Clarke v. TRIGO U.S.

Background

Steven M. Clarke and SSD Clarke Holdings, Inc. sued TRIGO U.S., Inc. and TRIGO Holdings S.AS. concerning earn-out payments under an agreement for TRIGO’s purchase of Supplier Management Solutions, LLC. The court had previously allowed two breach-of-contract claims against TRIGO to proceed, while dismissing claims against TRIGO’s corporate parent and a claim for breach of the implied promise of good faith and fair dealing.

The two surviving contract theories alleged that TRIGO impaired the earn-out payments by failing to provide promised quality-management services and by requiring Supplier Management Solutions to slow business development and stop pursuing a contract with L3Harris. TRIGO also asserted a counterclaim alleging that SSD breached an obligation to repay a $2 million earn-out advance and that Clarke breached his personal guarantee of repayment.

After new counsel appeared, plaintiffs sought to amend their complaint. The proposed amendment would combine the two existing contract claims and add fraudulent-inducement claims concerning both the purchase agreement and Clarke’s personal guarantee. It also sought to add Matthieu Rambaud and Emmanuel Marquis, described in the opinion as individual officers of TRIGO and its corporate parent, as defendants on the fraud claims.

Legal standard

Under Rule 15(a)(2) of the Federal Rules of Civil Procedure, a court generally should allow an amended pleading when justice requires, unless there is undue delay, bad faith, unfair prejudice, or futility. An amendment is futile when the proposed claim could not survive a motion to dismiss. The party opposing the amendment bears the burden of showing futility.

Amendment of the contract claim

The court allowed plaintiffs to combine the two previously upheld breach-of-contract theories into one claim against TRIGO. The court found no apparent bad faith, delay tactic, or prejudice to TRIGO. It also found that the amendment would not expand discovery or cause additional motion practice.

Proposed fraud claim concerning the purchase agreement

The court denied leave to add the proposed fraudulent-inducement claim concerning the purchase and sale agreement. Applying New York law, the court held that the proposed fraud claim duplicated the breach-of-contract claim because it was based on the same alleged failure to perform promises addressed by the agreement’s earn-out provisions. The court also stated that representations made by TRIGO’s officers on TRIGO’s behalf did not avoid the duplication problem.

The court separately held that the proposed claim did not plead fraud with the particularity required by Rule 9(b). That rule requires a fraud claim to identify the allegedly fraudulent statements, who made them, where and when they were made, and why they were fraudulent. The proposed complaint referred generally to statements by “Defendants,” covered a broad period, and did not identify the speaker, specific time and place, or method of communication for the alleged representations.

Proposed fraud claim concerning the personal guarantee

The court also denied leave to add the proposed fraudulent-inducement claim concerning Clarke’s personal guarantee. The court described the guarantee as clear, absolute, unconditional, and irrevocable. It required Clarke to guarantee payment of specified obligations and expressly waived defenses based on the validity or enforceability of the guarantee and on representations by TRIGO that could alter his risk.

Relying on New York law, the court concluded that the guarantee’s language barred the proposed fraud defense. The court also found this proposed claim insufficient under Rule 9(b) because it did not identify the particular speaker, time, place, or circumstances of the alleged false statements.

Disposition

The court granted the motion to amend in part, allowing plaintiffs to file the proposed First Claim for Relief for breach of contract against TRIGO. The amended complaint had to be filed within seven days, and TRIGO had to answer within 14 days after filing. The court otherwise denied the motion to amend and directed the clerk to terminate the motion.