Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alsd-1_09-cv-00515/USCOURTS-alsd-1_09-cv-00515-2/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1332 Diversity-Breach of Contract

---

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

ESCAPES!, INC., : 

: 

Plaintiff, : 

: 

vs. : CIVIL ACTION 09-515-KD-M 

: 

LEGACY LAND AND DEVELOPMENT LLC,: 

ESCAPES ACQUISITION COMPANY, : 

LLC, WILLIAM J. KEARNEY, ALLAN : 

A. BUNIAK, DOLORES “DEE” : 

BALLIETT, : 

: 

Defendants. : 

REPORT AND RECOMMENDATION

The Motion to Dismiss filed by Defendant William J. Kearney

(Docs. 41, 54) has been referred for report and recommendation,

under 28 U.S.C. § 636(b)(1)(B) and Local Rule 72.2. Diversity

jurisdiction has been invoked in this Court pursuant to 28 U.S.C.

§ 1332. After consideration, it is recommended that Defendant’s

Motion (Docs. 41, 54) be denied.

The facts, very briefly, are as follows. Plaintiff

Escapes!, Inc. (hereinafter Escapes) owns a resort, Escapes! to

the Shores (hereinafter Property), a “newly-constructed 20-floor

mixed use condominium property” located in Orange Beach, Alabama

(Doc. 1, ¶¶ 11-12). Escapes entered into negotiations with

Defendants for the sale of the Property (Doc. 1, ¶ 13). Though

an agreement was reached, Defendants failed to close the

transaction by paying the $36 million purchase price, causing

Case 1:09-cv-00515-KD-M Document 72 Filed 02/18/10 Page 1 of 23
2

Escapes to experience considerable expense (Doc. 1, ¶¶ 28, 30-

31).

Plaintiff brought this action, asserting claims of

fraudulent misrepresentation, promissory fraud, fraudulent

suppression, breach of contract for damages and specific

performance, conspiracy to defraud, and promissory estoppel;

Escapes seeks compensatory and punitive damages (Doc. 1). 

Defendant William J. Kearney filed a Motion to Dismiss

(hereinafter Motion) which would dismiss him from this action

(Docs. 41, 54). Plaintiff has filed a response to Kearney’s

Motion (Doc. 60).

The Court notes, initially, that “[w]hen considering a

motion to dismiss, all facts set forth in the plaintiff’s

complaint ‘are to be accepted as true and the court limits its

consideration to the pleadings and exhibits attached thereto.’” 

Grossman v. Nationsbank, N.A., 225 F.3d 1228, 1231 (11th Cir.

2000) (quoting GSW, Inc. v. Long County, 999 F.2d 1508, 1510

(11th Cir. 1993)). In order to state a claim for relief, the

Federal Rules of Civil Procedure state that a pleading must

contain “a short and plain statement of the claim showing that

the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). The

U.S. Supreme Court explained that the purpose of the rule was to

“give the defendant fair notice of what the plaintiff’s claim is

and the grounds upon which it rests.” Conley v. Gibson, 355 U.S.

Case 1:09-cv-00515-KD-M Document 72 Filed 02/18/10 Page 2 of 23
1

Conley also stated that “a complaint should not be dismissed for

failure to state a claim unless it appears beyond doubt that the

plaintiff can prove no set of facts in support of his claim which

would entitle him to relief.” Conley, 355 U.S. at 45-46. The U.S.

Supreme Court has done away with this standard in Bell Atlantic

Corporation v. Twombley, 550 U.S. 544, 557-563 (2007). The Court,

nevertheless, finds Conley’s statement regarding the purpose of Rule

8(a)(2) to be useful here in deciphering the analysis necessary for

evaluating Plaintiff’s claims.

3

41, 47 (1957).1 While factual allegations do not have to be

detailed, they must contain more than “labels and conclusions;”

“a formulaic recitation of the elements of a cause will not do.” 

Bell Atlantic Corporation v. Twombley, 550 U.S. 544, 555 (2007)

(citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). “Factual

allegations must be enough to raise a right to relief above the

speculative level.” Id. (citations omitted). “Facts that are

‘merely consistent with’ the plaintiff’s legal theory will not

suffice when, ‘without some further factual enhancement [they]

stop short of the line between possibility and plausibility of

“entitle[ment] to relief.”’” Weissman v. National Association of

Securities Dealers, Inc., 500 F.3d 1293, 1310 (11th Cir. 2007)

(quoting Twombley, 550 U.S. 557) (quoting DM Research, Inc. v.

College of American Pathologists, 170 F.3d 53, 56 (1st Cir.

