff two hundred thousand dollars (S200,000.00) per month. RI. at 2.

27 The Contract was twice amended, increasing Defendant’s payment obligations to two hundred

28 seventeen thousand dollars ($217,000.00) per month on June 12, 2014, and then to two hundred

Decision and Order Denying Plaintiffs Ivlotion to Dismiss first Cause of Action in Defendant’s Counterclaim CV0514-20, Japan Bus Lines, LLC v. HIS. Guam, Inc.

1 twenty-three thousand dollars ($223,000.00) per month on June 1,2015. Id. at 2-3. The Contract 2 was set to expire in March 2018, before Plaintiff exercised its option to extend the Contract until 3 March 31,2021. Id.at2. 4 On March 14, 2020, a state of emergency was declared in Guam following the arrival of the 5 Covid-19 pandemic on island. Executive Order 2020-03. Defendant temporarily ceased tour 6 operations and essentially all tourism to Guam halted. See Complaint, Ex. F (Jul. 23, 2020). One 7 month later, Defendant infonried Plaintiff they were no longer willing to pay the amounts due under 8 the Contract. Id. at 4. Plaintiff subsequently filed their Complaint for Breach of Contract on July 9 23,2020. Id. at 1. 10 On March 12, 2021, Defendant filed their Answer to Complaint for Breach of Contract and 11 Counterclaim (“Answer & Counterclaim”). Defendant counterclaimed for fraud against the 12 Plaintiff, alleging that Plaintiff deliberately misled them when negotiating the Contract’s second 13 amendment. See Answer & Counterclaim at 5-7 (Mar. 12, 2021). Plaintiff claims that Defendant 14 “produced misleading documents and made representations that it was losing money on the 15 Contract.” Id. at 6. Defendant claims they “reasonably accepted and justifiably relied” on the

16 Plaintiffs representations when amending the Contract. Id. at 6. Defendant alleges damages of six 17 thousand dollars ($6,000.00) per month from June 2015 until March 2020, reflecting the increased 18 monthly price Defendant paid following the second amendment. jçi, at 7. 19 On April 1, 2021, Plaintiff filed their Motion to Dismiss First Cause of Action in 20 Defendant’s Counterclaim. Plaintiff argued that Defendant’s fraud counterclaim warrants dismissal 21 as Defendant failed to meet GRCP Rule 9(b)’s requirements to plead with particularity. See 22 Motion at 2-5 (Apr. 1, 2021). Specifically, Plaintiff contends that Defendant failed to allege who

23 committed the fraud, what the fraud was, and where/how the fraud was committed. Id. at 3-5. 24 On April 29, 2021, Defendant filed their Opposition to Plaintiffs Motion to Dismiss 25 (“Opposition”). Defendant claims they alleged sufficient details in their counterclaim to provide

26 Plaintiff with notice as to what particular fraudulent action was alleged. See Opposition at 3-10

27 (Apr.29,2021).

2$

Decision and Order Denying Plaintiffs Motion to Dismiss first Cause of Action in Defendant’s Counterclaim CV0514-20, Japan Bits Lines, LLC v. HIS. Guam, Inc.

I Page2of5 1 On May 20, 2021, Plaintiff filed their Reply to Defendant’s Opposition (“Reply”). Plaintiff 2 claims Defendant improperly supplemented their counterclaim with new facts outside the original 3 pleading. See Reply at 1-3 (May 20, 2021). Plaintiff claims that looking solely at the 4 counterclaim, Defendant has failed to put Plaintiff on notice as to what Defendant’s cause of action 5 is. Id. at 3-6. 6 The Court held a hearing on June 13, 2022. Afler hearing the arguments of the parties, the

7 Court took the matter under advisement. $ DISCUSSION 9 I. Standard of Review:

10 Courts will dismiss a claim upon motion when the pleader fails to state a claim upon

11 which relief can be granted. See GRCP Rule 12(b)(6). “Dismissal for failure to state a claim

12 is appropriate only if it appears beyond doubt that the non-moving party can prove no set of

13 facts in support of his claim which would entitle him to relief” See Taitano u. €atvo 14 finance Corp., 200$ Guam 12 ¶ 9 (internal citations omitted). When reviewing a Rule 15 12(b)(6) motion, the Court must “construe the pleading in the light most favorable to the 16 non-moving party, and resolve all doubts in the non-moving party’s favor. See first 17 Hawaiian Bank v. Manley, 2007 Guam 2 ¶ 9.

18 When pleading allegations of “fraud or mistake, the circumstances constituting fraud 19 or mistake shall be stated with particularity. Malice, intent, knowledge, and other conditions 20 of mind of a person may be averred generally.” See GRCP Rule 9(b). Claimants pleading

21 fraud must set forth a claim “with sufficient detail to provide notice to defendants as to what

22 particular fraudulent action is being alleged.” See Ukatt v. Wang, 2016 Guam 26 ¶ 47. “This

23 standard has been described as a ‘who, what, when, where, and how’ requirement.” Id. at ¶ 24 47 (internal citations omitted).

