Title: Murayama 1997 Trust v. NISC Holdings, LLC
Citation: N/A
Docket Number: 111377
State: Virginia
Issuer: Virginia Supreme Court
Date: June 7, 2012

PRESENT: All the Justices 
 
JARED AND DONNA MURAYAMA 1997 TRUST  
 
 
 
OPINION BY 
v.  Record No. 111377 
JUSTICE ELIZABETH A. McCLANAHAN 
 
 
 
JUNE 7, 2011 
NISC HOLDINGS, LLC, ET AL. 
 
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY 
Jonathan C. Thacher, Judge 
 
 
Appellant, the Jared and Donna Murayama 1997 Trust (the 
"Trust"), through its Trustee, Jared Murayama ("Murayama"), 
challenges the circuit court's order sustaining a demurrer to 
the Trust's second amended complaint.  In that complaint, the 
Trust sought damages arising from a settlement agreement between 
the Trust, Murayama and two of the defendants, NISC Holdings, 
LLC ("NISC") and Omen LLC ("Omen"), which transaction included 
NISC's repurchase of the Trust's voting stock in NISC (the 
"settlement agreement").  The Trust claimed it was damaged from  
selling the stock to NISC for substantially less than its fair 
market value as a result of the Trust's reliance on fraudulent 
omissions and misrepresentations of the defendants: (i) NISC; 
(ii) Omen, a company NISC previously acquired from the Trust; 
(iii) DC Capital Partners, LLC and DC Capital Partners 
Investments, LLC (collectively "DC Capital Partners"), NISC's 
largest shareholder; and (iv) Thomas Campbell ("Campbell"), the 
 
2 
chairman of NISC and the managing member of DC Capital Partners 
(the appellees in this appeal).1 
 
The circuit court sustained the defendants' demurrer upon 
determining that the Trust's allegations, as amplified by the 
settlement agreement, established that, as a matter of law, the 
Trust did not reasonably rely upon the defendants' alleged 
fraudulent omissions and misrepresentations regarding the value 
of the NISC stock at the time of the settlement.  The circuit 
court reached that conclusion based upon both the language of 
the settlement agreement and the allegations regarding the 
adversarial relationship between Murayama and the defendants 
that precipitated the settlement.  Agreeing with the circuit 
court, we will affirm its judgment sustaining the demurrer.  
I. BACKGROUND 
 
Because the circuit court decided this case upon a 
demurrer, we will summarize the facts as alleged in the Trust's 
second amended complaint.   Kaltman v. All Am. Pest Control, 
Inc., 281 Va. 483, 486, 706 S.E.2d 864, 866 (2011).  We will 
also include in the summary relevant provisions of the 
settlement agreement, as the defendants properly submitted the 
agreement for the circuit court's consideration through its 
                     
 
1 The Trust also named International Business Machines 
Corporation ("IBM") as a defendant but non-suited its claims 
against IBM after dismissal of the second amended complaint.  
 
3 
motion craving oyer.2  Ward's Equip. v. New Holland N. Am., Inc., 
254 Va. 379, 382, 493 S.E.2d 516, 518 (1997).  "In doing so, we 
consider the facts stated and all those reasonably and fairly 
implied in the light most favorable to the nonmoving part[y], 
[the Trust]."  Kaltman, 281 Va. at 486, 706 S.E.2d at 866 
(citing Yuzefovsky v. St. John’s Wood Apartments, 261 Va. 97, 
102, 540 S.E.2d 134, 137 (2001)). 
 
