Capital Consulting, Llc v. Prestige Global Trading, Ltd et al

REPLY BRIEF re MOTION to Dismiss

N.D. Ga.June 5, 2017

WCSR 39981161v2 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION CAPITAL CONSULTING, LLC, Plaintiff, v. PRESTIGE GLOBAL TRADING, LTD., PETER BAKER, JAYAT PRAMOD KANETKAR, and GUARANTEED INVESTIGATIONS, INC., Defendants. ) ) ) ) ) ) ) ) ) ) ) ) CIVIL ACTION FILE NO. 1:17-cv-00724-ELR REPLY MEMORANDUM IN SUPPORT OF DEFENDANTS JAYAT PRAMOD KANETKAR’S AND GUARANTEED INVESTIGATIONS, INC.’S MOTION TO DISMISS I. INTRODUCTION Before this lawsuit was brought, Plaintiff Capital Consulting, LLC (“Capital”) and Defendants Prestige Global Trading, Ltd. (“Prestige”) and Peter J. Baker (“Baker”) agreed to go their separate ways and essentially rescind a prior business arrangement that Prestige and Baker claimed was fully performed and that Capital claimed was not. They entered into the Settlement Agreement and did so after Capital’s purported discovery of alleged fraud in connection with its transactions with the Defendants. That agreement is enforceable and bars the claims in the Complaint, including those against the GII Defendants. Case 1:17-cv-00724-ELR Document 26 Filed 06/05/17 Page 1 of 16 - 2 - WCSR 39981161v2 In its Response, Capital asserts that the Settlement Agreement does not bar its claims because Prestige and Baker have allegedly failed to perform its contractual obligation of paying Capital $561,000.00 (the “Settlement Payment”), which Capital maintains is a condition precedent to the Settlement Agreement’s enforcement. This argument fails because the Settlement Agreement clearly provides that its underlying agreement to settle claims arising from Capital’s financial instrument purchase agreement with Prestige (the “Purchase Agreement”) and its corresponding escrow agreement with Baker and Kanetkar (the “Escrow Agreement”) would go into effect no later than January 30, 2017, even if Capital had not received the Settlement Payment by that date. The Georgia Supreme Court has held that contractual language on when performance obligations under an agreement will become “effective” does not establish a condition precedent on contract formation, even if it establishes a condition precedent to liability. Accordingly, this holding, which Capital has failed to distinguish, must be applied to the Settlement Agreement as set forth in the Motion. The Response additionally argues that GII is not a third-party beneficiary that has standing to enforce the Settlement Agreement because it is not specifically named in the Settlement Agreement. However, this argument ignores the merger clause, which forecloses claims based on the Escrow Agreement and Purchase Case 1:17-cv-00724-ELR Document 26 Filed 06/05/17 Page 2 of 16 - 3 - WCSR 39981161v2 Agreement and related alleged pre-settlement agreement representations, and the actual language of the release. The Settlement Agreement specifically releases all of Capital’s “indirect” claims arising from the Purchase Agreement and Escrow Agreement. Based on this language, GII constitutes a third-party beneficiary that can seek enforcement of this release. Lastly, the Response requests leave to amend Capital’s Complaint in the event the Court is “inclined” to grant the Motion. This request for leave to amend is procedurally improper because it was not made pursuant to a separate motion. More importantly, because no amendment to Capital’s Complaint could prevent the Settlement Agreement from barring the claims asserted against the GII Defendants, the Response’s request for leave should be denied as futile. Accordingly, for the reasons set forth in the Motion, the Court should dismiss the GII Defendants from this action pursuant to Rule 12(b)(2) or otherwise dismiss all claims asserted against them in this action pursuant to Rule 12(b)(6). II. LEGAL ARGUMENT AND CITATION TO AUTHORITY a. The Response Fails To Rebut The Motion’s Argument That Enforcement Of The Settlement Agreement Is Not Conditional. The Settlement Agreement states that it is “effective as of the date that the last party hereto executes this Agreement or January 30, 2017, whichever is Case 1:17-cv-00724-ELR Document 26 Filed 06/05/17 Page 3 of 16 - 4 - WCSR 39981161v2 sooner.” See the Settlement Agreement, attached to the Complaint as Exhibit 4. As a result, by its own terms, the Settlement Agreement became effective on January 25, 2017 (the date of its execution) even though Prestige and Baker had not provided the Settlement Payment to Capital by that date. Id. Thus, the Settlement Agreement is a binding contract that is not conditioned upon