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