Touchstone Group, LLC v. Rink et al

Filing 82

ORDER that Plaintiffs Fed. R. Civ. P. 56(d) Motion to Deny Summary Judgment or to Defer Plaintiffs Opposition to the Tatum Defendants Motion for Summary Judgment, filed April 23, 2012 ECF No. 53 is DENIED. It is FURTHER ORDERED that my Order denyin g Plaintiffs Motion to Strike or Exclude, and converting the Tatum Defendants Motion to Dismiss to a Motion for Summary Judgment, entered April 20, 2012 ECF No. 48 is WITHDRAWN. It is FURTHER ORDERED that Plaintiffs Motion to Strike or Exclude, fil ed April 18, 2012 ECF No. 43 is GRANTED as set forth herein. It is FURTHER ORDERED that Plaintiff shall respond to the Tatum Defendants motion to dismiss within 21 days of the date of this Order, by Chief Judge Wiley Y. Daniel on 5/17/2012.(ervsl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Chief Judge Wiley Y. Daniel
Civil Action No. 11-cv-02971-WYD-KMT
TOUCHSTONE GROUP, LLC on behalf of itself and all others similarly situated,
Plaintiff,
v.
DANIEL J. RINK;
TATUM, LLC;
SFN GROUP, INC.;
CHRISTOPHER FLANNERY;
ASTOR, WEISS, KAPLAN & MANDEL LLP;
ESTILL & LONG, LLC
STEVEN GRANOFF, CPA;
KRASSENSTEIN, GRANOFF & UNGER, LLC
CARBON DIVERSION, INC.;
TRACS GROWTH INVESTMENT; and
JOHN DOES 1-100
Defendants.

ORDER

THIS MATTER is before the Court on Plaintiffs’ Fed. R. Civ. P. 56(d) Motion to
Deny Summary Judgment or to Defer Plaintiffs’ Opposition to the Tatum Defendants’
Motion for Summary Judgment, filed April 23, 2012 [ECF No. 53].
This is a class action brought under federal and state securities laws, to recover
damages resulting from a Ponzi scheme orchestrated by an entity known as Mantria
Corporation (“Mantria”) from approximately September 2007 to November 16, 2009. In
the Complaint, Plaintiff alleges that Defendant Tatum, LLC (“Tatum”),1 a firm that

1

Defendant SFN Group, Inc. is the parent company of Defendant Tatum.
Collectively, these entities will be referred to as the “Tatum Defendants.”

provides companies with interim executives, contracted with Mantria to have Defendant
Daniel Rink (“Rink”) function a member of Mantria’s three-person Executive Committee
and as its CFO. According to the Complaint, Defendant Rink was employed by and
acted at the direction of Tatum in performing his duties at Mantria. Plaintiff further
alleges that “[a]ccording to the terms of Tatum’s standard Executive Services
Agreement . . . Mantria paid Tatum directly for Tatum’s services and interim CFO of
Mantria.” Complaint at ¶ 60.
Plaintiff brings several claims against the Tatum Defendants including claims for
violation of section 10(b) and of The Exchange Act and Rule 10b-5, violation of section
20(a) of The Exchange Act, state securities and fraudulent transfer laws, and other
common law claims. Plaintiff maintains that the Tatum Defendants are liable as direct
participants and, by reason of their status as senior executive officers and/or directors,
were “controlling persons” within the meaning of Section 20(a) of the Exchange Act.
Complaint at ¶ 19.
On March 29, 2012, the Tatum Defendants filed a twenty-eight page motion to
dismiss. One of the arguments asserted by Tatum is that it does not maintain oversight
over companies seeking its services, and that the Interim Executive Services
Agreement (“Interim Agreement”) between Tatum and Mantria, specifically refutes any
allegation that Tatum had control, oversight or supervision over Mantria and Defendant
Rink. Although Tatum attached a copy of the Interim Agreement as Exhibit A to its
motion to dismiss, I did not automatically convert the motion to dismiss to a motion for
summary judgment pursuant to Fed. R. Civ. P. 12(d) because Tatum represented that
the Interim Agreement was the contract “referenced in the Complaint.” In deciding a
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motion to dismiss, a court may review a document referred to in a complaint if the
document is central to the plaintiff’s claim and the parties do not dispute the authenticity
of the document. Jacobson v. Deseret Book Co., 287 F.3d 936, 941 n.2 (10th Cir.
2002).
Shortly after the motion to dismiss was filed, Plaintiff filed a motion to strike or
exclude, asserting that the Interim Agreement attached to the motion to dismiss is not
the contract referenced the Complaint, is not central to Plaintiff’s claims, and is not
indisputably authentic2. I granted the motion to strike in part and converted the motion
to dismiss to a motion for summary judgment.
When a motion to dismiss is converted to a motion for summary judgment
pursuant to Fed. R. Civ. P. 12(d), the court must allow all parties a reasonable
opportunity to present all materials pertinent to the motion. Plaintiff filed the instant
motion pursuant to Fed. R. Civ. P. 56(d),3 which gives the court discretionary power to
deny summary judgment or order a continuance when the party in opposition to the
motion cannot provide supporting affidavits, or specific facts essential to justify its
position. See Hackworth v. Progressive Cas. Ins. Co., 468 F.3d 722, 732 (10th Cir.
2006). Therein, Plaintiff states that it needs to obtain additional discovery in order to
respond to the motion for summary judgment. However, as both Plaintiff and the Tatum

