COKeM International, Ltd. v. MSI Entertainment, LLC

U.S. District Court, District of Minnesota March 25, 2024

Trial Court Opinion

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
COKeM INTERNATIONAL, LTD,
Civil No. 19-3114 (JRT/DJF)
Plaintiff,

v.
MEMORANDUM OPINION AND ORDER
MSI ENTERTAINMENT, LLC; MORRIS GRANTING DEFENDANT JOSEPH
SUTTON; and JOSEPH FAHAM, FAHAM’S MOTION FOR SUMMARY
JUDGMENT
Defendants.

Gerald H. Fornwald, Matthew C. Robinson, and Peter G. Economou,
WINTHROP & WEINSTINE, PA, 225 South Sixth Street, Suite 3500,
Minneapolis, MN 55402, for Plaintiff.

Aaron R. Thom and Samantha Ellingson, THOM ELLINGSON, PLLP, 45 South
Seventh Street, Suite 2610, Minneapolis, MN 55402, for Defendant Joseph
Faham.

Plaintiff COKeM International, LTD (“COKeM”) worked with Defendant MSI
Entertainment, LLC (“MSI”), its owner Morris Sutton and its employee Joseph Faham for
roughly two years. When the relationship soured, COKeM initiated this action to recover
damages primarily from MSI but also alleging fraud by Sutton and Faham. The only claim
at issue in this Order is the fraud claim against Faham. Because the one pled
misrepresentation fails as a matter of law, the Court will grant Faham’s Motion for
Summary Judgment.
BACKGROUND
I. FACTS
COKeM contracted with MSI as a reseller for nearly two years. (Notice of Removal,

Ex. A (“Compl.”) ¶¶ 8–9, 35, Dec. 18, 2019, Docket No. 1.) The parties agreed to a
Distribution Agreement in August 2016, which they amended several times to add profit
sharing and alter specific product agreements. (Id. ¶¶ 9–22.)

COKeM and MSI modified a specific product agreement for various TV video games
scheduled for delivery in 2018 (“2018 Orders”).1 (Id. ¶ 23.) The 2018 Orders agreement
included an initial payment of 30%, $81,931, followed by the remaining 70%, $191,171,
to ensure complete delivery. (Decl. Charles Bond (“Bond Decl.”) ¶¶ 4–5, 13, Aug. 7, 2023,

Docket No. 164.) MSI coordinated delivery of the 2018 Orders through Faham and other
MSI employees. (Id. ¶¶ 3, 5–7, 12, 14, Exs. A–B, G–H.)
After the initial payment, COKeM alleges Defendants made “repeated
representations” in March and April 2018 to indicate the 2018 Orders were ready to be

fulfilled. (Compl. ¶ 25.) Specifically, Faham is accused of forwarding an email, he knew
or should have known to be false on March 28, 2018, providing a delivery schedule to
COKeM. (Bond Decl. ¶ 6, Ex. A; Decl. Joseph Faham, Ex. 1, July 17, 2023, Docket No. 162;
Compl. ¶¶ 26–27.) COKeM alleges he also indicated on “multiple occasions” that the

1 The Complaint references other specific amendments but only the 2018 Orders are
relevant to COKeM’s fraud claims against Faham. Thus, the Court will so limits its factual history.
2018 Orders were ready for shipment and would be dispatched upon payment by COKeM.
(Bond Decl. ¶ 12, Ex. G; Compl. ¶¶ 26–27.) COKeM makes additional general allegations

about MSI and Sutton’s misrepresentations. (Compl. ¶¶ 28–30.)
COKeM claims that the Defendants knew or should have known at the time of the
misrepresentations that the 2018 Orders would not arrive in time or in full and that the
Defendants used these misrepresentations to induce COKeM into sending the remaining

70% payment to MSI. (Id. ¶¶ 31–33.)
After numerous disputes, the parties terminated their business relationship and
MSI acknowledged that it owed COKeM money. (Id. ¶¶ 35–36.) COKeM had not received

any payment from MSI as of June 2022. (Id. ¶ 40; Mem. Op. & Order at 7 n.1, June 6,
2022, Docket No. 146.) COKeM requests $191,171 plus interest, costs, disbursements,
and reasonable attorneys’ fees and costs in damages on its fraud claim against Faham.
(Compl. ¶¶ 33–34, 70.)

