United States District Court, W.D. Virginia
K. MOON UNITED STATES DISTRICT JUDGE
matter is before the Court upon submission of
Plaintiff’s Second Amended Complaint. Dkt. 28. On July
22, 2016, I entered an order granting Defendant State
Farm’s motion to dismiss on the breach of contract and
intentional infliction of emotional distress claims; however,
I granted Gammon fourteen days to amend his constructive
fraud claim. On August 4, 2016, Gammon submitted his Second
Amended Complaint amending this claim. Because Gammon has
failed state a plausible claim for constructive fraud, I will
dismiss his Second Amended Complaint.
FACTS AS ALLEGED AND STANDARD OF REVIEW
Court’s July 22, 2016 opinion provided background of
this case and the standard of review that must be applied at
the motion to dismiss stage. The Court expressly adopts and
incorporates by reference those sections.
amended complaint alleges constructive fraud through four
separate “false representations.” 2d. Am. Compl.
¶¶9-19. In each of these representations, Gammon
alleges that the same representation was made-his marijuana
felony conviction would not cause a problem in his ability to
be licensed. Id.
elements of a cause of action for constructive fraud are a
showing by clear and convincing evidence that a false
representation of a material fact was made innocently or
negligently, and the injured party was damaged as a result of
his reliance upon the misrepresentation. Evaluation
Research Corp. v. Alequin, 247 Va. 143, 148 (Va. 1994);
accord Nationwide Mut. Ins. Co. v. Hargraves, 242
Va. 88, 92 (Va. 1991). Additionally, “[a] finding of. .
. constructive fraud requires clear and convincing evidence
that one has represented as true what is really false, in
such a way as to induce a reasonable person to believe it,
with the intent that the person will act upon this
representation.” Alequin, 247 Va. at 148.
Virginia law also requires that the fraud relate to a present
or a preexisting fact and not an unfulfilled promise or
statements concerning future events. See e.g., Lloyd v.
Smith, 150 Va. 132, 145 (Va. 1928) (“[A]n action
based upon fraud must aver the misrepresentation of present
pre-existing facts, and cannot ordinarily be predicated on
unfulfilled promises or statements as to future events. Were
the general rule otherwise, every breach of contract could be
made the basis of an action in tort for fraud.”).
case, Gammon fails to properly allege fraud for three
reasons. First, his alleged misrepresentations concern future
events. At the time each individual associated with State
Farm told him that his felony conviction would not disrupt
his licensing process, they were not making the final
decision on his license. The final decision would come in the
future. Gammon, himself, even admits to this fact when he
states that State Farm gave him “temporary
employment” until he was licensed and each
representation occurred prior to this temporary employment.
Am. Compl. ¶¶ 14-21; 2d. Am. Compl. ¶9-19.
Therefore, the alleged misrepresentations concerned only
future events. Lloyd, 150 Va. at 145.
Gammon cannot properly allege that any of the State Farm
employees represented as true what was really false.
Alequin, 247 Va. at 148. As Gammon’s complaint
states, Mr. Tribble, a State Farm employee and one of the
individual’s who spoke with Gammon, had been licensed
even though he had a past history. 2d. Am. Compl. ¶ 11.
Therefore, the representing that a felony will not prevent
licensing is not a false statement, even through
Gammon’s complaint. Id.
Gammon’s constructive fraud claim violates the economic
loss rule. Virginia law states that “[t]he primary
consideration underlying tort law is the protection of
persons and property from injury, while the major
consideration underlying contract law is the protection of
bargained for expectations.” Filak, et al. v.
George, 267 Va. 612, 618 (Va. 2004). Thus, “[w]hen
a plaintiff alleges nothing more than disappointed economic
expectations in a claim for constructive fraud, the law of
contracts, not the law of torts, provides the remedy for such
economic losses.” Branin v. TMC Enterprises,
LLC, 832 F.Supp. 2d. 646, 655 (W.D. Va. 2011). Here,
Gammon’s constructive fraud claim is squarely based
around “disappointed economic expectations.”
extent that Gammon’s complaint tries to perpetrate an
argument that the economic loss rule does not bar his claim
due a pre-contractual misrepresentation as explained in
Abi-Najm v. Concord Condominiums, LLC, 280 Va. 350,
360 (Va. 2010), he also fails. In Abi-Najm, the
Supreme Court of Virginia noted the requirements for
fraudulent inducement. Id. at 360. Here, Gammon has
failed, as mentioned above, to allege that the Defendant
“had knowledge that its representations. . . were
untrue.” Id. Instead, Gammon alleges that its
representations were true as it concerned Mr. Tribble. In
addition, Gammon has not alleged that State Farm’s
employees “made [the] misrepresentations. . . with the
present intention not to perform.” Id.
Gammon has failed to meet the pleading requirements, his
constructive fraud claim will be dismissed.