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Roadtrips, Inc. v. Hutton Group

February 22, 2010


The opinion of the court was delivered by: Robert C. Mitchell United States Magistrate Judge


Plaintiff, Roadtrips, Inc. ("Roadtrips"), brings this action against Defendants, The Hutton Group, Inc. ("THG"), Shirley A. Hutton and Douglas J. Ash, Jr., alleging that Defendants breached contractual obligations and committed acts of fraud and negligent misrepresentation when they failed to deliver tickets to the Beijing Olympics Opening Ceremony that Roadtrips had ordered and intended to include in travel packages sold to its customers.

Presently before this Court for disposition is a partial motion to dismiss, submitted by Defendants, seeking dismissal of Count I (negligent misrepresentation) and Count II (fraud) of the complaint. For the reasons that follow, the motion will be denied.

Plaintiff's Allegations

Roadtrips is a Canadian-based travel agent with one office in Winnipeg, Manitoba. The company specializes in arranging sports-related travel, securing sporting and sports-related event tickets and booking hotel and other accommodations for other travel agencies and directly to travelers in the form of travel packages. The company does not own, plan or sponsor the events for which it helps customers book travel; nor is it affiliated with any sports organizations, leagues or teams. It acts merely as an agent; its sole service is the coordination of travel plans. (Compl. ¶ 7.)

In 2007, Roadtrips sought a secure source to supply Opening Ceremony tickets for the Beijing Summer Olympics Games 2008 to be included in travel packages sold to its customers, along with other 2008 Olympic Games travel and travel-related accommodations such as hotels, ground transportation, guides, security and other Olympic event tickets. Roadtrips identified THG as a possible source. (Compl. ¶ 8.) Shirley A. Hutton, as President and Chief Executive Officer of THG, and Douglas J. Ash, Jr., an agent and employee of THG, solicited Roadtrips with representations that it was a sound, vetted source for the Opening Ceremony tickets. Hutton described THG as an incentive company with many years of successful experience providing tickets and services to the Olympics and other events. Roadtrips received assurances from THG, from Ash in particular, that the Beijing Olympics Opening Ceremony tickets would come direct from sponsors or Olympic Family members of the International Olympic Committee. (Compl. ¶ 9.)

Roadtrips contracted with THG in reliance on the foregoing representations. In total, Roadtrips coordinated sixty-five (65) travel packages that included a total of 326 Opening Ceremony tickets. Barry and Phyllis Connelly and Borden Liu, in particular, plaintiffs and proposed class representatives ("Proposed Class Representatives") in Barry Connelly et al. v. Roadtrips, Inc., Civil Action No. 4:08-CV-02987, a class action brought against Roadtrips in the United States District Court for the Northern District of Texas (the "Class Action Lawsuit"), secured 2008 Olympic Games travel packages with Opening Ceremony tickets from Roadtrips. (Compl. ¶ 10.)

Roadtrips has since learned that Ash, Hutton and THG never had any agreement or intention to obtain tickets directly through any Olympic Games sponsor or Olympic Family member of the International Olympic Committee. At the time Ash and Hutton induced Roadtrips to enter into the tickets contracts, Ash and Hutton instead intended to fulfill THG's ticket obligation through a third party, Harvey Slater ("Slater"), who does business through his Connecticut company, Advantage Marketing International, Inc. and, upon information and belief through Advantage Sports Hospitality and Merchandising, Advantage Sports Summer Games 1996, Inc., Tri-State Ticket Service, Inc., and Advantage Sports Classics, Inc. Also on information and belief, Roadtrips avers that neither Slater nor his businesses had a means of obtaining tickets directly through any Olympic Games sponsor or Olympic Family member of the International Olympic Committee. (Compl. ¶ 11.)

Slater, instead, intended to procure the tickets for Roadtrips from a British ticket broker who would act as a "middle man." While Ash, Hutton and THG were well aware of how Slater intended to obtain the tickets, this fact was not disclosed to Roadtrips. Had Roadtrips known that, contrary to Ash and Hutton's representations, THG intended to use Slater, who, in turn, intended to use a British ticket broker, and THG did not, in fact, have any binding agreement to obtain the Opening Ceremony tickets through an Olympic Games sponsor or Olympic Family member of the International Olympic Committee, Roadtrips would not have entered into the ticket contracts with THG. (Compl. ¶ 12.)

