NordAq Energy, Inc. v. Devine

Filing 194

ORDER: re NordAq's Motion to Dismiss 103 . Mr. Devine may file a Third Amended Answer and Counterclaim(s) consistent with the terms of this order, but must do so no later than March 13, 2018 (see order for full details). Signed by Judge Sharon L. Gleason on 02/27/2018. (AEM, CHAMBERS STAFF)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
NORDAQ ENERGY, INC.,
Plaintiff and
Counter Defendant,
v.

Case No. 3:16-cv-0267 SLG

PAUL L. DEVINE, et al.,
Defendants and
Counter Plaintiffs,

Case No: 3:17-cv-0031-SLG
(Consolidated)

and
PAUL L. DEVINE,
Third-Party Plaintiff,
v.
NUOXIN CO., LTD., et al.,
Third-Party Defendants,
and
JOHN EDWARD AITKEN KIDD,
Third-Party Plaintiff,
v.
NUOXIN CO., LTD., et al.,
Third-Party Defendants.

ORDER RE MOTION TO DISMISS
Before the Court at Docket 103 is Plaintiff and Counter Defendant NordAq Energy,
Inc.’s Motion to Dismiss First Amended Counterclaim of Paul L. Devine. 1 The motion has

1

The First Amended Counterclaims are included in Mr. Devine’s Second Amended Answer. See

been fully briefed. 2 Oral argument on the motion was held on November 1, 2017. 3 For
the following reasons the motion will be granted with leave to amend to the extent set
forth herein.
BACKGROUND
For purposes of this motion to dismiss, the facts as relevant to the motion are
briefly summarized based primarily on Paul Devine’s pleadings:
Paul Devine served as Chief Financial Officer (“CFO”) of NordAq from January
2011 to August 2013 and as Chief Executive Officer (“CEO”) of NordAq from September
2013 to July 2015. 4 Mr. Devine served as a member of NordAq’s Board of Directors from
April 2011 to June 2015. 5 Mr. Devine was tasked with raising capital for NordAq in order
for NordAq to pursue oil and gas drilling opportunities. 6

Mr. Devine’s employment

agreement with NordAq required NordAq to indemnify Mr. Devine for any legal fees
arising out of a lawsuit related to his employment with NordAq. 7

The employment

agreement also included a termination clause that Mr. Devine alleges NordAq violated. 8

Docket 101 (Second Am. Ans. and Countercls.).
2

See Docket 104 (Memo.); Docket 112 (Opp.); Docket 116 (Reply).

3

Docket 122 (Tr. of Oral Arg.).

4

Docket 101 at 3.

5

Docket 101 at 3, ¶ 8.

6

Docket 101 at 28, ¶ 13.

7

Docket 101 at 29, ¶ 14.

8

Docket 101 at 29, ¶ 14. Mr. Devine alleges that NordAq violated a termination clause by forcing
Mr. Devine to resign as CEO of NordAq. No written employment agreement appears to be in the
record.
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Shortly after Mr. Devine was hired, NordAq granted Mr. Devine an incentive
compensation package, which required NordAq to pay Mr. Devine 2.5 percent of all funds
raised by Mr. Devine for NordAq. 9
In the summer of 2014, Mr. Devine, on behalf of NordAq, entered into an
agreement (“Subscription Agreement”) with Nuoxin, an Anguilla limited liability
company. 10 The Subscription Agreement stated that Nuoxin would invest $60 million into
NordAq in two installments: $20 million (“Tranche A”) was to be paid immediately and $40
million (“Tranche B”) was to be paid by October 31, 2014. 11
After paying the initial $20 million, Nuoxin, through its agent Doris Cheng, obtained
seats on NordAq’s Board of Directors and became NordAq’s largest individual
shareholder. 12 Mr. Devine maintains that Nuoxin and Ms. Cheng assured Mr. Devine
several times that Nuoxin would provide the second installment of $40 million when due. 13
But Nuoxin defaulted on the Subscription Agreement and failed to provide the second
$40 million installment. 14 Despite the default, Mr. Devine raised additional capital for

9

Docket 101 at 37–38, ¶ 41.

10

Docket 101 at 27, ¶ 9; 32, ¶ 25; Docket 116-1 (Subscription Agreement).

11

Docket 101 at 32, ¶ 25.

12

Docket 101 at 33, ¶ 28.

13

Docket 101 at 34, ¶ 29.

14

Docket 101 at 34, ¶ 30.

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NordAq from other investors. 15 Mr. Devine alleges he was forced to resign in 2016 as a
result of NordAq’s misrepresentations. 16
On November 18, 2016, NordAq initiated this action. 17 Its Second Amended
Complaint against Mr. Devine alleges claims for conversion, breach of fiduciary duty, and
fiduciary fraud. 18 NordAq alleges that Mr. Devine improperly used NordAq’s assets for
his personal use and improperly disbursed NordAq monies to various individuals who
were in no way associated with NordAq. 19
NordAq also filed complaints against Mr. Devine’s friends in Texas and Alabama,
alleging they received property from Mr. Devine that was purchased with misappropriated
NordAq funds. 20 Mr. Devine is not a named party in either case.
On April 19, 2017, Mr. Devine filed an answer to NordAq’s Second Amended
Complaint. 21 On May 10, 2017, Mr. Devine filed an amended answer and asserted
counterclaims against NordAq for fraud, misrepresentation, breach of contract and third
party beneficiary, tortious interference with contract, intentional interference with

15

Docket 101 at 35, ¶¶ 31, 32.

