Submitted: December 8, 2014
Upon Defendants' Motion to Dismiss Plaintiffs' Complaint, GRANTED.
Gregory D. Stewart, Esquire, Law Office of Gregory D. Stewart, P.A., Wilmington, Delaware, Attorney for Plaintiff.
Brian M. Gottesman, Esquire (argued), Michael W. McDermott, Esquire, Suzanne H. Holly, Esquire, Berger Harris LLP, Wilmington, Delaware, Attorneys for Defendants.
MEMORANDUM OPINION AND ORDER
PAUL R. WALLACE, JUDGE.
Before the Court is Defendants Gianmarco Martuscelli, Gilda Martuscelli, the Estate of Brett J. Harris, Frozen Endeavors, Inc., AJT, Inc., and Chesapeake Inn, Inc.'s (collectively the "Defendants") motion to dismiss. Plaintiffs Agnieszka Kostyszyn and Marek Kostyszyn (together the "Plaintiffs") currently own and operate Paciugo Gelato and Café ("Paciugo"). They purchased the business from Defendants and now allege that Defendants committed fraud during its sale and have breached their duties under the sale's agreement. Because the Plaintiffs have failed to meet the required pleading standards for all claims, the Court GRANTS the Defendants' motion to dismiss.
II. Facts and Procedural Background
In late 2011, Plaintiffs approached the owners of Paciugo about the possibility of opening up a franchise. Plaintiffs met with Gianmarco Martuscelli ("Mr. Martuscelli"), principal of Frozen Endeavors, Inc. ("Endeavors"), and B.J. Harris (now deceased). Messrs. Martuscelli and Harris presented Plaintiffs with a profit statement for Paciugo ranging from July 2010 to August 2011. The profit statement reflects a profit ("net with payroll") of $7, 186.21 and details Paciugo's retail sales, catering sales, rent cost, insurance cost, ingredient costs, royalties paid, and payroll for those months.
On December 1, 2011, Plaintiffs purchased Paciugo from Endeavors for $272, 500, which they paid in three installments. The Martuscellis were not a party to the Agreement of Sale ("Agreement"); only Plaintiffs and Endeavors signed the contract. The contract provided, in part, that Mr. Martuscelli's other businesses, Chesapeake Inn ("Chesapeake") and Canal Creamery & Sweet Shoppe ("Creamery"), and Mr. Martuscelli's parents' business, La Casa Pasta, would continue purchasing gelato from Paciugo. Section 5(d) of the agreement states:
Seller shall continue to purchase gelato for Chesapeake Inn, Canal Creamery & Sweet Shoppe and La Casa Pasta for a period of ten years so long as Buyer does not breach its obligations under this Agreement or the companion note and security agreement or Buyer's lease with Christiana Mall, LLC.
The present dispute arose when Paciugo's sales declined after Plaintiffs purchased the business. Plaintiffs claim that gelato sales to Chesapeake, La Casa Pasta, and the Creamery immediately dropped in 2012 to $18, 475 and further declined in 2013 to $3, 300. The Creamery reportedly stopped purchasing altogether from Paciugo in April 2013 when Mr. Martuscelli, who held a three-year lease for the Creamery, sold his interest in the business prior to the termination of the lease. In an email exchange with the Plaintiffs, Mr. Martuscelli explained he never owned but only had a lease on the Creamery, and that he sold his interest because the Creamery had been losing money for the preceding two years. In that email, Mr. Martuscelli wrote:
I lost money at Paciugo and the Creamery but I tried to [sic] my best and it wasn't good enough. BJ and I sold Paciugo because we were both losing too much money (BJ lost all his savings and had nothing left). We sold you the business while still owing the bank over $70k in a loan that I just finished paying off this year. We didn't make any money from you or anything associated with Paciugo. We were absentee owners who couldn't afford to pay the bills any longer.
After receiving that email, Plaintiffs commenced this suit in the Court of Chancery, alleging both equitable and legal claims. The Court of Chancery dismissed the Plaintiffs' equitable fraud claim with prejudice and dismissed the remaining legal claims without prejudice for lack of subject matter jurisdiction. Plaintiffs now bring legal claims they enumerate as follows: (1) Breach of Contract; (2) Breach of Warranty; (3) Indemnification; (4) Fraud; (5) Negligent ...