1999)). “Only a complaint that states a plausible claim for

relief survives a motion to dismiss.” Ashcroft v. Iqbal, — U.S.

—, 129 S.Ct. 1937, 1950 (2009) (citing Twombley, 550 U.S. at 556. 

“Where the well-pleaded facts do not permit the court to infer

more than the mere possibility of conduct, the complaint has

alleged—but it has not ‘show[n]’—‘that the pleader is entitled to

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2

The Court, at this time, is going to set out all parts of the

Complaint which it considers relevant to the entire discussion in this

Motion, rather than setting out sections of the Complaint in piecemeal

fashion as it relates to the specific enquiry at hand. The Court will

reference the specific relevant sections, when necessary, in

addressing each component of the Motion.

4

relief.’” Iqbal, — U.S. —, 129 S.Ct. at 1950 (quoting

Fed.R.Civ.P. 8(a)(2)). As noted by the Supreme Court, Plaintiffs

must “nudge[] their claims across the line from conceivable to

plausible[; otherwise,] their complaint must be dismissed.” 

Twombly, 550 U.S. at 570. It is noted, however, that a complaint

may be dismissed, under Federal Rule of Civil Procedure 12(b)(6),

“on the basis of a dispositive issue of law.” Executive 100,

Inc. v. Martin County, 922 F.2d 1536, 1539 (11th Cir.) (citing

Neitzke v. Williams, 490 U.S. 319 (1989)), cert. denied, 502 U.S.

810 (1991). 

The allegations in the Complaint relevant to the disputes

raised in Kearney’s Motion follow.2 

¶ 7. On information and belief, Kearney

and [Defendant] Buniak are the sole members

of Legacy, Legacy is the sole member of EAC,

and [Defendant] Balliett is an investment

advisor performing consulting and advisory

services for Kearney, Legacy, and EAC.

***

¶ 13. The causes of action set forth

herein arise from a scheme and related

fraudulent conduct perpetrated by Defendants,

whereby and pursuant to which Defendants

represented to Escapes that Legacy and/or EAC

and/or their assigns would purchase the

Property. In reliance on Defendants’

Case 1:09-cv-00515-KD-M Document 72 Filed 02/18/10 Page 4 of 23
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misrepresentations and other acts of deceit,

Escapes prematurely removed the Property from

the real estate market before an

unprecedented global economic and financial

downturn, lost substantial tax benefits, and

incurred substantial expense in preparation

for a closing which, because of Defendants’

misconduct and misrepresentations, never

occurred.

¶ 14. In June 2008, Kearney and Buniak

were introduced to Escapes through Kay Gilpin

(“Gilpin”), a real estate broker in Gulf

Shores, Alabama. Kearney and Buniak advised

Escapes that they were very interested in

purchasing the Property. Kearney held

himself out as a wealthy real estate

developer and investor; he also represented

that he was a principal in the Kearney

Companies, a collection of family-owned

multi-faceted businesses that include

construction companies and a real estate

development firm.

¶ 15. Thereafter, Gilpin, Kearney, and

Buniak met with Mike Cox, a representative

from Escapes, to discuss the acquisition of

the Property. At that meeting, Kearney and

Buniak called Escapes’ officers, John Cooper

and Kent Burger, to confirm their desire to

purchase the Property.

¶ 16. Escapes and Defendants engaged in

extended, comprehensive negotiations

regarding the terms of a purchase agreement

during the summer and fall of 2008. These

negotiations were conducted over the

telephone, via e-mail, and at in-person

meetings.

¶ 17. Balliett participated in the

negotiations and repeatedly assured Escapes

that Kearney possessed and had access to

funds sufficient to purchase the Property.

¶ 18. On or about October 24, 2008, in

furtherance of Defendants’ stated interest to

acquire the Property, the parties agreed to

an acquisition price of $36 million.

Case 1:09-cv-00515-KD-M Document 72 Filed 02/18/10 Page 5 of 23
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¶ 19. In addition, Defendants agreed

with Escapes that they would immediately

begin a due diligence investigation. 

Escapes, in turn, agreed to provide

Defendants with whatever they reasonably

needed to conduct their requested due

diligence. Escapes also agreed that it would

not negotiate with other potential purchases

or otherwise “shop” the Property.

¶ 20. At Defendants’ request, Escapes

expended substantial time, money, and effort

cooperating with Defendants’ due diligence

investigation. Among other things, Escapes

provided Defendants with financial and other

records, allowed Defendants and their

representatives to make numerous inspections

of the Property, and made its Arkansas and

Alabama employees available to answer

Defendants’ representatives’ questions and to

provide Defendants’ representatives with

whatever information they requested. And, as

promised, Escapes did not negotiate with

other potential purchases or otherwise “shop”

the Property. 

