Opinion
CIVIL ACTION NO. 3:03-CV-0711-G
October 6, 2003
MEMORANDUM ORDER
Before the court is the motion of the plaintiff and counter-defendant Opus South Corporation ("Opus") to dismiss the claims of defendants and counter-plaintiffs Limestone Construction, Inc., Limestone Vista Ridge, LC, SCWWAW Investments, LP, Limestone Group, Inc., Eldon Frost, and James W. Whitehead (collectively, "Limestone") for failure to state a claim upon which relief may be granted. Limestone has filed a response to Opus's motion and, in the alternative, has moved for leave to amend its counterclaim. For the reasons discussed below, the court grants Opus's motion to dismiss but also grants Limestone's motion for leave to amend.
Frost Partners, LP is also a defendant in this action but was not listed as a party to the counterclaim. Original Counterclaim ("Counterclaim") at 1 ("Counter-Plaintiffs Limestone Construction, Inc., Limestone Vista Ridge, LC, SCWWAW Investments, LP, Limestone Group, Inc., Eldon L. Frost and James W. Whitehead (collectively referred to herein as "Counter-Plaintiffs or Limestone" . . .") (underlining in original).
I. BACKGROUND
On May 3, 2001, Limestone Construction, Limestone Group, Limestone Vista Ridge, Frost, and Whitehead executed a promissory note ("First Note") in favor of Opus in the amount of $250,000. Plaintiff's First Amended Original Complaint ("Complaint") ¶ 10; Defendants' Answer to First Amended Original Complaint ("Answer") ¶ 3. A few weeks later, on May 29, 2001, these same parties (Limestone Construction, Limestone Group, Limestone Vista Ridge, Frost, and Whitehead) entered into a Letter of Intent ("LOI") with Opus and a third party, New Horizon Corporate Advisors. Original Counterclaim ("Counterclaim") ¶ 3; Opus Limestone Venture — Letter of Intent, attached to Counterclaim as Exhibit A. The stated purpose of the LOI was "to outline the terms and conditions under which [the parties to the LOI were to] form a new entity . . . [the] objective of [which] will be to develop, construct, lease and sell . . . apartment communities . . . in selected markets throughout the United States." LOI at 1; see Counterclaim ¶ 4; Memorandum of Points and Authorities in Support of Counter-Defendant Opus South Corporation's Motion to Dismiss Counter-Plaintiffs' Counterclaim for Failure to State a Claim Upon Which Relief May Be Granted ("Motion") ¶ 1.4. The last paragraph of the LOI, which is relevant to the claims at issue here, is as follows:
As Opus points out, counter-plaintiff SCWWAW was not a party to the LOI. LOI at 1; Memorandum of Points and Authorities in Support of Counter-Defendant Opus South Corporation's Motion to Dismiss Counter-Plaintiffs' Counterclaim for Failure to State a Claim Upon Which Relief May Be Granted ¶ 2.1. To the extent that Limestone's counterclaims are based on the LOI, therefore, SCWWAW's status as a counterclaimant is on shaky ground. It would be helpful to this court if, in its amended counterclaim, Limestone could provide some additional explanation of SCWWAW's stake in these claims. See Response in Opposition to Counter-Defendant's Motion to Dismiss Counterclaim for Failure to State a Claim Upon Which Relief May be Granted, or, Alternatively Motion for Leave to Amend Counterclaim, and Brief in Support Thereof ("Response") ¶ 10.
The court may consider documents attached to or incorporated in the complaint in deciding a motion to dismiss. United States ex rel. Willard v. Humana Health Plan of Texas Inc., 336 F.3d 375, 379 (5th Cir. 2003).
This Letter of Intent is not binding on either Limestone or Opus, except that each party agrees to maintain as confidential any confidential or proprietary information disclosed to it by the other party, and that Limestone and its affiliates shall not execute any development agreement or other documents with respect to the Lewisville Project without the written consent of Opus unless either party has notified the other party in writing that it wishes to terminate discussions. If this Letter of Intent is satisfactory, please sign below as indicated, and we will begin preparation of the legal documents required to consummate the transactions anticipated hereby.
LOI at 4 (italics added; underlining in original).
