Opinion
Civil Action No. 19-698
01-29-2020
PROFIT POINT TAX TECHNOLOGIES, INC., Plaintiff, v. DPAD GROUP, LLP, JOHN MANNING, and DANIEL STEELE, Defendants.
District Judge William S. Stickman
Re: ECF No. 15 REPORT AND RECOMMENDATION
I. RECOMMENDATION
Presently before the Court is a Motion to Dismiss filed by Defendants DPAD Group, LLP ("DPAD"), John Manning ("Manning"), and Daniel Steele ("Steele") (collectively, "Defendants"). ECF No. 15. For the reasons set forth below, it is respectfully recommended that the Motion to Dismiss be granted in part by dismissing, without prejudice and with leave to amend the Complaint, Counts I, III, IV, IX, X and XI. The Court should deny the Motion to Dismiss with respect to the remaining claims.
II. REPORT
A. FACTUAL AND PROCEDURAL BACKGROUND
1. Legal Claims
Plaintiff Profit Point Tax Technologies, Inc. ("PPTT") filed this action against Defendants Manning, Steele and DPAD on June 14, 2019. ECF No. 1. In its Complaint, PPTT asserts eleven claims: Breach of Contract (Count I); Breach of Fiduciary Duty (Count II); Misappropriation of Trade Secrets pursuant to the Defend Trade Secrets Act ("DTSA"), 18 U.S.C. § 1836 (Count III); Misappropriation of Trade Secrets pursuant to the Pennsylvania Uniform Trade Secrets Act ("PUTSA"), 12 Pa. C.S.A. § 5301, et seq. (Count IV); Unfair Competition (Count V); Unjust Enrichment (Count VI); Tortious Interference with Prospective Contractual Relations (Count VII); Conversion (Count VIII); Intentional Misrepresentation (Count IX); Negligent Misrepresentation (Count X); and a claim for an accounting (Count XI). PPTT asserts Counts I and II against Manning and Steele, only. The remaining claims are asserted against all Defendants.
2. Factual Allegations
a. Manning and Steele's independent contractor work for PPTT
PPTT is a tax services provider. Id. ¶ 8. Manning and Steele worked as independent contractors for PPTT and provided tax services for PPTT. Id. ¶ 9.
Manning and Steele's work for PPTT was governed by a revenue sharing agreement (the "Revenue Sharing Agreement"). Id. ¶ 11. Under the Revenue Sharing Agreement, Manning and Steele received percentages of revenue for projects on the basis of certain criteria, such as work contributed on each project and their involvement in procuring the client. Id. Clients solicited under PPTT's name became PPTT clients and were subject to the Revenue Sharing Agreement. Id.
PPTT alleges that it has developed and employed "certain proprietary, confidential business plans (including a unique package of tax services), marketing strategies, and customer and business contact lists that are exclusive to PPTT and unique in the tax services industry." Id. ¶ 14. PPTT has taken steps to preserve the confidentiality of this information including by restricting access to those with a "need to know." Id. ¶ 17. PPTT limits disclosures of its business plan and marketing strategies to possible customers in order to preserve its competitive edge. Id. As independent contractors, Manning and Steele had access to PPTT's propriety information and the use of a PPTT email address, PPTT's server, and other PPTT resources, and were able to market to potential clients under PPTT's name. Id. ¶¶ 9, 18.
b. Formation of DPAD and the February 2, 2016 Release
On or about May 7, 2015, Manning and Steele formed DPAD. DPAD is a tax services provider and it competes with PPTT in the tax services market. Id. ¶ 20.
PPTT alleges that DPAD was formed in 2015. ECF No. 1 ¶ 19. Based on a search of business records on the State of Delaware's official website, available at https://icis.corp.delaware.gov/Ecorp/EntitySearch/NameSearch.aspx (last visited January 27, 2019), the date of incorporation for The DPAD Group, LLC was May 7, 2015. The Court is entitled to take judicial notice of public records in considering dismissal on the pleadings. See Dinicola v. DiPaolo, 945 F. Supp. 848, 854 n. 2 (W.D. Pa. 1996).