At all times relevant to this action, Murayama was the 
manager of the Trust. In 2007, the Trust was the majority owner 
of Omen, a Maryland based information and technology management 
company that Murayama founded and managed for several years.  In 
June 2007, DC Capital Partners, a Virginia limited liability 
company, formed NISC, a Delaware limited liability company 
located in Virginia, for the purpose of acquiring and 
consolidating information management and technology companies 
serving various federal government agencies.  On June 29, 2007, 
NISC purchased Omen from the Trust.  As consideration for the 
sale, the Trust received 48.78 percent of the Class A voting 
stock in NISC, a cash sum of $1,425,000 payable in November 
2008, Class B non-voting shares in NISC, and a seat on NISC's 
board of managers.  The Trust appointed Murayama to that 
                     
 
2 What is referred to herein as the "settlement agreement" 
actually consisted of two documents, one entitled the 
"Settlement Agreement" and the other entitled the "Murayama 
Financial Claims Settlement Agreement," both of which were 
executed together on December 9, 2009.   
 
4 
position, which he held for the next two and a half years – 
until December 9, 2009, when the settlement agreement was 
executed.  In addition, by that same date, as a result of NISC's 
subsequent acquisitions of additional companies, the Trust's 
Class A membership interest in NISC was diluted to 5.41 percent.  
Also following NISC's purchase of Omen, NISC hired Murayama as 
an advisor to Campbell, NISC's chairman. 
 
In a significant development leading to the instant 
dispute, Murayama became involved with "a native Hawaiian 
organization known as Hawaii 5-0," which was "owned by . . . a 
charitable, not-for-profit foundation."  According to the Trust, 
in January 2009, Murayama discussed with Campbell Murayama's 
"prospective role" at Hawaii 5-0, and "became a part-time 
uncompensated advisor to Hawaii 5-0" after receiving Campbell's 
"express consent."  Significantly, the Trust alleges that 
"Hawaii 5-0 did not compete with NISC and Mr. Murayama did not 
violate any non-competition agreements with NISC."  Further, 
"[a]t no time prior to November 2009 did [d]efendants ever 
express to Mr. Murayama any concern about his involvement with 
Hawaii 5-0."  
 
NISC and Omen, however, advanced a completely different 
view of Murayama's activities involving Hawaii 5-0 in relation 
to NISC and Omen.  On November 9, 2009, NISC and Omen filed a 
lawsuit in Fairfax County Circuit Court against Hawaii 5-0 and 
 
5 
several former NISC and Omen employees who became employed by 
Hawaii 5-0.3  While Murayama was not named as a defendant in the 
action, the complaint stated in detail how he allegedly 
conspired with the named defendants "to steal business from 
NISC/Omen, raid NISC/Omen’s employees, and take corporate 
opportunities belonging to NISC/Omen for their own benefit."  
Pled in twenty-one counts, the sixty-page complaint alleged 
conspiracy, breach of contract, tortious interference, 
conversion, and violations of the Virginia Computer Crimes Act 
and Uniform Trade Secrets Act, among others, and sought a 
preliminary injunction and millions of dollars in compensatory, 
treble, and punitive damages. 
 
Referring to Murayama no less than sixty-four times, the 
complaint alleged that he owed non-competition, non-
solicitation, fiduciary and confidential obligations to NISC and 
Omen, and breached them by his unlawful activities with the 
named defendants.  As an example, the complaint alleged that 
Murayama and his former co-shareholder of Omen, Robert Bregante, 
violated their agreements with NISC and Omen – entered into when 
they sold Omen to NISC – not to compete with NISC or Omen and 
not to solicit NISC or Omen's customers or employees.  Murayama 
and Bregante allegedly engaged in "a systematic campaign to 
                     
 
3 A copy of the NISC/Omen complaint is attached as Exhibit 1 
to the Trust's second amended complaint.  
 
6 
recreate the Omen business under the Hawaii 5-0 umbrella, thus 
effectively stealing back what they had just sold to NISC/Omen."  
NISC and Omen then alleged, in regard to their trade secrets 
claim, that Bregante and defendant Andrew Ganias, former chief 
financial officer of Omen and present chief financial officer of 
Hawaii 5-0, "conspired with Murayama, who remains not only an 
employee but a member of NISC/Omen's Board of Managers, to 
misappropriate NISC/Omen's trade secrets and other proprietary 
information.  For example, Murayama emailed . . . Bregante and 
Ganias NISC/Omen's highly confidential financial statements 
which . . . Bregante and Ganias then used to advance Hawaii 5-
0's business interests." 
 
