United States District Court, W.D. Kentucky, Louisville
IVAN WARE & SON, INC. d/b/a WARE, INC. PLAINTIFF
DELTA ALIRAQ, INC., et al. DEFENDANTS
Charles R. Simpson III, Senior Judge
case is before the court on defendants Delta Aliraq, Inc.
(“Delta”), Kais Almarzouk
(“Almarzouk”) and Armando Dupont's
“Defendants”) motion for summary judgment. ECF
No. 130. Plaintiff Ivan Ware & Son, Inc.
(“Ware”) responded, and Defendants replied. ECF
Nos. 135, 136. Ware subsequently moved for leave to file a
sur-reply to address new arguments in Defendants' reply.
ECF No. 139. For the reasons set forth below, Ware's
motion for leave to file a sur-reply will be granted, and
defendants' motion for summary judgment will be granted
in part and denied in part.
facts of this case were presented in detail in the memorandum
opinion regarding plaintiff's previous motion for summary
Prior to May 2007, the Iraqi Ministry of Oil (“the
Ministry”) requested proposals to supply three boilers
at the Iraqi government-owned South Oil Refinery near Basrah,
Iraq. The Ministry sought a “turn key” project,
which required the successful bidder to design and
manufacture boiler components, produce spare parts, install
the system, and provide engineering services and operational
training. After the initial bid, the bid process mandated
that the South Oil Refinery conduct a technical review of the
project proposals. The South Oil Refinery would then
contingently award the project contract. After this initial
award, the Ministry reviewed and determined whether to
consent to and award the contract. The Ministry's award,
however, was further conditioned on credit and bid bond
requirements. Mem Op., ECF No. 105, pp. 1-2.
seeking to bid on this project, sent out requests for
proposals (“RFPs”) to several boiler providers,
including Ware. ECF No. 130-2. Ware responded to Delta's
RFP, quoting a price of $18, 500, 000 to $20, 000, 000. ECF
No. 130-3. Delta relied on Ware's proposal in drafting
its bid for the South Oil Refinery project. ECF No. 130-4.
Ware then signed a letter of representation, stating that
“Mr. Kais Almarzouk and Delta Aliraq are authorized to
represent Ware for the sale of new boiler equipment in Iraq .
. . for a period of six months from [May 9, 2007] prior to
the contract[, ] [which] will be extended through the life of
the program if a purchase order/LC is placed with
Ware.” ECF No. 100-2, p. 1. The letter further stated
that “[t]his notification of representation does not
convey that a relationship other than that of an Independent
contractor exists between the two companies.”
Id. During this time, communication on behalf of the
companies was primarily between Delta's President and
Chief Executive Officer (“CEO”), Kais Almarzouk,
and Ware's Director of Sales, Steven Taylor.
Oil Refinery initially rejected Delta's bid-as it failed
to include certain required elements-but allowed the company
to re-submit a revised bid. ECF No. 59-1, p. 88. Delta and
Ware then jointly revised the bid and submitted it on August
18, 2007. ECF No. 130-5.
review of Delta's bid, South Oil Refinery sought
additional information concerning Ware's financial
integrity, as it had not previously worked with the company.
ECF No. 59-1, pp. 99-100. Ware provided a financial statement
written by two independent auditors. ECF No. 130-6. During
the review period, a Delta employee learned from a government
official associated with the South Oil Refinery project that
there were concerns regarding Ware's participation. ECF
No. 59-1, pp. 92-93. In October 2007, Delta sent a letter to
the Ministry indicating that if Delta were awarded the
project, the Ministry could choose whether Ware or another
company supplied the boilers. ECF No. 59-1, pp. 101-102.
Delta never informed Ware that the Ministry had concerns
about its participation, or that Delta told the Ministry it
could ultimately choose the boiler supplier. Id. at
148-49. In fact, Delta told Ware that it was “good
news” that the Ministry was investigating its
financials because Delta wanted Ware “to stay the
course.” Id. Delta admits that during the bid
review process, it received proposals from two of Ware's
competitors- Nebraska Boiler and English Boiler-but these
proposals were never submitted to the Ministry. ECF No.
100-5, p. 101.
the bid review, Ware provided Delta with a $1.5 million bid
bond from Fidelity and Deposit Company of Maryland. ECF No.
59-4. According to Ware, Delta requested that it provide this
bid bond. ECF No. 11-1, ¶ 10. Delta contests this,
stating that it never asked for Ware to provide a bid bond
because the bond for the project was required to come from an
Iraqi bank. ECF No. 59-1, p. 93-95. Delta ultimately
submitted a bid bond to the Ministry. ECF No. 130-7.
November 5, 2007, the South Oil Refinery awarded the project
to Delta, conditioned upon Delta providing an additional
three-month bank guarantee. ECF No. 130-8. Delta then
informed Ware that it received the award for the project, but
explained that it no longer had sufficient funding to cover
the bid through the remaining review process. ECF No. 130-9.
Delta requested that Ware provide it with a $100, 000 loan.
Id. at p. 4. On November 19, 2007, Ware responded to
Delta's letter, providing a proposed equipment sales
agreement and stating that Ware could not provide any funds
until an agreement between the two parties was formalized.
ECF No. 11-1, ¶ 13. Then, on December 16, 2007, Delta
informed Ware that it had obtained the funding through two
investors. Id. ¶ 14-15. Delta told Ware that it
would need a final proposal for the boilers, and informed
Ware that there was a second project from the Ministry that
the companies could partner on. Id. at ¶ 15.
