Wyles v. Aluminaid International, A.G. et al
Filing
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ORDER granting 7 Defendants' Motion to Dismiss or in the Alternative for Abstention; denying without prejudice 8 Defendants' Motion for Sanctions. The Court retains jurisdiction to decide this matter. This case is DISMISSED WITH PREJUDICE by Judge Christine M. Arguello on 6/30/2015.(vbarn )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Christine M. Arguello
Civil Action No. 15-cv-00393-CMA-KMT
TERRENCE M. WYLES,
Plaintiff,
v.
ALUMINAID INTERNATIONAL, A.G.,
WEST HILLS RESEARCH & DEVELOPMENT, INC., formerly known as Aluminaid, Inc.,
ALUMINAID PTE, LTD., a/k/a Advanced First Aid Research PTE Limited,
ZUPERFOODS, INC.,
CARL J. FREER,
ERICKA FREER, a/k/a Ericka Lapresle,
JAMES HUNT,
ALLEN Z. SUSSMAN,
LOEB & LOEB LLP,
ADAM FREER, a/k/a Adam Agerstam,
JULIA FREER, a/k/a Julia Agerstam,
DAVID WARNOCK,
ALEX ARENDT,
Defendants.
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS
Because claim splitting and res judicata preclude Plaintiff from re-litigating his
claims in federal court, Defendants Loeb & Loeb LLP and Allen Sussman’s
(“Defendants”) Motion to Dismiss (Doc. # 7) is granted. Further, Defendants’ Motion for
Sanctions (Doc. # 8) is denied without prejudice, as it is unclear whether attorney’s fees
should be awarded pursuant to Rule 11.
I.
BACKGROUND
This case stems from Plaintiff’s former employment with “Defendant
Corporations.” (Doc. # 1 at 5, ¶ 23.) Plaintiff’s complaint lists eleven claims for relief:
(1) breach of contract for employment; (2) violation of Colorado Wage Act; (3) libel and
slander; (4) wrongful termination; (5) interference with contract/ prospective economic
advantage; (6) shareholder derivative action; (7) fraudulent transfers;
(8) misrepresentation; (9) abuse of process; (10) negligence; and (11) joint liability.
Over a year ago, on March 6, 2014, Plaintiff filed a complaint in Arapahoe County
District Court (“State Court”) asserting the same claims listed in this case—except
misrepresentation and negligence—against the same defendants. (Doc. # 7-1.)
Indeed, the State Court complaint included one additional defendant, Aja Reynolds.
(Id.)
On January 14, 2015, the State Court held that the employment agreement at
issue in this case contains a forum selection clause that is applicable to Plaintiff’s first
(breach of contract for employment), second (violation of Colorado Wage Act), fourth
(wrongful termination), and fifth (interference with contract/ prospective economic
advantage) claims for relief. (Doc. # 7-2 at 2.) The State Court determined that
enforcement of the forum selection clause, which requires Plaintiff to bring any claims
arising under the employment agreement in Switzerland, was contingent upon
Defendants advancing to Plaintiff reasonable travel expenses related to litigating the
matter in Switzerland within thirty days. (Id. at 2–3) Because the parties disagreed as
to what expenses were “reasonable,” on April 3, 2015, the State Court ordered that
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Defendants were responsible for advancing 80% of Plaintiff’s proposed budget of $195,
066. (Doc. # 7-3 at 1–2.) The State Court also appointed a Special Master to
determine “which expenses are reasonable and necessary, and the amount and timing
of any deposits or reimbursements.” (Id. at 3.)
Further, the State Court ordered that the derivative claim concerning Defendant
Aluminaid International be dismissed if the “foregoing payment/deposit is made and
approved by the court.” (Doc. # 7-2 at 3.) Plaintiff’s derivative claim relating to West
Hills Research & Development Inc. was dismissed; and Plaintiff’s abuse of process
claim was “dismissed without prejudice so that it may be brought before the California
court.” (Id. at 4.)
