USCA4 Appeal: 22-2018 Doc: 29 Filed: 04/10/2024 Pg: 1 of 6
UNPUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 22-2018
K.C. COMPANY, INC.,
Plaintiff - Appellant,
v.
PELLA CORPORATION,
Defendant - Appellee.
Appeal from the United States District Court for the District of Maryland, at Greenbelt. Deborah K. Chasanow, Senior District Judge. (8:20-cv-00227-DKC)
Submitted: February 29, 2024 Decided: April 10, 2024
Before WYNN, THACKER, and HEYTENS, Circuit Judges.
Affirmed by unpublished per curiam opinion.
ON BRIEF: Michael T. Conway, LAZARE POTTER GIACOVAS & MOYLE LLP, New York, New York; Stephen Forte, OFFIT KURMAN, PA, New York, New York, for Appellant. Aaron D. Van Oort, Jeffrey P. Justman, Larry E. LaTarte, Minneapolis, Minnesota, Heather Carson Perkins, Andrew J. Ball, FAEGRE DRINKER BIDDLE & REATH LLP, Denver, Colorado, for Appellee.
Unpublished opinions are not binding precedent in this circuit. USCA4 Appeal: 22-2018 Doc: 29 Filed: 04/10/2024 Pg: 2 of 6
PER CURIAM:
K.C. Company, Inc. (“KCC”) appeals the district court’s orders granting Pella
Corporation’s (“Pella”) motion to dismiss KCC’s fraudulent inducement and negligent
misrepresentation claims and granting summary judgment to Pella on KCC’s breach of
contract claim. We affirm.
We review de novo the district court’s order dismissing KCC’s fraudulent
inducement and negligent misrepresentation claims under Fed. R. Civ. P. 12(b)(6),
“accept[ing] the factual allegations in the complaint as true and constru[ing] them in the
light most favorable to the nonmoving party.” Rockville Cars, LLC v. City of Rockville,
891 F.3d 141, 145 (4th Cir. 2018). To survive a motion to dismiss, “a complaint must
contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible
on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted).
In other words, the complaint’s factual allegations must do more than create “a sheer
possibility that a defendant has acted unlawfully”; rather, the complaint must “plausibly
suggest an entitlement to relief.” Int’l Refugee Assistance Project v. Trump, 961 F.3d 635,
648 (4th Cir. 2020) (internal quotation marks omitted).
Both parties agree that KCC’s fraudulent inducement and negligent
misrepresentation claims are evaluated under Maryland law. To establish a claim for
fraudulent inducement in Maryland, a plaintiff must show by clear and convincing
evidence:
(1) that the representation made is false; (2) that its falsity was either known to the [defendant], or the misrepresentation was made with such a reckless indifference to truth as to be equivalent to actual knowledge; (3) that it was
2 USCA4 Appeal: 22-2018 Doc: 29 Filed: 04/10/2024 Pg: 3 of 6
made for the purpose of defrauding the [plaintiff]; (4) that [the plaintiff] not only relied upon the misrepresentation, but had a right to rely upon it in the full belief of its truth, and that [the plaintiff] would not have done the thing from which the injury resulted had not such misrepresentation been made; and (5) that [the plaintiff] actually suffered damage directly resulting from such fraudulent misrepresentation.
Dynacorp Ltd. v. Aramtel Ltd., 56 A.3d 631, 660 (Md. Ct. Spec. App. 2012). To establish
the reliance element of these claims, a plaintiff must adequately allege that “it is
substantially likely that [he] would not have made the choice in question” if the defendant
had not made the misrepresentation. Bank of Am., N.A. v. Jill P. Mitchell Living Tr., 822
F. Supp. 2d 505, 535 (D. Md. 2011).
Moreover, fraud claims are subject to the Fed. R. Civ. P. 9(b) pleading standard,
see, e.g., Spaulding v. Wells Fargo Bank, N.A., 714 F.3d 769, 781 (4th Cir. 2013), which
requires a party alleging fraud or mistake to “state with particularity the circumstances
constituting fraud or mistake,” Fed. R. Civ. P. 9(b). “The circumstances include the time,
place, and contents of the false representations, as well as the identity of the person making
the misrepresentation and what he obtained thereby.” Spaulding, 714 F.3d at 781 (internal
quotation marks omitted).
