UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

HANOVER EXCHANGE,

Plaintiff,

v.

METRO EQUITY GROUP LLC, EXCEL

ESCROW SERVICES LLC, EXCEL TITLE

AGENCY LLC, COREY HOWARD, and

JANEL CHIPMAN,

Defendants.

 /

Case No. 2:08-cv-14897

HONORABLE STEPHEN J. MURPHY, III

OPINION AND ORDER GRANTING IN PART AND DENYING 

IN PART DEFENDANTS' MOTIONS TO DISMISS (document nos. 9 & 33)

 AND ADJOURNING THE SCHEDULING CONFERENCE (document no. 40)

INTRODUCTION

In this case, plaintiff Hanover Exchange ("Hanover") alleges that it entered a contract

with defendant Metro Equity Group, LLC ("Metro"), whereby Metro would purchase, on

behalf of Hanover, several dozen residential properties in New Jersey. Defendant Corey

Howard acted as Metro's agent, and appears to have been the principal or perhaps even

the only employee of Metro who Hanover dealt with. The contract allegedly called for

Hanover to deliver an escrow deposit of just over $125,000 to defendant Excel Title Agency

("Excel Title"), a title company operated by defendant Janel Chipman. According to the

complaint, however, Metro never delivered a single title to Hanover, but instead prevailed

upon Chipman and Excel Title to transfer the escrow funds without Hanover's consent or

any other authorization, first to defendant Excel Escrow Services ("Excel Escrow"), and

later to Metro, which then allegedly used the funds for purposes not authorized by the

contract.

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The complaint asserts ten counts, all under Michigan law. Count I, against all

defendants, is for conversion of the escrow funds. Count II, also against all defendants,

alleges a civil conspiracy to defraud Hanover out of the escrow money. Count III, against

Chipman and Excel Title only, asserts a breach of their fiduciary duties as escrow agents.

Count IV asserts that Metro breached the contract with Hanover. Count V, pleaded in the

alternative against all defendants, is for unjust enrichment. Count VI seeks a declaratory

judgment that the contract binds the defendants and that the escrow funds belong to

Hanover. Count VII is a claim for promissory estoppel, asserted against all defendants.

Count VIII is an attempt to rescind the contract based on fraud in the inducement. Count

IX, also against all the defendants, is for negligent misrepresentation. Count X simply

seeks injunctive relief based on the other grounds for liability.

Before the Court are two motions filed pursuant to Federal Rule of Civil Procedure

12(b)(6), each of which seeks to several of these counts, or portions thereof, for failure to

state a claim on which relief can be granted. One of the motions is by defendants Howard

and Metro; the other is by Chipman, Excel Title, and Excel Escrow. Both motions purport

to request dismissal of all the claims against the applicable individual defendant, but neither

actually addresses all of the claims asserted by the complaint against Howard or Chipman.

The Court will discuss only those claims against which defendants offer argument.

LEGAL STANDARD

“[W]hen the allegations in a complaint, however true, could not raise a claim of

entitlement to relief, ‘this basic deficiency should . . . be exposed at the point of minimum

expenditure of time and money by the parties and the court.’” Bell Atl. Corp. v. Twombly,

550 U.S. 544, 557; 127 S. Ct. 1955, 1966 (2007) (citations omitted). Accordingly, Federal

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Rule of Civil Procedure 12(b)(6) allows a defendant to test whether, as a matter of law, the

plaintiff is entitled to legal relief even if everything alleged in the complaint is true. See

Minger v. Green, 239 F.3d 793, 797 (6th Cir. 2001) (citations omitted).

In assessing a motion brought pursuant to Rule 12(b)(6), the Court must presume all

well-pleaded factual allegations in the complaint to be true and draw all reasonable

inferences from those allegations in favor of the non-moving party. Bishop v. Lucent

Techs., Inc., 520 F.3d 516, 519 (6th Cir. 2008). To determine whether Plaintiff has stated

a claim, the Court will examine the complaint and any written instruments that are attached

as exhibits to the pleading. Fed. R. Civ. P. 12(b)(6) & 10(c). Although the pleading

standard is liberal, bare assertions of legal conclusions will not enable a complaint to

survive a motion pursuant to Rule 12(b)(6). In re DeLorean Motor Co., 991 F. 2d 1236,

1240 (6th Cir. 1993). The Court will not presume the truthfulness of any legal conclusion,

opinion, or deduction, even if it is couched as a factual allegation. Morgan v. Church’s

Fried Chicken, 829 F.2d 10, 12 (6th Cir. 1987). 

