IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

SAMIR PATEL, AJAY BHATT, )

MING YE, JOSEPH SHAN, PETER )

SZETO, GENE LOU, JOSEPH )

SHAN, NIRVA VYAS, and )

NORMAN NELSON, )

 )

Plaintiffs, )

 )

v. ) C.A. NO.: N18C-01-185 AML

 )

SUNVEST REALTY )

CORPORATION d/b/a RE/MAX )

SUNVEST REALTY, RE/MAX, )

LLC, AND RE/MAX HOLDINGS, )

INC. )

 )

Defendants. )

Submitted: July 2, 2018

Decided: October 15, 2018

Upon Defendants’ Motion to Dismiss: Granted in part, denied in part

Upon Defendants’ Motions to Strike: Granted in part, denied in part

MEMORANDUM OPINION

Julia B. Klein, Esquire of KLEIN, LLC, Wilmington, Delaware, Attorney for 

Plaintiffs.

Eric J. Monzo, Esquire, and Brenna A. Dolphin, Esquire of MORRIS JAMES, LLP, 

Wilmington, Delaware, Attorneys for Sunvest Realty Corporation, Raymond W. 

Cobb, Esquire of O’HAGAN MEYER, LLC, Wilmington, Delaware, Attorney for

RE/MAX, LLC and RE/MAX Holdings.

LeGrow, J.
1

This case arose from alleged fraud committed by a real estate broker formerly 

employed by a franchise branch of a nationally-recognized real estate firm. 

Plaintiffs allege the broker embezzled funds Plaintiffs entrusted to him for the 

purpose of investing in real property. Beginning in summer 2017, the broker

defaulted on Plaintiffs’ promissory notes, and he filed for bankruptcy a few months 

later. Plaintiffs now bring claims of vicarious liability, common law negligence, 

negligent hiring, retention, and supervision, breach of contract, and fraud against the 

franchisee and franchisor. 

Plaintiffs’ claims present questions of franchisor and vicarious liability for 

conduct of a franchisee’s agent. Although the complaint adequately pleads vicarious 

liability claims against both defendants, the adequacy of its direct liability claims is 

more limited. As to those direct claims, Plaintiffs fail to plead claims that depend

on allegations that the franchisor employed the broker. Some of Plaintiffs’ other 

direct claims survive under the low pleading standard applicable to this motion, 

although Plaintiffs’ ultimate likelihood of success on those claims seems marginal 

at best. In sum, notwithstanding the exhausting length and rhetoric of Plaintiffs’ 

complaint, Plaintiffs barely make out fraud, negligence, and contract-based claims 

under agency principles, but those claims may not withstand a closer look after 

discovery.
2

FACTUAL AND PROCEDURAL BACKGROUND

The following facts are drawn from the amended complaint.

1

 Carl Chen 

worked as a real estate broker from 1986 until 2017 when his real estate license was 

terminated. According to the complaint, Chen worked for more than two decades at 

RE/MAX Sunvest Realty (“Sunvest”), a franchisee of RE/MAX, LLC (“RE/MAX”) 

(collectively with Sunvest, the “Defendants”). Beginning in 1991, Chen convinced 

several friends and acquaintances to invest in real property in return for monthly 

interest payments. Chen continued to enter into these promissory notes up to 

October 2016. In May 2017, Chen failed to make the monthly interest payment to 

one of his noteholders, Norman Nelson. Nelson later was informed that Chen no 

longer worked at Sunvest. On October 24, 2017, Chen filed for bankruptcy. Around 

this time, the noteholders learned most of their funds never were invested in real 

property. 

On January 17, 2018, several noteholders (“Plaintiffs”) brought this action 

against Sunvest and RE/MAX to recover the funds they invested with Chen.

2

 

 

1 The Complaint contains 104 paragraphs and spans 62 pages. It includes headshots, website 

screen shots, and numerous irrelevant, if not entirely conjectural, musings. The brevity of this 

factual background demonstrates Plaintiffs’ unnecessary expenditure of resources in drafting the 

Complaint, to say nothing of Defendants’ and the Court’s resources in reviewing and responding 

to it. At some point during the drafting process, Plaintiffs lost sight of Rule 8’s direction that a 

complaint shall contain a “short and plain statement of the claim.” Plaintiffs should not interpret

the Court’s partial denial of the motions to dismiss as an endorsement of this drafting style.