On June 5, 2001, Limestone executed a second promissory note ("Second Note") in favor of Opus in the amount of $150,000. Complaint ¶ 11; Answer ¶ 4. On December 31, 2001, the First and Second Notes were consolidated into a third promissory note in the amount of $400,000. Complaint ¶ 12; Answer ¶ 5; see generally Consolidated, Amended and Restated Promissory Note ("Consolidated Note"), attached to Plaintiffs Original Complaint as Exhibit A. Limestone executed the Consolidated Note in favor of Opus. Complaint ¶ 12; Answer ¶ 5.
Counter-plaintiff SCWWAW as well as the parties to the first note executed this second promissory note. Defendant (but not counter-plaintiff) Frost Partners was also a party to this second note. See supra note 1.
Under the terms of the Consolidated Note, Limestone was required to pay Opus: (1) $10,000 a month on the first of each month, beginning on May 1, 2002, and continuing until maturity; (2) a one-time principal reduction of $50,000 on the earlier of (a) Limestone Construction VR, Ltd.'s receipt of an Equity Appreciation Kicker, or (b) September 30, 2002; and (3) any remaining unpaid principal and interest due on the maturity date, December 31, 2003. Consolidated Note at 1; Complaint ¶ 13; Answer ¶ 6. Presumably because SCWWAW and Frost Partners had been parties only to the Second Note (for $150,000.00) and not the First Note (for $250,000.00), the liability of SCWWAW and Frost Partners under the Consolidated Note was not to exceed $150,000 plus accrued interest. Consolidated Note at 4; Complaint ¶ 13; Answer ¶ 6. The Consolidated Note also included an acceleration clause, allowing Opus to demand full payment of the principal and interest owed in the event of any one of four specific "Events of Default." Consolidated Note at 2.
Limestone Construction VR, Ltd. is neither a party to this suit, a party to the First, Second, or Consolidated Notes, nor a party to the LOI.
The Events in Default listed in the Note were:
(a) the bankruptcy or insolvency of, the assignment for the benefit of creditors by, or the appointment of a receiver for any of the property of, or the liquidation, termination, dissolution or death or legal incapacity of, any party liable for the payment of this Note, whether as maker, endorser, guarantor, surety or otherwise;
(b) the failure of Borrower [counter-plaintiffs and Frost Partners] to pay in full the Total Principal Amount, or so much thereof as may be advanced, together with accrued but unpaid interest thereon, by the Maturity Date whether by demand or otherwise;
(c) the failure of Borrower to perform any of its obligations under this Note, including, without limitation, timely payment of all amounts due hereunder; or
(d) a default by the Borrower under any of the terms and provisions of the Security Agreement. . . .
Consolidated Note at 2.
At some point after June 5, 2001, Opus withdrew from the venture contemplated by the LOI. When or how Opus withdrew is not clear from the pleadings, as Limestone alleges only that Opus did withdraw. Counterclaim ¶ 6 (". . . Opus also partially performed their obligations in furtherance of the new venture . . . before Opus withdrew from the venture"), ¶ 8 ("As a result of Opus withdrawing from the venture. . . .").
Limestone stopped making the $10,000 monthly payments in July 2002. Complaint ¶ 14; Answer ¶ 7. Limestone also did not pay the one-time principal reduction of $50,000 by September 30, 2002. Complaint ¶ 14; Answer ¶ 7. Opus then accelerated the outstanding principal balance on the Consolidated Note and all unpaid accrued interest. Complaint ¶ 15; Answer ¶ 8. Opus has demanded payment from Limestone, and Limestone has refused to pay. Complaint ¶ 18; Answer ¶ 11.
It is unclear from the pleadings when, exactly, Opus accelerated the balance and demanded payment.
Opus brought this suit against Limestone for breach of contract. Complaint ¶¶ 19-24. Limestone counterclaimed for (1) breach of fiduciary duty, (2) breach of contract, (3) promissory estoppel, and (4) fraud. See Counterclaim ¶¶ 9-29. Against this backdrop, the court will now examine Opus's motion to dismiss Limestone's counterclaim for failure to state a claim upon which relief may be granted.