¶ 21. Following their due diligence

investigation, Defendants notified Escapes of

their decision to proceed with the

acquisition of the Property. Defendants

assured Escapes that they intended to close

the transaction and purchase the Property. 

Moreover, Defendants repeatedly assured

Escapes that they possessed and had access to

sufficient funds to close the transaction.

¶ 22. Because the Property was

available for special depreciation-based tax

benefits under The Gulf Opportunity Zone Act

of 2005 (the “GO Zone Act”), it was of utmost

importance that the parties close the sale of

the Property before January 1, 2009. Under

the GO Zone Act, the owners of certain

property in certain Hurricane Katrinaaffected counties were eligible for a special

depreciation allowance if their property was

purchased between August 2005 and December

31, 2008. Because the Property was eligible

for GO Zone Act tax benefits, the Property

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was particularly desirable to purchasers that

could close on or before December 31, 2008.

¶ 23. In connection with their repeated

and consistent representations that they

would close the transaction and purchase the

Property, Defendants retained the law firm of

Baker, Donelson, Bearman, Caldwell &

Berkowitz, P.C. (“Baker Donelson”) to draft

purchase and closing documents. Baker

Donelson has offices throughout the

Southeast, including Birmingham, Alabama. 

Three Baker Donelson attorneys were involved

in the closing process: Louann P. Smith and

Jackson W. Seal from Baker Donelson’s

Chattanooga, Tennessee office and J. Murphy

McMillan from Baker Donelson’s Birmingham,

Alabama office.

¶ 24. Defendants also employed (1)

Lance Niel, a broker with Great Southern

Resorts Realty in Orange Beach, Alabama, to

broker the transaction; and (2) Gulf Shores

Title Company, Inc. of Gulf Shores, Alabama,

to prepare title work. In furtherance of

their fraud and conspiracy to defraud

Escapes, Defendants communicated through

phone, e-mail, and otherwise with Lance Niel,

their broker, and with agents and employees

of Gulf Shores Title Company, Inc.

¶ 25. Numerous drafts of a purchase

agreement, ancillary documents, exhibits, and

other disclosures were negotiated and

exchanged between Escapes’ counsel and Baker

Donelson with the stated goal of closing the

transaction on or before December 31, 2008. 

Although Escapes initially required a deposit

of Earnest Money with an Escrow Agent,

Defendants convinced Escapes that the deposit

was not necessary because they had no

intention of backing out of the deal and

because the transaction would be closed in

short order at which time all purchase funds

— the entire $36 million — would be wired to

Chicago Title Insurance Company (“the Closing

Agent”).

¶ 26. On or about December 23, 2008,

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Kearney and Buniak formed EAC for the

putative purpose of acquiring the Property.

¶ 27. As December 31, 2008 approached,

Defendants and Escapes exchanged numerous

drafts of documents, engaged a title company

to prepare title work regarding the Property,

and otherwise prepared for closing. Over the

course of this process, Defendants regularly

represented that they would consummate the

transaction and that $36 million,

constituting the Property’s purchase price,

would be wired to the Closing Agent.

¶ 28. By December 31, 2008, the

parties’ deal was complete and an agreement

as to all materials terms existed. The only

remaining items to close the sale of the

Property were the collection of signatures on

the pertinent documentation and the wiring,

by Defendants, of the $36 million purchase

price to the Closing Agent.

¶ 29. On December 31, 2008, Defendants,

through their counsel, repeatedly represented

to Escapes that $36 million had, in fact,

been wired to the Closing Agent.

¶ 30. Notwithstanding Defendants’

misrepresentation that they had wired $36

million to the Closing Agent, said agent

reported to Escapes, late in the day on

December 31, 2008, that the $36 million

purchase price had not, in fact, been wired

by Defendants. At that point, Escapes

realized that Defendants had no intention of

closing the transaction and that Defendants

had continually made false representation to

Escapes regarding their intent to do so.

¶ 31. As a result of Defendants’

misrepresentations, Escapes incurred

substantial damages, including, but not

limited to, the loss of the Property’s

marketability and GO Zone Act tax benefit

attributes, removal of the Property from the

real estate market before an unprecedented

global economic and credit market downturn,

attorney’s fees, costs, expenses, and lost

Case 1:09-cv-00515-KD-M Document 72 Filed 02/18/10 Page 8 of 23
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opportunity, all well in excess of the

jurisdictional limit of this Court.

