6. The Court Dismisses the Negligent Misrepresentation Claim: Count III
In this count, the plaintiffs allege that the defendants negligently misrepresented that they would make the plaintiffs whole. Compl. T 40-45. Addressing the defendants' motions to dismiss the negligent misrepresentation count, the court first discusses the general requirements for negligent misrepresentation and then determines that the plaintiffs failed to properly plead reasonable reliance.
Under District of Columbia law, a claim for negligent misrepresentation requires a showing that (1) the defendant made a false statement or omission of a fact, (2) the statement or omission was in violation of a duty to exercise reasonable care, (3) the false statement or omission involved a material issue, (4) the plaintiffs reasonably and to their detriment relied on the false information, and (5) the defendant's challenged conduct proximately caused injury to the plaintiffs. Appleton, 2001 WL 45473, at *3 (citing Redmond, 728 A.2d at 1207); Steele v. Isikoff, 130 F. Supp.2d 23, 34 (D.D.C.2000); Remeikis v. Boss & Phelps, Inc., 419 A.2d 986, 990 (D.C. 1980).
As with fraud claims, negligent misrepresentation claims must adequately allege all of the required elements, including allegations that the plaintiff reasonably relied on the alleged misrepresentation.*fn9 Alicke v. MCI Communications Corp., 111 F.3d 909, 912 (D.C. Cir. 1997) (applying District of Columbia law to dismiss claims of fraud and negligent misrepresentation); Smith v. Wash. Metro. Area Transit Auth., 1997 WL 182286, at *5 (D.D.C. Apr. 4, 1997) (same). In the commercial context, not only must the plaintiffs plead reasonable reliance, but the plaintiffs must plead reliance that is objectively reasonable. Id.
The court now turns to the defendants' argument that the court should dismiss Count III (the negligent misrepresentation claim) because the plaintiffs fail to adequately allege reasonable reliance. Mot. to Dismiss (USOP) at 30; Mot. to Dismiss (New Aztec) at 3. Because the parties' relationship is commercial, District of Columbia law requires the fraud and negligent misrepresentation claims to include allegations of reliance that are objectively reasonable. Alicke, 111 F.3d at 912.
Construing the complaint in the plaintiffs' favor, the court considers several facts regarding the February 11 Agreement that are critical to the court's reliance analysis: defendant Ledecky claimed that he knew the stock prices would increase, defendant Ledecky stated that defendant Ledecky or USOP would compensate the plaintiffs for the loss in value of their USOP stock, the method and amount of compensation was unclear, the agreement was oral, the defendants refused to sign a written agreement, the defendants told the plaintiffs that the agreement was confidential, and the Reorganization Agreement prohibits oral modifications. Compl. ¶¶ 40-45; Reorganization Agreement § 10.2; Alicke, 111 F.3d at 912. In the similar context of fraud, the District of Columbia Court of Appeals has explained that "[o]ne cannot close his eyes and blindly rely upon the assurances of another absent some fiduciary relationship or emergency. . . ." Hercules & Co. v. Shama Rest. Corp., 613 A.2d 916, 934 (D.C. 1992). Here, the parties had a commercial and arm's-length, not a fiduciary, relationship.*fn10 Also, the court has already determined that the statements were too indefinite and contradictory to create a promise or contract. Part III.B.4-5 supra. In light of the facts set forth in this paragraph, the plaintiffs' reliance on the alleged misrepresentations regarding the compensation by the defendants resembles blind reliance and not objectively reasonable reliance. Hercules, 613 A.2d at 934; Alicke, 111 F.3d at 912 (holding that reliance was unreasonable because even though all long-distance calls were billed by the defendant in whole-minute increments, "no reasonable customer could actually believe that each and every phone call she made terminated at the end of a full minute").
