United States District Court, D. Delaware
filed a complaint alleging breach of contract and fraud in
relation to a contract entered into in 2004. Defendant
responded with a motion to dismiss. (D.I. 11). I referred the
motion to the Magistrate Judge. (D.I. 15). The Magistrate
Judge duly issued a Report and Recommendation, which
recommended denial of the motion. (D.I. 21). Defendant filed
objections (D.I. 22), to which Plaintiff responded. (D.I.
24). I now consider the objections.
review of these objections is de novo. Fed. R. Crv.
reasons given below, I will OVERRULE all
objections, and ADOPT the Magistrate
Judge's Report and Recommendation to the extent it is not
inconsistent with anything stated below. IT IS HEREBY
ORDERED THAT Defendant's Motion to Dismiss for
Failure to State a Claim (D.I. 11) is
little background is helpful. The 2004 contract gives
Plaintiff the right to receive future commissions on various
long-term insurance policies issued by third parties, such as
Allianz. Plaintiff alleges that some of the representations
in the contract were false, with the result that it has
received $36 million less in commissions than it should have.
Plaintiff states that it did not know, and had no reason to
know, of any breach or fraud on the part of Defendant before
October 2009. (D.I. 1, ¶ 59). The parties entered into a
tolling agreement on June 18, 2012. (Id., ¶
60). There was a supplemental tolling agreement in September
2013, which covered additional claims. (Id., ¶
66). Thus, Plaintiff states, its complaint is timely.
motion urged that all claims were barred by the statute of
limitations and that the fraud count was inadequately pled.
The Magistrate Judge concluded that Plaintiff
"adequately alleged that the doctrines of inherently
unknowable injuries and fraudulent concealment apply to the
alleged breach of contract, fraud, and indemnification
claims, " thus tolling the statute of limitations. (D.I.
21 at 15). The Magistrate Judge further concluded that
"as a whole, Lion's complaint adequately pleads the
elements of fraud in accordance with Fed. R. Crv. P. 9(b) and
applicable Delaware law." (Id. at 17).
the facts pled in relation to the statute of limitations
issue in the light most favorable to Plaintiff.
raises three issues in its objections: (1) whether Plaintiff
has successfully pled "fraudulent concealment, "
(2) whether Plaintiff has successfully pled "inherently
unknowable injuries, " and (3) whether the pleadings
establish that Plaintiff was on "inquiry notice."
First, Defendant argues that the statute of limitations
cannot be tolled under fraudulent concealment "unless
the plaintiff pleads an independent act of concealment
separate and apart from the alleged wrongdoing underling its
claims." (D.I. 22 at 3) (emphasis omitted). Defendant
states that Plaintiff did not plead an independent act, so
fraudulent concealment should not apply.
Defendant argues that Plaintiff did not plead an unknowable
injury because the unknowable injury exception only applies
when it would be "practically impossible" for the
claimant to discover the basis for a cause of action.
(Id. at 4). Defendant states that Plaintiffs
complaint does not allege any facts implying, nor does the
Magistrate Judge's report conclude, that Plaintiffs
claims were "practically impossible" to discover.
(Id.). Defendant argues that Plaintiff had the means
of discovering its claims, and the communications that
Plaintiff had with an insurer leading to the discovery of the
alleged wrongdoing could have occurred at any time.
Defendant argues that, even if tolling is adequately pled,
Plaintiff was on inquiry notice in January 2009.
Magistrate Judge properly found that Plaintiff has adequately
pled fraudulent concealment for purposes of tolling. The
complaint alleges Defendant provided to Plaintiff a copy of a
1996 agreement but did not provide a commission schedule that
would have revealed the true state of affairs. This is a
sufficient allegation of concealment independent of the
not certain whether I agree with the Magistrate Judge on the
"inherently unknowable." I agree that Plaintiff
pled that its claims were unknown to it, but I am not sure
that that I would say the claims were "inherently"
unknowable. In light of the fact that one basis for tolling
the statute of limitations is pled, I do not think that I
have to decide each alleged alternative tolling theory. One
is sufficient. Thus, I express no opinion on the
"inherently unknowable" theory.
issue of inquiry notice is fact intensive. Viewing the
pleadings favorably to Plaintiff, I agree with the Magistrate
Judge. I think Plaintiff has alleged that it was not on
inquiry notice. It is an issue on which there ought to be
discovery, and I expect it will be revisited on summary
argues Plaintiffs fraud claim should be dismissed because (1)
it is based on supposed breaches of the 2004 agreement; and
(2) Plaintiff did not plead damages arising from fraud
distinct from those related to its contract claims. (D.I. 22
with the Magistrate Judge that Plaintiff has pled a fraud
theory that includes more than just the allegation that
Defendant breached a duty created by the 2004 contract. I
would treat the allegation of the breach ...