Leader Capital Corp v. FNEX Capital LLC et al.

• Court: District Court, W.D. Washington
• Decided: January 16, 2026
• Docket: 3:25-cv-05001
• Status: Unknown

Opinion

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5 UNITED STATES DISTRICT COURT 6 WESTERN DISTRICT OF WASHINGTON AT TACOMA 7 LEADER CAPITAL CORP, CASE NO. 3:25-cv-05001-BHS 8 Plaintiff, ORDER 9 v. 10 FNEX CAPITAL LLC et al., 11 Defendant. 12

13 This matter is before the Court on defendants FNEX and Maverick’s1 motion to 14 dismiss plaintiff Leader Capital’s claims, Dkt. 29, and Leader Capital’s motion to dismiss 15 defendants’ counterclaims, Dkt. 52. 16 Leader Capital is an investment advisor registered with the Securities and 17 Exchange Commission (SEC). FNEX is a broker-dealer that facilitates sales and 18 marketing for mutual funds. Dkt. 21 at 3. In November 2023, Leader Capital engaged 19 FNEX to provide sales and marketing services for Leader Capital’s mutual fund products. 20 21

22 1 The Court uses the singular “FNEX” to refer to defendants. 1 The sales agreement required Leader Capital to pay FNEX a 0.20% commission 2 on its monthly sales, unless the trade was designated from a “House Account.” Dkt. 21-1 3 at 3, 9–10. Leader Capital represented and warranted that the funds were registered with

4 the SEC and there were “no material adverse changes to the [f]unds since the filing of 5 their registration statement.” Id. at 5–6. The parties were to “keep confidential all 6 information concerning the financial affairs and matters of the other and their clients and 7 . . . not reproduce or distribute the same.” Id. at 7–8. Finally, the agreement excluded 8 liability for incidental, consequential, indirect, special, or punitive damages. Id. at 4.

9 Delaware law applies to the agreement. Id. at 8. 10 Leader Capital terminated the sales agreement in August 2024. Leader Capital 11 alleges FNEX subsequently falsely told investors that Leader Capital was under SEC 12 investigation, trading outside of its prospectus, and that its leadership “were bad guys.” 13 Id. at 4–5. Leader Capital asserts the SEC examination was routine, “not because of any

14 alleged wrongdoing,” and by omitting that information, FNEX gave the “false impression 15 that Leader Capital had violated federal securities laws.” Id. at 6. Leader Capital claims 16 investors withdrew significant investments from Leader Capital’s mutual fund because of 17 FNEX’s misrepresentations. Id. at 5–6. 18 In November 2024, Leader Funds Trust, the owner of the funds2, announced to the

19 SEC that overvaluation of certain securities had a “material impact” on the net asset value 20 21

22 2 The Trust is not a party. 1 (“NAV”) for at least one of the funds “from February 22, 2022 through August 14, 2 2024.” Dkt. 39, Ex. A at 34, 38–39, 45, 48. 3 In January 2025, Leader Capital sued FNEX for breach of contract, breach of the

4 implied duty of good faith and fair dealing, defamation, intentional interference with 5 contractual relations, and intentional interference with prospective economic relations. 6 Dkts.1 and 21.3 7 FNEX asserts as counterclaims breach of contract and breach of the implied duty 8 of good faith and fair dealing. Dkt. 48 at 14–16. It alleges Leader Capital owes FNEX

9 $15,064 in commission for a sale FNEX secured before the contract ended and that the 10 NAV error constituted a breach of Leader Capital’s representations to it. Id. at 12, 14. It 11 asserts the NAV error rendered Leader Capital’s marketing information inaccurate, which 12 FNEX then had to correct. Id. at 11. FNEX also seeks declaratory judgment that its 13 disclosure of a publicly filed annual report is not a breach of the contract’s confidentiality

14 provision. Id. at 16. Finally, FNEX asserted, and later voluntarily dismissed, an abuse of 15 process counterclaim. Dkt. 57. 16 FNEX moves to dismiss Leader Capital’s breach of contract, breach of the implied 17 duty of good faith and fair dealing, and intentional interference claims, arguing they are 18 insufficiently pled. Dkt. 29 at 7. It does not challenge the defamation claim. Dkt. 29 at 19

19 n.6. 20 21 3 Leader Capital also asserted a securities fraud claim, which it has voluntarily dismissed. 22 Dkt. 36 at 1. 1 Leader Capital moves to dismiss FNEX’s breach of the implied duty of good faith 2 and fair dealing and non-commission damages counterclaims. Dkt. 52. It argues the sales 3 agreement precludes damages other than sales commissions. Leader Capital also moved

