Eschino et al v. Lopez

Filing 31

ORDER by Judge Philip A. Brimmer on 8/27/15. ORDERED: Defendant Aurelio Lopez's Motion to Dismiss 10 is GRANTED. ORDERED: Plaintiffs Robert Eschino Jr. and Rick Scarpello's first, second, third, and fourth claims for relief are dismissed without prejudice. ORDERED: Within 14 days of the entry of judgment, defendants may have their costs by filing a bill of costs with the Clerk of the Court. ORDERED: This case is dismissed in its entirety. (kpreu)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Philip A. Brimmer
Civil Action No. 14-cv-02686-PAB-NYW
ROBERT ESCHINO JR and
RICK SCARPELLO,
Plaintiffs,
v.
AURELIO LOPEZ,
Defendant.

ORDER

This matter is before the Court on defendant Aurelio Lopez’s motion to dismiss
[Docket No. 10]. The Court has jurisdiction pursuant to 28 U.S.C. § 1332(a).
The complaint sets forth the following allegations, which, for the purpose of ruling
on the instant motion to dismiss, the Court takes as true. See Alvarado v. KOB-TV,
LLC, 493 F.3d 1210, 1215 (10th Cir. 2007) (“W e must accept all the well-pleaded
allegations of the complaint as true and must construe them in the light most favorable
to the plaintiff.”). Plaintiffs and defendant were, at all times relevant to this action,
members1 of SL Metal Works, L.L.C., a Colorado limited liability company (“SL Metal
Works”). Docket No. 3 at 1-2, ¶¶ 2a, 2 6-8. At some point, SL Metal Works borrowed
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Plaintiffs allege that each of them was, at times relevant to this action, “a
15.48% shareholder” of SL Metal Works. Docket No. 3 at 2, ¶¶ 6-7. Because plaintif fs’
complaint alleges that SL Metal Works is an LLC rather than a corporation, the Court
interprets plaintiffs’ allegation to mean that they were members of the LLC.
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Plaintiffs’ complaint mistakenly contains two paragraphs numbered paragraph 2.
See Docket No. 3 at 1. The Court refers to the second “paragraph 2” as ¶ 2a.

$69,120.00 from Medically Correct LLC in order to manufacture machines used to
extract THC from marijuana. Id. at 3, ¶¶ 16-17. The machines and various machine
parts were SL Metal Works’ only tangible assets. Id. ¶ 17. Plaintiffs allege that
defendant has removed the machines as well as all funds in SL Metal Works’ bank
account and has refused to return the machines and funds to the company. Id. ¶¶ 1819. Plaintiffs bring a derivative action on behalf of SL Metal Works and assert claims
for breach of fiduciary duty, breach of contract, “fraud/embezzlement,” and unjust
enrichment. See id. at 4-5.
Defendant moves to dismiss on the grounds that plaintiffs’ complaint does not
satisfy the requirements of Rule 23.1 of the Colorado Rules of Civil Procedure because
the complaint is not verified and does not describe any efforts made to obtain the
desired action or explain plaintiffs’ failure to make any such efforts. See Docket No. 10.
Plaintiffs respond that they intend to file a motion for leave to amend their complaint.
See Docket No. 18 at 1, ¶ 1. Plaintiffs filed their response in November 2014, see id.,
but have not, as of the date of this Order, moved for leave to amend their complaint.
“Federal courts must look to state law to determine whether a demand . . . is
necessary before a derivative action may be maintained on behalf of the corporation.”
Brooks v. Land Drilling Co., 564 F. Supp. 1518, 1522 (D. Colo. 1983) (citations
omitted). If state law requires that a demand be made before a plaintiff may bring a
derivative action, a complaint must then satisfy the pleading requirements of Rule 23.1
of the Federal Rules of Civil Procedure. Salit v. Stanley Works, 802 F. Supp. 728, 737

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(D. Conn. 1992).3
Under Colorado law, no LLC member may commence a derivative action against
a limited liability company unless:
(a) A written demand has been made upon the limited liability company to
take suitable action; and
(b) Thirty days have expired from the date the demand was made; except
that the thirty-day limitation shall not be required where:
(I) The member has been notified prior to the expiration of the
thirty-day period that the demand has been rejected by the limited
liability company; or
(II) Irreparable injury to the limited liability company would result
from waiting for the expiration of the thirty-day period.
Colo. Rev. Stat. § 7-80-714. Thus, Colorado requires a demand as a prerequisite to a
derivative action. As a result, plaintiffs must satisfy the requirements of Fed. R. Civ. P.
23.1.
Rule 23.1(b) requires, in relevant part, that a derivative complaint be verified and
state with particularity “(A) any effort by the plaintiff to obtain the desired action from the
directors or comparable authority and, if necessary, from the shareholders or members;
and (B) the reasons for not obtaining the action or not making the effort. Fed. R. Civ. P.
23.1(b), 23.1(b)(3). Plaintiffs’ complaint fails the verification requirement. See Docket
No. 3. Plaintiffs apparently concede this defect, as they stated in response to
defendant’s motion that they intended to move for leave to file an amended complaint
3

Defendant moves for dismissal pursuant to Rule 23.1 of the Colorado Rules of
Civil Procedure. See Docket No. 10. However, Federal Rule 23.1 applies in this
diversity action. The two rules are substantively identical for the purposes of this
motion, compare Fed. R. Civ. P. 23.1 with Colo. R. Civ. P. 23.1, but the Court will refer
to the pleading requirements of the federal rule.
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that would “include a verification statement as well as other necessary revisions,”
Docket No. 18 at 1, but plaintiffs have filed no such motion. Defendant’s motion will
therefore be granted, and plaintiffs’ complaint will be dismissed without prejudice. See
Van Schaack v. Phipps, 558 P.2d 581, 584 (Colo. App. 1976) (dism issing unverified
complaint without prejudice pursuant to Colo. R. Civ. P. 23.1). Because the Court will
dismiss the complaint for lack of verification, the Court need not consider defendant’s
argument that the complaint should be dismissed for failure to comply with the
requirements of Rule 23.1(b)(3) or for failure to state a claim upon which relief may be
granted.
Wherefore, it is
ORDERED that defendant Aurelio Lopez’s Motion to Dismiss [Docket No. 10] is
GRANTED. It is further
ORDERED that plaintiffs Robert Eschino Jr. and Rick Scarpello’s first, second,
third, and fourth claims for relief are dismissed without prejudice. It is further
ORDERED that, within 14 days of the entry of judgment, defendants may have
their costs by filing a bill of costs with the Clerk of the Court. It is further
ORDERED that this case is dismissed in its entirety.

DATED August 27, 2015.
BY THE COURT:

s/Philip A. Brimmer
PHILIP A. BRIMMER
United States District Judge

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