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Wallace v. Baylouny

United States District Court, E.D. Virginia, Alexandria Division

May 31, 2016

STEPHEN P. WALLACE, Plaintiff,
v.
JOHN BAYLOUNY, ET AL., Defendants.

          MEMORANDUM OPINION

          James C. Cacheris, UNITED STATES DISTRICT COURT JUDGE

         This matter is before the Court on Defendants’ motion to dismiss pro se Plaintiff Stephen P. Wallace’s Complaint for failure to state a claim. (Mot. to Dismiss [Dkt. 5]; Mem. in Supp. [Dkt. 6].) Wallace failed to appear at the May 26, 2016 hearing on this motion as ordered and he has not since explained his absence. The Court granted Defendants’ motion to dismiss without prejudice at the hearing. This Memorandum Opinion elaborates on the Court’s reasoning.

         I. Background

         In 2012, an Arkansas corporation named Vision Technologies, Inc. (“Vision”) authorized Wallace to act as its agent to procure investors. (Origination Fee Contract [Dkt. 1-1] at 2.) Wallace drafted a document entitled “Origination Fee Contract, ” which memorializes the agreement. (Id.) The Origination Fee Contract authorizes Wallace and Eric Peterson to “‘procure & originate [Ready, Willing & Able INVESTORS], whether Corporate or Individuals, solely acceptable to CLIENT, to acquire, JV, merge, & finance CLIENT via ‘bona fide Negotiations.’” (Id. (formatting in original).) If Wallace or Peterson procured an “Acceptable Transaction, ” Vision agreed to pay each agent an origination fee of three percent of “any & all FINANCIAL and/or EQUITY ‘infusion.’” (Id. (formatting in original).) Vision President and CEO Robert Lee Thompson and witness James Torraco signed the document on June 18, 2012. (Id.)

         Wallace alleges that in October 2012 he “successfully did procure” an unspecified investment from Virginia-based defense contractor, DRS Technologies (“DRS”). (Compl. at 4.)[1]Wallace describes his dealings with DRS as follows. On September 12, 2012, DRS Vice President John Baylouny (“Baylouny”) emailed Vision’s CEO to arrange a meeting to discuss the possibility of business dealings between DRS and Vision. (Compl. Ex. [Dkt. 1-1] at 6.) Wallace was copied on that email. (Id.) In a second email, Baylouny invited several people to attend a business development meeting between Vision and DRS, including Vision CEO Thompson, Wallace, DRS corporate counsel Matt Weingast (“Weingast”), and other DRS employees. (Compl. Ex. at 7.) The email provided instructions for attending by phone or internet connection. (Id.) Wallace did not attend the October 8, 2016 meeting or participate by phone or internet. (See Compl. at 3.)

         At the meeting, Defendants Baylouny and Weingast from DRS met with Vision CEO Thompson. (Comp. Ex. at 4.) The two companies entered into a nondisclosure agreement. (Compl. Ex. 19; Compl. ¶ 9.) Wallace has not seen the nondisclosure agreement and does not know the specifics of its contents. He alleges that the nondisclosure agreement is a “sham” that Vision imposed upon DRS to “covertly induce[] Defendants to tortiously interfere” with his Origination Fee Contract and the nondisclosure agreement is shielding an unspecified business transaction between Vision and DRS. (Compl. ¶ 9.)

         Three days after the meeting, Wallace informed DRS Vice President Baylouny of the Origination Fee Contract between Wallace and Vision. (See Compl. Ex. at 9.) Wallace requested that his Origination Fee Contract be attached to any future contracts and that Baylouny send copies of “confidential intercompany transactions” to him and his co-agent Peterson. (Compl. Ex. at 8.) Wallace has not since received a copy of any nondisclosure agreement or document memorializing business dealings between Vision and DRS. None-the-less, Wallace alleges that DRS has done business with Vision in some way and that he was the “sole procuring cause” of that business, entitling him to his origination fee. (Compl. at ¶ 8, 4.)

         On October 22, 2012, Wallace and co-agent Peterson sought to enforce their Origination Fee Contract by entering into arbitration proceedings with Vision and Vision CEO Thompson. (Compl. Ex. at 9.) The precise outcome of that proceeding is unknown, but Wallace indicates in an email that he did not prevail in the arbitration. (Compl. Ex. at 18 (Wallace stating in a letter that “Thompson has exhausted & tortuously thwarted All our Remedy @ the American Arbitration Association” (formatting in original)).)

         After the arbitration proceeding was completed, Wallace sent a letter to Baylouny, who was then still a vice president at DRS. (Compl. Ex. at 18.) This June 2014 letter explained Wallace’s belief that Vision had violated the terms of his Origination Fee Contract. (Id.) Wallace requested that Baylouny “cooperate” by sending all documents relating to any business dealings between Vision and DRS, so as to avoid the need for Wallace to file a lawsuit. (Id.) Baylouny responded with an email stating, “As I recall this interaction consisted of an NDA execution and one meeting. To my knowledge there was no further dialog, nor was there any business transacted. I believe that there is no material documentation available to help your case from my side.” (Compl. Ex. at 19.)[2] Baylouny referred any future questions to DRS corporate counsel Weingast. (Id.)

         Wallace emailed Weingast the same day asking for confirmation “for the record” that DRS and Vision had not entered into any “joint alliance/bidding agreements.” (Id.) Weingast never responded to the email. (Compl. ¶ 7.) Wallace construes this silence as affirmation that some business dealings did occur. (Compl. ¶ 7.)

