Opinion
No. 218-2015-CV-1406
07-10-2017
DG Whitefield, LLC, et al. v. Cate Street Capital, Inc., et al.
ORDER
The Plaintiffs, DG Whitefield, LLC ("Whitefield") and Indeck Energy-Alexandria, LLC ("Indeck"), brought a complaint against the Defendants, Cate Street Capital, Inc. ("Cate Street"), John Hallé, and Robert Desrosiers, alleging breach of contract against Cate Street (Count I), abuse of process against Cate Street (Count II), violation of the Consumer Protection Act against Cate Street (Count III), malicious prosecution against Cate Street (Count IV), and civil conspiracy against all the Defendants (Count V), and seeking enhanced compensatory damages (Count VI) and attorney's fees and costs (Count VII). Before the Court is the Defendants' Motion to Dismiss. Based on the following, the Motion to Dismiss is GRANTED, as it relates to Count III and V, and DENIED, as it relates to Counts I-II and IV.
The Plaintiffs have also filed suit against Wells Fargo Bank, National Association as a trustee process defendant only. --------
I
In ruling on a motion to dismiss, the Court must determine whether a plaintiff's allegations are "reasonably susceptible of a construction that would permit recovery." Bohan v. Ritzo, 141 N.H. 210, 212 (1996) (quotation omitted). This determination requires the Court to test the facts contained in the complaint against applicable law. Tessier v. Rockefeller, 162 N.H. 324, 330 (2011). In rendering such a determination, the Court "assume[s] the truth of all well-pleaded facts alleged by the plaintiff and construe[s] all inferences in the light most favorable to the plaintiff." Bohan, 141 N.H. at 213 (quotation omitted). "The plaintiff must, however, plead sufficient facts to form a basis for the cause of action asserted." Mt. Springs Water Co. v. Mt. Lakes Vill. Dist., 126 N.H. 199, 201 (1985). A Court "need not accept statements in the complaint which are merely conclusions of law." Id.
II
The following facts are derived from the allegations contained in the Plaintiff's First Amended Complaint. Cate Street and the Plaintiffs are competitors in the "competitive biomass power market," in which "Cate Street knew at all relevant times that Plaintiffs were financially struggling." (Compl. ¶¶ 44, 167.) Cate Street is a developer of a 75 megawatt biomass fueled power plant located in Berlin, New Hampshire known as Berlin Station. (Compl. ¶¶ 40-41.) Both Whitefield and Indeck own and operate wood-fired biomass facilities in New Hampshire. (Compl. ¶¶ 10-11.)
On June 8, 2010, Public Service Company of New Hampshire ("PSNH") and Laidlaw Berlin BioPower, LLC ("LBB") executed a 20-year, $2 billion power purchase agreement ("PPA") for renewable energy certificates ("RECs") and electricity. (Compl. ¶ 45.) "At all relevant times, Cate Street controlled LBB." (Compl. ¶ 46.)
On July 26, 2010, PSNH filed a petition with the New Hampshire Public Utilities Commission ("PUC") to approve the PPA under RSA 362-F. (Compl. ¶ 47.) On August 17, 2010, LBB filed a petition to intervene in the PUC proceeding. (Compl. ¶ 48.) On September 24, 2010, the Plaintiffs and other independent biomass power producers ("Wood IPPs") also petitioned to intervene. (Compl. ¶ 50.) "Numerous other parties also petitioned to intervene, some that supported the Berlin Station Project and others that did not." (Compl. ¶ 50.) "PSNH and LBB objected only to the interventions of those that opposed the Berlin Station Project." (Compl. ¶ 51.) Following a hearing, the PUC granted the Plaintiffs' petition to intervene. (Compl. ¶¶ 53, 59.)
Shortly thereafter, LBB withdrew from the PUC proceeding. (Compl. ¶ 57.) "However, LBB, through Cate Street, continued to work cooperatively with PSNH during the PUC Proceeding." (Compl. ¶ 57.)
"After reviewing the PPA and its supporting testimony, Plaintiffs and the Wood IPPs filed a motion to dismiss PSNH's petition for approval of the PPA, arguing that the PUC did not have the statutory authority to award the requested relief." (Compl. ¶ 60.) The PUC denied the Plaintiffs' motion to dismiss on January 14, 2011. (Compl. ¶ 66.) Following six days of evidentiary hearings, the PUC conditionally approved the PPA on April 18, 2011 in a two-to-one vote, but reduced the PPA's value to $1.3 billion. (Compl. ¶¶ 67-68.) The Plaintiffs allege that during the pendency of the PUC proceeding, Cate Street and Hallé, Cate Street's president, "engaged in improper efforts to assert political pressure on the PUC in order to cause it to approve the PPA as submitted on an expedited basis." (Compl. ¶ 95.)