The Federal Rules of Civil Procedure 

do not require a claimant to set out in detail the facts upon which he bases

his claim. To the contrary, all the Rules require is “a short and plain

statement of the claim” that will 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. 41, 47 (1957). This standard requires the claimant only to put

forth “enough facts to raise a reasonable expectation that discovery will reveal evidence

of [the requisite elements of the claim].” Bell Atlantic, 127 S. Ct. at 1965. Thus, although

“a complaint need not contain ‘detailed’ factual allegations, its ‘[f]actual allegations must be

enough to raise a right to relief above the speculative level on the assumption that all the

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allegations in the complaint are true.’” Ass’n of Cleveland Fire Fighters v. Cleveland, Ohio,

502 F.3d 545, 548 (6th Cir. 2007) (quoting Bell Atlantic, 550 U.S. at 555). Therefore, the

Court will grant a motion for dismissal pursuant to Rule 12(b)(6) only in cases where there

are simply not “enough facts to state a claim to relief that is plausible on its face.” Bell

Atlantic, 550 U.S. at 570. 

ANALYSIS

I. Count I-- Conversion

Hanover's first claim is that the defendants have converted the $125,000 escrow

deposit. In Michigan, conversion is "any distinct act of dominion wrongfully exerted over

another's personal property in denial of or inconsistent with his rights therein." Thomas v.

Tracy Motor Sales, Inc., 360 Mich. 434, 438 (1960) (quoted in Priesman v. Meridian Mutual

Ins. Co., 441 Mich. 60, 74 n.19 (1992)). Howard levels three arguments as to why the facts

alleged by Hanover do not support such a claim.

First, Howard correctly notes that failure to pay a debt, without more, does not amount

to conversion of the unpaid funds. According to the Michigan Supreme Court, "conversion

is maintainable for money when trover would lie under the former practice," and "[t]rover

is not maintainable for money unless there be an obligation on the part of the defendant to

return the specific money intrusted to his care." Garras v. Bekiares, 315 Mich. 141, 148

(1946) (quoting Alfred Shrimpton & Sons v. Culver, 109 Mich. 577, 580 (1896)). The Court

is satisfied, however, that by alleging that defendants used the money in the escrow

account for unauthorized purposes when in fact they were duty bound to return the funds,

Hanover has brought its claim within the "specific money" exception to this rule. The

Michigan Supreme Court has held that "[a]n action for conversion lies where an individual

cashes a check and retains the full amount of the check when he is entitled to only a

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 Howard makes what the Court regards as the subsidiary argument that a check

deposited in escrow is the property of the payee -- here Metro -- rather than the payor, and

so cannot be converted by the payee. This may be true, but it does not prevent Hanover

from alleging, as it has here, that when defendants deposited the check and used the

resultant fund of money for unauthorized purposes, they converted the money itself. This

is precisely the type of claim authorized by the cases cited above.

5

portion of that amount," Citizens Ins. Co. of Am. v. Delcamp Truck Ctr., Inc., 178 Mich.

App. 570, 576 (1989) (citing Hogue v. Wells, 180 Mich. 19, 23 (1914)), and has even

specifically held that the misuse of escrow funds can constitute unlawful conversion.

Cozadd v. Healy, 338 Mich. 157, 160 (1953). The case cited by Howard, Head v. Phillips

Camper Sales & Rental, Inc., 234 Mich. App. 94 (1999), is not to the contrary. There the

defendants refused to return the purchase price of a defective product even after the buyer

lawfully revoked her acceptance of the product. The Court of Appeals held that as a matter

of law this was not conversion of the purchase price by the defendants, "because they were

under no obligation to return the specific money entrusted to them." Id. at 112. The court

even reiterated the rule noted above, that under Michigan law an action does lie "where the

defendant cashes a check as the plaintiff's agent or bailor and retains an amount to which

he was not entitled." Id. n.3.1

Second, Howard appears to argue that he cannot have converted the money because

he is under no obligation to return it until and unless the Court orders him to do so after

resolving all the claims in this case. Howard cites no authority in support of this bizarre and

nonsensical argument, which would make conversion a mere method of enforcing

judgments entered on other legal theories and eliminate its viability as an independent legal

claim. The Court will not consider it further.