At some point, a dispute arose between the parties regarding fee splitting under the Revenue Sharing Agreement. Id. ¶ 25. In order to resolve all remaining fee splitting disputes, Manning, Steele, and PPTT entered into a separate agreement dated February 2, 2016 (the "Release"). Id.
c. The Exelon Project
Plaintiff claims that, approximately two years after Manning and Steele formed DPAD in 2015, Manning and Steele solicited Constellation Energy, a subsidiary of Exelon ("Exelon"), as a tax client. Id. ¶¶ 13, 19. Plaintiff asserts that Manning and Steele marketed to Exelon under PPTT's name and used PPTT's resources, including confidential company information, confidential work product, and references of companies for which PPTT had performed work, in order to procure Exelon as a client. Id. ¶ 22. Specifically, it alleges, Manning was introduced to tax personnel at Exelon through connections of PPTT's former business partner, Urish Popeck & Co. Id. Manning marketed a Section 199 tax project to Exelon under the trade name "PPTT." Id.
Exelon agreed to pay PPTT for tax services. Id. ¶ 23. However, Manning substituted a DPAD engagement letter in place of a PPTT engagement letter. Id. As a result, Manning procured Exelon as a client for his own company, DPAD, instead of PPTT. Id.
Plaintiff claims that Manning and Steele did not inform PPTT that PPTT had procured Exelon, or that DPAD had assumed Exelon as its client. Id. ¶ 24. After PPTT learned of Exelon as a client and in response to PPTT's request for payment, Manning represented that Exelon is a DPAD project and that PPTT was not entitled to any fee split for this project. Id. ¶ 26. PPTT alleges that Defendants intentionally withheld knowledge of their procurement of Exelon using PPTT resources in an effort to avoid any fee split with PPTT and to retain all fees generated from the project. Id. ¶ 27. PPTT further asserts that, due to Defendants' failure to inform PPTT of the existence of this client, it was not included in the Release. Id. ¶ 25.
On information and belief, PPTT alleges that DPAD performed tax services for Exelon, and that DPAD, Manning and Steele have received payment for those services. Id. ¶ 28. PPTT was not paid. Id.
3. Defendants' Motion to Dismiss
On August 8, 2019, Defendants filed the instant Motion to Dismiss and Brief in Support. ECF Nos. 15 and 16. PPTT filed a Brief in Opposition on August 30, 2019. ECF No. 18. Defendants filed a reply brief on September 13, 2019. ECF No. 20.
The Motion to Dismiss is fully briefed and is now ripe for consideration.
B. LEGAL STANDARD
In assessing the sufficiency of a complaint pursuant to a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the Court must accept as true all material allegations in the complaint and all reasonable factual inferences must be viewed in the light most favorable to the plaintiff. Odd v. Malone, 538 F.3d 202, 205 (3d Cir. 2008). The Court, however, need not accept bald assertions or inferences drawn by the plaintiff if they are unsupported by the facts set forth in the complaint. See Cal. Pub. Employees' Retirement Sys. v. The Chubb Corp., 394 F.3d 126, 143 (3d Cir. 2004) (citing Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997)). Nor must the Court accept legal conclusions set forth as factual allegations. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Rather, "[f]actual allegations must be enough to raise a right to relief above the speculative level." Id. (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). Indeed, the United States Supreme Court has held that a complaint is properly dismissed under Fed. R. Civ. P. 12(b)(6) where it does not allege "enough facts to state a claim to relief that is plausible on its face," id. at 570, or where the factual content does not allow the court "to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); see also Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (finding that, under Twombly, "labels, conclusions, and a formulaic recitation of the elements of a cause of action" do not suffice but, rather, the complaint "must allege facts suggestive of [the proscribed] conduct" and that are sufficient "to raise a reasonable expectation that discovery will reveal evidence of the necessary element[s] of his claim").
C. DISCUSSION
1. Breach of Contract (Count I)
In Count I, PPTT asserts a claim for breach of contract. PPTT alleges that Manning and Steele breached the Revenue Sharing Agreement by soliciting clients on behalf of PPTT, which became PPTT clients by virtue of the Revenue Sharing Agreement, and by transferring those clients to their company, DPAD. ECF No. 1 at 6.
