Starlion Electronics Distribution, LLC v. JDS Pro Health LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF OHIO

Starlion Electronics Case No. 1:24-cv-1186

Distribution, LLC,

Plaintiff,

-vs- JUDGE PAMELA A. BARKER

JDS Pro Health LLC, et al.,

MEMORANDUM OPINION & ORDER

Defendants.

Currently pending are the (1) Motion for Judgment on the Pleadings (the “12(c) Motion”) of

Defendants JDS Pro Health LLC (“JDS Pro”), JDS Labs, LLC (“JDS Labs”), and Damon Roberts

(“Roberts”) (collectively, the “Defendants”) (Doc. No. 15), filed on October 28, 2024, and (2) Motion

for Leave to Amend Verified Complaint (the “Motion to Amend”) of Plaintiff Starlion Electronics

Distribution, LLC (“Plaintiff” or “Starlion”) (Doc. No. 21), filed on November 27, 2024.

Also on November 27, 2024, Starlion filed a Brief in Opposition to the 12(c) Motion. (Doc.

No. 22.) On December 10, 2024, Defendants filed a Reply Brief in support of the 12(c) Motion (Doc.

No. 24) and a Brief in Opposition to the Motion to Amend. (Doc. No. 25.) On December 17, 2024,

Starlion filed a Reply Brief in support of the Motion to Amend. (Doc. No. 26.)

For the following reasons, Starlion’s Motion to Amend (Doc. No. 21) is GRANTED and

Defendants’ 12(c) Motion is DENIED (Doc. No. 15) as moot.

I. Background

A. Factual Allegations in the Verified Complaint

On or around April 10, 2023, Starlion and JDS Pro entered into an Agreement for the Supply

of COVID-19 tests (hereinafter “the Agreement”). (Doc. No. 1 at ¶ 10; Doc. No. 1-1.) Pursuant to

the Agreement, Starlion agreed to sell COVID-19 tests (“Tests”) to JDS Pro and deliver such Tests

to JDS Pro’s customers at JDS Pro’s request.1 (Doc. No. 1 at ¶ 11.) JDS Pro had 30 days after

receiving tracking numbers from Starlion confirming delivery of the Tests to JDS Pro's customers to

pay the relevant invoice in full. (Id. at ¶ 13.) The names and addresses of JDS Pro’s customers were

provided to Starlion by JDS Pro. (Id. at ¶ 14.) The Agreement further provided that JDS Pro was

responsible for the repayment of any reshipment to JDS Pro’s customers due to insufficiency of

address or poor data.2 (Id. at ¶ 16.)

According to Starlion, it had “no knowledge whatsoever about how JDS Pro obtained its

customers or the nature of the arrangements between JDS Pro and its customers.” (Id. at ¶ 15.)

Rather, “Starlion's sole role with regard to JDS Pro’s customers was to deliver the Tests.” (Id.)

Starlion was not paid or otherwise compensated by JDS Pro’s customers or any governmental agency

for its services under the Agreement. (Id.) Defendant Roberts, one of two members of JDS Pro

alongside Steven Prince (“Prince”), personally guaranteed JDS Pro’s payment to Starlion. (Id. at ¶¶

3(e), 17.)

Starlion made two deliveries and one reshipment of Tests to JDS Pro’s customers, each

evidenced by an invoice attached as an Exhibit to the Verified Complaint. (Doc. Nos. 1-2, 1-3, and

1-4.) Specifically, Invoice 818 indicates that on April 8, 2023, Starlion sold 130,000 Tests to JDS

1 Under the Agreement, JDS Pro was to pay Starlion $3.125. (Id. at ¶ 12.) The Tests came in packages, each of which

contained eight (8) tests. (Id.) As a result, under the Agreement, JDS Pro was required to pay $25 per package. (Id.)

2 The cost for a reshipment to a JDS Pro customer was $8.60. (Id.)

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Pro for $3,250,000.00. (Doc. No. 1 at ¶ 19; Doc. No. 1-2 at PageID# 18.) Starlion delivered the

130,000 Tests to JDS Pro’s customers and provided the relevant tracking numbers to JDS Pro. (Doc

No. 1 at ¶ 20.) JDS Pro paid Starlion $1,750,000.00 on Invoice 818, leaving an unpaid balance of

$1,515,000.00. (Doc. No. 1 at ¶ 21; Doc. No. 1-2 at PageID# 18.)

Invoice 977 indicates that on May 17, 2023, Starlion sold an additional 106,864 Tests to JDS

Pro for $2,671,600.00. (Doc. No. 1 at ¶ 22; Doc. No. 1-3 at PageID# 20.) Starlion delivered the

106,864 Tests to JDS Pro’s customers and provided the relevant tracking numbers to JDS Pro. (Doc.

No. 1 at ¶ 23.) However, JDS Pro failed to make any payment on Invoice 977, leaving an unpaid

balance of $2,671,600.00. (Id. at ¶ 24.)

Lastly, on June 15, 2023, Starlion sent JDS Pro Invoice 1217 for $89,715.20 for reshipments

of Tests to a number of JDS Pro’s customers. (Id. at ¶ 25; Doc. No. 1-4 at PageID# 21.) Starlion

provided JDS Pro with the tracking numbers relating to these reshipments. (Id. at ¶ 26.) JDS Pro

failed to make any payment on Invoice 1217, leaving an unpaid balance of $89,715.20. (Id. at ¶ 27.)

Thus, Starlion alleges that, in total, JDS Pro and Roberts owe Starlion $4,276.315.20 on Invoices

818, 977, and 1217. (Id. at ¶ 28.)

Of particular relevance herein, Starlion alleges that JDS Pro and Roberts represented that

“JDS Pro would receive proceeds for the Tests and pay Starlion for Invoices 818, 977, and 1217.”

(Id. at ¶ 51.) In addition, JDS Pro represented to Starlion that “virtually all of the JDS Pro customers

to which Starlion delivered the Tests were covered by private insurance.” (Id. at ¶¶ 30, 52.) JDS

Pro’s and Roberts’ representations were material to Starlion’s decision to sell the Tests to JDS Pro.

(Id. at ¶ 53.) Starlion alleges, however, the JDS Pro and Roberts made the representations to Starlion

“knowing that they were false.” (Id. at ¶ 54.) Specifically, Starlion alleges, upon information and

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belief, that “JDS Pro’s customers to whom Starlion delivered the Tests were covered by Medicare

and Medicaid” – not by private insurance. (Id. at ¶ 55.) Moreover, while JDS Pro and Roberts

represented to Starlion that JDS Pro was “the party buying the Tests from Starlion,” it was, in fact,

JDS Labs (a separate LLC owned by Roberts) that “invoice[ed] the U.S. federal government

(Medicare or Medicaid) for part or all of the Tests JDS Pro bought from Starlion and which Starlion

delivered to JDS Pro’s customers.” (Id. at ¶ 31.) Indeed, Starlion alleges that “JDS Pro and Roberts

used its sister company, JDS Labs, to sell the Tests to the U.S. government (Medicare or Medicaid)

and receive the proceeds, thus hindering Starlion's ability to recover on Invoices 818, 977, and 1217

because there is no contract between Starlion and JDS Labs for the Tests.”3 (Id. at ¶ 56.)

Starlion alleges that despite its “several demands” for payment, JDS Pro and Roberts have

failed and/or refused to pay the amounts owed to Starlion on Invoices 818, 977, and 1217. (Id. at ¶

29.)