The Plaintiffs and other Wood IPPs subsequently appealed the PUC's decision to the New Hampshire Supreme Court. (Compl. ¶ 75.) PSNH then moved for summary dismissal of the appeal on August 2, 2011. (Compl. ¶ 85.) On August 18, 2011, the Supreme Court denied PSNH's motion and set the matter for oral argument before the full court. (Compl.¶ 90.) The Plaintiffs allege that after they filed the appeal, "Cate Street waged an aggressive public relations campaign to discredit and shame them into withdrawing it." (Compl. ¶ 105.) "As part of this effort, Cate Street defamed Plaintiffs by publishing ads that portrayed them as engaging in acts of extortion and blackmail." (Compl. ¶ 107.) "The purpose of these public relations efforts and accompanying false statements was to force Plaintiffs to withdraw their Appeal and to wrongfully cause them economic harm." (Compl. ¶ 112.)
During this time, the Plaintiffs and other Wood IPPs, the Defendants, PSNH, PUC staff, and the New Hampshire Department of Economic Development "engaged in extensive settlement discussions to resolve all of the outstanding issues related to the PUC process" with the assistance of the Governor's office. (Compl. ¶ 77.) "These negotiations continued over approximately six weeks and involved significant back and forth between and among the principals and counsel for Plaintiffs, Cate Street and PSNH. Representatives from the Governor's office, DRED and the PUC also continued to participate throughout the negotiations and to provide input and suggestions." (Compl. ¶ 125.) These discussions ultimately culminated in a settlement agreement ("the Settlement Agreement") on August 19, 2011. (Compl. ¶ 92.) Specifically, the parties entered into the Settlement Agreement, a support agreement requiring the Plaintiffs to "support certain legislative interests of PSNH," a REC price support agreement between Whitefield and Cate Street, a REC price support agreement between Indeck and Cate Street, a facility sales option agreement between Whitefield and Cate Street, and five individual PPAs with the Wood IPPs and Indeck. (Compl. ¶ 128.) The PUC subsequently "approved the Settlement Agreement and found that it and the Five PPAs were in the public interest." (Compl. ¶ 131.)
Cate Street entered into the Settlement Agreement upon advice of counsel and released all its claims against the Plaintiffs based upon conduct relating to the Berlin Station Project, the PUC proceedings, and the Supreme Court appeal. (Compl. ¶ 83.) Additionally, one of the Settlement Agreement's requirements was for the Plaintiffs to withdraw their Supreme Court appeal of the PUC's decision. (Compl. ¶ 92.) Because of the withdrawal of the Plaintiffs' appeal, "Cate Street was able to quickly close on the financing for the Berlin Station Project." (Compl. ¶ 93.)
Pursuant to the REC price support agreements and the facility sales option agreement, "and to provide security for the obligations contained therein," Cate Street placed $4.5 million into escrow with Wells Fargo. (Compl. ¶ 139.) All but $1 million of the escrow funds have been released, with the $1 million remaining in escrow "to secure funds that are the subject of a motion to attach." (Compl. ¶ 140.) Cate Street has not made any payments to the Plaintiffs "arising from or related to" the REC price support agreements or the facility option agreement. (Compl. ¶ 141.)
In 2013, Cate Street brought a declaratory judgment action against the Plaintiffs ("the Underlying Litigation") in which it alleged that the price support and sales option agreements, intertwined within the Settlement Agreement the parties had executed in 2011, were void. The Plaintiffs allege that Hallé, knowing the Plaintiffs were "financially pressed," told the investors in the Berlin Station Project that a lawsuit could be filed against the Plaintiffs in order to "increase cash flow and return on investments," and that the Defendants used the Underlying Litigation as a way to address the concerns of their investors and as a "future source of cash to buttress investor returns." (Compl. ¶¶ 187, 194.) The Plaintiffs contend that the Defendants "use aggressive litigation tactics and threats of litigation as a business tool," and that Cate Street, Hallé, and their affiliates have been involved in more than 66 lawsuits since 2005. (Compl. ¶¶ 200, 204.)