25 II. Defendant pled with particularity the circumstances surrounding their cause of action

26 alleging fraud.

27 a. Defendant sufficiently alleged who committed the fraud.

28

Decision and Order Denying Plaintiffs Motionio Dismiss first Cause of Action in Defendant’s Counterclaim CV0514-20, Japan Bus Lines, LLC v. HIS. Guam, Inc.

1 Defendant’s counterclaim clearly states that Plaintiff committed the fraud 2 when Plaintiff “asserted that it was losing money” and “produced misleading 3 documents” during negotiations leading up to the June 2015 amendment. $ç 4 Answer & Counterclaim at 6 (Mar. 12, 2021). It naturally follows that the 5 employee representing Plaintiff during these negotiations was the specific individual 6 who connnitted the fraud, and that the fraud is imputed to the company. See 18 7 G.C.A. § 20309 (doctrine of respondeat superior holds that “a principal is $ responsible to third persons for the negligence of his agent in the transaction of the 9 business of the agency.”). 10 Despite Plaintiff already being put on notice of who committed the fraud, 11 Defendant has supplemented this with additional information alleging that it was 12 Shun Matsornoto, the President of Japan Bus Lines, LLC who specifically provided 13 Plaintiffs financial information during the negotiations. See Declaration of Priscila 14 Badilia, Ex. 1 (Apr. 29, 2021). Although this additional information is not needed 15 given the high standard to dismiss under Rule 12(b)(6), it follows that Plaintiff is 16 certainly put on notice of who allegedly committed the fraud moving forward. 17 b. Defendant sufficiently alleged what the fraud was. 1$ Under Guam Law, the elements of fraud are: “(1) a misrepresentation; (2) 19 knowledge of falsity (or scienter): (3) intent to defraud to induce reliance; (4) 20 justifiable reliance; and (5) resulting damages.” See Taitano v. Calvo finance Corp., 21 2008Guam12J12. 22 Defendant’s allegations clearly state that the Plaintiffs fraudulent actions 23 consist of producing “misleading documents” “and representations that it was losing 24 money on the Contract.” See Answer & Counterclaim at 6 (Mar. 12, 2021). The 25 alleged misrepresentation is contained in a letter signed by President Shun 26 Matsumoto, setting forth Plaintiffs financial information and why a monthly increase 27 was necessary to continue the Contract. See Declaration of Priscila Bacilia, Ex. 1 28 (Apr. 29, 2021). Knowledge of falsity and intent to defraud are averred generally.

Decision and Order Denying Plaintiffs Motion to Dismiss first Cause of Action in Defendants Counterclaim CV0514-20. Japan Btis Lines, LLC v. HIS. Guam, Inc.

1 See GRCP Rule 9(b). Defendant also claims to have “reasonably accepted the 2 information and justifiably relied on the representations of Plaintiff’ when amending

3 the contract. See Answer & Counterclaim at 6 (Mar. 12, 2021). 4 Defendant has sufficiently alleged the elements of fraud, and put Plaintiff on 5 notice as to what particular fraudulent action is being alleged. 6 c. Defendant sufficiently alleged where the fraud was committed.

7 Defendant’s counterclaim clearly states that the fraudulent activity was $ realized when the parties executed the June 2015 amendment to the Contract, as

9 that’s when Defendant started paying an additional six thousand dollars ($6,000.00) 10 per month. Id. at 6. It reasonably follows that the places where the negotiations and

11 exchange of documents leading up to the June 2015 amendment occurred is where 12 Plaintiffs alleged fraudulent activity occurred. 13 d. Defendant sufficiently alleged how they were defrauded. 14 Lastly, Defendant’s counterclaim clearly states they were defrauded when 15 they relied on the misleading documents and misrepresentations Plaintiff produced in 16 the time leading up to the June 2015 Contract amendment. Id. at 6. Defendant 17 claims this reliance induced them to amend the Contract’s terms and increase their

1$ payment obligations by six thousand dollars ($6,000.00) per month despite receiving

19 no additional services or consideration in return. RI. at 6. 20 CONCLUSION 21 For the reasons stated above, the Court DENIES Plaintiffs Motion. Defendant’s

22 counterclaim for fraud complies with GRCP Rule 9(b), as Defendant clearly notifies Plaintiff of 23 what particular fraudulent activity is being alleged. The Defendant does not need to amend their

24 counterclaim for fraud, and the counterclaim will not be dismissed.

IllS SOORDEREDth1s August 16, 2022 26 N SERVE VIA E.MAlL acko,1 oe tha an etyctrotyc copy &the rignai cue e-malled to:

HONORABLE ALBERTO C. LAMORENA, III Presiding Judge, Superior Court of Guam Date Tme_, Dcision anOer Denying Plaintiffs Motion to Dismiss First Cause of Action in Defendant’s Counterclaim OS h oa Jr. CV0514-20,JapanBusLines, LLC u. HIS. Guam, Inc.

Deputy Cter Superior Court of Guam