***

¶ 33. Defendants made the following

misrepresentations of material fact to

Escapes:

a. Defendants possessed and/or had

access to the $36 million purchase price

because, among other things, Kearney was

a wealthy businessman from a wealthy

family engaged in construction and real

estate development ventures;

b. Defendants were satisfied with

all information provided to them

concerning the Property;

c. Defendants needed no further

information on which to base their

purchase decision;

d. Defendants had no intention to

terminate the transaction;

e. Defendants desired to focus the

parties’ activities on negotiating and

drafting the agreements and related

documents necessary to close the

transaction before the quicklyapproaching expiration of the GO Zone

Act tax benefits;

f. There was no need for the

Earnest Money Deposit because the

transaction would close within a short

period of time and, in any event, no

later than December 31, 2008.

g. Defendants were satisfied with

and approved the final draft of the

purchase agreements and would close the

transaction and purchase the Property by

December 31, 2008; and

h. In connection with the purchase

of the Property, $36 million would be,

and in fact was, wired to the Closing

Agent.

¶ 34. In connection with Defendants’

scheme to defraud, Defendants hired counsel

and negotiated and exchanged numerous drafts

of a purchase agreement, ancillary documents,

exhibits, and other disclosures.

Case 1:09-cv-00515-KD-M Document 72 Filed 02/18/10 Page 9 of 23
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¶ 35. Escapes reasonably relying upon

Defendants’ misrepresentations and other acts

of deceit, spent a substantial amount of

time, money, and effort attempting to close

the purchase of the Property. As a result of

its reasonable reliance on Defendants’

misrepresentations and other acts of deceit,

Escapes removed the Property from the real

estate market before an unprecedented global

economic and credit market downturn and,

ultimately, lost GO Zone Act tax benefits

that would have been attractive to other

potential purchasers.

¶ 36. As a direct and proximate result

of its reasonable reliance on Defendants’

misrepresentations and other misconduct,

Escapes sustained damages in an amount to be

determined at trial.

***

¶ 38. Defendants made the following

misrepresentations of material fact to

Escapes: 

a. Defendants possessed and/or had

access to the $36 million purchase price

because, among other things, Kearney was

a wealthy businessman from a wealthy

family engaged in construction and real

estate development ventures;

b. Defendants were satisfied with

all information provided to them

concerning the Property;

c. Defendants needed no further

information on which to base their

purchase decision;

d. Defendants had no intention to

terminate the transaction;

e. Defendants desired to focus the

parties’ activities on negotiating and

drafting the agreements and related

documents necessary to close the

transaction before the quicklyapproaching expiration of the GO Zone

Act tax benefits;

f. There was no need for the

Earnest Money Deposit because the

transaction would close within a short

Case 1:09-cv-00515-KD-M Document 72 Filed 02/18/10 Page 10 of 23
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period of time and, in any event, no

later than December 31, 2008.

g. Defendants were satisfied with

and approved the final draft of the

purchase agreements and would close the

transaction and purchase the Property by

December 31, 2008; and

h. In connection with the purchase

of the Property, $36 million would be,

and in fact was, wired to the Closing

Agent.

¶ 39. Defendants represented that they

intended to close the transaction and to

purchase the Property up to, and including,

December 31, 2008, when Defendants knew they

had no intention of doing so.

¶ 40. Defendants’ repeated

misrepresentations were made with a present

intent to deceive Escapes.

¶ 41. In connection with Defendants’

scheme to defraud, Defendants hired counsel

and negotiated and exchanged numerous drafts

of a purchase agreement, ancillary documents,

exhibits, and other disclosures.

¶ 42. Escapes, reasonably relying upon

Defendants’ misrepresentations and actions,

spent a substantial amount of time, money,

and effort attempting to close the purchase

of the Property. As a result of its

reasonable reliance on Defendants’

misrepresentations and other misconduct,

Escapes removed the Property from the real

estate market before an unprecedented global

economic and credit market downturn, and

ultimately, lost GO Zone Act tax benefits

that would have been attractive to other

potential purchasers.

¶ 43. As a direct and proximate result

of its reasonable reliance on Defendants’

misrepresentations, Escapes sustained damages

in an amount to be determined at trial.