B. Relevant Procedural History

On July 12, 2024, Starlion filed a Complaint against Defendants JDS Pro, JDS Labs, and

Roberts. (Doc. No. 1.) Starlion’s Complaint sets forth five counts: (1) Breach of Contract against

JDS Pro (Count I): (2) Breach of Contract – Guarantee against Roberts (Count II); (3) Unjust

Enrichment against JDS Labs and Roberts (Count III); (4) Fraud against JDS Pro and Roberts (Count

IV); and (5) Civil Conspiracy against all three Defendants (Count V). (Id. at ¶¶ 34-64.)

Starlion seeks relief specific to each count. For its breach of contract claim against JDS Pro,

it seeks “damages in the amount of $4,276,315.20 to compensate [Starlion] for JDS Pro’s breach of

3 According to Starlion, the United States has reimbursed JDS Labs and/or JDS Pro for some of the Tests Starlion sold to

JDS Pro and delivered to JDS Pro’s customers. (Id. at ¶¶ 32-33.)

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contract.” (Id. at PageID# 10.) For its breach of guarantee claim against Roberts, Starlion seeks the

same amount “to compensate [Starlion] for Roberts’ breach of the personal guarantee clause

contained in the Agreement.” (Id. at PageID# 11.) For its unjust enrichment claim, Starlion seeks

“[d]amages for unjust enrichment against JDS Labs and Roberts, the exact amount of which will be

determined at trial.” (Id.) For its fraud claim, Starlion seeks “a judgment in favor of Starlion and

against Defendants JDS Pro and Roberts, jointly and severally, for fraud in an amount to be

determined at trial, and an award of punitive damages, and attorney’s fees.” (Id.) Lastly, for its civil

conspiracy claim, Starlion seeks “a judgment in favor of Starlion and against Defendants JDS Pro,

JDS Labs, and Roberts, jointly and severally, for civil conspiracy in an amount to be determined at

trial, and an award of punitive damages, and attorney’s fees,” and for all counts, “any such other

relief, legal or equitable, that this Court deems suitable and proper.” (Id.)

On October 28, 2024, Defendants filed an Answer (Doc. No. 14) and a Partial Motion for

Judgment on the Pleadings pursuant to Fed. R. Civ. P. 12(c). (Doc. No. 15.) Defendants’ 12(c)

Motion seeks partial judgment as to Starlion’s claims for fraud and civil conspiracy. (Id. at PageID#

72.) On November 27, 2024, Starlion filed its Motion to Amend pursuant to Fed. R. Civ. P. 15(a)(2)

(Doc. No. 21) to provide additional details to its fraud and civil conspiracy claims and to eliminate

Roberts from its civil conspiracy claim. (Id. at PageID#s 125-30.) That same day, Starlion

additionally filed a Brief in Opposition to Defendants’ 12(c) Motion. (Doc. No. 22.) On December

10, 2024, Defendants filed a Reply Brief in support of their 12(c) Motion (Doc. No. 24) and a Brief

in Opposition to Starlion’s Motion to Amend. (Doc. No. 25.) On December 17, 2024, Starlion filed

a Reply Brief in support of its Motion to Amend. (Doc. No. 26.)

II. Factual Allegations in the Proposed Amended Complaint

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In its Proposed Amended Complaint, Starlion proposes no changes to the general allegations

of the Complaint or to each of the allegations regarding Starlion’s breach of contract and unjust

enrichment claims from paragraphs 2 through 49. (Doc. No. 21 at ¶¶ 2-49.)

Starlion does, however, propose substantial additions to its fraud claim. Specifically,

Paragraphs 51 and 52 of the Proposed Amended Complaint set forth additional details regarding JDS

Pro’s and Roberts’ two allegedly fraudulent misrepresentations. Paragraph 51 sets forth Starlion’s

allegation that JDS Pro and Roberts misrepresented “to Starlion that JDS Pro would receive proceeds

for the Tests and pay Starlion for the Invoices 818, 977, and 1217.” (Doc. No. 21-2 at ¶ 51.) This

Paragraph includes the following additional allegations:

a. Defendants JDS Pro and Roberts made representations to Starlion that JDS Pro

would receive proceeds for the Tests and pay Starlion for Invoices 818, 977, and

1217. Roberts made the representations on behalf of JDS Pro and on his own behalf

to Shadi Abdelwahab (“Abdelwahab”), Chief Executive Officer & President of

Starlion, during a meeting on April 10, 2023 (prior to the execution of the

Agreement for the Supply of COVID-19 Tests) in Miami, Florida at 7240 NW 32nd

Street, Miami, Florida 33122. Defendants JDS Pro and Roberts made this

representation with the intent to mislead Starlion and did mislead Starlion.

b. Roberts and JDS Pro’s representation to Starlion was fraudulent because JDS Pro

received some payment for the Tests delivered by Starlion, but yet JDS Pro failed

and/or refused to pay Starlion. Roberts and JDS Pro made the representation

knowing that it was false because they never intended to pay Starlion for the Tests

after delivery - which they did not.

c. Defendants JDS Pro and Roberts’ representation to Starlion that JDS Pro would

receive proceeds for the Tests and pay Starlion for Invoices 818, 977, 1217 was

material to Starlion’s decision to contract with JDS Pro because Starlion was

providing the Tests to JDS Pro on credit and the representation provided further

assurance that JDS Pro would pay for the Tests and not divert the proceeds to other

endeavors.

d. Starlion justifiably relied on JDS Pro’s assurance to pay Invoices 818, 977, 1217

because JDS Pro paid Starlion a substantial downpayment of $200,000 for the Tests

and Roberts offered to personally guarantee JDS Pro’s payment of the invoices.

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(Id.) Paragraph 52 sets forth Starlion’s allegation that JDS Pro and Roberts misrepresented the source

of JDS Pro’s customers’ insurance, as follows:

a. Defendants JDS Pro and Roberts also represented to Starlion that virtually all JDS

Pro customers to which Starlion delivered the Tests were covered by private

insurance. Roberts made the representations on behalf of JDS Pro and on his own

behalf to Abdelwahab during the same meeting on April 10, 2023[,] in Miami,

Florida at 7240 NW 32nd Street, Miami, Florida 33122.

b. JDS Pro and Roberts representation about their customers insurance coverage was

fraudulent because JDS Pro submitted its requests for payment for the Tests to

Medicare and/or Medicaid, not to private insurance companies. Roberts and JDS

Pro made the representation knowing that it was false because JDS Pro never

intended to submit the claims to private insurance for payment - which it did not.

Defendants JDS Pro and Roberts made this representation with the intent to mislead

Starlion and did mislead Starlion.

c. Furthermore, Roberts and JDS Pro’s representation that virtually all JDS Pro

customers to whom Starlion delivered the Tests were covered by private insurance

was material to Starlion’s decision to contract with JDS Pro because private

insurance companies process repayment faster than Medicare or Medicaid. In other

words, because of the bureaucracy involved with Medicare and Medicaid,

repayment to JDS Pro by Medicare and/or Medicaid would have taken longer

compared to private insurance, which in turn would have delayed JDS Pro’s

payment to Starlion for the Tests. JDS Pro and Roberts knew that Starlion wanted

to avoid any dealings with Medicare and/or Medicaid because a delayed payment

for the Tests by JDS Pro, would be fatal to Starlion 's operation and caused cessation

of activities - which it did.

d. Starlion justifiably relied on JDS Pro’s representation that virtually all of the

customers to whom Starlion delivered the Tests were covered by private insurance

because Roberts offered on or around April 10, 2023[,] to share data with Starlion

in support of that representation. JDS Pro subsequently did share some data with

Starlion which purported to show that most of JDS Pro’s customers were covered

by private insurance. The data, however, turned out to be fraudulent because the

customers were not covered by private insurance.

(Id. at ¶ 52.) The Proposed Amended Complaint also alleges in Paragraph 55 that Starlion suffered

the following damages:

a. Starlion borrowed the funds with which it bought the Tests provided to JDS Pro.