Capital’s receipt of the Settlement Payment. See Harris v. Distinctive Builders, Inc., 249 Ga. App. 686, 688 (2001) (holding a contract must be enforced according to its clear and unambiguous terms). In the Response, Capital argues the Settlement Agreement is conditioned upon its receipt of the Settlement Payment pursuant to its Claim Release Provision, which provides that Capital’s release of claims arising from the Purchase Agreement and Escrow Agreement becomes “effective” upon Prestige’s and Baker’s performance of providing the Settlement Payment. See the Response at 9- 10. However, as set forth in the Motion, the Georgia Supreme Court has articulated that a statement which articulates conditions that must be met to make an agreement “‘effective’ does not determine whether the parties entered into a contract.” Sw. Life Ins. Co. v. Middle Ga. Neurological Specialists, 262 Ga. 273, 274 (1992). Instead, when a contract articulates an overarching “effective date,” as the Settlement Agreement does here, any additional conditions on performance of Case 1:17-cv-00724-ELR Document 26 Filed 06/05/17 Page 4 of 16 - 5 - WCSR 39981161v2 the contract are “conditions precedent to liability, not conditions precedent to contract formation.” Id. at 274. Capital maintains that Sw. Life Ins. Co. is distinguishable from this case because its “holding turned on the inconsistency between two ‘effective date’ provisions . . . that is not relevant to this case because the Settlement Agreement includes a condition precedent with a date certain deadline” for Prestige and Baker to submit the Settlement Payment. Response at 13. Not only does this argument fail to distinguish Sw. Life Ins. Co., it actually underscores why this holding is directly applicable to the Settlement Agreement. Specifically, in Sw. Life Ins. Co., the insurance contract at issue listed its effective date as “March 28, [1988].” 262 Ga. at 273. Additionally, however, the application for the underlying insurance contract stated that the contract would became “effective” when “it is delivered to and accepted by the Applicant,” which occurred after March 28, 1988. Id. at 273- 74. Under these facts, the Georgia Supreme Court determined that the insurance contract constituted a valid contractual agreement that became effective “on March 28[, 1988].” Id. at 275. In making this determination, the Georgia Supreme Court articulated that when a condition precedent as to performance under a contract contradicts the contract’s articulated “effective date” of its underlying agreement, the contract is binding as of the underlying agreement’s effective date. Id. at 275 Case 1:17-cv-00724-ELR Document 26 Filed 06/05/17 Page 5 of 16 - 6 - WCSR 39981161v2 (“However, where the conditions precedent to liability that are described in the application or policy are contradicted by a specified date on which insurance coverage is to take effect, the date certain controls.”). Here, the Settlement Agreement articulates its underlying agreement to settle all of Capital’s potential claims regarding the execution and performance of the Purchase Agreement and Escrow Agreement would become effective when “the last party hereto executes this Agreement or January 30, 2017, whichever is sooner.” As a result of this articulated effective date, Capital agreed that the Settlement Agreement would become binding no later than January 30, 2017, even if it had not received the Settlement Payment by that date. Thus, the Claim Release Provision’s articulated deadline of January 30, 2017 for submission of the Settlement Payment merely provides a condition precedent to Prestige’s and Baker’s potential liability under the Settlement Agreement if they fail to perform in accordance with this deadline. Id. at 274.1 As clearly established in Sw. Life Ins. Co., Capital cannot use this condition precedent on Prestige’s and Baker’s liability under the Settlement Agreement to negate the formation of the Settlement 1 Such a condition precedent on contract liability is consistent with the Settlement Agreement’s overarching effective date. Specifically, because the Settlement Agreement would become binding no later than January 30, 2017, Capital could seek contractual relief from Prestige and Baker if they failed to provide the Settlement Payment by that date. Case 1:17-cv-00724-ELR Document 26 Filed 06/05/17 Page 6 of 16 - 7 - WCSR 39981161v2 Agreement’s overarching agreement to settle the claims Capital asserts against the GII Defendants in this action. Id. at 275. b. The Settlement Agreement’s Merger Clause Applies To The Purchase Agreement and Escrow Agreement and Alleged