2 The complaint included RE/MAX Holdings as a named defendant. At oral argument, however, 

Plaintiffs conceded that all claims against RE/MAX Holdings should be dismissed. Accordingly, 

only claims against Sunvest and RE/MAX remain. 
3

Sunvest and RE/MAX filed separate motions to dismiss the original complaint, and 

Plaintiffs then filed an amended complaint containing counts against each defendant 

for vicarious liability, common law negligence, negligent hiring, retention, and 

supervision, breach of contract, and fraud. Defendants filed motions to dismiss the 

first amended complaint (“the Complaint”) and the parties briefed and argued those

motions. 

The Parties’ Contentions

In its motion to dismiss, Sunvest first argues the Court should dismiss 

Plaintiffs’ claims under Rule 19 because the parties cannot join Chen who, Sunvest 

maintains, is an indispensable party. Sunvest contends complete relief cannot be 

granted to the parties without Chen’s joinder because Chen’s conduct is the basis of 

Plaintiffs’ action. Sunvest acknowledges the automatic stay prevents Chen’s joinder 

in this case while the bankruptcy case is litigated, but Sunvest asserts all Plaintiffs’ 

claims can be litigated in the bankruptcy action. Apart from this procedural 

argument, Sunvest also maintains the Complaint should be dismissed for failure to 

state a claim. Sunvest contends Plaintiffs only made conclusory statements in 

support of their vicarious liability, negligent hiring, retention and supervision, 

breach of contract, and fraud claims. 

In a separate motion, RE/MAX argues the Complaint fails to allege the 

existence of any legally-cognizable relationship between Chen and RE/MAX. 
4

RE/MAX notesthe Complaint alleges claims against “RE/MAX,” but fails to specify 

which claims are asserted against which defendants. RE/MAX contends the 

Complaint fails to make any connection between Sunvest and RE/MAX and does 

not allege an employment or agency relationship with RE/MAX. Finally, like 

Sunvest, RE/MAX argues the Complaint fails to plead fraud with sufficient 

particularity. 

In response to Sunvest’s motion, Plaintiffs argue Chen is not an indispensable 

party because the parties may obtain discovery from him without joining him to this

action. Additionally, Plaintiffs assert they have pleaded fraud and the other claims 

with sufficient particularity and have pleaded sufficient facts to put RE/MAX on 

notice that they intend to show RE/MAX exerted control over Chen. 

ANALYSIS

On a motion to dismiss, the Court must determine whether the “plaintiff ‘may 

recover under any reasonably conceivable set of circumstances susceptible of 

proof.’”

3

 “If [the plaintiff] may recover, the motion must be denied.”4 A court may 

grant the motion if “it appears to a reasonable certainty that under no state of facts 

which could be proved to support the claim asserted would plaintiff be entitled to 

 

3 Holmes v. D’Elia, 2015 WL 8480150, at *2 (Del. Dec. 8, 2015) (quoting Spence v. Funk, 396 

A.2d 967, 968 (Del. 1978)). 

4 Deuley v. DynCorp Int’l, Inc., 2010 WL 704895, at *3 (Del. Super. Feb. 26, 2010) (citing Parlin 

v. DynCorp Int’l, Inc., 2009 WL 3636756, at *1 (Del. Super. Sept. 30, 2009) (quoting Spence, 396 

A.2d at 968)), aff’d, 8 A.3d 1156 (Del. 2010). 
5

relief.”5 When applying this standard, the Court will accept as true all nonconclusory, well-pleaded allegations.6

 In addition, “a trial court must draw all 

reasonable factual inferences in favor of the party opposing the motion.”7 

A. Chen is not an indispensable party under Rule 19(a).

Sunvest first argues the amended complaint should be dismissed because 

Chen allegedly is an indispensable party who cannot be joined in this action. Sunvest 

argues Chen’s conduct forms the basis for Plaintiffs’ claims and therefore he is an 

indispensable party under Rule 19. Because the automatic stay imposed by the 

bankruptcy action prevents the parties from joining Chen, Sunvest argues the 

Complaint should be dismissed. 