4 to dismiss the abuse of process counterclaim before FNEX’s voluntary dismissal. Dkt. 53 5 (citing RCW 4.105.010). It asks the Court to address its motion nonetheless. Dkt. 59 6 (citing RCW 4.105.060). 7 The issues are addressed in turn. 8 I. DISCUSSION

9 Dismissal under Federal Rule of Civil Procedure 12(b)(6) may be based on either 10 the lack of a cognizable legal theory or the absence of sufficient facts alleged under a 11 cognizable legal theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 12 1988). A plaintiff’s complaint must allege facts to state a claim for relief that is plausible 13 on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A claim has “facial plausibility”

14 when the party seeking relief “pleads factual content that allows the court to draw the 15 reasonable inference that the defendant is liable for the misconduct alleged.” Id. Although 16 courts must accept as true the complaint’s well-pled facts, conclusory allegations of law 17 and unwarranted inferences will not defeat an otherwise proper Rule 12(b)(6) motion to 18 dismiss. Vasquez v. Los Angeles Cnty., 487 F.3d 1246, 1249 (9th Cir. 2007); Sprewell v.

19 Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). “[A] plaintiff’s obligation to 20 provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and 21 conclusions, and a formulaic recitation of the elements of a cause of action will not do. 22 Factual allegations must be enough to raise a right to relief above the speculative level.” 1 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted). This requires a 2 plaintiff to plead “more than an unadorned, the-defendant-unlawfully-harmed-me 3 accusation.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555). The Court’s

4 review is “limited to the complaint, materials incorporated into the complaint by 5 reference, and matters of which the Court may take judicial notice.” Metzler Inv. GMBH 6 v. Corinthian Colleges, Inc., 540 F.3d 1049, 1061 (9th Cir. 2008). 7 When granting a Rule 12(b)(6) motion to dismiss, “a district court should grant 8 leave to amend even if no request to amend the pleading was made, unless it determines

9 that the pleading could not possibly be cured by the allegation of other facts.” Cook, 10 Perkiss & Liehe v. N. Cal. Collection Serv., 911 F.2d 242, 247 (9th Cir. 1990). However, 11 when the facts are not in dispute and the sole issue is whether there is liability as a matter 12 of substantive law, courts may deny leave to amend. Albrecht v. Lund, 845 F.2d 193, 13 195–96 (9th Cir. 1988).

14 Leave to amend a complaint under FRCP 15(a) “shall be freely given when justice 15 so requires.” Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 892 (9th Cir. 2010). 16 This policy is “to be applied with extreme liberality.” Eminence Cap., LLC v. Aspeon, 17 Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (internal quotation omitted). In determining 18 whether to grant leave under Rule 15, courts consider five factors: “bad faith, undue

19 delay, prejudice to the opposing party, futility of amendment, and whether the plaintiff 20 has previously amended the complaint.” United States v. Corinthian Colls., 655 F.3d 984, 21 995 (9th Cir. 2011). Among these factors, prejudice to the opposing party carries the 22 greatest weight. Eminence Cap., 316 F.3d at 1052. 1 A. Leader Capital’s contractual claims are not plausible. 2 Leader Capital claims FNEX breached the contract’s confidentiality provision by 3 “disclosing information relating to Leader Capital’s financial matters” and seeks at least

4 $3.56 million in resulting damages. Dkt. 21 at 8. It also claims FNEX breached its 5 implied obligation to act “reasonably and in good faith in its performances under the 6 Sales Agreement, and not to frustrate the benefit Leader Capital reasonably expected to 7 obtain from the Sales Agreement.” Id. at 9. FNEX argues both allegations are 8 insufficiently pled. Dkt. 29 at 18–24.

9 In Delaware, a breach of contract claim requires the plaintiff to demonstrate the 10 existence of the contract, the breach of an obligation imposed by that contract, and “the 11 resultant damage to the plaintiff.” Kuroda v. SPJS Holdings, L.L.C., 971 A.2d 872, 883 12 (Del. Ch. 2009). The plaintiff must show that the damages are “provable to a reasonable 13 certainty, and that these damages flowed from defendant’s violation of the contract.”

