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UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF NEW JERSEY 

INVENTORY RECOVERY 

CORPORATION, 

 Plaintiff, 

 v. 

ASHLEY A. GABRIEL, et al.,

 Defendants.

Civ. No. 2:11-cv-01604 (WJM) 

OPINION

 

WILLIAM J. MARTINI, U.S.D.J.: 

Plaintiff Inventory Recovery Corporation (“IRC”) brings this action against 

Defendants Richard Gabriel (“R. Gabriel”) and Ashley Gabriel (“A. Gabriel”), alleging 

that Defendants breached an agreement for the sale of 324 Internet domain names. This 

matter comes before the Court on Defendants’ motion to dismiss pursuant to Fed. R. Civ. 

P. 12(b)(6). There was no oral argument. Fed. R. Civ. P. 78(b). For the reasons set forth 

below, the Defendants’ motion is GRANTED in part, and DENIED in part. 

I. BACKGROUND

 

The following facts are drawn from the Complaint. IRC is an Illinois company 

that conducts business in New Jersey. Compl. ¶ 1. Matthew Coleman is the President of 

IRC. Compl. ¶ 6. Defendants are residents of Florida, and are the former owners of 324 

Internet domain names that were used to sell nutraceutical food; that is, food that 

provides health or medical benefits (the “Business”). Id. ¶¶ 2-3, 7-8, 13. 

In October 2009, Plaintiff learned that Defendants listed the Business for sale. 

Compl. ¶¶ 14-15. On January 31, 2010, Plaintiff and R. Gabriel met face-to-face to 

discuss Plaintiff’s purchase of the Business. Id. ¶ 16. They discussed general 

information about the Business, including gross sales and net income values. Id. These 

negotiations continued via e-mail and telephone through February 2010, when R. Gabriel 

provided Plaintiff with financial documents for the Business. These documents included 

the budget for advertising with Google, the Business’ primary source of advertising. Id.

¶¶ 17-19. R. Gabriel also represented that the Business had a strong sales record and a 

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good relationship with the merchant banks that processed the financial transactions 

between customers and the Business. 

On February 26, 2010, Plaintiff and Defendants entered into two agreements: (1) a 

Sale and Transfer Agreement, for the sale of the 324 Internet domain names (“Sale 

Agreement”); and (2) an Asset and Consulting Agreement (“Consulting Agreement”), 

under which R. Gabriel agreed to serve as a consultant to Plaintiff for 120 days after the 

sale (collectively, the “Agreements”). Compl. ¶¶ 6, 10. The Agreements contained the 

following representations and warranties: 

[N]o threatened occurrence or development exists which would 

materially adversely affect the [Business]; [and] 

No representation or warranty of SELLER or CONSULTANT . . . 

contains any untrue statement of a material fact or omits [any] 

material fact necessary in order to make the statements contained 

herein or therein not misleading. 

Sale Agreement, Representations and Warranties of Seller and Consultant (“Reps and 

Warranties”), Compl. Ex. 1 ¶¶ 4, 12, ECF No. 1-1. The parties set a purchase price of 

$5,600,000, but agreed that Defendants would accept a plot of real estate in the Bahamas, 

an airplane, and the remaining balance in cash. Id. ¶ 25. The deal closed on February 26, 

2010. Id.

 

 After taking control of the Business, Plaintiff discovered that the Business was not 

nearly as strong as R. Gabriel had represented. Specifically, Plaintiff alleges that: the 

Business was no longer permitted to advertise on Google; the Business’ relationship with 

merchant banks was severely impaired; and the financial documents provided by R. 

Gabriel omitted certain business practices that artificially inflated the Business’ sales. 

Compl. ¶¶ 19-20, 28-29. Soon after the agreement was entered into, the Business’ sales 

fell. Id. ¶ 27.

II. LEGAL STANDARD 

Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint, 

in whole or in part, if the plaintiff fails to state a claim upon which relief can be granted. 

The moving party bears the burden of showing that no claim has been stated. Hedges v. 

United States, 404 F.3d 744, 750 (3d Cir. 2005). In deciding a motion to dismiss under 

Rule 12(b)(6), a court must take all allegations in the complaint as true and view them in 

the light most favorable to the plaintiff. See Warth v. Seldin, 422 U.S. 490, 501 (1975); 

Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Inc., 140 F.3d 478, 483 (3d Cir. 

1998). 

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Although a complaint need not contain detailed factual allegations, “a plaintiff’s 

obligation to provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels 

and conclusions, and a formulaic recitation of the elements of a cause of action will not 

do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the factual allegations 

must be sufficient to raise a plaintiff’s right to relief above a speculative level, such that it 

is “plausible on its face.” See id. at 570; see also Umland v. PLANCO Fin. Serv., Inc., 

542 F.3d 59, 64 (3d Cir. 2008). A claim has “facial plausibility when the plaintiff pleads 

factual content that allows the court to draw the reasonable inference that the defendant is 

liable for the misconduct alleged.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citing 

Twombly, 550 U.S. at 556). While “[t]he plausibility standard is not akin to a 

‘probability requirement’ . . . it asks for more than a sheer possibility.” Iqbal, 129 S.Ct. 

at 1949 (2009). 