Defendants argue that Count I should be dismissed because PPTT's breach of contract claim is barred by the Release, which resolved any disputes arising under the Revenue Sharing Agreement or relating to fees derived from work up to the date of the Release. ECF No. 16 at 7. In its Brief in Opposition, PPTT contends that the Court cannot properly consider the Release on a Rule 12(b)(6) motion because it is extrinsic to the Complaint. Moreover, it argues, the Release was procured by fraud and therefore does not bar PPTT's claims.
a. The Release is Subject to Consideration
"As a general matter, a district court ruling on a motion to dismiss may not consider matters extraneous to the pleadings." In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997). One exception to this rule, however, is that "'a document integral to or explicitly relied upon in the complaint' may be considered 'without converting the motion [to dismiss] into one for summary judgment.'" Id. (quoting Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1220 (1st Cir. 1996), superseded on other grounds); see also Pension Benefit Guar. Corp. v. White Consol Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993) ("[A] court may consider an undisputedly authentic document that a defendant attaches to a motion to dismiss if the plaintiff's claims are based on the document."). This exception exists because "the primary problem raised by looking to documents outside the complaint—lack of notice to the plaintiff—is dissipated '[w]here the plaintiff has actual notice . . . and has relied upon these documents in framing the complaint.'" Id. (quoting Watterson v. Page, 987 F.3d 1, 3-4 (1st Cir. 1993)).
Upon review, the Court should consider the Release pursuant to the integral document exception. PPTT explicitly relies on the Release in its Complaint, detailing facts regarding the existence and purpose of the Release. See ECF No. 1 ¶ 24. PPTT's misrepresentation claims, Counts IX and X, arise out of allegations that Defendants improperly induced PPTT to enter into the Release. See id. ¶¶ 87-93. Indeed, PPTT even argues in its Brief in Opposition that the Release "is directly at issue" with respect its claims. ECF No. 18 at 5. Given that PPTT relied upon the Release in "framing its complaint," it had "actual notice" of its contents before the Court considered this document. See In re Burlington Coat Factory Sec. Litig., 114 F.3d at 1426.
The Court may also consider the Release at this stage because, although "release" is an affirmative defense, the law of this Circuit permits an affirmative defense to be raised by a motion under Rule 12(b)(6) in certain circumstances. See PPG Indus., Inc. v. Generon IGS, Inc., 760 F. Supp. 2d 520, 525 (W.D. Pa. 2011).
Although PPTT argues the Release is not "undisputedly authentic" because it was procured by misrepresentation, these are not arguments regarding authenticity, but are instead legal arguments regarding the effect of the Release. See ECF No. 18 at 4. PPTT does not dispute that the document Defendants have attached in support of their Motion to Dismiss is, in fact, a genuine copy of the Release that PPTT refers to in its Complaint. Accordingly, the Release is an undisputedly authentic document that PPTT has relied upon in its Complaint, and it may be properly considered in resolving Defendants' Motion to Dismiss. See In re Burlington Coat Factory Sec. Litig., 114 F.3d at 1426.
b. The Release Precludes PPTT's Breach of Contract Claim
Under Pennsylvania law, "the general rule for construction of releases is that the intention of the parties must govern, but this intention must be gathered from the language of the release." Three Rivers Motors Co. v. Ford Motor Co., 522 F.2d 885, 892 (3d Cir. 1975). "A signed release is binding upon the parties unless executed and procured by fraud, duress, accident or mutual mistake." Id. Thus, "unless [the complaint] raises sufficient allegations from which [the Court] can conclude that it is plausible that the Release was executed and procured by duress, fraud, accident or mutual mistake, the Release cannot be set aside." Nayak v. Voith Turbo, Inc., No. 1:14-cv-1053, 2017 WL 9485536, at *7 (M.D. Pa. July 19, 2017), report and recommendation adopted, Nayak v. Voith Turbo, Inc., 2017 WL 4230923 (M.D. Pa. Sept. 25, 2017).
PPTT contends that the Release does not bar its claims against Defendants because it "was procured by misrepresentations (intentional and negligent)," referring the Court to its intentional and negligent misrepresentation claims at Counts IX and X. ECF No. 18 at 2, 5. Specifically, it argues, "PPTT anticipates that discovery will show, as alleged in the Complaint, that Manning and Steele obscured their solicitation and obtention of a client, Exelon, to induce PPTT to sign the [Release]." Id. at 4. PPTT does not dispute that its claim for breach of contract would be barred by the terms of the Release, if the Release is applied.
For the reasons subsequently discussed in this Report and Recommendation, to the extent PPTT broadly asserts in Counts IX and X that an alleged misrepresentation occurred by virtue of the "non-inclusion of clients by the Defendants in the [Release]," PPTT does not plead sufficient facts to support these conclusions. PPTT only specifically addresses Defendants' procurement of Exelon, which Defendants did not allegedly solicit until after the Release was signed. See ECF No. 1 ¶¶ 19, 25. Because PPTT does not set forth factual allegations in the Complaint showing that the Release should be invalidated, "the Release shall control." Nayak, 2017 WL 9485536, at *6.
