Scowcroft Group, Inc. v. Toreador Resources Corp.

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

) THE SCOWCROFT GROUP, INC., ) ) Plaintiff, ) ) v. ) Civil Action No. 09-1107 (RMC) ) TOREADOR RESOURCES CORP., ) ) Defendant. ) )

MEMORANDUM OPINION

The Scowcroft Group, Inc., a Maryland corporation with its principal place of

business in Washington, D.C., brings this action against Toreador Resources Corp., a Delaware

corporation with its principal place of business in Dallas, Texas.1 Plaintiff alleges that it entered into

a contract for services with Defendant on December 7, 2007, and that Defendant breached that

contract by failing to pay the agreed upon fees upon completion of the services. On June 17, 2009,

Plaintiff filed this action against Defendant, seeking relief on theories of breach of contract, unjust

enrichment or quantum meruit, and fraud. Defendant moves to dismiss.

I. FACTS

Plaintiff alleges that in September 2007 it entered into a Retainer and Consulting

Agreement with Defendant, pursuant to which Plaintiff would assist and advise Defendant in its

business operations in Turkey, Hungary, and Romania. See Compl. [Dkt. # 1] ¶ 8. At that time,

Defendant held a partial ownership interest in an offshore natural gas concession called the South

1 The Court has diversity jurisdiction over this action pursuant to 28 U.S.C. § 1332. Akcakoca Sub-Basin project and associated licenses (collectively, “SASB”). Id. ¶ 9. Defendant was

in contact with Petrol Ofisi, a private Turkish oil company, about the possibility of Petrol Ofisi

purchasing SASB. Id. ¶ 10. Petrol Ofisi is 50% owned by the Dogan Group (“Dogan”), a Turkish

company. Id. ¶ 9.

In November 2007, Defendant asked Plaintiff to “assist in facilitating the sale of

SASB by identifying Turkish companies that might be interested in purchasing SASB and make [sic]

the necessary introductions.” Id. ¶ 11. Plaintiff alleges that on December 7, 2007, the parties

entered into a contract (the “Contract”) whereby Defendant would pay Plaintiff “a success fee of

1.5% of the value of each transaction” completed as a result of Plaintiff’s introductions and

assistance. Id. ¶ 13; Def.’s Mot. to Dismiss (“Def.’s Mot.”) [Dkt. # 7], Ex. 1 (Dec. 7, 2007

Contract). The Contract provided that Defendant would not pay a success fee on any investment in

SASB by Petrol Ofisi, either alone or with Dogan, but Defendant would pay a success fee on an

investment by Dogan, either alone or in conjunction with Petrol Ofisi. See Compl. ¶¶ 12, 14; Def.’s

Mot., Ex. 1.

Plaintiff alleges that it performed work beyond the scope of the Contract’s terms,

including “structuring the sale of SASB to Petrol Ofisi (the ‘SASB Transaction’),” “obtaining

necessary Turkish government approvals for the SASB Transaction,” and “ensuring the Turkish

Ministry of Energy’s endorsement of the SASB Transaction and the rapid governmental approval

of the SASB Transaction.” Compl. ¶ 15. Plaintiff also alleges that in October 2008, due to this

additional work and the fact that Defendant requested further assistance with respect to the SASB

Transaction, Plaintiff proposed that Defendant pay Plaintiff the 1.5% success fee on the full proceeds

of the SASB Transaction which, as defined by Plaintiffs, consisted of the sale of SASB to Petrol

-2- Ofisi. See id. ¶¶ 15, 16.

According to Plaintiff, on November 6, 2008, Defendant “agreed to pay the full 1.5%

success fee upon the closure of the SASB Transaction.” Id. ¶ 17. Defendant allegedly made this

representation twice more, in writing – once on December 15, 2008, and once on January 22, 2009.

Id. ¶¶ 18 & 20. Plaintiff alleges that it relied on these representations from Defendant and, as a

result, continued to provide services to Defendant under the Contract, including “convincing the

Dogan management to close the deal.” Id. ¶¶ 17-20.

The SASB Transaction closed on March 9, 2008, for $55 million. See id. ¶ 21. As

a result, Plaintiff alleges, Defendant owes Plaintiff $825,000. Id. Plaintiff requested partial payment

from Defendant on March 9, 2008, and April 9, 2009. Id. ¶¶ 22-23. Plaintiff alleges that on May

11, 2009, Defendant refused to pay Plaintiff for services performed under the Contract. Id. ¶ 24.