Finally, Howard argues that neither he nor Metro have exercised dominion over the

funds, and thus that a conversion claim properly lies only against Chipman, Excel Title, and

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Excel Escrow, who have actual custody of the deposit. This is simply a misstatement of

the allegations of the complaint, which specifically alleges that "ETA, EES and Defendant

Chipman have allowed MEG to use escrowed funds to pay . . . amounts greater than

authorized by Plaintiff in the Contracts." Compl., document no. 1, ¶ 40. Obviously then,

Metro and/or Howard are alleged to have exercised dominion over at least some of the

funds, and the complaint therefore fairly states a conversion claim against them.

II. Counts II and VIII-- Civil Conspiracy to Defraud and Fraud in the Inducement

In Count II of its complaint, Hanover alleges that all the defendants participated in a

civil conspiracy to defraud it by misrepresenting their intent to use the funds as agreed

between the parties. In Michigan, "[a] civil conspiracy is a combination of two or more

persons, by some concerted action, to accomplish a criminal or unlawful purpose, or to

accomplish a lawful purpose by criminal or unlawful means." Admiral Ins. Co. v. Columbia

Casualty Ins. Co., 194 Mich. App. 300, 313 (1992) (citations omitted). The 'unlawful

purpose' element means that "a claim for civil conspiracy may not exist in the air; rather it

is necessary to prove a separate, actionable tort." Advocacy Org. for Patients & Providers

v. Auto Club Ins. Ass'n, 257 Mich. App. 365, 384 (2003) (quoting Early Detection Ctr., PC

v. N.Y. Life Ins. Co., 157 Mich. App. 618, 632 (1986)). Here, defendants attack the

sufficiency of the complaint's allegations both in regard to the existence of a "combination,"

and in regard to the underlying tort of fraud.

First, Howard notes that "an agent or employee cannot be considered a separate

entity from his principal or corporate employer, respectively, as 'long as the agent or

employee acts only within the scope of his agency of [sic] employment." Blair v. Checker

Cab Co., 219 Mich. App. 667, 674 (1996) (quoting Metro Club, Inc. v. Schostak Bros. &

Co., 89 Mich. App. 417, 420 (1979)) (alteration in original). This is because "a corporation

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acts only through those persons and conspiring with those persons would be like conspiring

with itself." Id. (quoting Schostak, 89 Mich. App. at 420).

It appears the Michigan courts have adopted an exception to this rule, however, for

cases "where the directors have an independent personal stake in a particular action, and

therefore, are actually acting on their own behalf." Id. at 674-75 (citations omitted). The

defendant in Blair was the Checker Cab Company, a corporation consisting of Detroit

taxicab owners. The Company was in the business of providing, among other things,

centralized dispatch services for Detroit area cab drivers. The plaintiff alleged that the

Company and some of its directors and officers, who were also cab owners, conspired to

restrain trade in the taxicab industry by preventing member-owners from soliciting each

others' cab drivers. In reversing a grant of summary disposition on the complaint, the court

found that because the plaintiff had alleged that the officers and directors personally

benefitted from the artificially high fees they were able to collect from their drivers due to

the collusion, her complaint fell within the independent-interest exception to the general

rule. Id. at 675-76.

Here, Hanover does not deny that Howard was an agent of Metro, but argues that his

actions fall within the "independent personal stake" exception because he stood to benefit

personally from the alleged scam. The Court agrees with Howard that Hanover has not

alleged facts that fit within this exception. First, the complaint does not in fact allege that

Howard benefitted from the escrow deposit in any way. Second, even if Howard is a

member of Metro as both parties seem to concede, this would be unlikely to confer upon

him a truly independent stake in the conspiracy, because his stake in the outcome would

be entirely derivative of Metro's own.