Starlion’s monthly interest payment on the loan is approximately $40,000. Starlion

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borrowed the funds and agreed to the interest because it relied on JDS Pro and

Roberts’ representations that the claims would be submitted to private insurance

and that Invoices 818, 977, 1217 would be promptly paid. Because of [sic] JDS

Pro and Damon failed to pay Starlion for the Tests, Starlion is now liable for

accumulated interest on the loan.

b. Starlion contracted with United Parcel Service (“UPS”) for the delivery of the Tests

to JDS Pro’s customers based on JDS Pro and Roberts’ fraudulent statements. As

a result Starlion presently owes UPS approximately $850,000 in delivery fees. UPS

is presently attempting to collect the amount owed to it and is threatening a lawsuit.

c. Because of JDS Pro and Roberts’ fraudulent conduct and resulting damages,

Starlion has been unable to operate, to generate profit, and to pay its own creditors.

As a result, Starlion had judgment awarded against it for $551,000 in favor of CTK

Co. Ltd. and $1,119,215.30, in favor of iPromo, LLC.

d. Because of JDS Pro and Roberts’ fraudulent misconduct and the resulting damages.

Starlion had no operating capital, was forced to lay off its employees, and had to

cease operation - which caused substantial financial detriment to Starlion.

e. Because of JDS Pro and Roberts’ fraudulent conduct and the resulting damages,

Starlion was unable to pay rent for its facility at 7240 NW 32nd Street, Miami,

Florida 33122 and was evicted.

f. Because of JDS Pro and Roberts’ fraudulent conduct and the resulting damages,

Starlion was unable to operate and to generate revenue to pay approximately

$1,600,000 of debt owed to Diska, LLC for the purchase of tablets. As result,

Starlion faces substantial payment of interest/penalties and principal relating to the

tablets.

g. Because of JDS Pro and Roberts’ fraudulent conduct and the resulting damages,

Starlion was unable to operate and to generate revenue to pay for two plastic

molding machines to manufacture plastic folks [sic], spoons, plates, and to-go

boxes for restaurants, from which Starlion expected to generate substantial revenue.

h. Because of JDS Pro and Roberts’ fraudulent conduct and the resulting damages,

Starlion was unable to operate and to generate revenue to fulfil [sic] orders placed

by its other customers.

(Id. at ¶ 55.) The Proposed Amended Complaint retains the allegation that “Defendants JDS Pro and

Roberts’ conduct was intentional and evidences the degree of malice necessary to support an award

of punitive damages.” (Id. at ¶ 56.)

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Lastly, the Proposed Amended Complaint does not name Defendant Roberts in its claim for

conspiracy set forth in Count V. Instead, the Proposed Amended Complaint provides that JDS Pro

(and JDS Labs) “agreed and conspired among themselves to defraud Starlion regarding the Tests, as

explained in Count IV above” and that “JDS Pro and JDS Labs are not interrelated companies.” (Id.

at ¶¶ 62, 63.) In fact, Starlion alleges “JDS Pro and JDS Labs are separate legal entities” and “[t]he

only commonality between the two companies is the fact that Roberts was or is a member of both

companies, but not the sole member[,]” and that “JDS Pro is not a wholly owned subsidiary of JDS

Labs or vice versa.” (Id. at ¶¶ 63-64.) Starlion also traces the damage from the conspiracy to the

same damages as those “explained in Paragraph 55(a)-(h) above” and it retains the allegation that

“JDS Pro and JDS Labs’ conduct was intentional and evidences the degree of malice necessary to

support an award of punitive damages.” (Id. at ¶¶ 63-64.)

III. Standard of Review

A. Fed. R. Civ. P. 15

Rule 15(a)(2) provides that “a party may amend its pleading only with the opposing party’s

written consent or the court’s leave. The court should freely give leave when justice so requires.”

Fed. R. Civ. P. 15(a)(2). However, if amending the complaint is ‘futile,’ the court need not grant a

motion to amend. See Beydoun v. Sessions, 871 F.3d 459, 469 (6th Cir. 2017) (quoting Foman v.

Davis, 371 U.S. 178, 182 (1962)). “An amendment is futile when, after including the proposed

changes, the complaint still ‘could not withstand a Rule 12(b)(6) motion to dismiss.’” Skatemore,

Inc. v. Whitmer, 40 F.4th 727, 737 (6th Cir. 2022) (quoting Rose v. Harford Underwriters Ins. Co.,

203 F.3d 417, 420 (6th Cir. 2000)). In other words, when a defendant opposes a plaintiff’s motion to

amend under Rule 15 as futile, the court looks to the “substance of the proposed amendment” to

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determine if the proposed amended complaint could withstand a Rule 12(b)(6) motion to dismiss.

See Beydoun, 871 F.3d at 469 (quoting Roskam Baking Co., Inc. v. Lanham Machinery Co., Inc., 288

F.3d 895, 906 (6th Cir. 2002)).

B. Fed. R. Civ. P. 12(c)

Under Federal Rule of Civil Procedure 12(c), “[a]fter the pleadings are closed—but early

enough not to delay trial—a party may move for judgment on the pleadings.” Fed. R. Civ. P. 12(c).

“For purposes of a motion for judgment on the pleadings, all well-pleaded material allegations of the

pleadings of the opposing party must be taken as true, and the motion may be granted only if the

moving party is nevertheless clearly entitled to judgment.” JPMorgan Chase Bank, N.A. v. Winget,

510 F.3d 577, 581 (6th Cir. 2007) (quoting S. Ohio Bank v. Merrill Lynch, Pierce, Fenner & Smith,

Inc., 479 F.2d 478, 480 (6th Cir. 1973)).

Where, as here, the defendant has both moved for judgment on the pleadings under Rule 12(c)

and has opposed the plaintiff’s subsequent motion to amend under Rule 15(a)(2) as futile, the “inquiry

into whether the amended complaint would be futile merges—indeed, entirely overlaps—with the

Rule 12(c) question.” Kue v. North, 2024 WL 3537650 at *3 (6th Cir. July 25, 2024). “The same

standard for deciding a Rule 12(b)(6) motion to dismiss for failure to state a claim applies to a Rule

12(c) motion for judgment on the pleadings.” Showman v. Q Corp. Holdings, LLC, 2024 WL

4336373 at *5 (N.D. Ohio Sept. 27, 2024) (citing Roth v. Guzman, 650 F.3d 603, 605 (6th Cir. 2011)).

Therefore, this Court must analyze the allegations of Starlion’s Proposed Amended Complaint to

determine if it could survive a motion to dismiss under Rule 12(b)(6).

Under Fed. R. Civ. P. 12(b)(6), the court may dismiss a claim where the claimant has failed to

“state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). When deciding a motion

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to dismiss under this rule, the function of the court is to test the legal sufficiency of the complaint.

See Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993). The court must construe the complaint in

the light most favorable to plaintiffs, accept all factual allegations as true, and determine whether the

complaint contains enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp.

v. Twombly, 550 U.S. 544, 555 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). However, legal

conclusions and unwarranted factual inferences are not entitled to a presumption of truth. See

Twombly, 550 U.S. at 555; Papasan v. Allain, 478 U.S. 265, 286 (1986) (the Court is “not bound to

accept as true a legal conclusion couched as a factual allegation.”).