16

Docket 101 at 46, ¶ 54(f). NordAq alleges in its Second Amended Complaint that Mr. Devine
resigned in July 2015. Docket 23 at 31, ¶ 51. In Mr. Devine’s answer, he admits he resigned from
his employment with NordAq, but “lacks knowledge or information sufficient to form a belief as to
the truth of the remaining allegations.” Docket 101 at 11, ¶ 51.
17

Docket 1 (Compl.).

18

Docket 23 (Second Am. Compl.) at 33–36.

19

Docket 23 at 6, ¶ 11.3–11.5.

20

Docket 101 at 37, ¶ 39; see also Docket 112-6 (Texas Compl.); Docket 112-7 (Alabama Compl.).

21

Docket 49 (Ans.).

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prospective economic advantage, RICO, conspiracy and acting in concert, conversion,
and punitive damages. 22 On August 31, 2017, Mr. Devine filed a Second Amended
Answer with First Amended Counterclaims (“FAC”).

The FAC again pleads all the

counterclaims against NordAq as alleged in the amended answer along with an additional
claim labelled “discovery rule,” which asserts that any applicable statute of limitations for
Mr. Devine’s claims was tolled until his “effective wrongful termination.” 23
On September 14, 2017, NordAq filed its Motion to Dismiss. It seeks to dismiss
all of Mr. Devine’s counterclaims, apart from the breach of contract claim, pursuant to
Federal Rule of Civil Procedure 12(b)(6). 24
LEGAL STANDARDS
NordAq seeks dismissal of most of Mr. Devine’s counterclaims for failure to state
a claim. Under Rule 8(a), a complaint must contain a “short and plain statement of a
claim showing that the [plaintiff] is entitled to relief.”25 If a complaint fails to do this, the
defendant may move to dismiss it under Rule 12(b)(6). 26
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” 27 Iqbal does not

22

Docket 68 (First Am. Ans. and Countercls.).

23

Docket 101 at 56, ¶ 101.

24

Docket 104 at 2.

25

Fed. R. Civ. P. 8(a).

26

Fed. R. Civ. P. 12(b)(6).

27

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007)).
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require a litigant to prove his case in his pleading, but it requires the litigant to “state
‘enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of
[the misconduct alleged].’” 28 The pleading must contain “enough facts to state a claim to
relief that is plausible on its face.” 29 A claim is plausible on its face “when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” 30 Thus, there must be “more than a sheer
possibility that a defendant has acted unlawfully.” 31 When considering a motion to
dismiss, a court “accept[s] factual allegations in the complaint as true and construe[s] the
pleadings in the light most favorable to the nonmoving party.” 32
For a Rule 12(b)(6) motion, a court considers only the pleadings and documents
incorporated into the pleadings by reference, as well as matters on which a court may
take judicial notice. 33 “Even if a document is not attached to a complaint, if may be
incorporated by reference into a complaint if the plaintiff refers extensively to the
document or the document forms the basis of the plaintiff’s claim.” 34 Moreover, a court
can “consider certain materials—documents attached to the complaint, documents

28

Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011)
(alterations in original) (quoting Twombly, 550 U.S. at 556).
29

Twombly, 550 U.S. at 570.

30

Iqbal, 556 U.S. at 678.

31

Id.

32

Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008).

33

Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1061 (9th Cir. 2008) (citing
Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)).
34

United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).

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incorporated by reference in the complaint, or matters of judicial notice—without
converting the motion to dismiss into a motion for summary judgment.” 35
When a motion to dismiss for failure to state a claim is granted, a court “should
freely give leave when justice so requires.” 36 But leave to amend is properly denied as
to those claims for which amendment would be futile. 37
Under Federal Rule of Civil Procedure 9(b), “a party must state with particularity
the circumstances constituting fraud.” Rule 9(b) also applies to claims for fraudulent
misrepresentation. 38 “While statements of the time, place, and nature of the alleged
fraudulent activities are sufficient, mere conclusory allegations of fraud are insufficient.” 39
“Any averments which do not meet the standard should be ‘disregarded’ or ‘stripped’ from
the claim[.]”40
The Court has diversity jurisdiction over NordAq’s claims against Mr. Devine. 41
Pursuant to 28 U.S.C. § 1367(a), this Court has supplemental jurisdiction over “all other

35

Id. Applying these rules, the Court will consider the Subscription Agreement in its entirety at
Docket 116-1 and take judicial notice of the out-of-state complaints at Dockets 112-6 and 112-7.
When considering this motion to dismiss, although both parties refer to additional documents, the
Court has not considered any other documents and is not converting this motion to dismiss to a
motion for summary judgment at this juncture.

36

Fed. R. Civ. P. 15(a).

37

Gordon v. City of Oakland, 627 F.3d 1092, 1094 (9th Cir. 2010) (citing Albrecht v. Lund, 845
F.2d 193, 195 (9th Cir. 1988)).

