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Inventory Recovery Corporation v. Ashley A. Gabriel

July 20, 2012


The opinion of the court was delivered by: William J. Martini, U.S.D.J.:


Plaintiff Inventory Recovery Corporation ("IRC") brings this action against Defendants Richard Gabriel ("R. Gabriel") and Ashley Gabriel ("A. Gabriel"), alleging that Defendants breached an agreement for the sale of 324 Internet domain names. This matter comes before the Court on Defendants' motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6). There was no oral argument. Fed. R. Civ. P. 78(b). For the reasons set forth below, the Defendants' motion is GRANTED in part, and DENIED in part.


The following facts are drawn from the Complaint. IRC is an Illinois company that conducts business in New Jersey. Compl. ¶ 1. Matthew Coleman is the President of IRC. Compl. ¶ 6. Defendants are residents of Florida, and are the former owners of 324 Internet domain names that were used to sell nutraceutical food; that is, food that provides health or medical benefits (the "Business"). Id. ¶¶ 2-3, 7-8, 13.

In October 2009, Plaintiff learned that Defendants listed the Business for sale. Compl. ¶¶ 14-15. On January 31, 2010, Plaintiff and R. Gabriel met face-to-face to discuss Plaintiff's purchase of the Business. Id. ¶ 16. They discussed general information about the Business, including gross sales and net income values. Id. These negotiations continued via e-mail and telephone through February 2010, when R. Gabriel provided Plaintiff with financial documents for the Business. These documents included the budget for advertising with Google, the Business' primary source of advertising. Id. ¶¶ 17-19. R. Gabriel also represented that the Business had a strong sales record and a good relationship with the merchant banks that processed the financial transactions between customers and the Business.

On February 26, 2010, Plaintiff and Defendants entered into two agreements: (1) a Sale and Transfer Agreement, for the sale of the 324 Internet domain names ("Sale Agreement"); and (2) an Asset and Consulting Agreement ("Consulting Agreement"), under which R. Gabriel agreed to serve as a consultant to Plaintiff for 120 days after the sale (collectively, the "Agreements"). Compl. ¶¶ 6, 10. The Agreements contained the following representations and warranties:

[N]o threatened occurrence or development exists which would materially adversely affect the [Business]; [and]

No representation or warranty of SELLER or CONSULTANT . . . contains any untrue statement of a material fact or omits [any] material fact necessary in order to make the statements contained herein or therein not misleading.

Sale Agreement, Representations and Warranties of Seller and Consultant ("Reps and Warranties"), Compl. Ex. 1 ¶¶ 4, 12, ECF No. 1-1. The parties set a purchase price of $5,600,000, but agreed that Defendants would accept a plot of real estate in the Bahamas, an airplane, and the remaining balance in cash. Id. ¶ 25. The deal closed on February 26, 2010. Id.

After taking control of the Business, Plaintiff discovered that the Business was not nearly as strong as R. Gabriel had represented. Specifically, Plaintiff alleges that: the Business was no longer permitted to advertise on Google; the Business' relationship with merchant banks was severely impaired; and the financial documents provided by R. Gabriel omitted certain business practices that artificially inflated the Business' sales. Compl. ¶¶ 19-20, 28-29. Soon after the agreement was entered into, the Business' sales fell. Id. ¶ 27.


Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint, in whole or in part, if the plaintiff fails to state a claim upon which relief can be granted. The moving party bears the burden of showing that no claim has been stated. Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). In deciding a motion to dismiss under Rule 12(b)(6), a court must take all allegations in the complaint as true and view them in the light most favorable to the plaintiff. See Warth v. Seldin, 422 U.S. 490, 501 (1975); Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Inc., 140 F.3d 478, 483 (3d Cir. 1998).

Although a complaint need not contain detailed factual allegations, "a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the factual allegations must be sufficient to raise a plaintiff's right to relief above a speculative level, such that it is "plausible on its face." See id. at 570; see also Umland v. PLANCO Fin. Serv., Inc., 542 F.3d 59, 64 (3d Cir. 2008). A claim has "facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 ...

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