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School’s Foundation Fails to Upend Fraud Claims

RICHMOND, Va. (CN) - Old Dominion University's Research Foundation cannot dismiss claims it fraudulently exaggerated its ability to produce biodiesel and other valuable chemicals to net a lucrative contract.

In an underlying lawsuit that's now layered in a series of counterclaims, Aqua Terra accused the research foundation of making fraudulent misstatements and omitted critical facts in order to secure an exclusive licensing agreement. Among these omissions was the fact it had not yet developed the technology necessary to fulfill its promises.

The foundation was also accused of withholding a scientific report which predated their agreement and detailed their difficulties in producing the relevant bio-fuels.

Old Dominion then filed a countersuit, accusing Aqua Terra of breaching it contract by failure to make a required payment.

Aqua Terra responded by amending its complaint accusing the foundation of actual and constructive fraud.

On November 18, 2014, the foundation filed a motion to dismiss and an additional motion to strike elements of the amended complaint. In doing so it argued that the alleged misrepresentations are not actionable because they are opinions or promises of future performance, that Aqua Terra did not reasonably rely on its statements, and finally, that a claim of constructive fraud cannot be based on a fraudulent omission or concealment of material facts.

The foundation also claimed Aqua Terra did not respond fully to an earlier court order and failed to include document related to exchanges between the two entities that is highly material to the case.

On review, Senior U.S. District Judge Henry Coke Morgan Jr. noted that the court had already found that Aqua Terra had pled a valid cause of action for fraud.

"The Amended Counterclaim continues to rely on the Services Agreement, and it maintains the same allegations that ODURF knew it could not perform its obligations, that it knew it had not developed the technology it represented, that it knew Aqua Terra was interested in a commercialized product, that Aqua Terra reasonably relied on ODURF's representations, and that Aqua Terra was accordingly damaged."

"While not every single allegation in and of itself may lead to a valid fraud claim, the Amended Counterclaim continues to plead what the Court earlier found to be a valid fraud claim," Morgan wrote.

As to the other claims, the judge held that "the prejudice to ODURF is not severe as it has already filed a responsive pleading that it does not have sufficient information to either admit or deny the allegations. Moreover, this information should be discoverable from either or both parties as the statements were contained in e-mails. Thus, dismissing an entire pleading for failing to attach a discoverable document, when the Court has found sufficient allegations pleading a valid fraud claim, is unwarranted."

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