Under Rule 19(a), joinder is mandatory when: (1) complete relief cannot be 

afforded without the absent party’s participation, or (2) the absent party claims an 

interest in the subject of the action. Specifically, the rule provides, in relevant part:

A person who is subject to service of process and whose 

joinder will not deprive the Court of jurisdiction over the 

subject matter of the action shall be joined as a party in the 

action if (1) in the person’s absence complete relief cannot 

be accorded among those already parties, or (2) the person 

claims an interest relating to the subject of the action and 

is so situated that the disposition of the action in the 

 

5 Fish Eng’g Corp. v. Hutchinson, 162 A.2d 722, 724 (Del. 1960) (citing Danby v. Osteopathic 

Hosp. Ass’n of Del., 101 A.2d 308, 315 (Del. Ch. 1953), aff’d, 104 A.2d 903 (Del. 1954)); Nero 

v. Littleton, 1998 WL 229526, at *3 (Del. Ch. Apr. 30, 1998). 

6 Pfeffer v. Redstone, 965 A.2d 676, 683 (Del. 2009). 

7 Doe v. Cahill, 884 A.2d 451, 458 (Del. 2005) (citing Ramunno v. Cawley, 705 A.2d 1029, 1034 

(Del. 1998) (citing Solomon v. Pathe Commc’ns Corp., 672 A.2d 35, 38 (Del. 1996)) (other 

citations omitted)). 
6

person’s absence may (i) as a practical matter impair or 

impede the person’s ability to protect that interest or (ii) 

leave any of the persons already parties subject to a 

substantial risk of incurring double, multiple, or otherwise 

inconsistent obligations by reason of the claimed interest. 

If the person has not been so joined, the Court shall order 

that the person be made a party.8

Rule 19(a)(2) is not implicated here because none of the parties argues Chen 

has an interest in the subject of the action or that litigation without Chen would 

impair his ability to protect his interests. As to Rule 19(a)(1), on which Sunvest 

relies, complete relief can be accorded to all named parties without Chen’s joinder. 

Sunvest argues Chen is indispensable because his conduct forms the basis for 

Plaintiffs’ claims. Chen’s likely role as an essential factual witness, however, does 

not compel the conclusion that joinder is necessary to accord relief to all the named 

parties. The parties may subpoena Chen, take discovery from him, and compel him 

to testify. Thus, Plaintiffs’ claims do not require Chen’s joinder for evidentiary 

purposes. Additionally, Chen’s joinder is not required to determine liability because 

Plaintiffs do not claim Chen or either defendant was comparatively or contributorily 

negligent. Accordingly, Chen is not an indispensable party under Rule 19(a). 

 

8 Super. Ct. Civ. R. 19(a).
7

B. Count I of the Complaint adequately pleads Chen committed fraud and 

that he was Sunvest’s employee.

Count I of the Complaint alleges Sunvest vicariously is liable for Chen’s 

fraud. Sunvest argues the Complaint fails to plead fraud with particularity and fails 

adequately to allege Chen was Sunvest’s employee or agent.

1. The Complaint adequately alleges Chen committed fraud.

According to Superior Court Civil Rule 9(b), “[i]n all averments of fraud, . . . 

the circumstances constituting fraud . . . shall be stated with particularity.”9 The rule 

requires a plaintiff to “allege circumstances sufficient to fairly apprise the defendant 

of the basis for the claim.”10 The elements of fraud are: 

(1) defendant’s false representation, usually of fact, (2) 

made either with knowledge or belief or with reckless 

indifference to its falsity, (3) with an intent to induce the 

plaintiff to act or refrain from acting, (4) the plaintiff's 

action or inaction resulted from a reasonable reliance on 

the representation, and (5) reliance damaged the 

plaintiff.