This lawsuit followed.

Plaintiff alleges claims based on theories of breach of contract, unjust enrichment,

and fraud. See id. Counts I, II, and III. Defendant moves to dismiss, arguing 1) that by the express

terms of the Contract, Plaintiff is not entitled to any fee; 2) that Plaintiff cannot state a claim for

unjust enrichment where there is an express contract between the parties, and; 3) that Plaintiff failed

to state its claim for fraud with particularity. See generally Def.’s Mot. For the reasons set forth

below, Defendant’s motion will be denied.

II. LEGAL STANDARDS

A. Rule 12(b)(6)

A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges

the adequacy of a complaint on its face, testing whether a plaintiff has properly stated a claim.

-3- Federal Rule of Civil Procedure 8(a) requires that a complaint contain “a short and plain statement

of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a). A complaint must

be sufficient “to give a defendant fair notice of what the . . . claim is and the grounds upon which

it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted).

Although a complaint does not need detailed factual allegations, a plaintiff’s obligation to provide

the grounds of his entitlement to relief “requires more than labels and conclusions, and a formulaic

recitation of the elements of a cause of action will not do.” Id. The facts alleged “must be enough

to raise a right to relief above the speculative level.” Id. Rule 8(a) requires an actual showing and

not just a blanket assertion of a right to relief. Id. at 555 n.3. “[A] complaint needs some

information about the circumstances giving rise to the claims.” Aktieselskabet Af 21. Nov. 2001 v.

Fame Jeans, Inc., 525 F.3d 8, 16 n.4 (D.C. Cir. 2008) (emphasis in original).

In deciding a motion under Rule 12(b)(6), a court may consider the facts alleged in

the complaint, documents attached to the complaint as exhibits or incorporated by reference, and

matters about which the court may take judicial notice. Abhe & Svoboda, Inc. v. Chao, 508 F.3d

1052, 1059 (D.C. Cir. 2007). To survive a motion to dismiss, a complaint must contain sufficient

factual matter, accepted as true, to state a claim for relief that is “plausible on its face.” Twombly,

550 U.S. at 570. When a plaintiff pleads factual content that allows the court to draw the reasonable

inference that the defendant is liable for the misconduct alleged, then the claim has facial

plausibility. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). “The plausibility standard is not akin

to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted

unlawfully.” Id.

A court must treat the complaint’s factual allegations as true, “even if doubtful in

-4- fact.” Twombly, 550 U.S. at 555. But a court need not accept as true legal conclusions set forth in

a complaint. Iqbal, 129 S. Ct. at 1949. “Threadbare recitals of the elements of a cause of action,

supported by mere conclusory statements, do not suffice.” Id. “While legal conclusions can provide

the framework of a complaint, they must be supported by factual allegations. When there are well-

pleaded factual allegations, a court should assume their veracity and then determine whether they

plausibly give rise to an entitlement to relief.” Id. at 1950.

B. Rule 9(b)

While Federal Rule of Civil Procedure 8 requires that every complaint include “a

short and plain statement of the claim showing that the pleader is entitled to relief,” Fed. R. Civ. P.

8(a), Rule 9(b) provides a heightened pleading standard for a party alleging fraud or mistake; it

requires any such party to “state with particularity the circumstances constituting fraud or mistake.

Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Fed.

R. Civ. P. 9(b). The Court of Appeals for the District of Columbia Circuit has noted that these rules

are not contrary to one another, but should be considered jointly. See United States ex rel. Williams

v. Martin-Baker Aircraft Co., 389 F.3d 1251, 1256 (D.C. Cir. 2004).

[T]his means that the pleader must state the time, place and content of the false misrepresentations, the fact misrepresented and what was obtained or given up as a consequence of the fraud. The rule serves to discourage the initiation of suits brought solely for their nuisance value, and safeguards potential defendants from frivolous accusations of moral turpitude. . . . And because “fraud” encompasses a wide variety of activities, the requirements of Rule 9(b) guarantee all defendants sufficient information to allow for preparation of a response.