Subject matter jurisdiction is based on diversity of citizenship. Accordingly, these claims are controlled by Texas law. See Erie Railroad Company v. Tompkins, 304 U.S. 64, 78 (1938); Rogers v. Corrosion Products, Inc., 42 F.3d 292, 295 (5th Cir.), cert. denied, 515 U.S. 1160 (1995).
II. ANALYSIS 1. Standard for Dismissal Under Rule 12(b)(6)
Federal Rule of Civil Procedure 12(b)(6) authorizes dismissal of a complaint for "failure to state a claim upon which relief can be granted." FED. R. CIV. P. 12(b)(6). There are two primary principles that guide the court's determination of whether dismissal under Rule 12(b)(6) should be granted. First, a motion under Rule 12(b)(6) should be granted only if it appears beyond doubt that the nonmovants could prove no set of facts in support of their claims that would entitle them to relief. Conley v. Gibson, 335 U.S. 41, 45-46 (1957); Leffall v. Dallas Independent School District, 28 F.3d 521, 524 (5th Cir. 1994); see also Kaiser Aluminum Chemical Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982) (citing WRIGHT MILLER, FEDERAL PRACTICE AND PROCEDURE: CIVIL § 1357 at 598 (1969), for the proposition that "the motion to dismiss for failure to state a claim is viewed with disfavor and is rarely granted"), cert. denied, 459 U.S. 1105 (1983). Second, the court must accept all well-pleaded facts as true and view them in the light most favorable to the nonmovants. Capital Parks, Inc. v. Southeastern Advertising and Sales System, Inc., 30 F.3d 627, 629 (5th Cir. 1994); Norman v. Apache Corporation, 19 F.3d 1017, 1021 (5th Cir. 1994); Chrissy F. by Medley v. Mississippi Department of Public Welfare, 925 F.2d 844, 846 (5th Cir. 1991). However, conclusory allegations and unwarranted factual deductions will not suffice to prevent a motion to dismiss. United States ex rel. Willard v. Humana Health Plan of Texas Inc., 336 F.3d 375, 379 (5th Cir. 2003).If it appears that a more carefully drafted pleading might state a claim upon which relief could be granted, the court should give the claimant an opportunity to amend his claim rather than dismiss it. Friedlander v. Nims, 755 F.2d 810, 813 (11 th Cir. 1985); Taylor v. Dallas County Hospital District, 976 F. Supp. 437, 438 (N.D. Tex. 1996). Furthermore, leave to amend a pleading should be freely given and should be granted unless there is some justification for refusal. Willard, 336 F.3d at 386.
2. Breach of Fiduciary Duty
To establish a breach of fiduciary duty, Limestone must first demonstrate that the relationship between Limestone and Opus arose to the level of a fiduciary relationship. Two types of fiduciary relationships are recognized in Texas: formal fiduciary relationships and informal fiduciary relationships. A formal fiduciary relationship arises as a matter of law, for example, between an attorney and a client, a principal and an agent, or between partners or joint venturers. See Imperial Premium Finance, Inc. v. Khoury, 129 F.3d 347, 353 (5th Cir. 1997); Crim Truck Tractor Co. v. Navistar International Transportation Corporation, 823 S.W.2d 591, 593-94 (Tex. 1992); Kardell v. Union Bankers Insurance Company, No. 05-01-00662-CV, 2002 WL 1809867, at *6 (Tex.App. — Dallas Aug. 8, 2002, no pet.) (not designated for publication). An informal fiduciary relationship, also known as a confidential relationship, arises from a moral, social, domestic, or merely personal relationship that exists prior to and apart from the agreement on which the suit is based. Schlumberger Technology Corp. v. Swanson, 959 S.W.2d 171, 176-77 (Tex. 1997). The existence of an informal fiduciary relationship is usually a question of fact, but if the evidence offered is "no evidence" of a fiduciary relationship, the issue may be decided as a matter of law. See ARA Automotive Group v. Central Garage, Inc., 124 F.3d 720, 723 (5th Cir. 1997); Crim Truck, 823 S.W.2d at 594. The relevant inquiry is whether "one party is in fact accustomed to being guided by the judgment or advice of the other, or is justified in placing confidence in the belief that such party will act in its interest." Imperial Premium Finance, Inc., 129 F.3d at 353 (quoting Thames v. Johnson, 614 S.W.2d 612, 614 (Tex.Civ.App.-Texarkana 1981, no writ)) (internal quotation marks omitted).