As a further example of Murayama's alleged wrongdoing, the 
NISC/Omen complaint stated that Murayama sent emails to his "co-
conspirators" in March 2009 in which he told them that he had to 
" 'stay below radar for technically [sic] am still an employee 
of Omen,' " and that they needed a different " 'front man' " 
because he had to " 'stay low for now.' "  He also allegedly 
assured one of his co-conspirators, however, that when Hawaii 5-
0 would eventually need a local president, " 'by that time yours 
truly should be available.' " 
 
NICS and Omen also stated in their complaint that Murayama 
engaged in the alleged unlawful activities in his capacity as a 
 
7 
member of NICS's board of managers and a business adviser to 
them both, for which they paid him an annual salary of $275,000. 
 
Within three days of filing their complaint, NISC and Omen 
delivered it to Murayama's counsel, along with a demand in the 
form of a proposed settlement agreement.  Counsel for NISC and 
Omen made it "clear" that the proposed agreement was being 
offered as an alternative to adding Murayama and the Trust to 
the lawsuit.  The proposal was thus presented to Murayama "as a 
prepackaged deal that would include him [and] the Trust, as well 
as the named defendants."  Trust's Second Am. Compl. ¶ 24 
(emphasis in original).  Central to the terms of the proposal 
was the requirement that the Trust return its Class A membership 
stock to NISC "even without compensation if NISC's lender did 
not approve the payment to buy back the shares.  According to 
the proposed settlement agreement, the [Trust's] Class A 
[m]embership [i]nterest was worth approximately $1,000,000 
dollars."  Id. (emphasis in original). 
 
Following the parties' negotiations through their 
respective counsel over the terms of the ultimate settlement, 
the Trust, Murayama, NISC and Omen (along with certain named 
defendants in the NISC/Omen lawsuit) executed the settlement 
agreement on December 9, 2009.  The settlement agreement 
expressly recited that NISC and Omen believed that Murayama was 
involved in the conduct at issue in the NISC/Omen lawsuit, and 
 
8 
that they contemplated amending their complaint to add Murayama 
and the Trust as defendants.  Having settled their disputes 
pursuant to the terms of the settlement agreement, however, NISC 
and Omen therein released all claims they had against the Trust 
and Murayama and certain named defendants in the NISC/Omen 
lawsuit "arising at any time before the execution" of the 
settlement agreement, without any of the released parties paying 
any money. 
 
NISC and Omen did so in exchange for the Trust's agreement 
to sell its NISC Class A membership interest to NISC for 
$2,000,000.  Murayama was also obligated to resign from NISC's 
board of managers. 
 
As to the value of the NISC Class A membership interest 
transferred under the settlement agreement, Murayama and the 
Trust therein "acknowledge and agree that they are fully aware 
that NISC is considering and pursuing a range of strategic 
alternatives, including a sale of the company or a qualified 
public offering, that could ultimately result in a different 
valuation" of the Class A shares than the $2,000,000 being paid 
pursuant to the terms of the agreement.  Murayama and the Trust 
also "acknowledge and agree that they have had sufficient 
opportunity to confer with their financial advisors concerning 
the [a]greement." 
 
9 
 
The settlement agreement also provided standard mutual 
disclaimers and releases.  In particular, Murayama and the Trust 
"irrevocably and unconditionally release[d]" and "forever 
discharge[d]" NISC and Omen from all claims "known or unknown, 
arising at any time before the execution of this [a]greement, 
whether based on: . . . fraud . . . or any other theory of 
recovery . . . and all claims which Murayama . . . or [the] 
Trust may now have or may have had, arising from in any way 
whatsoever connected with their prior employment, membership on 
[b]oards of [m]anagers, or ownership of a Class A [m]embership 
[i]nterest in NISC . . . ."  The settlement agreement further 
provided that each party to the agreement "acknowledges that it 
or he has relied upon its or his own judgment and the advice of 
counsel and financial advisors in making this [a]greement."  
 