III. DISCUSSION

The Court has diversity jurisdiction based on 28 U.S.C. § 1441.1

 Plaintiff’s 

Complaint asserts eleven causes of action: (1) fraud; (2) breach of fiduciary duty; (3) 

breach of contract; (4) breach of duty of good faith and fair dealing; (5) conspiracy; (6) 

aiding and abetting fraud; (7) unjust enrichment, (8) negligent or intentional 

misrepresentation; (9) rescission of contract that is a product of fraud; (10) constructive 

fraud; and (11) contract rescission. Defendants have moved to dismiss all eleven counts. 

For the reasons set forth below, all counts except Count III (breach of contract) and 

Count IV (breach of duty of good faith and fair dealing) are dismissed. Each issue will 

be addressed in turn. 

A. Fraud (Count I), Conspiracy (Count V), Aiding and Abetting Fraud 

(Count VI), and Constructive Fraud (Count X)

In Count I, Plaintiff asserts a claim for fraud, on which the claims for conspiracy 

(Count V), aiding and abetting fraud (Count VI), and constructive fraud (Count X) rely. 

Plaintiff argues that Defendants intentionally misrepresented and omitted material 

information about the Business. Defendants move to dismiss these claims, arguing that 

the Plaintiff failed to plead fraud with particularity. Defendants are correct. 

The parties agree that New Jersey law applies. The elements of a claim for 

common law fraud in New Jersey are: (1) a material misrepresentation of a presently 

existing or past fact; (2) knowledge or belief by the defendant of its falsity; (3) an 

intention that the other person rely on it; (4) reasonable reliance thereon; and (5) resulting 

damages. Eli Lilly & Co. v. Roussel Corp., 23 F.Supp.2d 460, 492 (D.N.J. 1998). 

 

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 The Agreements entered into by the parties contain a forum selection clause designating the 

District of New Jersey as the proper forum for the dispute. Neither party challenges venue. 

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Pursuant to Rule 9(b), a plaintiff alleging fraud must state the circumstances of the 

alleged fraud with sufficient particularity to place the defendant on notice of the “precise 

misconduct with which [it is] charged.” Frederico v. Home Depot, 507 F.3d 188, 200 (3d 

Cir. 2007) (internal quotation marks and citation omitted). To satisfy this standard, the 

plaintiff must plead or allege the date, time, and place of the alleged fraud or otherwise 

inject precision or some measure of substantiation into a fraud allegation. Id.

 The Complaint addresses the fraud factors, but does not do so with the 

particularity that Rule 9(b) requires. For example, Plaintiff alleges that Defendants lied 

about the Business’ operations “between February 2009 and February 26, 2010,” Compl. 

¶ 19, and made misrepresentations “throughout February 2010.” Id. ¶ 17. This falls far 

short of pleading the date, time, and place of the alleged fraud. Similarly, Plaintiff 

alleges that Defendants “made representations” to IRC “concerning the projected cost of 

Internet advertising and marketing budget for Google” and that “[t]his statement was 

false and misleading.” Compl. ¶ 18; see also Compl. ¶¶ 28-29. But Plaintiff never 

identifies what “[t]his statement” was. Compl. ¶ 18. Such allegations do not meet the 

stringent pleading requirements of Rule 9(b). 

Plaintiff’s claims for conspiracy, aiding and abetting fraud, and constructive fraud 

rely on successfully pleading the underlying fraud claim. See Am. Corporate Soc. v. 

Valley Forge Ins. Co., 424 Fed. Appx. 86, 90 (3d Cir. 2011) (listing elements of 

conspiracy); Morganroth & Morganroth v. Norris, McLaughlin & Marcus, P.C., 331 

F.3d 406, 415 (3d Cir. 2003) (listing elements of aiding and abetting fraud); Jewish Ctr. 

of Sussex Cnty. v. Whale, 432 A.2d 521, 524 (N.J. 1981) (listing elements for 

constructive fraud). Accordingly, Defendants’ motion to dismiss Counts I, V, VI, and X 

is GRANTED, and these Counts are DISMISSED WITHOUT PREJUDICE. 

B. Breach of Fiduciary Duty (Count II)

In Count II, Plaintiff asserts a claim for breach of fiduciary duty, arguing that a 

fiduciary relationship arose from the Consulting Agreement between Plaintiff and R. 

Gabriel. Defendants move to dismiss this claim, arguing that the parties had an armslength business relationship. Defendants are correct. 

