AB Investments LLC v. Gelbard

Filing 87

ORDER ON PENDING MOTIONS. Plaintiff's 50 Motion for Summary Judgment on its First Claim for Relief for Breach of Contract is denied. Plaintiff's 52 Request for Judicial Notice in Support of Motion for Summary Judgment is denied without prejudice. Plaintiff's 75 Motion to Dismiss without Prejudice the Second and Third Causes of Action Asserted in Plaintiff's Complaint is granted. By Judge Walker D. Miller on 7/21/11.(mnf, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Senior Judge Walker D. Miller
Civil Action No. 10-cv-00046-WDM-BNB
AB INVESTMENTS, LLC,
Plaintiff,
v.
ALLEN W. GELBARD,
Defendant.

ORDER ON PENDING MOTIONS
Miller, J.
This case is before me on Plaintiff’s Motion for Summary Judgment on its First
Claim for Relief for Breach of Contract, filed December 10, 2010 (ECF No. 50), Plaintiff’s
Request for Judicial Notice in Support of Motion for Summary Judgment, filed December
10, 2010 (ECF No. 52), and Plaintiff’s Motion to Dismiss without Prejudice the Second and
Third Causes of Action Asserted in Plaintiff’s Complaint, filed May 13, 2011 (ECF No. 75).
I have reviewed the parties’ filings with regard to each of these motions, and I conclude that
oral argument is not required.
Background
In 1998 Defendant Allen W. Gelbard (Gelbard) and Robert Beaton (Beaton) formed
AB Investments (ABI) to provide professional consulting services and to invest on its own
account.

Each contributed stock, warrants, and other assets to fund ABI.

Their

contributions made them equal interest-members in ABI. Both Gelbard and Beaton were
named managers of the limited liability company. Gelbard’s duties were to bring in

business for the company, which he did primarily in California. Beaton managed the dayto-day business of ABI and was responsible for the books, records, banking, brokerage,
accounting and tax preparation, which he did primarily in Colorado.
In January 1999, ABI sold shares that it held in USA Talks.com, Inc. (USAT) for
approximately $15 million and divided the proceeds equally between the two members.
Gelbard and his wife spent his share of the money freely; his purchases included a ranch
in California. As a result, according to ABI, Gelbard had no money left and was forced to
borrow funds from ABI.
Eventually, Beaton and Gelbard approached Rodney Unger (Unger) to participate
with ABI in two entertainment projects and to rehabilitate the Ranch. He agreed. Unger
became a one-third member and manager with Beaton and Gelbard in January 2004.
At this point, the parties’ stories diverge. Gelbard claims that Beaton entered a
secret agreement with Unger to borrow up to $1 million to pay the mortgage on the Ranch
and to fund personal and business expenses incurred by Beaton and Gelbard through ABI.
Gelbard claims that Beaton illegally transferred title to the Ranch to Unger as a gift, without
informing Gelbard. He claims that Beaton and Unger falsified the ABI books to show that
the company was losing money and took the money for their own use. He further claims
that Beaton and Unger fraudulently forced him to file bankruptcy in October 2005 by
claiming that Gelbard had a $2.6 million debt to ABI.
On January 8, 2010, Gelbard’s bankruptcy case was dismissed on his motion. The
day that the case was dismissed, ABI filed its complaint in this court, bringing claims for
breach of contract, breach of fiduciary duty, and conversion. Gelbard later brought claims
of fraud in a California court against ABI, Beaton, and Unger; this lawsuit was dismissed
2