The Trust alleges that up to the time of the execution of 
the settlement agreement on December 9, 2009, Murayama and the 
Trust, in fact, did not know and the defendants in the instant 
action did not disclose to them any information regarding the 
defendants' specific pursuits to sell NISC.  In fact, according 
to the Trust's allegations, the defendants "knowingly and 
intentionally withheld [that] information" from the Trust and 
Murayama, even though they were entitled to it based on 
Murayama’s position as a member of NISC's board of managers.  
The Trust alleges that, because Murayama held that position up 
 
10 
until the time the settlement agreement was executed, "the Trust 
reasonably assumed it would have known of such activity and 
reasonably relied on [d]efendants that such events did not 
exist.  In fact, NISC and Omen['s] attorney, Mr. Keiser, 
represented in telephone conversations with the Trust’s counsel 
that a sale of NISC was not in the works or imminent." 
 
Furthermore, the Trust alleges that the defendants owed the 
Trust fiduciary duties, which would include duties to "disclose 
the value of the [NISC] Class A shares, the impending sale of 
[NISC], that other offers were made to acquire [NISC], [and] 
NISC's dealings with IBM." 
Murayama and the Trust only learned after execution of the 
settlement agreement, however, that IBM entered into a 
confidentiality agreement with NISC in August 2009 "to perform 
due diligence ahead of acquiring NISC."  Then in November 2009, 
in the process of obtaining assistance in the sale of NISC from 
several financial advisors, the defendants represented that 
NISC's value exceeded $367,000,000.  The financial advisor 
ultimately retained by the defendants valued NISC at more than 
$400,000,000.  Accordingly, prior to December 9, 2009, the 
defendants offered to sell NISC to at least three different 
companies for an amount in excess of $400,000,000.  In addition, 
prior to that date, IBM made an offer to purchase NISC for an 
amount in excess of $300,000,000.  And in a meeting of NISC's 
 
11 
board of managers in November 2009, to which Murayama was not 
invited, those present were informed that NISC had received 
purchase offers in excess of $300,000,000, and that "the sale of 
NISC was imminent." 
 
NISC and IBM then announced publicly on January 20, 2010, 
that IBM had acquired NISC.  The purchase price was 
$367,000,000.  After learning of this sale, along with the 
information summarized in the preceding paragraph, the Trust 
instituted the instant action, claiming Murayama "had been duped 
by [d]efendants into giving up the Trust's [NISC] shares for 
$2,000,000, a price far below market value."  The Trust alleged 
that the sale of NISC to IBM would have resulted in a 
distribution of approximately $9,000,000 to the Trust.  On that 
basis, the Trust sought judgment against the defendants in the 
amount of $7,000,000 in compensatory damages, $350,000 in 
punitive damages, and attorney's fees.  As set forth in the 
Trust's second amended complaint, the Trust sought these damages 
upon claims of fraud in the inducement (Count I), negligent 
misrepresentation (Count II), breach of fiduciary duty and duty 
of good faith and fair dealing (Count III), abuse of process 
(Count IV), and unjust enrichment (Count V). 
 
Having prevailed on their demurrer to essentially the same 
allegations in the Trust's first amended complaint, the 
defendants demurred to the Trust's second amended complaint.  
 
12 
Significantly, however, we note that in allegations set forth in 
the first amended complaint, which were omitted in the second 
amended complaint, the Trust admitted that, despite Murayama's 
membership on the NISC board of managers, "Mr. Murayama was 
prevented from having access to the books, records and 
activities of NISC and its affiliates.  Mr. Campbell repeatedly 
ignored and/or refused Mr. Murayama’s requests for such 
information."  (Emphasis added.) 
By order dated February 14, 2011, the circuit court 
sustained the second demurrer for the same reason it sustained 
the first demurrer.  As explained in its letter opinion 
accompanying the order, the court concluded that the Trust's 
allegations demonstrated as a matter of law that it did not 
reasonably rely upon the defendants' alleged fraudulent 
misrepresentations and omissions related to the value of the 
Trust's NICS Class A membership stock transferred under the 
terms of the settlement agreement. 
 
