SUNTUITY SOLAR, LLC v. ROSEBURG

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

SUNTUITY SOLAR, LLC,

Plaintiff,

v. Civil Action No. 21-17801 (MAS) (TJB)

AMANDA ROSEBURG & ABBY

BUCHMILLER, MEMORANDUM OPINION

Defendants.

SHIPP, District Judge

This matter comes before the Court on separate Motions to Dismiss Plaintiff Suntuity

Solar, LLC’s (“Suntuity”) Amended Complaint from Defendant Amanda Roseburg (“Roseburg”’)

and Defendant Abby Buchmiller (“Buchmiller,” and together with Roseburg, “Defendants”), (ECF

Nos. 18, 19.) Suntuity opposed both motions (ECF Nos. 26, 27), and Defendants separately replied

(ECF Nos. 30, 32). With leave of the Court, Suntuity sur-replied to Roseburg’s Motion. (ECF No.

35.) The Court has carefully considered the parties’ submissions and decides the matter without

oral argument under Local Civil Rule 78.1. For the reasons below, the Court grants in-part and

denies in-part Defendants’ Motions.

L BACKGROUND

In this case, a creditor-turned-manager corporation seeks recovery for several common law

and statutory torts against two executives in the debtor manager-managed limited liability

company (LLC). The matter spans the gambit of corporate law, comprising bad lending deals,

bankruptcies, and lost business opportunities. In chronicling the Amended Complaint’s boom and

bust allegations, the Court accepts all well-pleaded facts as true. See Phillips vy. County of

Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (quoting Pinker v. Roche Holdings, Ltd., 292 F.3d

361, 374 n.7 (3d Cir. 2002)).

A. Empire Solicits a Competitor for Financial Help.

The story begins with two competitors in the renewable energy market: Suntuity Solar LLC

and Empire Solar Group, LLC (“Empire”). (Am. Compl. ff 1-2, ECF No. 8.) Defendants

Buchmiller and Roseburg co-owned Empire as members and served as the company’s CEO and

CFO, respectively. Ud. §§ 21-22.) In June 2021, Empire’s cash reserves began to dry up, and the

company sought money to shore up its “short-term liquidity needs.” Gd. J] 29, 32.) Through

Defendants, Empire engaged Suntuity as a potential creditor. According to the Amended

Complaint, Defendants represented to Suntuity that “Empire was a growing business,” that Empire

had “significant revenue and profitability,” and that “Empire generated over $230 million in

revenue and nearly $4 million in net profits in 2020.” Ud. 9 34-35.) Spurred on by those financial

assurances, Suntuity lent Empire $1.5 million in secured notes that Suntuity could convert to

membership interests in Empire if it attempted to acquire Empire. U/d. §[ 36-37 (alleging that

Suntuity executed a Private Bridge Loan Agreement (the “Loan Agreement”) with Empire).)

A little over a week later, Defendants again asked for money—this time to cover employee

payroll and other debt obligations. U/d. 4 47.) According to the Amended Complaint, at this time,

Defendants still had not provided “complete access to [Empire’s] financials” or the “requested due

diligence” but had assured Suntuity that they had disclosed “all material liabilities.” Ud. 48.)

Suntuity adopted a more cautious approach this time around: agreeing to lend Empire another

roughly $550,000 but only if Suntuity became a manager of Empire under Empire’s Operating

Agreement. Ud. J] 51-53.) Empire agreed and Suntuity became involved in the day-to-day

operations of its competitor on July 9, 2021. Ud. {51 (alleging that the parties executed a letter

agreement (the “Letter Agreement’”).)

B. Suntuity Realizes Empire Is in Dire Financial Straits.

It was not long before Suntuity caught wind of Empire’s true financial situation. “After

taking over as manager, Suntuity realized that Empire’s liquidity situation would require additional

weekly loan advances amounting to millions of dollars.” Ud. 455.) But that was not all. Suntuity

learned that Empire’s cash position was not as cheery as Defendants represented—namely, in

2020, Empire took in only $150 million in revenues and had negative net profits. (/d. □□ see also

id. 60 (‘Abby Buchmiller and Roseburg represented to Suntuity that Empire was profitable when,

in fact, it was losing money and struggling to pay its employees and contractors.”).) Even worse,

Empire was insolvent and behind on its debts. (Am. Compl. { 7.) The Amended Complaint alleges,

for example, that in June 2021 Empire defaulted on two loans to a lender that had loaned it more

than $300,000. (Jd. § 46.) The crushing debt invited crushing litigation. By June 2021, Empire had

drawn the scrutiny of two state attorneys general over its sales practices and the ire of bilked

employees and vendors in multiple lawsuits. Ud. J] 66-68; see also id. § 43 ([N]either Abby

Buchmiller nor Roseburg disclosed to Suntuity that Empire had between $10 million and $50

million in liabilities ....”) For good measure, Buchmiller also engaged the legal system by filing

for a personal Chapter 13 bankruptcy in July 2021. (Am. Compl. {| 70.)