Limestone asserts that the fiduciary nature of its relationship with Opus was created by "the actions of the parties themselves," and that the LOI was merely indicative of that relationship. Response ¶ 10. The actions of the parties specifically pleaded by Limestone are: (1) Limestone entered into a LOI with Opus and New Horizon Corporate Advisors on May 29, 2001, Counterclaim ¶ 3; Response ¶ 1; (2) Opus made promises to Limestone to pursue and financially support the venture anticipated by the LOI, Counterclaim ¶ 19; Response ¶ 3; (3) Limestone borrowed funds from Opus pursuant to the LOI, Counterclaim ¶ 6; Response ¶ 4; (4) Limestone incurred costs related to the furtherance of the venture, Counterclaim ¶ 6; Response ¶ 4; (5) Opus partially performed its obligations under the LOI (including placing a tract of land under contract), Counterclaim ¶ 6; (6) the parties continued negotiating the terms of a limited partnership agreement, Counterclaim ¶ 7; and (7) Limestone formed the new entity contemplated by the LOI. Counterclaim ¶ 7; Response ¶ 4.
Counter-plaintiff SCWWAW was not a party to the LOI. See LOI at 1; supra note 2.
"Anticipated" is the term used in the LOI. LOI at 4.
Even if Limestone cannot show that the relationship between the parties rose to the level of a formal fiduciary relationship, Limestone's allegations — when viewed in the light most favorable to Limestone — raise a question of fact as to whether an informal fiduciary relationship existed between the parties. Taking Limestone's allegations as true, the court concludes that Limestone could prove a set of facts showing that its belief that Opus would act in Limestone's best interest was justified. Under Texas law, such a justified belief would be sufficient to create an informal fiduciary relationship between the parties. See Imperial Premium Finance, Inc., 129 F.3d at 353.
Limestone alleges that the relationship between the parties could be characterized as a partnership or joint venture. Response ¶ 16. The Texas Revised Partnership Act (TRPA) outlines a list of "[f] actors indicating [creation of] a partnership." TEX. REV. CIV. STAT. ANN. Art. 6132b-2.03 (Vernon Supp. 2003). The factors include the parties':
(1) receipt or right to receive a share of profits of the business;
(2) expression of an intent to be partners in the business;
(3) participation or right to participate in control of the business;
(4) sharing or agreeing to share:
(A) losses of the business; or
(B) liability for claims by third parties against the business; and
(5) contributing or agreeing to contribute money or property to the business.
Art. 6132b-2.03(a). An agreement to share losses (factor (4)(A)) is explicitly not necessary to create a partnership. Art. 6132b-2.03(c). The comments to the Act explain that the first and third factors are traditionally considered the most important. Art. 6132b-2.03, Comment of Bar Committee — 1993.
The TRPA treats joint ventures as if they were partnerships. See Art. 6132b-2.02(a). However, most Texas courts have held that the creation of a joint venture requires five distinct elements: (1) an express or implied agreement; (2) a community of interest; (3) an agreement to share profits; (4) an agreement to share losses; and (5) a mutual right to control or management of the enterprise. United States v. $47,875.00 in United States Currency, 746 F.2d 291, 294 (5th Cir. 1984); Coastal Plains Development Corporation v. Micrea, Inc., 572 S.W.2d 285, 287 (Tex. 1978); Swinehart v. Stubbeman, McRae, Sealy, Laughlin Browder, Inc., 48 S.W.3d 865, 879 (Tex.App.-Houston [14th Dist.] 2001, pet. denied). But see Dallas Sales Company, Inc. v. Carlisle Silver Company, Inc., No. 10-00-077-CV, 2003 WL 21877647, at *7 (Tex.App. — Waco Aug. 4, 2003, no pet.) ("[W]e conclude that the Legislature has by statute overruled the common law rule that a joint venture does not exist in the absence of an express agreement to share losses"). To successfully establish the existence of a formal fiduciary relationship between the parties, Limestone would need to plead facts addressing these required elements.
