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Note: John F. Chase (Victim) filed a multi-count complaint alleging that ten named defendants, acting in various roles, promoted a scheme promising a USD 10,000,000 return for every USD 250,000 invested in standby letters of credit. As part of this scheme, Victim entered into an “Irrevocable 17.5% Success Fee Participation & Pay order Agreement” (Success Fee Agreement) whereby Victim would pay the defendants a 17.5% fee on proceeds Victim received “within 7 to 12 days” from the time of Victim’s investment. Pursuant to a separate agreement, Victim wired USD 500,000 into the attorney trust account of another named defendant on the basis that none of the wired money would “be disbursed from the trust account until [defendant] provided [Victim] proof that two banking instruments, including a standby letter of credit, had been issued and transmitted.” The wired money, however, immediately left the trust account and Victim was neither provided proof that a standby letter of credit was issued nor returned any of the USD 500,000.

As part of the complaint, Victim sued Robert Cloutier (Alleged Fraudster 1) and Mark Cloutier (Alleged Fraudster 2, collectively “Alleged Fraudsters”) for breach of contract under the Success Fee Agreement. After Alleged Fraudster 1 succeeded on his motion for additional time to file an answer nunc pro tunc, Victim apparently amended the complaint to remove claims of fraud and conspiracy to commit fraud against Alleged Fraudsters with the only remaining claim being breach of contract. Thereafter, Alleged Fraudsters moved to dismiss Victim’s lawsuit pursuant to Fed. R. Civ. Pro. 12(b)(6). The United States District Court for the District of Maine, Hornby, J., granted Alleged Fraudsters’ motions.

Attached to the complaint was a copy of the Success Fee Agreement, alternatively entitled “Profit Participation, Non-Circumvention, Non-Disclosure & Working Agreement”, which the Judge described as “a bizarre document, with several nonsensical provisions.” After reviewing the Success Fee Agreement and Victim’s complaint, the Judged noted that Victim was “unable to point to any specific provision of the contract that the [Alleged Fraudsters] breached.” No provision of the agreement explicitly imposed any obligations on Alleged Fraudsters in return for Victim paying the USD 500,000 fee. Moreover, Victim was unable to explain “whether [Alleged Fraudsters] are third-party beneficiaries or more active participants.” Because Victim was unable to plausibly “claim a breach of th[e] contract under federal pleading standards”, the Judge granted Alleged Fraudsters’ motions to dismiss.

[MJK]

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