To address the insolvency issues, Suntuity brought on Rock Creek Advisors (“Rock

Creek”) as Empire’s Chief Restructuring Officer. Ud. { 58.) In addition to revealing the true state

of Empire’s finances, Rock Creek attempted to save the company by instituting salary haircuts on

top executives, including Defendants. Ud. § 61 (“Through August 2021, Abby Buchmiller, Steve

Buchmiller and Roseburg were paying themselves more than $23,000 per week in salary, until

Rock Creek stepped in to require a reduction in salary for the good of [Empire].”); id. § 64 (“[E]ven

as Abby Buchmiller and Roseburg were representing to Suntuity that they needed additional loans

from Suntuity just to keep Empire operating and make payroll, they were paying themselves and

their families an outsized portion of that payroll and distributions.”).) Rock Creek’s austerity

measures, however, were in vain as Empire declared Chapter 7 bankruptcy on August 22, 2021.

Ud. ¥ 72.)

C. Defendants Disparage Suntuity.

Not only did Suntuity stand to lose millions from Empire’s bankruptcy, but it also faced

the loss of future business from Defendants’ disparagement. Specifically, the Amended Complaint

alleges that Defendants “made false statements to Empire employees and third[-|part[y] business

relationships that Suntuity forced Empire into bankruptcy.” Ud. § 75; see also id. § 76 (“Abby

Buchmiller and Roseburg accused Suntuity and Rock Creek of siphoning funds out of Empire for

itself.”).)' The Amended Complaint further asserts that Roseburg told specific vendors that

Suntuity “did not intend to make commission payments” to those vendors—vendors which

Suntuity had pre-existing relationships with. (Am. Compl. { 77; see also id. {78 (“Roseburg also

told third parties that Suntuity was taking money for itself instead of paying dealers.”).) “As a

result of Roseburg’s false statements, solar power dealers .. . have expressed concern about doing

business with Suntuity.” (id. J 80.)

D. Suntuity Launches This Litigation Against Defendants.

No doubt fed up with Defendants’ conduct, Suntuity sued in state court in August 2021.

(See generally Compl., ECF No. 1-2.) Defendants removed and Suntuity amended, asserting seven

causes of action: (1) legal and equitable fraud (Count I), (2) violations under the New Jersey

' The Amended Complaint also alleges that non-party Steve Buchmiller made disparaging

comments. (Am. Compl. Jf 81-83.)

Uniform Securities Act “NJUSA,” Count ID, (3) violations under the Utah Uniform Securities

Act “UUSA,” Count HD), (4) fraudulent nondisclosure (Count IV), (5) civil conspiracy (Count V),

(6) tortious interference with business relations (Count VI), and (7) defamation (Count VII). (See

generally Am, Compl.) The instant Motions followed. (ECF Nos. 18, 19.)

il. LEGAL STANDARD

Federal Rule of Civil Procedure 8(a)(2)? “requires only ‘a short and plain statement of the

claim showing that the pleader is entitled to relief,’ in order to ‘give the defendant fair notice of

what the . . . claim is and the grounds upon which it rests.’” Bell Atl. Corp. v. Twombly, 550 U.S.

544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). On a motion to dismiss for

failure to state a claim, a “defendant bears the burden of showing that no claim has been presented.”

Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005).

A. district court conducts a three-part analysis when considering a Rule 12(b)(6) motion.

Malleus v. George, 641 F.3d 560, 563 (Gd Cir. 2011). “First, the court must ‘tak[e] note of the

elements a plaintiff must plead to state a claim.’” Jd. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 675

(2009)). Second, the court must accept as true all of a plaintiff’s well-pleaded factual allegations

and construe the complaint in the light most favorable to the plaintiff. Fowler v. UPMC Shadyside,

578 F.3d 203, 210-11 (d Cir. 2009). The court, however, must disregard any conclusory

allegations proffered in the complaint. /d. For example, the court is free to ignore legal conclusions

or factually unsupported accusations that merely state “the-defendant-unlawfully-harmed-me.”

Iqbal, 556 US. at 678 (citing Twombly, 550 U.S. at 555). Finally, once the well-pleaded facts have

been identified and the conclusory allegations ignored, a court must next “determine whether the

2 All references to “Rule” or “Rules” hereafter refer to the Federal Rules of Civil Procedure.

facts alleged in the complaint are sufficient to show that the plaintiff has a ‘plausible claim for

relief.’” Fowler, 578 F.3d at 211 (quoting /gbal, 556 U.S. at 679).

In addition to satisfying the pleading requirements of Rule 8, for those claims sounding in

fraud, Rule 9(b) imposes a heightened pleading standard. “In alleging fraud or mistake, a party

must state with particularity the circumstances constituting fraud or mistake. Malice, intent,

knowledge, and other conditions of mind of a person may be averred generally.” Fed. R. Civ. P.

9(b). The heightened standard requires specific allegations as to the circumstances surrounding the

fraud: “the plaintiff must plead or allege the date, time and place of the alleged fraud or otherwise

inject precision or some measure of substantiation into a fraud allegation.” Frederico v. Home

Depot, 507 F.3d 188, 200 (3d Cir. 2007).

