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NovaFund Advisors, LLC v. Capitala Group, LLC

United States District Court, D. Connecticut

January 14, 2020

NOVAFUND ADVISORS, LLC, Plaintiff,
v.
CAPITALA GROUP, LLC, Defendant.

          RULING ON PENDING MOTIONS (ECF Nos. 67, 70, 96)

          Michael P. Shea, U.S.D.J.

         This case is centered on an agreement between Plaintiff NovaFund Advisors, LLC (“NovaFund”) and Defendant Capitala Group, LLC (“Capitala”) whereby NovaFund agreed to assist Capitala with capital-raising efforts. Each party accuses the other of breaching the agreement and engaging in other unfair business practices. NovaFund filed suit against Capitala on June 15, 2018; following a prejudgment remedy motion and hearing, Capitala answered the complaint and asserted counterclaims against NovaFund on March 27, 2019, ECF No. 56.

         On April 26, 2019, Capitala moved to amend its counterclaims and to join two new parties to the case. ECF No. 67. NovaFund moved to dismiss Capitala's existing counterclaims on May 8, 2019. ECF No. 70. Most recently, on December 11, 2019, NovaFund moved to amend its complaint to add new claims against Capitala, based on evidence produced in discovery. ECF No. 96. I address each of these three pending motions below, grant in part and deny in part the motion to dismiss Capitala's Counterclaim, grant Capitala's motion to amend its counterclaims and to join new parties, and grant NovaFund's motion to amend its complaint.

         I. BACKGROUND

         The factual allegations below are drawn from Capitala's counterclaim, ECF No. 56 at 7- 23, and documents incorporated therein. I draw on these facts in considering Capitala's motion to amend, ECF No. 67, and NovaFund's motion to dismiss Capitala's counterclaims, ECF No. 70. In considering NovaFund's recent motion to amend its complaint, ECF No. 96, I draw on the facts set forth in NovaFund's complaint, ECF No. 1.

         A. Factual Allegations

         NovaFund is a limited liability company with its principal place of business in Darien, Connecticut. Counterclaim, ECF No. 56 ¶ 10. Capitala is a limited liability company with its principal place of business in Charlotte, North Carolina, id. ¶ 9, and its business “involves the organization and management of various types of funds and provision of investment management advice to institutional investors, portfolio companies, and clients.” Id. ¶ 11.

         In early 2016, Capitala planned to raise funds for “Fund V, ” which was “to invest primarily in mezzanine loans and subordinated debt, along with equity co-investments.” Id. ¶ 12. “Capitala sought to engage a placement agent to assist with the marketing materials, road show, introductions to investors who would acquire limited partnership interests in Fund V, and the ultimate placement of those interests.” Id. Following a “nationwide search, ” Capitala engaged “NovaFund[] to serve as the exclusive placement agent for Fund V.” Id. ¶ 13. Capitala believed that NovaFund was a “division of Columbus, ” a registered broker-dealer. Id. ¶ 14.

         On May 9, 2016, Capitala entered into a term sheet with “NovaFund Advisors, a Division of Columbus Advisory Group LTD” (the “Term Sheet”) for Fund V. Id. ¶ 15-16; Term Sheet, ECF No. 81-1 at 2.[1] The Term Sheet required NovaFund to “make best efforts to place partnership interests in Capitala Private Credit Fund V, L.P. (the ‘Fund') with North American, European, Australian, and Asian investors” and to “assist with the preparation of offering materials and, in coordination with Capitala, contacting potential Fund investors, ” along with other services. Term Sheet, ECF No. 81-1 at 2; Counterclaim, ECF No. 56 ¶ 17. The Term Sheet also provides that “[a]s compensation for the advisory and exclusive placement services to be provided by NovaFund hereunder, Capitala agrees to pay NovaFund” a monthly “Retainer Fee” and a “Success Fee.” Term Sheet, ECF No. 81-1 at 3; Counterclaim, ECF No. 56 ¶¶ 18-19. Capitala alleges that the reference to “exclusive placement services” meant that “NovaFund would not be engaged in providing placement services for another fund . . . competitive with Fund V.” Counterclaim, ECF No. 56 ¶ 18.