THG failed to deliver the Opening Ceremony tickets to Roadtrips in Winnipeg well in advance of the Olympic Games as promised, explaining that delivery of Opening Ceremony tickets was delayed because of special security measures for the event. Roadtrips remained in close contact with THG as the Olympic Games approached. It repeatedly inquired about the delivery status of the Opening Ceremony tickets and received additional assurances from THG in June and July 2008 that the tickets would be delivered well in advance of the Opening Ceremony and that other agents were reporting similar delays. As the Beijing Olympics neared and the tickets still had not been delivered, THG then assured Roadtrips that the Opening Ceremony tickets would be delivered in Beijing the week before the Opening Ceremony. (Compl. ¶ 13.)

Roadtrips learned for the first time on August 6, 2008 in Beijing--less than two full days prior to the Opening Ceremonies--that THG would not honor its agreement to deliver the tickets. Roadtrips was forced to take immediate and extraordinary action to mitigate injury to its customers. These steps were also necessary to salvage the business relationships Roadtrips had worked hard to develop with individual travelers and, perhaps most especially, with travel agency customers. It immediately informed its customers by e-mail and hand delivered letters of the situation. Roadtrips also immediately began efforts to obtain replacement Opening Ceremony tickets from other sources, but candidly reported to its customers that the search was not promising. In fact, Roadtrips could only secure a very limited number of replacement tickets and, then, only at a cost well in excess of what the customers paid Roadtrips for the tickets. Roadtrips provided refunds, additional compensation, as well as complimentary event tickets and other special accommodations for those for whom it could not secure replacement tickets. (Compl. ¶¶ 14-16.)

Roadtrips incurred significant injury as a result of Ash and Hutton's misrepresentations and THG's breach of the parties' contract, including, but not limited to, the cost to purchase the limited number of replacement tickets available; the cost of refunds, additional compensation and complimentary event tickets; injury to its reputation and business relationships; diversion of human resources to address the situation; and lost profits. Roadtrips also faced the cost, distraction, delay and uncertainty of a Class Action suit wherein the Proposed Class Representatives sought additional payments from Roadtrips for themselves and for a broadly defined putative class of people "who purchased Beijing Olympics Opening Ceremony tickets from Roadtrips but did not receive them." In addition to the refund of the ticket price, the Proposed Class Representatives demanded that Roadtrips provide a refund for every other aspect of their travel to Beijing, even items that Roadtrips never arranged. Their alleged damages included hotel, airfare, ground transportation expenses and even tickets to other Beijing Olympic sporting events. (Compl. ¶¶ 17-18.)

Procedural History

Plaintiff filed this action on November 4, 2009. Jurisdiction is based on diversity of citizenship, in that Plaintiff is a corporation organized and existing under the laws of the province of Manitoba, Canada and maintains its principal place of business in Winnipeg, Manitoba; THG is a Pennsylvania corporation with its principal place of business in Pittsburgh, Pennsylvania; Hutton and Ash are individuals residing in Pittsburgh, Pennsylvania; and the amount in controversy is in excess of $75,000.00, exclusive of interest and costs. (Compl. ¶¶ 1-5.) The complaint alleges that Defendants made negligent misrepresentations regarding how they would obtain the Olympics Opening Ceremony tickets (Count I), that they committed fraud to induce Roadtrips to enter into the ticket purchase orders (Count II) and that they breached their contractual obligations by failing to produce the tickets as promised (Count III).

On January 4, 2010, Defendants filed a motion to dismiss Counts I and II of the complaint. They argue that: 1) both Count I and Count II fail to state a claim upon which relief can be granted because the purchase orders contained a disclaimer that the tickets would be purchased on the "secondary market"; 2) the parol evidence rule would bar any consideration of representations made prior to the contracts that contradict the disclaimer; and 3) the claims are barred by the gist of the action doctrine because the parties entered into contracts and Plaintiff has alleged a breach of contract claim in Count III.

Plaintiffs respond that: 1) Defendants have misstated the averments of the complaint, which alleges that Defendants represented that their sources would be sponsors, sports federations or some other member of the Olympic Family and that Ash specifically represented that the tickets were not being sourced from a ticket broker; 2) the parol evidence rule does not apply where the existence of a custom or usage to explain the meaning of words in a writing is concerned and the invoices are not integrated documents, such that resort must be made to pre-agreement representations to answer the question of the source of the tickets; an 3) the gist of the action doctrine does not apply to claims asserting negligent misrepresentation and fraud.

Standard of Review

The Supreme Court has recently stated that: Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." As the Court held in [Bell Atlantic Corp. v.] Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 [(2007)], the pleading standard Rule 8 announces does not require "detailed factual allegations," but it demands more than an unadorned, the-defendant- unlawfully-harmed-me accusation. Id., at 555, 127 S.Ct. 1955 (citing Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986)). A pleading that offers "labels and conclusions" or "a formulaic recitation of the elements of a cause of action ...

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