 A fiduciary relationship exists when “one party places trust and confidence in 

another who is in a dominant or superior position.” McKelvey v. Pierce, 173 N.J. 26, 57 

(2002) (citations omitted). Fiduciary relationships do not exist “in ordinary commercial 

business transactions.” Alexander v. CIGNA Corp., 991 F. Supp. 427, 438 (D.N.J.1998), 

aff’d, 172 F.3d 859 (3d Cir.1998) (citations omitted). To prove a breach of fiduciary 

duty, the plaintiff must prove: (1) the existence of a fiduciary relationship between the 

parties, (2) the breach of a duty imposed by that relationship, and (3) harm to the 

plaintiff. ACE Am. Ins. Co. v. Wachovia Ins. Agency Inc., No. 08-4369, 2008 WL 

4630486, *6 (D.N.J. Oct. 17, 2008) (citing McKelvey, 173 N.J. at 57). The duties of a 

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fiduciary to a dependent party include the duty of loyalty and the duty to exercise 

reasonable skill and care. McKelvey, 173 N.J. at 57. 

 In this case, Plaintiff’s allegations do not support the existence of a fiduciary 

relationship. The parties certainly did not have a fiduciary relationship during 

negotiations, as that was a classic arms-length business transaction where the parties were 

on opposite sides of the bargaining table. And Plaintiff wholly fails to articulate how a 

120-day Consulting Agreement gives rise to a fiduciary relationship. Plaintiff also failed 

to allege a breach of fiduciary duty. Plaintiff does not identify a single action that R. 

Gabriel took in his consulting capacity, let alone an action that might have breached the 

duty of loyalty or the duty of care. 

 Accordingly, Defendants’ motion to dismiss Count II is GRANTED, and Count II 

is DISMISSED WITH PREJUDICE.

C. Breach of Contract (Count III)

In Count III, Plaintiff asserts a claim for breach of contract. Defendants move to 

dismiss this claim, arguing that Plaintiff’s claim is merely a formulaic recitation of the 

breach of contract elements, and fails to indicate which contractual provision was 

breached. Defendants are incorrect. 

To plead a breach of contract claim in New Jersey, Plaintiff, must allege that (1) 

there was a contract; (2) that contract was breached; (3) the breach resulted in damages; 

and (4) the person suing for breach performed his own contractual duties. Cotter v. 

Newark Housing Auth., 422 Fed. App’x. 95, 98 (3d Cir. 2011) (citation omitted). A party 

adequately pleads a breach of contract claim if it alleges a breach of the contract’s 

representations and warranties provisions. See Leder v. Shinfeld, 609 F. Supp. 2d 386, 

406-07 (E.D. Pa. 2009) (allegations that defendant violated “representations and 

warranties of seller” in a stock purchase agreement were sufficient to state a claim for 

breach of contract); Roadsafe Traffic Sys. v. Ameriseal Northeast Fla., Inc., No. 09-148, 

2011 U.S. Dist. LEXIS 111058, at *42 (D. Del. Sept. 29, 2011) (“[D]efendants were in 

breach of the representations and warranties provisions of the [agreement] from the 

moment the agreement was signed”). 

In this case, Plaintiff has adequately pled a breach of contract claim. First, 

Plaintiff pled that there were two contracts: the Sale Agreement and the Consulting 

Agreement. Second, contrary to Defendants’ assertion, Plaintiff adequately identified the 

contractual provisions that were breached: Plaintiff alleged that Defendants breached the 

material adverse change clause (“no threatened occurrence or development exists which 

would materially adversely affect the [Business]”) and the disclosure clause (“[n]o 

representation or warranty of SELLER . . . omits [any] material fact”) of the Sale 

Agreement. Reps and Warranties ¶¶ 4, 12; Compl. ¶¶ 21, 23. Further, Plaintiff alleged 

that Defendants failed to disclose that the Business was unable to advertise with Google 

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and unable to work with many merchant banks, which materially impaired the Business’ 

operations. See Compl. ¶¶ 19-20. Third, Plaintiff alleged that sales from the Business 

plummeted as a result of these impairments. Compl. ¶¶ 34, 38. Finally, Plaintiff alleged 

that it satisfied all of its obligations under the Agreements. Compl. ¶ 51.

Accordingly, Defendants’ motion to dismiss Count III is DENIED. 

D. Breach of Good Faith and Fair Dealing (Count IV)

 In Count IV, Plaintiff argues that Defendants’ misrepresentations amount to a 

breach of the covenant of good faith and fair dealing. Defendants argue that the covenant 

should not apply because only the express terms of the contract should govern the parties’ 

obligations. Defendants are incorrect. 

