Exceed Talent Capital, LLC v. Banks

Background

Exceed Talent Capital’s amended complaint asserted a common-law fraud claim, Count II, against Durk Derrick Banks and other defendants. Exceed alleged that Andrew Bonsu and the corporate defendants—Only the Family Entertainment, Inc., OTF Label, and TTPMG, LLC—misrepresented their authority to convey revenue rights and induced Exceed to enter a contract. Exceed alleged that Bonsu and the corporate defendants acted as Banks’s agents and within their actual or apparent authority.

Banks moved to dismiss the fraud claim. He argued that the claim was duplicative of Exceed’s breach-of-contract claim and that the amended complaint did not plead the alleged misrepresentation or the defendants’ state of mind with the particularity required by Federal Rule of Civil Procedure 9(b). Judge Lehrburger issued a report and recommendation recommending dismissal of the fraud claim with leave to amend. The recommendation concluded that the fraud claim was not duplicative because it involved an alleged pre-contract misrepresentation intended to induce Exceed to enter the contract.

Issues and review of the recommendation

Banks objected to the recommendation’s conclusion that the fraud claim was not duplicative. He also argued that amendment would be futile because the alleged fraud was not attributed to him and Exceed had already had opportunities to identify him as the person who made a pre-contractual misrepresentation.

The district court reviewed the unobjected-to portion of the recommendation for clear error and reviewed the challenged portion under the applicable standard for specific objections. The court found no clear error in the recommendation that the fraud claim lacked the particularity required by Rule 9(b).

Court’s reasoning

The court adopted the recommendation to dismiss the fraud claim because the amended complaint did not plead the alleged fraud with sufficient particularity. Because that defect independently required dismissal, the court declined to decide whether the fraud claim was duplicative of the breach-of-contract claim. The court therefore did not adopt the recommendation’s analysis of duplication.

The court rejected Banks’s argument that amendment would necessarily be futile. Under the agency principles discussed in the opinion, a principal may be liable for an agent’s acts within the scope of actual or apparent authority, including alleged fraud or misrepresentation. Exceed alleged that Bonsu and the corporate defendants acted as Banks’s agents in the transaction and while inducing Exceed to enter the contract. The court emphasized that this did not mean the existing complaint adequately pleaded agency or fraud; it meant only that the court could not determine that a properly amended claim against Banks would be futile.

Disposition

The court overruled Banks’s objections in part and adopted the report and recommendation in its entirety except for the conclusion and supporting analysis that the fraud claim was not duplicative. It dismissed Count II as to Banks without prejudice, granted Exceed leave to file a second amended complaint solely to cure the identified deficiencies, and set a 30-day deadline from the date of the order. The Clerk of Court was directed to terminate Banks’s motion at Docket No. 33.