ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT (Doc. 48)

TIMOTHY S. BLACK, District Judge.

This civil action is presently before the Court on motion for partial summary judgment filed by Defendant Advent Financial Services, LLC's and Defendant/Counterclaimant NovaStar Financial, Inc. (collectively "Defendants") (Doc. 48), and the parties' responsive memoranda (Docs. 54, 57).

I. BACKGROUND FACTS AS ALLEGED BY PLAINTIFF ITS

This case arises from a business dispute between ITS Financial, LLC ("ITS"), Advent Financial Services, LLC ("Advent"), and NovaStar Financial, Inc. ("NovaStar").1 ITS franchises "Instant Tax Service" stores that provide tax preparation services directly to customers. Advent partners with businesses such as ITS to provide certain tax related financial products to the customers of tax preparation businesses, e.g., early season loans ("ESLs")2 and refund anticipation loans ("RALs").3

About a month before tax season, after a long series of negotiations, ITS entered into a License and Operations Agreement ("L & O Agreement") whereby Advent agreed to provide ESLs and RALs to customers of ITS franchised stores. Included in these negotiations was discussion about the anticipated funding that would be required to adequately fund ITS' need for ESLs and RALs. The Loan Forecast Volume outlined in the Agreement required lending capacities in the amounts of ten to twelve million dollars for the ESL program and approximately two hundred million dollars for the RAL program. Both parties knew that these amounts were based on a 50% approval rate for the loans, which was specifically provided for in the Agreement. Advent committed to using, and was later contractually obligated to use, its commercially reasonable best efforts to achieve this loan approval rate and assured ITS prior to contract formation that it had already acquired sufficient lending capacity to meet these projections.

ITS alleges that Advent knew that, absent this assurance, ITS would have ceased negotiating with Advent because ITS would not have done business with a new company for a business venture of this size and import. Also based on this assurance, ITS ceased negotiating with Republic Bank ("Republic"), a potential business partner which was willing and able to provide a RAL program to ITS and which already had lending capacity sufficient to meet the aforementioned projections required by ITS. ITS entered into the Agreement with Advent based upon these assurances and paid $200,000 to a third party company to get it to waive an exclusivity clause in a contract it had with ITS to provide ESLs.

As it turned out, Advent did not have sufficient lending capacity to meet the agreed upon requirements, nor did Advent ever acquire such capacity. Yet, a few days before the start of the ESL and RAL program, NovaStar allegedly assured ITS that Advent had sufficient lending capacity in order to prevent ITS from resuming discussions with Republic. NovaStar also attempted to negotiate a new contract that significantly altered the terms of the original Agreement, and was highly prejudicial to ITS. The new contract altered ITS' rights under the original Agreement by, among other things, making ITS pay substantially more in funding and providing for a loan approval rate of 15% rather than 50% — a rate more closely resembling Advent's actual lending capacity. The lending criteria were unacceptable because the market served by ITS is mostly made up of customers with poor credit. The newly proposed lending criteria were specifically designed to deny ESLs and RALs to precisely those to whom such loans are normally provided in the course of everyday business in the industry. After giving in to several of NovaStar's demands in order to get the ESL and RAL programs up and running, ITS declined to sign a new agreement. NovaStar then caused Advent to terminate its original agreement with ITS, leaving ITS without vital products necessary to compete in the tax preparation services industry.

Defendants move this Court to enter partial summary judgment in their favor with respect to the following counts of Plaintiff's complaint: (1) fraud in the inducement (Count I); (2) tortious interference with contract (Count III); (3) fraudulent misrepresentation (Count VI); (4) negligent misrepresentation (Count VII)4; and (5) declaratory judgment (Count VIII).5 Additionally, Defendants request partial summary judgment on the following matters: (1) bar Plaintiff from recovering all damages identified in its Rule 26(a) disclosures6 based on the contractual damages exclusion contained within the L & O Agreement; and (2) bar Plaintiff from recovering punitive damages because all of its tort claims fail as a matter of law and punitive damages are not available for breach of contract claims.