In its Order on summary judgment dated April 5, 2016, the Court dismissed all of Cate Street's claims in the Underlying Litigation. Cate Street Capital, Inc. v. DG Whitefield, LLC, Merrimack County Superior Ct., No. 218-2013-cv-734, at 25 (Order, McNamara, J.), 2017 N.H. LEXIS 4 (Apr. 5, 2016). Cate Street appealed that decision to the New Hampshire Supreme Court, which affirmed the dismissal of the Underlying Litigation. Cate Street Capital, Inc. v. DG Whitefield, LLC, 2017 N.H. LEXIS 27 (January 27, 2017); (Compl. ¶¶ 4-5.).
The Plaintiffs filed the instant action during the pendency of the Underlying Litigation. The Defendants now move to dismiss the Plaintiffs' Amended Complaint. The Court addresses the parties' arguments in turn.
III
The Defendants first assert that the Plaintiffs were required to file all their claims, except for the malicious prosecution claim (Count IV), as compulsory counterclaims in the Underlying Litigation. New Hampshire Superior Court Civil Rule 10(a) governs compulsory counterclaims and states as follows:
A pleading shall state as a counterclaim any claim which at the time of serving the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties over whom the court cannot acquire jurisdiction.
The Plaintiffs argue that their claims are not compulsory counterclaims because "they do not arise out of the same 'transactions or occurrences' as those that gave rise to the Underlying Litigation." (Pl.'s Obj. to Def.'s Supplemental Mot. to Dismiss 1, 4.) In Count I, the Plaintiffs allege the filing of the Underlying Litigation constituted a breach of contract. (Compl. ¶ 231.) In Count II, the Plaintiffs allege Cate Street engaged in abuse of process when it initiated the Underlying Litigation. (Compl. ¶ 235.) In Count III, the Plaintiffs allege Cate Street violated the New Hampshire Consumer Protection Act ("CPA") when it filed and pursued the Underlying Litigation. (Compl. ¶ 242.) In Count V, the Plaintiffs allege all the Defendants engaged in a civil conspiracy when they breached their contract with the Plaintiffs, filed and pursued the Underlying Litigation, and violated the Consumer Protection Act, RSA 358-A ("CPA"). (Compl. ¶ 254.) In Count VI, the Plaintiffs seek enhanced compensatory damages against the Defendants. (Compl. ¶ 259.) In Count VII, the Plaintiffs seek attorney's fees and costs. (Compl. ¶ 261.)
The Plaintiffs claims, therefore, arise from the Defendants' filing and pursuit of the Underlying Litigation. The Underlying Litigation, on the other hand, concerned the Settlement Agreement and actions that occurred prior to the execution of the Settlement Agreement. As a result, the Plaintiffs' claims in this action do not arise out of the same transactions or occurrences that formed the basis of the Underlying Litigation. Thus, the Plaintiffs' claims are not compulsory counterclaims. See 412 S. Broadway Realty, LLC v. Wolters, 169 N.H. 304, 314 (2016) (agreeing with those jurisdictions that have held that "generally an abuse of process claim does not arise out of the same transaction or occurrence as the underlying claim"); Parker v. Sadler, No. 1:08-CV-57, 2008 WL 2697376, at *2 (E.D. Tenn. July 1, 2008) ("When a plaintiff files a lawsuit and a defendant files a counterclaim alleging the plaintiff's behavior regarding the filing of the lawsuit was improper, courts have repeatedly held the counterclaim is not compulsory."); but see Pochiro v. Prudential Ins. Co. of Am., 827 F.2d 1246, 1252 (9th Cir. 1987) ("Because we believe that the liberal reading of the 'transaction or occurrence' standard is more in keeping with the pronouncements of the Supreme Court, we now reject the line of cases that has refused to find an abuse of process claim a compulsory counterclaim."). Moreover, Rule 10(a) was not in effect at the time the Underlying Litigation was initiated. The Plaintiffs, therefore, need not have brought their claims as counterclaims in the Underlying Litigation.
The Defendants alternatively argue that even if the Plaintiffs were not required to file their claims as compulsory counterclaims in the Underlying Litigation, they nonetheless fail as a matter of law. The Court addresses each claim in turn.