as barred by the statute of limitations.
Standard of Review
Summary judgment is appropriate when there is no genuine issue as to any material
fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56. A
factual issue is genuine if “the evidence is such that a reasonable jury could return a verdict
for the nonmoving party.” Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986). A moving
party’s burden is met if the moving party demonstrates that there is “an absence of
evidence to support the nonmoving party’s case.” Celotex Corp. v. Catrett, 477 U.S. 317,
325 (1986).
Discussion
My review of the record in this case, including the complaint and answer, the motion
for summary judgment, and the request for judicial notice convince me that summary
judgment is not appropriate in this case. In the first instance, the motion for summary
judgment is unsupported by factual evidence. Instead of attaching exhibits to the summary
judgment motion, ABI chose to file a separate motion, the Request for Judicial Notice,
asking that I take notice of certain documents pursuant to Fed. R. Evid. 201. This request
is accompanied by fifteen exhibits, but the motion asks that I take judicial notice of only nine
of them. I assume the other exhibits, referenced in the summary judgment motion, are
merely summary judgment evidence, but this is not clear from ABI’s filings.
More importantly, summary judgment is not merited given the many and substantial
factual disputes between the parties. ABI requests summary judgment on its claim that
Gelbard owes it approximately $2.7 million from loans extended to Gelbard from 2001 to
2004. There is no outright evidence of those loans in the form of promissory notes or
3

written contracts. And, although Gelbard has admitted to owing substantial sums to ABI
in several judicial filings, he has later claimed that he was fraudulently induced to make
those admissions. He also claims amounts owing from ABI that would set off the alleged
debts.
Nor is ABI’s motion saved by its arguments that Gelbard is judicially estopped from
denying that he owes the claimed debts and that his affirmative defense of fraud is barred
by the doctrine of claim preclusion.
In deciding whether to apply judicial estoppel, courts look to such factors as
whether “1) a party’s later position is clearly inconsistent with its earlier
position; 2) a party has persuaded a court to accept that party’s earlier
position, so that judicial acceptance of an inconsistent position in a later
proceeding would create the perception that either the first or the second
court was misled; and 3) the party seeking to assert the inconsistent position
would derive an unfair advantage if not estopped.”
Mathews v. Denver Newspaper Agency LLP, ___ F.3d ___, 2001 WL 1901341 (10th Cir.
May 17, 2011) (quoting Bradford v. Wiggins, 516 F.3d 1189, 1194 (10th Cir. 2008) (further
quotations omitted)). Here, it is clear that the first two positions are met. Gelbard admitted
in his California bankruptcy action and in divorce proceedings in California state court that
he owed a substantial debt to ABI. I conclude, however, that the third element is not
satisfied here. No court has ruled on the merits of Gelbard’s claims that he was the victim
of fraud at the hands of ABI and its principals, Beaton and Unger. Accordingly, I conclude
that Gelbard should be allowed to raise that fraud as a defense to ABI’s contract claim
based on the alleged debt and that he would not derive an unfair advantage if not
estopped.
ABI’s argument of claim preclusion fails on similar grounds. ABI asserts that
Gelbard should be precluded from raising fraud as an affirmative defense in this case
4

because his claims of fraud were raised in litigation in California that was subject to a final
judgment dismissing those claims. The first element of claim preclusion is that the prior
case be the subject of a final decision on the merits. Pelt v. Utah, 539 F.3d 1271, 1279
(10th Cir. 2008). Here, the judgment dismissing Gelbard’s claims of fraud clearly states that
the dismissal is based on the statute of limitations. Request for Judicial Notice, Exhibit 15
(ECF No. 52-17) Hence, there is no final judgment on the merits, and Gelbard is not
precluded from asserting fraud as an affirmative defense here.
I agree with ABI that its claim is not barred by the statute of limitations, because the
claim was tolled by Gelbard’s bankruptcy case.
I will grant the motion to dismiss the second and third claims without prejudice.
Accordingly, it is ORDERED:
1.

Plaintiff’s Motion for Summary Judgment on its First Claim for Relief for Breach of
Contract, filed December 10, 2010 (ECF No. 50), is denied.

2.

Plaintiff’s Request for Judicial Notice in Support of Motion for Summary Judgment,
filed December 10, 2010 (ECF No. 52), is denied without prejudice.

3.

Plaintiff’s Motion to Dismiss without Prejudice the Second and Third Causes of
Action Asserted in Plaintiff’s Complaint, filed May 13, 2011 (ECF No. 75), is granted.
DATED at Denver, Colorado, on July 21, 2011.
BY THE COURT:

s/ Walker D. Miller
United States District Judge

PDF FINAL

5