Prior Representations. As discussed above, the Settlement Agreement is an enforceable agreement that bars Capital’s claims. The merger clause in the Settlement Agreement is likewise enforceable and, as a result, the Settlement Agreement “supersedes and replaces” the Purchase Agreement and Escrow Agreement as well as “all prior and contemporaneous negotiations, discussions, communications, and contracts of agreement, whether oral or written,” barring all claims based on those agreements or alleged representations. (Settlement Agr., ¶ 10.) Capital argues that these agreements and alleged prior representations that Capital now contends were fraudulent are “collateral” and are not “related to the terms of the written contract in which the clause appears.” Response p. 22. This argument ignores the repeated references to the Purchase Agreement and Escrow Agreement which are the focus of the Settlement Agreement. (Settlement Agr., ¶ 2 (releasing claims relating to the Purchase Agreement and/or Escrow Agreement), ¶ 3 (providing of the termination of the Purchase Agreement), p. 1 (reciting that “the Parties have reached an agreement . . . to fully and finally resolve all disputes and Case 1:17-cv-00724-ELR Document 26 Filed 06/05/17 Page 7 of 16 - 8 - WCSR 39981161v2 claims between them related to the Purchase Agreement and Escrow Agreement”). The entire point of the Settlement Agreement is to redefine the parties’ prior obligations under the Purchase Agreement and Escrow Agreement to be those set forth in Settlement Agreement. See First Data POS, Inc. v. Willis, 273 Ga. 792, 795 (2001) (holding “the rational basis for merger clauses is that where parties enter into a final contract all prior negotiations, understandings, and agreements on the same subject are merged into the final contract, and are accordingly extinguished.” (internal quotation marks, alterations, and citation omitted)). Based on this purpose, the Purchase Agreement and the Escrow Agreement are the specific agreements that are extinguished by the Settlement Agreement’s merger clause. See Rabun & Assocs. Constr., Inc. v. Berry, 276 Ga. App. 485, 489 (2005) (holding that merger clause in a settlement agreement executed to resolve a dispute regarding funds owed under an insurance contract “superseded any provision of the insurance contract.”). Accordingly, claims based on these agreements and alleged misrepresentations leading to their formation are foreclosed by the merger clause in the Settlement Agreement. See Willis, 273 Ga. at 795 (“[M]erger clauses exist in written contracts specifically to preclude any claim of deceit by prior representations …” (internal quotation marks and citation omitted)). Case 1:17-cv-00724-ELR Document 26 Filed 06/05/17 Page 8 of 16 - 9 - WCSR 39981161v2 c. The Response Does Not Create A Question Of Fact. A contract governed by Georgia law is analyzed under the following three step process: first, the court must determine whether the language therein is clear and unambiguous, and if it is, the contract is to be enforced according to its clear terms; the contract alone is looked to for its meaning; next, if the contract is ambiguous in some respect, the court must apply the rules of contract construction to resolve the ambiguity; and finally, if the ambiguity remains after applying the rules of construction, the issue of what the ambiguous language means and what the parties intended must be resolved by the trier of fact. Atlanta Dev. Auth. v. Clark Atlanta Univ., Inc., 298 Ga. 575, 579 (2016). A contract is not considered ambiguous “unless and until an application of pertinent rules of interpretation leaves it uncertain as to which of two or more possible meanings represents the true intention of the parties.” Lay Bros., Inc. v. Golden Pantry Food Stores, Inc., 273 Ga. App. 870, 872 (2005). In the Response, Capital argues that the Motion should not be granted because “whether the language in the Settlement Agreement is a condition precedent is a factual issue for the trier of fact to decide.” Response at 14. However, Capital fails to support this argument by identifying any ambiguous language in the Settlement Agreement that cannot be resolved through basic contract construction. Thus, Capital effectively argues that, by simply disputing Case 1:17-cv-00724-ELR Document 26 Filed 06/05/17 Page 9 of 16 - 10 - WCSR 39981161v2 the meaning of the Settlement Agreement’s clear language, it has created a question of fact that should “allow the parties to conduct discovery.” Id. at 15. Such an argument is obviously without merit as it contravenes the basic principles of contract