A. Breach of Contract
The Defendants argue that the Plaintiffs' breach of contract claim is time-barred because they brought the action more than three years after Cate Street repudiated the agreements it had signed. In particular, the Defendants argue that Cate Street's breach of the Settlement Agreement occurred when it repudiated the agreement in December 2011 and February 2012. The Court addressed this issue in its Order on Summary Judgment in the Underlying Litigation in the context of Cate Street's economic duress argument:
The first notice Cate Street gave to the Defendants that it would not honor one of the agreements was a letter dated December 2, 2011, in which it stated, "it is our position that the referenced agreements are unenforceable." On February 17, 2012, six months after the Settlement Agreement was executed, Cate Street, in a letter from its attorney, first used the words "economic duress." Critically, neither letter referenced the actual Settlement Agreement or its mutual release clause, but expressed [Cate Street's] view of the merits of the price support and sales option agreements. The February 2012 letter concluded by requesting [Whitefield and Indeck] preserve any and all evidence relating to "Whitefield's ability to extract 'price support' from Cate Street in the context of the proposal." Such a request is obviously made because litigation is anticipated, to prevent spoliation. Yet no litigation was brought until July 2013 and it was not until September 2014, when the Plaintiff filed its Second Amended Complaint, that it made clear, at the Court's instruction, that it was seeking to set aside the Settlement Agreement and its mutual release based on economic duress. Moreover, a mere protestation is not a repudiation of the agreement. See Hammond v. T.J. Litle & Co., 82 F.3d 1166, 1178 (1st Cir. 1996) (noting that repudiation "must be a definite and unequivocal manifestation of intention not to render performance.") (citation and quotations omitted).Cate Street Capital, Inc. v. DG Whitefield, LLC, Merrimack County Superior Ct., No. 218-2013-cv-734, at 23-24 (Order, McNamara, J.) (internal citations omitted) 2017 N.H. LEXIS 4 (Apr. 5, 2016), aff'd, 2017 N.H. LEXIS 4 (January 27, 2017).
A breach of contract claim must be brought within three years of the alleged breach. See RSA 508:4 ("Except as otherwise provided by law, all personal actions, except actions for slander or libel, may be brought only within 3 years of the act or omission complained of . . . ."); W. Gate Vill. Ass'n v. Dubois, 145 N.H. 293, 298 (2000) (applying RSA 508:4 to contract actions). In a contract action, the cause of action arises, and the three year statute of limitations begins to run, at the time of the breach. W. Gate Vill. Ass'n, 145 N.H. at 298. "A breach of contract occurs when there is a failure without legal excuse, to perform any promise which forms the whole or part of a contract." Id. (quotation omitted).
In their Amended Complaint, the Plaintiffs allege the filing of the Underlying Litigation in July 2013, in contravention of the parties' release agreement contained within the Settlement Agreement, constituted a breach of contract. (Compl. ¶¶ 223, 231.) The Plaintiffs filed this action less than three years later in December 2015. These allegations, taken as true, would form the basis of a breach of contract claim. Accordingly, the Defendants' Motion to Dismiss Count I is DENIED.
B. Abuse of Process
The Defendants next argue that the Plaintiffs have failed to state an abuse of process claim because they cannot assert that Cate Street initiated the Underlying Litigation for an ulterior purpose. In order to maintain an abuse of process claim, a party must prove the following: "(1) a person used (2) legal process, whether criminal or civil, (3) against the party (4) primarily to accomplish a purpose for which it is not designed and (5) caused harm to the party (6) by the abuse of process." Long v. Long, 136 N.H. 25, 29 (1992) (adopting the definition of abuse of process from the Restatement (Second) of Torts § 682). "No liability exists, however, where a party has done nothing more than carry out the process to its authorized conclusion, even though with ulterior intentions." Cabletron Sys., Inc. v. Miller, 140 N.H. 55, 57 (1995) (quotation omitted).
The tort consists of two essential elements: "an ulterior purpose and a willful act in the use of the process not proper in the regular conduct of the proceeding." Id. (quotation omitted). "The improper purpose usually takes the form of coercion to obtain a collateral advantage, not properly involved in the proceeding itself, such as the surrender of property or the payment of money, by the use of the process as a threat or a club." Id. (quotation omitted). "The issuance of process itself . . . does not constitute the tort. Rather, the purpose for which the process is used, once it is issued, is the only thing of importance." Id. at 58 (internal citation and quotations omitted).
The New Hampshire Supreme Court has emphasized the following:
The gravamen of the misconduct for which the liability stated in this Section is imposed is not the wrongful procurement of legal process or the wrongful initiation of criminal or civil proceedings; it is the misuse of process, no matter how properly obtained, for any purpose other than that which it was designed to accomplish. Therefore, it is immaterial that the process was properly issued, that it was obtained in the course of proceedings that were brought with probable cause and for a proper purpose, or even that the proceedings terminated in favor of the person instituting or initiating them. The subsequent misuse of the process, though properly obtained, constitutes the misconduct for which the liability is imposed under the rule stated in this Section.Long, 136 N.H. at 29-30 (quoting Restatement (Second) of Torts § 682 comment a).
