Reported / Citable
Background
Details Custom Builders, Inc. (DCB), owned by Stelios Roditis, sued Cornbread Ventures and related entities for breach of contract over unpaid change orders for remodeling work performed on a Z’Tejas Southwestern Grill location. Cornbread Ventures responded with its own breach of contract claim against DCB and a fraud claim against both DCB and Roditis individually.
Cornbread alleged that in late 2021 and early 2022, Roditis represented that DCB possessed the experience and skill to manage two construction projects in Texas and Arizona, could complete them within the proposed timeline, and sought to expand DCB’s presence in the Texas market. Cornbread further alleged that throughout the projects, Roditis represented via meetings, calls, emails, and pay applications that disbursed funds would be paid to subcontractors and material suppliers, when in fact Roditis and DCB retained the funds.
Roditis moved to dismiss the fraud claim under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim, arguing the allegations lacked personal liability and violated Rule 9(b)’s particularity requirement.
The Court’s Holding
The magistrate judge found that Cornbread adequately pleaded Roditis’s personal liability as DCB’s owner who made representations directly to Cornbread, satisfying the threshold for holding an agent individually liable for fraudulent statements under Texas law. However, the court determined Cornbread failed to meet Rule 9(b)’s heightened pleading standard for fraud claims, which requires plaintiffs to allege the “who, what, when, where, and how” with particularity.
Although Cornbread adequately identified “who” made the statements (Roditis), it failed to provide sufficient specificity regarding the other elements. The court found Cornbread’s allegations referring to “introductory phone calls and emails,” “in-person meetings,” and “numerous emails” lacked concrete dates and specific details about when statements were made. Generic statements that DCB was capable and could perform on time—ordinary representations in contract negotiations—required greater specificity to satisfy Rule 9(b). Additionally, Cornbread pleaded no facts demonstrating that DCB actually lacked the necessary experience and skill to complete the work.
The magistrate recommended granting Roditis’s motion to dismiss without prejudice and permitting Cornbread to file an amended complaint. The June 26, 2026 amendment deadline had not passed, and the court concluded that greater specificity was within Cornbread’s knowledge.
Key Takeaways
- Rule 9(b) requires fraud allegations to include specific time, place, contents, and identity of the person making false representations—generic capability statements do not suffice.
- An agent (here, a company owner) may be held individually liable for fraudulent statements made in a personal capacity inducing another to contract with the principal.
- Courts will grant leave to amend when a plaintiff fails Rule 9(b) particularity requirements if the amendment deadline has not passed and specificity is within plaintiff’s knowledge.
- Dismissal without prejudice preserves plaintiff’s right to re-plead with adequate factual detail.
Why It Matters
This decision clarifies that fraud claims in commercial construction disputes must clear a high pleading bar. Contractors and vendors cannot rely on general allegations that a party made capability or timeline representations; they must identify specific statements, dates, and communications. This protects defendants from facing discovery burdens based on vague fraud theories while still permitting parties to develop viable claims through amendment.
For construction participants, the decision underscores the importance of contemporaneous documentation. Cornbread’s reference to written pay applications and emails could have survived dismissal had it cited specific dates, email addresses, or application numbers. The ruling reinforces that evidence gathered during performance—detailed records of communications and disbursements—is essential to pleading fraud with the particularity courts now demand.