construction under Georgia law. See Bulford v. Verizon Bus. Network Servs., Inc., 564 F. App’x 449, 452 (11th Cir. 2014) (“When [a] contract provides plainly that it was the intent of the parties to settle and effect a resolution of all claims and disputes of every kind and nature among them . . . [n]o grounds at law or in the contract itself exist to open [it] to jury examination.” (quoting Kobatake v. E.I. DuPont De Nemours & Co., 162 F.3d 619, 624-5 (11th Cir. 1998))). More importantly, for the reasons explained in the Motion, the terms of the Settlement Agreement, as well as the basic rules of contract construction, establish that the Settlement Agreement is a binding contract that bars Capital’s claims against the GII Defendants. Therefore, no discovery to determine the meaning of the Settlement Agreement’s terms is necessary. See Kwok v. Delta Air Lines, Inc., 994 F. Supp. 2d 1290, 1295 (2014) (granting motion to dismiss a breach of contract action because “[t]o the extent that there is ambiguity [in the contract], the tools of contractual interpretation resolve it. Thus, extrinsic evidence may not be considered.”); see also Choice Hotels Int’l, Inc. v. Ocmulgee Fields, Inc., 222 Ga. App. 185, 186 (1996) (“Well-established Georgia law provides that matters outside Case 1:17-cv-00724-ELR Document 26 Filed 06/05/17 Page 10 of 16 - 11 - WCSR 39981161v2 a contract cannot be used to vary or explain the unambiguous terms of an agreement.”). Accordingly, Capital’s attempt to challenge the clear and unambiguous language of the Settlement Agreement does not provide a basis for the Court to deny the Motion. d. GII Is A Third-Party Beneficiary Of The Settlement Agreement. Georgia law is clear that “[i]t is not necessary for the third-party beneficiary to be specifically named in the contract” in order to seek its enforcement. Boller v. Robert W. Woodruff Arts Ctr., Inc., 311 Ga. App. 693, 698 (2011). Despite this clearly established rule of law, Capital argues that GII lacks standing to enforce the Settlement Agreement because it “is not named anywhere in the Settlement Agreement.” Response at 16. In support of this argument, Capital cites Lackey v. McDowell, 262 Ga. 185 (1992), but Capital’s reliance on Lackey is misplaced because, even if not “named” as a release, GII is a third-party beneficiary entitled to enforce the merger clause and the scope of the release of Kanetkar necessarily includes claims against GII. First, as discussed above, the Settlement Agreement is enforceable according to its terms, including the agreement that prior agreements and alleged misrepresentations have been “supersede[d] and replace[d]” pursuant to the merger Case 1:17-cv-00724-ELR Document 26 Filed 06/05/17 Page 11 of 16 - 12 - WCSR 39981161v2 clause in the Settlement Agreement. As a result, Capital’s claims fail under the Settlement Agreement. Second, GII constitutes a third-party beneficiary of the Settlement Agreement because, pursuant to the terms of the Settlement Agreement, Capital has agreed to settle and release all direct and indirect claims arising from the conduct of Prestige, Baker, and Kanetkar which relates to the Purchase Agreement and the Escrow Agreement. Thus, any claim that involves the alleged misconduct of Prestige, Baker, and Kanetkar regarding the execution or performance of the Purchase Agreement and the Escrow Agreement is barred pursuant to the Claim Release Provision. In order for this provision to have any meaningful effect, it must bar both any claim asserted directly against Prestige, Baker, and Kanetkar and any indirect claim that is contingent upon a finding of misconduct of Prestige, Baker, and Kanetkar which relates to the Purchase Agreement and the Escrow Agreement. Carroll v. Bd. of Regents of Univ. Sys. of Ga., 324 Ga. App. 598, 601 (2013) (“[A] contract must be interpreted to give the greatest effect possible to all provisions rather than to leave any part of the contract unreasonable or having no effect.”). Here, all of Capital’s direct allegations against GII relate to its alleged involvement in a scheme with Prestige, Baker, and Kanetkar. Compl. at ¶¶ 125-59, Case 1:17-cv-00724-ELR Document 26 Filed 06/05/17 Page 12 of 16 - 13 - WCSR 39981161v2 181-84, 188-92.2 Thus, the claims Capital asserts against GII in this action are barred by the Claim Release Provision because they are contingent upon, and attempt to recover alleged damages from, a finding that Prestige, Baker, and Kanetkar purportedly committed fraud related to the execution and performance of the Purchase Agreement and Escrow Agreement. Argentum Int’l, LLC v. Woods, 280 Ga. App. 