Here, the district court correctly concluded that KCC failed to sufficiently allege a
claim for fraudulent inducement. The misrepresentations KCC alleged Pella made
contradicted the express terms of the parties’ contracts. Therefore, KCC could not have
reasonably relied on any such purported misrepresentations. See Bank of Am., N.A., 822
F. Supp. 2d at 537 (“A person cannot reasonably believe in the full truth of an alleged
misrepresentation that directly contradicts the terms of a contract.”).
3 USCA4 Appeal: 22-2018 Doc: 29 Filed: 04/10/2024 Pg: 4 of 6
Next, to establish a negligent misrepresentation claim in Maryland, a plaintiff must
allege, among other elements, that “the defendant, owing a duty of care to the plaintiff,
negligently assert[ed] a false statement” and that “the plaintiff, justifiably, t[ook] action in
reliance on the statement [and] . . . suffer[ed] damage proximately caused by the
defendant’s negligence.” Dynacorp, 208 Md. App. at 493. A negligent misrepresentation
claim must show “the promisor or predictor made the statements with the present intention
not to perform.” Miller v. Fairchild Indus., Inc., 97 Md. App. 324, 346 (1993). We have
reviewed the record and conclude that the district court correctly dismissed this claim for
failure to sufficiently allege false representatives and justifiable reliance.
With respect to the breach of contract claim, “[a] district court shall grant summary
judgment if the movant shows that there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.” Smith v. CSRA, 12 F.4th 396, 402
(4th Cir. 2021) (internal quotation marks omitted). A dispute qualifies as genuine “if a
reasonable jury could return a verdict for the nonmoving party.” Id. (internal quotation
marks omitted). “In determining whether a genuine dispute of material fact exists, we view
the facts and all justifiable inferences arising therefrom in the light most favorable to the
nonmoving party.” Id. (cleaned up). We review a district court’s order granting summary
judgment de novo. Id.
The parties agree that Iowa law applies to the breach of contract claim. To establish
breach of contract under Iowa law, the plaintiff must show “(1) the existence of a contract;
(2) the terms and conditions of the contract; (3) that [the plaintiff] has performed all the
terms and conditions required under the contract; (4) the defendant[] breach[ed] . . . the
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USCA4 Appeal: 22-2018 Doc: 29 Filed: 04/10/2024 Pg: 1 of 6
UNPUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 22-2018
K.C. COMPANY, INC.,
Plaintiff - Appellant,
v.
PELLA CORPORATION,
Defendant - Appellee.
Appeal from the United States District Court for the District of Maryland, at Greenbelt. Deborah K. Chasanow, Senior District Judge. (8:20-cv-00227-DKC)
Submitted: February 29, 2024 Decided: April 10, 2024
Before WYNN, THACKER, and HEYTENS, Circuit Judges.
Affirmed by unpublished per curiam opinion.
ON BRIEF: Michael T. Conway, LAZARE POTTER GIACOVAS & MOYLE LLP, New York, New York; Stephen Forte, OFFIT KURMAN, PA, New York, New York, for Appellant. Aaron D. Van Oort, Jeffrey P. Justman, Larry E. LaTarte, Minneapolis, Minnesota, Heather Carson Perkins, Andrew J. Ball, FAEGRE DRINKER BIDDLE & REATH LLP, Denver, Colorado, for Appellee.
Unpublished opinions are not binding precedent in this circuit. USCA4 Appeal: 22-2018 Doc: 29 Filed: 04/10/2024 Pg: 2 of 6
PER CURIAM:
K.C. Company, Inc. (“KCC”) appeals the district court’s orders granting Pella
Corporation’s (“Pella”) motion to dismiss KCC’s fraudulent inducement and negligent
misrepresentation claims and granting summary judgment to Pella on KCC’s breach of
contract claim. We affirm.
