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No Claim for Fraud or Misrepresentation Where Party Overlooks Express Term of Contract
(December 2011) By Colleen K. O’Brien, Associate
For more information, contact Paul
Farquharson.
My National Tax & Insurance Services, Inc. v. H&R Block Tax Services, Inc.,
No. 8:10-cv-02411-AW (D. Md., January 11, 2012) |
View pdf
This case arose from a series of business negotiations that
culminated in Plaintiff My National Tax & Insurance Services, Inc. (“My National”)
becoming a franchisee of Defendant H&R Block Tax Services, Inc. (“HR Block”).
The Franchise Agreement provided that HR Block was to pay My National based on its achievement of a
performance target. The performance target was based on the number of tax
returns prepared by My National. Specifically, My National had to prepare 4,105
returns as a condition to receiving payment. My National claimed that it did not
notice the performance target condition prior to signing the Agreement. It also
alleged that HR Block knew that it could not reach the performance target before
the Agreement was signed. When HR Block did not pay My National, My National
sued HR Block for fraud, misrepresentation, and breach of contract. HR Block
moved to dismiss the fraud and misrepresentation claims.
The Court held that My National failed to allege adequately
its misrepresentation claim. Specifically, the Complaint failed to allege that
HR Block made any sort of false statement. Further, the express terms of the
contract, signed by My National, contained the performance target as an express
term. Generally, a plaintiff has no right to rely on an alleged
misrepresentation that directly contradicts the terms of a contract to which the
plaintiff is a signatory.
My National also failed to state a cognizable claim for
fraudulent concealment. A plaintiff seeking to establish fraudulent
concealment must prove that the defendant took affirmative action to conceal
something and that the plaintiff could not have discovered it despite the
exercise of reasonable diligence. Although My National alleged that HR Block
failed to disclose the performance target, My National’s allegations failed
to establish that there was such a duty. Furthermore, My National’s
fraudulent concealment claim would fail even if HR Block owed it such a duty
as My National did not adequately allege that it justifiably relied on the
alleged material omission. My National’s allegations lead to the inference
that the performance target was an express term of the Agreement. My
National alleged no justification for its apparent failure to read the
Agreement, identify the performance target term, and object to it.
Therefore, My National’s fraud and misrepresentation
claims failed as a matter of law. Accordingly, the Court dismissed the
claims with prejudice, since My National failed to state a cognizable claim
for both claims in either its Complaint or its Amended Complaint.
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