38

See Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1105 (9th Cir. 2003) (holding allegations
for misrepresentation did not satisfy Rule 9(b)).
39

Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 540 (9th Cir. 1989).

40

Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (citing Vess, 317 F.3d at 1105).

41

NordAq asserts that this Court has jurisdiction based on diversity of citizenship between NordAq
and Mr. Devine and that the amount in controversy exceeds $75,000 pursuant to 28 U.S.C. §
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claims that are so related to claims in this action within such original jurisdiction[.]” The
Court applies federal procedural law; as discussed further herein, Alaska substantive law
applies to all claims except the federal RICO claim. 42
DISCUSSION
Mr. Devine’s FAC alleges the following ten counterclaims against NordAq: fraud;
misrepresentation; breach of contract and third party beneficiary; tortious interference
with contract; intentional interference with prospective economic advantage; RICO;
conspiracy and acting in concert; conversion; punitive damages; and discovery rule. 43
1. Fraud and Intentional Misrepresentation
Mr. Devine asserts tort counterclaims against NordAq for fraud and
misrepresentation. 44 NordAq maintains that Mr. Devine failed to plead these claims with
particularity as required by Rule 9(b). 45
Under Federal Rule of Civil Procedure 9(b), “a party must state with particularity
the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other
conditions of a person’s mind may be alleged generally.”

Allegations of fraudulent

1332(a)(1) and 28 U.S.C. § 1332(a)(2). Docket 23 at 3–4, ¶ 6.
42

See Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).

43

Docket 101 at 44–56. NordAq does not seek to dismiss Mr. Devine’s counterclaim for breach
of contract. See Docket 104 at 9.
44

Mr. Devine’s fraud claim alleges fraudulent misrepresentation. Docket 101 at 44–46, ¶ 54. The
Court will consider the two claims together. Mr. Devine also alleges in the FAC that “the Counter
Defendants failed to use reasonable care when making the statement(s).” Docket 101 at 47, ¶
60. To the extent Mr. Devine intended to also plead a claim for negligent misrepresentation, that
claim has not been adequately pleaded and is dismissed. See Reeves v. Alyeska Pipeline Serv.
Co., 56 P.3d 660, 670 (Alaska 2002).
45

Docket 104 at 7.

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misrepresentation must be “accompanied by ‘the who, what, when, where, and how’ of
the misconduct charged.” 46
Under

Alaska

law,

fraudulent

misrepresentation

consists

of

“(1)

a

misrepresentation of fact or intention, (2) made fraudulently (i.e. with scienter), (3) for the
purpose of inducing another to act in reliance, (4) with justifiable reliance by the recipient,
(5) causing loss.” 47 Mr. Devine asserts that NordAq misrepresented that “[he] would
receive a raise in his salary once the transaction with Nuoxin was closed in 2014,” and
that “Mr. Devine’s resignation was required in 2016 . . . that resulted in the effective
wrongful termination of Mr. Devine.” 48
Mr. Devine has not identified who stated that he would receive a raise, and when
that statement was made. Nor does he explain the terms of his employment contract with
NordAq, the circumstances of his resignation, or precisely who made what fraudulent
misrepresentations to him, and when.

Accordingly, Mr. Devine’s fraud and

misrepresentation claims against NordAq as to his raise and resignation fail to state a
claim with particularity and are dismissed.
Mr. Devine also alleges NordAq induced him to enter into an employment contract
by representing that “[NordAq] would indemnify him for any litigation arising from his
employment” and by representing that “[Mr. Devine] was entitled to 2.5% of the monies

46

Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (quoting Cooper v. Pickett, 137
F.3d 616, 627 (9th Cir. 1997)).
47

Anchorage Chrysler Ctr., Inc., 129 P.3d at 914.

48

Docket 101 at 45–46, ¶ 54(b), (f).

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he was able to raise for NordAq.” 49

But Mr. Devine does not argue that these

representations were false when made. At oral argument, counsel for Mr. Devine stated
“[a]t the time [John Kidd told Mr. Devine he would receive a 2.5 percent incentive
compensation], Mr. Devine, I think rightfully, believed that it was a representation not a
misrepresentation, took the job, did the work, and then didn’t get paid from NordAq. Now,
retroactively, after forced out Mr. Devine and Mr. Kidd, they are saying that representation
itself was invalid.” 50 However, to be actionable, a statement that is alleged to be a
misrepresentation must be misrepresented when made. 51 Mr. Devine has failed to state
a claim for fraudulent misrepresentation because he has not alleged that Mr. Kidd made
false representations to him when he offered him the 2.5 percent incentive compensation.
On this basis alone, dismissal of the fraud and misrepresentation claims would be
warranted.
So as to provide some guidance in the event Mr. Devine seeks to amend to assert
these claims, the Court also addresses the scope of the fraudulent misrepresentation
claims under Alaska law in the context of employment disputes. “Only where the duty
breached is one imposed by law, such as traditional tort law duty furthering social policy,
may an action between contracting parties sound in tort.” 52 [E]very contract breach

49

Docket 101 at 45, ¶ 54(c).

50

Docket 122 at 22–23.