Hi. DISCUSSION

Defendants move to dismiss all seven of the Amended Complaint’s causes of action. The

Court first addresses Defendants’ argument under Rule 9(b) and then considers each remaining

cause of action in turn.

A. Rule 9(b)

Defendants urge the Court to toss the Amended Complaint’s fraud-based claims as

deficient under Rule 9(b). They argue, for example, that “the pleading does not identify the

speaker, listener, the specifics of the statement, the timing of the statement, or the purported

culpable mind-set relative to the purported fraud.” (Buchmiller’s Moving Br. 1, ECF No. 19-1.)

The Court disagrees and concludes that the Amended Complaint satisfies Rule 9(b). .

To start, Rule 9(b) applies to all of the Amended Complaint’s fraud-based causes of action,

which include all but the tortious interference and defamation claims.? Under the Rule, plaintiffs

must buttress their allegations with “the essential factual background that would accompany ‘the

first paragraph of any newspaper story’—that is, the ‘who, what, when, where and how’ of the

events at issue.” In re Rockefeller Ctr. Props., Inc. Sec. Litig., 311 F.3d 198, 217 (3d Cir. 2002)

(quoting Jn re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1422 Gd Cir. 1997)). Although

Rule 9(b) calls for stringent pleading, it does not demand unrealistically precise pleading about

each and every fraudulent statement. Indeed, “[d]etails about the timing, context and content of

the allegedly false statements must be identified in discovery, but they are not within the ambit

of Rule 9(b).” Diversified Indus., Inc. v. Vinyl Trends, Inc., No. 13-6194, 2014 WL 1767471, at

*4 n.6 (D.N.J. May 1, 2014).

The Amended Complaint meets this challenge. Start with the “who” and the “what”: the

Amended Complaint uniformly alleges that Buchmiller and Roseburg misrepresented Empire’s

finances and assured Suntuity that Empire’s liquidity position was nothing to worry about. (See

Am. Compl. {/ 6 (‘Buchmiller and Roseburg represented to Suntuity that Empire was a growing

business, with significant revenue and profitability, but short-term liquidity needs to support its

continued growth. Abby Buchmiller and Roseburg specifically stated that Empire generated over

$230 million in revenue and close to $4 million in net profits in 2020.”); id. § 48 (“Abby

Buchmiller and Roseburg assured Suntuity that it had access to all material information and that

3 E.g., Slim CD, Inc. v. Heartland Payment Sys., Inc., No. 06-2256, 2007 WL 2459349, at *10-11

(D.N.J. Aug. 24, 2007) (common law and equitable fraud); Syuc Labs LLC v. Fusion Mfg., No.

11-3671, 2013 WL 4776018, at *6 (D.N.J. Sept. 4, 2013) (New Jersey Uniform Securities Act);

Precision Vascular Sys., Inc. v. Sarcos, L.C., 199 F. Supp. 2d 1181, 1190 (D. Utah 2002) (Utah

Uniform Securities Act); Weske v. Samsung Elecs. Am., Inc., No. 10-4811, 2012 WL 833003, at

*5 (D.N.J. Mar. 12, 2012) (fraudulent nondisclosure); Va. Sur. Co. v. Macedo, No. 08-5586, 2009

WL 3230909, at *11 (D.N.J. Sept. 30, 2009) (fraud-based civil conspiracy).

they had disclosed all of Empire’s material liabilities.”).) Adding to the “what,” the Amended

Complaint also alleges specific information that Defendants neglected to share with Suntuity—to

the tune of $10 to $50 million dollars in legal and financial liabilities. (Am. Compl. § 43 (“[N]either

Abby Buchmiller nor Roseburg disclosed to Suntuity that Empire had between $10 million and

$50 million in liabilities ....”); id. Ff 65-70 (outlining undisclosed liabilities).)

The Amended Complaint also answers the “when” and “where,” alleging that in late June

2021 and early July 2021, Defendants made these false or misleading statements during

negotiations over the Loan Agreement and the Letter Agreement. (E.g., Am. Compl. § 42 (“At no

point during the negotiations did either Abby Buchmiller or Roseburg disclose that Empire was in

imminent risk of financial collapse and on the brink of filing for bankruptcy. Nor did Abby

Buchmiller or Roseburg disclose that Empire recently laid off 100 of its employees in or around

May or June of 2021 because it lacked the resources to pay wages, salaries and provide benefits

owed to its employees.”).) The “how” is even more detailed. The Amended Complaint explains

that Defendants knew Empire was starved for cash and lied to get it. (Am. Compl. 45 (‘Prior to

making the above representations and warranties to Suntuity, Abby Buchmiller and Roseburg

knew that Empire’s revenues were significantly lower than what was communicated to Suntuity,

that it lacked the ability to even pay its employees’ wages and benefits, and that Empire lacked the

ability to repay Suntuity. Nonetheless, they provided, or caused to be provided, information to

Suntuity that they knew was materially false or misleading.”).) The lies included telling Suntuity,

for example, that “Empire had recently transitioned to a new accounting system and in that process

had compromised its books.” (Am. Compl. f 7.)