14 LaPoint v. AmerisourceBergen Corp., 2007 WL 2565709, at *9 (Del. Ch. 2007). See 15 Moody v. Nationwide Mut. Ins. Co., 549 A.2d 291, 293 (Del. 1988) (there must be “some 16 reasonable basis for the [fact finder] to estimate with a fair degree of certainty [the 17 plaintiff’s] probable loss.”); eCommerce Indus., Inc. v. MWA Intel., Inc., 2013 WL 18 5621678, at *42 (Del. Ch. 2013) (“Responsible estimates of damages that lack

19 mathematical certainty are permissible so long as the court has a basis to make such 20 estimates.”). 21 Leader Capital does not sufficiently allege FNEX breached the contract. The 22 complaint merely asserts FNEX disclosed “information relating to . . . financial matters.” 1 Dkt. 21 at 8. In its response to FNEX’s motion to dismiss, Leader Capital offers the SEC 2 examination as an example of the disclosed “information.” Dkt. 36 at 7. However, the 3 complaint does not assert, and Leader Capital does not argue, that the examination was

4 confidential or non-public.4 See Martin Marietta Materials, Inc. v. Vulcan Materials Co., 5 68 A.3d 1208, 1219 (Del. 2012) (“A confidentiality agreement is intended to protect a 6 contracting party’s non-public information.”). 7 The implied covenant of good faith and fair dealing “inheres in every contract and 8 requires a party in a contractual relationship to refrain from arbitrary or unreasonable

9 conduct which has the effect of preventing the other party to the contract from receiving 10 the fruits of the bargain.” Kuroda, 971 A.2d at 888 (citation modified). It infers contract 11 terms where there are “developments or contractual gaps that the asserting party pleads 12 neither party anticipated” to ensure the parties’ reasonable expectations are fulfilled. 13 Nemec v. Shrader, 991 A.2d 1120, 1125 (Del. 2010); Kuroda, 971 A.2d at 888. The

14 plaintiff must “allege a specific implied contractual obligation, a breach of that 15 obligation, and resulting damage.” Id. (citing Fitzgerald v. Cantor, 1998 WL 842316, at 16 *1 (Del. Ch. 1998)). The duty is not “free floating,” and “[g]eneral allegations of bad 17 faith conduct are not sufficient.” Id. It is a “limited and extraordinary legal remedy.” 18 Oxbow Carbon & Min. Holdings, Inc. v. Crestview-Oxbow Acquisition, LLC, 202 A.3d

19 482, 507 (Del. 2019) (citation modified). 20

21 4 The contract does not define “confidential,” so the Court gives the term its plain and ordinary meaning. See Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 739 (Del. 22 2006). 1 Leader Capital’s alleges FNEX had an implied obligation to “act reasonably and in 2 good faith,” and “not to frustrate the benefit” of the agreement. Dkt. 21 at 9. Such a 3 general, “free floating” implied duty falls short of the “specific implied contractual

4 obligation” required to plausibly plead a breach of contract. Kuroda, 921 A.2d at 888. 5 Leader Capital’s briefing argues FNEX violated an implied contractual duty when FNEX 6 used Leader Capital’s allegedly confidential information to “persuade investors . . . to 7 withdraw their investments from the funds.” Dkt. 36 at 11–12. The contract’s 8 confidentiality provision covers such conduct, rendering the implied covenant

9 inapplicable here. See Oxbow, 202 A.3d at 507 (citation modified) (“the implied covenant 10 does not apply when the contract addresses the conduct at issue, but only when the 11 contract is truly silent concerning the matter at hand.”). Even so, as the Court concluded 12 above, Leader Capital has not sufficiently pled that FNEX disclosed any confidential 13 information.

14 Finally, Leader Capital again does not explain how or why FNEX’s alleged 15 misconduct resulted in $3.56 million in damages. Dkt. 21 at 9. It unpersuasively argues it 16 “need not plead or prove a specific amount of monetary damages, as there are various 17 remedies available to the plaintiff.” Dkt. 36 at 6–7 (citing eCommerce Indus., 2013 WL 18 5621678, at *13). While Delaware permits plaintiffs to estimate their damages, there

19 must still be a reasonable basis for its requested amount. It is not enough to simply claim 20 $3.56 million in damages. 21 22 1 Leader Capital fails to plausibly plead its breach of contract and breach of implied 2 duty of good faith and fair dealing claims. FNEX’s motion to dismiss Leader Capital’s 3 contractual claims is GRANTED.