51

See Anchorage Chrysler Center, Inc. v. DaimlerChrysler Corp., 129 P.3d 905, 914 n.21 (Alaska
2006) (discussing the requirement of scienter for misrepresentation claims requires the speaker
“knows or believes that the matter is not as he represents it to be, does not have the confidence
in the accuracy of his representation that he state or implies, or knows that he does not have the
basis for his representation that he states or implies” (quotations and citation omitted)).
52

Jarvis v. Ensminger, 134 P.3d 353, 363 (Alaska 2006).

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cannot be turned into a tort.” 53 “[P]romises set forth in a contract must be enforced by an
action on that contract.” 54
Mr. Devine asserts that his case is similar to Jarvis v. Ensminger. 55 In Jarvis,
Jarvis entered into an employment agreement with Ensminger, which included a
performance incentive conditioned on Jarvis meeting certain sales benchmarks. 56 When
Ensminger failed to pay the performance incentive, Jarvis sued. The Alaska Supreme
Court held there was no breach of contract claim because it was undisputed that Jarvis
had not met the specified sales benchmarks. But Jarvis had also alleged intentional
misrepresentation;

specifically,

he

alleged

that

Ensminger

had

made

three

misrepresentations about the basic terms of the contract that had induced Jarvis to sign
it. The court held that the misrepresentation claim could proceed because it was based
on alleged “tortious conduct separate and apart from [an alleged] failure to fulfill . . .
contractual obligations.” 57 Yet at the same time, the Court recognized “a violation of a
duty arising from contract—such as the duty to pay wages under an employment or tender
payment for goods—does not give rise to a tort claim.”58

53

K & K Recycling, Inc. v. Alaska Gold Co., 80 P.3d 702, 717 (Alaska 2003).

54

Id. (quoting Alaska Pac. Assur. Co. v. Collins, 794 P.2d 936, 946 (Alaska 1990)).

55

Docket 112 at 24–25.

56

Jarvis, 134 P.3d at 356.

57

Id. at 363 (citing New York University v. Continental Ins. Co., 87 N.Y.2d 308, 316 (1995)). The
court also allowed Jarvis’ promissory estoppel claim to proceed. Id. at 364.
58

Id. at 363.

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This case is unlike Jarvis because Mr. Devine has not alleged claims that he relied
on misrepresentations knowingly made by Mr. Kidd acting on behalf of NordAq that
induced Mr. Devine to enter into an agreement with NordAq. Indeed, Mr. Devine has
expressly disavowed any intent to pursue such claims. 59 Rather, he appears to be
alleging a breach of the “duty to pay wages under an employment contract”; a claim which
may only proceed in contract. Accordingly, Mr. Devine’s fraud and misrepresentation
claims against NordAq that relate to Mr. Devine’s employment contract with NordAq are
dismissed, with leave to amend only to allege a claim where an independent tort duty can
be factually demonstrated.

Mr. Devine’s tort claims against NordAq seeking

indemnification, the 2.5 percent incentive pay, or enforcement of any other terms in the
employment contract are dismissed with prejudice.
Mr. Devine also asserts that additional fraudulent misrepresentations were made
by Ms. Cheng and David Pfeiffer. He claims that Ms. Cheng “acted as an agent on behalf
of both NordAq and Nuoxin” in stating that the “second funding was positive and would
be successful.” 60 A principal can be liable for the torts of its agents. 61 However, “for an
agency relationship to exist, the agent must have [(1)] ‘a power to alter the legal relations
between the principal and third persons’ . . . . [and, (2)] [t]he principal, in turn, must have
‘the right to control the conduct of the agent with respect to matters entrusted to him.’” 62

59

Mr. Devine’s lawyers also represent Mr. Kidd. See NordAq Energy, Inc. v. Johnathon Edward
Aitkin Kidd, Case No. 3:17-cv-0031-SLG.
60

Docket 101 at 45–46, ¶ 54(d).

61

Anderson v. PPCT Mgmt. Sys., Inc., 145 P.3d 503, 508 (Alaska 2006).

62

Manes v. Coats, 941 P.2d 120, 123–24 (Alaska 1997) (quoting Restatement (Second) of Agency

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In this case, Mr. Devine is alleging that Ms. Cheng, acting in her capacity as a
majority shareholder, was an agent of NordAq. 63 However, Mr. Devine has not alleged
any facts demonstrating that Ms. Cheng had the power to alter the legal relations between
NordAq and Mr. Devine; nor has he alleged any facts demonstrating that NordAq had
control over Ms. Cheng’s alleged statements. Accordingly, a principal-agent relationship
has not been adequately alleged to make NordAq liable for the alleged torts of Ms. Cheng.
Mr. Devine’s claim for fraudulent misrepresentation against NordAq as it relates to Ms.
Cheng’s alleged conduct is dismissed without prejudice, with leave to amend to allege
facts that would constitute an agency relationship. In addition, any such claim must
clearly set forth the circumstances of such alleged misrepresentations with particularity
including the who, what, when, where, and how.
Mr. Devine’s fraudulent misrepresentation claim against NordAq based on Mr.
Pfeiffer’s alleged statements in 2016 or later is without merit. Mr. Devine alleges that Mr.
Pfeiffer, an employee of NordAq, made fraudulent misrepresentations as an agent of
NordAq. Specifically, he asserts Mr. Pfeiffer falsely represented that “he would carry out
the best interests of Clearview” and that he “and NordAq were concerned for Mr. Devine’s
well being in the latter part of 2016 and early 2017.” 64

Mr. Devine asserts these

statements were “made in order to induce Mr. Devine into believing that NordAq would
not try to take advantage of his debilitated state,” and were made “to capitalize on Mr.