The circuit court reasoned that consideration of the facts 
alleged "inescapably leads to the conclusion that [the] Trust 
was not justified in its reliance and had every reason to 
question the [d]efendants['] silence and statements regarding 
any sale of NISC and the value of [the] Trust's shares."  The 
court specifically noted that "the parties' relationship had 
clearly developed into an adversarial one at the time of the 
 
13 
settlement negotiations"; that the settlement agreement 
contained "an explicit no reliance clause"; and that the 
agreement disclosed that "NISC was considering a range of 
options, including a stock sale, that could ultimately lead to a 
different valuation of [the] Trust's shares."  These facts would 
have "arouse[d] the suspicions of an ordinary person," the court 
determined.  Yet, the Trust "saw fit to trust itself in the 
hands of the [d]efendants instead of demanding information and 
investigating as a reasonable person would have."  The court 
thus sustained the demurrer to the second amended complaint, and 
did so with prejudice. 
 
We granted the Trust an appeal from the judgment sustaining 
the demurrer to the second amended complaint on the following 
assignments of error: 
 
1. The trial court erred in sustaining the [d]emurrer to 
the [s]econd [a]mended [c]omplaint when there was a material 
contested issue of fact relating to the "reasonableness" of the 
Trust's reliance on the fraudulent conduct of the NISC 
[d]efendants, which concealed their pending sale of the 
[c]ompany for $367 million. 
 
 
2. The trial court erred in sustaining the [d]emurrer to 
the [s]econd [a]mended [c]omplaint when the NISC defendants had 
a duty to inform the Trust (and Jared Murayama) about its 
negotiations to sell [NISC], the pending sale to IBM, and 
professional valuations of [NISC] made prior to sale. 
 
 
3. The trial court erred in sustaining the [d]emurrer to 
the [s]econd [a]mended [c]omplaint, and thus dismissing the 
allegations in toto, before the Trust had any opportunity to 
take discovery on its allegations of fraud. 
 
 
 
14 
II. ANALYSIS 
 
In our review of the circuit court's decision sustaining a 
demurrer, we are guided by well-established principles.  The 
purpose of a demurrer is to determine whether a complaint states 
a cause of action upon which the requested relief may be 
granted.  Code § 8.01-273; Dunn, McCormack & MacPherson v. 
Connolly, 281 Va. 553, 557, 708 S.E.2d 867, 869 (2011).  A 
demurrer tests the legal sufficiency of the facts properly 
alleged in the challenged pleading and the inferences fairly 
drawn from those facts, all of which are accepted as true.  Id.  
A demurrer does not admit, however, the correctness of the 
pleader's legal conclusions.  Dodge v. Randolph-Macon Woman's 
College, 276 Va. 1, 5, 661 S.E.2d 801, 803 (2008).  Because the 
circuit court's ruling on a demurrer presents an issue of law, 
we review the decision de novo.  Dunn, McCormack & MacPherson, 
281 Va. at 557, 708 S.E.2d at 869.  
 
Upon allegations in its pleadings of fraudulent procurement 
of the settlement agreement by the defendants, the Trust has 
sought to have set aside those terms of the agreement (i) that 
established the price paid to the Trust for its NISC stock, and 
(ii) that released the defendants from all such fraud claims by 
the Trust and Murayama, so as to allow the Trust to pursue an 
award of an additional $7,000,000 for the stock as compensatory 
damages, along with $350,000 in punitive damages. 
 
