Opinion ID: 733
Heading Depth: 2
Heading Rank: 2

Heading: Fraud (Count IV)

Text: Count IV of Cole's complaint alleges fraud. To succeed in a fraud claim under Missouri law, a plaintiff must prove: (1) a defendant made a material representation; (2) with knowledge of its falsity; (3) with intent that plaintiff rely on that representation; (4) that the plaintiff was ignorant of the falsity; (5) that the plaintiff justifiably relied upon the representation; and (6) that plaintiff was damaged by that representation. See Ryann Spencer Group, Inc. v. Assurance Co. of Am., 275 S.W.3d 284, 287 (Mo.Ct.App.2008). Cole alleges that, upon entering into the oral agreement with Homier, Homier represented that it would provide Cole with an exclusive distributorship in Missouri if Cole would establish dealerships in Missouri and surrounding states. Cole alleges that, at the time Homier made this representation, Homier's true intention was to induce Cole to establish a dealership network and then, once this had been accomplished, bypass the distributor relationship with Cole and deal directly with the newly established dealerships. It is undisputed that Homier has eliminated the distributor relationship and now deals directly with the dealerships. However, the issue below and now on appeal is whether, at the time of the oral agreement, Homier intended not to perform consistently with its statements. [A]bsent such an inconsistent intent there is no misrepresentation of fact or state of mind but only a breach of promise or failure to perform. Craft v. Metromedia, Inc., 766 F.2d 1205, 1219 (8th Cir.1985) (applying Missouri law). The district court found that Gole failed to sufficiently allege that Homier intended not to perform the contract at the time of its formation. For this reason, the district court dismissed Cole's fraud claim. On appeal, Cole alleges that Homier manifested an intent not to perform at the time of the agreement by: (1) preferring oral agreements; (2) failing to provide sufficient repair and replacement parts in breach of an implicit promise in the oral agreement; (3) giving inconsistent grounds for terminating the Distributorship Agreement; and (4) contacting Cole's dealerships prior to terminating the Distributorship Agreement. We find that these allegations do not provide grounds to infer an intent to defraud at the time of formation. We begin with the first two allegations. The complaint indicates that, although Homier may have desired to maintain oral agreements, it did in fact memorialize the oral agreement with Cole after performing under that agreement for nearly two years. Further, the complaint does not allege that the oral agreement [4] contained any promiseimplicit or otherwiseto provide replacement parts. Even if it did, the complaint alleges that this failure began after September 20, 2004, nearly two years after the parties entered into the oral agreement. We recognize that, pursuant to Cole's allegations, the fact that Homier performed under the agreement for two years is not necessarily inconsistent with Cole's theory. Under Cole's theory, it would seem necessary for Homier to performat least for some period of timein order for Cole to take the steps necessary to establish dealerships. Thus, we do not foreclose a fraud claim merely because the party alleged to have perpetrated the fraud performed under the contract for some period of time. In this case, however, Cole's allegations, without more, are just as consistent with a present intent to perform as they are with fraud. Such allegations are not enough to transform a breach-of-contract claim into a fraud claim. See Moses.com Sec., Inc. v. Comprehensive Software Sys., Inc., 406 F.3d 1052, 1064 (8th Cir.2005) (citing Blanke v. Hendrickson, 944 S.W.2d 943, 944 (Mo.Ct.App.1997)). Cole's third allegation states that Homier's inconsistent grounds for terminating the Distributorship Agreement create an inference of Homier's intent to defraud at the time of the agreement. Cole claims that, although Homier cited Cole's poor performance in the termination letter as the reason for terminating the Distributorship Agreement, Cole was in fact Homier's best distributor and Homier itself was also suffering losses. But neither the complaint nor any documents attached to or referenced in the complaint support this argument. See Great Plains Trust Co. v. Union Pac. R.R. Co., 492 F.3d 986, 990 (8th Cir.2007) (stating that on a motion to dismiss, we may consider documents attached to the complaint and matters of public and administrative record referenced in the complaint.). The alleged inconsistency stems from deposition testimony and acknowledgments by Homier that are not part of the documents we are permitted to consider in ruling on a motion to dismiss. Accordingly, Cole cannot overcome a motion to dismiss on this ground. Even if we were to consider these outside documents, the explanation that Homier provided in its termination letter simply is not inconsistent with the allegations that Cole now puts forth on appeal. Finally, the allegation that Homier breached the agreement by contacting dealerships prior to and during the notice period does not demonstrate an intent to defraud at the time the parties entered into the agreement. Missouri courts have stated on numerous occasions that the necessary intent cannot be established merely by pointing to the defendant's subsequent breach. See, e.g., Emerick v. Mut. Benefit Life Ins. Co., 756 S.W.2d 513, 519-20 (Mo. 1988); Sofka v. Thal, 662 S.W.2d 502, 507 (Mo.1983); Dillard v. Earnhart, 457 S.W.2d 666, 671 (Mo.1970). Cole's allegations do no more than suggest that Homier, for one reason or another, changed its mind as to how it wished to deal with distributors. This, as a matter of law, is insufficient to state a claim for fraud. See Craft, 766 F.2d at 1221; see also Restatement (First) of Torts § 530 cmt. a (1938) ([O]ne who acts in justifiable reliance upon another's honest statement of his then existing intention cannot maintain an action for the loss caused by the disappointment of his expectations if the other for any reason, good or bad, changes his mind and fails to perform.). Having considered Cole's allegations in the light most favorable to Cole, and drawing all reasonable inferences in Cole's favor, we find that Cole has failed to allege facts that plausibly could suggest Homier intended not to perform at the time of the oral agreement.