11

Plaintiffs’ Complaint alleges Chen falsely claimed to invest significant funds 

in real estate on Plaintiffs’ behalf.12 The Complaint describes how Chen developed 

a reputation as a seasoned real estate broker and alleges that several plaintiffs were 

friends with Chen for many years before they entrusted their money to him. The 

 

9 Super. Ct. Civ. R. 9(b). 

10 H-M Wexford, LLC v. Encorp, Inc., 832 A.2d 129, 145 (Del. Ch. 2003). 

11 Stephenson v. Capano Development, Inc., 462 A.2d 1069, 1074 (Del. 1983).

12 Am. Compl. ¶¶ 6-13. 
8

Complaint includes the following exchange that occurred at a creditors’ meeting for 

the bankruptcy action between Chen, the debtors’ trustee, Alfred Giuliano, and 

Plaintiffs’ attorney, Julia Klein: 

CHEN: Yeah, we – we borrowed the money – the intention was to invest in 

real estate, but then I ended up using that to take care of my negative cash 

flow.

GIULIANO: Is that what you told them? You told them it was to invest in 

real estate?

CHEN: In the very beginning, yes. Later on when they –

GIULIANO: Like the million seven, when you borrowed the million seven, 

what did you tell those folks?

CHEN: Yeah, to invest in real estate.

GIULIANO: To invest in real estate. But you did not invest it in real estate, 

you used it to cover the cash flow?

CHEN: Yeah.

. . . 

KLEIN: What did you – so, just so I understand the money that you received 

from Mr. B[h]at, the $200,000, those went to pay interest payments of other 

noteholders or what did you use the money for? 

CHEN: I – I used the money for – to take care of negative cash flow for 

Chen-MAX, both of the Chen-MAX Properties, Inc.

KLEIN: Okay. Did you use the money you received from him to invest in 

any property, any real property or rental property? 

CHEN: No.

KLEIN: Okay. Were you supposed to under the promissory note?
9

CHEN: Yeah, yeah.13

From this exchange, it is reasonable to infer that: (1) Chen falsely represented 

that he would invest Plaintiffs’ funds in real estate; (2) Chen knew his 

representations were false; (3) Chen intended to induce Plaintiffs to invest their 

funds through him; (4) Plaintiffs reasonably relied on Chen’s representations; and 

(5) Plaintiffs suffered damages.14 In other words, the Complaint fairly appraises 

Defendants of the basis for the claim.

15

 Accordingly, the Complaint alleges with 

sufficient particularity that Chen committed fraud. 

2. The Complaint adequately alleges Chen was Sunvest’s 

agent/employee. 

In Delaware, “the party asserting an agency relationship has the burden of 

proving it.”16 An agency relationship “results from the manifestation of consent by 

one person to another that the other shall act on his behalf and subject to his control, 

and consent by the other so to act.”17 A plaintiff may sue an employer for the actions 

 

13 Id. at ¶ 47 (emphasis in the original).

14 Id. at ¶ 48 (“Chen knew that Plaintiffs expected their funds to be used to purchase, improve, and 

maintain real property. Chen over the years locally [sic] had established a reputation for being a 

fine real estate broker and assured Plaintiffs that their funds would be used for precisely that 

purpose: invest in and manage real property and ensure a steady return on investment. Based on 

these representations, Plaintiffs parted with their money.”). 

15 Id. ¶¶ 6-13.

16 F.E. Myers Co. v. Pipe Maintenance Services, Inc., 599 F.Supp. 697, 702 (D. Del. 1984). 

17 RESTATEMENT (SECOND) OF AGENCY § 1 (AM. LAW INST. 2006). 
10

of an employee under principles of vicarious liability if the actions occurred within 

the scope of employment.

18

 

It is reasonable to infer from the Complaint that Chen was Sunvest’s employee 

or agent. Chen acted as a real estate broker, which is Sunvest’s regular business. 

Chen worked at Sunvest’s office on Kirkwood Highway, and Plaintiffs signed the 

promissory notes in that office.