United States ex rel. Joseph v. Cannon, 642 F.2d 1373, 1385 (D.C. Cir. 1981) (internal quotation

marks and citations omitted). A plaintiff must specifically “identify the individuals allegedly

-5- involved in the fraud.” Williams v. Martin-Baker Aircraft Co., 389 F.3d at 1256. Additionally,

while Rule 9 allows “[m]alice, intent, knowledge, and other conditions of a person’s mind [to] be

alleged generally,” “‘generally’ is a relative term. In the context of Rule 9, it is to be compared to

the particularity requirement applicable to fraud or mistake. Rule 9 merely excuses a party from

pleading discriminatory intent under an elevated pleading standard.” Iqbal, 129 S. Ct. at 1954.

III. ANALYSIS

A. Count I – Breach of Contract

Plaintiff alleges that, pursuant to the Contract, Defendant is obligated to pay it a 1.5%

“success fee on any investment made by the Dogan Group, either alone or jointly with Petrol Ofisi,”

Compl. ¶ 14, and that Defendant has breached the Contract. Id. ¶ 27. In full, however, the relevant

provision of the agreement states:

We understand that Toreador has already had indirect contact with Petrol Ofisi, in which the Dogan group is a significant shareholder, and that Toreador would not expect to have to pay a success fee if Petrol Ofisi is an investor, either alone or jointly with the Dogan Group. However, Toreador would pay The Scowcroft Group a success fee on any investment made by the Dogan Group, either alone or jointly with Petrol Ofisi.

Def.’s Mot., Ex. 1.2 Plaintiff acknowledges that it agreed to these terms. See Compl. ¶ 12. Thus,

Defendant argues that Plaintiff is not entitled to a success fee under the explicit terms of the contract

because the transaction with which Plaintiff assisted was “the sale of SASB to Petrol Ofisi,” not the

2 The Court may consider documents “incorporated by reference in the complaint” or “upon which the plaintiff’s complaint necessarily relies even if the document is not produced by the plaintiff in the complaint but by the defendant in a motion to dismiss.” See Hinton v. Corr. Corp. of Am., 624 F. Supp. 2d 45, 46 (D.D.C. 2009) (citing Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998) and Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47-48 (2d Cir. 1991)) (internal citations and quotation marks omitted).

-6- Dogan Group. See Def.’s Mot. at 7; Compl. ¶¶ 15 (defining the “SASB Transaction” as “the sale

of SASB to Petrol Ofisi”) & 21 (alleging that Defendant completed the SASB Transaction as a result

of Plaintiff’s service).

The Court finds that the Contract is ambiguously worded – the two sentences relevant

to this claim appear to at least partially contradict one another. In deciding a Rule 12(b)(6) motion

to dismiss, the Court must take all allegations contained in the Complaint as true to determine if they

state a “plausible” claim for relief. See Twombly, 550 U.S. at 555, 570. Despite the fact that

Plaintiff itself defined the transaction that underlies this lawsuit as a sale “to Petrol Ofisi,” it is not

entirely clear that Dogan Group was not an investor. For example, Plaintiff alleges that it “took on

the critical role of convincing the Dogan management to close the deal and, due to the Scowcroft

Group’s diligence and action, Dogan agreed to continue with the SASB Transaction.” Compl. ¶ 19.

Furthermore, both parties acknowledge that the Dogan Group holds a substantial ownership interest

in Petrol Ofisi. See id. ¶ 9 (“Petrol Ofisi, a private Turkish oil company, was and is 50% owned by

the Dogan Group[.]”); Def.’s Mot., Ex. 1 (“[T]he Dogan Group is a significant shareholder [in Petrol

Ofisi].”). Giving Plaintiff the benefit of the doubt and accepting its allegations as true, the Court

cannot find at this stage that Plaintiff has failed to state a claim for breach of contract.3

3 In its Opposition to Defendant’s Motion to Dismiss, Plaintiff argues that the parties modified the terms of the Contract and that it is on this basis that Plaintiff is entitled to the 1.5% success fee. In the Complaint, however, although Plaintiff alleges that on two separate occasions Defendant represented unequivocally and in writing that it would pay Plaintiff “the full 1.5% success fee upon the closure of the SASB Transaction,” Compl. ¶¶ 18 & 20, Plaintiff never suggests that these representations served to modify the Contract, which it explicitly defines as the December 7, 2007 agreement. See Compl. ¶ 13. At this stage, the allegations in the Complaint control and the Court will not consider a theory Plaintiff has not alleged therein.