§§ 12, 14).
63

Docket 101 at 45–46, ¶ 54(d).

64

Docket 101 at 46, ¶ 54(d).

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Devine’s health crisis by maliciously filing baseless lawsuits against Mr. Devine and his
interests.”65
Mr. Devine has not pleaded any facts showing that Mr. Pfeiffer, as a NordAq
employee, had “the power to alter the legal relationships” between Mr. Devine and
NordAq. Moreover, Mr. Devine has not pleaded any facts to demonstrate how he relied
on Mr. Pfeiffer’s alleged statements, because according to Mr. Devine, he was forced to
resign in 2016 and was no longer working for NordAq when at least some of these
statements were allegedly made. Accordingly, Mr. Devine’s fraudulent misrepresentation
claim against NordAq as it pertains to statements allegedly made by Mr. Pfeiffer is
dismissed without prejudice with leave to amend to allege facts that demonstrate an
agency relationship as well as reliance together with all other requisite elements for such
a claim.
2. Conversion
Mr. Devine also alleges a counterclaim against NordAq for conversion. He asserts
“Mr. Devine had a possessory interest in his stock holdings of NordAq, in his agreed-to
salary, and in his agreed-to incentive compensation . . . [and] Counter Defendants
intentionally interfered with Mr. Devine’s right to possess that property.” 66 Mr. Devine
also alleges that NordAq committed conversion by failing to pay Mr. Devine more than $1

65

Docket 101 at 46, ¶ 54(d); Docket 112 at 15.

66

Docket 101 at 55, ¶ 94.

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million in incentive compensation and failing to pay more than $1 million in salary as a
result of his wrongful termination. 67
To establish a claim for conversion under Alaska law, a plaintiff must establish “(1)
that []he had a possessory interest in the property; (2) that the defendant interfered with
the plaintiff’s right to possess the property; (3) that the defendant intended to interfere
with plaintiff’s possession; and (4) that the defendant’s act was the legal cause of the
plaintiff’s loss of the property.” 68
Mr. Devine’s conversion claims all appear to arise directly from NordAq’s alleged
breach of the employment contract. 69 However, “every contract breach cannot be turned
into a tort” due to the “consequential damages that would flow from [such] tort claims and
from [the related] contract claims [that] significantly overlap.” 70 As stated above, Mr.
Devine cannot bring a tort claim against NordAq for its alleged breach of his employment
contract with NordAq; rather, he must plead a sufficient factual basis to demonstrate the
existence of an independent duty. 71

Accordingly, Mr. Devine’s conversion claim is

dismissed. To the extent it is based on Mr. Devine’s contract with NordAq, it is dismissed
with prejudice.

67

Docket 101 at 55, ¶ 95.

68

Silvers v. Silvers, 999 P.2d 786, 793 (Alaska 2000).

69

Mr. Devine does not clearly state whether the stock holdings in NordAq were included in the
employment agreement or another agreement. Nonetheless, Mr. Devine has not alleged
sufficient facts to plead a viable claim for conversion for his stock holdings.

70

K & K Recycling, Inc. v. Alaska Gold Co., 80 P.3d 702, 717 (Alaska 2003).

71

See supra pp. 11–12.

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3. Third Party Beneficiary
Mr. Devine’s third counterclaim against NordAq includes a claim that he is a third
party beneficiary of the Subscription Agreement between NordAq and Nuoxin. 72 Under
Alaska law, a court looks to the objective motives or intent of the parties to determine
whether a party is an intended third-party beneficiary. 73

A court “will recognize a third-

party right to enforce a contract upon a showing that the parties to the contract intended
that at least one purpose of the contract was to benefit the third party.” 74 In Smallwood,
the Alaska Supreme Court explained that it is the intent of the promisee that is key. 75
In this case, Mr. Devine alleges that the Subscription Agreement between NordAq,
the promisee, and Nuoxin, the promisor, “expressly stipulated . . . that Mr. Devine would
be entitled to 2.5% of the monies paid by Nuoxin[.]” 76 Mr. Devine further alleges in his
FAC that “at least one purpose of the contract was to benefit Mr. Devine.” 77 Although Mr.
Devine alleges one of the purposes of the agreement was to benefit him, the agreement
does not contain any such indication. The only portion of the agreement that mentions

72

Docket 101 at 48, ¶¶ 67–68.

73

Rathke v. Corrections Corp. of Am., Inc., 153 P.3d 303, 310 (Alaska 2007). NordAq asserts
that this Court should apply Delaware law to this issue under the internal affairs doctrine. Docket
104 at 12 n.2. However, Mr. Devine’s third party beneficiary claim does not involve the internal
affairs of NordAq. See McDermott Inc. v. Lewis, 531 A.2d 206, 215 (Del. 1987) (“The internal
affairs doctrine has no applicability in [corporations and individuals entering into contracts,
committing torts, and dealing in personal and real property].”). Accordingly, Alaska law applies.

