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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WO

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Christoph Hagemann, a German citizen;)
Eva Weidlich, a German citizen; Sonja)
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Hagemann, a German citizen,
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Plaintiffs,
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vs.
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Russell Ritchie, et al.,
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Defendants.
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No. CV-11-1479-PHX-GMS
ORDER

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Pending before the Court are Defendants’ Motion for Judgment on the Pleadings on

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Fraud Claim (Doc. 31) and Plaintiffs’ Motion for Leave to File Amended Complaint (Doc.

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34). For the reasons discussed below, Plaintiffs’ Motion for Leave to File Amended

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Complaint is granted, and Defendants’ Motion for Judgment on the Pleadings on the Fraud

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Claim is denied as moot.

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BACKGROUND1

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In early 2008, Helmut Hagemann, who is not a party to this action, earned certain
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options to obtain stock in a company called J.S. Elekta, Ltd., a Cyprus LLC. J.S. Elekta held,
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as its primary asset, an ownership interest in ICHUA Ltd., another Cyprus LLC, which was
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The facts in this section are alleged in Plaintiff’s complaint and taken as true for
purposes of this Order.

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at the time the sole shareholder of Intellecom, a Ukraine LLC. Also in early 2008, a corporate

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restructuring of Intellecom occurred. This restructuring was facilitated by an agreement

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called the Project Limes Frame Agreement (“Limes Agreement”), which incorporated several

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separately negotiated agreements between various stakeholders.

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On March 19, 2008, Helmut Hagemann, Kurt Hiete and Defendant Scott Ritchie, on

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behalf of Defendant Russell Ritchie, negotiated, prepared and executed a document entitled

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“Settlement Agreement.” The Settlement Agreement provided that a new entity would be

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formed to hold “at least 50% of the total shareholder rights in Elekta.” This new entity was

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referred to in the Settlement Agreement as the Ritchie Group. The Settlement Agreement

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further provided that Russell Ritchie was to grant Hiete and Hagemann “1,500 shares in the

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Ritchie Group, which equals 24% of th Ritchie Group.” Helmut Hagemann and Hiete agreed

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between themselves that Hagemann would obtain 1147 of the 1500 shares pledged to them

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in the Settlement Agreement, and that Hagemann would accordingly have an 18.12%

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ownership interest in the Ritchie Group.2 The Settlement Agreement was attached to and

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incorporated into the Limes Agreement, which was executed by Helmut Hagemann,

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Plaintiffs, Russell Ritchie, and several others on April 8, 2008.

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Under the Limes Agreement, an entity referred to both as “Ritchie NewCo” and as

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“EHI,” would obtain a 23.2% share of an entity called “NewCo II,” which later became LMS

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2 Beteilligungs GmbH, a German LLC (“LMS 2”). LMS 2 acquired certain shareholder

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rights of ICHUA, and EHI obtained an interest in LMS 2 equivalent to 50% or more of the

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shareholder rights held by JS Elekta prior to the execution of the Limes Agreement.

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On September 20, 2008, Russell Ritchie sent to Helmut Hagemann via email a draft

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Operating Agreement for EHI. This draft Operating Agreement identified Helmut Hagemann

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as holding 1147 shares. These 1147 shares reflect an 11.65% ownership in EHI, not the

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18.12% ownership interest contemplated by the Settlement Agreement. In total, Scott

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At some point, Helmut Hagemann gifted this interest to his children, who are the
Plaintiffs in this action.
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Ritchie, Cliff Nordyke (Russell Ritchie’s son-in-law), and a company owned and controlled

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by Russell Ritchie, were listed as holding an ownership in EHI that was 11.525% greater

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than the ownership listed for them in the Settlement Agreement. Plaintiffs allege in their

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complaint that during the course of negotiating the Limes Agreement, Scott Ritchie made one

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or more false and material misrepresentations of present facts to Hagemann that Scott Ritchie

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knew was false, including that the value of the 1147 shares in EHI pledged to Plaintiffs and

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their predecessor in interest were worth 18.12% of EHI.