Taken together, these allegations are enough to satisfy Rule 9(b)’s general pleading

requirements.* The Court now turns to the specific elements of each claim, mindful that the fraud-

based ones must too be pled with particularity.

B. Count I: Legal and Equitable Fraud

The Amended Complaint first alleges fraudulent misrepresentation under theories of legal

fraud and equitable fraud. Under New Jersey law, a complaint asserting legal fraud must allege

“(1) a material representation by the defendant of a presently existing or past fact; (2) knowledge

or belief by the defendant of its falsity; (3) an intent that the plaintiff rely upon it; (4) reasonable

reliance by the plaintiff; and (5) resulting damage to the plaintiff.” Pemri v. McRoberts Protective

Agency, Inc., No. 14-7459, 2015 WL 5089570, at *5 (D.N.J. Aug. 27, 2015) (citing Weil v. Express

Container Corp., 824 A.2d 174, 182 (N.J. Super. Ct. App. Div. 2003)). Equitable fraud is no

different except that a plaintiff need not allege scienter. See T/G Ins. Co. v. Privilege Care Mktg.,

Inc., No. 03-3747, 2005 WL 994581, at *6-7 (D.N.J. Apr. 27, 2005) (quoting Bonnco Petrol, Inc.

v. Epstein, 560 A.2d 655, 660 (N.J. 1989)). For substantially the same reasons as outlined in

Section II.A, supra, the Court finds that the Amended Complaint adequately alleges each of these

elements.

* The Court also rejects Defendants’ “group pleading” argument under Rule 8(a). (See

Buchmiller’s Moving Br. 4-5.) Improper group pleading occurs when the plaintiff “seeks to lump

several defendants together without setting forth what each particular defendant is alleged to have

done.” Jngris v. Borough of Caldwell, No. 14-855, 2015 WL 3613499, at *5 (D.N.J. June 9, 2015).

Plainly, Suntuity has distinguished the statements made by and the conduct of Buchmiller and

Roseburg. (E.g., Am. Compl. Ff 21-22, 38, 50, 75, 77-78.) That some allegations implicate both

Defendants (because, for example, both Defendants lied to Suntuity) does not render the Amended

Complaint impermissibly vague. For example, Buchmiller asserts that “the Complaint merely

alleges that one of the two defendants, without identifying which one, claimed, purportedly, that

Empire had revenues of $230,000,000.” (Buchmiller’s Moving Br. 12.) That assertion ignores the

plain meaning of the word “and.” (See Am. Compl. § 35 (‘Abby Buchmiller and Roseburg

specifically stated that Empire generated over $230 million in revenue . . . .” (emphasis added)).)

Defendants resist that conclusion and counter that the Amended Complaint fails to plead

reasonable reliance and scienter. (See, e.g., Buchmiller’s Moving Br. 9-10.) The Court disagrees.

Starting with reliance, Buchmiller contends that the Amended Complaint “makes clear that an

ordinary audit of the books and records by [Suntuity] of Empire would have disclosed the

purported overstatement of revenue, profits, and contingent liabilities.” (/d. at 9.)° Buchmiller gets

the legal standard wrong for reliance. To show reliance, Suntuity must show that it suffered harm

because of accepting its counterparty’s statements as true—not that it should have affirmatively

inquired until it was satisfied no fraud existed. See Tonglu Rising Sun Shoes Co. v. Nat. Nine (USA)

Co., No. 14-1634, 2016 WL 7374543, at *5 (D.N.J. Dec. 20, 2016) (‘Under New Jersey law, a

party’s reliance is generally reasonable even if it accepts the other party’s representations as true

without further inquiry.” (citation omitted)). Said another way, “[o]ne who engages in

fraud... may not urge that one’s victim should have been more circumspect or astute.” Jewish

Cir. of Sussex Cnty. v. Whale, 432 A.2d 521, 524 n.1 (N.J. 1981) (citation omitted). The Amended

Complaint alleges that Suntuity would not have loaned out millions in notes to Empire had it

known that Defendants’ representations were false. (#.g., Am. Compl. 7 90.) At this stage, that is

enough.®

> The Court strains to understand the substance of this argument because Defendants appear to

have a timing problem. Defendants maintain that the Amended Complaint establishes that Suntuity

had access to Empire’s financials “at the time the loan closed.” (Buchmiller’s Moving Br. 9.) Even

if that was true (and reasons exist to doubt that conclusion), the Loan Agreement did not close

until July 1, 2021. Many of the Amended Complaint’s alleged misrepresentations and omissions

occurred before July 1, 2021. (E.g., Am. Compl. ff 34-35.)