15 
 
As we explained in Metrocall of Delaware, Inc. v. 
Continental Cellular Corp., 246 Va. 365, 373-74, 437 S.E.2d 189, 
193 (1993) (internal citations omitted) (emphasis added): 
[A] written, mutual release memorializing a compromise 
and settlement may be rescinded for fraud in its 
procurement.  And, the wrong of fraud requires an 
intentional, knowing misrepresentation by a defendant 
of a material fact upon which a plaintiff has relied 
to its detriment.  Concealment of a fact that is 
material to the transaction, knowing that the other 
party is acting on the assumption that no such fact 
exists, is as much fraud as if existence of the fact 
were expressly denied.  But to establish fraud, it is 
essential that the defrauded party demonstrates the 
right to reasonably rely upon the misrepresentation. 
[S]ome courts label this requirement "justifiable 
reliance."  
 
In its second amended complaint, the Trust has plainly 
alleged facts demonstrating, when taken as true, that the 
defendants made material misrepresentations to the Trust and 
Murayama regarding the value of the Trust's NISC stock.  
Specifically, the defendants misrepresented to the Trust and 
Murayama in the proposed settlement agreement that the stock was 
worth approximately $1,000,000 when, in fact, it was worth 
nearly ten times that amount based on values being placed on 
NISC by the company, as well as others, at that time.  The 
defendants likewise misrepresented to the Trust and Murayama the 
value of the Trust's NISC stock when the defendants indicated in 
the settlement agreement that the stock was worth $2,000,000 - 
 
16 
the amount the plaintiffs actually paid the Trust for the stock 
under the terms of the agreement following negotiations. 
As Metrocall makes clear, however, to withstand the 
defendants' demurrer and establish a cause of action based on 
fraud, the Trust also had to demonstrate in its pleadings that 
the Trust and Murayama, acting on behalf of the Trust as its 
trustee, reasonably relied upon the misrepresentations and 
omissions by the defendants that allegedly constituted the 
fraud.  Absent such reasonable or " 'justifiable reliance,' " no 
fraud is established.  Id. at 374, 437 S.E.2d at 194. 
In Metrocall, on facts analogous to those here presented, 
this Court affirmed the trial court's dismissal of the 
plaintiffs' action for rescission of a prior settlement of 
litigation between the same parties or their privies based on 
allegations of defendants' fraud in the inducement of the 
settlement.  Id. at 376-77, 437 S.E.2d at 195.  The plaintiffs 
in Metrocall, as parties holding a minority interest in Norfolk 
Cellular Telephone Company ("NCTC"), initiated the original 
litigation against the majority entity (the managing general 
partner of NCTC), claiming it was guilty of a number of improper 
and fraudulent acts. The parties subsequently reached a 
settlement of their dispute, which included an extensive general 
release.  As part of the settlement, the plaintiffs also agreed 
to transfer their NCTC interests to the defendant majority 
 
17 
entity and its affiliates for an agreed sum.  After the 
plaintiffs' sale of their NCTC interests was consummated, the 
majority group sold those interests to a third party for a price 
significantly greater than that paid to the plaintiffs.  Id. at 
367, 437 S.E.2d at 190. 
Much like the claims of the Trust in the instant case, the 
plaintiffs in Metrocall subsequently filed consolidated actions 
claiming that, during the negotiations to settle the prior 
litigation, "the defendants were simultaneously and covertly 
conducting negotiations to sell the entire partnership to the 
third party for the higher price."  Id.  Indeed, the plaintiffs 
alleged that during the settlement negotiations, the defendants 
falsely represented that they would not sell the plaintiffs' 
NCTC interests to any third party.  Id. at 368, 437 S.E.2d at 
190.  The plaintiffs further alleged that they detrimentally 
relied upon the defendants' misrepresentations and omissions of 
material information in regard to those negotiations, and would 
not have entered into the prior settlement agreement had they 
been aware of those negotiations.  Id. at 367-70, 437 S.E.2d at 
189-191.  The plaintiffs also alleged that the defendants' 
subject actions constituted a breach of their fiduciary duties 
owned to the plaintiffs during the negotiations, "even though 
defendants were plaintiffs' adversaries in litigation."  Id. at 
369-73, 437 S.E.2d at 191-93. 
 