2

Plaintiffs have since filed a Notice of Errata indicating that the document
referenced in ¶ 60 of the Complaint is a standard form agreement used by Tatum with
its clients, copied from the files of unrelated litigation. This fact does not alter the
analysis herein.
3

In 2010 Rule 56 was amended and the new subsection (d) carried forward
without substantial change the provisions of former subsection (f).
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Defendants correctly note, discovery in this case has been automatically stayed
pursuant to the Private Securities Litigation Reform Act (“PSLRA”). The PSLRA
provides for an automatic stay of all discovery during the pendency of a motion to
dismiss claims brought under the Exchange Act. 15 U.S.C. § 78u-4(b)(3)(B). The
purpose of the automatic discovery stay is to all the court to determine the “legal
sufficiency of a complaint alleging securities fraud before corporate defendants are
forced to engage in costly discovery, which in turn may unfairly coerce early settlement.”
In re Spectranetics Corp. Sec. Litig., 2009 WL 33446611, at *2 (D. Colo., Oct. 14, 2009)
(citing In re Carnegie Int’l Corp. Sec. Litig., 107 F.Supp.2d 676, 682-83 (D. Md. 2000).
While it would not be appropriate lift or modify the automatic stay at this time, it
would also be unfair to deny Plaintiff a chance to fully respond to the Tatum Defendants’
converted motion for summary judgment. Therefore, after careful consideration of the
automatic stay provisions in the PSLRA, the instant motion, and Plaintiff’s motion to
strike or exclude, I find the best course of action is to withdraw my order converting the
Tatum Defendants’ motion to dismiss to a motion for summary judgment, and exclude
from consideration any reference to the Interim Agreement in ruling on the Tatum
Defendants’ motion to dismiss.
Therefore, it is hereby
ORDERED that Plaintiffs’ Fed. R. Civ. P. 56(d) Motion to Deny Summary
Judgment or to Defer Plaintiffs’ Opposition to the Tatum Defendants’ Motion for
Summary Judgment, filed April 23, 2012 [ECF No. 53] is DENIED. It is
FURTHER ORDERED that my Order denying Plaintiff’s Motion to Strike or

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Exclude, and converting the Tatum Defendants’ Motion to Dismiss to a Motion for
Summary Judgment, entered April 20, 2012 [ECF No. 48] is WITHDRAWN. It is
FURTHER ORDERED that Plaintiff’s Motion to Strike or Exclude, filed April 18,
2012 [ECF No. 43] is GRANTED as set forth herein. It is
FURTHER ORDERED that Plaintiff shall respond to the Tatum Defendants’
motion to dismiss within 21 days of the date of this Order.
Dated: May 17, 2012
BY THE COURT:

s/ Wiley Y. Daniel
Wiley Y. Daniel
Chief United States District Judge

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