II. UNDISPUTED FACTS7

The License And Operations Agreement Between ITS and Advent

III. STANDARD OF REVIEW

A motion for summary judgment should be granted if the evidence submitted to the Court demonstrates that there is no genuine issue as to any material fact, and that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party has the burden of showing the absence of genuine disputes over facts which, under the substantive law governing the issue, might affect the outcome of the action. Celotex, 477 U.S. at 323, 106 S.Ct. 2548. All facts and inferences must be construed in a light most favorable to the party opposing the motion. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

A party opposing a motion for summary judgment "may not rest upon the mere allegations or denials of his pleading, but. . . must set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 248, 106 S.Ct. 2505 (1986).

IV. ANALYSIS

A. Fraud Claims

A claim of fraudulent misrepresentation arises when a party is induced to enter into an agreement through fraud or misrepresentation. ABM Farms, Inc. v. Woods, 81 Ohio St.3d 498, 692 N.E.2d 574 (1998). "Fraudulent inducement involves a general duty to avoid wrongful conduct that induces a party to enter into a contract." Onyx Envtl. Servs. v. Maison, 407 F.Supp.2d 874, 879 (N.D.Ohio 2005).9 The elements of fraud under Ohio law are: (1) a representation or, when there is a duty to disclose, a concealment of a fact; (2) which is material to the transaction at hand; (3) made falsely, with knowledge of its falsity, or with such utter disregard as to whether it is true or false that knowledge may be inferred; (4) with the intent of misleading another into relying upon it; (5) justifiable reliance on the representation or concealment; and (6) an injury proximately caused by that reliance. Williams v. Aetna Fin. Co., 83 Ohio St.3d 464, 700 N.E.2d 859 (1998).

"In alleging fraud or mistake a party must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). "At a minimum, [the plaintiff] must allege the time, place and contents of the misrepresentations upon which [it] relied." Frank v. Dana Corp., 547 F.3d 564 (6th Cir.2008). "Malice, intent, knowledge, and other condition of mind of a person may be averred generally." Minger v. Green, 239 F.3d 793, 800 (6th Cir.2001).

Defendants argue that the allegations in the Complaint fall short of the standard. The Court disagrees. The Complaint pleads the claims with sufficient particularity to meet the Rule 9(b) standard: Defendants "knowingly made representations and assurances to Instant Tax that they had secured sufficient lending capacity to meet Instant Tax's requirements, and that they had the operational ability to develop and deliver the ESL and RAL programs." (Complaint at ¶ 56). "Defendants repeatedly represented — both before and after they signed the Agreement — that they had secured lending commitments greater than $150,000,000 for the RAL program for Instant Tax." (Id. at ¶ 57). "Defendants intended to induce Instant Tax to rely on their representations that they had sufficient lending capacity to satisfy Instant Tax requirements." (Id. at ¶ 60). "Instant Tax's reliance on Defendants' representations caused detriment to Instant Tax in that Defendants do not have sufficient lending capacity to fund its ESL and RAL program, which will result in a loss of customers." (Id. at ¶ 62).10

The L & O Agreement contains an express provision governing Advent's obligation to obtain lending capacity.11 The L & O Agreement states: "ADVENT convenants that it will obtain sufficient commitments for lending capacity to satisfy the agreed upon Loan Forecast Volume." (L & O Agreement, Section 5(a)). Contrary to Advent's argument otherwise, ITS's misrepresentation claims are not based on Advent's failure to perform a duty encompassed by the L & O Agreement, but rather arise from Advent's alleged misrepresentation of fact during contract negotiations — specifically that it already had obtained sufficient lending capacity. Although Plaintiffs initial conversations were with Advent only, after the Agreement was entered into, Plaintiff alleges that Lance Anderson at NovaStar assured ITS that Advent had secured sufficient lending capacity when ITS expressed doubts. (Ogbazion at ¶ 21). Plaintiff claims that NovaStar's assurances were designed to and did in fact convince ITS from ceasing negotiations with an alternate business partner that was competing with Advent for ITS' business and ultimately prevented ITS from re-engaging Republic. (Id. at ¶ 22). Construing all facts and inferences in a light most favorable to the nonmoving party, Plaintiff alleges sufficient facts to maintain causes of action for fraudulent inducement and misrepresentation.