Upon review of the Release, we recommend that PPTT's breach of contract claim be dismissed because it is precluded by the Release. PPTT and Defendants are the parties to the Release. ECF No. 16-1 at 2. In relevant part, the Release states that "except as specifically reserved herein, the Parties desire to resolve all remaining fee splits on all projects that Manning and/or Steele have worked on as independent contractors for PPTT." Id. With two exceptions not at issue here, the Release further states "each party releases any claim against each other Party for fees for work done or claimed to have been done on behalf of any client." Id. ¶ 11. The parties agreed:
This agreement constitutes the entire agreement by and among the Parties with respect to the matters addressed herein and supersedes any and all oral or written agreements between the Parties that may have been entered into prior to the Effective Date [February 2, 2016].Id. ¶ 16.
Because the Release resolves any fee splits under the Revenue Sharing Agreement and supersedes any prior agreements, any claims for projects arising under the Revenue Sharing Agreement are precluded by the Release. Accordingly, PPTT fails to state a claim for breach of contract under the Revenue Sharing Agreement. Therefore, the Motion to Dismiss the breach of contract claim (Count I) should be granted.
2. Misappropriation of Trade Secrets Claims (Counts III and IV)
PPTT asserts claims for misappropriation of trade secrets under the DTSA and PUTSA, which provide a private cause of action to the "owner of a trade secret that is misappropriated." See ECF No. 1 at 8-12; 18 U.S.C. § 1836(b)(1); 12 Pa. C.S. § 5301, et seq. In its Complaint, PPTT defines the alleged "confidential and proprietary information and trade secrets" as "PPTT's business plans, marketing strategies, customer contacts and procuring access to the confidential information of a variety of companies," including "the business plan marketed by PPTT as the 'PPTT Approach.'" ECF No. 1 ¶¶ 41-42. It claims that Defendants "abused their access" to this information to benefit DPAD, which "accelerated DPAD's entry into and competitive viability in PPTT's marketplace." Id. ¶¶ 44, 48.
In their Motion to Dismiss, Defendants argue that the misappropriation of trade secrets claims should be dismissed because they are insufficiently pled. Specifically, Defendants assert that PPTT failed to plead the existence of any protected "trade secret." ECF No. 16 at 15. They argue that PPTT relies on generic terms without specifying what the purported trade secrets are or how they qualify as trade secrets, and PPTT has admitted that it disclosed these "trade secrets" to customers. Id. at 15-16. In addition, PPTT does not claim "misappropriation" because it does not specify the actual conduct Defendants engaged in with respect to information that allegedly was unlawfully disclosed. Id. at 17. Finally, Defendants argue that the DTSA claim is precluded because the misappropriation occurred before the DTSA was enacted, on May 11, 2016. Id. at 17-18.
With respect to whether it has pleaded the existence of a "trade secret," PPTT responds that the information was "classified as confidential" and that PPTT "took measures to restrict access," arguing that it restricted access of its proprietary information to its contractors. ECF No. 18 at 8-9. PPTT denies that it shared proprietary information with third parties. Id. at 9 n. 4. Because the misappropriation is ongoing and post-dates the May 11, 2016 enactment of the DTSA, it argues, the claim is not precluded on these grounds. Id. at 9.
Under the DTSA and PUTSA, a trade secret is defined as information that: (1) the owner has taken reasonable means to keep secret; (2) derives independent economic value, actual or potential, from being kept secret; (3) is not readily ascertainable by proper means; and (4) others who cannot readily access it would obtain economic value from its disclosure or use. Jazz Pharm., Inc. v. Synchrony Grp., LLC, 343 F. Supp. 3d 434, 444 (E.D. Pa. 2018). Both statutes define "misappropriation" to include the "acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means" or the "disclosure or use of a trade secret of another without express or implied consent." PDC Machines Inc. v. Nel Hydrogen A/S, No. 17-5399, 2018 WL 3008531, at *2 (E.D. Pa. June 15, 2018) (quoting 18 U.S.C. § 1838(5); 12 Pa. C.S.A. § 5302).