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As Howard was Metro's agent, then, the two were unable to conspire with each other

to defraud Hanover. This alone is insufficient to defeat the conspiracy claim, however,

because Hanover does not allege a conspiracy only between Howard and Metro (or

between Chipman and Excel Title or Excel Escrow, for that matter). Instead, the complaint

states that all the defendants conspired with each other to commit the fraud. There is no

indication that Howard was an agent of Excel Title or Excel Escrow, or that Chipman was

an agent of Metro. Accordingly, it is legally possible for these persons to conspire with

each other. Nevertheless, Howard also argues that the complaint does not allege the

"concerted action" element of civil conspiracy, because it does not offer any material

allegation that they worked in concert to actually commit the misrepresentations that

constituted the fraud. The Court cannot agree. The complaint alleges that "Defendant

Chipman and [Metro's] principals were in communications regarding the Agreement nearly

two weeks before the agreement was ever executed," Compl., document no. 1, ¶ 38, and

that defendants "engaged in extensive telephone and e-mail communications with Plaintiff's

representatives to negotiate the Agreement and discuss the status of attempted

purchases," id. at ¶ 29. It was during the course of these negotiations that Howard's first

fraudulent misrepresentations allegedly occurred. Id. at ¶¶ 11-12, 86, 88. Hanover further

alleges that Chipman falsely promised to hold the escrow monies properly, id. ¶¶ 87, 89,

104, and that while the contract was being performed, both defendants frequently misled

Hanover as to the status of the funds and the property sale negotiations, id. ¶¶ 50-51, 94-

95, 98. It is true that the complaint pleads the existence of an agreement to make these

misrepresentations only in conclusory fashion. Id. ¶¶ 48, 52. Nevertheless, given the

inherent plausibility of an allegation of a conspiracy between a middleman and an escrow

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agent to loot the escrow account for their own benefit, the Court finds that the complaint

sufficiently alleges the existence of a combination and concerted action in this regard.

Whether the complaint has also sufficiently alleged the underlying fraud is another

question. Under Michigan law the elements of common-law fraud are 

(1) [t]hat defendant made a material representation; (2) that it was false; (3)

that when he made it he knew that it was false, or made it recklessly, without

any knowledge of its truth, and as a positive assertion; (4) that he made it

with the intention that it should be acted upon by plaintiff; (5) that plaintiff

acted in reliance upon it; and (6) that he thereby suffered injury.

 Hi-Way Motor Co. v. Int'l Harvester Co., 398 Mich. 330, 336 (1976) (quoted in Cooper v.

Auto Club Ins. Ass'n, 481 Mich. 399, 408 (2008)) (citation omitted). Pursuant to Federal

Rule of Civil Procedure 9(b), "[i]n alleging fraud or mistake, a party must state with

particularity the circumstances constituting fraud or mistake." In this Sixth Circuit, this

requires a plaintiff "at a minimum, to 'allege the time, place, and content of the alleged

misrepresentation on which he or she relied; the fraudulent scheme; the fraudulent intent

of the defendants; and the injury resulting from the fraud.'" Coffey v. Foamex LP, 2 F.3d

157, 161-62 (6th Cir. 1993). This standard applies to both Count II, alleging civil conspiracy

to defraud, and Count VIII, alleging fraud in the inducement of the contract between

Hanover and Metro.

In regard to the alleged fraud, Hanover's complaint contains the following allegations:

¶ 11: "Defendant Howard represented that he was able to deliver residential property

in the New Jersey area by purchasing it at a significant discount from his contacts in

the real estate market."

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¶ 12: "[I]n the summer of 2008, Plaintiff was told by Defendant Howard that

Defendant Howard was able to obtain significant discounts upon numerous properties

in New Jersey."

¶ 50: "In furtherance of the civil conspiracy amongst the Defendants, the Defendants

have in fact defrauded Plaintiff on many occasions by misrepresenting to Plaintiff the

status of funds in the escrow account(s) and the uses of said funds."

¶ 51: "Defendants have further defrauded Plaintiff by representing to Plaintiff that

specific agreements to purchase specific properties had been executed (Exh. J) when

such no such [sic] agreements had been reached with the properties' owners. Exhibit

K.

[Exhibit J is an email from Brian Kinsley of Metro Equity, dated 9/26/2008. It states:

"Hanover and Home 911: There are the properties that are locked and scheduled for

close on Thursday: 

39 Atno

217 Autumn

86 Prospect

. . . .