The "essence" of an abuse of process claim "lies in the misuse of the power of the court; it is an act done in the name of the court and under its authority for the purpose of perpetuating an injustice." Id. at 30-31 (quotation omitted). "An essential element of the tort of abuse of process is some form of compulsory process forcing the performance or forbearance of some prescribed act." Id. at 31 (quotation omitted).
In their Amended Complaint, the Plaintiffs allege the Defendants initiated the Underlying Litigation for the purpose of "seeking leverage to force the PUC to reopen its proceeding and amend the PPA," inflicting financial harm on the Plaintiffs as retribution for the Plaintiffs' actions, "seeking collateral benefits that they were not entitled to," and "assuaging investor concerns arising from Defendants' misfeasance." (Compl. ¶ 235.) In particular, the Plaintiffs allege the Defendants "sought to financially punish Plaintiffs through aggressive litigation understanding there was a likelihood that the Plaintiffs would be forced to close their doors." (Comp. ¶ 180.) The Plaintiffs further allege that as a result of the Defendants' actions, they "were forced to expend" more than $1 million defending the Underlying Litigation. (Compl. ¶ 236.) These allegations, taken as true, would form the basis of an abuse of process claim. Accordingly, the Defendants' Motion to Dismiss Count II is DENIED.
C. CPA Violation
The Defendants next argue that the Plaintiffs have failed to state a CPA claim under RSA chapter 358-A. Under RSA 358-A:2, it is "unlawful for any person to use any unfair method of competition or any unfair or deceptive act or practice in the conduct of any trade or commerce within this state." The CPA defines "trade" and "commerce" as "the advertising, offering for sale, sale, or distribution of any services and any property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value wherever situate, and shall include any trade or commerce directly or indirectly affecting the people of this state." RSA 358-A:1, II. However, despite the broad language of the statute, the Court has stated that remedies under the CPA "are not available where the transaction is strictly private in nature, and is in no way undertaken in the ordinary course of a trade or business." Hughes v. DiSalvo, 143 N.H. 576, 578 (1999) (quotation omitted).
[T]o prove a violation of RSA chapter 358-A, a plaintiff must prove that the defendant is a person, that the defendant used an unfair method of competition or a deceptive act or practice, that the act occurred in trade or commerce, and that the defendant's conduct rose to a level of rascality that would raise an eyebrow of someone inured to the rough and tumble of the world of commerce.Hair Excitement, Inc. v. L'Oreal U.S.A., Inc., 158 N.H. 363, 369 (2009) (quotation omitted).
1. Trade or Commerce
The Plaintiffs allege that "Cate Street is engaged in trade or commerce within New Hampshire as an aggressive private equity and management firm." (Compl. ¶ 241.) From the Complaint itself, it is difficult to ascertain how the transaction at issue could be part of a trade or business, rather than a one-time transaction; the allegations made against Cate Street allege actions taken in support of its attempt to open a single biomass power plant. See, e.g., Ellis v. Candia Trailers & Snow Equip., 164 N.H. 457, 465 (2012). The Plaintiffs have not alleged facts which support the proposition that Cate Street itself has engaged in a business practice of suing others in the biomass power industry to protect its business. But even assuming that the Plaintiffs' allegations are sufficient to establish that the conduct at issue was part of a trade or business, the Plaintiffs' claim cannot succeed.
2. Acts of Employees and Officers Attributed to Cate Street
The Plaintiffs allege that "as a corporate practice, Cate Street, Hallé and Defendants use aggressive litigation tactics and threats of litigation as a business tool" (Compl. ¶ 200). They allege that Cate Street "engaged in unfair methods of competition and/or unfair or deceptive acts or practices" in order to retaliate against the Plaintiffs, inflict economic harm upon the Plaintiffs, restrain competition to its own advantage, intimidate future parties from exercising their free speech and due process rights for fear of retaliation, and gain economic benefits to which it is not entitled. (Compl. ¶ 242). The Plaintiffs allege that Cate Street, Hallé, and their affiliates have been involved in more than 66 lawsuits since 2005, and provide three examples of what they describe as "abusive, bad faith, baseless and wrongful claims and defenses." (Compl. ¶ 204.) As explained infra, employees and officers of a corporation cannot conspire with it, and claims against Hallé are not necessarily claims against the corporation. The only specific allegations are that John Hallé has been involved in litigation with one Richard Davimos which is now settled, and that Cate Street and Hallé recently sued an unnamed journalist for defamation, and that the suit was dismissed. (Compl. ¶ 200 (A),(B),(C).)
