Remember, Fraudulent Inducement Requires Particularity

A recent case out of the District of Utah, HealthBanc International v. Synergy Worldwide, Case No. 2:16-cv-00135-JNP-PMW, reminds us all of this rule. Well, it definitely reminded the parties and now I'm blogging about it and reminding all of you!

This case revolves around "a recipe for a powder comprised of various grasses and other components." Apparently you can combine this powder with water to make a nutritional supplement. HealthBanc entered into a contract with Synergy whereby Synergy would distribute the powder and pay HealthBanc royalties for every bottle of powder it sold. After almost a decade of doing business together, the relationship between the two parties soured. HealthBanc sued first, and then Synergy counterclaimed, alleging that HealthBanc had led Synergy to believe that it owned intellectual property rights in the recipe for the power, which apparently turned out to be untrue. HealthBanc then moved to dismiss this fraudulent inducement claim based on lack of particularity in Synergy's pleadings. The court here grants the motion. 

Synergy's complaint just generally alleged that HealthBanc had made misrepresentations. Those general allegations are not enough for a fraudulent inducement claim. Synergy identified nothing about the misrepresentations: When did they happen? Where did they happen? Were they written? Oral? Who made them? Without any of this information, the court finds this cause of action can't survive. 

The contract between the parties did contain a clause where HealthBanc

represents and warrants that it is the sole and exclusive owner of the entire rights, title and interest, including without limitation all patent, trademark, copyright and other intellectual property rights,

and another clause where HealthBanc "represents and warrants" that it has exclusive rights to the recipe that it can provide to Synergy. But those clauses don't raise a valid fraudulent inducement claim. Synergy made no allegations about the drafting of those clauses, nor did it allege that those clauses caused it to falsely believe that HealthBanc owned IP rights in the recipe and that that false belief prompted Synergy to sign the contract. 

Likewise, Synergy failed to allege any particular way that it was harmed by the alleged misrepresentations. 

Therefore, on basically every single element Synergy made very general claims that failed to meet the particularity standards. The court does dismiss without prejudice, though, giving Synergy the opportunity to try to fix the deficiencies. Stay tuned!

*Note the first: Synergy Worldwide sounds vaguely like what a company would be called in a Marvel movie so I actually looked the company up to see what it does. It seems to be a company specializing in nutritional supplements: "Your source for ProArgi-9 Plus, the highest quality l-arginine supplement on the market, as well as Mistica acai supplement, Core Greens, and more."

*Note the second: I also looked up "greens formula," which is what the court here refers to the recipe as. Wikipedia just wants to tell me about mathematical theorems, which then sent me down the Wikipedia rabbit hole to learn about George Green, a self-taught mathematical genius who received only one year of formal schooling as a child and to this day no one really knows where or how he learned the form of calculus that his theorems advanced.