District Judge Arthur D. Spatt
Texas residents Murphy and Seabolt were chief executive and general counsel of Texas-based STW Resources Holding Corp. (STW). Under a Feb. 8, 2016 financing agreement Virginia firm Power Up Lending Group Ltd. provided STW $150,000. STW would repay $202,500 over 168 daily automatic payments. Murphy executed the financing agreement as STW’s CEO. On STW’s behalf he also executed a $202,500 confession of judgment in Power Up’s favor. After defaulting repayment, STW sought bankruptcy relief on Aug. 2, 2016. Invoking the court’s diversity jurisdiction, Power Up sued defendants for fraudulent inducement and tortious interference with contract. District court denied defendants’ motion to dismiss suit. It found Power Up’s’ amended complaint asserted it was defrauded both in conversations with defendants and in documents they prepare and/or signed, wherein defendants withheld the true financial situation and knowingly made false affirmative statements about STW’s finances. Combined with Power Up’s claim it would not have entered the financing agreement were it not for defendants’ fraudulent statements and omissions, the court concluded Power Up’s fraud claim met FRCP 9(b)’s heightened pleading standard.