There are no allegations that these lawsuits have anything to do with the biomass power business. Moreover, the examples the Plaintiffs provide to establish Cate Street's aggressive litigation tactics are based on the actions of Hallé, or are cases in which Cate Street or Hallé was a defendant rather than an aggressive plaintiff, or involve unnamed "affiliates." Apart from these three examples, the allegations provided are general and nonspecific; that "Cate Street and Hallé and their affiliates have been parties to more than 66 lawsuits since 2005." (Compl. ¶ 204.)
Mere conclusions of law are insufficient to state a cause of action. A court need not accept allegations that are merely conclusions of law. Beane v. Dana S. Beane & Co., 160 N.H. 708, 711 (2010).
3. Abusive Litigation Practices in the Underlying Litigation
The Plaintiffs' Complaint focuses upon the conduct of the Underlying Litigation which involves one lawsuit against them. Plaintiffs allege only that Cate Street breached its contract (i.e. the Settlement Agreement and Release), "amended its Complaint multiple times, served massive discovery requests and filed a new action against previously dismissed parent companies in Rockingham County Superior Court and appealed the trial court's well-reasoned dismissal of the Abusive Litigation. . . ." (Compl. ¶ 171.)
The Plaintiffs argue that "[a]ggressive litigation tactics, when intended to cause another party to incur legal fees and costs, can constitute actionably unfair business practices" under the CPA. (Pl.'s Obj. to Def.'s Supplemental Mot. to Dismiss 1, 19.) However, the New Hampshire Supreme Court has not yet decided as a general matter whether or not "unfair litigation tactics fall within the scope of the CPA." Axenics, Inc. v. Turner Const. Co., 164 N.H. 659, 677 (2013). The Plaintiffs primarily rely upon a broad statement in Gallagher v. Funeral Source One Supply & Equip. Co., No. 14-CV-115-PB, 2015 WL 773737, at *3 (D.N.H. Feb. 24, 2015) ("I can find no basis in the CPA's plain text to conclude that CPA liability does not extend to abusive litigation practices") to support their argument. The Court is not persuaded.
The Gallagher Court did not engage in extensive analysis of what conduct would violate the CPA. Rather, it noted that the CPA provides that in any action or prosecution under it "the courts may be guided by the interpretation and construction given Section 5(a)(1) of the Federal Trade Commission act . . . by the Federal Trade Commission and the Federal courts." Id. at *4 (quoting RSA 358-A:13). The court then noted that the Federal Trade Commission has brought enforcement actions based on abusive litigation practices, citing Spiegel, Inc. v. FTC, 540 F.2d 287, 292-93 (7th Cir. 1976) and FTC v. Sperry & Hutchinson Co., 405 U.S. 233, 244 (1972). But the circumstances of both cases are far different than the circumstances of this case.
In Spiegel, the Seventh Circuit held that a practice of suing customers with whom it had dealt by catalog sales for relatively small amounts of money, exclusively in Cook County, Illinois through use of a long arm statute, constituted an unfair trade practice. 540 F.2d at 293. Similarly, in Sperry & Hutchinson, the United States Supreme Court held that Sperry & Hutchinson's practice of instituting litigation selectively against business entities that would affect its business model could violate the Federal Trade Commission Act, even though it expressed no opinion on the merits of the FTC's claim. 405 U.S. at 239. Both cases stand for the proposition that a policy of instituting litigation against competitors to injure competition could violate the Federal Trade Commission Act and that the FTC could lawfully enjoin such conduct.