         Capitala also avers that the Term Sheet it signed “contained only two signature blocks: [o]ne for ‘NovaFund Advisors' and one for ‘Capitala Group, LLC, '” and that “a third signature block and signature-for Columbus Advisory Group, Ltd-was added to the Term Sheet at some point after Capitala signed it and after it was returned fully executed to Capitala.” Counterclaim, ECF No. 56 ¶ 16; compare Term Sheet, ECF No. 81-1 at 4 (showing two signature blocks) with Term Sheet, ECF No. 70-2 at 4 (showing three signature blocks). Other than the signature pages, the two versions of the Term Sheet are identical.

         “From the inception of [NovaFund's] engagement [with Capitala], NovaFund's performance was inadequate.” Counterclaim, ECF No. 56 ¶ 20. Capitala alleges that NovaFund did not “proactively manag[e] the marketing process and road show, . . . provid[ed] few comments and little to no strategic input . . . . [, ] made very few introductions to potential Fund V limited partners for Capitala, . . . failed to set up meetings at important industry conferences, ” such as “a February 2017 investor conference in Berlin . . . . [, ] appeared to be purposefully delaying introductions for Capitala even when investors had indicated an interest in discussing Fund V . . . . [, and failed] to revise the strategy and marketing materials to further advance the fundraising effort for Fund V.” Id. ¶¶ 20-22. Capitala “became aware” in February 2017 that NovaFund “was arranging meetings and introductions for one or more competing funds, to the exclusion of Capitala, in direct violation of NovaFund's exclusive engagement with Capitala.” Id. ¶ 23.

         Capitala and NovaFund “attempted to salvage the relationship” in early 2017, and “Capitala and Columbus executed an Addendum to the Term Sheet (‘Addendum')” on April 24, 2017. Id. ¶ 25; Addendum, ECF No. 70-3 at 2. Capitala notes that the Addendum was “agreed to and accepted by ‘NovaFund Advisors.'” Counterclaim, ECF No. 56 ¶ 25; Addendum, ECF No. 70-3 at 2 (titled “Capitala Group and NovaFund Advisors Addendum”). The Addendum states, inter alia:

Both Nova and Capitala agree to release and discharge each other and all affiliates, officers and agents, of any and all claims, disputes, demands or causes of action of any nature, which the parties had, now have, or may have, related to Nova's services rendered to Capitala, or Capitala's obligations to Nova, to date.

ECF No. 70-3 at 2.

         Following execution of the Addendum, NovaFund continued to “fail[] to use its best efforts as the placement agents for Fund V . . . . [, ] failed to make introductions for Capitala with potential investors and failed to assist Capitala in further marketing of Fund V . . . . [, ] continued to make introductions which resulted in capital commitments for funds that were in direct competition with Fund V . . . . [, and] even took potential investor suggestions that Capitala gave NovaFund and arranged for capital commitments from those investors to funds that were in direct competition with Fund V.” Counterclaim, ECF No. 56 ¶ 26 (emphasis in original). In September 2017, NovaFund “indicated that it would not be identifying additional investors for Fund V.” Id. ¶ 27. Capitala alleges that NovaFund did not “contribute[] to the closing of even one dollar of investor capital commitment to Fund V.” Id. ¶ 28.

         After “NovaFund withdrew and effectively disengaged, ” Capitala announced on April 25, 2018 that it would “advise a new, permanent capital vehicle (‘2018 Vehicle'), ” which would “focus[] exclusively on investing in senior debt issued by lower middle market companies.” Id. ¶ 29. Capitala is not the manager of the 2018 Vehicle; rather, Capitala's “affiliate [Capitala Specialty Lending Corporation (‘Capitala SLC')] serves in a contractual sub-advisory capacity . . . to an unaffiliated, third-party fund manager, ” and the third-party fund manager “identified and closed the capital commitments from investors in the 2018 Vehicle.” Id. ¶ 30, 32.