Additionally, the Court must read Rule 12(b)(6) in conjunction with Rule 8(a)(2)’s

requirement that a plaintiff need only offer “‘a short and plain statement of the claim showing that

the pleader is entitled to relief.’” Erickson v. Pardus, 551 U.S. 89, 93 (2007) (citing Twombly, 550

U.S. at 555). Although specific facts are not required to meet the basic minimum notice pleading

requirements of Rule 8, a complaint must give the defendant fair notice of what the plaintiff’s legal

claims are and the factual grounds upon which they rest. See Bassett v. Nat’l Collegiate Ath. Ass’n,

528 F.3d 426, 437 (6th Cir. 2008). The plaintiff’s obligation to provide the grounds for relief

“requires more than labels and conclusions” or a “formulaic recitation of the elements of a cause of

action.” Twombly, 550 U.S. at 555. Thus, the plaintiff’s factual allegations “must be enough to raise

a right to relief above the speculative level.” Id.

IV. Analysis

In their Motion for Judgment on the Pleadings, Defendants first argue that Starlion failed to

state a claim for fraud because it did not plead fraud with the specificity required by Fed. R. Civ. P.

9(b). (Doc. No. 15 at PageID#s 74-77.) Specifically, Defendants assert that “nowhere in the

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complaint does Plaintiff allege the time or place of the alleged misrepresentation or who made and

received the alleged misrepresentation.” (Id. at PageID# 75.) Defendants further argue that Starlion

failed to allege why the alleged misrepresentations were material to its decision to contract with JDS

Pro; why Starlion was justified in relying on a material representation that is not contained in the

Agreement; or what specific injuries Starlion suffered as a result of the alleged fraud. (Id. at PageID#

76.)

Defendants next argue that Starlion failed to state a claim for either fraud or conspiracy

because it failed to plead that it incurred any damages other than contract damages. (Id. at PageID#s

77-79.) Defendants note that, under the economic loss doctrine, Ohio courts generally preclude a

party from asserting tort claims arising from a breach of contract. (Id.) Defendants assert that

Starlion’s fraud and conspiracy claims are subject to dismissal under this doctrine because “no matter

how the ‘wrong’ is framed, the gravamen of the complaint is that JDS Pro and/or Damon Roberts

failed to pay for the Tests – a contractual breach warranting contractual damages.” (Id. at PageID#

79.)

Lastly, Defendants argue that Starlion’s conspiracy claim fails as a matter of law because

Starlion’s underlying fraud claim fails for the reasons set forth above. (Id. at PageID#s 79-80.)

Starlion further asserts that Starlion’s conspiracy claim fails because it is barred by the intra-corporate

conspiracy doctrine. (Id. at PageID#s 80-81.) Specifically, Defendants argue that while a conspiracy

requires a combination of “two or more persons,” Starlion’s Verified Complaint alleges that JDS Pro,

JDS Labs, and Roberts are “interrelated” and, therefore, “not separate persons for purposes of a

conspiracy.” (Id. at PageID#s 79-81.)

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In response, Starlion filed a Brief in Opposition to Defendants’ Rule 12(c) Motion (Doc. No.

22) and a Motion for Leave to Amend its Verified Complaint (Doc. No. 21). In its Brief in

Opposition, Starlion argues that Defendants’ Rule 12(c) Motion should be denied because Starlion

has cured any alleged pleading deficiencies in its Proposed Amended Complaint. (Doc. No. 22 at

PageID#s 146-153.) Starlion then argues, in both its Brief in Opposition and its Motion for Leave to

Amend, as follows.

Regarding its fraud claim, Starlion maintains that its Proposed Amended Complaint meets the

heightened pleading standard for fraud claims under Rule 9(b) because (for both alleged

misrepresentations) it clearly (1) specifies the statements Roberts/JDS Pro made that Starlion

contends were fraudulent; (2) identifies Roberts as the person who made the fraudulent statements on

his own behalf and on behalf of JDS Pro; (3) states where and when the statements were made; and

(4) explains why the statements were fraudulent. (Doc. No. 21-1 at PageID#s 110-12; Doc. No. 22

at PageID#s 146-49.) Starlion further asserts that the Proposed Amended Complaint sufficiently

alleges that Starlion suffered substantial damages as a result of JDS Pro’s and Roberts’

misrepresentations, i.e., the damages set forth in detail in Paragraph 55 of the Proposed Amended

Complaint. (Doc. No. 21-1 at 113-14; Doc. No. 22 at PageID# 150-51.)

Regarding its conspiracy claim, Starlion argues that “the intra-corporate conspiracy doctrine

does not apply in this case because the proposed First Amended Verified Complaint, taken as true,

does not allege JDS Pro and JDS Labs are interrelated” and, in fact, alleges that JDS Pro and JDS

Labs are separate legal entities. (Doc. No. 21-1 at PageID# 115; Doc. No. 22 at PageID# 153.)

Accordingly, Starlion maintains that the intra-corporate conspiracy doctrine does not defeat the

proposed amendment to Count V of the original Verified Complaint.

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In their Reply Brief in support of their Rule 12(c) Motion, Defendants note that Starlion failed

to address the merits of any of Defendants’ specific arguments with respect to the pleading

deficiencies in the original Verified Complaint. (Doc. No. 24.) Therefore, Defendants assert, the

Court should find that Starlion has essentially conceded that its original Verified Complaint fails to

state a claim for fraud or civil conspiracy. (Id.)

Defendants also filed a Brief in Opposition to Starlion’s Motion for Leave to Amend. (Doc.

No. 25.) Therein, Defendants argue that allowing Starlion to amend would be futile because “the

new allegations contained in the Proposed Amended Complaint make it even more obvious that

Plaintiff’s claimed damages flow exclusively from Defendants’ alleged failure to pay (i.e., breach of

contract).” (Doc. No. 25 at PageID#s 165-66.) Defendants further assert (summarily and without

citation to authority) that the damages outlined in proposed Paragraph 55 “were either anticipated

costs . . . or arguable consequential damages arising from Defendants’ alleged failure to pay the

contract price,” and, therefore, are barred by the economic loss doctrine. (Id. at PageID# 168.) Thus,

Defendants maintain, amendment would be futile because Starlion’s Proposed Amended Complaint

would not survive a Rule 12(b)(6) Motion to Dismiss. (Id.) Lastly, Defendants note that while

Starlion’s proposed amendment “might skirt application of the intra-corporate conspiracy doctrine,”

its conspiracy claim nonetheless fails because Starlion’s Proposed Amended Complaint fails to state

an underlying claim for fraud. (Id. at PageID#s 169-70.)

In reply, Starlion maintains that Defendants’ futility argument fails because the economic loss

doctrine does not apply to Starlion’s fraudulent inducement claims. (Doc. No. 26 at PageID#s 174-

76.) Specifically, Starlion argues that it has sufficiently alleged that JDS Pro and Roberts fraudulently

induced it to enter into the Agreement and continue the business relationship when they

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misrepresented (1) their willingness or intent to fully pay for the Tests, and (2) that virtually all JDS

Pro’s customers were covered by private insurance. (Id.) As such, Starlion asserts “the

misrepresentations at issue here implicate duties that are distinct and independent from the Agreement

or the parties’ contractual duties” and, therefore, the economic loss doctrine does not apply. (Id.)

Starlion further maintains that it has alleged damages based on JDS Pro’s and Roberts’ extra-

contractual misrepresentations, which are “separate and distinct from losses arising from the breach

of the Agreement,” including (1) monthly interest of $40,000 owed on the money used to buy the

Tests; (2) $850,000 in delivery fees owed to UPS; (3) $551,000 in debt owed to CTK Co, Ltd; (4)

$1,119.215.30 in debt owed to iPromo, LLC; (5) lack of operating capital, layoff of employees, and

cessation of operation; (6) eviction for failure to pay rent; (7) $1,600,000 in debt owed to Diska, LLC:

and (8) lost business opportunities and profits. (Id. at PageID#s 177-79.) Starlion argues that these

damages are not contract damages because they are not contemplated by or addressed in the

Agreement. (Id.)