***

Case 1:09-cv-00515-KD-M Document 72 Filed 02/18/10 Page 11 of 23
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¶ 45. Defendants made the following

misrepresentations of material fact to

Escapes:

a. Defendants possessed and/or had

access to the $36 million purchase price

because, among other things, Kearney was

a wealthy businessman from a wealthy

family engaged in construction and real

estate development ventures;

b. Defendants were satisfied with

all information provided to them

concerning the Property;

c. Defendants needed no further

information on which to base their

purchase decision;

d. Defendants had no intention to

terminate the transaction;

e. Defendants desired to focus the

parties’ activities on negotiating and

drafting the agreements and related

documents necessary to close the

transaction before the quicklyapproaching expiration of the GO Zone

Act tax benefits;

f. There was no need for the

Earnest Money Deposit because the

transaction would close within a short

period of time and, in any event, no

later than December 31, 2008.

g. Defendants were satisfied with

and approved the final draft of the

purchase agreements and would close the

transaction and purchase the Property by

December 31, 2008; and

h. In connection with the purchase

of the Property, $36 million would be,

and in fact was, wired to the Closing

Agent.

¶ 46. Defendants concealed and did not

inform Escapes that they did not intend to

close the transaction and purchase the

Property. In fact, it was not until 

Defendants failed to wire the $36 million

purchase price to the Closing Agent on

December 31, 2008, as promised, that Escapes

realized Defendants had no intention of

purchasing the Property.

Case 1:09-cv-00515-KD-M Document 72 Filed 02/18/10 Page 12 of 23
13

¶ 47. In light of the nature of the

transaction, the inquiries made by Escapes,

and Defendants’ special knowledge, Defendants

had a legal duty to inform Escapes that they

did not intend to purchase the Property. 

¶ 48. In connection with Defendants’

scheme to defraud, Defendant hired counsel

and negotiated and exchanged numerous drafts

of a purchase agreement, ancillary documents,

exhibits, and other disclosures.

¶ 49. Defendants’ failure to inform

Escapes that they did not intend to close the

transaction and purchase the Property induced

Escapes to spend a substantial amount of

time, money, and effort attempting go close

said transaction. Further, as a result of

its reasonable reliance on Defendants’

misrepresentations and suppression of the

truth, Escapes removed the Property from the

real estate market before an unprecedented

global economic and credit market downturn

and, ultimately, lost GO Zone Act tax

benefits that would have been attractive to

other potential purchasers.

¶ 50. As a direct and proximate result

of Defendants’ failure to inform Escapes that

they had no intention of closing the sale of

the Property, Escapes sustained damages in an

amount to be determined at trial.

***

¶ 52. The parties agreed to the

conveyance of the Property as specifically

alleged herein. Although Escapes worked

diligently to close the sale and stood ready

to tender title to and/or convey the Property

to Defendants and to satisfy its obligations

pursuant to the parties’ agreement,

Defendants breached the agreement by failing

to satisfy their obligation to purchase the

Property. 

***

¶ 54. The parties agreed to the sale of

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3

The Court notes, however, that Kearney is acting as his own

attorney and that, apparently, he is untrained in legal writing. 

While it will not act as Defendant’s counsel, the Court will be

mindful of Kearney’s pro se status in reviewing his pleadings and

arguments.

14

the Property as alleged specifically herein. 

Although Escapes worked diligently to close

the sale and stood ready to tender title to

and/or convey the Property to Defendants,

Defendants refused to tender the purchase

price.

¶ 55. Escapes now offers to convey the

Property. 

***

¶ 57. Defendants entered into a civil

conspiracy to accomplish an unlawful end or

to accomplish a lawful end by unlawful means. 

Specifically, Defendants entered into a civil

conspiracy to defraud Escapes, as alleged in

the factual allegations stated herein. 

Defendants acted in concert with the intent

to cause injury to Escapes.

(Complaint). 

Before taking up Kearney’s specific assertions in bringing

this Motion, the Court notes Escapes’ assertion that Kearney has

not challenged the claim against him for promissory estoppel

(Doc. 60, p. 4 n.2). After a careful reading of Defendant’s

Motion (Docs. 41, 54), the Court agrees with Escapes: Kearney

has not specifically challenged the claim against him for

promissory estoppel (see Complaint, ¶¶ 58-62).3 Therefore, the

Court will not discuss this claim.

In his Motion, Plaintiff has challenged the existence of a

Case 1:09-cv-00515-KD-M Document 72 Filed 02/18/10 Page 14 of 23
4

In this action, Alabama law controls. Erie Railroad Co. v.

Tompkins, 304 U.S. 64 (1938).

15

contract. More specifically, Kearney stated the following; 

At no time has Plaintiff produced a

document that is anything other than a letter

of interest. A real estate transaction

involves a purchase and sale with two parties

who have completed a meeting of the minds. 