74

Smallwood v. Cent. Peninsula Gen. Hosp., 151 P.3d 319, 324 (Alaska 2006).

75

Id. at 325.

76

Docket 101 at 48–49, ¶ 68.

77

Docket 101 at 49, ¶ 68.

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Mr. Devine’s 2.5 percent compensation is in a schedule attached to the actual agreement;
it is not found in the body of the agreement. 78 No other provision in the Subscription
Agreement supports the allegation that NordAq intended to benefit Mr. Devine by entering
into the Subscription Agreement with Nuoxin. Mr. Devine has not adequately pleaded
facts that would plausibly support a claim that he was a third party beneficiary of the
Subscription Agreement. 79 Accordingly, Mr. Devine’s third party beneficiary claim is
dismissed. 80
4. Tortious Interference with Contract and Intentional Interference with
Prospective Economic Advantage
Mr. Devine alleges counterclaims for tortious interference with a contract and
intentional interference with prospective economic advantage. Both claims allege that
Nuoxin, Ms. Cheng, and Mr. Pfeiffer interfered with Mr. Devine’s relationship and contract
with NordAq. 81 Mr. Devine’s theory of liability as to NordAq is that NordAq is vicariously
liable for the interference made by Nuoxin, Ms. Cheng, and Mr. Pfeiffer. 82
To state a claim for tortious interference with a contract under Alaska law, Mr.
Devine must plead “(1) an existing contract between the plaintiff and a third party; (2)

78

Docket 116-1 at 36.

79

Mr. Devine also alleges that he was an intended third-party beneficiary of his incentive
compensation agreement with NordAq. Docket 101 at 49, ¶ 69. However, there is no plausible
third-party beneficiary claim as to Mr. Devine’s incentive compensation agreement because Mr.
Devine cannot be a third party beneficiary to his own agreement.
80

Mr. Devine may attempt to plead a viable third party beneficiary claim under the Subscription
Agreement, although the Court is quite skeptical, based on the facts alleged to date, that any such
claim could be viable.

81

Docket 101 at 51, ¶ 79.

82

Docket 112 at 27.

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defendant’s knowledge of the contract and intent to induce a breach; (3) breach; (4)
wrongful conduct of the defendant causing the breach; (5) damages; and (6) absence of
privilege or justification for the defendant’s conduct.” 83 Mr. Devine has pleaded that he
had a contract with NordAq; however, he has not pleaded that there was any contract
that existed between him and either Nuoxin, Ms. Cheng, or Mr. Pfeiffer. Moreover, he
concedes in his opposition that the “tortious interference claims are primarily against
Nuoxin, Cheng, and Pfeiffer.” 84 The Court is unaware of any Alaska authority that would
permit NordAq to be held vicariously liable for any alleged interference by Nuoxin, Ms.
Cheng, or Mr. Pfeiffer with NordAq’s contract with Mr. Devine. In light of the foregoing,
Mr. Devine’s claim for tortious interference with a contract against NordAq is dismissed.
To the extent it is based on Mr. Devine’s contract with NordAq, it is dismissed with
prejudice. 85
Mr. Devine has also failed to state a valid claim against NordAq for tortious
interference with a prospective business opportunity under Alaska law. To establish a
claim for tortious interference with a prospective business opportunity, Mr. Devine must
show “(1) an existing prospective business relationship between it and a third party; (2)
defendant’s knowledge of the relationship and intent to prevent its fruition; (3) failure of

83

Cornelison v. TIG Ins., 376 P.3d 1255, 1269 (Alaska 2016) (citation omitted).

84

Docket 112 at 27.

85

At oral argument, counsel for Mr. Devine acknowledged “that a claim against NordAq [for the
acts of Nuoxin and Ms. Cheng] for intentional interference of a contract which NordAq is a party
cannot stand under Alaska law, apart from some potential vicarious liability theory[.]” Docket 122
at 31–32. Mr. Devine cites no Alaska case that would impose vicarious liability on a contracting
party for the tortious interference of its own contract. Accordingly, this claim is futile.

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the prospective relationship to culminate in pecuniary benefit to the plaintiff; (4) conduct
of the defendant interfering with the prospective relationship; (5) damages caused by the
defendant; and (6) absence of privilege or justification for the defendant’s conduct.” 86
Mr. Devine’s FAC alleges that “NordAq, Cheng, Nuoxin and Pfeiffer knew about
[Mr. Devine’s relationship with NordAq and its shareholders] and intended to prevent Mr.
Devine from growing these relationships, and intentionally disrupted them.” 87 However,
Mr. Devine does not identify any specific “prospective business relationship” or lost deal
between him and an identifiable third party. Instead, he generally alleges that NordAq
caused reputational harm to him among NordAq’s shareholders. 88 Accordingly, Mr.
Devine’s counterclaim for tortious interference with a prospective business opportunity is
dismissed. In light of Mr. Devine’s acknowledgement at oral argument that he had no
facts that could support a specific interference claim that would be maintained under
Alaska law, the dismissal of this claim is with prejudice without leave to amend.
5. RICO
Mr. Devine next asserts a counterclaim against NordAq under the Racketeer
Influenced and Corrupt Organizations Act (“RICO”). 89 A civil RICO claim consists of the
following: “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity

86

K & K Recycling, Inc. v. Alaska Gold Co., 80 P.3d 702, 717 (Alaska 2003).