At the outset, the Court notes as follows. If even the Proposed Amended Complaint cannot

survive dismissal under the Rule 12(b)(6) standard set forth above, then the Court has no reason to

let Starlion file it. In other words, the Court would have no reason grant Starlion leave to replace one

defective pleading with another—that is what would make such an amendment ‘futile.’ Thus, the

Court evaluates the Proposed Amended Complaint to ensure it can survive a motion to dismiss before

it lets Starlion file it. If it could not survive, the Court would therefore deny Starlion’s Motion to

Amend. However, if the Proposed Amended Complaint can survive a Rule 12(b)(6) motion to

dismiss in that “the underlying facts or circumstances relied upon by a [Starlion] may be a proper

subject of relief,” the Court would instead deny Defendants’ 12(c) Motion and grant Starlion leave

15

to amend to “afford[] an opportunity to test [Starlion’s] claim[s] on the merits.” Foman, 371 U.S. at

183. Thus, the threshold question in resolving both Motions is whether the fraud and conspiracy

claims in Starlion’s Proposed Amended Complaint would survive a motion to dismiss under Rule

12(b)(6).

For the following reasons, the Court finds that they would. Regarding Starlion’s proposed

amended fraud claim, the Court finds that this claim would survive a 12(b)(6) motion to dismiss

because it is not barred by the economic loss doctrine. Specifically, and as explained in more detail

below, the Court concludes that he economic loss doctrine does not bar Starlion’s proposed amended

fraud claim for two reasons: (1) well-established Ohio precedent confirms that fraud is not subject to

the economic loss doctrine because fraud is an intentional tort predicated on legal duties distinct from

contractual duties; and (2) even if the economic loss doctrine required Starlion to plead damages

distinct from its contract damages, the Proposed Amended Complaint meets that requirement.

Regarding Starlion’s proposed amended civil conspiracy claim, Defendants’ only argument is that

the civil conspiracy claim depends on the success of Starlion’s fraud claim and that because the

economic loss doctrine bars the fraud claim, the civil conspiracy must fail too. (Doc. No. 25 at

PageID#s 169-68.) Because the Court rejects Defendants’ contention, the Court finds that Starlion’s

proposed amended civil conspiracy claim is not futile.

A. The economic loss doctrine does not bar claims for fraud because fraud is an

intentional tort.

The economic loss doctrine “generally prevents recovery in tort of damages for purely

economic loss.” Corporex Dev. & Constr. Mgt., Inc. v. Shook, Inc., 835 N.E.2d 701, 704 (Ohio

2005). “The well-established general rule is that a plaintiff who has suffered only economic loss due

to another’s negligence has not been injured in a manner which is legally cognizable or compensable.”

16

Id. (citation omitted). Thus, “[i]n Ohio, the economic loss doctrine has two aspects. First, it bars a

plaintiff from recovering in negligence for purely economic damages. Second, it prevents a plaintiff

from recovering in tort for the conduct of a defendant that violates only a contractual duty rather than

any free-standing duty of care.” Ross v. PennyMac Loan Servs. LLC, 761 Fed. Appx. 491, 496 (6th

Cir. 2019). However, the Sixth Circuit has also explained that “Ohio law makes an exception to the

economic loss doctrine in cases where the defendant has committed an intentional tort.” Id. (citing

Eysoldt v. ProScan Imaging, 957 N.E.2d 780, 785 (Ohio App. 1st Dist. 2011)).

Indeed, Ohio courts consistently hold that the economic loss doctrine does not apply to

intentional torts, including claims for fraud. See, e.g., Eysoldt, 957 N.E.2d at 785 (holding that that

the economic loss doctrine “applies only in negligence cases, not in cases involving intentional

torts”); TRAX Constr. Co. v. Reminderville, 2021 WL 4477460 at *7 n.3 (Ohio App. 11th Dist. Sept.

30, 2021) (citing Corporex, 835 N.E.2d at 705) (“It is important to note that the seminal economic

loss rule cases cited by appellants concern negligence claims, not intentional torts, such as fraud. In

this respect, those cases are factually different than this matter, which alleged an intentional tort – a

matter outside the economic loss rule to the extent it is premised upon a duty independent of the

contract at issue.”); Windsor Med. Ctr., Inc. v. Time Warner Cable, Inc., 167 N.E.3d 23, 29 (Ohio

App. 5th Dist. 2021) (quoting Corporex, 835 N.E.2d at 705) (“A plaintiff may pursue such a tort

claim if it is ‘based exclusively upon [a] discrete, preexisting duty in tort and not upon any terms of

a contract or rights accompanying privity.’ These types of exempt claims may include negligent

misrepresentation, breach of fiduciary duty, fraud, and conversion.”).

Federal courts applying Ohio law reach the same result. See, e.g., In re Nat’l Prescription

Opiate Litig., 440 F. Supp. 3d 773, 815 (N.D. Ohio 2020) (“Numerous courts addressing operation

17

of the economic loss doctrine in other contexts refuse to apply it to bar intentional torts.”); and ODW

Logistics, Inc. v. Karmaloop, Inc., 2014 WL 293816 at *6 (S.D. Ohio Jan. 27, 2014) (“Ohio’s

economic loss doctrine applies only in negligence cases, not in cases involving intentional torts[.]”).

“[C]ourts have repeatedly rejected application of the doctrine to intentional torts.” Id.4

In the tortious interference with business relations context, one court highlighted why the

economic loss doctrine does not apply to intentional torts:

It makes sense that the economic loss rule would be limited to negligence actions. In

a tortious interference with business relations action, for example, any recovery will

always be for purely economic loss. The tort is designed to redress economic losses

4 There is extensive case law supporting the proposition that Ohio’s economic loss doctrine does not apply to fraud claims.

See, e.g., Bibbs v. Allstate Ins., 2024 WL 4124171 at *11 n.6 (N.D. Ohio Sept. 9, 2024) (declining to apply the economic

loss doctrine to the plaintiffs’ allegations of fraudulent inducement and promissory fraud because “[t]he Court is

persuaded by the weight of authority in this district finding that the economic loss doctrine does not apply to intentional

torts under Ohio law, including claims for fraud in the inducement and fraudulent misrepresentation.”); Sinmier LLC v.

Everest Indem. Ins. Co., 666 F. Supp. 3d 690, 703 (N.D. Ohio 2023) (internal citations omitted) (“There is an exception

to the economic loss rule for claims based upon a tort duty independent of contractually created duties . . . This exception

has been applied in the context of intentional torts, fraud, and negligent misrepresentation.”); MRI Software, LLC v. Pac.

Cap. Mgmt., Inc., 2016 WL 1436067 at *3 (N.D. Ohio Apr. 12, 2016) (internal citations omitted) (“The economic loss

rule is generally only applied to negligence cases and not to intentional torts . . . Ohio courts and many courts in this

district have held that this doctrine does not prevent a party from raising a claim for fraud in the inducement . . . [t]herefore,

the economic loss doctrine does not justify dismissal of Pacific’s fraud in the inducement and/or negligent

misrepresentation claim.”); Pride of Hills Mfg. Inc. v. Range Res.-Appalachia, LLC, 2011 WL 2116455 at *7 (N.D. Ohio

May 27, 2011) (internal citations omitted) (“Fraud in the inducement is also an intentional tort under Ohio law. Summary

judgment is denied as to Counts VIII [for fraud] and X [for civil conspiracy] because the economic loss rule does not

preclude recovery as a matter of law.”); Hodell-Natco Indus., Inc. v. SAP Am., Inc., 2010 WL 6765522 at *11 (N.D. Ohio

Sept. 2, 2010) (“As such, the Court finds SAP’s argument that Hodell’s fraud, fraud in the inducement, and negligent

misrepresentation claims are barred by the economic loss rule to be without merit.”); MyVitaNet.com v. Kowalski, 2008

WL 2977889 at *8 (S.D. Ohio July 29, 2008) (“The dispositive teaching from Ohio’s intermediate courts, however, is

that the economic loss doctrine is limited in its application. Even assuming arguendo that the state law doctrine can

potentially apply to intentional torts of the sort alleged in this action, case law provides that the doctrine ultimately cannot

apply” to plaintiff’s fraud claim). And, as noted above, it does not apply to intentional torts more generally. See, e.g.,

Metro. Title Agency, Inc. v. Fed. Express Corp., 2023 WL 2600397 at *6 (S.D. Ohio Mar. 22, 2023) (“Importantly, while

the rule bars recovery for purely economic loss caused by negligence, the doctrine does not apply to intentional torts such

as conversion.”); Houser v. PowerDot, Inc., 2022 WL 18863810 at *6 (N.D. Ohio July 11, 2022) (citing Ross, 761 Fed.