4 Leader Capital may amend the complaint, however, to address these deficiencies. 5 Allowing amendment would not prejudice FNEX, and there is no claim or evidence of 6 bad faith or undue delay. Corinthian Colls., 655 F.3d at 995. 7 B. Leader Capital’s intentional interference claims are not plausible. 8 Leader Capital claims FNEX’s intentional misrepresentations caused investors to

9 withdraw investments from the funds, intentionally interfering with Leader Capital’s 10 existing and prospective business relations. Dkt. 21 at 9–10. FNEX argues the claims are 11 insufficiently pled, arguing that Leader Capital simply repeats “the same deficiencies in 12 the other counts,” fails to allege “what business relationship it has (if any) with investors 13 in the Trust” and how it has been or will be damaged by the withdrawn investments. Dkt.

14 29 at 24–27. 15 Washington5 recognizes the tort of intentional interference with a contractual 16 relationship or business expectancy. Leingang v. Pierce Cnty. Med. Bureau, Inc., 131 17 Wn.2d 133, 157 (1997). To succeed on an intentional interference claim, the plaintiff 18 must prove “(1) the existence of a valid contractual relationship or business expectancy;

19 (2) that defendants had knowledge of that relationship; (3) an intentional interference 20 5 The parties seem to agree that Washington law applies to Leader Capital’s tort claims. 21 Dkt. 29 at 25; Dkt. 36 at 12. See Tilden-Coil Constructors, Inc. v. Landmark Am. Ins. Co., 721 F. Supp. 2d 1007, 1016 (W.D. Wash. 2010) (Under Washington choice of law rules, the Court 22 looks to the state with the most significant relationship to the occurrence and the parties.). 1 inducing or causing a breach or termination of the relationship or expectancy; (4) that 2 defendants interfered for an improper purpose or used improper means; and (5) resultant 3 damage.” Id.

4 Leader Capital does not sufficiently allege a valid contractual relationship or 5 business expectancy. Its argument that “shares in a mutual fund are . . . ‘contracts’” is not 6 well taken. Dkt. 36 at 13–14. A share is more akin to a property interest than a contract. 7 See In re Marriage of Langham and Kolde, 153 Wn.2d 553, 566 (2005) (“[W]e hold that 8 stock options are property.”). Moreover, the mutual funds are owned by the Trust, not

9 Leader Capital. The complaint lacks any detail on the investors’ existing or prospective 10 relationships with Leader Capital. 11 Leader Capital does not plausibly allege intentional interference with a contract or 12 business expectancy. FNEX’s motion to dismiss the intentional interference claims is 13 GRANTED.

14 Leader Capital may amend the complaint, however, to address these deficiencies. 15 Allowing amendment here would not prejudice FNEX, and there is no claim or evidence 16 of bad faith or undue delay. Corinthian Colls., 655 F.3d at 995. 17 C. FNEX’s counterclaim for damages incurred by the NAV error is plausible. 18 FNEX asserts a breach of contract counterclaim, alleging Leader Capital breached

19 its express warranty that “[t]here have been no material adverse changes to the [f]unds 20 since the filing of their registration statement” in incurring the NAV error. Dkt. 48 at 14– 21 15 (quoting Dkt. 21-1 at 6). It claims it “incurred costs and fees associated with 22 informing its customers regarding material error concerning NAV of shares.” Id. at 15. 1 Leader Capital argues the sales agreement precludes recovery of such consequential 2 damages. Dkt. 52 at 8–9. FNEX agrees the agreement bars consequential damages, but 3 contends the cost and fees associated with informing customers are direct damages

4 because they flow directly and immediately from Leader Capital’s warranty breach. Dkt. 5 58 at 4–5. Alternatively, FNEX argues it is “premature at the pleadings stage” to dismiss 6 its request for damages. Id. at 7 (citing J.A. Jones Const. Co. v. City of Dover, 372 A.2d 7 540, 553 (Del. Super. Ct. 1977). 8 Direct damages are “inherent in the breach,” the “necessary and usual result of the

9 defendant’s wrongful act,” and “flow naturally and necessarily from the wrong.” 10 Bonanza Restaurant Co. v. Wink, 2012 WL 1415512, at *3 (Del. Super. Ct. 2012). 11 Consequential damages, on the other hand, “result naturally but not necessarily from the 12 wrongful act, because they require the existence of some other contract or relationship.” 13 Id. Consequential damages are recoverable only if they are “foreseeable and traceable to

14 the wrongful act and result from it.” Id. 15 FNEX’s claimed damages arise directly and necessarily from the NAV error. It 16 incurred costs and fees in informing customers “who may have subscribed to the Funds” 17 of the material error. Dkt. 48 at 11. There is no contract or relationship beyond the sales 18 agreement at issue here. Bonanza, 2012 WL1415512, at *3. Absent Leader Capital’s