87

Docket 101 at 51, ¶ 79.

88

At oral argument, counsel for Mr. Devine acknowledged that the only interference Mr. Devine
had was “the reputational harm that he’s lost with those particular [NordAq] shareholders.” Docket
122 at 33.

89

18 U.S.C. §§ 1341, 1961 et. seq.

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(known as ‘predicate acts’) (5) causing injury to plaintiff’s ‘business or property.’” 90
“Racketeering activity” includes mail fraud, which occurs “whenever a person, ‘having
devised or intending to devise any scheme or artifice to defraud,’ uses the mail ‘for the
purpose of executing such scheme or artifice.’” 91
Mr. Devine alleges Nuoxin, Ms. Cheng, and Mr. Pfeiffer “are using NordAq to run
a litigation smear campaign against Devine by wrongfully suing him and/or his interests
in Alaska, Texas, and Alabama, in order to financially punish Mr. Devine, wrongfully seek
recovery of the compensation he properly earned while employed by NordAq, and
increase the time and expense he is incurring to protect his name and his interests from
baseless lawsuits.” 92 Mr. Devine also alleges that Mr. Pfeiffer attempted to prevent him
from defending himself in this case by signing misleading affidavits in support of a default
judgment against him. 93 Mr. Devine alleges that “Counter Defendants have used mail
and wire fraud to perpetuate their racketeering scheme.” 94
Although the Ninth Circuit has not directly ruled on whether filing documents with
a court can constitute a RICO claim, other federal courts have held that these litigation

90

Living Designs, Inc. v. E.I. Dupont de Nemours and Co., 431 F.3d 353, 361 (9th Cir. 2005) (citing
18 U.S.C. §§ 1964(c), 1962(c)).
91

Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639, 647 (2008) (quoting 18 U.S.C. § 1341).

92

Docket 112 at 29.

93

Docket 112 at 6.

94

Docket 112 at 6.

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activities cannot constitute RICO violations under 18 U.S.C. § 1962 (a)-(c). 95 One district
court reasoned:
Plaintiffs’ interpretation of RICO . . . would result in the inundation of federal
courts with civil RICO actions that could potentially subsume all other state
and federal litigation in an endless cycle where any . . . litigant immediately
sues opponents for RICO violations. . . . [L]itigants might hesitate to avail
themselves of the courts and available legal remedies or be unable to find
representation to help vindicate their rights. Moreover, allowing [such
cases] . . . would inappropriately by pass [sic] the state tribunal. . . . 96
The Court agrees with this reasoning. Moreover, Mr. Devine is not a named party to
either the Texas or Alabama lawsuits. 97 Accordingly, Mr. Devine’s RICO claim against
NordAq is dismissed. Mr. Devine may attempt to plead a viable RICO claim against
NordAq, but it must not be based on the use of the mail or wire to submit filings to a court,
which claim is dismissed with prejudice.
6. Conspiracy
Mr. Devine alleges claims for conspiracy and acting in concert claims, stating “[t]he
ultimate unlawful objective was to perpetuate the racketeering scheme against Mr.
Devine.” 98 However, since he has not pleaded a claim pursuant to 18 U.S.C. § 1962 (a)-

95

See Smith v. HSBC Bank USA, N.A., 2017 WL 3840273 at *5 (S.D. Ga. 2017) (dismissing a
RICO claim because “courts have consistently refused to recognize as wire or mail fraud even
litigation activities that rise to the level of malicious prosecution simply because the mail or wires
were used”); FindTheBest.com, Inc. v. Lumen View Tech. LLC, 20 F. Supp. 3d 451, 460 (S.D.N.Y.
2014); see also First Pac. Bancorp, Inc. v. Bro, 847 F.2d 542, 547 (9th Cir. 1988) (holding that
threat of derivative lawsuit is not a predicate act for RICO purposes).

96

Smith, 2017 WL 3840273 at *5 (quoting Curtis & Assoc., P.C. v. Law Offices of David M.
Bushman, Esq., 758 F. Supp. 2d 153, 173 (E.D.N.Y. 2010), aff’d, 443 Fed.Appx. 582 (2d Cir.
2011)).
97

See Docket 112-6 at 2 (naming Cheryl White as defendant); Docket 112-7 at 4 (naming Donna
Denise Kress as defendant).
98

Docket 101 at 54, ¶ 89.

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(c), Mr. Devine cannot assert a conspiracy claim under 18 U.S.C. § 1962(d) and this claim
will be dismissed. 99
Mr. Devine also asserts that the misrepresentations made by Mr. Pfeiffer were
“made conspiratorially with NordAq and others—seeking to capitalize on Mr. Devine’s
health crises.” 100 Mr. Devine also claims that NordAq conspired with Mr. Pfeiffer, Nuoxin
and Ms. Cheng to tortiously interfere with his employment contract. 101 However, as
discussed above, Mr. Devine’s misrepresentation claims relate to his breach of
employment contract claim; he has not pleaded any separate viable fraud and
misrepresentation claims. 102 Moreover, he has not pleaded a viable claim for tortious
interference with a contract. 103 Accordingly, Mr. Devine’s claims for conspiracy are
dismissed.
Mr. Devine also asserts that NordAq, Ms. Cheng, Mr. Pfeiffer, and Nuoxin are
jointly and severally liable for their tortious conduct under a cause of action for acting in

99

See 18 U.S.C. § 1962(d) (“It shall be unlawful for any person to conspire to violate any of the
provisions of subsection (a), (b), or (c) of this section.”); see also Davis v. King Craig Trust, 2017
WL 2209879 at *3 n.9 (Alaska 2017) (“Whether ‘civil conspiracy’ actually constitutes a separate
wrong is not something we need to address today.”).
100

Docket 112 at 15.