Appx. at 498) (“Ohio law makes an exception to the economic-loss doctrine in cases where the defendant committed an

intentional tort.”); In re Nat’l Prescription Opiate Litig., 589 F. Supp. 3d 790, 824 (N.D. Ohio 2022) (“Ohio caselaw

clearly and uniformly limits application of this doctrine to negligence-based qualified nuisance claims and finds it does

not apply to intentional torts, such as the intentional misconduct alleged by Plaintiffs.”); Cintas Corp. v. First Advantage

Enter. Screening Corp., 2013 WL 12121962 at *3 (S.D. Ohio July 19, 2013) (“Though Defendant argues for the

application of the economic loss doctrine, the doctrine has been held inapplicable to intentional torts under Delaware and

Ohio law.”); Medpace, Inc. v. Biothera, Inc., 2013 WL 1386298 at *4 (S.D. Ohio Apr. 4, 2013) (“the economic loss

doctrine does not bar Biothera’s conversion claim because the doctrine does not apply to intentional torts.”).

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when a defendant has unfairly and intentionally disrupted a plaintiff's business. A

negligence cause of action, on the other hand, is designed to redress personal injury or

injury to property. Moreover, the fundamental policy consideration underlying the

economic loss rule—the inevitable absence of a duty independent of that created by a

contract in a negligence action for purely economic loss—is missing in the intentional

tort context, where duty is not an element of the claim.

Reengineering Consultants, Ltd. v. EMC Corp., 2009 WL 113058 at *6 (S.D. Ohio Jan. 14, 2009)

(internal citation omitted).

The economic loss doctrine does not bar a fraud claim because a defendant’s socially imposed

obligation in tort to avoid inducing another to enter a contract in the first place is categorically distinct

from the defendant’s duty to abide by its subsequently assumed contractual obligations. See

MedChoice Fin., LLC v. ADS All. Data Sys., Inc., 857 F. Supp. 2d 665, 671 (S.D. Ohio 2012)

(“[F]raudulent inducement implicates a general duty to avoid wrongful conduct that induces a party

to enter into a contract.”). In other words, the duty to avoid engaging in fraudulent conduct to create

the contract exists separately from the duty to avoid breaching an already-created contract. This court

has explained:

Ohio courts have held that fraudulent inducement claims, based on a party’s intent not

to perform their terms at the time of contracting are viable even if the claim arises from

the same contractual relationship as the breach of contract claim. This is because the

focus of the wrongful conduct in a fraud in the inducement or promissory fraud claim

is not the conduct that causes a contractual or promissory breach, but the intent of the

tortfeasor, at the formation of the contract or promise, to defraud the other party into

entering into the agreement. The common-law duty not to deceive a party into entering

the contract or agreement is, thus, independent and separate from a duty not to breach

a contractual obligation. Under Ohio law, Plaintiff can maintain a fraud claim based

on a theory of fraud in the inducement or promissory fraud alongside his breach of

contract claim.

King v. Hertz Corp., 2011 WL 1297266 at *3 (N.D. Ohio Mar. 31, 2011) (internal citations omitted).

This Court follows the ample authority from Ohio courts and from federal courts applying Ohio law

19

to conclude that Ohio’s economic loss doctrine does not bar a fraud claim because fraud is an

intentional tort.5

That is dispositive because here, Starlion’s Proposed Amended Complaint asserts a fraud

claim.6 It alleges that Defendants made two fraudulent misrepresentations. First, that “Roberts and

JDS Pro made representations to Starlion that JDS Pro would receive proceeds for the Tests and pay

Starlion for Invoices 818, 977, and 1217” but they “made the representation knowing that it was false

because they never intended to pay Starlion for the Tests after delivery – which they did not.” (Doc.

No. 21-2 at ¶ 51.) Second, that JDS Pro and Roberts “represented to Starlion that virtually all of JDS

Pro customers to which Starlion delivered the Tests were covered by private insurance” when that

coverage “was material to Starlion’s decision to contract with JDS Pro,” yet they “made the

representation knowing that it was false because JDS Pro never intended to submit the claims to

private insurance for payment – which it did not.” (Id. at ¶ 52.)

Accordingly, because the economic loss doctrine does not bar claims for intentional torts such

as fraud, and because Starlion’s Proposed Amended Complaint asserts a claim for fraud, the economic

loss doctrine does not bar Starlion’s claim for fraud against JDS Pro and Roberts.

5 Fraud is an intentional tort because one of the elements of any fraud claim is that the defendant made the

misrepresentation “with the intent of misleading [the plaintiff] into relying on it[.]” Franco Marine 1, LLC v. Great Lakes

Towing Co., 2018 WL 2985185 at *6 (N.D. Ohio June 14, 2018); see also Jasar Recycling, Inc. v. Major Max Mgmt.

Corp., 2010 WL 395212 at *9 (N.D. Ohio Jan. 22, 2010) (“fraud is also an intentional tort under Ohio law”); Foster v.

D.B.S. Collection Agency, 2008 WL 755082 at *11 (S.D. Ohio Mar. 20, 2008) (“intent is a required element of a fraud

claim under Ohio law.”); Kreiner, Uhlinger & Edmonds Co., L.P.A. v. State Farm Fire & Cas. Co., 1991 WL 302446 at

*3 (Ohio App. 5th Dist. Dec. 23, 1991) (“fraud is an intentional tort, with ‘intent’ as one of its elements”).

6 Starlion recharacterizes its fraud claim as fraudulent inducement in its Reply. (Doc. No. 26 at PageID#s 174-76.) This

distinction is immaterial, however, because the “elements of fraudulent inducement [are the] same as elements of fraud.”

Med. Billing, Inc. v. Med. Mgmt. Scis., Inc., 212 F.3d 332, 338 (6th Cir. 2000) (citing Spencer v. Huff, 1998 WL 391948

at *3 (Ohio App. 4th Dist. July 2, 1998); see also Franco Marine 1, LLC, 2018 WL 2985185 at *6 (quoting Chem. Bank

of New York v. Neman, 556 N.E.2d 490, 494 (Ohio 1990) (setting forth the elements of fraud).

20

B. The Proposed Amended Complaint pleads damages in addition to Defendants’

alleged breach of contract.

Despite the above authorities establishing that the economic loss doctrine does not bar claims

for fraud because it is an intentional tort not subject to Ohio’s economic loss doctrine, Defendants’

Brief in Opposition to Starlion’s Motion to Amend cites several cases to support its contention that

the economic loss doctrine bars Starlion’s fraud claim. (Doc. No. 25 at PageID#s 168-69.)

Defendants cite PLC Corp. v. Brandywine Recovery Inc., 2015 WL 5852829 at *6-7 (N.D. Ohio Oct.

