The Court will GRANT Defendant Wilon's motion to dismiss Plaintiffs' allegations of constructive fraud, as they fail to allege facts underlying the alleged constructive fraud with any specificity (Court File No. 27). Constructive fraud is "a breach of a legal or equitable duty which is deemed fraudulent because of its tendency to deceive others, to violate public or private confidence, or to injure public interests." Kincaid v. SouthTrust Bank, 221 S.W.3d 32, 39 (Tenn.Ct.App. 2006). Constructive fraud is distinguished from actual fraud because the former does not require a showing of an intent to deceive.

In the Defendants' motion to dismiss and/or for partial summary judgment, the Defendants argued that the Plaintiff's claims based on civil conspiracy should be dismissed for failure to state a claim upon which relief can be granted. They alleged that the Plaintiff made "no specific allegation as to how the Defendants acted jointly in a civil conspiracy," and that mere conjecture and conclusory allegations unsupported by material facts are not sufficient to state a claim for civil conspiracy. In response, the Plaintiff argued that "the facts contained in her pleadings and Statement of Facts, taken in a light most favorable to her, establish all of the elements of the causes of action for civil conspiracy . . . required by Kincaid v. SouthTrust Bank, 221 S.W.3d 32, 38 ([Tenn. Ct. App.] 2006)." The trial court addressed the civil conspiracy claims as a part of the Defendants' motion for partial summary judgment, rather than as a motion to dismiss.

Under Tennessee law, the elements of a civil conspiracy are: “(1) a common design between two or more persons, (2) to accomplish by concerted action an unlawful purpose, or a lawful purpose by unlawful means, (3) an overt act in furtherance of the conspiracy, and (4) resulting injury.” Kincaid v. SouthTrust Bank, 221 S.W.3d 32, 38 (Tenn. Ct. App. 2006) (citation omitted). As to the first element, “[e]ach conspirator must have the intent to accomplish this common purpose, and each must know of the other's intent.”

The elements are: (1) a common design between two or more persons; (2) to accomplish by concerted action an unlawful purpose, or a lawful purpose by unlawful means; (3) an overt act in furtherance of the conspiracy; and (4) resulting injury. Kincaid v. SouthTrust Bank, 221 S.W.3d 32, 38 (Tenn. Ct. App. 2006). Civil conspiracies are "rarely proven directly."

Lastly, plaintiff proposed second amendment asserts claims of civil conspiracy against both defendants [Doc. 68-1 ¶¶ 19, 22]. Under Tennessee law, a plaintiff pursuing a claim for civil conspiracy must show: "(1) a common design between two or more persons, (2) to accomplish by concerted action an unlawful purpose, or a lawful purpose by unlawful means, (3) an overt act in furtherance of the conspiracy, and (4) resulting injury." Kincaid v. SouthTrust Bank, 221 S.W.3d 32, 38 (Tenn. Ct. App. 2006) (citing Morgan v. Brush Wellman, Inc., 165 F. Supp. 2d 704, 720 (E.D. Tenn. 2001)). In addition, "[c]onspiracy claims must be pled with some degree of specificity," and "[c]onclusory allegations . . . unsupported by material facts will not be sufficient to state such a claim."

In Tennessee, common law fraud requires "(1) an intentional misrepresentation of a material fact, (2) knowledge of the representation's falsity, (3) an injury caused by reasonable reliance on the representation, and (4) the requirement that the misrepresentation involve a past or existing fact." Kincaid v. SouthTrust Bank, 221 S.W.3d 32, 40 (Tenn. Ct. App. 2006). Federal Rule of Civil Procedure 9(b) requires that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake."

B. Conspiracy To establish a claim for civil conspiracy under Tennessee law, a plaintiff must prove: "(1) a common design between two or more persons, (2) to accomplish by concerted action an unlawful purpose, or a lawful purpose by unlawful means, (3) an overt act in furtherance of the conspiracy, and (4) resulting injury." Kincaid v. SouthTrust Bank, 221 S.W.3d 32, 38 (Tenn.Ct.App. 2006) (citing Morgan v. Brush Wellman, Inc., 165 F.Supp.2d 704, 720 (E.D.Tenn. 2001)). The Federal Rules of Civil Procedure do not explicitly state that civil conspiracy claims must be pled with particularity. However, some recognized authorities have noted that

With respect to the trial court's decisions regarding Plaintiff's motion to amend, whether to consider AllStates' reply filing, and AllStates' motion for discretionary costs, we review the trial court's decisions under an abuse of discretion standard. SeeKincaid v. SouthTrust Bank , 221 S.W.3d 32, 42 (Tenn. Ct. App. 2006) ; Owens v. Owens , 241 S.W.3d 478, 497 (Tenn. Ct. App. 2007). In order to ascertain whether a trial court's decision constitutes an abuse of discretion, we review the decision to determine whether the factual basis is properly supported by the evidence in the record, whether the trial court properly identified and applied the most appropriate legal principles applicable to the decision, and whether the court's decision was within the range of acceptable alternate dispositions.

Similarly, constructive fraud is a breach of a legal or equitable duty which is deemed fraudulent because of its tendency to deceive others by, inter alia, violating a private confidence. Kincaid v. SouthTrust Bank, 221 S.W.3d 32, 39 (Tenn. Ct. App. 2006). The general rule is that a party to a transaction has no duty to disclose material facts to the other.

(Paragraphs 256, 266, and 276). Furthermore, the Complaint avers that Appellees “made continued representations about the financial status and condition of the project[s] without disclosing the misappropriations....” (Paragraphs 162, 180, 197). In these pleadings, it appears that the Appellants rely on the definition of fraud set forth in Kincaid v. SouthTrust Bank, 221 S.W.3d 32, 40 (Tenn.Ct.App.2006), which requires an intentional misrepresentation. In order to establish a claim for fraudulent or intentional misrepresentation, a plaintiff must show the following: (1) the defendant made a representation of an existing or past fact; (2) the representation was false when made; (3) the representation was in regard to a material fact; (4) the false representation was made either knowingly or without belief in its truth or recklessly; (5) plaintiff reasonably relied on the misrepresented fact; and (6) plaintiff suffered damage as a result of the misrepresentation.