There would be consideration. Plaintiff’s

attorneys have produced a letter of interest. 

There is no reference or proof of

consideration. 

(Doc. 41, p. 5). Defendant has also asserted the following: 

“There was no contract at all” (Doc. 41, p. 5); “there are no

supporting factual verifications of the Contract” (Doc. 54, p.

2); “[i]n this set of facts there is no showing of a Contract”

(Doc. 54, p. 2). Kearney further asserted that because no

earnest money deposit was ever paid, no contract had been made

(Doc. 54, p. 2).

Plaintiff has asserted two breach of contract claims against

Kearney; one is for damages (Complaint ¶¶ 51-52) while the other

is for specific performance (Complaint ¶¶ 53-55). Under Alabama

law,4

 “[t]he elements of a valid contract are offer, acceptance,

consideration, and mutual assent to its terms.” Freed v. Cobb,

845 So.2d 807, 809 (Ala. Civ. App.) (citing Hargrove v. Tree of

Life Christian Day Care Center, 699, So.2d 1242, 1247 (Ala.

Case 1:09-cv-00515-KD-M Document 72 Filed 02/18/10 Page 15 of 23
5

The Court also notes that some Alabama courts also impose a

requirement of legal capacity as one of the elements of a valid

contract. See Gray v. Reynolds, 514 So.2d 973, 975 (Ala. 1987)

(citing Freeman v. First State Bank of Albertville, 401 So.2d 11 (Ala.

1981)). However, as Kearney has not challenged anyone’s legal

capacity to enter into the contract, the Court will not consider it.

16

1997)), cert. denied, 845 So.2d 810 (2002).5

The asserted facts in the Complaint, which are accepted as

true by the Court, see Grossman, 225 F.3d at 1231, seem to

establish that there was an offer and acceptance between the

Plaintiff and Defendants (Complaint ¶¶ 7, 14-16, 18-21, 23-29).

That leaves the “consideration” and “mutual assent to its terms”

to be established. These are the elements challenged by

Defendant.

The Court notes that whether the parties to a contract have

had a meeting of the minds is a factual question to be decided by

a jury. See Henig Furs, Inc. v. J.C. Penney Co., 811 F.Supp.

1546, 1557 (M.D. Ala. 1993). As such, Kearney must present this

issue to a jury as the Court, in a motion to dismiss, is not

allowed to make factual determinations. See Malone v. Chambers

County Bd. Of Commissioners, 875 F.Supp. 773, 794 (M.D. Ala.

1994). 

As far as the element of consideration, the Alabama Supreme

Court, in Files v. Schaible, 445 So.2d 257, 260 (Ala. 1984),

stated the following:

Adequate consideration exists, or is

implied, if it arises from any act of the

Case 1:09-cv-00515-KD-M Document 72 Filed 02/18/10 Page 16 of 23
17

plaintiff from which the defendant derived a

pecuniary benefit (i.e. the profitable sale

of the restaurant business), if such act was

performed by the plaintiff to the desired

end, with the expressed or implied assent of

the defendant. That which creates and

carries a benefit to the party promising, or

causes trouble, injury, inconvenience,

prejudice, or detriment to the other party,

is sufficient consideration. Cristie v.

Durden, 205 Ala. 571, 88 So. 667 (1921). 

Conflicting evidence as to whether the

consideration was adequate creates a question

of fact to be determined by the trier of

fact. Hyatt's Supply Co. v. Lyle, 222 Ala.

460, 133 So. 3 (1931); Bush v. Russell, 180

Ala. 590, 61 So. 373 (1913).

Files, 445 So.2d at 260. Escapes has asserted facts which, if

believed, would meet the definition of consideration under Files

(see Complaint ¶¶ 19-20, 22, 25, 27, 31). Again, though, a jury

must determine whether the consideration was adequate to have

established the contract.

After setting out the elements of a contract and examining

those component parts, the Court finds that Plaintiff has set out

plausible breach of contract claims against Kearney under

Twombley and Iqbal (Complaint ¶¶ 52, 54-55). Though constrained

from making factual determinations as to whether there was a

meeting of the minds between the parties and whether the

consideration was adequate, the Court is, nevertheless, satisfied

that Escapes, in its complaint, has “give[n] the defendant fair

notice of what the plaintiff’s claim is and the grounds upon

which it rests.” Conley, 355 U.S. at 47. 