6 Further, the Court can reasonably infer that Suntuity likely did inquire into the true state of

Empire’s finances during negotiations over the Letter Agreement, only to be rebuffed by swift

assurances from Defendants. (See Am. Compl. 4 48 (‘Although Empire still had not provided

Suntuity with complete access to its financials or its requested due diligence, Abby Buchmiller

and Roseburg assured Suntuity that it had access to all material information and that they had

disclosed all of Empire’s material liabilities.”).)

10

Defendants’ argument on scienter fares little better. Suntuity need not allege scienter with

particularity. Fed. R. Civ. P. 9(b) (“[Ml]alice, intent, knowledge, and other conditions of a person’s

mind may be alleged generally.”). To that end, several allegations support the conclusion that

Defendants knew they were lying.’ For example, on July 1, 2021, Buchmiller executed the Loan

Agreement that warranted Empire had “[n]o actions, suits or proceedings” against it that “might

result in any material adverse change in the operations, business property, assets or condition

(financial or otherwise) of Empire.” (Am. Compl. § 36, 39.) Yet, the Amended Complaint alleges

that as of June 2021, two state attorneys general were investigating Empire’s sales practices and

that former employees had filed a class action against Empire. Ud. {[ 65-67.) Further, common

sense dictates that C-suite executives in a manager-managed LLC likely know a thing or two about

the LLC’s finances, particularly finances related to the company’s core business. Compare In re

Campbell Soup Co. Sec. Litig., 145 F. Supp. 2d 574, 599 (D.N.J. 2001) (“[K]nowledge may be

imputed to individual defendants when the disclosures involve the company’s core business.”),

with (Am. Compl. § 6 (‘Abby Buchmiller and Roseburg represented to Suntuity that Empire was

a growing business, with significant revenue and profitability, but short-term liquidity needs to

support its continued growth.”), and id. § 7 (“[Defendants] further stated that they were about to

finalize their 2020 financials and 2021 QI and Q2 financials within a few days through the help

of an external accounting firm.”’).) These allegations are enough at this stage to show scienter.

With the pleading arguments out, Defendants launch a final substantive one: the integration

clause in the Loan Agreement bars reasonable reliance on any prior misrepresentations.

7 Almost comically, Buchmiller posits that Suntuity “has failed to identify any direct statements

made by Ms. Buchmiller specifically, so Plaintiff is consequently unable to satisfy the scienter

requirement in a common law legal fraud claim.” (Buchmiller’s Moving Br. 9.) That argument

ignores the at least half-dozen or so allegations of fraudulent statements or omissions made by

Buchmiller, (£.g., Am. Compl. fff 34-35, 39, 41-43, 46.)

11

(Buchmiller’s Moving Br. 16-17.) This argument also fails. The Court notes at the onset that no

party has uploaded to the docket the Loan Agreement for the Court’s review nor clearly articulated

how the Court can consider this extrinsic document on a motion to dismiss. See Burlington Coat

Factory, 114 F.3d at 1426 (“As a general matter, a district court ruling on a motion to dismiss may

not consider matters extrancous to the pleadings.” (citation omitted)). Nevertheless, the Court will

consider it as it is expressly relied on in the Amended Complaint and neither party appears to

dispute the reliability of the document. (See, e.g., Am. Compl. {§ 39-40 (detailing terms of the

Loan Agreement).)

Considering the substance of the integration clause, the Court concludes that it does not

unambiguously disclaim reliance on prior misrepresentations. As provided in Buchmiller’s

Moving Brief, the clause states (in full) that “[t]he Loan Documents and any accompanying

documents the Lender requires, constitutes [sic] the full and entire understanding and agreement

between the Parties hereto with regard to the Loan.” (Buchmiller’s Moving Br. 16.) The clause is

far from a specific disclaimer of reliance. See St. Matthew Baptist Church v. Wachovia Bank

Nat. Ass’n, No. 04-4540, 2005 WL 1199045, at *4 (D.N.J. May 18, 2005) (“General merger and

integration clauses and disclaimers of reliance are insufficient to prevent the introduction of parol

evidence of misrepresentations in... New Jersey.”). In addition, even if the integration clause

were more specific, the Court struggles to ascertain its relevance as the extrinsic evidence “is not

offered to alter or vary” the terms of the Loan Agreement but rather to “avoid the contract” and

“prosecute a separate action predicated upon the fraud.” Filmlife, Inc. v. Mal “Z” Ena, Inc., 598

A.2d 1234, 1235 (N.J. Super. Ct. App. Div. 1991). The Court accordingly concludes that the

integration clause is neither dispositive nor relevant to resolving this dispute.

12

C. Count I: New Jersey Uniform Securities Act

Turning next to the Amended Complaint’s cause of action under the NJUSA, Suntuity must

allege “(1) an untrue material statement or omission|,]| (2) scienter[,] (3) causation|,] and (4) injury

to a plaintiff? DeRobbio v. Harvest Cmtys. of Sioux City, Inc., No. 01-1120, 2002 WL 31947203,

at *6 (D.N.J. Oct. 30, 2002). Again, for substantially the same reasons as expressed in Section

UIL.A, the Court finds the Amended Complaint sufficiently pled.