Upon review, Counts III and IV should be dismissed because the Complaint does not sufficiently plead the existence of a trade secret. Beyond conclusory statements, Plaintiff does not plead facts showing that PPTT took reasonable means to keep the information at issue secret and that it was not readily ascertainable by others. See Jazz Pharm., 343 F. Supp. 3d at 444. Although PPTT argues that it took confidentiality measures "by restricting its access of its proprietary business information and strategies to its contractors," this allegation is not in PPTT's Complaint. See ECF No. 18 at 9. In support of this proposition, PPTT refers the Court to paragraphs 14, 15 and 16 of its Complaint—none of which specify with whom PPTT did (or did not) share information. See ECF No. 1 ¶¶ 14-16. In the next paragraph of its Complaint, PPTT asserts that it affirmatively disclosed its business plan and marketing strategies to third parties. PPTT claims that it restricts access to individuals with a "need to know," and "[i]n particular, PPTT carefully limits disclosures of its business plan and marketing strategies to possible customers, so as to preserve its competitive edge in the marketplace." Id. ¶ 17 (emphasis added). By describing its efforts to keep the information at issue secret to include disclosures, albeit limited disclosures, to third parties with no alleged duty to maintain secrecy, PPTT undercuts its claim that this information was a "trade secret."
In a footnote, PPTT denies that a "strict reading" of its Complaint suggests that it disclosed proprietary information to third parties, but it does not attempt to address or explain this allegation. See ECF No. 18 at 9 n. 5.
To the extent PPTT relies on Teva Pharmaceuticals USA, Inc. v. Sandhu, 291 F. Supp. 3d 659, 680 (E.D. Pa. 2018), this case is distinguishable. In Teva, PPTT argues, the court did not dismiss the plaintiff's DTSA claim, holding that it was apparent through the allegations that "the information was classified as confidential and the plaintiff took measures to restrict access" and a "similar conclusion should follow here." ECF No. 18 at 8. The plaintiff in Teva alleged that the defendant, its former employee: (1) signed a confidentiality agreement that prohibited her from improperly disclosing trade secrets or confidential information; and (2) documents she shared were marked "confidential." Teva, 291 F. Supp. 3d at 666-67. The court noted that, because the information was classified as confidential and Teva took measures to restrict access, it was not available outside Teva. Id. at 675. Here, by contrast, PPTT does not identify any specific measures it took to ensure individuals kept its information secret, and its allegations suggest that the information was shared outside of PPTT. Accordingly, the Motion to Dismiss as to the misappropriation of trade secret claims (Counts III and IV) should be granted.
3. Unfair Competition (Count V)
In Count V, PPTT asserts a claim for unfair competition. ECF No. 1 at 12. PPTT claims that Defendants "engaged in acts of unfair competition" by "purposefully misappropriat[ing] and divulg[ing] PPTT's trade secrets, and other confidential and proprietary information to DPAD . . . in order to destroy PPTT's competitive advantage in the marketplace and to significantly and irreparably damage PPTT's business." Id. ¶¶ 69-70.
In moving for dismissal, Defendants argue that this claim is preempted by PUTSA, to the extent that PPTT's claim arises out of the misappropriation of trade secrets. Because it is not clear whether Plaintiff's unfair competition claim is based solely on purported trade secrets under the PUTSA, and having recommended that PPTT's PUTSA claim be dismissed for failure to adequately plead the existence of a "trade secret" under the statute, the Court should decline to find that this claim is preempted at this juncture. See, e.g., EXL Lab., LLC v. Egolf, No. 10-6282, 2011 WL 880453, at *9 (E.D. Pa. 2011). Accordingly, the Motion to Dismiss as to the unfair competition claim (Count V) should be denied.
4. Tort claims (Counts II, VI, VII, VIII and X)
PPTT also pleads various tort claims: breach of fiduciary duty (Count II); unjust enrichment (Count VI); tortious interference with prospective contractual relations (Count VII); conversion (Count VIII) and negligent misrepresentation (Count X). With respect to these claims, Defendants argue that they are all barred by the Release. Because the parties agreed to a mutual release with respect to any work done or claimed to have been done on behalf of any client, Defendants argue, any tort claims for unpaid fees should be dismissed. ECF No. 16 at 8-10. In the alternative, Defendants argue in a footnote that the claims are barred by the gist of the action doctrine, which provides that a plaintiff may not recover in tort for claims that actually sound in contract. Id. at 10 n. 4. Defendants also argue that, as to all claims, PPTT insufficiently pleads boilerplate legal conclusions. Id. at 1. In response, PPTT contends that it has sufficiently pleaded the elements of these claims and dismissal is improper. ECF No. 18 at 10-12.