II. PROCEDURAL HISTORY
COKeM’s initial Complaint against MSI, Sutton, and Faham contained five counts:
(1) breach of contract against MSI; (2) accounts stated and unpaid against MSI; (3) unjust
enrichment against MSI; (4) conversion against MSI; and (5) fraud against all Defendants.

(Id. ¶¶ 41–70.) The Court issued default judgment against MSI requiring payment of all
outstanding debt and dismissing MSI’s counterclaims. (Order Awarding Default J. at 2,
May 21, 2021, Docket No. 93.) COKeM proceeded in its suit against Sutton and Faham.
The claims against Sutton are stalled as he has passed away and his estate is refusing to
appoint a representative. (Letter to District Judge by COKeM at 1–2, May 1, 2023, Docket
No. 156.) Meanwhile, the Court advised the remaining parties, COKeM and Faham, that

they should submit any additional motions. (Order in Response to Letters, June 20, 2023,
Docket No. 158.) Faham then filed a motion for summary judgment.2 (Mot. Summ. J.,
July 17, 2023, Docket No. 159.)
DISCUSSION

I. STANDARD OF REVIEW
Summary judgment is appropriate when there are no genuine issues of material
fact, and the moving party can demonstrate that it is entitled to judgment as a matter of
law. Fed. R. Civ. P. 56(a). A fact is material if it might affect the outcome of the case, and

a dispute is genuine if the evidence is such that it could lead a reasonable jury to return a
verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 248

 (1986).  
A court considering a motion for summary judgment must view the facts in the light most 
favorable to the nonmoving party and give that party the benefit of all reasonable 

inferences to be drawn from those facts.  Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,

475 U.S. 574, 587

 (1986).  The nonmoving party may not rest on mere allegations or 
denials but must show, through the presentation of admissible evidence, that specific 
facts exist creating a genuine issue for trial.  Anderson,

477 U.S. at 256

 (discussing Fed. R. 



    2 The Court previously denied Faham’s motion for summary judgment based on an 
independent duty theory.   (Mem. Op. & Order at 9–10, June 6, 2022, Docket No. 146.)  None of 
the arguments in this briefing are foreclosed by the Court’s previous order.  
Civ. P. 56(e)).  “The mere existence of a scintilla of evidence in support of the plaintiff’s 
position will be insufficient; there must be evidence on which the jury could reasonably 

find for the plaintiff.”

Id. at 252

.                                     
II.  FRAUD CLAIMS                                                         
    The only claim at issue in this motion is COKeM’s fraud claim against Joseph Faham.  
Federal Rule of Civil Procedure 9(b) governs fraud pleadings in federal court.  Under Rule 

9(b)’s particularity requirement, Plaintiffs must allege “such matters as the time, place, 
and contents of false representations, as well as the identity of the person making the 
misrepresentation and what was obtained or given up thereby.”  Schaller Tel. Co. v. 
Golden  Sky  Sys.,  Inc.,

298 F.3d 736, 746

  (8th  Cir.  2002)  (quoting  Abels  v.  Farmers 

Commodities Corp.,

259 F.3d 910, 920

 (8th Cir. 2001)).  Essentially, Plaintiffs must plead 
the “who, what, where, when, and how” of the alleged fraud.  United States ex rel. Joshi 
v. St. Luke’s Hosp., Inc.,

441 F.3d 552, 556

 (8th Cir. 2006) (citing United States ex rel. 
Costner v. URS Consultants, Inc.,

317 F.3d 883, 888

 (8th Cir. 2003)).     

