Alonzo D. Washington Obtains Summary Judgment in Fraud and Unjust Enrichment Case

The United States District Court for the Northern District of West Virginia granted summary judgment in a fraud and unjust enrichment case. The case involved "a business dispute between two individuals and their corporate alter egos."

This case came before the Honorable Thomas Kleeh of the Northern District of West Virginia on the Defendant's Motion for Summary Judgment. Alonzo D. Washington of Flaherty Sensabaugh Bonasso represented the Defendants, a professional land management company and one of its limited partners with its principal place of business in Malakoff, Texas. The Plaintiffs in this case were a limited liability company in Morgantown, West Virginia, and its sole member.

Beginning in 2007, the parties entered into multiple independent contractual agreements in which the Plaintiffs performed field landman services for the Defendants. The independent contractor agreements between the parties expired in December of 2012.

The parties continued to do business together from 2015 to 2021, thus giving rise to the claims of this lawsuit. The Defendants contend that from 2015 to 2021, the Plaintiffs continued to work for them as an independent contractor; however, the Plaintiffs alleged that the Defendants' conduct led them to believe that they had become a partner of the Defendants' land management company, earning an interest that began in 2012. Plaintiffs further alleged that they continued to work for the Defendants based on promises of their limited partner. Defendants asserted that none of their partners led Plaintiffs to believe that they had any ownership interest in Defendants' company, citing that the Plaintiffs' representative managed Defendants' West Virginia finances, which reflected that Plaintiffs' sole member reported his income as an independent contractor, not as partnership income.

The Plaintiffs filed their Complaint in the Circuit Court of Monongalia County on December 21, 2021, alleging claims of fraud and unjust enrichment. In their Complaint, the Plaintiffs asserted that the Defendants repeatedly led them to believe that they had partial ownership of the Defendants' company, which led them to continue to work for Defendants. The Defendants removed the case to the Northern District of West Virginia in January 2022. Both parties filed for summary judgment; however, the Northern District held that West Virginia law applied to the Plaintiffs' claims and denied the Plaintiffs' motion for summary judgment.

In their Motion for Summary Judgment, Defendants argued that Plaintiffs failed to demonstrate the elements necessary for their fraud and unjust enrichment claims. Defendants also argued that the applicable statutes of limitations barred the Plaintiff's claims. In addressing the Plaintiff's claim for fraud, the Court granted the Defendants' Motion because the undisputed facts showed that the Defendants expressly told the Plaintiffs in April 2015 that they were not an owner of the land management company. This exchange between the parties put the Plaintiffs on notice that they were not part owners. The Court reasoned that had the Plaintiffs truly believed that fraud had occurred, they should have rescinded the agreement in 2015, but instead, they affirmed the agreement and continued to reap the benefits of their agreement with the Defendants. Moreover, the Plaintiffs continued to do business with Defendants until 2021, ratifying the agreement between the parties. Because of this, the Court granted summary judgment in favor of the Defendants.

As for the claim of unjust enrichment, the Plaintiffs argue that their claim should survive summary judgment because there was no valid or enforceable written contract between the parties; however, the Northern District was not persuaded by the Plaintiffs' argument. The Court reasoned that "the right to recover for unjust enrichment is based on the principles of equity." Defendants argued that the claim should be dismissed because an express agreement existed between the parties. The Plaintiffs' representative was compensated in revenue interest that was promised in exchange for his continued work for the Defendants, and as such, the Defendants could not have been unjustly enriched by the Plaintiffs' performance. While the Court acknowledged that this claim may survive summary judgment as there was a genuine dispute of material fact as to the payment structure between the parties' August/October 2014 agreement, the Court found that they did not need to reach summary judgment on this issue as Plaintiffs' claims were barred by the statute of limitations.

Under West Virginia law, claims of fraud are governed by a two-year statute of limitations period. The Court found that the undisputed facts showed that the alleged fraud was discovered by the Plaintiffs in April 2015. The Plaintiffs did not file suit until December 2021, and as such, their claim of fraud was barred by the statute of limitations. Therefore, the Court dismissed the Plaintiffs' claim of fraud on this additional ground.

Contrary to fraud, claims of unjust enrichment operate under a five-year statute of limitations period. In looking at the claim in the light most favorable to the Plaintiff, the Court found that even if the statute of limitations period began in October of 2014 when the Plaintiffs relied on the Defendants' alleged promise of "equity," the statute of limitations would have tolled in October of 2019. Because the Plaintiffs did not file suit until December 2021, their claim of unjust enrichment was untimely. As such, the Northern District of West Virginia granted summary judgment on this ground and dismissed the Plaintiffs' Complaint against the Defendants with prejudice.

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