Further evaluating the reasonableness of the reliance, the court considers § 10.2 of the Reorganization Agreement that requires any modification of the Reorganization Agreement to be in writing and executed by each of the parties to the agreement. The February 11 Agreement was oral and did not include all of the parties to the Reorganization Agreement. Compl. ¶¶ 40-45. The plaintiffs were aware of § 10.2 as they signed the contract after negotiating, drafting, and reviewing it with their legal counsel. Reorganization Agreement §§ 10.11-10.12. District of Columbia courts have ruled that no reasonable trier of fact could conclude that a plaintiff reasonably relied on oral representations contradicted by express written provisions. Smith, 1997 WL 182286, at *5 (holding that no reasonable trier of fact could conclude that the plaintiff reasonably relied on oral representations of his superior that were contradicted by the express written provisions of the manual governing employment); Hercules, 613 A.2d at 934 (determining that reliance on statements contradicted by the contract and not in the contract was unreasonable). Although the plaintiffs were aware of § 10.2, and although the February 11 Agreement allegedly modified the Merger Consideration that USOP would pay to the plaintiffs, the plaintiffs have plead no facts to demonstrate why a reasonable person would be so certain that the February 11 Agreement was outside of the scope of § 10.2 that they would detrimentally rely on this conclusion. Id.
In the similar context of failure to plead fraud with particularity, the D.C. Circuit has ruled that a dismissal with prejudice is warranted only when the trial court determines that there exist no facts, consistent with the challenged complaint, that could cure the pleading deficiency. Firestone, 76 F.3d at 1208. While the court is not aware of any facts that could demonstrate reasonable reliance regarding the February 11 Agreement, the court recognizes that such facts might exist and therefore dismisses the negligent misrepresentation claim without prejudice. Id.; Alicke, 111 F.3d at 912. For these reasons, the court grants the defendants' motions to dismiss Count III for failure to properly plead reasonable reliance, but denies the motions to the extent that they request a dismissal with prejudice.*fn11 Firestone, 76 F.3d at 1208; Alicke, 111 F.3d at 912.
For the foregoing reasons, the court grants in part and denies in part the motions to dismiss of defendants USOP and New Aztec. The court grants defendant USOP's motion to the extent that it requests a ruling of improper venue but denies the motion to dismiss for improper venue. If the plaintiffs file an amended complaint within 60 days, then the court will direct the Clerk of the Court to transfer the venue of the complaint to the District of Columbia. The court also rules that the plaintiffs failed to state a claim upon which relief may be granted for Counts I-II and IV. Consequently, the court grants the defendants' motions for dismissal of these counts. Because the court dismisses Count IV without prejudice, the court denies the motions to dismiss Count IV to the extent they request a dismissal with prejudice. If the plaintiffs intend to amend their complaint to replead this count using applicable law, they must do so within 60 days. The court also determines that Count III fails to adequately plead negligent misrepresentation and thus dismisses this count without prejudice, granting the motions to dismiss this count but denying them to the extent they request a dismissal with prejudice. An order directing the parties in a manner consistent with this Memorandum Opinion is separately and contemporaneously issued this 4th day of March, 2003.
Granting in Part and Denying in Part Defendant USOP's Motion to Dismiss; Granting in Part and Denying in Part Defendant New Aztec's Motion to Dismiss; Granting the Plaintiffs' Motion for Leave to Amend the Complaint; Granting Hale and Dorr LLP's Motion to Withdraw as Counsel for New Aztec
For the reasons stated in this court's Memorandum Opinion separately and contemporaneously issued this 4th day of March, 2003, it is
ORDERED that defendant USOP's motion to dismiss is GRANTED in part and DENIED in part; and it is
FURTHER ORDERED that defendant New Aztec's motion to dismiss is GRANTED in part and DENIED in part; and it is
ORDERED that the plaintiffs' motion for leave to amend the complaint is GRANTED and the plaintiffs may file an amended complaint within 60 days of the date of this order; and it is FURTHER ORDERED that Hale and Dorr LLP's motion to withdraw as counsel for New Aztec is GRANTED.