1. Factually Intertwined

Advent argues that the tort claims and contract claims are intertwined and therefore the tort claims merge with the contract claim. "A breach of contract does not create a tort claim." Textron Fin. Corp. v. Nationwide Mut. Ins. Co., 115 Ohio App.3d 137, 151, 684 N.E.2d 1261 (1996). "A tort claim based upon the same actions as those upon which a claim of contract breach is based will exist independently of the contract action only if the breaching party also breaches a duty owed separately from that created by the contract, that is, a duty owed even if no contract existed." Thornton v. Cangialosi, No. 2:09cv585, 2010 WL 2162905, at *2, 2010 U.S. Dist. LEXIS 51818, at *2 (S.D.Ohio 2010). "If the tort claim is factually intertwined with the breach of contract claim, such that the two cannot be separated, recovery cannot be had for both." Id. at *2, 2010 U.S. Dist. LEXIS 51818, at *2.12 This is so because claims of fraud ordinarily must be premised upon misrepresentations of past or existing fact, not promises relating to future actions or conduct. Williams v. Edwards, 129 Ohio App.3d 116, 717 N.E.2d 368 (Ohio 1st Dist. 1998).

Plaintiffs breach of contract claim, like its fraud-based claims, is based upon the interpretation that Defendants represented that they had sufficient lending capacity which concerned future conduct, and thus customarily would not be actionable as fraud. "An exception to this rule exists, however, where an individual makes a promise concerning a future action, occurrence, or conduct, and, at the time he makes it, has no intention of keeping the promise." Williams, 717 N.E.2d at 374. Here, Plaintiff does not contend that Defendants committed fraud by entering into the contract without any intention of performing according to the contract's terms, but instead that Defendants specifically intended to perform the contract pursuant to an interpretation of its terms that was contrary to the interpretation represented by Defendants to Plaintiff during negotiations, and upon which Plaintiff relied to its detriment in foregoing the Agreement. Plaintiff has made a prima facie case, where it asserts that Defendants made a promise which induced its reliance, and at the time such promise was made, Defendants had no intention of keeping the promise.13

ITS claims that Advent's misrepresentations were actions separate from the later breach of contract, and resulted in ITS losing more than just the loss of its bargain struck with Advent subsequent to the misrepresentations.14 Moreover, Advent's fraudulent misrepresentation did not occur simultaneously or consecutively with Advent's breach of contract — it occurred before contract formation. (Ogbazion Aff. at ¶ 12). Eggert Agency, Inc. v. NA Mgmt. Corp., No. C2-07-1011, 2008 WL 3474148, at *7, U.S. Dist. LEXIS 90830, at *7 (S.D.Ohio Aug. 12, 2008) (denying a 12(b)(6) motion on a similar claim in part because plaintiffs contended that their tort claims arose due to conduct that occurred prior to contract formation). In fact, ITS alleges that Defendants uttered fraudulent misrepresentations to induce ITS into certain acts and omissions both before and after ITS entered into the Agreement. (Ogbazion Aff. at ¶ 12).15 ITS claims that it entered into the L & O Agreement and forwent negotiations with others in detrimental reliance on Defendants' misrepresentations that Advent had secured sufficient lending capacity. Gator Dev. Corp. v. VHH, Ltd., No. C-080193, 2009 WL 1027584, at *4, 2009 Ohio App. LEXIS 1525, at *4 (Ohio Ct.App.2009) (ruling that plaintiff did not establish a separate fraud claim because plaintiff "did not allege any detrimental reliance on a positive misrepresentation").

2. Parol Evidence

Defendants claim that the parol evidence rule bars claims based on representations of fact that are inconsistent with the language of an integrated agreement, citing the L & O Agreement which contains a merger/integration clause:16

Id. at 10. Defendants argue that ITS could not have reasonably relied on representations that Advent already had sufficient lending capacity when the written L & O Agreement expressly contemplates that Advent would obtain sufficient lending capacity.17 However, parol evidence may be used to prove fraud in the inducement in Ohio. Drew v. Christopher Const. Co., 140 Ohio St. 1, 41 N.E.2d 1018, 1018 (1942).