19 Additionally, the Complaint alleges Chen worked 

at Sunvest for twenty years. Because Chen worked at Sunvest as a real estate broker,

and the Complaint’s allegations permit a reasonable inference that Chen’s fraud 

occurred within the scope of his employment at Sunvest, the Complaint adequately 

pleads Sunvest vicariously is liable for Chen’s conduct. Whether Plaintiffs can 

prove Chen was acting within the scope of his employment is a distinct question, but 

Plaintiffs need not meet that burden of proof at the pleadings stage.

C. Count II of the Complaint adequately pleads a vicarious liability claim 

against RE/MAX.

Count II of the Complaint alleges RE/MAX vicariously is liable for Chen’s 

fraudulent conduct because RE/MAX is Sunvest’s franchisor. RE/MAX argues the 

Complaint fails sufficiently to allege that Chen or Sunvest was RE/MAX’s agent or 

that RE/MAX benefited from Chen’s conduct. As discussed in Section B.2, the 

Complaint adequately alleges Chen was Sunvest’s employee. The adequacy of 

 

18 Fisher v. Townsends, Inc., 695 A.2d 53, 58 (Del. 1997).

19 Am. Compl. at ¶ 34.
11

Count II, therefore, depends on whether RE/MAX, as Sunvest’s franchisor, may be 

held vicariously liable for Chen’s fraud. 

A plaintiff may hold a franchisor vicariously liable by establishing the 

franchisor had an actual or apparent agency relationship with its franchisee. In order 

to establish actual agency between a putative franchisor and franchisee, a plaintiff 

must show the franchisor has the right to control the franchisee’s business.20 An 

agency relationship exists if the franchisor has the right to exercise control over the

franchisee’s daily operations.

21

 Evidence of such control includes, among other 

things, a franchisor’s power to regulate advertising, office procedures, staff 

procedures, accounting, insurance, and maintenance of the premises. 

Here, the Complaint fails to allege RE/MAX exerted control over Sunvest’s

daily operations. Although the Complaint alleges RE/MAX is a very large and welladvertised realty company, the Complaint does not allege RE/MAX controlled 

Sunvest’s operations, and actual agency therefore is not sufficiently pleaded.

Alternatively, the principle of apparent agency focuses on the apparent 

relationship between a principal and an agent.22 In Billops v. Magness Construction 

Co., the Delaware Supreme Court examined the rule for apparent agency in a 

franchise relationship and held that apparent agency depends on a third party’s 

 

20 Billops v. Magness Const. Co., 391 A.2d 196, 197 (Del. 1978).

21 Id.

22 Id. at 198.
12

reasonable reliance on an alleged principal’s manifestations of the agent’s authority 

to bind the principal.23 The Billops Court explained that the manifestations “may be 

made directly to the third party, or may be made to the community in general, for 

example, by way of advertising.”

24

 An agent’s apparent authority is a question of 

fact typically left to the jury.25

In Billops, the plaintiffs sued several Hilton Hotels entities as the franchisors 

of Brandywine Hilton Inn for the tortious conduct of the inn’s banquet director.26 

The Court held the plaintiffs showed ample evidence indicating the inn was the 

franchisor’s apparent agent.

27

 Among the factors considered by the Court were the 

inn’s use of Hilton’s logo and signage at the exclusion of all other logos28 and the 

requirement that the inn identify itself completely with the Hilton system, including 

color scheme and interior design.29 The Court also relied on the fact that the 

defendants admitted there was no basis for a reasonable person to distinguish the inn 

from any other Hilton Hotels corporation,

30 and the plaintiffs stated they put their 

 

23 Id.

24 Id. at 198-99.

25 Id.

26 Id.

27 Id.

28 Id. at 199. 

29 Id.

30 Id.
13

faith and trust in the inn because Hilton “was a major hotel.”31 Accordingly, the

Court found the plaintiffs relied on the Hilton name and the quality it represents.32

Plaintiffs’ Complaint sufficiently alleges that RE/MAX had apparent 

authority over Sunvest. RE/MAX’s logo and trademark was featured prominently 

in the office and on Sunvest’s website. Sunvest’s signs, email signatures, and 

documents all bore RE/MAX’s name and/or trademark. The Complaint also alleges 

Plaintiffs reached out to RE/MAX’s franchises because they thought the franchises 

would be backed by RE/MAX and “its philosophy of caring for customers.”33 The 

Complaint therefore alleges Plaintiffs relied on RE/MAX’s name and brand quality. 

