FCX Solar, LLC v. FTC Solar, Inc.

Background

FCX Solar, LLC alleged that it shared intellectual property concerning a passive load-sharing damper with FTC Solar, Inc. under a nondisclosure agreement. After FCX believed FTC’s Voyager Tracker used that technology, the parties entered a Consulting Agreement and a License Agreement. FCX alleged that it accepted a relatively low hourly consulting rate because it expected to receive substantial compensation through royalties under the License Agreement.

FTC initially paid FCX more than $1.4 million in royalties, according to the complaint. The parties later disagreed about milestone payments and whether FTC’s trackers were covered by the License Agreement. FTC stopped making royalty payments and asserted that its dampers did not infringe the relevant patents. FCX brought claims for breach of contract, fraudulent inducement of the Consulting Agreement, and unjust enrichment.

FTC moved under Federal Rule of Civil Procedure 12(b)(6), which asks whether a complaint alleges enough facts to state a legally plausible claim. FTC sought dismissal of the fraud and unjust-enrichment claims. FTC had also initially sought a more definite statement concerning the breach-of-contract claim, but the parties agreed to limited interrogatories, making that part of the request moot.

Fraudulent Inducement

The court applied New York law because it found no meaningful difference between New York and Delaware law for the fraud claim. To plead fraud, FCX had to allege, among other things, a material false statement that FTC knew was false when it made it. Federal Rule of Civil Procedure 9(b) also required FCX to describe the alleged fraud with particularity, including what was said, who said it, when and where it was said, and why it was fraudulent.

FCX relied on statements indicating that FTC was aligned with FCX’s concerns about an overlap between the Voyager Tracker and FCX’s intellectual property. FCX argued that FTC secretly planned to deny that the tracker used FCX’s intellectual property and made the earlier statements to induce FCX to enter the Consulting Agreement.

The court held that FCX had not pleaded enough facts to plausibly show that FTC knew its statements were false when made. The complaint’s main support for FTC’s alleged secret belief was FTC’s later change in position in December 2020. The court stated that the allegations instead suggested the parties shared an understanding that the Voyager Tracker incorporated at least some FCX intellectual property, and that FTC’s royalty payments and related communications undercut the theory that FTC had been secretly lying in 2018 or 2019. The court therefore granted FTC’s motion to dismiss the fraud claim.

Unjust Enrichment

The court also applied New York law to the unjust-enrichment claim, finding no material difference between New York and Delaware law. Unjust enrichment generally requires allegations that the defendant received a benefit at the plaintiff’s expense and that fairness requires repayment. Under New York law, such a claim generally cannot proceed when a valid contract governs the same subject, although it may be pleaded alternatively when the contract’s validity or enforceability is disputed.

FCX offered three theories for why its unjust-enrichment claim should proceed: that the Consulting Agreement was invalid because of fraudulent inducement; that the consulting services themselves supported unjust enrichment; and that the parties might have acted under a mutual mistake or innocent misrepresentation. The court rejected each theory. The first two depended on the fraud claim, which the court dismissed. The third lacked supporting facts, and FCX’s allegations were based on an asserted intentional secret belief rather than a mistake. Because FCX had not adequately alleged that the Consulting Agreement was invalid, the court held that unjust enrichment, a claim based on obligations implied by law rather than an express contract, could not apply.

Disposition

The court granted FTC Solar, Inc.’s motion to dismiss FCX Solar, LLC’s fraud and unjust-enrichment claims. The opinion did not add a “with prejudice” or “without prejudice” qualifier. The court directed the Clerk of Court to terminate the motion at docket entry 12.