    Rule 9(b)’s particularity requirement “demands a higher degree of notice than that 
required for other claims” so that a defendant can “respond specifically and quickly to the 
potentially damaging allegations.”  Costner,

317 F.3d at 888

.  “[C]onclusory allegations 

that a defendant’s conduct was fraudulent and deceptive are not sufficient to satisfy the 
rule.”  Schaller Tel. Co.,

298 F.3d at 746

 (quoting Commercial Prop. v. Quality Inns Int'l, 
Inc.,

61 F.3d 639, 644

 (8th Cir. 1995)) (alteration in original).  The heightened pleading 
standard is mandatory, any challenges need not be raised as an affirmative defense, and 
the court can address the pleadings sua sponte.  Hennessey v. Gap, Inc., No. 19-1867,

2022 WL 4447399

, at *3 (E.D. Mo. Sept. 23, 2022), aff’d,

86 F.4th 823

 (8th Cir. 2023).  

    A.   Fraud by Omission                                               
    Fraud by omission is a viable claim under Minnesota Law, but COKeM did not 
include this theory in its Complaint.  A party may not assert new claims for the first time 
in response to a motion for summary judgment.  Rodgers v. City of Des Moines,

435 F.3d 904

, 909–10 (8th Cir. 2006); Wickner v. McComb, No. 9-1220,

2010 WL 3385079

, at *12 
(D. Minn. July 27, 2010), adopted, No. 09-1220,

2010 WL 3385082

.  Because COKeM raised 
fraud by omission for the first time in its responsive summary judgment briefing, the Court 
will grant Faham’s Motion for Summary Judgment on COKeM’s fraud by omission claim.  

    B.   Negligent/Fraudulent Misrepresentation                          
    There is at least one adequately plead negligent/fraudulent misrepresentation 
claim3 stemming from the March 28, 2018 email.  However, one instance of adequate 
pleading does not automatically allow a case to proceed.  Rather the Court must evaluate 

whether other misrepresentations missing from the Complaint can be used in support of 



    3 COKeM’s Complaint pleads fraud generally but the terminology “should have known” 
indicates an intent to plead negligent misrepresentation as well as fraudulent misrepresentation.  
The parties focus on the fraudulent misrepresentation claim, without mention of negligent 
misrepresentation. Thus the Court will also focus on fraudulent misrepresentation.  Even so, the 
only difference between negligent and fraudulent misrepresentation claims is the state of mind.  
Cox v. Mortg. Elec. Registration Sys. Inc.,

685 F.3d 663

, 672–73 (8th Cir. 2012).  Because the Court’s 
analysis here does not turn on state of mind, the analysis of fraudulent misrepresentation applies 
equally to a negligent misrepresentation claim.                           
the fraud claim and if not, if the March 28 email independently survives summary 
judgment.                                                                 

         1.   Additional Representations                                 
    COKeM’s  Complaint  contains  only  one  specific  communication  attributed  to 
Faham—the  March  28,  2018  email—preceded  by  vague  allegations  of  other 
communications between March and April of 2018 relating to the 2018 Orders.  In its 

briefing, COKeM claims the March 28 email was pled as a representative example and 
that  the  other  more  general  statements  logically  encompassed  additional 
communications from Faham.                                                
    Because these additional communications are not described in the Complaint, the 

Court must determine if, notwithstanding their absence, the Complaint as pled provided 
sufficient notice to Faham.  The heightened pleading standard must be read in harmony 
with Federal Rule of Civil Procedure 8(a)’s notice requirements.  Select Comfort Corp. v. 

Sleep Better Store, LLC,

796 F. Supp. 2d 981, 984

 (D. Minn. 2011).  The heightened pleading 
standard does not require a party to plead the particulars of every instance of fraud, but 
they must plead a representative example such that the accused can adequately respond.  
Joshi, 441 F.3d at 556–57; Ransom v. VFS, Inc.,

918 F. Supp. 2d 888, 898

 (D. Minn. 2013).  