-7- B. Count II - Unjust Enrichment/Quantum Meruit

Under District of Columbia law, “there can be no claim for unjust enrichment when

an express contract exists between the parties.” Schiff v. Am. Ass’n of Retired Persons, 697 A.2d

1193, 1194 (D.C. 1997); see also Albrecht v. Comm. on Employee Benefits of the Fed. Reserve

Employee Benefits Sys., 357 F.3d 62, 69 (D.C. Cir. 2004) (finding that there can be no claim for

unjust enrichment when the claim relies on the terms of an express contract between the parties).

Under the Federal Rules of Civil Procedure, however, a plaintiff may plead alternative theories of

recovery. See Fed. R. Civ. P. 8(d). Courts in this District have found that a plaintiff should be

permitted to plead both breach of contract and unjust enrichment. See McWilliams Ballard, Inc. v.

Broadway Mgmt. Co., 636 F. Supp. 2d 1, 21 n.10 (D.D.C. 2009) (finding that while “plaintiff

ultimately cannot recover under both a breach of contract claim and an unjust enrichment claim

pertaining to the subject matter of that contract . . . at [the pleadings stage], plaintiff’s unjust

enrichment claim is an alternate theory of liability which it may pursue”); Nevius v. Afr. Inland

Mission Int’l, 511 F. Supp. 2d 114, 122 n.6 (D.D.C. 2007) (finding that, in light of Federal Rule of

Civil Procedure 8(d), “[t]he court is not persuaded . . . that [Plaintiff] cannot allege an express

contract while asserting a claim for unjust enrichment, a remedy designed for the absence of a

contract”). Such a conclusion is in the interest of justice — to find that a plaintiff may not plead

unjust enrichment where he or she also has alleged a breach of contract could leave that plaintiff

without any remedy should the fact-finder determine at a later stage that there was no express

agreement between the parties. See Fed. R. Civ. P. 8(e) (“Pleadings must be construed so as to do

justice.”).

-8- C. Count III – Fraud

Finally, Defendant argues that Plaintiff has not plead its claim of fraud with the

particularity required by Federal Rule 9(b). “To plead fraud with particularity, the plaintiff[] must

specify the circumstances constituting the defendant’s allegedly fraudulent behavior. At common

law, the requisite elements of fraud are (1) a false representation; (2) made in reference to a material

fact; (3) with knowledge of its falsity; (4) with the intent to deceive; and (5) an action that is taken

in reliance upon the representation.” Antoine v. U.S. Bank Nat’l Ass’n, 547 F. Supp. 2d 30, 37

(D.D.C. 2008) (internal citations and quotation marks omitted); Higgs v. Higgs, 472 A.2d 875, 876

(D.C. 1984) (setting forth the “essential elements of fraud”).

Plaintiff alleges that on November 6, 2008, December 15, 2008, and January 22,

2009, Defendant explicitly agreed to pay Plaintiff the 1.5% success fee upon the closure of the SASB

Transaction, and that based on these representations from Defendant, Plaintiff continued to provide

services for Defendant. See Compl. ¶¶ 17, 18, & 20. Plaintiff also alleges that Defendant knew that

its statements were false and made those statements with the intent to deceive. See id. ¶¶ 37-38 and

40-41. Rule 9 allows a plaintiff to plead elements relating to a defendant’s state of mind generally.

See Fed. R. Civ. P. 9(b). Furthermore, although Plaintiff did not specify which individual employed

by or representing Defendant perpetrated the alleged fraud, it specifies the dates and nature of two

of Defendant’s misrepresentations – by letter dated December 15, 2008, and by email dated January

22, 2009. These documents can be incorporated into the Complaint by reference, see Hinton, 624

F. Supp. at 46, and are sufficient to put Defendant on notice of which individuals made the allegedly

false statements.

-9- IV. CONCLUSION

Accordingly, Defendant’s motion to dismiss [Dkt. # 7] will be denied. A

memorializing order accompanies this memorandum opinion.

Date: October 26, 2009 /s/ ROSEMARY M. COLLYER United States District Judge

-10-