Hagemann et al v. Ritchie et al

Filing 49

ORDER granting 34 Plaintiffs' Motion for Leave to File Amended Complaint; Denying as moot 31 Defendants' Motion for Judgment on the Pleadings. Plaintiffs shall file and serve the proposed amended pleading (Doc. 34-1) on all parties within (14) fourteen days of the filing of this Order. Signed by Judge G Murray Snow on 5/8/12.(DMT)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 10 11 12 13 14 15 Christoph Hagemann, a German citizen;) Eva Weidlich, a German citizen; Sonja) ) Hagemann, a German citizen, ) ) Plaintiffs, ) ) vs. ) ) ) Russell Ritchie, et al., ) ) Defendants. ) ) No. CV-11-1479-PHX-GMS ORDER 16 17 Pending before the Court are Defendants’ Motion for Judgment on the Pleadings on 18 Fraud Claim (Doc. 31) and Plaintiffs’ Motion for Leave to File Amended Complaint (Doc. 19 34). For the reasons discussed below, Plaintiffs’ Motion for Leave to File Amended 20 Complaint is granted, and Defendants’ Motion for Judgment on the Pleadings on the Fraud 21 Claim is denied as moot. 22 BACKGROUND1 23 In early 2008, Helmut Hagemann, who is not a party to this action, earned certain 24 options to obtain stock in a company called J.S. Elekta, Ltd., a Cyprus LLC. J.S. Elekta held, 25 as its primary asset, an ownership interest in ICHUA Ltd., another Cyprus LLC, which was 26 27 1 28 The facts in this section are alleged in Plaintiff’s complaint and taken as true for purposes of this Order. 1 at the time the sole shareholder of Intellecom, a Ukraine LLC. Also in early 2008, a corporate 2 restructuring of Intellecom occurred. This restructuring was facilitated by an agreement 3 called the Project Limes Frame Agreement (“Limes Agreement”), which incorporated several 4 separately negotiated agreements between various stakeholders. 5 On March 19, 2008, Helmut Hagemann, Kurt Hiete and Defendant Scott Ritchie, on 6 behalf of Defendant Russell Ritchie, negotiated, prepared and executed a document entitled 7 “Settlement Agreement.” The Settlement Agreement provided that a new entity would be 8 formed to hold “at least 50% of the total shareholder rights in Elekta.” This new entity was 9 referred to in the Settlement Agreement as the Ritchie Group. The Settlement Agreement 10 further provided that Russell Ritchie was to grant Hiete and Hagemann “1,500 shares in the 11 Ritchie Group, which equals 24% of th Ritchie Group.” Helmut Hagemann and Hiete agreed 12 between themselves that Hagemann would obtain 1147 of the 1500 shares pledged to them 13 in the Settlement Agreement, and that Hagemann would accordingly have an 18.12% 14 ownership interest in the Ritchie Group.2 The Settlement Agreement was attached to and 15 incorporated into the Limes Agreement, which was executed by Helmut Hagemann, 16 Plaintiffs, Russell Ritchie, and several others on April 8, 2008. 17 Under the Limes Agreement, an entity referred to both as “Ritchie NewCo” and as 18 “EHI,” would obtain a 23.2% share of an entity called “NewCo II,” which later became LMS 19 2 Beteilligungs GmbH, a German LLC (“LMS 2”). LMS 2 acquired certain shareholder 20 rights of ICHUA, and EHI obtained an interest in LMS 2 equivalent to 50% or more of the 21 shareholder rights held by JS Elekta prior to the execution of the Limes Agreement. 22 On September 20, 2008, Russell Ritchie sent to Helmut Hagemann via email a draft 23 Operating Agreement for EHI. This draft Operating Agreement identified Helmut Hagemann 24 as holding 1147 shares. These 1147 shares reflect an 11.65% ownership in EHI, not the 25 18.12% ownership interest contemplated by the Settlement Agreement. In total, Scott 26 27 28 2 At some point, Helmut Hagemann gifted this interest to his children, who are the Plaintiffs in this action. -2- 1 Ritchie, Cliff Nordyke (Russell Ritchie’s son-in-law), and a company owned and controlled 2 by Russell Ritchie, were listed as holding an ownership in EHI that was 11.525% greater 3 than the ownership listed for them in the Settlement Agreement. Plaintiffs allege in their 4 complaint that during the course of negotiating the Limes Agreement, Scott Ritchie made one 5 or more false and material misrepresentations of present facts to Hagemann that Scott Ritchie 6 knew was false, including that the value of the 1147 shares in EHI pledged to Plaintiffs and 7 their predecessor in interest were worth 18.12% of EHI. 8 Hagemann and Plaintiffs have repeatedly demanded a revised ownership percentage 9 in EHI, but their demand has been refused. Although EHI sold a significant portion of its 10 assets in LMS 2 in late 2008, no proceeds of that sale were distributed to Hagemann or any 11 of the Plaintiffs. On July 27, 2011, Plaintiffs filed their Complaint in this action. Count I of 12 the Complaint is a claim for unjust enrichment against all Defendants except Russell Ritchie. 