Defendants attempt to flip the script on Suntuity’s cause of action by importing elements

from federal securities cases. For instance, Buchmiller argues (without citation to New Jersey

authority) that Suntuity must allege reliance and loss causation. Black-letter New Jersey law

forecloses Defendants’ analogy to federal law:

The [NJUSL]’s drafters rejected any “requirement that the buyer

prove reliance on the untrue statement or the omission. He must

show only that he did not know of it.” As a result, securities-fraud

plaintiffs need only prove the misrepresentations and their ignorance

of them, a significantly lower burden than that imposed by a

common-law fraud action.

The [New Jersey] Legislature ... has already clearly stated its choice

in approaching securities-fraud complaints: it did not lessen the

proof required to demonstrate reliance on a misrepresentation, but

instead eliminated reliance as an element of securities fraud entirely

in favor of a system in which privity establishes causation. The

Legislature balanced the plaintiffs advantage of not having to show

reliance with the defendant’s advantage of being immune from

liability to anyone out of privity.

Kaufman v. I-Stat Corp., 754 A.2d 1188, 1197 (N.J. 2002) (citations omitted) (emphases added).

No reliance or loss causation elements exist for NJUSA claims; the cause of action thus passes the

pleading muster.

13

D. Count II: Utah Uniform Securities Act

The same cannot be said for Suntuity’s UUSA claim, however. That is so because the

parties expressly agreed that actions arising out of the Loan Agreement and the Letter Agreement

would be governed by New Jersey law. (See Am. Compl. fff 26-28.)* “Ordinarily, when parties to

a contract have agreed to be governed by the laws of a particular state, New Jersey courts will

uphold the contractual choice if it does not violate New Jersey’s public policy.” Networld

Comme’ns, Corp. v. Croatia Airlines, D.D., No. 13-4770, 2014 WL 4662223, at *2 (D.N.J. Sept.

18, 2014) (quoting /mstructional Sys., Inc. v. Comput. Curriculum Corp., 614 A.2d 124, 133 (N.J.

1992)). Further, where the party against whom the clause will be enforced fails to identify any

relevant public policy concerns, courts generally enforce the agreed-upon choice-of-law provision.

See, e.g., Zeckman v. Bush Indus., Inc., No. 08-4420, 2009 WL 10728298, at *1 (D.N.J. June 23,

2009) (applying New York choice-of-law provision where the “[p]laintiff here points to no public

policy of New Jersey that... would be violated by application of the . . . choice-of-law clause”);

Berckeley Inv. Grp. v. Colkitt, 455 F.3d 195, 224 n.28 (Gd Cir. 2006) (applying choice-of-law

clause where “[the defendant] fails to set forth any public policy interest to invalidate the choice

of law provision entered into between two parties that freely bargained for the terms of the

[a]greement”). So too here: Suntuity does not proffer why applying the New Jersey choice-of-law

provision would infringe this state’s public policy.

The Court accordingly dismisses the UUSA cause of action. Should Suntuity amend, it

should allege precisely why the New Jersey choice-of-law provision does not bar claims under

Suntuity argues only conclusorily that its claims are not governed by the choice-of-law provisions

in the Loan Agreement and the Letter Agreement. (Def.’s Opp’n Br. to Buchmiller’s Mot. to

Dismiss 22-25, ECF No. 26.)

14

Utah’s blue sky laws. Cf Organ v. Byron, 435 F. Supp. 2d 388, 391 (D. Del. 2006) (applying

choice-of-law provision after considering the plaintiff's public policy arguments).

E. Count IV: Fraudulent Nondisclosure

Next up is Suntuity’s fraudulent nondisclosure claim. The parties hone in on one element

of Suntuity’s nondisclosure claim: whether Defendants owed Suntuity a duty of disclosure. See

Rosenblit v. Zimmerman, 766 A.2d 749, 758 (N.J. 2001) (noting that nondisclosure claims require

a duty of disclosure). Under New Jersey law, three scenarios give rise to a duty to disclose:

(1) “fiduciary relationships such as principal and agent”; (2) “situations in which either one or each

of the parties in entering the transaction, expressly reposes a trust and confidence in the other”;

and (3) “contracts or transactions which .. . are intrinsically fiduciary and necessarily call for

perfect good faith.” United Jersey Bank v. Kensey, 704 A.2d 38, 44 (N.J. Super. Ct. App. Div.

1997) (cleaned up). Suntuity argues that the relationship between it and Defendants falls

somewhere in either the second or third scenario because the trio were potential business partners.

(Def.’s Opp’n Br. to Buchmiller’s Mot. to Dismiss 17.)