6, 2015) (citing Med. Billing, Inc. v. Med. Mgmt. Sciences, Inc., 212 F.3d 332, 338 (6th Cir. 2000)),

Infocision Mgmt. Corp. v. Found. for Moral L. Inc., 2009 WL 2244166 at *4 (N.D. Ohio July 27,

2009), Polytec Internacional v. Artco Glob. Grp., LLC, 2023 WL 8600575 (S.D. Ohio Sept. 6, 2023),

and Jasmine-Jade Enters., LLC v. Borders Grp., Inc., 2009 WL 10715172 (N.D. Ohio Oct. 19, 2009),

but their reliance on these authorities is misplaced for two reasons: (1) PLC, Medical Billing, and

Infocision are inapposite because they concern the calculation of damages at the motion for summary

judgment stage, not the pleading requirements at the motion to dismiss stage; and (2) the complaints

in Polytec Internacional and Jasmine-Jade are factually distinguishable from the Proposed Amended

Complaint at issue here.

First, Defendants’ reference to PLC severs it from its essential context. Defendants cite PLC

as follows: “[A] plaintiff ‘must seek to recover damages apart from the mere loss of the bargain

reached for a specified payment.’ ‘A plaintiff may not directly recover the amount owed under the

contract based upon a tort theory–the plaintiff would only be able to recover other damages

proximately caused by the fraud.’” (Doc. No. 25 at PageID# 167) (quoting PLC, 2015 WL 5852829

at *7 (quoting Marine Direct, 2007 WL 81842 at *2 and Med. Billing, 212 F.3d at 338)). From this,

Defendants reason that “[t]o state a tort claim, a party must plead damages specific to the tort that are

21

separate and distinct from its contract damages.” (Doc. No. 25 at PageID# 167). However,

Defendants overlook that the court in PLC was discussing how to calculate damages for a fraud claim

granted on the merits at the summary judgment stage, not the standard for pleading a fraud claim at

the motion to dismiss stage. The full text reads:

Additionally, fraud damages must be limited to the injury actually arising from the

fraud. The tort injury must be unique and separate from any injury resulting from a

breach of contract. While recovery of purely economic loss is permissible with a

fraudulent inducement claim, a plaintiff must seek to to [sic] recover damages apart

from the mere loss of the bargain reached for a specified payment. A plaintiff may not

directly recover the amount owed under the contract based upon a tort theory–the

plaintiff would only be able to recover other damages proximately caused by the fraud.

PLC, 2015 WL 5852829 at *7 (cleaned up) (citing Med. Billing for the proposition that “any award

of damages arising from [a] fraudulent inducement claim must be separate and distinct from the

damages awarded on claim for breach of the contract.”). That matters, not only because the court in

PLC acknowledges that “recovery of a purely economic loss is permissible with a fraudulent

inducement claim,” but because that court highlights that the plaintiff can recover for the damages

“proximately caused by the fraud.” Id. (citing Med. Billing, 212 F.3d at 338). PLC therefore does

not support Defendants’ conclusion that “to state a tort claim” such as fraud, the plaintiff “must plead

damages specific to the tort[.]” (Doc. No. 167 at PageID# 167) (emphasis added). Rather, PLC and

Medical Billing merely limit the plaintiff’s eventual recovery on the fraud claim to those it “suffered

as a result of its justifiable reliance on any fraudulent or negligent misrepresentation that is separate

and distinct from the damages already awarded for the breach of contract.” PLC, 2015 WL 5852829

at *7 n.8.

Infocision Mgmt. Corp. v. Found. for Moral L. Inc., 2009 WL 2244166 (N.D. Ohio July 27,

2009) does not discuss the economic loss doctrine at all. Rather, like PLC, Infocision discusses only

22

whether the plaintiff’s evidence at the summary judgment stage was sufficient to entitle it to distinct

damages on its fraud claim. See id. at *7. The court concluded that the plaintiff had not made that

showing because it sought through its fraud claim only “the same damages [as] in its contract claim.”

Id. The plaintiff, the court concluded, lacked evidence to “show damages resulting specifically from

fraud.” Id. Thus, Infocision too does not help Defendants at this stage of the litigation.

Second, while Polytec Internacional and Jasmine-Jade do apply at the motion to dismiss

stage, they help Starlion more than they help Defendants. The court in Polytec Internacional imposed

an additional element that the plaintiff must plead beyond a separate legal duty: the fraud claim must

include “actual damages attributable to the wrongful acts of the alleged tortfeasor which are in

addition to those attributable to the breach.” Polytec Internacional, 2023 WL 8600575 at *2 (quoting

Popovich v. Sony Music Entm’t, Inc., 2005 WL 8171846 at *12 (N.D. Ohio Feb. 10, 2005)). But

Polytec Internacional does not help Defendants because Starlion’s Proposed Amended Complaint is

factually distinguishable from the complaint at issue in that case. As Starlion correctly notes, the

plaintiff in Polytec Internacional only alleged that it “was ‘injured by the lack of payment’ under the

Contracts—which are the same damages Plaintiff alleges in its breach of contract claim.” (Doc. No.

26 at PageID# 180) (citing Polytec Internacional, 2023 WL 8600575 at *3) (cleaned up). Polytec

Internacional, however, limited its application of the ‘separate damages’ requirement only to the

plaintiff’s “complete failure to even plead such an allegation.” 2023 WL 8600575 at *3. The court

distinguished the plaintiff’s conclusory allegations from those in Cunningham Prop. Mgmt. Tr. v.

Ascent Res. - Utica, LLC, 351 F. Supp. 3d 1056 (S.D. Ohio 2018), where the court denied the

defendant’s motion to dismiss the plaintiff’s fraud claim, reasoning as follows:

It is also unclear at this stage of the litigation if recovery under both causes of action

would produce duplicative damages. Dismissal of the fraud claim is therefore

23

premature. Of course, should [the plaintiff] ultimately prevail on her fraud claim, her

recoverable damages would be limited to those separate and distinct from any damages

awarded on her breach of contract claim.

Id. at 1067 (quoting Lebo v. Impac Funding Corp., 2012 WL 630046 at *6 (N.D. Ohio Feb. 8, 2012)).

Jasmine-Jade, like Polytec Internacional, also involved a fraud claim based on the defendant’s mere

breach of the contract. There, the plaintiff grounded its fraud claim in its allegation that the

defendants returned the incorrect books in violation of their agreement, and the court applied the

economic loss doctrine to bar the plaintiff’s fraud claim because “what is in dispute is [the

defendants’] failure to adhere to the terms of an agreement” so it dismissed the plaintiff’s fraud claim

because that claim “identifie[d] no alleged injury distinct from the contractual breach.” Jasmine-

Jade Enters., LLC, 2009 WL 10715172 at *8-9 (emphasis added).

In summary, Defendants’ cases show that where a plaintiff asserts a fraud claim on top of its

breach of contract claim, the plaintiff has a high burden to successfully recover additional damages

on its fraud claim at the summary judgment stage. See PLC, 2015 WL 5852829 at *7. At that stage,

the burden is high because the plaintiff must marshal evidence that identifies distinct damages

proximately caused by the defendant’s fraudulent misrepresentations that are separate from any

damages caused by the defendant’s breach. See Med. Billing, Inc., 212 F.3d at 338-39 (holding that

the plaintiff could only recover for “damages that could have arisen uniquely from the fraud” such

that the plaintiff must identify “damages that flowed from the fraud but not from the breach of

contract.”). But Defendants’ present reliance on those cases is unfounded because this case is not yet

at the summary judgment stage. Rather, this case is at the motion to dismiss stage. And at this stage,

Defendants’ cases illustrate that the plaintiff has a lower burden. That burden is lower because even

if the plaintiff’s complaint alleges that the fraud and the breach caused “duplicative damages,” the

24

plaintiff’s fraud claim can still survive a motion to dismiss. See Polytec Internacional, 2023 WL

8600575 at *3 (quoting Cunningham, 351 F. Supp. 3d at 1067). 7 At this earlier stage of the litigation,

the plaintiff need only avoid pleading that its injury for fraud is the lack payment on the contract. See

id.