We review de novo the district court’s order dismissing KCC’s fraudulent
inducement and negligent misrepresentation claims under Fed. R. Civ. P. 12(b)(6),
“accept[ing] the factual allegations in the complaint as true and constru[ing] them in the
light most favorable to the nonmoving party.” Rockville Cars, LLC v. City of Rockville,
891 F.3d 141, 145 (4th Cir. 2018). To survive a motion to dismiss, “a complaint must
contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible
on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted).
In other words, the complaint’s factual allegations must do more than create “a sheer
possibility that a defendant has acted unlawfully”; rather, the complaint must “plausibly
suggest an entitlement to relief.” Int’l Refugee Assistance Project v. Trump, 961 F.3d 635,
648 (4th Cir. 2020) (internal quotation marks omitted).
Both parties agree that KCC’s fraudulent inducement and negligent
misrepresentation claims are evaluated under Maryland law. To establish a claim for
fraudulent inducement in Maryland, a plaintiff must show by clear and convincing
evidence:
(1) that the representation made is false; (2) that its falsity was either known to the [defendant], or the misrepresentation was made with such a reckless indifference to truth as to be equivalent to actual knowledge; (3) that it was
2 USCA4 Appeal: 22-2018 Doc: 29 Filed: 04/10/2024 Pg: 3 of 6
made for the purpose of defrauding the [plaintiff]; (4) that [the plaintiff] not only relied upon the misrepresentation, but had a right to rely upon it in the full belief of its truth, and that [the plaintiff] would not have done the thing from which the injury resulted had not such misrepresentation been made; and (5) that [the plaintiff] actually suffered damage directly resulting from such fraudulent misrepresentation.
Dynacorp Ltd. v. Aramtel Ltd., 56 A.3d 631, 660 (Md. Ct. Spec. App. 2012). To establish
the reliance element of these claims, a plaintiff must adequately allege that “it is
substantially likely that [he] would not have made the choice in question” if the defendant
had not made the misrepresentation. Bank of Am., N.A. v. Jill P. Mitchell Living Tr., 822
F. Supp. 2d 505, 535 (D. Md. 2011).
Moreover, fraud claims are subject to the Fed. R. Civ. P. 9(b) pleading standard,
see, e.g., Spaulding v. Wells Fargo Bank, N.A., 714 F.3d 769, 781 (4th Cir. 2013), which
requires a party alleging fraud or mistake to “state with particularity the circumstances
constituting fraud or mistake,” Fed. R. Civ. P. 9(b). “The circumstances include the time,
place, and contents of the false representations, as well as the identity of the person making
the misrepresentation and what he obtained thereby.” Spaulding, 714 F.3d at 781 (internal
quotation marks omitted).
Here, the district court correctly concluded that KCC failed to sufficiently allege a
claim for fraudulent inducement. The misrepresentations KCC alleged Pella made
contradicted the express terms of the parties’ contracts. Therefore, KCC could not have
reasonably relied on any such purported misrepresentations. See Bank of Am., N.A., 822
F. Supp. 2d at 537 (“A person cannot reasonably believe in the full truth of an alleged
misrepresentation that directly contradicts the terms of a contract.”).
3 USCA4 Appeal: 22-2018 Doc: 29 Filed: 04/10/2024 Pg: 4 of 6
Next, to establish a negligent misrepresentation claim in Maryland, a plaintiff must
allege, among other elements, that “the defendant, owing a duty of care to the plaintiff,
negligently assert[ed] a false statement” and that “the plaintiff, justifiably, t[ook] action in
reliance on the statement [and] . . . suffer[ed] damage proximately caused by the
defendant’s negligence.” Dynacorp, 208 Md. App. at 493. A negligent misrepresentation
claim must show “the promisor or predictor made the statements with the present intention
not to perform.” Miller v. Fairchild Indus., Inc., 97 Md. App. 324, 346 (1993). We have
reviewed the record and conclude that the district court correctly dismissed this claim for
failure to sufficiently allege false representatives and justifiable reliance.