Next, the court must look for a breach of the duties created under such a fiduciary relationship. Limestone does not elaborate on this point in its counterclaim, simply stating that "[a]s a result of Opus withdrawing from the venture, Limestone has suffered significant damages," Counterclaim ¶ 8, and "[a]s alleged above, Opus breached its fiduciary duty owed to Limestone." Id. ¶ 12. As Opus points out in its motion to dismiss, the fiduciary duties that partners owe to one another do not encompass a duty to remain partners. Motion ¶ 2.4 (citing Bohatch v. Butler Binion, 977 S.W.2d 543, 546 (Tex. 1998)). Although Limestone acknowledges this argument, it makes no substantive response to the argument at all, nor does it provide any additional factual or legal support for its contention that Opus breached its fiduciary duties. See Response ¶¶ 9-16. The simple fact that Opus withdrew from the venture does not, by itself, establish a breach of fiduciary duty. Accordingly, Opus's motion to dismiss Limestone's breach of fiduciary duty claim is granted.
3. Breach of Contract
Under Texas law, a breach of contract claim requires: (1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by the defendant; and (4) damages to the plaintiff resulting from the defendant's breach. Kay v. North Texas Rod Custom, 109 S.W.3d 924, 927 (Tex.App.-Dallas 2003, no pet.). To meet the first requirement (the existence of a valid contract), five elements must be present: (1) an offer; (2) an acceptance in strict compliance with the terms of that offer; (3) a meeting of the minds; (4) each party's consent to the terms; and (5) execution and delivery of the contract with intent that it be mutual and binding. Coffel v. Stryker Corp., 284 F.3d 625, 640 n. 17 (5th Cir. 2002); Prime Products, Inc. v. S.S.I. Plastics, Inc., 97 S.W.3d 631, 636 (Tex.App.-Houston [1st Dist.] 2002, pet. denied); Oakrock Exploration Co. v. Killam, 87 S.W.3d 685, 689 (Tex.App.-San Antonio 2002, pet. denied). The dispositive issue in determining whether a contract exists in this case is the last requirement — the intent of the parties to be bound. Without this intent, there cannot be a valid contract upon which to base a breach of contract action.
Where the intent of the parties to be bound (or not) is clear and unambiguous on the face of an agreement, that intent may be determined as a matter of law. John Wood Group USA, Inc. v. ICO, Inc., 26 S.W.3d 12, 16 (Tex.App.-Houston [1st Dist.] 2000, pet. denied). For example, when an agreement is expressly non-binding and there is no subsequent partial performance by either party, Texas courts have found, as a matter of law, that the parties did not have the requisite intent to be bound. Id. at 15, 18 (finding that a letter stating "it is understood and agreed that this letter is an expression of the parties' mutual intent and is not binding upon them . . ." was not binding as a matter of law where there was no partial performance by either party); RHS Interests, Inc. v. 2727 Kirby Ltd., 994 S.W.2d 895, 897-99 (Tex.App.-Houston [1st Dist.] 1999, no pet.) (finding that a letter of intent was not binding as a matter of law where the letter anticipated the negotiation and execution of further documents, and where neither party partially performed).
However, where the intent of the parties is not clear in the agreement, or when subsequent actions by the parties suggest that they did intend to be bound by an agreement that was expressly non-binding, Texas courts have held that the intent of the parties to be bound becomes a question of fact. Foreca, S.A. v. GRD Development Co., Inc., 758 S.W.2d 744, 746 (Tex. 1988); Geophysical Micro Computer Applications (International) Ltd. v. Paradigm Geophysical Ltd., No. 05-98-02016-CV, 2001 WL 1270795, at *6 (Tex.App.-Dallas Oct. 24, 2001, pet. denied) (not designated for publication); Murphy v. Seabarge, Ltd., 868 S.W.2d 929, 933 (Tex.App.-Houston [14th Dist.] 1994, writ denied). In Foreca, S.A. v. GRD Development Co., Inc., the Texas Supreme Court found that the question of whether the parties intended to be bound was properly submitted to the jury where the agreement at issue stated that it was "subject to legal documentation" that was never executed. 758 S.W.2d at 745-46. More recently, the Houston Court of Appeals, Fourteenth District, found that subsequent partial performance by a party to an agreement that was expressly "not intended to be a binding contract" created a question of fact as to whether the parties actually intended to be bound by the agreement. Murphy, 868 S.W.2d at 933.