Accordingly, it is reasonable to infer from the Complaint that Sunvest was 

RE/MAX’s apparent agent. 

D. Count III of the Complaint adequately alleges Sunvest negligently 

retained Chen.

Count III of the Complaint includes claims of common law negligence and

negligent hiring, retention, and supervision against Sunvest. Plaintiffs largely base 

this claim on the fact that Chen and Sunvest were named as co-defendants in several 

real estate-related legal actions beginning in 2007. Plaintiffs contend these lawsuits 

put Sunvest on actual or constructive notice of Chen’s fraudulent conduct. Sunvest 

 

31 Id.

32 Id.

33 Am. Compl. at ¶ 26 (“Real estate purchasers and investors, including Plaintiffs, reach out to 

RE/MAX franchisees because they trust those franchises are backed by RE/MAX and its 

philosophy of caring for customers.”). 
14

argues the Complaint only makes conclusory statements regarding its alleged 

negligent hiring, retention, and supervision of Chen. As discussed in Section B.2, it 

is reasonable to infer from the Complaint that Sunvest employed Chen, and Plaintiffs 

therefore may maintain adequately pleaded claims of common law negligence and 

negligent hiring, supervision, and retention. 

Plaintiffs’ amended Complaint, however, does not adequately plead claims 

for common law negligence or negligent hiring and supervision. The elements of 

common law negligence in Delaware are duty, breach, causation, and harm.34 The 

Complaint fails to allege Sunvest had any duty to Plaintiffs, and Plaintiffs therefore

have failed to allege common law negligence against Sunvest. Similarly, “[a]n 

employer is liable for negligent hiring or supervision where the employer [was]

negligent . . . in the employment of improper persons involving risk of harm to others 

or in the supervision of the employee’s activit[ies].”35 The plaintiff must, however,

allege the employer was on notice of the employee’s risk of tortious behavior at the 

time the employer hired the employee.

36

 Here, the Complaint fails to allege facts 

that would show Sunvest was on notice of the risk of Chen’s tortious conduct at the 

time of his hiring. At most, the Complaint alleges Sunvest was or should have been 

aware of Chen’s misconduct in 2007, well after Sunvest hired him.

37

 

 

34 Hudson v. Old Guard Ins. Co., 3 A.3d 246, 250 (Del. 2010). 

35 Simms v. Christina School District, 2004 WL 344015, at *8 (Del. Super. Jan. 30, 2004). 

36 Fanean v. Rite Aid Corp. of Delaware, Inc., 984 A.2d 812, 826 (Del. Super. 2009). 

37 See Am. Compl. ¶ 22.
15

The Complaint does, however, adequately allege a claim for negligent 

retention, which considers an employer’s actions or omissions after an employee’s 

hiring.

An action for negligent supervision is based upon the 

employer’s negligence in failing to exercise due care to 

protect third parties from the foreseeable tortious acts of 

the employee.

. . .

The deciding factor is whether the employer had or should 

have had knowledge of the necessity to exercise control 

over its employee. Thus, existence of duty under a 

negligent supervision theory depends upon whether the 

risk of harm from the dangerous employee was reasonably 

foreseeable as a result of the employment.

38

The amended Complaint alleges “Sunvest had constructive, if not actual, 

notice that Chen may [have been] engaging in conduct that [wa]s legally 

actionable.”

39

 Plaintiffs allege Sunvest regularly was named as Chen’s co-defendant 

and garnishee in debt and breach of contract actions relating to his real estate 

investments. Plaintiffs also generally allege Sunvest knew or should have known 

Chen was using his Sunvest position and office to facilitate his fraud. Again, 

Plaintiffs will need substantially more to prevail on this claim at trial, but at the 

pleadings stage, and drawing all reasonable inferences in Plaintiffs’ favor, there is a 

 

38 Matthews v. Booth, 2008 WL 2154391, at *3 (Del. Super. May 22, 2008). 

39 Am. Compl. ¶ 76.
16

reasonably conceivable set of circumstances under which Plaintiffs could prevail on 

a claim against Sunvest for negligent retention. 