A complaint is sufficiently detailed if it informs the defendant of the “core factual basis 
for the fraud claims.”  Ransom,

918 F. Supp. 2d at 898

 (quotation omitted).  Notice is 
evaluated  from  the  entire  complaint,  not  just  specific  accusations,  and  takes  into 
consideration the nature of the case and the relationship of the parties.  CPI Card Grp., 
Inc. v. Dwyer,

294 F. Supp. 3d 791, 820

 (D. Minn. 2018); In re Mirapex Prods. Liab. Litig.,

246 F.R.D. 668, 672

(D. Minn. 2007).

By including only the March 28 email in the Complaint, COKeM asks Faham to infer
many other details of his alleged wrongdoing. That is insufficient. For instance, the
Complaint suggests that all the fraudulent communications took place in March and April;
then in its briefing, COKeM expands that timeframe to include May and June. The

Complaint references multiple MSI employees, confusing which communications can be
attributed to whom. The Complaint does not describe any specific fraudulent
communications actually drafted by Faham. It only describes content created by a third

party and forwarded by Faham. And while the delivery schedule attached to the March
28 email references dates of delivery, it does not address payments at all. It is difficult to
imagine how Faham would have been on notice that now alleged, though originally
unpled, requests for payment would serve as the basis for a fraud claim. Because the

communication in the Complaint differs in significant respects to the other fraud
allegations—notably the who, what, and when—it does not provide a representative
example such that Faham had adequate notice as to the core basis for the fraud claim.
It is not impossible that Faham could have divined the scope of the fraud

accusations, but the onus is on COKeM to plead these facts with sufficient particularity
such that Faham had adequate notice. Because the Court finds that the one
misrepresentation insufficiently pleads a representative example of the alleged fraud, the
Court will exclude the communications not alleged in the Complaint as the basis for
COKeM’s fraud claim.

2. March 28, 2018 Email
The only properly pled potential misrepresentation is the March 28, 2018 email.
The Complaint does detail the who, what, where, when, and how of this communication.
But this email on its own fails as a matter of law for two reasons. First, the only

representation included in the email is that of future assurances, not a present or past
fact. Second, a third party prepared the email and Faham merely forwarded it to COKeM.
Generally, a fraud claim must be based in a misrepresentation of a past or present
fact. The first prong of a fraud claim requires that “there was a false representation by a

party of a past or existing material fact susceptible of knowledge.” Trooien v. Mansour,

608 F.3d 1020, 1028

 (8th Cir. 2010) (quoting Hoyt Properties, Inc. v. Prod. Res. Grp., L.L.C.,

736 N.W.2d 313, 318

 (Minn. 2007)).  “[A] representation or expectation as to future acts 

is not a sufficient basis to support an action for fraud merely because the represented act 
or event did not take place.”  Exeter Bancorp., Inc. v. Kemper Secs. Grp., Inc.,

58 F.3d 1306

, 
1312 (8th Cir. 1995) (quoting Vandeputte v. Soderholm,

216 N.W.2d 144, 147

 (1974)).  A 
future assurance can be a basis for fraud only when there is affirmative evidence that the 
party who made the assurance never intended to fulfill it.4  Vandeputte,

216 N.W.2d at 147

Because the delivery schedule Faham sent to COKeM clearly represented a future
assurance, COKeM would need to present affirmative evidence that at the time the email
was sent, Faham and MSI never intended to comply with the schedule. But the first two
deliveries were completed. It is unlikely that someone intending to never comply would

then partially comply. COKeM supports its contention that Faham and MSI never
intended to comply with the shipping schedule by citing unpled communications and the
short time frame between the email and when shipments ceased. Both arguments

present evidence that at some point after the March 28 email was sent, something went
wrong. But neither is affirmative evidence that at the time the March 28 email was sent,
Faham and MSI never intended to comply. COKeM cannot sustain its fraud claim with a
failed business deal.