 Exhibit K is an email from a bank representative, dated 11/18 2008, and stating that

"there was never a fully executed contract for 86 Prospect St., Jersey City, NJ with

Metro Equity LLC. The contract was signed by the Buyer but never the Seller."]

¶ 53: "Plaintiff has incurred damages due to Defendnats' civil conspiracy [to defraud.]

¶ 86: "As set forth herein, Defendant Howard represented to Plaintiff that Defendant

Howard and [Metro] could secure properties for a fraction of the list price."

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¶ 87: "As set forth herein, Defendant Chipman, EES and ETA received plaintiff[']s

escrowed funds in a result [sic] of Defendant Chipman's representations that the same

would be held in escrow and distributed pursuant to the Agreement."

¶ 88: "Each of the representations made by Defendant Howard was false."

¶ 89: "Each of the representations made by Defendant Chipman was false."

¶ 93: "Unbeknownst to Plaintiff, Defendants harbored an undisclosed plan to use

Plaintiff[']s funds for reasons other than those provided to Plaintiff."

¶ 94: MEG made false representations in writing of an existing material fact, i.e., that

it would sell real property to Plaintiff at only 45.5% of the prices at which those

properties were offered in the marketplace."

¶ 95: "MEG made false representations in writing of an existing material fact, that it

had reached agreements to purchase specific properties identified within the

Agreement, when, in fact, no such agreements had been reached."

¶ 96: "The false representations made by [Metro] were made to Plaintiff for the

purpose of inducing Plaintiff to enter into the Agreement and, as well, keep sending

money for more properties so that [Metro] could use those funds to pay higher prices

for those properties to the . . . Sellers,

¶ 98: "[Metro's] representations to induce the Agreement were false promises to do

acts (specifically, to deliver properties for only 45.5% of their listed prices ) and to

surrender deeds to the properties to Plaintiff."

¶ 100: "[Metro] made such promises with no intention of fulfilling them."

¶ 101: "Said promises were made to Plaintiff for the purpose of inducing Plaintiff to

tender funds to defendants, and those promises were relied on by Plaintiff in

conveying those funds to defendants."

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Most of these allegations do not satisfy the requirements of particularity, as articulated

in Coffey, because they do not include the time or place of the assertedly fraudulent

statements. The lone exception is Paragraph 51 of the complaint, which alleges that a

specific, identified email (Exhibit J) fraudulently stated that Metro had three named

properties under contract, when in fact it did not. Unfortunately for Hanover, with respect

to these alleged misrepresentations the complaint does not allege fraudulent intent.

Paragraph 96 does allege something of a scheme, but the complaint is devoid of any

allegation that any of the defendants knew that the September 26th, 2008 email contained

false statements of fact, or were reckless as to whether it did. Paragraph 100 of the

complaint alleges fraudulent intent as to misrepresentations of defendant's intention to

perform on the contract at the time they promised to do so, but that is not relevant to

defendants' intentions as to statements made in the course of performing the contract. The

Court will thus grant defendants' motion to dismiss the conspiracy/fraud claim. Because

none of the alleged fraudulent statements that occurred before the formation of the contract

are pleaded with the requisite specificity, the Court will also dismiss Hanover's fraud in the

inducement claim.

Hanover has requested that it be granted leave to amend its complaint, should the

Court dismiss these claims. That leave will be granted, and defendants will be free to move

to file a renewed motion to dismiss the amended complaint. In this light, although the Court

need not definitively reach the other arguments asserted by defendants in support of

dismissal, it will briefly note that they do not clearly render any amendment futile.

Defendants correctly state the rule that "[a]n action for fraudulent misrepresentation must

be predicated upon a statement of past or existing fact. A mere broken promise does not

constitute fraud, nor is it evidence of fraud. . . . [F]uture promises [are] contractual and

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 This is the first of several areas in which the briefs barely identify, let alone explain,

the legal theories and caselaw on which defendants seek dismissal. Should the complaint

be amended and the defendants file renewed motions to dismiss, it is the Court's hope that

this will be rectified. 

13

cannot be the basis of an action for fraud." Marrero v. McDonnell Douglas Capital Corp.,

200 Mich. App. 438, 444 (1993) (citations omitted). Defendants argue that Hanover's

allegations as to their statements about how the escrow funds would be used therefore state

only a contract claim.