         On April 27, 2018, NovaFund sent Capitala an email asking for “a list of the entities investing in Capitala SLC and their respective commitments, so it could calculate fees allegedly due NovaFund from Capitala.” Id. ¶ 32. Capitala responded “explaining that it could not disclose that information because of relevant confidentiality agreements” and that “NovaFund was not due any fee under the Term Sheet.” Id. ¶ 34. Capitala alleges that “NovaFund also reached out to one or more of Capitala's business relationships and pressured them to reveal whether they had invested with Capitala, ” thereby “harm[ing] Capitala's business relationship(s), ” “adversely impact[ing] Capitala's reputation for respecting client confidentiality, ” and causing the “sponsor of the 2018 Vehicle” to “incorrectly assum[e]” that Capitala had breached relevant confidentiality agreements. Id. ¶ 35.

         B. Procedural History

         On May 17, 2018, Capitala filed a lawsuit in North Carolina Superior Court, Mecklenburg County, Case No. 18-CVS-8247 (the “North Carolina action”), seeking a declaratory judgment that Capitala is not required to pay fees to Columbus under the Term Sheet and seeking damages resulting from Columbus's breach of contract, unfair trade practices, and fraud. See Ruling, ECF No. 45 at 5-6. That action was later dismissed for lack of personal jurisdiction over NovaFund. Id. at 6; ECF No. 42-1 at 3 (North Carolina Superior Court Order on Motion to Dismiss).

         NovaFund filed suit in this court against Capitala on June 15, 2018; following a prejudgment remedy motion and hearing, and my ruling denying Capitala's motion to dismiss the complaint, Capitala answered the complaint and asserted counterclaims against NovaFund on March 27, 2019, ECF No. 56. On April 26, 2019, Capitala moved to amend its counterclaims and to join two new parties to the case. ECF No. 67. NovaFund moved to dismiss Capitala's counterclaims under Fed.R.Civ.P. 12(b)(6) on May 8, 2019. ECF No. 70. Most recently, on December 11, 2019, NovaFund moved to amend its complaint to add new claims against Capitala, based on evidence produced in discovery. ECF No. 96.

         II. MOTION TO DISMISS COUNTERCLAIM (ECF No. 70)

         A. Legal Standard

         “The analysis of a motion to dismiss for failure to state a claim is equivalent for claims and counterclaims.” ARMOUR Capital Mgmt. LP v. SS&C Techs., Inc., No. 3:17-CV-00790, 2019 WL 688308, at *2 (D. Conn. Feb. 19, 2019). “To survive a Rule 12(b)(6) motion to dismiss, a [counterclaim] must contain sufficient factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The Court must accept the well-pleaded factual allegations of the counterclaim as true and draw all reasonable inferences in the counterclaimant's favor. See Warren v. Colvin, 744 F.3d 841, 843 (2d Cir. 2014). The Court must then determine whether those allegations “plausibly give rise to an entitlement to relief.” Hayden v. Paterson, 594 F.3d 150, 161 (2d Cir. 2010).

         In deciding a motion to dismiss under Rule 12(b), the Court may consider documents attached to, integral to, or incorporated by reference in the counterclaim. Chambers v. Time Warner, 282 F.3d 147, 153 (2d Cir. 2002) (“For purposes of [Rule 12(b)], the complaint is deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference. Even where a document is not incorporated by reference, the court may nevertheless consider it where the complaint relies heavily upon its terms and effect, which renders the document integral to the complaint.” (internal citations and quotation marks omitted)). Because Capitala's Counterclaim refers to and relies on the terms of both the Term Sheet and the Addendum, I may consider these documents as part of the pleading. Chambers, 282 F.3d at 153 (finding that contracts, attached to defendants' motions to dismiss, were properly considered “when disposing of a Rule 12(b)(6) motion” since the contracts were “integral to the Amended Complaint”).

