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Weinstein v. Luxeyard, Inc.
Superior Court of Delaware
August 23, 2018
BURTON WEINSTEIN, CAROLE NIMEROFF, CEDARVIEW OPPORTUNITIES MASTER FUND, LP, JEFFREY SCHNAPER, NIGEL GREGG, and WILLIAM SHEPPARD et al., Plaintiffs,
LUXEYARD, INC., a Delaware corporation, and AMIR MIRESKANDARI, Defendants.
ORDER GRANTING MOTION OF DEFENDANT AMIR MIRESKANDARI
TO DISMISS HIM FROM THIS ACTION FOR FAILURE TO STATE A CLAIM
AND LACK OF PERSONAL JURISDICTION
M. Davis, Judge.
consideration of the Motion of Defendant Amir Mireskandari to
Dismiss Him From This Action For Failure to State a Claim and
Lack of Personal Jurisdiction (the "Motion") filed
by Defendant Amir Mireskandari; Plaintiffs' Opposition to
Motion of Defendant Amir Mireskandari to Dismiss Him From
this Action for Failure to State a Claim and Lack of Subject
Matter Jurisdiction ("Opposition") filed by
Plaintiffs Burton Weinstein, Carole Nimaroff, Cedarview
Opportunities Master Fund, LP, Jeffrey Schnapper, Nigel
Gregg, and William Sheppard (collectively
"Plaintiffs"); the Court having determined that no
hearing is necessary on the Motion and Opposition; and the
entire record of this civil action,
1. Plaintiffs loaned money to LuxeYard between April 17 and
April 19, 2012.Plaintiffs and LuxeYard executed Promissory
Notes in connection with the loans. All of the Promissory Notes
provide for a ten percent interest rate compounded
annually. The Promissory Notes matured on January
31, 2014. Margot L. Ritcher executed the Promissory
Notes on behalf of LuxeYard as its chief financial
officer. Mr. Mireskandari is one of the founders of
LuxeYard and has served as chairman and as interim chief
executive officer of LuxeYard.
2. Plaintiffs called the Promissory Notes upon
maturity. On February 25, 2014, a representative of
Plaintiffs spoke with Mr. Mireskandari regarding repayment of
the Promissory Notes. Plaintiffs' representative indicated
that Plaintiffs would pursue legal action unless payment was
forthcoming. Mr. Mireskandari stated that LuxeYard
would repay the Promissory Notes with interest
shortly. At the time of this statement, LuxeYard
did not have the financial ability to repay the Promissory
3. On several other occasions in 2014 and 2015, Mr.
Mireskandari said that LuxeYard was collecting funds to pay
the Promissory Notes. Mr. Mireskandari made the same
representation during an in-person meeting with a few of the
Plaintiffs and their representatives on November 20,
2015. Mr. Mireskandari allegedly made the
representations knowing that LuxeYard was not collecting
funds to repay the Promissory Notes. Mr. Mireskandari failed
to respond to any correspondence since the November 20
4. On November 22, 2017, Plaintiffs gave formal notice of a
default requesting all amounts due under the Promissory
Notes. Plaintiffs gave notice of default again
on November 30, 2017. On April 5, 2018, Plaintiffs filed
the complaint ("Complaint") in this civil
litigation. The Complaint alleges: (1) breach of
contract-against LuxeYard; and (2) intentional
misrepresentation-against Mr. Mireskandari. In the Prayer for
Relief, Plaintiffs seek
judgment against LuxeYard and [Mr.] Mireskandari, jointly and
severally, as follows: (a) All principal amounts due, owing,
and outstanding under the Promissory Notes; (b) Accrued
compounded pre-judgment interest at the contractual rate of
10% per annum; (c) Post-judgment interest, all attorneys'
fees and costs incurred in connection with bringing this
action, including, without limitation, the costs incurred in
obtain service and giving notice of these proceedings as
required by law; (d) Such other and further relief as this
Court deems just and proper.
Plaintiffs also seek to pierce the corporate veil and hold
Mr. Mireskandari personally liable for LuxeYard's
5. On June 25, 2018, Mr. Mireskandari filed the Motion. Mr.
Mireskandari argues that Count II-intentional
misrepresentation- is truly a claim of fraud. The damages
for the fraud claim and breach of contract claim are the
same. Therefore, the fraud claim cannot survive and must be
dismissed. Further, any claim for piercing the
corporate veil belongs in the Court of Chancery.
6. On July 10, 2018, Plaintiffs filed the Opposition.
Defendants acknowledge that courts generally do not allow
plaintiffs to pursue separate causes of action for fraud and
breach of contract. But, courts will allow both claims if the
claims are "based on conduct that is separate and
distinct. . . ." Plaintiffs argue that this case
involves separate and distinct conduct. Further, the breach
of contract claim is asserted against LuxeYard while the
intentional misrepresentation claim is against Mr.
Mireskandari. The Plaintiffs also withdrew their request to
pierce the corporate veil and ask the Court to strike
paragraph 39 of the Complaint.
7. Upon a motion to dismiss under Civil Rule 12(b)(6), the
Court (i) accepts all well-pleaded factual allegations as
true, (ii) accepts even vague allegations as well-pleaded if
they give the opposing party notice of the claim, (iii) draws
all reasonable inferences in favor of the non-moving party,
and (iv) only dismisses a case where the plaintiff would not
be entitled to recover under any reasonably conceivable set
of circumstances. However, the Court must "ignore
conclusory allegations that lack specific supporting factual
allegations." "Dismissal is warranted where the
plaintiff has failed to plead facts supporting an element of
the claim, or that under no reasonable interpretation of the
facts alleged could the complaint state a claim for which
relief might be granted."
8. The intentional misrepresentation claim reads as an
attempt to pierce the corporate veil even after striking
paragraph 39 of the Complaint. Mr. Mireskandari is one of the
founders and the principal shareholder of
LuxeYard. Mr. Mireskandari has also served as
chairman and as interim chief executive officer of
LuxeYard. The Complaint seeks "an aggregate
amount of the principal amounts plus interest outstanding,
owing, and continuing to accrue under the Promissory
Notes" for Count II. Plaintiffs seek "judgment
against LuxeYard and Mireskandari, jointly and severally. . .
." All damages alleged under Count II are completely
intertwined with the breach of contract claim. Therefore,
dismissal is appropriate because there is no claim of any
damages specific to the intentional misrepresentation that
are not included in the breach of contract.
9. The Court will allow Plaintiffs leave to amend Count II of
the Complaint. Plaintiffs, however, should take into account
the applicable law regarding the impermissible
"bootstrapping" of a breach of contract claim into
a fraud claim.
IS HEREBY ORDERED that, for the reasons set forth