An implied covenant of good faith and fair dealing is present in all 

contracts governed by New Jersey law. Emerson Radio Corp. v. Orion Sales, Inc, 253 

F.3d 159, 169-70 (3d Cir. 2001). This obligation to perform contracts in good faith has 

been interpreted in New Jersey to mean that “neither party shall do anything which will 

have the effect of destroying or injuring the right of the other party to receive the fruits of 

the contract.” Id. at 170. New Jersey law also holds that a party to a contract can breach 

the implied duty of good faith even if that party abides by the express and unambiguous 

terms of that contract if that party “acts in bad faith or engages in some other form of 

inequitable conduct.” Id. A claim for breach of an implied obligation can be pled 

alongside a breach of contract claim as an alternative form of liability. See Id. at 163. 

 Here, Plaintiff adequately pled that Defendants’ conduct destroyed its right to 

receive the fruits of the contract. Plaintiff alleged that it entered into the agreement with 

the expectation that the Business could sufficiently advertise and complete transactions 

with customers. Compl. ¶¶ 19-20. But, according to the Complaint, the Business that 

Defendants sold was unable to advertise with Google, a primary marketing source, and 

was cut off from working with many online merchant banks, severely hindering the 

Business’ ability to engage in transactions with its customers. Id. As such, Plaintiff has 

adequately pled that it was left with a business that was materially different than the one 

it reasonably expected. 

Accordingly, Defendants’ motion to dismiss Count IV is DENIED.

E. Unjust Enrichment (Count VII)

 In Count VII, Plaintiff asserts a claim for unjust enrichment. However, “[w]here 

there is an express contract covering the identical subject matter of the claim, plaintiff 

cannot pursue a quasi-contractual claim for unjust enrichment.” Construcciones Haus 

Soceidad v. Kennedy Funding Inc., 2008 WL 1882857, at *6 (D.N.J. Apr. 24, 2008). In 

this case, “there can be no doubt” that a contract existed between the parties. Pl.’s Opp’n 

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Br. 23. Accordingly, Defendants’ motion to dismiss Count VII is GRANTED, and 

Count VII is DISMISSED WITH PREJUDICE. 

F. Negligent Misrepresentation (Count VIII)

 In Count VIII, Plaintiff alleges that, even if Defendants did not know that their 

representations were false, they negligently provided false information about the 

Business to Plaintiff. Under New Jersey law, negligent misrepresentation requires a 

showing that the defendant negligently provided false information. See Highlands Ins. 

Co. v. Hobbs Group, LLC, 373 F.3d 347, 351 (3d Cir. 2004) (citation omitted). 

Negligent misrepresentation is governed by Rule 9(b), which requires that the allegations 

to be stated with particularity. See Dist. 1199P Health and Welfare Plan v. Janssen, L.P., 

784 F.Supp. 2d 508, 532 (D.N.J. 2011). As discussed above, the allegations in the 

Complaint fall far short of Rule 9’s particularity requirement. For example, the 

Complaint alleges that R. Gabriel “made misrepresentations concerning the business 

model or operations of the Business” that were “false, misleading and/or failed to include 

material information.” Compl. ¶ 15. The Complaint completely fails to identify what 

representations were made, when and where those representations were made, how those 

representations were false, and how the alleged misrepresentations were material. As 

such, the Complaint does not adequately state a claim under Rule 9. Accordingly, 

Defendants’ motion to dismiss Count VIII is GRANTED, and Count VIII is 

DISMISSED WITHOUT PREJUDICE. 

G. Rescission of Contract (Counts IX and XI)

In Counts IX and XI of the Complaint, Plaintiff asserts claims for rescission of 

contract under N.J.S.A. 2A:32-1 and New Jersey common law. Defendants correctly 

argue that contract rescission is a remedy, not a cause of action. Under N.J.S.A. 2A:32-1 

and New Jersey common law, rescission is an equitable remedy for fraud, not a 

substantive claim. See Alvez v. Verizon, No. 08-3196, 2010 WL 2989988, at *11 (D.N.J. 

July 27, 2010); Cooper v. Borough of Wenonah, 977 F.Supp. 305, 313, 316 (D.N.J. 

1997). Accordingly, Defendants’ motion to dismiss Counts IX and XI is GRANTED, 

and these Counts are DISMISSED WITH PREJUDICE

IV. CONCLUSION

For the reasons stated above, the Defendants’ motion to dismiss is GRANTED in 

part, and DENIED in part. The motion to dismiss is denied with respect to Count III 

(Breach of Contract), and Count IV (Breach of the Duty of Good Faith and Fair Dealing), 

and granted with respect to the remaining Counts. Counts I, V, VI, VIII, and X are 

DISMISSED WITHOUT PREJUDICE. Counts II, VII, IX, and XI are DISMISSED 

WITH PREJUDICE. An appropriate order follows.

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 /s/ William J. Martini 

 WILLIAM J. MARTINI, U.S.D.J. 

Date: July 20, 2012

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