18 
We held that the plaintiffs had no right, as a matter of 
law, "reasonably to rely upon any misrepresentations or 
concealment of facts by the defendants in connection with the 
settlement and execution of the [settlement agreement]; there 
was no justifiable reliance."  Id. at 374, 437 S.E.2d at 194.  A 
compelling consideration for the Court was the fact that the 
plaintiffs had negotiated the subject settlement to litigation 
in which they were alleging that the defendants were guilty of a 
number of improper and fraudulent acts.  Id. at 375, 437 S.E.2d 
at 194.  The Court reasoned that, "when negotiating or 
attempting to compromise an existing controversy over fraud, 
dishonesty, and self-dealing, it is unreasonable to rely on the 
representations of the allegedly dishonest party."  Id. at 375, 
437 S.E.2d at 195.  In other words, the Court explained, there 
is "no logical basis" for parties who are "represented by 
counsel and involved in an adversarial relationship" to expect 
"full disclosure to the adverse parties, prior to settlement."  
Id. at 375, 437 S.E.2d at 194. 
As the United States Court of Appeals for the Ninth Circuit 
Court recently stated in rejecting an attempt to set aside a 
settlement including a sale of stock: 
 
Parties involved in litigation know that they are 
locked in combat with an adversary and thus have every 
reason to be skeptical of each other's claims and 
representations.  They can use discovery to ferret out 
a great deal of information before even commencing 
 
19 
settlement negotiations.  They can further protect 
themselves by requiring that the adverse party supply 
the needed information, or provide specific 
representations and warranties as a condition of 
signing the settlement agreement. Such parties stand 
on a very different footing from those who enter into 
an investment relationship in the open market, where 
it's reasonable to presume candor and fair dealing, 
and access to inside information is often limited.  
There are also very important policies that favor 
giving effect to agreements that put an end to the 
expensive and disruptive process of litigation. 
 
Facebook, Inc. v. Pacific Nw. Software, Inc., 640 F.3d 1034, 
1039 (9th Cir. 2011) (internal citations omitted). 
Though the Trust and Murayama did not sue NISC or the other 
defendants in this case for fraud in the litigation that was the 
subject of the settlement agreement challenged here, Metrocall's 
application of the underlying principle of reasonable reliance 
in fraud claims provides guidance for our application of that 
principle to the facts here presented.  In its broader context, 
Metrocall dictates that parties to a settlement agreement that 
were in an adversarial relationship and represented by counsel 
at the time of negotiation and settlement, as in the instant 
case, will be strictly held to this reasonable reliance standard 
under Virginia law when seeking to vitiate the settlement based 
on claims of detrimental reliance on the misrepresentations 
and/or omissions of information by the adversary.  
The Trust argues that the circuit court erred in deciding 
the reasonable reliance issue adverse to the Trust as a matter 
 
20 
of law rather than allowing the issue to be decided by a jury as 
a disputed issue of fact.  On the facts alleged, the Trust 
asserts, "it is entirely credible that the Trust was not 
'alerted' to the potential fraud and thus reasonably relied on 
the statements and actions of the NISC [d]efendants."  We 
disagree.  As the circuit court correctly determined, careful 
consideration of the facts alleged, viewed in their totality, 
compels the conclusion that the Trust was not justified in its 
reliance on any misrepresentations and omissions by defendants 
regarding the value of the Trusts' shares in the company. 
Once the defendants filed the NISC/Omen complaint, alleging 
numerous, significant unlawful acts committed by Murayama, as a 
"co-conspirator," against NISC and Omen in a multi-million 
dollar lawsuit, and threatened to name both Murayama and the 
Trust as defendants in the lawsuit if the Trust did not agree to 
transfer its NISC Class A stock to NISC, the defendants clearly 
became the adversaries of both Murayama and the Trust.  At that 
point, the Trust and Murayama had every reason to be skeptical 
of the defendants' actions and representations in regard to such 
demand.  This was particularly so when the defendants' 
allegations against Murayama in that lawsuit are viewed as 
false, as they must be upon our review, given that the Trust 
alleges that neither Murayama nor Hawaii 5-0 was guilty of the 
conduct charged in the NISC/Omen complaint.  From that 
 