Suntuity’s characterization of the parties’ relationship fails to convince the Court that a

duty of disclosure arose. As pled, the third scenario does not apply. Before Suntuity became a

manager in Empire—the time in which the Amended Complaint alleges Defendants made material

omissions—the parties were engaged in a quintessential creditor-debtor relationship. Because

creditors and debtors act at arms-length, nothing “intrinsically fiduciary” characterizes their

relationship. See United Jersey Bank, 704 A.2d at 44-45 (“As aptly noted by the Court of Appeals

for the Third Circuit, it “would be anomalous to require a lender to act as a fiduciary for interests

on the opposite side of the negotiating table,’ because their respective positions are essentially

adversarial.” (quoting Paradise Hotel Corp. v. Bank of Nova Scotia, 842 F.2d 47, 53 Gd Cir.

1988))). So, the question becomes whether Suntuity has pled enough facts to satisfy the second

15

scenario, a special relationship of trust. The problem for Suntuity here is that it does not plead

sufficient facts or cite any law establishing that prospective business partners share a special

relationship. Indeed, in many respects, prospective business partners are no different than

adversarial business partners. (See, e.g., Am. Compl. § 33 (“Suntuity was interested in acquiring

all or substantially all of Empire’s assets or Abby Buchmiller’s and Roseburg’s membership

interests in Empire.”).)

The Court will thus dismiss the fraudulent nondisclosure claim for failure to allege the

requisite duty of disclosure. Should Suntuity amend this claim, it should allege specific facts

showing why it expected a special relationship with Defendants, particularly in the period before

July 9, 2021.

F. Count V: Civil Conspiracy

“The necessary elements of a civil conspiracy are: (1) a combination of two or more

persons; (2) a real agreement or confederation with a common design; (3) the existence of an

unlawful purpose, or a lawful purpose to be achieved by unlawful means; and (4) special

damages.” John Wiley & Sons, Inc. v. Rivadeneyra, 179 F, Supp. 3d 407, 412 (D.N.J. 2016) (citing

Morganroth & Morganroth v. Norris, McLaughlin & Marcus, P.C., 331 F.3d 406, 414 (3d Cir.

2003)). This claim must fail. On its face, the Amended Complaint does not allege a written or oral

agreement or confederation. (Compare Am. Compl. § 141 (‘Abby Buchmiller and Roseburg had

a meeting of the minds toward the goal of having Suntuity loan money to Empire without

disclosing the fact that Empire lacked the financial resources and ability to repay Suntuity.””), with

Great W. Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159, 179 (3d Cir. 2010)

(dismissing conspiracy claim where the plaintiff “has failed to allege except in general terms the

approximate time when the agreement was made, the specific parties to the agreement . . . , the

period of the conspiracy, or the object of the conspiracy”).) That is especially problematic because

16

fraud-based civil conspiracy must be pled with particularity and because the Court must assure

itself that Defendants’ conduct is in concert rather than in parallel. See Twombly, 550 U.S. at 557

(“[P]arallel conduct does not suggest conspiracy, and a conclusory allegation of agreement at some

unidentified point does not supply facts adequate to show illegality.”); Callaway v. Small, No.

21-12058, 2021 WL 6062281, at *11 (D.N.J. Dec. 22, 2021) (granting motion to dismiss where

complaint alleged conspiracy because one defendant acquiesced and failed to respond to another

defendant’s misconduct), Otherwise, virtually any case with multiple tortfeasors could qualify as

a conspiracy. As the Amended Complaint alleges nothing more than conclusions regarding a

purported agreement between Defendants, the Court dismisses the civil conspiracy count.

G. Count VI: Tortious Interference with Business Relations

Now outside the realm of Rule 9(b), the Amended Complaint need only allege tortious

interference and defamation under the more relaxed notice pleading standard. See P&I Ins. Serv.,

LLC vy. Risk Averse Ins, LLC, No. 20-5910, 2022 WL 103135, at *12 (E.D. Pa. Jan. 11, 2022)

(ruling that because “nothing” in tortious interference claim “sounds in fraud, Rule 9(b) does not

require more particularized pleading’’). Tortious interference requires that Suntuity allege “[1] that

it had a reasonable expectation of economic advantage, [2] which was lost as a direct result of

[Defendants’] malicious interference, and [3] that it suffered losses thereby.” Avaya Inc., RP v.

Telecom Labs, Inc., 838 F.3d 354, 382 (3d Cir. 2016) (first, second, and fourth alterations in

original) (quoting /deal Dairy Farms, Inc. v. Farmland Dairy Farms, Inc., 659 A.2d 904, 932 (N.J.

Super. Ct. App. Div. 1995)).

The Amended Complaint does just that. First, it alleges that Suntuity had a reasonable

expectation of continuing relationships with several vendors—two of which it names specifically.

(See Am. Compl. { 149 (Suntuity had a protectable right and reasonable expectation of economic

advantage in its relationships with solar power dealers like LGCY Power and Primitive Power.’”’);

17

Harris v. Perl, 197 A.2d 359, 363 (N.J. 1964) (‘Protection is not limited to contracts already made.

