Omorfia Ventures, Inc. v. Posh Bridal Couture, LLC

Decision Date11 September 2020
Docket NumberNO. 3:19-cv-00794,3:19-cv-00794
PartiesOMORFIA VENTURES, INC., Plaintiffs, v. POSH BRIDAL COUTURE, LLC, MARIE SUCHY, and DEAN SUCHY, Defendant.
CourtU.S. District Court — Middle District of Tennessee

OMORFIA VENTURES, INC., Plaintiffs,
v.
POSH BRIDAL COUTURE, LLC, MARIE SUCHY, and DEAN SUCHY, Defendant.

NO. 3:19-cv-00794

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF TENNESSEE NASHVILLE DIVISION

September 11, 2020


JUDGE RICHARDSON

MEMORANDUM OPINION

Pending before the Court is Defendants Posh Bridal Couture, LLC, Marie Suchy, and Dean Suchy's Motion to Dismiss (Doc. No. 11, "Motion"). Plaintiff Omorfia Ventures, Inc. responded, (Doc. No. 15), and Defendants replied. (Doc. No. 19). For the following reasons, Defendants' Motion will be denied.

PLAINTIFF'S FACTUAL ALLEGATIONS AND CLAIMS1

Plaintiff Omorfia Ventures, Inc. is a corporation organized under Tennessee law. (Doc. No. 1 at ¶ 1). Defendant Posh Bridal Couture, LLC ("Posh Bridal") is a Minnesota limited liability company. (Id. at ¶¶ 2, 9). Prior to March 6, 2019, Posh Bridal owned a bridal store located in Nashville, Tennessee ("Posh Bridal Tennessee") and a bridal store located in Wayzata, Minnesota ("Posh Bridal Minnesota"). (Id. at ¶ 10).

Defendants Marie Suchy and Dean Suchy are husband and wife. (Id. at ¶ 8). Defendant Marie Suchy owns, operates, and manages Posh Bridal. (Id. at ¶ 9). Defendants Marie Suchy and

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Dean Suchy operated, managed, and assisted with the financial affairs of both Posh Bridal stores. (Id. at ¶¶ 11-12).

Defendant Dean Suchy has worked in the banking industry as a commercial loan officer. (Id. at ¶ 13). Upon information and belief, Dean Suchy prepared Posh Bridal's financial records relevant to this action and engaged the services of a business broker to find a buyer for Posh Bridal Tennessee. (Id. at ¶¶ 14-15). It is through this business broker that Plaintiff became aware of Defendants' intent to sell the Posh Bridal Tennessee business. (Id.).

On or around December 14, 2018, Plaintiff began discussions with Defendants to purchase Posh Bridal Tennessee. (Id. at ¶ 17). Prior to the sale of Posh Bridal Tennessee, Defendants Dean and Marie Suchy prepared detailed financial disclosure documents and profit and loss statements for Posh Bridal Tennessee, which were provided to Plaintiff. (Id. at ¶ 18). Additionally, during negotiations, Defendant Marie Suchy prepared detailed responses to a questionnaire designed to provide Plaintiff with numerous material representations concerning the value, financial condition and viability of Posh Bridal Tennessee. (Id. at ¶ 20). In numerous discussions and negotiations between the parties, Defendants made additional representations to Plaintiff regarding the value, financial condition and viability of Posh Bridal Tennessee. (Id. at ¶ 21). Defendants had superior knowledge of all financial matters related to the business and were in exclusive control of information related to the assets, liabilities and inventory depicted in the financial disclosures and profit and loss statements prepared by Dean and Marie Suchy. (Id. at ¶ 19). Plaintiff relied on the representations made in the documents provided by Defendants and during discussions between the parties, which impacted Plaintiff's decision to purchase Posh Bridal Tennessee and dictated the ultimate purchase price. (Id. at ¶¶ 22-24).

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Plaintiff and Defendant Posh Bridal entered into an Asset Purchase Agreement ("APA"), wherein Defendant Posh Bridal, as Seller, agreed to sell, "free from all liabilities and encumbrances," substantially all of the assets of Posh Bridal Tennessee to Plaintiff, as Purchaser. (Id. at ¶¶ 25-27).

Under the APA, Defendant Posh Bridal represented and warranted that the "financial information supplied to Purchaser by seller [was] true and correct as of the dates of such information in all material aspects." (Id. at ¶ 33). Furthermore, the APA states that Defendant Posh Bridal represented and warranted that the supplied financial information was "a fair and accurate representation of the financial condition" of Posh Bridal Tennessee and that no document provided by Defendants contained "any untrue statement of a material fact or omit[ted] to state a material fact required to be stated in order to make such a statement not misleading." (Id. at ¶¶ 33-34). On March 6, 2019, the parties closed on the sale contemplated by the APA. (Id. at ¶ 38).