Galmish v. Cicchini, 90 Ohio St.3d 22, 734 N.E.2d 782, 790 (2000). "[T]he parol evidence rule does apply to . . . promissory fraud if the evidence in question is offered to show a promise which contradicts an integrated written agreement. Unless the false promise is either independent of or consistent with the written instrument, evidence thereof is inadmissible." Id. at 791.18 See also Glazer v. Lehman Bros., 394 F.3d 444, 457 (6th Cir.2005) (quoting the same language and applying the "independent of or consistent with" test). The Ohio Supreme Court's analysis in Galmish is fatal to Defendants' position.

3. Economic Loss Rule

Finally, Defendants argue that "[t]he economic-loss rule generally prevents recovery in tort of damages for purely economic loss." Corporex Dev. & Constr. Mgmt., Inc. v. Shook, Inc., 106 Ohio St.3d 412, 835 N.E.2d 701, 704 (2005). However, read in context, the court in Corporex was discussing simple negligence actions and not intentional torts. Immediately after the above statement, the Ohio Supreme Court quoted an earlier decision (Chemtrol Adhesives, Inc. v. American Mfrs. Mut. Ins. Co., 42 Ohio St.3d 40, 537 N.E.2d 624, 630 (1989)), that specifically states as follows: "[t]he well-established general rule is that a plaintiff who has suffered only economic loss due to another's negligence has not been injured in a manner which is legally cognizable or compensable." Id.

Other courts have been critical of the Corporex decision to the extent that it suggests that all torts are barred by the economic loss rule where there is a contract. For example, the Ninth Circuit Court of Appeals observed that the economic loss doctrine has caused much confusion, primarily because some courts have mistakenly stated in "overly broad terms that purely economic losses cannot be recovered in tort." Giles v. GMAC, 494 F.3d 865, 874 (9th Cir.2007). The court in Giles asserted that "[s]uch broad statements are not accurate [as] tort law has traditionally protected individuals from a host of wrongs that cause only monetary damage" such as fraud, fraud in the inducement, or conversion actions. Id. at 875 (noting that "[m]ost courts that have applied the economic loss doctrine beyond product liability cases have done so to bar recovery of economic loss in negligence and strict liability.").19

In Gator Dev. Corp. v. VHH, Ltd., No. C-080193, 2009 WL 1027584, *4, 2009 Ohio App. LEXIS 1525, at *4 (Ohio Ct. App.2009), the court held that the economic loss doctrine barred a fraud claim because it was a "recapitulation of the breach-of-contract claim, seeking recovery of the same economic loss contemplated by the contract." Conversely, in the instant case ITS seeks damages distinct from and in addition to damages caused by Advent's breach of contract.20

D. Tortious Interference (Count III)

The "torts of interference with business relationships and contract rights generally occur when a person, without privilege to do so, induces or otherwise purposely causes a third person not to enter into or continue a business relation with another, or not to perform a contract with another." Super Sulky, Inc. v. U.S. Trotting Ass'n, 174 F.3d 733, 741 (6th Cir. 1999). A plaintiff bears the burden to prove "lack of privilege" or "improper interference." Id. Under Ohio law, a parent company is privileged to interfere with the contracts of a subsidiary for the purpose of protecting the parent company or the subsidiary's financial interest. Canderm Pharmacal, Ltd. v. Elder Pharm., Inc., 862 F.2d 597, 601 (6th Cir.1988).21

ITS's complaint alleges that NovaStar became involved in the contractual relationship between ITS and Advent in an "attempt to limit Advent's outstanding liabilities" because Advent could not secure sufficient lending capacity. (Complaint at ¶¶ 44, 48, 52, 53). ITS relies on GZK, Inc. v. Schumaker P'ship, No. 22172, 2008 WL 1838356, 2008 Ohio App. LEXIS 1690 (Ohio Ct.App. Apr. 28, 2008), which addressed the extent to which a non-parent, third-party may be justified in interfering with a contractual relationship. Id. at *19, 2008 Ohio App. LEXIS 1690, at *19. GZK applies a multi-factor test from Section 767 of the Restatement of the Law of Torts — but this test does not apply to a claim of tortious interference asserted against a parent company. The privilege enjoyed by a parent company is not dependent on a Section 767 analysis.

Accordingly, Defendants' motion for summary judgment on the tortious interference claim (Count III) is GRANTED.

E. Declaratory Judgment (Count VII)

ITS requests Declaratory Judgment, seeking a declaration that:

This claim fails because ITS waived the defense of setoff in the Note:

Accordingly, Defendants' motion for summary judgment on the declaratory judgment claim (Count VIII) is GRANTED.