The law protects also a man’s interest in reasonable expectations of economic advantage.” (citation

omitted)). Second, it alleges that Defendants spread lies about Suntuity to other Empire employees

and solar power dealers. (See, e.g., Am. Compl. {76 (“In discussions with several solar power

dealers, Abby Buchmiller and Roseburg accused Suntuity and Rock Creek of siphoning funds out

of Empire for itself.”); id. {77 (alleging that Roseburg told solar power vendors that Suntuity “did

not intend to make commission payments”); id. {78 (“Roseburg also told third parties that Suntuity

was taking money for itself instead of paying dealers.”).) Finally, the Amended Complaint alleges

a reputational injury. (Am. Compl. § 157 (‘Solar power dealers are less likely to conduct business

with Suntuity due to Roseburg’s intentional interference.”); id. | 80 (“As a result of Roseburg’s

false statements, solar power dealers like LGCY Power and Primitive Power have expressed

concern about doing business with Suntuity.”).)

Defendants agitate about how the Amended Complaint does not allege “tangible loss.”

(Buchmiller’s Moving Br. 19.) But notably, courts analyzing tortious interference claims have

given plaintiffs leeway in asserting damages at the pleading stage. See AlphaCard Sys. LLC vy. Fery

LLC, No. 19-20110, 2021 WL 2190901, at *4 (D.N.J. May 31, 2021) [T]he Court finds it prudent

to ‘await the development of [the] record’ before dismissing a tortious interference claim for failing

to allege damages.” (second alteration in original) (quoting Printing Mart-Morristown v. Sharp

Elecs. Corp., 563 A.2d 31, 47 (N.J. 1989))). Indeed, drawing all inferences in favor of Suntuity—

as the Court must at this stage—the Court cannot say that Suntuity did not suffer harm. As stated,

the Amended Complaint asserts that at least two specific solar power vendors (which pre-dated

Suntuity’s relationship with Empire) expressed concerns about doing business with Suntuity as a

18

direct result of Roseburg’s disparaging statements. (Am. Compl. 80.) The Court concludes the

most prudent course is to await the benefit of discovery to see if Suntuity’s damages come to light.

H. Count VII: Defamation

Turning to the final cause of action, defamation requires six elements:

(1) a defamatory statement, (2) concerning the plaintiff, (3) which

was false, (4) that was communicated to someone other than the

plaintiff, (5) with actual knowledge that the statement was false or

with reckless disregard of the statement’s truth or falsity or with

negligence in failing to ascertain the truth or falsity, and (6) which

caused damage.

Cristelli v. Filomena LL, Inc., No. 99-2862, 1999 WL 1081290, at *2 (D.N.J. Dec. 1, 1999). For

the reasons already stated above regarding Suntuity’s tortious interference claim, the Court

concludes that the Amended Complaint is sufficiently pled for this cause of action.

The Court is not persuaded by Defendants’ argument that (again) misreads the Amended

Complaint and overlooks relevant law. Buchmiller represents that the following are the “only

allegations” against her for this claim:

Abby Buchmiller has been responding to Sunuity [sic] postings on

social media with comments requesting people to reach out to her

so that she can provide them details about Suntuity’s relationship

with Empire relationship for the purpose of disparaging Suntuity.

Abby Buchmiller made false statement to Empire employees and

third parties business relationships that Suntuity forced Empire into

bankruptcy.

(Buchmiller’s Moving Br. 17 (quoting Am. Compl. Jf 84, 158, 166).) They are not. (See Am.

Compl. § 75 (“Abby Buchmiller and Steve Buchmiller made false statements to Empire employees

and third parties business relationships that Suntuity forced Empire into bankruptcy.”); id. § 76

(“In discussions with several solar power dealers, Abby Buchmiller and Roseburg accused

Suntuity and Rock Creek of siphoning funds out of Empire for itself.”); id. {17 (‘Abby Buchmiller

19

and Roseburg used confidential internal communications and forwarded or blind copied these to

solar power dealers in order to disparage Suntuity by making knowingly false statements that

Suntuity did not intend to make commission payments to them and that Rock Creek was

withholding payments under Suntuity’s direction.”).) What’s more, Buchmiller represents that “no

disparaging comments are even identified in the complaint, and no listener of such disparaging

comments is identified to establish damage or harm as a result of the alleged comments.”

(Buchmiller’s Moving Br. 18.) Buchmiller is factually and legally wrong. The Amended

Complaint alleges disparaging comments, solar power dealers that were recipients of those

comments, and reputational harm. Further, Buchmiller exaggerates Suntuity’s pleading burden,

which is not heightened pleading under Rule 9(b). See Russelman v. ExxonMobil Corp., No.

12-752, 2012 WL 3038589, at *10 (D.N.J. July 25, 2012) (‘According to Rule 8, a defamation

pleading does not need to cite precise defamatory statements, it must only provide sufficient notice

to the other party of the allegations made against him.” (citing Cristelli, 1999 WL 1081290, at

*3)). The Amended Complaint adequately pleads defamation.

IV. CONCLUSION

The Court grants in-part and denies in-part Defendants’ Motions. It will issue an Order

consistent with this Memorandum Opinion.

_UNITED STATES DISTRICT JUDGE

20