This argument does not apply to the portion of Hanover's civil conspiracy to defraud

claim which is grounded in Metro's alleged misrepresentations as to the then-current status

of the escrow funds or the negotiations to purchase specific properties. With respect to any

aspects of the false-promises claim that may appear in an amended complaint, however,

the Court notes Hanover's rejoinder that under an exception to the general Michigan rule,

"a fraudulent misrepresentation may be based upon a promise made in bad faith without

intention of performance." Hi-Way Motor, 398 Mich. at 337; Gorman v. Soble, 120 Mich.

App. 831, 840 (1982) (citing Danto v. Charles C. Robbins, Inc., 250 Mich. 419, 425 (1930)

("If at the time the representation was made there was no present intent to carry it out,

however, the representation constitutes fraud."); see also Marrero, 200 Mich. App. at 444

(discussing an exception for a defendant's statements about his intentions that he "knew

at the time were false"). 

Metro appears to argue that notwithstanding these cases, Hanover's proper remedy

is solely in contract insofar as it alleges that defendants falsely promised to take actions

that they had an independent contractual duty to perform. The briefing on this issue has

been sparse at best.2

 Rather than ruling on the issue now, the Court will content itself to

note an apparent inconsistency in the Michigan cases as to whether a fraud claim can be

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 The individual defendants, Chipman and Howard, do make arguments as to why

contract claims cannot be brought against them. But the complaint does not assert a

contract claim against either Chipman or Howard.

14

grounded solely in a promise to perform an action that was also the defendant's contractual

duty. Compare Addy Machinery Co. v. Vantage Industries LLC, Nos. 279326 & 280526,

2008 WL 4958688, *4-*5 (Mich. App. Nov. 20, 2008) (permitting such a claim) with Flagstar

Bank v. Harbor Northwestern-30800, No. 266198, 2006 WL 954155, *4 (Mich. App. Apr.

13, 2006) (disallowing a similar misrepresentation claim). In the Court's view it will be

better resolved on a motion to dismiss the amended complaint, should one be filed.

III. Counts V and VII-- Unjust Enrichment and Promissory Estoppel

No defendant named in Counts III (breach of fiduciary duty), IV (breach of contract)

and VI (declaratory judgment) offers any argumentation as to why those counts should be

dismissed.3

 In Count V, Hanover asserts that all defendants were unjustly enriched when

Hanover wired them money only to have the defendants fail to do what they promised to

do.

Under Michigan law, 

[i]n order to sustain the claim of unjust enrichment, plaintiff must establish (1)

the receipt of a benefit by defendant from plaintiff, and (2) an inequity

resulting to plaintiff because of the retention of the benefit by defendant. If

this is established, the law will imply a contract in order to prevent unjust

enrichment. However, a contract will be implied only if there is no express

contract covering the same subject matter.

Belle Isle Grill Corp. v City of Detroit, 256 Mich. App. 463, 478 (2003) (citations omitted).

Somewhat similarly, 

[t]he elements of promissory estoppel are (1) a promise, (2) that the promisor

should reasonably have expected to induce action of a definite and

substantial character on the part of the promisee, (3) which in fact produced

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reliance or forbearance of that nature, (4) in circumstances such that the

promise must be enforced if injustice is to be avoided.

 McMath v. Ford Motor Co., 77 Mich. App. 721, 725 (citations omitted). As with a claim for

unjust enrichment, "if the performance which satisfied the detrimental reliance requirement

of the promissory estoppel theory is the same performance which represents consideration

for the written contract, the doctrine of promissory estoppel does not apply." McCartney

v. Lakeside Community Bank, No. 272131, 2007 WL 914664, at *2 (Mich. App. Mar. 27,

2007). 

Here, defendants note that Hanover has alleged the existence of a contract between

it and Metro, and that its entire alleged detrimental reliance on defendants' promises --

depositing the escrow money -- was a portion of its performance on the contract. This,

defendants argue, should preclude claims for unjust enrichment or promissory estoppel.

