FCS Advisors, LLC; Brevet Direct Lending - Short Duration Fund, L.P. Plaintiffs - Appellants
State of Missouri; Douglas Nelson Defendants - Appellees
Submitted: February 12, 2019
from United States District Court for the Western District of
Missouri - Jefferson City
SMITH, Chief Judge, BENTON and STRAS, Circuit Judges.
investor loaned $20 million to EngagePoint, Inc., which was
the prime contractor on a major software project for the
State of Missouri. When Missouri terminated the contract and
EngagePoint was unable to repay its debts, the investor sued
and claimed that Missouri had fraudulently induced the loan
and illegally discriminated against EngagePoint. The district
court dismissed the lawsuit, and we affirm.
hired EngagePoint, a minority-owned information-technology
company, to redesign the software for its health-benefits
programs. Douglas Nelson, the Commissioner of Missouri's
Office of Administration at the time, managed the project,
which had an estimated cost of $147 million financed through
a combination of state and federal funds.
EngagePoint's costs ballooned, Nelson allegedly
encouraged the company to do something to improve its cash
flow. Acting on this advice, EngagePoint turned to Brevet
Direct Lending - Short Duration Fund, L.P. and its
administrative agent, FCS Advisors, LLC (together,
"Brevet"), for a loan. Brevet is a private lender
engaged in so-called "impact lending," which
focuses on promoting social or environmental objectives such
as, in this case, supporting a minority-owned business.
making the loan, Brevet held a conference call with Nelson,
who allegedly "led [Brevet] to believe, in words or
substance," that he was pleased with EngagePoint's
work and that the company was likely to continue to serve as
the prime contractor through the end of the project. Shortly
after the call, Brevet approved the loan.
days later, however, EngagePoint's role diminished. And
within months, Missouri terminated EngagePoint altogether,
refused to pay the company for its past work, and found a new
prime contractor. This sequence of events left the company
unable to repay its loan and Brevet looking for a way to
recoup its losses.
sued Nelson and the State of Missouri in federal district
court based on two theories. The first was that Nelson
fraudulently induced it into making what turned out to be an
ill-advised loan. The second was that Nelson's alleged
racial animus toward EngagePoint's "Asian-Indian
American management" led to the company's
termination, which violated federal anti-discrimination laws.
The district court rejected both theories and dismissed
review the dismissal de novo, "accepting as true the
allegations . . . and drawing all reasonable inferences in
favor of the nonmoving party." Star City Sch. Dist.
v. ACI Bldg. Sys., LLC, 844 F.3d 1011, 1016 (8th Cir.
2017). To survive a motion to dismiss, the complaint had to
contain "sufficient factual matter" to state a
facially plausible claim for relief. Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). The
fraudulent-inducement claim had to be pleaded with
particularity, including "the who, what, where, when,
and how of the alleged fraud." Mitec Partners, LLC
v. U.S. Bank Nat'l ...