         B. Discussion

         Capitala asserts six counterclaims against NovaFund. First, it seeks a declaratory judgment that NovaFund “is not entitled to recover any fees from Capitala with respect to Fund V, the 2018 Vehicle, or Capitala SLC.” Id. ¶ 41. Second, should the Court find that NovaFund “was the party with which Capitala contracted”-even though Capitala believes that its contractual counterparty to the Term Sheet was actually Columbus-Capitala seeks damages for breach of contract and breach of the covenant of good faith and fair dealing. Id. ¶¶ 43-46. Capitala also alleges that NovaFund violated the North Carolina Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat. §§ 75-1.1 et seq., or, in the alternative, the Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. § 42-110a. Id. ¶¶ 47-62. Capitala alleges that NovaFund is liable for common law fraud, id. ¶¶ 64-69, and finally, it seeks rescission of the contract as illegal and void. Id. ¶¶ 93-97.

         1. Mutual Release in the Addendum

         NovaFund's central argument in its motion to dismiss Capitala's Counterclaim is that Capitala's claims are all barred by the release contained in the Addendum. Mot. to Dismiss, ECF No. 70-1 at 8-9.[2] NovaFund argues that the Addendum releases NovaFund “from all of Capitala's claims related to the execution of the parties' contract and NovaFund's performance under the contract, ” as well as from “claims that NovaFund somehow breached the contract by serving as a placement agent for another investment fund manager.” Id. at 9. Capitala argues that the Addendum does not bar its claims because both the parties to and the scope of the release are ambiguous, because Capitala's Counterclaim includes allegations of misconduct after the execution of the Addendum, and because fraudulent inducement claims are not barred by releases. Opp'n, ECF No. 81 at 7-13.

         Courts interpret a release of claims based on “well established principles of contract law, ” “constru[ing the release] to effectuate the intent of the parties, which is determined from the language used interpreted in the light of the situation of the parties and the circumstances connected with the transaction. . . . Where the language of the contract is clear and unambiguous, the contract is to be given effect according to its terms.” Tallmadge Bros. v. Iroquois Gas Transmission Sys., L.P., 252 Conn. 479, 498 (2000); Eternity Glob. Master Fund Ltd. v. Morgan Guar. Tr. Co. of N.Y., 375 F.3d 168, 177 (2d Cir. 2004) (“Under New York law, [t]he fundamental, neutral precept of contract interpretation is that agreements are construed in accord with the parties' intent.” (internal quotation marks omitted) (alteration in original)); Register v. White, 358 N.C. 691, 695 (2004) (“If the terms of the [contract] are plain, unambiguous, and susceptible of only one reasonable construction, the courts will enforce the contract according to its terms.” (internal quotation marks omitted)).[3] “Whether or not a writing is ambiguous is a question of law to be resolved by the courts.” Orchard Hill Master Fund Ltd. v. SBA Commc'ns Corp., 830 F.3d 152, 156 (2d Cir. 2016). Connecticut, New York, and North Carolina all employ a similar definition of when an agreement is “ambiguous.” United Illuminating Co. v. Wisvest-Connecticut, LLC, 259 Conn. 665, 670-71 (2002) (“[A] contract is ambiguous if the intent of the parties is not clear and certain from the language of the contract itself. . . [A]ny ambiguity in a contract must emanate from the language used by the parties.” (internal citations omitted)); Eternity Glob., 375 F.3d at 178 (“[A]mbiguity exists where a contract term could suggest more than one meaning when viewed objectively by a reasonable intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business.” (alteration in original); Register, 358 N.C. at 695 (“An ambiguity exists in a contract when either the meaning of the words or the effect of provision is uncertain or capable of several reasonable interpretations.”).

         Capitala does not dispute the validity of the Addendum as a contract, but argues that the language of the release in the Addendum is ambiguous and therefore “cannot bar Capitala's counterclaims under Rule 12(b)(6).” Opp'n to Mot. to Dismiss, ECF No. 81 at 7. For instance, Capitala claims that it is ambiguous whether the plaintiff, “NovaFund Advisors, LLC, ” is the same entity as “NovaFund Advisors, ” the party to the Addendum, id, and Capitala alleges that it “has no agreements or contractual relationship with [NovaFund Advisors, LLC], ” Counterclaim, ECF No. 56 ¶¶ 2, 40. Capitala believes that it executed the Addendum with Columbus Advisory Group, LTD (“Columbus”), that the Addendum “set forth additional agreements between the parties to the original Term Sheet, ” and that the “Addendum was agreed to and accepted by “NovaFund Advisors, ” a division of Columbus. Counterclaim, ECF No. 56 ¶ 25, 1.