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Hagemann and Plaintiffs have repeatedly demanded a revised ownership percentage

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in EHI, but their demand has been refused. Although EHI sold a significant portion of its

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assets in LMS 2 in late 2008, no proceeds of that sale were distributed to Hagemann or any

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of the Plaintiffs. On July 27, 2011, Plaintiffs filed their Complaint in this action. Count I of

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the Complaint is a claim for unjust enrichment against all Defendants except Russell Ritchie.

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Count II is a breach of contract claim against Russell Ritchie. Count III is a fraud claim

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against Scott Ritchie. Defendant now moves for judgment on the pleadings on the fraud

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claim. (Doc. 31).

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DISCUSSION
I.

Legal Standard

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A motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure

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12(c) “is properly granted when, taking all the allegations in the non-moving parties’s

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pleadings as true, the moving party is entitled to judgment as a matter of law.” Fajardo v.

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County of L.A., 179 F.3d 698, 699 (9th Cir. 1998); see Elvig v. Calvin Presbyterian Church,

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375 F.3d 951, 955 (9th Cir. 2004) (stating that in ruling on a Rule 12(c) motion the court

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must accept as true all allegations in the plaintiff’s complaint and treat as false the allegations

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in the defendant’s answer that contradict the plaintiff’s allegations). In other words, dismissal

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pursuant to Rule 12(c) is inappropriate if the facts as pled would entitle the plaintiff to a

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remedy. Merchants Home Delivery Serv., Inc. v. Hall & Co., 50 F.3d 1486, 1488 (9th Cir.

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1995).

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Certain elements of fraud claims carry a higher standard of pleading under the Federal
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Rules Civil Procedure: “In alleging fraud or mistake, a party must state with particularity the

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circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions

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of a person’s mind of a person may be alleged generally.” FED. R. CIV. P. 9(b). Under this

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rule, a plaintiff “must state the time, place, and specific content of the false representations

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as well as the identities of the parties to the misrepresentation.” Schreiber Distrib. Co. v.

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ServWell Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986); see also Vess v. Ciba-Geigy

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Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (“Averments of fraud must be accompanied

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by the who, what, when, where, and how of the misconduct charged.”) (internal quotations

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omitted).

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II.

Analysis

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In the Complaint, Plaintiffs allege that during the course of negotiating the Limes

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Agreement, Scott Ritchie made “one or more false and material misrepresentations of present

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facts” that he knew was false, including that “the value of the 1,147 shares in the EHI

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pledged to plaintiffs and [Hagemann] were worth 18.12% of EHI.” (Doc. 1, ¶ 89). Plaintiffs

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further allege that Ritchie made such representations intending that Hagemann rely on them,

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and that Hagemann did, in fact, so rely. (Id. at ¶ 90). As stated by Defendants, however,

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“[t]he times, dates, places and other details of [Ritchie’s ]alleged fraudulent statements are

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not provided” in Plaintiffs’ Complaint. (Doc. 31 at 8). Plaintiffs have therefore failed to state

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a fraud claim for which relief can be granted.

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Plaintiffs, however, have attached a proposed amended complaint to their Response

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to Defendants’ motion to dismiss in which they appear to have remedied the defects in their

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initial complaint. (See Doc. 34-1, ¶¶ 59–68). Plaintiffs request leave to file the proposed

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amended complaint. (Doc. 34 at 9–10). Defendant Scott Ritchie “has no objection to an

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amendment of the Complaint.” (Doc. 38 at 4). The Court will therefore grant Plaintiffs leave

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to file their proposed amended complaint, Doc. 34-1, and dismiss Defendants’ Motion for

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Judgment on the Pleadings as moot.

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IT IS THEREFORE ORDERED that Plaintiffs’ Motion for Leave to File Amended
Complaint (Doc. 34) is GRANTED.
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IT IS FURTHER ORDERED that Defendants’ Motion for Judgment on the
Pleadings on Fraud Claim (Doc. 31) is denied as moot.

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IT IS FURTHER ORDERED that Plaintiffs shall file and serve the proposed

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amended pleading (Doc. 34-1) on all parties within (14) fourteen days of the filing of this

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Order as required by LRCiv. 15.1.

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DATED this 8th day of May, 2012.

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