With respect to the breach of contract claim, “[a] district court shall grant summary
judgment if the movant shows that there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.” Smith v. CSRA, 12 F.4th 396, 402
(4th Cir. 2021) (internal quotation marks omitted). A dispute qualifies as genuine “if a
reasonable jury could return a verdict for the nonmoving party.” Id. (internal quotation
marks omitted). “In determining whether a genuine dispute of material fact exists, we view
the facts and all justifiable inferences arising therefrom in the light most favorable to the
nonmoving party.” Id. (cleaned up). We review a district court’s order granting summary
judgment de novo. Id.
The parties agree that Iowa law applies to the breach of contract claim. To establish
breach of contract under Iowa law, the plaintiff must show “(1) the existence of a contract;
(2) the terms and conditions of the contract; (3) that [the plaintiff] has performed all the
terms and conditions required under the contract; (4) the defendant[] breach[ed] . . . the
4 USCA4 Appeal: 22-2018 Doc: 29 Filed: 04/10/2024 Pg: 5 of 6
contract in some particular way; and (5) that plaintiff has suffered damages as a result of
the breach.” Molo Oil Co. v. River City Ford Truck Sales, Inc., 578 N.W.2d 222, 224 (Iowa
1998). “A party breaches a contract when, without legal excuse, it fails to perform any
promise which forms a whole or a part of the contract.” Molo Oil Co., 578 N.W.2d at 224.
Here, KCC, a Pella distributor and franchisee, agreed to sell its business. Pursuant
to the parties’ agreement, Pella had to consent to any sale, which it could not unreasonably
withhold. KCC claimed that Pella unreasonably withheld its consent to a buyer that KCC
presented, causing damage to KCC, as the subsequent sale of KCC was completed at a
substantially lower purchase price. We agree with the district court that KCC failed to
demonstrate that Pella breached the parties’ contracts when it rejected KCC’s proposed
buyer. Pella cited legitimate business reasons for rejecting the buyer, and consistently
relied on those reasons in explaining its rejection. KCC failed to demonstrate that Pella’s
withholding of its consent to the sale was unreasonable, pretextual, or otherwise in bad
faith.
Finally, KCC asserts that the district court should have granted leave to file a second
amended complaint. After the time for filing a responsive pleading has expired, “a party
may amend its pleading only with the opposing party’s written consent or the court’s
leave,” but “[t]he court should freely give leave when justice so requires.” Fed. R. Civ. P.
15(a)(2). “[L]eave to amend should be denied only when the amendment would be
prejudicial to the opposing party, there has been bad faith on the part of the moving party,
or amendment would be futile.” Matrix Cap. Mgmt. Fund, LP v. BearingPoint, Inc., 576
F.3d 172, 193 (4th Cir. 2009). When the leave to amend is denied based on futility grounds,
5 USCA4 Appeal: 22-2018 Doc: 29 Filed: 04/10/2024 Pg: 6 of 6
we conduct a de novo review. See In re Triangle Cap. Corp. Sec. Litig., 988 F.3d 743, 750
(4th Cir. 2021). A district court should deny leave to amend on the grounds of futility only
when the proposed amendment is “clearly insufficient or frivolous on its face” or “fails to
withstand Rule 12(b)(6) scrutiny.” Id. (internal quotation marks omitted). The district court
did not err in denying KCC’s second motion to amend based on futility as KCC’s proposed
amendments would still have failed to withstand Rule 12(b)(6) scrutiny.
Accordingly, we affirm the district court’s orders. We dispense with oral argument
because the facts and legal contentions are adequately presented in the materials before this
court and argument would not aid the decisional process.
AFFIRMED