E. Count IV of the Complaint fails to adequately plead common law 

negligence and negligent hiring, supervision, or retention against 

RE/MAX.

Count IV of the Complaint alleges claims of common law negligence and 

negligent hiring, supervision, and retention against RE/MAX. Plaintiffs argue 

RE/MAX had the duty to ensure its agents “are of such qualification and character 

that they will not . . . harm its customers.”40 Plaintiffs also claim RE/MAX has a 

duty to review its agents’ qualifications and character regularly. In response, 

RE/MAX argues the Complaint fails to allege facts to support Plaintiffs’ negligence 

claims. 

Similar to their claims against Sunvest for common law negligence and 

negligent hiring and supervision, Plaintiffs also fail adequately to plead those claims 

against RE/MAX. Regarding the negligent retention claim, however, and unlike 

their adequately-pleaded claims against Sunvest, Plaintiffs fail to allege facts to 

support a negligent retention claim against RE/MAX. The Complaint refers to Chen 

as Sunvest’s employee, rather than RE/MAX’s employee.

41

 Although the Complaint

alleges RE/MAX “benefited” from Chen’s employment with Sunvest, it does not 

 

40 Id. at ¶ 80.

41 Id. ¶ 2.
17

allege or permit a reasonable inference that Chen was RE/MAX’s employee.42 The 

Complaint fails to allege that RE/MAX consented to have Chen act on its behalf or 

be subject to RE/MAX’s control. In their reply brief, Plaintiffs state they are 

uncertain of the nature of Chen’s relationship with RE/MAX and concede the 

Complaint is vague in this regard.

43

 Plaintiffs, however, maintain Chen’s 

employment status may be inferred from RE/MAX’s website and ask for leave to 

amend the Complaint.

44

 Although I am skeptical that Plaintiffs will be able to plead 

that Chen is RE/MAX’s employee, Count IV is dismissed without prejudice to 

Plaintiffs filing an amended Complaint within twenty days. 

F. Count V of the Complaint adequately pleads a breach of contract claim 

against Sunvest.

Count V of the Complaint alleges a breach of contract claim against Sunvest 

because Sunvest has not paid the interest due on Plaintiffs’ promissory notes. The 

Complaint claims Sunvest is bound by the notes because Chen signed the notes as 

Sunvest’s agent. In response, Sunvest argues the Complaint fails to allege Plaintiffs 

ever entered into a contract with Sunvest. 

When an agent enters into a contract with actual authority on behalf of a 

disclosed principal, the principal is a party to the contract.45 The elements of a 

 

42 Id.

43 Pl.s’ Resp. to RE/MAX’s Mot. Dismiss at ¶ 4.

44 Id.; see also Am. Compl. at ¶ 22.

45 RESTATEMENT (THIRD) OF AGENCY § 6.01 (AM. LAW INST. 2006).
18

breach of contract claim are: (1) a contractual obligation; (2) a breach of that 

obligation; and (3) resulting damages.46 

Here, it is reasonable to infer Chen entered into contracts with Plaintiffs on 

Sunvest’s behalf. The Complaint alleges Chen was Sunvest’s employee and entered 

into promissory notes with each plaintiff. The Complaint contained exhibits 

showing Chen signed promissory notes with plaintiffs Patel, Bhatt, and Ye. Chen’s 

signature block presented Chen as a broker and president of Sunvest.47 Further, the 

Complaint adequately alleges the promissory notes are in default. The notes promise 

to pay the holders monthly interest payments, and neither Chen nor Sunvest has 

made interest payments on the notes since 2017. Accordingly, the Complaint

adequately pleads a breach of contract claim against Sunvest. 

G. Count VI of the Complaint adequately pleads a breach of contract claim 

against RE/MAX.