The LOI at issue in this case is expressly non-binding on the parties. See LOI at 4 ("This Letter of Intent is not biding on either Limestone or Opus . . .") (underlining in original); Motion ¶ 1.4. Once again, however, this court must view the facts in the light most favorable to Limestone and take Limestone's well-pleaded facts as true. Capital Parks, Inc., 30 F.3d at 629; Norman, 19 F.3d at 1021; Chrissy F., 925 F.2d at 846. Limestone alleges that both parties partially performed after entering into the LOI. Specifically (according to Limestone), Limestone borrowed funds from Opus, incurred costs related to the furtherance of the venture, and formed a new entity as required by the LOI. Counterclaim ¶¶ 6, 7. Meanwhile, Opus loaned funds to Limestone, placed a tract of land under contract pursuant to the LOI, and continued negotiations of the terms of an Agreement of Limited Partnership with Limestone. Id. Taking these facts as true, the court concludes that there is at least a question of fact as to whether a valid contract existed between Limestone and Opus. See Foreca, S.A., 758 S.W.2d at 746; Murphy, 868 S.W.2d at 933.
Even if it is assumed, however, that Limestone can establish a valid contract between itself and Opus, Limestone must still allege facts showing that Opus breached that contract. Limestone simply asserts that Opus withdrew from the venture, Counterclaim ¶ 8, but does not allege facts showing that Opus's withdrawal was a breach of any contract(s) existing between the parties. Limestone instead goes on to state: "As described above, Opus materially breached its contractual obligation owed to Limestone." Counterclaim ¶ 16. Especially in light of the fact that the LOI is expressly non-binding and even anticipates that the parties may "wish to terminate discussions," LOI at 4, Limestone must allege more than Opus's mere withdrawal from the venture to support its claim for breach of contract. However, Limestone offers no further explanation in its response to Opus's motion to dismiss but merely opines that "Limestone is confident that the evidence will establish not only an enforceable contract between the parties, but that Opus breached that agreement." Response ¶ 17. These conclusory assertions will not prevent a motion to dismiss. See Willard, 336 F.3d at 379. Accordingly, Opus's motion to dismiss Limestone's breach of contract claim is granted.
The court assumes that the counter-plaintiffs are referring here to Opus's withdrawal from the venture, as no other facts remotely suggesting breach of contract are alleged "above." See Counterclaim ¶¶ 3-15.
4. Promissory Estoppel
Under Texas law, a claim of promissory estoppel has four elements: (1) a promise; (2) foreseeability by the promisor that the promisee would rely on the promise; (3) substantial and detrimental reliance on the promise by the promisee; and (4) a definite finding that injustice can be avoided only by the enforcement of the promise. Zenor v. El Paso Healthcare System, Ltd., 176 F.3d 847, 864 and n. 11 (5th Qr. 1999) (acknowledging that although not all Texas cases list the fourth element as an element of a promissory estoppel claim, Texas courts do recognize "that estoppel applies to prevent injustice"); Trammell Crow Co. No. 60 v. Harkinson, 944 S.W.2d 631, 636 (Tex. 1997) ("[Promissory estoppel] may apply when [1] there is a promise that [2] the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee, and [3] does induce such action or forbearance, if [4] injustice can be avoided only by enforcement of the promise.").