After executing the APA and closing on the sale of Posh Bridal Tennessee, Plaintiff learned that certain business information and financial records provided by Defendants were inaccurate, inflated and/or manipulated to misrepresent the actual financial condition of Posh Bridal Tennessee. (Id. at ¶¶ 38-39). That is, Defendants had made material misrepresentations in the financials and documents provided to induce Plaintiff to purchase Posh Bridal Tennessee, and to fraudulently inflate the value of and increase the purchase price of Posh Bridal Tennessee. (Id. at ¶¶ 40-41). For example, Defendants had failed to include and deduct sales taxes in the financial documents, and profit and loss statements, thereby fraudulently inflating Defendants' gross profits. Defendants also failed to disclose marketing expenses, payroll expenses, certain liabilities, past due accounts in excess of $25,000, and the fact that Posh Bridal Tennessee was two months past due on rent. (Id. at ¶¶ 44-49). Defendants also had fraudulently misrepresented to Plaintiff that the

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closing ratio was twice the close rate of the typical bridal store. (Id. at ¶ 50). Plaintiffs relied upon the representation of the sales closing ratio represented by Defendants in valuing the business and determining the purchase price. (Id. at ¶ 51). After purchasing the business, Plaintiff learned that Defendants significantly misrepresented the sales closing ratio. (Id. at ¶ 52). Defendants also failed to disclose to Plaintiff that the assets of Posh Bridal Tennessee and Posh Bridal Minnesota had been pledged as collateral and were encumbered by a lien. (Id. at ¶ 58).

Plaintiff made numerous requests to Defendants for the release of the lien, but Defendants failed and refused to do so until July 12, 2019, after Plaintiff retained legal counsel and made a formal demand. (Id. at ¶¶ 63-64). As a result, Plaintiff was unable to obtain financing to grow and market its newly acquired business. (Id. at ¶ 65).

On September 11, 2019, Plaintiff filed its Complaint against Defendants asserting four causes of action: Breach of Contract (Count I); Fraudulent Inducement to Contract/Promissory Fraud (Count II); Fraud and Intentional Misrepresentation (Count III); and Negligent Misrepresentation (Count IV). (Doc. No. 1). Plaintiff seeks damages amounting to no less than $350,000, payment of attorneys' fees and costs, an award of pre- and post-judgment interest, and any further relief as should be deemed appropriate. (Id. at 11-12).

LEGAL STANDARD

Rule 12(b)(6)

For purposes of a motion to dismiss brought pursuant to Rule 12(b)(6), the Court must view all the factual allegations in the complaint as true. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). To survive a motion to dismiss brought pursuant to Rule 12(b)(6), a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Id. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to

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draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Id. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief. Id. at 679. A legal conclusion, including one couched as a factual allegation, need not be accepted as true on a motion to dismiss, nor are mere recitations of the elements of a cause of action sufficient. Id. at 678; Fritz v. Charter Twp. of Comstock, 592 F.3d 718, 722 (6th Cir. 2010); Abriq v. Hall, 295 F. Supp. 3d 874, 877 (M.D. Tenn. 2018). Moreover, factual allegations that are merely consistent with the defendant's liability do not satisfy the claimant's burden, as mere consistency does not establish plausibility of entitlement to relief, even if it supports the possibility of relief. Iqbal, 556 U.S. at 678.

In determining whether a complaint is sufficient under the standards of Iqbal and its predecessor and complementary case, Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), it may be appropriate to "begin [the] analysis by identifying the allegations in the complaint that are not entitled to the assumption of truth." Iqbal, 556 U.S. at 680. Identifying and setting aside such allegations is crucial, because the allegations simply do not count toward the plaintiff's goal of showing plausibility of entitlement to relief. As suggested above, such allegations include "bare assertions," formulaic recitation of the elements, and "conclusory" or "bald" allegations. Id. at 681. The question is whether the remaining allegations—factual allegations, i.e., allegations of factual matter—plausibly suggest an entitlement to relief. Id. If not, the pleading fails to meet the standard of Fed. R. Civ. P. 8 and thus must be dismissed pursuant to Rule 12(b)(6). Id. at 683.

As a general rule, matters outside the pleadings may not be considered in ruling on a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) unless the motion is converted to one

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for summary judgment under Rule 56. Fed. R. Civ. P. 12(d). However, when a document is referred to in the pleadings and is integral to the claims, it may be considered without converting a motion to dismiss into one for summary judgment. Doe v. Ohio State Univ., 219 F. Supp. 3d 645, 652-53 (S.D. Ohio 2016); Blanch v. Trans Union, LLC, 333 F. Supp. 3d 789, 791-92 (M.D. Tenn. 2018).

Rule 9(b)

In the federal system, fraud claims are subjected to a "heightened pleading standard." Republic Bank & Trust Co. v. Bear Stearns & Co., Inc., 683 F.3d 239, 257 (6th Cir. 2012). The...

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