Upon review, Defendants present insufficient grounds to dismiss Counts II, VI, VII, and VIII. As discussed above, PPTT has alleged that Defendants procured Exelon after the parties signed the Release, and therefore after the Revenue Sharing Agreement ceased to be in effect. To the extent the Release precluded claims for client fees "under the [Revenue Sharing Agreement] or otherwise relating to fees derived from client work up to the date of the Release," as Defendants argue, this does not address alleged tortious activity that took place after the date of the Release. See ECF No. 16 at 7 (emphasis added).
With respect to PPTT's negligent misrepresentation claim at Count X, however, this claim should be dismissed. PPTT argues that its claim arises out of Defendants' failure to disclose their solicitation of Exelon, which induced PPTT to sign the Release. As discussed below, this is not a plausible claim as pleaded because PPTT alleges that Defendants solicited Exelon after the Release signed, in 2017. PPTT otherwise refers the Court to its pleading of broad, conclusory allegations that PPTT made misrepresentations regarding clients in connection with the Release, without identifying supporting factual allegations. This is insufficient to state a claim. See Iqbal, 556 U.S. at 678.
Thus, the Motion to Dismiss does not provide sufficient grounds for dismissing the tort claims asserted in Counts II, VI, VII, and VIII, and the Motion to Dismiss should be denied with respect to these claims. The Motion to Dismiss should be granted as to the negligent misrepresentation claim (Count X).
5. Intentional Misrepresentation (Count IX)
PPTT asserts a claim for intentional misrepresentation at Count IX, alleging that Defendants made "false or misleading representations as to the clients that would be subject to the [Release]" in order to "induce PPTT to sign the [Release]." ECF No. 1 ¶ 87. In the Motion to Dismiss, Defendants argue that this claim fails because PPTT does not specifically identify the false misrepresentation(s) at issue, PPTT has waived any challenge to the Release by failing to return the consideration it received, and this claim is simply an improper effort to avoid the preclusive effect of the Release. ECF No. 16 at 10-13.
In response, PPTT argues that its pleadings sufficiently set forth the elements of this claim, and Defendants committed fraud through "the non-inclusion of clients by the Defendants in the Release that were solicited by the Defendants under PPTT's name." ECF No. 18 at 11. In describing the alleged fraud, PPTT specifically refers the Court to its allegation that Manning and Steele "obscured their solicitation and obtention of a client, Exelon, to induce PPTT to sign the [Release]." Id. at 18.
Under Pennsylvania law, the elements of intentional misrepresentation (also referred to as fraudulent misrepresentation) are: (1) a representation; (2) which is material to the transaction at hand; (3) made falsely, which knowledge of its falsity or recklessness as to whether it is true or false; (4) with the intent of misleading another into relying on it; (5) justifiable reliance on the misrepresentation; and (6) the resulting injury was proximately caused by the reliance. Gibbs v. Ernst, 647 A.2d 882, 889 (Pa. 1994). "[S]cienter, or the maker's knowledge of the untrue character of his representation, is a key element in finding fraudulent misrepresentation." Weston v. Northampton Personal Care, Inc., 62 A.3d 947, 960 (Pa. Super. 2013).
Federal Rule of Civil Procedure 9(b) additionally requires that "in alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." This requires plaintiff to allege "all of the essential factual background that would accompany the first paragraph of any newspaper story—that is, the who, what, when, where, and how of the events at issue." United States ex rel . Bookwalter v. UPMC, 946 F.3d 162, 176 (3d Cir. 2019) (quoting United States ex rel . Moore & Co., P.A. v. Majestic Blue Fisheries, 812 F.3d 294, 307 (3d Cir. 2016)) (internal quotations omitted).