13 Count II is a breach of contract claim against Russell Ritchie. Count III is a fraud claim 14 against Scott Ritchie. Defendant now moves for judgment on the pleadings on the fraud 15 claim. (Doc. 31). 16 17 DISCUSSION I. Legal Standard 18 A motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 19 12(c) “is properly granted when, taking all the allegations in the non-moving parties’s 20 pleadings as true, the moving party is entitled to judgment as a matter of law.” Fajardo v. 21 County of L.A., 179 F.3d 698, 699 (9th Cir. 1998); see Elvig v. Calvin Presbyterian Church, 22 375 F.3d 951, 955 (9th Cir. 2004) (stating that in ruling on a Rule 12(c) motion the court 23 must accept as true all allegations in the plaintiff’s complaint and treat as false the allegations 24 in the defendant’s answer that contradict the plaintiff’s allegations). In other words, dismissal 25 pursuant to Rule 12(c) is inappropriate if the facts as pled would entitle the plaintiff to a 26 remedy. Merchants Home Delivery Serv., Inc. v. Hall & Co., 50 F.3d 1486, 1488 (9th Cir. 27 1995). 28 Certain elements of fraud claims carry a higher standard of pleading under the Federal -3- 1 Rules Civil Procedure: “In alleging fraud or mistake, a party must state with particularity the 2 circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions 3 of a person’s mind of a person may be alleged generally.” FED. R. CIV. P. 9(b). Under this 4 rule, a plaintiff “must state the time, place, and specific content of the false representations 5 as well as the identities of the parties to the misrepresentation.” Schreiber Distrib. Co. v. 6 ServWell Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986); see also Vess v. Ciba-Geigy 7 Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (“Averments of fraud must be accompanied 8 by the who, what, when, where, and how of the misconduct charged.”) (internal quotations 9 omitted). 10 II. Analysis 11 In the Complaint, Plaintiffs allege that during the course of negotiating the Limes 12 Agreement, Scott Ritchie made “one or more false and material misrepresentations of present 13 facts” that he knew was false, including that “the value of the 1,147 shares in the EHI 14 pledged to plaintiffs and [Hagemann] were worth 18.12% of EHI.” (Doc. 1, ¶ 89). Plaintiffs 15 further allege that Ritchie made such representations intending that Hagemann rely on them, 16 and that Hagemann did, in fact, so rely. (Id. at ¶ 90). As stated by Defendants, however, 17 “[t]he times, dates, places and other details of [Ritchie’s ]alleged fraudulent statements are 18 not provided” in Plaintiffs’ Complaint. (Doc. 31 at 8). Plaintiffs have therefore failed to state 19 a fraud claim for which relief can be granted. 20 Plaintiffs, however, have attached a proposed amended complaint to their Response 21 to Defendants’ motion to dismiss in which they appear to have remedied the defects in their 22 initial complaint. (See Doc. 34-1, ¶¶ 59–68). Plaintiffs request leave to file the proposed 23 amended complaint. (Doc. 34 at 9–10). Defendant Scott Ritchie “has no objection to an 24 amendment of the Complaint.” (Doc. 38 at 4). The Court will therefore grant Plaintiffs leave 25 to file their proposed amended complaint, Doc. 34-1, and dismiss Defendants’ Motion for 26 Judgment on the Pleadings as moot. 27 28 IT IS THEREFORE ORDERED that Plaintiffs’ Motion for Leave to File Amended Complaint (Doc. 34) is GRANTED. -4- 1 2 IT IS FURTHER ORDERED that Defendants’ Motion for Judgment on the Pleadings on Fraud Claim (Doc. 31) is denied as moot. 3 IT IS FURTHER ORDERED that Plaintiffs shall file and serve the proposed 4 amended pleading (Doc. 34-1) on all parties within (14) fourteen days of the filing of this 5 Order as required by LRCiv. 15.1. 6 DATED this 8th day of May, 2012. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -5-

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