         Even if Capitala is correct that “NovaFund Advisors, LLC” and “NovaFund Advisors” are different entities, it is clear that Capitala intended to release claims against the party that was providing services under the Term Sheet. See Counterclaim, ECF No. 56 ¶ 2 (alleging that the Addendum “set forth additional agreements between the parties to the original Term Sheet”); Addendum, ECF No. 70-3 at 2 (releasing claims “related to Nova's services rendered to Capitala, or Capitala's obligations to Nova, to date”). Even if Columbus were the true legal counterparty to the Term Sheet and Addendum, or if Capitala believed that it was when it entered the agreements, the Addendum unambiguously released claims “related to Nova's services.” ECF No. 70-3 at 2 (emphasis added). And Capitala's Counterclaim alleges that some NovaFund entity-whether “NovaFund Advisors, ” a division of Columbus, or “NFLLC, ” a separate entity-was the party providing services under the Term Sheet. E.g., Counterclaim, ECF No. 56 ¶ 13 (“Capitala engaged Columbus's division, NovaFund, to serve as the exclusive placement agent for Fund V.”); id. ¶ 20 (“From the inception of its engagement, NovaFund's performance was inadequate.”); id. ¶ 43 (“If in fact NFLLC was the party with which Capitala contracted . . . then NFLLC breached its agreement with Capitala by failing to use best efforts to place partnership interests in Capitala Fund V . . . .”).

         As a general matter, therefore, any counterclaims that are “related to Nova's services rendered to Capitala, or Capitala's obligations to Nova, to date [i.e., prior to April 24, 2017]” would be unambiguously within the scope of the release, regardless of the contractual counterparty to the Addendum. ECF No. 70-3 at 2. But for the reasons discussed below, Capitala's allegations, taken as true, do state some claims that fall outside the scope of this release.

         2. Declaratory Judgment Claim (Claim I)

         Capitala's first claim for relief is a request for declaratory judgment that “NFLLC is not entitled to recover any fees from Capitala with respect to Fund V, the 2018 Vehicle, or Capitala SLC.” Counterclaim, ECF No. 56 ¶ 41. NovaFund moves to dismiss this claim, arguing it is barred by the release and that Capitala's allegation that there is no contractual relationship between it and “NFLLC” is implausible. Mot. to Dismiss, ECF No. 70-1 at 14. NovaFund also argues that “declaratory judgment is a remedy not a separate cause of action, ” so the claim should be dismissed on that basis. Id. at 14 n.3.

         NovaFund is correct that “[t]he Declaratory Judgment Act does not . . . . provide an independent cause of action” but “provide[s] a form of relief previously unavailable, ” such that “a court may only enter a declaratory judgment in favor of a party who has a substantive claim of right to such relief.” In re Joint E. & S. Dist. Asbestos Litig., 14 F.3d 726, 731 (2d Cir. 1993). As discussed below, Capitala has adequately alleged other causes of action regarding its contractual liabilities, including claims for rescission of the Term Sheet and Addendum and for breach of contract. And as Capitala notes in its opposition brief, it did include a request for declaratory judgment in its claim for relief. Opp'n to Mot. to Dismiss, ECF No. 81 at 6 n.6; Counterclaim, ECF No. 56 at 22 (seeking “[a] declaratory judgment holding NFLLC is not entitled to any fees under the Term Sheet or Addendum”). Because I find that Capitala states a claim for rescission and for breach of contract, I also find that it may seek declaratory relief regarding its contract dispute. I grant the motion to dismiss Capitala's “Claim I ” as a separate cause of action, but this will not preclude the Court from awarding declaratory relief if it is warranted on Capitala's other claims.