F. Damages

Per its Rule 26(a) disclosures, Plaintiff seeks to recover damages of approximately $88 million, consisting of lost "revenue" or various forms of consequential damages, lost profits, and lost opportunities.

The L & O Agreement states:

Id. at 8. The express terms of the L & O Agreement bar the recovery of both consequential damages and lost profits. Plaintiff argues that the L & O Agreement is unconscionable. However, clauses barring recovery of both consequential damages and lost profits are fully enforceable. See, e.g., Gen. Elec. Capital Corp. v. Ranch, 970 S.W.2d 348, 358 (Mo.Ct.App.1998) (consequential damages); Roy A. Elam Masonry, Inc. v. Fru-Con Const. Corp., 922 S.W.2d 783, 791 (Mo.Ct.App.1996) (consequential damages); World Enters., Inc. v. Midcoast Aviation, Servs., 713 S.W.2d 606 (Mo.Ct.App.1986) (consequential damages, incidental damages, and lost profits).23

Defendants characterize Plaintiffs damage claim against Advent as consequential damages because ITS's reduction in revenue "is a consequence of Advent's breach of the contract." (Id. at 32). Defendants also characterize ITS's damages against Advent as "lost profits" thereby encompassing them within the damages limitation clause. This characterization bars recovery of all possible damages because all damages recoverable under a breach of contract are lost profits of some kind.

Missouri distinguishes between three different types of damages:

Catroppa v. Metal Building Supply, Inc., 267 S.W.3d 812, 818 (Mo.Ct.App.2008).

ITS' first category of damages, "Lost revenue24 from 2010 Tax Season," (Rule 26(a) Disclosures § III(1)(a)-(d)), constitutes the nonexistent revenue that would have been garnered from customers in exchange for the service that Advent contracted to provide. This is exactly the revenue ITS contracted for, and this is how ITS was going to make money from the contract. The second category of damages, "Future lost profits, over the next four years (remaining term of agreement)," (Id. at § 111(2)), is the exact same type of damages listed in § III(1)(a)-(d) extended out for the length of the Agreement. Plaintiff argues that Defendants' characterization of these damages as "lost profits" is irrelevant.25 Plaintiff maintains that the issue before the Court is into which category of damages these lost profits fall, actual or consequential. Actual damages include lost profits, which may be recovered if: (1) profits were within the contemplation of the parties at the time the contract was made; (2) the loss of profits is the probable result of the breach of contract; and (3) the profits are not remote and speculative and may be shown with reasonable certainty. Charles R. Combs Trucking, Inc. v. Int'l Harvester Co., 12 Ohio St.3d 241, 466 N.E.2d 883 (1984). Plaintiff cannot simply characterize lost profit damages as actual damages and thereby dodge the express terms of the L & O Agreement. In the final analysis, the Court concludes that Plaintiff seeks lost profits and consequential damages which are expressly precluded by the L & O Agreement.

G. Punitive Damages

Fraudulent inducement and fraudulent misrepresentation are tort claims. Yo-Can, Inc. v. The Yogurt Exchange, Inc., 149 Ohio App.3d 513, 778 N.E.2d 80 (2002). Punitive damages may be recovered by a plaintiff injured by fraudulent inducements or misrepresentations. Curran v. Vincent, 175 Ohio App.3d 146, 885 N.E.2d 964 (2007). In such a case, exemplary damages are available in tort even if the case incidentally involves a contract. Id. Under Ohio law, punitive damages may be awarded in tort actions that involve fraud, actual malice, or insult. Preston v. Murty, 32 Ohio St.3d 334, 512 N.E.2d 1174, 1175 (1987).

Accordingly, Defendants request to bar Plaintiff from recovering punitive damages is DENIED.

V. CONCLUSION

Based on the evidence of record, the Court finds that Defendants' motion for partial summary judgment (Doc. 48) is GRANTED with respect to negligent misrepresentation (Count VII), tortious interference (Count III), declaratory judgment (Count VIII); and lost profits and consequential damages, and DENIED as to fraud in the inducement (Count I); fraudulent misrepresentation (Count VI), and punitive damages.

IT IS SO ORDERED.