440, 444 (2006) (holding claims sounded in conspiracy to commit fraud require a showing that “two or more persons, acting in concert, engaged in conduct that constitutes a tort. Absent the underlying tort, there can be no liability.”). Accordingly, the Response fails to refute that GII does not constitute a third-party beneficiary that can seek enforcement of the Settlement Agreement and its Claim Release Provision. e. The Response’s Alternative Request To Amend The Complaint Is Improper As A Matter Of Law. Pursuant to Rule 15(a)(2), “[f]iling a motion is the proper method to request leave to amend a complaint.” Long v. Satz, 181 F.3d 1275, 1279 (11th Cir. 1999); see also FED. R. CIV. P. 7(b)(1) (“A request for a court order must be made by motion.”). Thus, it is procedurally improper to request leave to amend a complaint in a response brief opposing a motion to dismiss. See Long, 181 F.3d at 1279 2 To the extent Capital argues GII should be held liable for Kanetkar’s alleged misconduct under the principles of agency law, such an argument is also barred by the Settlement Agreement for the reasons set forth in the Motion. Case 1:17-cv-00724-ELR Document 26 Filed 06/05/17 Page 13 of 16 - 14 - WCSR 39981161v2 (holding trial court did not err in denying plaintiff’s request for leave to amend included in her opposition brief because “plaintiff did not file a motion for leave to amend.”). Moreover, while leave to amend a complaint should be freely given, the Court can “properly deny leave to amend [a] complaint under Rule 15(a) when such amendment would be futile.” Wedemeyer v. Pneudraulics, Inc., 510 F. App.’x 875, 878 (11th Cir. 2013) (citing Forman v. Davis, 371 U.S. 178, 182 (1962)). Here, the Response’s request for leave to amend is not provided in a separate motion. Thus, this request is procedurally improper and should be denied by the Court on this basis alone. Additionally, the Response does not articulate how any amendment to the Complaint would resolve the issue that Capital is barred from asserting any claim against the GII Defendants that arises from the execution and performance of the Purchase Agreement and Escrow Agreement pursuant to the Settlement Agreement. As a result, the Court should deny the Response’s request for leave on the basis that any amendment to the Complaint would be futile. See Wedemeyer, 510 F. App.’x at 878. Accordingly, the Court should deny the Response’s request for leave to amend the Complaint. CONCLUSION For the foregoing reasons and the reasons previously briefed, the GII Defendants respectfully request that the Court grant the Motion and dismiss them Case 1:17-cv-00724-ELR Document 26 Filed 06/05/17 Page 14 of 16 - 15 - WCSR 39981161v2 from this action pursuant to Rule 12(b)(2) or otherwise dismiss all claims asserted against them in this action pursuant to Rule 12(b)(6), without leave to amend. Respectfully submitted, this 5th day of June, 2017. WOMBLE CARLYLE SANDRIDGE & RICE A Limited Liability Partnership By: /s/ Robert R. Ambler, Jr. Robert R. Ambler, Jr. State Bar No. 014462 Jennifer S. Collins State Bar No. 436806 271 17th Street, NW, Suite 2400 Atlanta, Georgia 30363-1017 Phone: (404) 872-7000 rambler@wcsr.com jennifer.collins@wcsr.com Attorneys for Defendants Jayat Pramod Kanetkar and Guaranteed Investigations, Inc. CERTIFICATION OF COMPLIANCE WITH L.R. 5.1 I hereby certify that the foregoing has been computer processed with 14 point New Times Roman font in compliance with the United States District Court for the Northern District of Georgia Local Rule 5.1. Dated: June 5, 2017 /s/ Robert R. Ambler, Jr. Robert R. Ambler, Jr. Georgia Bar No. 014462 Case 1:17-cv-00724-ELR Document 26 Filed 06/05/17 Page 15 of 16 - 16 - WCSR 39981161v2 CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of the within and foregoing REPLY MEMORANDUM IN SUPPORT OF DEFENDANTS JAYAT PRAMOD KANETKAR’S AND GUARANTEED INVESTIGATIONS, INC.’S MOTION TO DISMISS was electronically filed with the Clerk of Court using the CM/ECF system, which will automatically send email notification of such filing to the following attorneys of record: S. Derek Bauer Ian Kyle Byrnside Cody Sams Wigington BAKER & HOSTETLER LLP 1170 Peachtree Street NE, Suite 2400 Atlanta, GA 30309 In addition, the following have been served via U.S. Mail: Peter Baker 1565 Great Oaks Drive Lawrenceville, GA 30045 This 5th day of June, 2017. WOMBLE CARLYLE SANDRIDGE & RICE A Limited Liability Partnership By: /s/ Robert R. Ambler, Jr. Robert R. Ambler, Jr. State Bar No. 014462 Jennifer S. Collins State Bar No. 436806 Case 1:17-cv-00724-ELR Document 26 Filed 06/05/17 Page 16 of 16