19 breach of its warranty, FNEX would not have communicated the NAV error to 20 customers. Its alleged damages are the direct result of Leader Capital’s alleged breach of 21 contract. 22 1 The contract does not bar FNEX’s direct damages claimed in connection to the 2 NAV error. Leader Capital’s motion to dismiss this counterclaim is DENIED. 3 D. FNEX’s breach of the implied duty of good faith and fair dealing counterclaim is not plausible. 4 FNEX alleges Leader Capital breached its implied duty to provide FNEX 5 “marketing information free from material error” and provide “accurate factual 6 information regarding the [f]unds . . . on a continued basis.” Dkt. 48 at 15. Leader Capital 7 contends FNEX’s alleged damages are implausible because Leader Capital “publicly 8 remedied the error by . . . reimbursing the fund.” Dkt. 52 at 10. 9 As discussed above with respect to Leader Capital’s claim, the implied covenant 10 of good faith and fair dealing claim allows the Court to infer contract terms to “ensure the 11 parties’ reasonable expectations are fulfilled.” Kuroda, 971 A.2d at 888 (citation 12 modified). A claim invoking the implied covenant must allege “a specific implied 13 contractual obligation and . . . how the violation of that obligation denied the plaintiff the 14 fruits of the contract.” Id. 15 FNEX has not sufficiently pled that it was injured by Leader Capital’s alleged 16 violation of the implied covenant. FNEX asserts it incurred costs and fees in correcting 17 the inaccurate information, but fails to articulate “a contractual benefit [it] was denied as 18 a result.” Kuroda, 971 A.2d at 887. Its counterclaim is conclusory. 19 Leader Capital’s motion to dismiss FNEX’s breach of the implied duty of good 20 faith and fair dealing claim is GRANTED. 21 22 1 FNEX may amend its counterclaim, however, to address these deficiencies. 2 Allowing amendment here would not prejudice Leader Capital, and there is no claim or 3 evidence of bad faith or undue delay. Corinthian Colls., 655 F.3d at 995.

4 E. The Court will not rule on Leader Capital’s motion to dismiss FNEX’s abuse of process counterclaim. 5 FNEX initially asserted an abuse of process counterclaim, alleging Leader Capital 6 “improperly used legal process by filing a securities fraud claim knowing it to be 7 baseless.” Dkt. 48 at 13–14. Leader Capital dismissed its securities fraud claim, Dkt. 36 8 at 1, and later moved to dismiss FNEX’s abuse of process counterclaim under 9 Washington’s “anti-SLAPP” statute6, Dkt. 53. FNEX subsequently dismissed its abuse of 10 process claim. Dkt. 57. 11 Leader Capital insists the Court still rule on its motion to dismiss the abuse of 12 process claim, Dkt. 53, arguing it is entitled to a ruling notwithstanding FNEX’s 13 voluntary dismissal of the counterclaim. Dkt. 59 (citing RCW 4.105.060(2)). 14 RCW 4.105.060(2) provides, “A voluntary dismissal without prejudice of a 15 responding party’s cause of action . . . that is the subject of” an anti-SLAPP motion “does 16 not affect a moving party’s right to obtain a ruling on the motion.” 17 FNEX’s counterclaim was predicated on Leader Capital’s securities fraud claim. 18 When Leader Capital voluntarily dismissed its claim, FNEX did the same. There is no 19 longer an underlying communication in a judicial proceeding at issue here. The Court 20 21 6 The Uniform Public Expression Protection Act constitutes Washington’s anti-SLAPP 22 (strategic lawsuit against public participation) statute. RCW Chapter 4.105. 1 will not rule on Leader Capital’s motion to dismiss FNEX’s abuse of process 2 counterclaim. 3 II. ORDER

4 Leader Capital has not sufficiently pled its breach of contract, breach of the 5 implied duty of good faith and fair dealing, and intentional interference claims. FNEX’s 6 motion to dismiss these claims is GRANTED. FNEX has not sufficiently pled its breach 7 of the implied duty of good faith and fair dealing counterclaim. Leader Capital’s motion 8 to dismiss this claim is GRANTED. These claims are DISMISSED without prejudice

9 and with leave to amend. Any amended complaint must be filed within 21 days of this 10 Order, and any amended answer must be filed within 14 days thereafter. 11 FNEX’s damages counterclaim for the costs and fees incurred in informing 12 customers of the NAV error is plausible. Leader Capital’s motion to dismiss on that claim 13 is DENIED.

14 IT IS SO ORDERED. 15 Dated this 16th day of January, 2026. A 16 17 BENJAMIN H. SETTLE 18 United States District Judge

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