Case 1:09-cv-00515-KD-M Document 72 Filed 02/18/10 Page 17 of 23
18

In his Motion, Kearney has also asserted that Plaintiff has

not met the burden of proving that he committed any form of

fraud. More specifically, Defendant asserts that “[n]o

conspiracy existed, no scheme to defraud was perpetrated” (Doc.

41, p. 5). He further asserts that “[p]romissory fraud and

promissory repression are not detailed to meet the Test in

Conley” (Doc. 54, p. 2). 

Escapes has asserted three fraud claims against Defendant. 

Specifically, those claims are for fraudulent misrepresentation

(Complaint ¶¶ 33-36), promissory fraud (Complaint ¶¶ 38-43), and

fraudulent suppression (Complaint ¶¶ 45-50). Under Alabama law,

“[a] claim of promissory fraud is ‘one based upon a promise to

act or not to act in the future.’” Ex parte Michelin North

America, Inc., 795 So.2d 674, 678 (Ala. 2001) (quoting Padgett v.

Hughes, 535 So.2d 140, 142 (Ala. 1988)). The Michelin Court

further quoted Padgett in stating as follows:

“The elements of fraud are (1) a false

representation (2) of a material existing

fact (3) reasonably relied upon by the

plaintiff (4) who suffered damage as a

proximate consequence of the

misrepresentation. To prevail on a

promissory fraud claim . . . , two additional

elements must be satisfied: (5) proof that at

the time of the misrepresentation, the

defendant had the intention not to perform

the act promised, and (6) proof that the

defendant had an intent to deceive.”

Ex Parte Michelin, 795 So.2d at 678-79 (quoting Padgett, 535

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So.2d at 142). 

The Court notes first that factual assertions in the

Complaint would seem to establish a claim of fraudulent

misrepresentation (Complaint ¶¶ 13, 19-20). The allegations made

by Escapes are that Defendants falsely told Plaintiff that they

would purchase the Property which caused Plaintiff to undertake

certain actions which damaged them. The Court finds that these

assertions satisfy the requirements for asserting a claim of

fraud as set out in Ex parte Michelin. As such, those assertions

state a claim sufficient to survive Kearney’s Motion to Dismiss.

Defendant has also challenged Plaintiff’s claim for

promissory fraud (see Complaint ¶¶ 38-43). On review of the

Complaint, however, the Court finds that the asserted facts seem

to clearly set out the elements necessary to establish a claim of

promissory fraud against Kearney (Complaint ¶¶ 7, 13-16, 17-21,

23-27, 29-31). Those assertions provide details of Defendant’s

representations that he, along with the other Defendants, wanted

to purchase the Property and information of the procedures they

completed to make that purchase a reality. While those facts, by

themselves, do not prove up a claim of fraud, the Defendants’

assertion that the money had been wired, when it had not

(Complaint ¶¶ 29-31), provides the necessary elements to state a

cause of action for promissory fraud to withstand Twombley and

Iqbal at this stage of the proceedings (Complaint ¶¶ 38-43).

Kearney has also challenged the claim for fraudulent

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suppression asserted by Plaintiff (see Complaint ¶¶ 45-50). The

Alabama Supreme Court has held that “to prove fraudulent

suppression, a plaintiff must show (1) a duty to disclose the

facts; (2) concealment or nondisclosure of material facts by the

defendant; (3) inducement of the plaintiff to act, and (4) action

by the plaintiff to his injury.” Cato v. Lowder Realty Co., 630

So.2d 378, 383 (Ala. 1983) (citing Wilson v. Brown, 496 So.2d

756, 759 (Ala. 1986)). 

The Court has reviewed the Complaint and finds asserted

facts therein which seem to establish a claim of fraudulent

suppression against Kearney (Complaint ¶¶ 14-15, 17, 21, 23-29). 

Within those assertions are allegations that Kearney, along with

the other Defendants, had a duty to disclose their decision not

to proceed with the purchase of the Property and that their

failure to make that disclosure induced Escapes to take multiple

actions, to their detriment, to effectuate that sale (see

Complaint ¶¶ 45-50). The Court finds that Plaintiff has set out

a plausible claim for fraudulent suppression against Kearney

under Twombley and Iqbal. 

Finally, Kearney has challenged any evidence of a

conspiracy. Specifically, the Court notes the following

assertion in a section of the Motion captioned Conspiracy: 

“Nowhere in the Plaintiff’s pleasing [sic] do they document when

this might have happened, where this might have happened, what

the purpose may have been, who would benefit from such a scheme,

Case 1:09-cv-00515-KD-M Document 72 Filed 02/18/10 Page 20 of 23
21

and, finally, why would anyone bother to do this” (Doc. 41, p.