Here, Starlion avoids that pleading insufficiency. The Proposed Amended Complaint alleges

at least some damages distinct from Defendants’ alleged breach. While Starlion alleges that it was

injured by JDS Pro’s and Roberts’ lack of the $4,276,315.20 payment (Doc. No. 21-2 at PageID#

130), it also alleges eight (8) other sources of damages distinct from the lack of payment. (Doc. No.

21-2 at PageID#s 128-29; Doc. No. 25 at PageID#s 167-68.) Defendants’ alleged failure to pay may

have caused those downstream damages, but the damages are distinct from the mere fact that

Defendants failed to pay Starlion. Not only are Starlion’s alleged damages distinct from the breach

itself, but Cunningham shows that Starlion need not trace the source of those downstream damages

directly to its fraud claim at the pleading stage. Thus, the potential for overlap between the damages

caused by Defendants’ failure to pay and Defendants’ misrepresentations is not fatal to Starlion’s

Proposed Amended Complaint, see Polytec Internacional, 2023 WL 8600575 at *3; Cunningham,

7 See also Mitsui Sumitomo Ins. Co. of Am. v. Vertiv Corp., 2024 WL 962742 at *5 (S.D. Ohio Mar. 5, 2024) (citing

Cunningham, 351 F. Supp. 3d at 1067) (“[T]he Court permits Plaintiffs to plead in the alternative and allows both their

contract and fraud claims to proceed at the pleading stage. Of course, if Plaintiffs ultimately prevail on their fraud claim,

their recoverable damages would be limited to those separate and distinct from any damages awarded on the contract

claim.”); Price v. Gulfport Energy Corp., 2020 WL 5433683 at *2 (S.D. Ohio Sept. 10, 2020) (citations omitted) (“The

plaintiff in Cunningham similarly pled claims of breach of contract, fraud, and unjust enrichment as Plaintiffs have in this

case. While in general plaintiffs cannot duplicate a breach of contract claim as a fraud claim under Ohio law, this Court

found in Cunningham that it is unclear at this stage if both fraud and breach of contract claims would lead to duplicative

damages, so dismissing the fraud claim is premature. Plaintiffs can thus plead both breach of contract and fraud claims,

but if Plaintiffs ultimately prove their fraud claim, then they would only be able to recover damages separate from any

damages recovered from their breach of contract claims.”); G.C. Franchising Sys., Inc. v. Kelly, 2021 WL 1209263 at *8

(S.D. Ohio Mar. 31, 2021) (denying motion to dismiss plaintiff’s fraud claim on the same basis).

25

351 F. Supp. 3d at 1067), even if such overlap at later stages in the litigation must be untangled to

prevent double recovery. See Med. Billing, Inc., 212 F.3d at 338-39.

Even if Starlion were required to plead non-duplicative damages, the Proposed Amended

Complaint meets that higher standard. In Popovich v. Sony Music Entertainment, Inc., 2005 WL

8171846 (N.D. Ohio Feb. 10, 2005), the court explained that “[f]raud damages that are independent

of contract damages are typically reliance or forbearance damages.” Id. at *3. For instance, the court

in ITS Fin., LLC v. Advent Fin. Servs., LLC, 823 F. Supp. 2d 772, 783 (S.D. Ohio 2011)

acknowledged that the plaintiff’s fraud claim sought “damages distinct from and in addition to

damages caused by [the defendant’s] breach of contract” because “the damages sought were not

contemplated by the Agreement[.]” Id. at 783 n.20.

Here, Starlion’s Proposed Amended Complaint contains at least three reliance damages not

contemplated by its Agreement with Defendants and which therefore exist independently of the

damages flowing from Defendants’ alleged breaches. In the Proposed Amended Complaint, Starlion

alleges that it borrowed money to pay for the Tests and has incurred monthly interest payments of

approximately $40,000. (Doc. No. 21-2 at PageID# 128, ¶ 55.) Starlion took out that loan “because

it relied on JDS Pro and Roberts’ representations that the claims would be submitted to private

insurance and that Invoices 818, 977, and 1217 would be promptly paid.” (Id.) Those costs are not

traceable to Defendants’ alleged breach because even if Defendants never breached the contract,

Starlion would have been obligated to pay the interest on the loan. However, those damages are

directly traceable to Defendants’ alleged misrepresentations because if Defendants had not

misrepresented their intent to abide by their contractual obligations and had not misrepresented the

source of JDS Pro’s customers’ insurance, then Starlion would not have entered the Agreement and

26

taken out the loan. Thus, the alleged misrepresentation—not the alleged breach—caused Starlion’s

injury.

So too with Starlion’s allegation that it incurred $850,000 in delivery fees because it

“contracted with United Parcel Service (“UPS”) for the delivery of the Tests to JDS Pro’s customers

based on JDS Pro and Roberts’ fraudulent statements.” (Id.) Even if Defendants never breached the

Agreement, Starlion would have incurred those fees. But Starlion would not have incurred those fees

if it never entered the agreement because, as Defendants note, they were “anticipated costs of

performance[.]” (Doc. No. 25 at PageID# 168.)

Starlion’s allegation that it could not “operate to . . . fulfil [sic] orders placed by its other

customers” also alleges distinct damages. (Doc. No. 21-2 at PageID# 129.) Starlion alleges that had

it not entered the Agreement with Defendants, it could have fulfilled those orders. Thus, damages

resulting from its inability to fulfill other, potentially more lucrative orders to other customers would

be directly traceable to Defendants’ alleged misrepresentations, not to Defendants’ subsequent

breaches.

Defendants describe Starlion’s remaining damages for its insolvency, layoffs, eviction,

inability to pay Diska, LLC for tablets, and inability to afford two plastic molding machines as

“arguable consequential damages arising from Defendants’ alleged failure to pay the contract price.”

(Doc. No. 25 at PageID# 168.) However, those downstream consequences may also result, at least

in part, from Starlion’s missed interest payments, unpaid UPS delivery fees, and the loss of Starlion’s

opportunity to sell Tests to other customers, i.e., the costs it incurred to perform under an agreement

it otherwise would have not executed.

27

Thus, even assuming that the economic loss doctrine requires Starlion to plead distinct

damages stemming from its fraud claim, the Court finds that the Proposed Amended Complaint

sufficiently alleges distinct damages resulting from Defendants’ misrepresentations for its fraud claim

to survive the economic loss doctrine.

Accordingly, and for all the reasons set forth above, the Court finds that allowing Starlion to

amend its fraud claim would not be futile.8 And, because Starlion’s proposed amended fraud claim

is not futile, the Court further finds that it would not be futile to allow Starlion to amend its civil

conspiracy claim as well. Starlion’s Motion to Amend (Doc. No. 21) is, therefore, granted.

V. Conclusion

For all the reasons set forth above, the Court GRANTS Starlion’s Motion to Amend (Doc.

No. 21) and DENIES Defendants’ 12(c) Motion (Doc. No. 15) as moot. Starlion shall file its First

Verified Amended Complaint on the docket within seven (7) days of the date of this Order.

IT IS SO ORDERED.

s/Pamela A. Barker

PAMELA A. BARKER

Date: February 25, 2025 U. S. DISTRICT JUDGE

8 The Court notes that, although Defendants argued that Starlion’s original Verified Complaint failed to plead fraud with

particularity, Defendants do not assert this argument with respect to Starlion’s fraud claim in its Proposed Amended

Complaint.

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