The facts pleaded by Limestone go to the first and third elements of its claim of promissory estoppel: specifically, that Opus made promises to Limestone, and that Limestone substantially and detrimentally relied on those promises. See Counterclaim ¶ 19 ("Opus made promises to Limestone to generally pursue the new venture and to financially support same"), ¶ 20 ("Limestone substantially relied upon the promises made by Opus, to the detriment of Limestone"); Response ¶ 20 ("Based upon these representations, Limestone proceeded to borrow funds from Opus, performed an investigation of a prospective project in Tampa, Florida on behalf of Opus, and incurred thousands of dollars in expenses in furthering the venture between the parties."). However, Limestone has failed to plead any facts addressing the fourth element — that injustice can be avoided only by the enforcement of Opus's promises — and, in support of the second element (forseeability), Limestone offers only the conclusory allegation that "Limestone's reliance on Opus' promises was foreseeable to Opus." Counterclaim ¶ 21. In light of the fact that the LOI signed by the parties was expressly non-binding, and that the LOI anticipated further documents that were apparently never finalized, this conclusory allegation is not enough to avoid dismissal of Limestone's claim of promissory estoppel. Accordingly, Opus's motion to dismiss Limestone's promissory estoppel claim is granted.
5. Fraud
Although under the general pleading requirements of FED. R. ClV. P. 8(a) the complaint need only contain "a short and plain statement of the claim," a claim for fraud must meet the more stringent requirements of FED. R. ClV. P. 9(b). Under Rule 9(b), the circumstances constituting the alleged fraud "shall be stated with particularity." FED. R. ClV. P. 9(b). The elements of a fraud claim are: (1) a misstatement or omission (2) of material fact (3) made with the intent to defraud the plaintiff (4) on which the plaintiff relied, and (5) which proximately caused the plaintiff's injury. Williams v. WMX Technologies, Inc., 112 F.3d 175, 177 (5th Cir.), cert. denied, 522 U.S. 966 (1997). Pleading fraud with particularity requires that a plaintiff specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent. Id.; see also Benchmark Electronics, Inc. v. J.M. Huber Corporation, No. 02-20655, 2003 WL 21981976, at *2 (5th Cir. Aug. 20, 2003) (stating that Rule 9(b) requires the plaintiff to lay out "the who, what, when, where, and how" of the alleged fraud); United States ex rel. Russell v. Epic Healthcare Management Group, 193 F.3d 304, 308 (5th Cir. 1999). If a plaintiff's fraud claim is not pleaded with particularity, however, the plaintiff should be given an opportunity to amend. Hart v. Bayer Corporation, 199 F.3d 239, 248 n. 6 (5th Cir. 2000).
In its counterclaim, Limestone does not plead with particularity any facts regarding its fraud claim, instead making conclusory allegations that track the elements of fraud. See Counterclaim ¶¶ 24-28. The closest that Limestone comes to meeting Rule 9(b)'s heightened pleading standard is in its response to Opus's motion to dismiss. Here, Limestone alleges (in a footnote) that the misrepresentation made by Opus was that "the venture would come to fruition (i.e. `Was a done deal') and that Opus considered Limestone its multi-family development partner." Response ¶ 3 n. 2. Later in the response, Limestone elaborates that
Opus represented that it would provide the financial backing for the new venture thereby enticing Limestone to borrow the funds from Opus at a substantial rate of interest. . . . Had Limestone been aware that Opus had no intention of proceeding with the project, Limestone would not have borrowed these funds.
Response ¶ 21.
It is simply not enough for Limestone to show that it could prove a set of facts in support of its fraud claims that would entitle it to relief. The heightened pleading requirements of 9(b) must be met for Limestone to survive a motion to dismiss its fraud claim. Taking into consideration both the conclusory allegations contained in Limestone's counterclaim and the more detailed statements contained in its response, the court finds that Limestone has not met the heightened pleading requirement. Accordingly, Opus's motion to dismiss Limestone's fraud claim is granted.
III. CONCLUSION
For the reasons discussed, Opus's motion to dismiss Limestone's counterclaims for failure to state a claim upon which relief may be granted is GRANTED. However, because it appears that a more carefully drafted counterclaim might state claims upon which relief could be granted, Limestone's alternative motion for leave to amend its counterclaim is GRANTED. Limestone shall have leave to file and serve, not later than October 21, 2003, an amended counterclaim to remedy the Rule 8(a)(2) and 9(b) deficiencies in their pending counterclaim; otherwise, this counterclaim will be deemed dismissed without further notice. If Limestone duly amends its counterclaim, Opus may reassert its motion to dismiss if it believes the amended counterclaim fails to cure the defects in the original counterclaim.