4). The Court notes the following assertions as well: “No

conspiracy existed, no scheme to defraud was perpetrated, no

meeting of the minds ever took place” (Doc. 41, p. 5); “[n]o

facts have been produced to support the existence of a

conspiracy” (Doc. 41, p. 6); and “[t]here is no factual

discussion by the Plaintiffs that document the alleged

conspiracy” (Doc. 54, p. 2).

Escapes has asserted a claim of conspiracy to defraud

against Kearney (Complaint ¶¶ 56-57). The Alabama Supreme Court

has stated the following in describing this claim: “‘Civil

conspiracy is a combination of two or more persons to accomplish

an unlawful end or to accomplish a lawful end by unlawful means. 

The gist of an action alleging civil conspiracy is not the

conspiracy itself but, rather, the wrong committed.’” Hooper v.

Columbus Regional Healthcare System, Inc., 956 So.2d 1135, 1141

(Ala. 2006) (quoting Keith v. Witt Auto Sales, Inc., 578 So.2d

1269, 1274 (Ala. 1991)) (internal citations omitted). As such,

because the underlying wrong—the three claims for fraud—are

considered to be viable claims as of this stage of the

litigation, the conspiracy claim should not be dismissed. See

Garrett v. Stanton, 2008 WL 4701215, at *9 (S.D. Ala. October 22,

2008); see also Mitchell Co. v. Campus, 2008 WL 183344, at *6

(S.D. Ala. January 16, 2008).

The Court has reviewed the evidence of record and finds that

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22

Defendant Kearney has failed to demonstrate that Plaintiff cannot

establish a single element of any of the claims against him. 

Though Defendant denies the assertions made against him, the

Court finds that Escapes’ Complaint has satisfied the

requirements of Twombley and Iqbal. 

After thorough consideration of all the relevant pleadings

of record, it is recommended that Defendant Kearney’s Motion to

Dismiss (Docs. 41, 54) be denied and that this action be allowed

to continue.

MAGISTRATE JUDGE’S EXPLANATION OF PROCEDURAL RIGHTS

AND RESPONSIBILITIES FOLLOWING RECOMMENDATION

AND FINDINGS CONCERNING NEED FOR TRANSCRIPT

1. Objection. Any party who objects to this recommendation or

anything in it must, within fourteen days of the date of service

of this document, file specific written objections with the clerk

of court. Failure to do so will bar a de novo determination by

the district judge of anything in the recommendation and will bar

an attack, on appeal, of the factual findings of the magistrate

judge. See 28 U.S.C. § 636(b)(1)(C); Lewis v. Smith, 855 F.2d

736, 738 (11th Cir. 1988); Nettles v. Wainwright, 677 F.2d 404

(5th Cir. Unit B, 1982)(en banc). The procedure for challenging

the findings and recommendations of the magistrate judge is set

out in more detail in SD ALA LR 72.4 (June 1, 1997), which

provides that:

A party may object to a recommendation entered by a

magistrate judge in a dispositive matter, that is, a

matter excepted by 28 U.S.C. § 636(b)(1)(A), by filing

a “Statement of Objection to Magistrate Judge’s

Recommendation” within fourteen days after being served

with a copy of the recommendation, unless a different

time is established by order. The statement of

objection shall specify those portions of the

recommendation to which objection is made and the basis

for the objection. The objecting party shall submit to

the district judge, at the time of filing the

objection, a brief setting forth the party’s arguments

that the magistrate judge’s recommendation should be

Case 1:09-cv-00515-KD-M Document 72 Filed 02/18/10 Page 22 of 23
23

reviewed de novo and a different disposition made. It

is insufficient to submit only a copy of the original

brief submitted to the magistrate judge, although a

copy of the original brief may be submitted or referred

to and incorporated into the brief in support of the

objection. Failure to submit a brief in support of the

objection may be deemed an abandonment of the

objection.

A magistrate judge’s recommendation cannot be appealed to a

Court of Appeals; only the district judge’s order or judgment can

be appealed.

2. Transcript (applicable where proceedings tape recorded). 

Pursuant to 28 U.S.C. § 1915 and Fed.R.Civ.P. 72(b), the

magistrate judge finds that the tapes and original records in

this action are adequate for purposes of review. Any party

planning to object to this recommendation, but unable to pay the

fee for a transcript, is advised that a judicial determination

that transcription is necessary is required before the United

States will pay the cost of the transcript.

DONE this 17th day of February, 2010.

s/BERT W. MILLING, JR. 

UNITED STATES MAGISTRATE JUDGE

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