The New Hampshire Supreme Court has not accepted claims that litigation tactics in a particular case, rather than in litigation strategy as a business tool, are violative of the CPA. See, e.g., Axenics, 164 N.H. at 676-77 (no violation of CPA where plaintiff alleged defendant's litigation tactics were "unfair" and were "designed to further delay the adjudication of Axenics' claim and make the litigation prohibitively expensive"); Turner v. Shared Towers VA, LLC, 167 N.H. 196, 209 (2014) (no CPA violation by requiring the plaintiff to honor his obligations under a loan agreement and promissory note, enforcing rights under those documents by initiating a collection and foreclosure action upon default and rejecting an offer of compromise); Fat Bullies Farm, LLC v. Devenport, No. 2015-0692, 2017 WL 2325084, at *5-6 (N.H. May 26, 2017) (prospective purchaser's conduct of arriving at a property unannounced with an attorney and option agreement, misrepresenting its intentions for purchasing the farm, not recommending the sellers obtain legal counsel, attempting to negotiate the selling price of the farm, failing to explain the meaning of the language in the option agreement, threatening and attempting to enforce the option agreement, and pursuing a contentious litigation strategy "would not raise an eyebrow of someone inured to the rough and tumble of the world of commerce"). The Court's reluctance to find CPA liability in such cases is consistent with the general policy that CPA damages may not duplicate damages awarded on other grounds. See, e.g., Refuse & Envtl. Sys., Inc. v. Indus. Servs. of Am., Inc., 932 F.2d 37, 43 (1st Cir. 1991). If litigation has been conducted unfairly, a party can obtain sanctions, which the Plaintiffs never sought, or bring an action for abuse of process and malicious prosecution as the Plaintiffs have done. Any CPA award would be duplicative of those claims.
The Plaintiffs allege no more than that Cate Street, for its own selfish purposes, breached its contract with the Plaintiffs (the Settlement Agreement and Release), amended its Complaint multiple times, and served "massive discovery requests," filed a new action against the previously dismissed parent companies in Rockingham County Superior Court and appealed the trial court's dismissal of prior litigation. (Compl. ¶ 171.) A breach of contract, regardless of the motivation, does not violate the CPA. George v. Al Hoyt & Sons, Inc. 162 N.H. 123, 129 (2011); Frye v. Hubbell, 74 N.H. 358, 374 (1914); and allegations that a party amended its complaint, filed "massive discovery requests," brought another lawsuit, and appealed an adverse finding hardly constitutes conduct which would "raise an eyebrow of someone inured to the rough and tumble of the world of commerce." Axenics, 164 N.H. at 676-77.
Therefore, the Defendants' Motion to Dismiss Count III must be GRANTED.
D. Malicious Prosecution
The Defendants next argue that the Plaintiffs have failed to state a claim for malicious prosecution because Cate Street had probable cause to bring its claims in the Underlying Litigation. "In order to prevail on a civil malicious prosecution claim, the plaintiff must prove: (1) that he was subjected to a civil proceeding instituted by the defendant; (2) without probable cause; (3) with malice; and (4) that the proceedings terminated in the plaintiff's favor." Paul v. Sherburne, 153 N.H. 747, 749 (2006). To establish the element of probable cause, the plaintiff "is required to prove that, when the defendant initiated the underlying suit against the plaintiff, he did not possess such knowledge of facts as would lead a [person] of ordinary caution and prudence to believe that [he or she] had a cause of action against the plaintiff." Id. at 749-50 (quotation omitted). "The existence of probable cause, in this context, is a question for the trier of fact to the extent that it depends upon the credibility of conflicting evidence proffered on that issue. Whether there was probable cause is ultimately, however, a question of law to be determined by the court." Id. at 750 (internal quotations omitted).
The Defendants argue that the Court's refusal to grant the motion to dismiss in the Underlying Litigation establishes that they had probable cause to bring the Underlying Litigation. This argument, however, ignores the differences between the standard for a Motion to Dismiss and the requirements to establish the probable cause element of a malicious prosecution claim. In their Amended Complaint, the Plaintiffs allege that Cate Street instituted the Underlying Litigation "without probable cause and with full knowledge, inter alia, that the Settlement Agreement and Release were valid and binding." (Compl. ¶ 247.) The Plaintiffs further allege that Cate Street knew at all relevant times that, as part of the Settlement Agreement, it was releasing the claims that formed the basis of the Underlying Litigation. (Compl. ¶ 153.) These allegations, taken as true, would satisfy the probable cause element of a malicious prosecution claim. Accordingly, because the Defendants do not contest the other elements of the malicious prosecution claim, the Defendants' Motion to Dismiss Count IV is DENIED.
E. Civil Conspiracy
The Defendants also argue that the Plaintiffs cannot assert a claim for civil conspiracy because the underlying claims are barred and Cate Street could not have conspired with its own directors.