Upon review, it is apparent that PPTT did not plead any fraudulent misrepresentation with the specificity required under Federal Rule of Civil Procedure 9(b), and this claim therefore should be dismissed. Here, PPTT does not specifically identify any false misrepresentation in its Complaint. Although PPTT argues that Defendants mispresented facts related to procuring Exelon as a client, this is not supported by the timeline set forth in its pleadings. In the Complaint, PPTT claims that Defendants solicited Exelon approximately two years after it formed DPAD. Manning and Steele formed DPAD in May 2015, meaning that this solicitation allegedly occurred in or about 2017. Because the parties signed the Release on February 2, 2016, before Defendants' alleged solicitation of Exelon, there is no plausible claim that Defendants induced PPTT to sign the Release based on misrepresentations regarding Exelon or that Defendants acted with the requisite knowledge. See Dorley v. S. Fayette Tp. Sch. Dist., 129 F. Supp. 3d 220, 236 (W.D. Pa. 2015) (noting that, although plaintiff is permitted to plead inconsistent claims, any inconsistent allegations "'must still have a plausible basis grounded in fact'") (quoting Kovach v. Turner Dairy Farms, Inc., 929 F. Supp. 2d 477, 500 (W.D. Pa. 2013)); see also Iqbal, 556 U.S. at 678 (to survive a motion to dismiss, a complaint must "contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face'") (quoting Twombly, 550 U.S. at 570).
PPTT does not attempt to address Defendants' argument regarding this discrepancy, but instead refers the Court to broad language in its Complaint regarding the fraudulent "non-inclusion of clients" in the Release. See ECF No. 18 at 11. The only client specifically identified in the Complaint is Exelon. To the extent PPTT claims that Defendants made misrepresentations regarding clients other than Exelon—and it is unclear whether it attempting to do so—it has not pleaded these allegations with particularity, as required under Federal Rule of Civil Procedure 9(b). Thus, in the absence of any particularized evidence of fraud set forth in the Complaint, PPTT fails to state a claim for intentional misrepresentation. As such, the Motion to Dismiss as to the intentional misrepresentation claim (Count IX) should be granted.
6. Claim for Accounting (Count XI)
Finally, in Count XI and in its Prayer for Relief, PPTT requests an Order requiring that Defendants "provide a full accounting of compensation received by [Defendants] for all tax services clients." ECF No. 1 at 15-16. Defendants argue in a footnote that Count XI should be dismissed because an accounting is a demand for relief, incident to a proper breach of contract claim, and should not be pleaded as a separate count. ECF No. 16 at 9 n. 3. PPTT does not respond to this argument. Upon review, Count XI, asserted as separate cause of action, should also be dismissed. See Canfield v. Statoil USA Onshore Properties, Inc., No. 3:16-0085, 2017 WL 4544619, at *25 (M.D. Pa. Sept. 29, 2017) ("A legal accounting is not a claim, but a demand for relief"); Vilkofsky v. Specialized Loan Servicing, LLC, No. 16-cv-01291, 2017 WL 2573874, at *7 (W.D. Pa. June 14, 2017) ("The Court also notes that Pennsylvania has abolished equitable accounting as an independent cause of action. Federal courts in Pennsylvania have generally held that an accounting is not a valid cause of action, but an equitable remedy") (internal citations omitted).
D. CONCLUSION
For the foregoing reasons, it is respectfully recommended that Defendants' Motion to Dismiss, ECF No. 15, should be denied with respect to Counts II, VI, VII, and VIII and granted with respect to Counts I, III, IV, IX, X, and XI. "If a complaint is vulnerable to Rule 12(b)(6) dismissal, a district court must permit a curative amendment, unless an amendment would be inequitable or futile." Phillips v. Cty of Allegheny, 515 F.3d 224, 236 (3d Cir. 2008). Particularly given the apparent discrepancies between PPTT's arguments and the facts as alleged in the Complaint, and the Court's conclusion that certain claims lack sufficient factual support, leave to amend is appropriate in the event it is possible to resolve these issues and plead a valid cause of action. Therefore, the identified claims should be dismissed without prejudice and with leave to amend the Complaint, as appropriate.
In accordance with the Magistrate Judges Act, 28 U.S.C. § 636(b)(1), and Local Rule 72.D.2, the parties are permitted to file written objections in accordance with the schedule established in the docket entry reflecting the filing of this Report and Recommendation. Failure to timely file objections will waive the right to appeal. Brightwell v. Lehman, 637 F.3d 187, 193 n. 7 (3d Cir. 2011). Any party opposing objections may file their response to the objections within fourteen (14) days thereafter in accordance with Local Civil Rule 72.D.2. Dated: January 29, 2020
Respectfully submitted,
/s/_________
MAUREEN P. KELLY
UNITED STATES MAGISTRATE JUDGE cc: Honorable William S. Stickman,
United States District Judge
All counsel of record via CM/ECF.