         In April 2015, Wallace filed suit in Arkansas state court against Vision, Vision CEO Thompson, and co-agent Peterson for breach of the Origination Fee Contract and wrongful termination. (See Compl. 4-6.) The Circuit Court of Benton County, Arkansas dismissed the petition without prejudice on August 7, 2015, after finding Wallace’s petition “deficient in all respects as to claims he attempts to assert.” Wallace v. Vision Tech., Inc., No. CV-15-558-6 (Ark. Cir. Ct. Aug. 7, 2015).[3]

         Wallace filed the present Complaint in January 2016 against DRS Vice President Baylouny, DRS corporate counsel Weingast, and former DRS CEO William Lynn III (“Lynn”). The Complaint alleges tortious interference with contract and civil conspiracy to interfere with contract.[4] (Compl. at 2.) As a remedy, Wallace seeks a declaratory judgment and order for Defendants to produce “Any & All JV Bidding Contracts” between DRS and Vision after September 11, 2012. (Compl. at 3.) Wallace also seeks an order requiring Defendants to sign affidavits declaring that DRS will deduct his origination fee from any payments it makes to Vision. Lastly, Wallace seeks payment of the origination fee he alleges he is owed.

         In February 2016, Defendants moved to dismiss the Complaint for failure to state a claim. (Defs.’ Mem. in Supp. [Dkt. 6].)[5] Wallace filed a memorandum and exhibits in opposition on March 9, 2016. (Mem. in Opp’n [Dkt. 12].) Defendants replied on March 14, 2016. (Reply [Dkt. 13].)

         On March 29, 2016, the Court granted a motion from Wallace to stay the case to permit him time to retain counsel. (See Stay Order [Dkt. 16].) Five weeks into the six-week stay, Wallace filed a motion to disqualify the undersigned Judge, to vacate the order granting his stay, and to grant a new stay because the previous order granting his stay was prejudicial to him. (See Vacate Motion [Dkt. 17].) Six days later, Wallace failed to appear at a previously scheduled status conference. (See Minute Entry [Dkt. 18].) Thereafter, the Court issued a memorandum opinion denying Wallace’s motions to disqualify, vacate, and stay. See Wallace v. Baylouny, No. 1:16-cv-47, 2016 WL 2868865 (E.D. Va. May 17, 2016).[6] The Court then returned the case to active status.

         On May 26, 2016, the Court held a hearing on Defendants’ motion to dismiss. Wallace failed to appear as ordered at the May 26, 2016 hearing. The Court then dismissed Wallace’s Complaint without prejudice. This Memorandum Opinion expands upon the Court’s reasoning.

         II. Standard of Review

         “The purpose of a Rule 12(b)(6) motion is to test the legal sufficiency of a complaint; importantly, [it] does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.” Butler v. United States, 702 F.3d 749, 752 (4th Cir. 2012) (citations and internal quotation marks omitted). A court reviewing a complaint on a Rule 12(b)(6) motion “must accept as true all of the factual allegations contained in the complaint, ” and draw “all reasonable inferences” in the plaintiff’s favor. E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 440 (4th Cir. 2011) (citations omitted). However, the court need not accept as true legal conclusions disguised as factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 679-81 (2009). Thus, the Court need not accept as true “naked assertions” or “unadorned conclusory allegations” devoid of “factual enhancement.” Vitol, S.A. v. Primerose Shipping Co. Ltd, 708 F.3d 527, 543 (4th Cir. 2013) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007)). The court also need not assume the veracity of “labels and conclusions, ” Iqbal, 556 U.S. at 678, or legal conclusions drawn from the facts alleged, Adcock v. Freightliner LLC, 550 F.3d 369, 374 (4th Cir. 2008).

         To survive a motion to dismiss, the complaint must contain sufficient factual allegations, taken as true, “to raise a right to relief above the speculative level” and “nudge[] [the] claims across the line from conceivable to plausible.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007). This standard obligates the plaintiff to provide “more than labels and conclusions and a formulaic recitation of the elements of a cause of action will not do.” Id. at 555. Instead, sufficient pleading requires “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Clatterbuck v. City of Charlottesville, 708 F.3d 549, 554 (4th Cir. 2013).

         Because a motion to dismiss tests the sufficiency of the complaint, the court’s evaluation is “generally limited to a review of the allegations in the complaint itself.” Goines v. Valley Cmty. Servs. Bd., --F.3d--, 2016 WL 2621262, at *3 (4th Cir. 2016). However, the court may also consider a document incorporated into the complaint by reference, a document attached to the complaint as an exhibit, and “a document submitted by the movant that was not attached to or expressly incorporated in a complaint, so long as the document was integral to the complaint and there is no dispute about the document’s authenticity.” Id.; Fed.R.Civ.P. 10(c).

         In the event of a conflict between the bare allegations of the complaint and any exhibit attached to the complaint pursuant to Federal Rule of Civil Procedure 10(c), the exhibit prevails. Fayetteville Inv’r v. Commercial Builders, Inc., 936 F.2d 1462, 1465 (4th Cir. 1991). Accordingly, “[w]hen the plaintiff attaches or incorporates a document upon which the claim is based, or when the complaint otherwise shows that the plaintiff has adopted the contents of the document, crediting the document over conflicting allegations in the complaint is proper.” Goines, 2016 WL 2621262, at *5. The court must exercise caution when applying the exhibit-prevails rule because “where the ...


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