101

Docket 101 at 49.

102

See supra pp. 8–14. At oral argument, counsel for Mr. Devine stated the following regarding
the conspiracy claim: “I think, Your Honor, that what I’m driving at is that if Nuoxin and Doris
Cheng, the scheme that’s been enacted to take over NordAq and to act to the detriment of Mr.
Devine, if they have joint and several liability with NordAq for doing that, then their independent
bad acts that they have taken, their wrongful tortious conduct, in terms of their interference they—
we believe—we have a good intentional interference claim against Nuoxin and Doris Cheng.”
Docket 122 at 30.
103

See supra pp. 17 –18.

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concert. 104 However, acting in concert is not a separate cause of action and cannot be
alleged on its own. 105 Mr. Devine appears to argue in his opposition to the motion to
dismiss that NordAq acted in concert by aiding and abetting. 106 Alaska law follows the
Restatement (Second) of Torts § 876, which provides that a person can be liable for the
tortious conduct of another when he “does a tortious act in concert with the other” or
“knows that the other’s conduct constitutes a breach of duty and gives substantial
assistance or encouragement to the other” or “gives substantial assistance to the other in
accomplishing a tortious result.”107 However, as previously discussed, Mr. Devine has
not pleaded a viable tort claim against NordAq. Nor has he alleged facts that would
demonstrate that NordAq knew that certain specified acts were being performed by the
other parties, which acts constituted a breach of duty. Nor has he alleged facts that would
demonstrate that NordAq provided substantial assistance with respect to such acts.
Accordingly, Mr. Devine’s claim for conspiracy and acting in concert are dismissed.
7. Punitive Damages and Discovery Rule
Mr. Devine alleges that due to NordAq’s intentional and outrageous actions, he is
entitled to punitive damages. 108 However, apart from the breach of contract claim, the

104

Docket 101 at 53–54, ¶¶ 89–92; Docket 112 at 15.

105

See Williams v. Alyeska Pipeline Serv. Co., 650 P.2d 343, 348 (Alaska 1982) (holding that
individual who is liable for acting in concert is individually liable for underlying tort); see also
Resolution Trust Corp. v. Keating, 186 F.3d 1110, 1117 (9th Cir. 1999) (holding “acting in concert”
is an additional element to prove a civil conspiracy claim).
106

Docket 112 at 15–16.

107

Ellison v. Plumbers and Steam Fitters Union Local 375, 118 P.3d 1070, 1077 n.36 (Alaska
2005).
108

Docket 101 at 56, ¶¶ 98–99.

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Court has dismissed all claims at this juncture, albeit several with leave to amend. 109
Accordingly, Mr. Devine’s claim for punitive damages is dismissed without prejudice with
leave to amend.
Mr. Devine also asserts that his claims are not barred by the statute of limitations
because he did not discover the representations until his effective wrongful termination. 110
The discovery rule is not a cause of action. 111 Whether any claim is barred by the statute
of limitations is not the subject of this order.
CONCLUSION
Therefore, for the foregoing reasons IT IS ORDERED that NordAq’s Motion to
Dismiss at Docket 103 is GRANTED. The following claims by Mr. Devine against NordAq
are dismissed herein with prejudice and without leave to amend: all tort claims against
NordAq seeking indemnification, the 2.5 percent incentive pay or enforcement of any
other terms of the employment or incentive contract; tortious interference with Mr.
Devine’s employment contract with NordAq; intentional interference with prospective
economic advantage; and RICO claims based on the use of the mail or wire to submit
filings to a court. Leave to amend is otherwise granted as set forth herein.

109

See Lull v. Wick Const. Co., 614 P.2d 321, 325 (Alaska 1980) (holding that breach of contract
that is not tortious does not warrant punitive damages).

110

Docket 101 at 56, ¶ 101.

111

See Greater Area Inc. v. Bookman, 657 P.2d 828, 829 (Alaska 1982) (holding that the discovery
rule provides that “the statute of limitations for legal malpractice does not begin to run until the
client discovers, or reasonably should discover, the existence of all the elements of his cause of
action”).
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Mr. Devine may file a Third Amended Answer and Counterclaim(s) consistent with
the terms of this order, but must do so no later than March 13, 2018. If Mr. Devine fails
to file a Third Amended Answer and Counterclaim(s) that is consistent with the terms of
this order by that date, his case against NordAq will proceed solely under the breach of
contract claim.
DATED this 27th day of February, 2018 at Anchorage, Alaska.
/s/ Sharon L. Gleason
UNITED STATES DISTRICT JUDGE

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