Forwarding information from a third party raises the defense of honest belief that
the information was true. The second element of fraudulent representation is that the
misrepresentation is “made with knowledge of the falsity of the representation or made
as of the party’s own knowledge without knowing whether it was true or false.”5 Trooien,

4 Courts apply the same analysis to future assurances under a negligent misrepresentation
theory. Igbanugo v. Cangemi, No. A10-2002,

2011 WL 2519205

, at *4 (Minn. Ct. App. June 27, 
2011).                                                                    
    5 The corresponding element of negligent misrepresentation states that the defendant 
failed “to exercise reasonable care in communicating the information.”  Williams v. Smith, 820

608 F.3d at 1028

 (quotation omitted).  Bad faith is not required for a finding of fraudulent 
misrepresentation,  but  an  honest  belief  that  the  representation  is  true  does  not 

necessarily absolve one of liability.  Florenzano v. Olson,

387 N.W.2d 168

, 173–74 (Minn. 
1986).  If the speaker honestly believes something that is “completely improbable,” 
liability may be imposed.

Id.

  Liability may also be imposed when a speaker claims a 
statement as his own or vouches for its accuracy.  Fidelity & Deposit Co. of Md. v. Drovers’ 

State Bank,

15 F.2d 306, 309

 (8th Cir. 1926).  A speaker can be protected by identifying the 
source such that it is clearly coming from another party and not of their own knowledge.  
Schlechter v. Felton,

158 N.W. 813, 815

 (Minn. 1916).6                    

    Faham took the information directly from the third party, identified his source, and 
provided it to COKeM.   Taylor Inv. Corp. v. Weil,

169 F. Supp. 2d 1046, 1063

 (D. Minn. 
2001) (describing that transmitting information prepared entirely by a third party negated 
the knowledge prong).  Faham could still be held liable if the information was “completely 

improbable,” Florenzano,

387 N.W.2d at 174

, but the arrival of two of the deliveries 
indicates that the schedule itself was not so improbable as to impute liability to Faham.  




N.W.2d 807, 815 (Minn. 2012).  COKeM presents no information suggesting the Faham failed to 
exercise reasonable care when he forwarded the email.                     
    6 Cf. Great N. Ins. Co. v. Amazon.com, Inc.,

524 F. Supp. 3d 852

, 859 (N.D. Ill. 2021) 
(declining to find Amazon responsible for product description written by a third party and 
provided to Amazon); Reeves v. Keesler,

921 S.W.2d 16, 20

 (W.D. Mo. 1996) (dismissing claim 
against real-estate agent because it just delivered the alleged misrepresentation prepared by a 
third party).                                                             
      Because the March 28, 2018 email alone is insufficient for COKeM’s fraud claim to 
proceed, the Court will grant Faham’s Motion for Summary Judgment. 
                                 CONCLUSION 
      COKeM  and  MSI  engaged  in  a  business deal that ended  poorly.  COKeM  has a 
judgment against MSI  but still seeks damages for alleged fraud perpetuated by Faham. 
COKeM failed, however, to adequate plead or support its fraud allegations.  First, COKeM 
brought a fraud by omission claim for the first time in its responsive summary judgment 
briefing.     Second,   COKeM   only   pled   one   nonrepresentative   example   of   a 
misrepresentation, which itself had two fatal flaws.  It relied entirely on future assurances 
with no affirmative evidence that Faham never intended to comply.  It also included only 
information procured by a third party.  Faham disclosed his source and did not claim the 
information  as  his  own  allowing  for  an  honest  belief  defense.   Because  of  these 
deficiencies, the Court will grant Faham’s Motion for Summary Judgment.

ORDER

      Based on the foregoing, and  all the files,  records, and  proceedings herein,  IT IS 
HEREBY  ORDERED  that  Defendant  Joseph  Faham’s  Motion  for  Summary  Judgment 
[Docket No. 159] is GRANTED. 

DATED:  March 25, 2024                            doi K. (bin 
at Minneapolis, Minnesota.                         JOHN R. TUNHEIM 
                                             United States District Judge 

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