21 
perspective, Murayama and the Trust reasonably should have 
viewed the defendants' actions as most egregious, and 
"alert[ing]" them to question the defendants' actions, 
representations and motives.  
In their initial demand, the defendants represented that 
the Trust's NISC Class A stock was worth approximately 
$1,000,000, but even then the defendants were demanding that it 
be transferred to them without any compensation to the extent 
NISC's lender would not approve the payment to buy the stock.  
Over the course of negotiations through the parties' respective 
counsel, the defendants then changed their purported valuation 
of the stock and represented in the settlement agreement that it 
was worth $2,000,0000 - constituting a one-hundred percent 
increase from the defendants' representation as to the stock's 
value just four weeks earlier. 
In addition, as to the defendants' pursuit of a sale of 
NISC, the Trust received conflicting representations from the 
defendants.  During negotiations over the settlement agreement, 
the defendants' counsel communicated to the Trust's counsel that 
"a sale of NISC was not in the works or imminent."  However, in 
the settlement agreement, the defendants represented just the 
opposite, expressly stating that "NISC was considering a range 
of options, including a stock sale, that could ultimately lead 
to a different valuation of [the] Trust's shares."  The Trust 
 
22 
also acknowledged in its allegations that Murayama, in his 
capacity as a member of NISC's board of managers, had requested, 
but was "repeatedly" denied, access to the books, records and 
activities of NISC. 
We hold, as did the circuit court, that these facts 
established as a matter of law that the Trust did not reasonably 
rely on any misrepresentations and omissions by defendants in 
regard to the value of the Trust's NISC stock for purposes of 
determining its sale price under the terms of the settlement 
agreement.  
The Trust, therefore, will be held to the terms of the 
settlement agreement, in which it expressly released the 
defendants from any known or unknown claims based on fraud or 
any other theory of recovery "arising from or in any way 
whatsoever connected with [its] ownership of a Class A 
[m]embership [i]nterest in NISC."  (App. 105-106) 
 
Finally, the Trust contends that the circuit court erred as 
a matter of law in dismissing the second amended complaint 
without permitting any discovery or investigation.  Rule 
4:1(d§ 2) states: "Discovery shall continue after a demurrer 
. . . addressing one or more claims or counter-claims has been 
filed and while such motion is pending decision – unless the 
court in its discretion orders that discovery on some or all 
issues in the action should be suspended."  (Emphasis added.) 
 
23 
See also, Titan America, LLC v. Riverton Inv. Corp., 264 Va. 
292, 306-08, 569 S.E.2d 57, 65 (2002). 
 
Pending its ruling on the demurrers to the Trust's first 
and second amended complaints, the circuit court suspended 
discovery by orders dated August 27, 2010 and January 7, 2011, 
and by a ruling from the bench at the end of the parties' 
hearing on the demurrer to the second amended complaint on 
January 28, 2011.  The Trust agreed to the first order, objected 
to the second order, and stated no objection to the third ruling 
by the court to continue the suspension of discovery. 
 
Assuming arguendo that this assignment of error was not 
waived, we cannot conclude that the circuit court abused its 
discretion in suspending discovery - pending its ruling on the 
demurrer to the second amended complaint - where the allegations 
in that complaint, taken as true, established that the Trust did 
not reasonably rely upon the defendants in determining the value 
of the stock it sold to NISC. 
III. CONCLUSION 
 
For the reasons stated, we will affirm the judgment of the 
circuit court. 
Affirmed.