Count VI of the Complaint claims RE/MAX is in breach of contract because 

Chen signed Plaintiffs’ promissory notes as RE/MAX’s actual or apparent agent. As 

discussed above, the Complaint fails to allege Chen was RE/MAX’s employee or 

actual agent, but sufficiently alleges Sunvest was RE/MAX’s apparent agent and that 

Sunvest’s employees, including Chen, had apparent authority to contract on 

 

46 Interim Healthcare, Inc. v. Spherion Corp., 884 A.2d 513, 548 (Del. Super. 2005). 

47 Ye’s promissory note lists “Chenmax properties Inc., a Company of Carl Chen” as the note 

buyer. Ex. C. to Am. Compl. It is reasonable to infer, however, that Chen acted with apparent 

authority from Sunvest due to his signature. See RESTATEMENT (THIRD) OF AGENCY § 6.01 (AM.

LAW INST. 2006).
19

RE/MAX’s behalf. Under Delaware law, an apparent agent has authority to bind a 

principal to a contract.48 Whether Plaintiffs ultimately may prove the necessary 

elements of this claim is a matter for another day.

H. Count VII of the Complaint fails to adequately plead common law fraud 

against Sunvest & RE/MAX.

Count VII of the Complaint pleads a common law fraud claim against both 

Sunvest and RE/MAX based on Chen’s tortious conduct. Plaintiffs argue Chen’s 

conduct is imputed to Sunvest and RE/MAX because Chen acted as their actual or 

apparent agent. Count VII does not, however, allege Sunvest or RE/MAX 

committed fraud through any conduct other than Chen’s. As noted previously, the 

Complaint sufficiently pleads Sunvest and RE/MAX vicariously may be liable for 

Chen’s fraud because he acted as their actual or apparent agent. Because the 

Complaint fails to allege Sunvest or RE/MAX committed fraud directly, the 

Complaint fails to plead a fraud claim against Sunvest and RE/MAX distinct from 

the vicarious liability claims alleged in Counts I and II.

I. Defendants’ motions to strike are granted in part.

 

48 International Boiler Works Co. v. General Waterworks Corp., 372 A.2d 176, 177 (Del. 1977); 

Giangrant v. Richard A. Parsons Agency, Inc., 1988 WL 40023, at * 2 (Del. Super. Apr. 22, 1988); 

Sarissa Capital Domestic Fund LP v. Innoviva Inc., 2017 WL 6209597, at *19 (Del. Ch. Dec. 8, 

2017) (“even if a person lacks actual authority to bind an entity to a contract with a third party, the 

person still may have apparent authority to do so.”); RESTATEMENT (THIRD) OF AGENCY § 6.01

(AM. LAW INST. 2006).
20

In its motion to dismiss, RE/MAX argued that, if the Court does not dismiss 

the Complaint in its entirety, it should strike paragraphs 21, 26, 27, and 32 under 

Superior Court Civil Rule 12(f). Each of the allegations in those paragraphs, 

however, relate – directly or indirectly – to Plaintiffs’ agency theories and therefore 

are relevant to Plaintiffs’ claims. In contrast, footnote 21 of the Complaint is 

nugatory and therefore is striken. 

Defendants also moved to strike exhibits Plaintiffs attached to their opposition 

brief, arguing those exhibits introduced matters outside the pleadings and therefore 

could not be considered by the Court in resolving the motions to dismiss. Plaintiffs 

contend those exhibits were offered for the limited purpose of supporting Plaintiffs’

argument that any dismissal should be without prejudice. I agree with Defendants 

that the exhibits may not properly be considered by the Court, and the motion to 

strike therefore is granted as to those exhibits. Because the only claim dismissed 

with prejudice is the duplicative Count VII, Plaintiffs’ reliance on those exhibits to 

support their request to amend the Complaint is unnecessary.

CONCLUSION

For the foregoing reasons, Defendants’ Motions to Dismiss are DENIED as 

to Counts I, II, III, V, and VI, are GRANTED without prejudice as to Count IV, and 

are GRANTED with prejudice as to Count VII. RE/MAX Holdings, Inc.’s Motion 

to Dismiss is GRANTED as to all counts. IT IS SO ORDERED.
21