The opinion of the court was delivered by: Michael M. Mihm United States District Judge
On August 10, 2009, a Report & Recommendation was filed by Magistrate Judge Byron G. Cudmore in the above-captioned case recommending that several of Hipage's state law claims be dismissed from both the Counterclaims and Third Party Complaint. Hipage filed a timely response to the Report & Recommendation, and this Order follows.
The relevant facts were sufficiently set forth in the comprehensive Report & Recommendation of the Magistrate Judge and need not be restated here. Suffice it to say that this action arises out of an alleged scheme to defraud Hipage that included the improper use of confidential information by one of its employees, Christopher Unger. Hipage removed the case to this Court based on diversity jurisdiction and filed various Counterclaims and a Third Party Complaint. Motions to Dismiss were brought by Access2Go and Broadline. The Magistrate Judge concluded that Virginia law applies to govern Hipage's state law claims and declined the request to dismiss claims based on Virginia state law solely for that reason. There has been no objection to this portion of the Report & Recommendation.
The Magistrate Judge further recommended that Hipage's claims for fraudulent inducement to contract, rescission, and common law conspiracy to induce breach of contract be dismissed. It is the portion of the Report & Recommendation with respect to the claims for fraudulent inducement and rescission to which Hipage objects. Access2Go has filed a response to Hipage's objection, and this Order follows.
A district court reviews de novo any portion of a magistrate judge's report and recommendation to which written objections have been made. See Fed. R. Civ. P. 72(b).
"The district judge may accept, reject, or modify the recommended decision, receive further evidence, or recommit the matter to the magistrate judge with instructions." Id.
Hipage objects to the portion of the Report & Recommendation finding that its state law claims for fraudulent inducement to contract and rescission should be dismissed for failure to state a claim. Specifically, Hipage asserts that the dismissal of these claims would be premature and that its theories are not inconsistent.*fn1
The fraudulent inducement claim is brought against Broadline and Access2Go, based on vicarious liability for Broadline's actions as its agent. The gist of this claim is that Broadline expressly told Unger that his endorsement on the alleged contract between Hipage and Access2Go was solely for the purposes of obtaining pricing information and that it would not create any contractual obligation. In order to state a claim for fraud, the plaintiff must prove:
(1) a false representation, (2) of a material fact, (3) made intentionally and knowingly, (4) with intent to mislead, (5) reliance by the party mislead, and (6) resulting damage to the party misled.
Hitachi Credit America Corp. v. Signet Bank, 166 F.3d 614, 628 (4th Cir. 1994). The reliance by the party misled must be reasonable, and reliance has generally been held to be unreasonable where the party has a chance to read the contract, and the contract plainly contradicts the allegedly false representation. Nationwide Mutual Ins. Co. v. Muncy, 217 Va. 916, 234 S.E.2d 70 (1977).
Hipage does not dispute the Magistrate Judge's finding that the Service Agreement contained all of the kinds of provisions that would be expected in a contractually binding agreement (e.g., default, limitations on liabilities, renewal, termination, warranties, etc.) and was clearly a contract. Nor does Hipage dispute that Unger had the opportunity to read the contract, including these provisions, before signing. Rather, without citation to any legal authority in support of its position, Hipage bases its objection on the fact that Unger lacked actual authority to sign the agreement and was under no heightened compulsion to closely review the terms of the ...