However, Delta never signed Ware's equipment sales
November 2007 to February 2008, Ware continued to work on
formalizing details for the project with Delta. Id.
at ¶ 16. During this time period, Delta continued to get
negative feedback from the Ministry regarding Ware's
participation in the project. ECF No. 100-5, p. 98. The
Ministry was familiar with Ware's competitors, Nebraska
Boiler and English Boiler, but was unfamiliar with Ware.
Id. In response to this, Delta submitted a letter to
the Ministry stating that it would be working with Ware, and
vouching for Ware's business experience. ECF No. 55-10.
25, 2008, the Ministry awarded Delta the contract for the
project. ECF No. 130-13. However, two weeks later the Deputy
Minister of the Ministry unilaterally changed the payment
schedule for the award, requiring Delta to shoulder a greater
cost burden during construction. ECF No. 130-15.
Specifically, the modifications required a new performance
bond equal to 5% of the purchase price. Id.
contacted Ware regarding the contract for the project. ECF
No. 130-16. Delta told Ware that it would like to enter a
partnership with Ware, but that it had insufficient funds to
complete the project. Id. Both Delta and Ware then
began searching for alternative ways to fund the project.
Id. During this time, Ware sent a letter of intent
and another equipment sales agreement to Delta. ECF No.
130-17. Delta signed the letter of intent, but did not
execute the equipment sales agreement. Id.
efforts by both Delta and Ware, the companies were initially
unable to secure financing for the project. As a last resort,
Delta met with investor Dave Weisman to secure the funding
for the project. Weisman agreed to provide the funds for the
South Oil Refinery project in exchange for 55% of the
project's profits, return on investment funds, and a
position as CEO. ECF No. 130-18.
positioned as CEO, Weisman requested boiler
providers-including Ware, Nebraska Boiler, and English
Boiler-re-submit proposals for the project. ECF No. 11-1,
¶ 28. Ware submitted a revised copy of its proposal in
February 2009, which included its copyrighted technical
proposal. ECF No. 130-20. At some point, Delta showed
Ware's technical proposal to Nebraska Boiler without
Ware's consent. ECF No. 130-21; ECF No. 100-5, p. 158. In
April 2009, Delta-under Weisman's authority-executed a
contract with Nebraska Boiler for the production of boilers
for the project. ECF No. 130-24.
2012, Delta's Board of Directors voted to terminate
Weisman as CEO based on his alleged embezzlement of funds
from the corporation. ECF No. 100-5, pp. 121-22. Almarzouk
subsequently resumed his position as CEO. As of May 2012,
Delta had not completed the South Oil Refinery project
because the company “r[an] out of money.”
Id. at 162.
filed suit against Delta in this court, alleging fraud in the
inducement, quantum meruit and unjust enrichment. ECF No. 1.
Ware subsequently amended its complaint, adding Almarzouk and
Dupont as co-defendants and adding claims for promissory
estoppel, breach of fiduciary duty, and piercing the
corporate veil. ECF No. 59. Defendants now move for summary
judgment on all of Ware's claims. ECF No. 130.
trial court shall grant summary judgment in a case “if
the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a
matter of law.” Fed.R.Civ.P. 56(a). The party moving
for summary judgment bears the initial burden of
“demonstrating that [there is] no genuine issue of
material fact.” Celotex Corp. v. Catrett, 477
U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the
moving party satisfies this burden, the burden then shifts to
the nonmoving party to “point to evidence demonstrating
that there is a genuine issue of material fact for
trial.” Id. at 323 (emphasis added).
considering a motion for summary judgment, the court must
consider the facts in the light most favorable to the
nonmoving party. Scott v. Harris, 550 U.S. 372, 378,
127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). However, the
nonmoving party “must do more than simply show that
there is some metaphysical doubt as to the material
facts.” Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538
(1986). There must actually be “evidence on which the
jury could reasonably find for the [nonmoving] party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252,
106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
contend that they are entitled to summary judgment on all of
Ware's claims. Specifically, Defendants argue that Ware
has failed to demonstrate prima facie claims for fraud in the
inducement, quantum meruit/unjust enrichment, promissory
estoppel, and breach of fiduciary duty. Additionally,
Defendants claim that Ware has not shown a need to pierce the
corporate veil to extend liability to Almarzouk and Dupont in
their individual capacities. These arguments will be
addressed in further detail below.
Count I: Fraud in the Inducement
of Ware's amended complaint alleges that Delta defrauded
Ware by making multiple oral misrepresentations and omissions
“which caused Ware to provide Delta with Ware's
technical expertise, legal counsel, contractors, team and
copyrighted information.” ECF No. 59, ¶¶
85-86. Because the elements for fraud by misrepresentation
are different than those for fraud by omission, these claims
will be considered separately. Rivermont Inn v. Bass
Hotels & Resorts, Inc., 113 S.W.3d 636, 641 (Ky. Ct.
Fraud By Misrepresentation
order to state a claim for fraud by misrepresentation, a
plaintiff “must establish six elements by clear and
convincing evidence: (a) material representation; (b) which
is false; (c) known to be false or recklessly made; (d) made
with inducement to be acted upon; (e) acted in reliance
thereon; and (f) causing injury.” Farmers Bank
& Trust Co. of Georgetown, Ky. v. Wilmott Hardwoods,
Inc., 171 S.W.3d 4, *11 (Ky. 2005). A material
representation “must concern an existing or a past
fact, and not a future promise, prophecy, or opinion of a
future event, unless [the] declarant falsely represents his
opinion of a future happening.” Kentucky Elec. Dev.