Hanover responds that the existence of a contract with Metro does not prevent it from

recovering in unjust enrichment or promissory estoppel from defendants who were not

parties to the contract. In general, Hanover's argument is a correct statement of Michigan

law. In Morris Pumps v. Centerline Piping, Inc., 273 Mich. App. 187, 199-200 (2006), the

Michigan Supreme Court stated that "we perceive no reason why a plaintiff should not be

allowed to simultaneously and alternatively assert a contract claim against one defendant

with whom an express contract exists and a quantum meruit claim against a different

defendant with whom no express contract exists." Although the Court is aware of no

Michigan case establishing an analogous rule in the promissory estoppel context, it agrees

that such a rule exists in that context-- that is, that in general there is no obstacle to a single

act by a plaintiff qualifying as both performance on a contract with one defendant, and

detrimental reliance on a promise by another defendant. 

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Hanover's claims against Chipman, Excel Title, and Excel Escrow fall squarely under

these rules. The claims against Metro, of course, do not, because Hanover does allege a

contract with Metro, and the deposit of the escrow money was in fact performance on that

contract. Howard argues that the contract also precludes claims against him personally for

unjust enrichment and promissory estoppel, on the theory that as an agent of Metro, his

duties to Hanover were also defined by the contract. The Court is inclined to agree with

Howard's argument in this regard, but need not rule on the matter, because even if

Hanover could not recover from both Metro (in contract) and Howard (in unjust enrichment

or promissory estoppel), the Court regards the unjust enrichment claims against both Metro

and Howard as acceptable alternative pleading under Federal Rule of Civil Procedure

8(c)(3). Hanover alleges that it reached an agreement with Metro, pursuant to which

Hanover parted ways with some of its money. As a matter of law, either this agreement

was a legally binding contract, or it was not. If the former, Hanover's proper claim to

recover its money is in contract; if the latter, Hanover can assert unjust enrichment and

promissory estoppel claims. Under Rule 8(c)(3), the inconsistency of these theories does

not prevent their simultaneous assertion. 

V. Count IX-- Negligent Misrepresentation

Hanover's final theory of liability is that if defendants' misrepresentations were not

fraudulent, they at least amounted to tortious negligent misrepresentation. A claim of

negligent misrepresentation "requires plaintiff to prove 'that a party justifiably relied to his

detriment on information prepared without reasonable care by one who owed the relying

party a duty of care.'" Marble Cleary Trust v. Edward-Marlah Muzyl Trust, 262 Mich. App.

485, 502 (2004). In addition, the misrepresentation must have been "of facts that can be

independently verified." Id. (citing City Nat'l Bank v. Rodgers, 155 Mich. App. 318, 323-24

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(1986)). As a result, statements of opinion cannot give rise to liability for negligent

misrepresentation, even if the opinion ultimately turns out to be incorrect. City Nat'l Bank,

155 Mich. App. at 323-25 (attorney's legal opinion was not actionable on a theory of

negligence).

As an initial matter, the Court concludes that a claim of negligent misrepresentation

under Michigan law is not subject to the heightened pleading requirement of Rule 9(b).

Although the Court is unaware of any Sixth Circuit precedent dealing with this question, the

Fourth, Fifth, Seventh, Eighth and Ninth Circuits, at least, have held that negligent

misrepresentation is not "fraud" within the meaning of the rule. See Baltimore County v.

Cigna Healthcare, 238 F. App'x 914, 921 (4th Cir. 2007); Gen. Electric Capital Corp. v.

Posey, 415 F. 3d 391, 396-97 (5th Cir. 2005); Tricontinental Inds., Ltd. v.

PricewaterhouseCoopers, LLP, 475 F. 3d 824, 833 (7th Cir. 2007); In re NationsMart Corp.

Securities LItigation, 130 F. 3d 309, 315 (8th Cir. 1997); Vess v. Ciba-Geigy Corp. USA,

317 F. 3d 1097, 1105 (9th Cir. 2003). It is true that the Fifth Circuit has created an

exception to this rule, and applied the Rule 9(b) standard to negligent misrepresentation

claims where the plaintiff's "fraud and negligent misrepresentation claims are based on the

same set of alleged facts" and the parties themselves do not "urge a separate focus on the

negligent misrepresentation claims." Benchmark Electronics, Inc. v. J.M. Huber Corp., 343

F. 3d 719, 723 (5th Cir. 2003). In the Court's view, however, a negligent misrepresentation

claim can easily be pleaded in the alternative to a fraud claim on a single set of facts,

without itself somehow being transformed into an allegation of fraud subject to Rule 9(b).

