Hawke Media, LLC v. Stable Group Holdings, LLC, The

Background

Hawke Media, LLC and The Stable Group Holdings, LLC signed a mutual nondisclosure agreement in May 2020 to facilitate discussions about a possible acquisition. Hawke alleged that it provided Stable with confidential business information, including financial, employee, compensation, client, revenue, and profitability information.

Hawke alleged two related sets of facts. First, it claimed Stable misused the confidential information for Stable’s benefit, supporting a breach-of-contract claim. Second, it claimed Stable never genuinely intended to acquire Hawke and instead used the acquisition discussions as a ruse to obtain information and solicit Hawke’s employees and clients, supporting a fraud claim.

Jurisdiction and Other Preliminary Issues

The case was filed under diversity jurisdiction. Because both parties are limited liability companies, their citizenship depends on the citizenship of their members. The original complaint did not adequately allege Stable’s citizenship. After the court ordered Hawke to address that issue, Hawke alleged that Accenture was Stable’s only member and that Accenture was incorporated under Delaware law with its principal place of business in Illinois.

The court noted that the public filings contained inconsistent information about Stable’s membership. At the hearing, Stable’s counsel represented that Accenture became Stable’s sole member on February 28, 2023, before Hawke filed this case, and remained the sole member through filing. The court found that this representation, together with the amended complaint’s allegations, was enough at this stage to establish subject-matter jurisdiction. The court directed the parties to alert it if discovery later cast doubt on those facts or on jurisdiction.

Stable also asked the court to consider a California complaint and six Stable press releases under Federal Rule of Evidence 201, which permits courts to recognize certain facts that are not reasonably disputable. The court declined. Stable did not explain the California complaint’s relevance to the dismissal motion, and using the press releases to draw inferences favoring Stable would conflict with the rule that a court generally accepts the complaint’s factual allegations as true and draws reasonable inferences for the plaintiff when reviewing a dismissal motion.

The court found that Stable violated the District of Minnesota’s meet-and-confer requirement. Stable did not file the required statement with its motion, and the communications it cited occurred before this case was filed or did not address the fraud claim and the motion to dismiss it. The court nevertheless declined to deny the motion on that basis because Hawke did not ask for that result and the record showed that the parties genuinely disagreed about the motion’s merits.

Fraud Claim

Stable moved under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not state a legally sufficient claim. Because Hawke alleged fraud, Federal Rule of Civil Procedure 9(b) also required Hawke to plead the circumstances of the alleged fraud with particularity, including who made the statements, what they said, where and when they said it, and how the fraud occurred.

The court found that Hawke adequately identified the general theory of its fraud claim. Hawke identified Stable employees Nik Larsen and Chad Hetherington as the people who allegedly represented that Stable was interested in acquiring Hawke. Hawke alleged that the representations began in May 2020, were made verbally and by email, and were intended to induce Hawke to share confidential information.

The court found, however, that Hawke did not allege particular facts plausibly showing fraudulent intent. Hawke repeatedly alleged that Stable and its employees never intended to acquire Hawke, but those allegations were conclusions rather than facts explaining how or why Stable’s conduct showed an intent to deceive. The court emphasized that a breach-of-contract claim can coexist with a fraud claim, but the allegations here did not provide enough factual support to distinguish the fraud claim from an ordinary contract dispute.

Disposition

The court GRANTED The Stable Group Holdings, LLC’s motion to dismiss Hawke Media, LLC’s second cause of action for fraud. The court DISMISSED that fraud claim without prejudice. The order did not rule on Hawke’s breach-of-contract claim.