United States District Court, D. Connecticut
RULING ON PENDING MOTIONS (ECF Nos. 67, 70,
Michael P. Shea, U.S.D.J.
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.
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.
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.
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.
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.
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
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.
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.
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.
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.
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.
“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,
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.
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
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.
MOTION TO DISMISS COUNTERCLAIM (ECF No. 70)
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).
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”).
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.
Mutual Release in the Addendum
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. 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.
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)). “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
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.
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 . . . .”).
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.
Declaratory Judgment Claim (Claim I)
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.
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.
Breach of Contract Claim (Claim II)
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).
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.
Effect of Release
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.
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.
Sufficiency of Pleadings
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.
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. 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
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). 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.
Breach of the Implied Covenant of Good Faith and ...