A civil conspiracy is a combination of two or more persons by concerted action to accomplish an unlawful purpose, or to accomplish some purpose not in itself unlawful by unlawful means. Its essential elements are: (1) two or more persons (including corporations); (2) an object to be accomplished (i.e. an unlawful object to be achieved by lawful or unlawful means or a lawful object to be achieved by unlawful means); (3) an agreement on the object or course of action; (4) one or more unlawful overt acts; and (5) damages as the proximate result thereof.Jay Edwards, Inc. v. Baker, 130 N.H. 41, 47 (1987) (internal quotations omitted). "For a civil conspiracy to exist, there must be an underlying tort which the alleged conspirators agreed to commit." Univ. Sys. of N.H. v. U.S. Gypsum Co., 756 F. Supp. 640, 652 (D.N.H. 1991).
The Defendants first argue that the Plaintiffs have not alleged an underlying action that the alleged conspirators agreed to commit. However, as discussed above, the Plaintiffs have sufficiently pleaded, to survive a motion to dismiss, claims of breach of contract, abuse of process, and malicious prosecution.
The Defendants alternatively argue that the Plaintiffs cannot assert a civil conspiracy claim here because they have failed to allege that more than one person has agreed to accomplish an unlawful purpose, as both Hallé and Desrosiers are agents of Cate Street. In their Amended Complaint, the Plaintiffs allege that Cate Street, Hallé, Desrosiers, and various John and/or Jane Does engaged in civil conspiracy when they breached and induced the breaching of contractual obligations with the Plaintiffs, filed and pursued the Underlying Litigation, and "willfully and knowingly" violated the CPA, among other actions. (Compl. ¶ 254.) Hallé is the president and controlling director of Cate Street, and Desrosiers is an officer and director of Cate Street. (Compl. ¶¶ 13-14.)
"Under the intracorporate conspiracy doctrine, the agents and employees of a corporate entity acting within the scope of their employment or authority are legally incapable of conspiring together." Carney v. Town of Weare, No. 15-CV-291-LM, 2017 WL 680384, at *15 (D.N.H. Feb. 21, 2017). The New Hampshire Supreme Court has not yet addressed the issue of whether or not the intracorporate conspiracy doctrine applies under New Hampshire law. Id. However, "[t]he majority rule and the modern trend among states recognizes the intracorporate conspiracy doctrine," and "the few states that have expressly rejected the doctrine have not addressed the issue in over two decades." Id. (citations omitted); see also 16 Am. Jur. 2d Conspiracy § 56 ("Since a corporate entity cannot conspire with itself because employees of a corporation are considered part of the corporate entity, a civil conspiracy is not legally possible where a corporation and its alleged coconspirators are not separate entities."). "It is basic in the law of conspiracy that you must have two persons or entities to have a conspiracy. A corporation cannot conspire with itself any more than a private individual can, and it is the general rule that the acts of the agent are the acts of the corporation." Buschi v. Kirven, 775 F.2d 1240, 1251 (4th Cir. 1985) (quotation omitted); see also State v. Luv Pharmacy, Inc., 118 N.H. 398, 404 (1978) (stating a corporation "is an artificial creature, acting only through agents"); Carney, No. 15-CV-291-LM, 2017 WL 680384, at *16 ("The court concludes that, if confronted with the issue, the New Hampshire Supreme Court would adopt the intracorporate conspiracy doctrine."). This Court agrees with the majority of jurisdictions that recognize the intracorporate conspiracy doctrine, and finds that it bars the Plaintiffs civil conspiracy claim.
The Plaintiffs also argue that there are John Doe and Jane Doe individuals and entities that have also conspired with the Defendants. The Plaintiffs claim that the "identities, relations and conduct of these unknown Defendants will be revealed during discovery." (Compl. ¶ 16.) Because the Plaintiffs have not provided any information regarding the identities of these unnamed defendants, for purposes of this motion to dismiss, the Court assumes the John and Jane Does are agents or employees of Cate Street and that the civil conspiracy claim against them is barred by the intracorporate conspiracy doctrine. However, if the Plaintiffs find during discovery that the Doe defendants are individuals or entities outside of Cate Street, then the Plaintiffs may amend their complaint to include a civil conspiracy claim, if still within the statute of limitations. Accordingly, the Defendants' Motion to Dismiss Count V is GRANTED, with leave to amend.
IV
In sum, for the reasons stated in this Order, the Defendants' Motion to Dismiss is GRANTED, as it relates to Count III and V, and DENIED, as it relates to Counts I-II and IV.
SO ORDERED
7/10/17
DATE
s/Richard B . McNamara
Richard B. McNamara,
Presiding Justice