Moreover, the Court concludes that a plaintiff's failure to "urge a separate focus" on a

particular claim cannot operate as a waiver of the notice pleading standards of the Federal

Rules. Accordingly, the Court holds that in order to state a claim for negligent

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misrepresentation under Michigan law, Hanover need simply plead "a short and plain

statement of the claim showing that [it] is entitled to relief." Fed. R. Civ. P. 8(a)(2).

Howard argues in conclusory fashion that Hanover has failed to allege facts

establishing that he owed Hanover any duty of care. Hanover has, however, adequately

pleaded that it negotiated and signed a contract with Metro Equity, with Howard acting on

Metro's behalf. The Court has little difficulty in concluding that persons negotiating or

performing a contract may be held to have a duty of care in representing to each other their

intentions with regard to the contract and the actual status of their performance. 

Howard also maintains that Hanover has not alleged that he misrepresented any

independently verifiable facts. To the extent that Hanover's misrepresentation claim is

grounded in defendants' representations as to the then-current status of the escrow funds

and the purchase agreements, see, e.g., Compl., document no. 1 ¶¶ 50-51, this argument

must fail. Moreover, because these allegations need not be pleaded with particularity in

order to state a claim for negligent misrepresentation, as opposed to fraud, they are

sufficient even with respect to the alleged misrepresentations that are not specifically

identified by time, place, and content.

To the extent that Hanover's negligent misrepresentation claim is predicated on

defendants' misrepresentations of their intentions in the course of negotiating the

agreement, however, the Court agrees that it is an untenable attempt to fit a round peg into

a square hole. As Michigan law recognizes in the context of fraud, a promise to do

something (or not do something) in the future can be false only if at the time it is made the

promisor actually has no intention of following through. If such a misrepresentation is

intentional, it is actionable fraud and not negligent misrepresentation. As a practical matter,

this leaves little room for an independent tort of negligent misrepresentation of one's

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 Nor does there appear to be any meaningful distinction to be drawn in this case

between the element of duty, in negligent misrepresentation, and the corresponding but

perhaps not identical element of intent to induce reliance, in fraud. The complaint makes

it crystal clear that Howard did in fact intend to induce reliance, and it is impossible to

conceive of any set of facts consistent with the complaint that would allow Hanover to

recover without proving this element.

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present intentions. Although it is perhaps not completely impossible, it would be a very rare

case in which a person could misrepresent his own present intentions without doing so

knowingly. At any rate, there is absolutely nothing in the complaint to indicate that was the

situation here.4 Accordingly, the Court need not decide whether there might be a very

narrow slice of cases in which a plaintiff could recover for a defendant's negligent

misrepresentation of the defendant's own intentions: even if there are such cases, this is

not one of them. Insofar as it is based on allegations that defendants falsely promised to

take action in the future, Hanover's claim for negligent misrepresentation must therefore

be dismissed.

ORDER

WHEREFORE, it is hereby ORDERED that:

Defendants' motions to dismiss are GRANTED IN PART and DENIED IN PART; 

Counts II and VIII of the complaint are DISMISSED WITHOUT PREJUDICE; 

Count IX of the complaint is DISMISSED WITH PREJUDICE, insofar as it alleges a

negligent misrepresentation of defendants' then-current intentions; and

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Within 20 days of the entry of this order, plaintiff may file an amended complaint

addressing the deficiencies noted herein and reasserting the claims that were

dismissed without prejudice;

The scheduling conference in this matter, currently set for August 12th, 2009, is

AJOURNED. If no amended complaint is filed, the conference will be rescheduled

after the deadline for filing the amendment has passed. If an amendment is filed, the

conference will be rescheduled after an answer to the amendment is filed.

SO ORDERED.

s/Stephen J. Murphy, III 

STEPHEN J. MURPHY, III

United States District Judge

Dated: July 14, 2009

I hereby certify that a copy of the foregoing document was served upon the parties

and/or counsel of record on July 14, 2009, by electronic and/or ordinary mail.

Alissa Greer 

Case Manager

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