IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

SAMIR PATEL, AJAY BH ATT, ) MING YE, JOSEPH SHAN, PETER ) SZETO, GENE LOU, JOSEPH ) SHAN, NIRVA VYAS, and ) NORMAN NELSON, ) ) Plaintiff s , )

) 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 1 5 , 2018 Upon Defendants’ Motion to Dismiss: Granted in p art , d enied 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, Attorney s 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 fund s Plaintiffs entrusted to him for the purpose of investing in real pr operty

. Beginning in summer 2017 , the broker defaulted on Plaintiffs’ promissory notes , and he filed for bankruptcy a few months
later . Pla intiffs no w bring claims of vicarious liability, common law negligence, negligent hiring, retention, and supervision, breach of contr act, and fraud against the
franchisee and franchisor

. Plaintiffs’ claims present questions of franc hisor and vicarious l iability 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, Pla intiffs 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,
al though Plaintiffs’ ultimate likelihood of success on those claims seem s 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 afte r discovery.2

FACTUAL AND PROCEDUR AL BACKGROUND The following facts are drawn fr om 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 worke d 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 convinc ed
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 Ma y 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 S unvest 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 expend iture 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 motion s to dismiss as an endorsement of this drafting style. 2 The complaint included RE/MAX Holdings as a named defendant. At oral argument, ho wever, 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 motion s to dismiss the original complaint, and
Plaintiffs then filed an amended complaint co ntaining 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 C omplaint”) 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 t he parties cannot join Chen who, Sunvest
maintains , is an indi spensable party. Sunvest contends complete relief cannot be
gr anted 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 whil e the bankruptcy case is litigated, but Sunvest asserts all Plaintiffs’ claims can be litigated in the b ankruptcy 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 moti on, RE/MAX argues the Complaint fails to allege the
existence of any legally

- cognizable relationship between Chen and RE/MAX

.4

RE/MAX notes the Complaint alleges claims against “RE/MAX,” but fails to specify which claims are asserted against which defendan ts

. 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 partic ularity. 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 whe ther 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 non

conclusory, well

- pleaded allegations. 6 In addition, “a trial court must dra w 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 cann o t 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 absen t 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 sha ll 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 a ction 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 inconsiste nt 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 o f 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 indispensabl e because his conduct form s 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 a ll the named parties. The parties may subpoena Chen , take discovery from him, and com pel 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 defend ant was comparatively or contributorily negligent. Accordingly, Chen is not an indispensable party under Rule 19(a).

8 Super. Ct. Civ. R. 1 9(a).7

B. Count I of t he Complaint adequately pleads Chen committed fraud and that he was Sunvest’s employee
. Count I of the Complaint alleges Sunv est vicariously is liable for Chen’s
fraud. Sunvest argues the Complaint fails to plead fraud w ith particularity and fails adequately to allege Chen was Sunvest’s employee or agent

. 1. The Complaint adequately allege s 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 b asis 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 dama ged the plaintiff

. 11
Plaintiffs’ Complaint alleges Chen falsely claimed to invest significant funds
in real estate on Plaint iffs’ 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 followi ng 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

– G IU LIANO : Like the million seven, when yo u borrowed the million seven, what did you tell those folks?
CHEN: Yeah, to invest in real estate.
G IU LIANO: 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 prom issory note?9

CHEN: Yeah, yeah. 13 From this exchange , i t 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 “resul ts 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 a n 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 br oker 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 R ESTATEMENT (S ECOND ) OF A GENCY § 1 ( A M

. L AW I NST

. 2006 ).10

of an emp loyee under principles of vicarious liability if the actions occurred within the scope of employment

. 18
I t is reasonable to infer from the Complaint that C hen was Sunvest’s employee or agent . Chen acted as a real estate broker , which is Sunvest’s regular business

. Chen worked a t Sunvest’s office on Kirkwood Highway , and Plaintiffs signed the promissory notes in that office

. 19 Additionally, t he 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 adequat ely pleads Sunvest vicariously is liab le for Chen’s conduct. W hether Plaintiffs can prove Chen was acting within th e 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 l iability 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 Sec tion 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 vicariou sly 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 th e 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 well

advertised realty company, the Complaint does not allege RE/MAX controlled
Sunvest ’s operations , and actual agency therefore is not sufficiently pleaded

. Alternatively, t he principle of apparent agency focuses on t he apparent relationship between a principal and an agent. 22 I n Billops v. Magness Construction
Co. , t he 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

reaso nable 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 ban quet director. 26 The Court held the plaintiffs showed ample evidence indicating the inn wa s the
franchisor’s apparent agent

. 27 Among the factors considered by the Court were t he
inn ’s use of Hilton’s logo and sign age at the exclusion of all other logos 28 an d the requirement that th e 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, t he Court found the plainti ffs 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 cus tomers.” 33 The Complaint therefore alleges Plaintiffs relied on RE/MAX’s name and brand quality

. Accordingly, it is reasonable to infer fro m the Complaint that Sunvest was
RE /MAX ’s apparent agent

. D. Count III of t he 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 lawsu its 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 c onclusory 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 reten tion

. Plaintiffs’ amended Complaint , however, does not adequately plead claims for common law negligence or negligent hiring and supervision. The elements of common law neglige nce in Delaware are duty, breach, causation, and harm. 34 T he 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,

a llege 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 o f his hiring

. At most, t he 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.3 d 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 fa ctor 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 reasona bly 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 Sunv est 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 t he Complaint fails to adequat ely plead common law negligence and n egligent hir ing, 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 u nlike their adequately

- pleaded claim s against Sunvest, Plaintiffs fail to allege facts to support a negligent retention claim against RE/MAX. T he 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 T he Complaint fails to allege that RE/MAX consented to have Chen act on its behalf or be subject to RE/M AX’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/MA X’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 b reach of c ontract claim against Sunvest
. Count V of the Complaint alleges a breach of contract claim against S unvest because Sunvest has not paid the interest due on Plaintiffs ’ promissory notes . The Complain t claims Sunvest is bound by the n otes because Chen signe d the n otes 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 auth ority 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 R ESTATEMENT (T HIRD ) OF A GENCY § 6.01 ( A M

. L AW I NST

. 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 prom ise to pay the holders mont hly 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 t he Complaint adequately pleads a b reach of c ontract 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 emplo yee 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 R ESTATEMENT (T HIRD ) OF A GENCY § 6.01 ( A M

. L AW I NST

. 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 Complai nt 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 claim s alleged in Count s 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, I nc. , 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.” ); R ESTATEMENT (T HIRD ) OF A GENCY § 6.01 (A M

. L AW I NST

. 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). E ach of the allegations in thos e paragraphs, however, relate

– di rectly 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 t heir 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 suppor ting 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 di smissed with prejudice is the duplicative Count VII, Plaintiffs’ reliance on those exhibits to support their request to amend the Complaint is unnecessary
. CONCLUSION
Fo r the foregoing reasons, Defendant s ’ Motion s 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