         3. Breach of Contract Claim (Claim II)

         To state a breach of contract claim, a plaintiff must allege formation of an agreement, breach of the agreement by the defendant, and damages. Meyers v. Livingston, Adler, Pulda, Meiklejohn & Kelly, P.C., 87 A.3d 534, 540 (Conn. 2014); Eternity Glob. Master Fund Ltd. v. Morgan Guar. Tr. Co. of N.Y., 375 F.3d 168, 177 (2d Cir. 2004) (applying New York law); Prime Commc 'ns, L.P. v. Ragsdale Liggett, PLLC, No. 5:19-CV-238-FL, 2019 WL 5677928, at *5 (E.D. N.C. Oct. 31, 2019) (applying North Carolina law). “At the motion to dismiss stage, a district court may dismiss a breach of contract claim only if the terms of the contract are unambiguous.” Orchard Hill Master Fund Ltd. v. SBA Commc'ns Corp., 830 F.3d 152, 156 (2d Cir. 2016).

         Here, Capitala pleads its breach of contract claims in the alternative, arguing first that it “has no agreements or contractual relationship with NFLLC, ” but that “[i]f in fact NFLLC was the party with which Capitala contracted, . . . then NFLLC breached its agreement.” Counterclaim, ECF No. 56 ¶¶ 40, 43. Specifically, Capitala alleges that NovaFund “breached its agreement with Capitala by failing to use best efforts to place partnership interests in Capitala Fund V, failing to provide Capitala with exclusive placement services, and abandoning its agreements with Capitala without notice to Capitala . . . . [and] by concealing that it was not a division of Columbus, attempting to provide services without proper licensure, and deceiving Capitala concerning the identity of its contractual counterparty.” Counterclaim, ECF No. 56 ¶¶ 43-44. NovaFund argues that Capitala's claims are barred by the release, that NovaFund did not violate any of the provisions of the Term Sheet, and that “[w]ith respect to NovaFund's performance after the Addendum's execution, Capitala fails to sufficiently allege a breach and how that breach caused it harm.” Mot. to Dismiss, ECF No. 70-1 at 20-25.

         (a) Effect of Release

         Because I find that the Addendum does bar any claims “related to Nova's services rendered to Capitala . . . to date, ” and because NovaFund's performance or nonperformance under the Term Sheet is certainly “related to Nova's services rendered to Capitala, ” the release does bar Capitala's breach of contract claims related to NovaFund's performance prior to April 24, 2017, including alleged violations of the exclusivity requirement of the Term Sheet.

         As Capitala notes, however, the Counterclaim also alleges “breach[es] of the Term Sheet after the Addendum was signed in April 2017.” Opp'n to Mot. to Dismiss, ECF No. 81 at 10. For instance, Capitala alleges that “[a]fter execution of the Addendum, NovaFund continued to default, failing to use its best efforts as the placement agent for Fund V . . . . fail[ing] to make introductions for Capitala with potential investors and fail[ing] to assist Capitala in further marketing of Fund V.” Counterclaim, ECF No. 56 ¶ 26. NovaFund admits that these “performance-based allegations after the Addendum's execution” are “not barred by the release.” Reply, ECF No. 83 at 6. Capitala also alleges that NovaFund's breach of the alleged exclusivity requirement continued after the release. Counterclaim, ECF No. 56 ¶ 26 (“After the execution of the Addendum . . . . NovaFund continued to make introductions which resulted in capital commitments for funds that were in direct competition with Fund V.”). The release cannot be a complete bar, therefore, to this claim.

         (b) Sufficiency of Pleadings

         Capitala alleges that, continuing after the execution of the Addendum, NovaFund “fail[ed] to use its best efforts[, ] . . . . failed to make introductions . . . and failed to assist Capitala in further marketing of Fund V.” Id. ¶ 26. This alleged post-release conduct violates the specific requirement in the Term Sheet that “NovaFund will make best efforts to place partnership interests in [Fund V] . . . . [and] to assist with the preparation of offering materials and, in coordination with Capitala, contacting potential Fund investors.” Term Sheet, ECF No. 81-1 at 2. Based on this alleged post-release conduct, Capitala has plausibly alleged both a duty and a breach.

         I also find that Capitala's plausibly alleges a post-release breach of the Term Sheet's purported exclusivity requirement. Capitala avers that, even after April 2017, NovaFund “continued to make introductions which resulted in capital commitments for funds that were in direct competition with Fund V. “ Counterclaim, ECF No. 56 ¶ 26. This conduct could plausibly violate the provision of the Term Sheet stating, “As compensation for the advisory and exclusive placement services to be provided by NovaFund hereunder, Capitala agrees to pay NovaFund a monthly fee . . . .” ECF No. 81-1 at 3. The parties dispute whether this exclusivity language restricted NovaFund or Capitala. Capitala alleges that “NovaFund agreed not to accept an engagement for any investment vehicle that could be competitive with Fund V, ” Counterclaim, ECF No. 56 ¶ 1, while NovaFund argues that the provision “meant Capitala was prohibited from retaining any other placement agents, ” Mot. to Dismiss, ECF No. 70-1 at 21. Considering only the allegations contained within Capitala's Counterclaim, I find that the provision is sufficiently ambiguous to prevent dismissal of Capitala's allegations at this stage.[4] Capitala's proposed interpretation is plausible, particularly since payment of a monthly “Retainer Fee” to NovaFund-in addition to commission-based “Success Fee[s]” and “Tail Fee[s]”-makes sense as compensation for NovaFund's forgoing other employment opportunities. Therefore, Capitala's allegation that NovaFund failed to recruit investors exclusively for Fund V even after April 2017 plausibly alleges a breach of NovaFund's contractual duties.

         NovaFund also argues that Capitala failed to allege “how [any post-release] breach caused it harm.” Mot. to Dismiss, ECF No. 70-1 at 22. At the motion to dismiss stage, however, a plaintiff “need not . . . specify the measure of damages nor plead . . . [specific] proof of causation.” Terex S. Dakota, Inc. v. Carraro Drive Tech, S.P.A., No. 3:17-CV-00154, 2018 WL 1211198, at *3 (D. Conn. Mar. 8, 2018). In addition, nominal damages are available in Connecticut, New York, and North Carolina for breach of contract even in the absence of actual damages. Lydall, Inc. v. Ruschmeyer, 282 Conn. 209, 254 (2007) (noting that nominal damages are available for breach of contract claims in Connecticut); Ely-Cruikshank Co. v. Bank of Montreal, 81 N.Y.2d 399, 402 (1993) (Under New York law, “[n]ominal damages are always available in breach of contract actions.”); Prime Commc'ns, 2019 WL 5677928, at *6 (applying North Carolina law and finding, “First, ‘[i]n a suit for damages for breach of contract, proof of the breach would entitle the plaintiff to nominal damages at least.' . . . Therefore, where plaintiff alleges a breach of the obligation to use best efforts, plaintiff's breach of contract claim must proceed at least on the basis of nominal damages”). Here, Capitala alleges that NovaFund's post-release conduct caused damages, including “payments made under the agreements, and [] losses caused by the delay of NFLLC in raising investors for Fund V.” Counterclaim, ECF No. 56 ¶ 46. Though courts may dismiss breach of contract claims “[w]here a party has failed to come forward with evidence sufficient to demonstrate damages flowing from the breach alleged and relies, instead, on wholly speculative theories of damages, ” Capitala has alleged specific conduct that could plausibly cause specific damages in the form of payments to NovaFund and lost investors. Lexington 360 Assocs. v. First Union Nat'l Bank of N.C. , 651 N.Y.S.2d 490, 492 (1st Dep't 1996).[5] At the very least, Capitala has alleged a basis for nominal damages due to NovaFund's alleged failure to use best efforts after April 2017. Prime Commc 'ns, 2019 WL 5677928, at *6. Accepting Capitala's allegations as true, I find that it has adequately alleged a breach of contract claim based on NovaFund's post-release conduct, and I deny the motion to dismiss this claim.

         (c) Breach of the Implied Covenant of Good Faith and ...


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