Additionally, in the January 14, 2015 Order, the State Court denied without
prejudice Plaintiff’s motion to amend his complaint to assert a derivative claim of
negligence/ legal malpractice. (Id. at 5.) Specifically, the State Court stated:
This issue may be raised again if the derivative claim [of legal malpractice]
survives the motion to dismiss related to the payment/deposit discussed
above. . . . Plaintiff may file another amended complaint in compliance
with the foregoing within 14 days after the issues concerning the deposit/
advance discussed above have been resolved.
(Id.)
Despite the ongoing State Court case, on February 26, 2015, Plaintiff filed a
complaint in this Court. (Doc. # 1.) On May 26, 2015, Defendants filed a Motion to
Dismiss and a Motion for Sanctions. (Doc. ## 7, 8.) On June 16, 2015, Plaintiff filed a
Response, to which Defendants replied on June 30, 2015. (Doc. ## 13, 16.)
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II.
STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 12(b)(6), a claim may be dismissed due to
the plaintiff’s “failure to state a claim upon which relief can be granted.” A dismissal
under Rule 12(b)(6) may be based on the lack of a cognizable legal theory or on the
absence of sufficient facts alleged under a cognizable legal theory. See id.; see also
Golan v. Ashcroft, 310 F.Supp.2d 1215, 1217 (D. Colo. 2004). The Rule 12(b)(6)
standard tests “the sufficiency of the allegations within the four corners of the complaint
after taking those allegations as true.” Mobley v. McCormick, 40 F.3d 337, 340 (10th
Cir. 1994).
Additionally, under Federal Rule of Civil Procedure 8(a)(2), a pleading must
contain a “short and plain statement of the claim showing that the pleader is entitled to
relief.” This pleading standard “does not require detailed factual allegations, but it
demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation. A
pleading that offers labels and conclusions or a formulaic recitation of the elements of a
cause of action will not do.” Ashcroft v. Iqbal, 556 U.S. 662, 677–78 (2009) (quoting
and citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)) (internal quotation
marks and citations omitted; alterations incorporated).
Further, “only a complaint that states a plausible claim for relief survives a motion
to dismiss [under Rule 12(b)(6)]. Determining whether a complaint states a plausible
claim for relief will . . . be a context-specific task that requires the reviewing court to
draw on its judicial experience and common sense. But where the well-pleaded facts
do not permit the court to infer more than the mere possibility of misconduct, the
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complaint has alleged—but it has not shown—that the pleader is entitled to relief.” Id. at
679 (quotation marks omitted).
The purpose of this pleading requirement is two-fold: “to ensure that a defendant
is placed on notice of his or her alleged misconduct sufficient to prepare an appropriate
defense, and to avoid ginning up the costly machinery associated with our civil
discovery regime on the basis of a largely groundless claim.” Kan. Penn Gaming, LLC
v. Collins, 656 F.3d 1210, 1214 (10th Cir. 2011) (internal quotation marks omitted).
III.
A.
DISCUSSION
MOTION TO DISMISS
Defendants argue Plaintiff’s claims should be dismissed because “each
defendant named in this suit is named in the State Court case,” and Plaintiff “seeks the
exact same relief in each case, bringing the exact same claims based on the exact
same set of facts.” The Court agrees.
Claim splitting is an aspect of res judicata that prevents parties from filing two
substantially identical complaints to circumvent procedural rules. Hartsel Springs
Ranch of Colorado, Inc. v. Bluegreen Corp., 296 F.3d 982, 990 (10th Cir. 2002).
Indeed, “[t]he rule against claim-splitting requires a plaintiff to assert all of its causes of
action arising from a common set of facts in one lawsuit.” Katz v. Gerardi, 655 F.3d
1212, 1217 (10th Cir. 2011). Dismissal for claim-splitting is premised in significant
measure on the ability of the district court to manage its own docket. Id. To determine
if a plaintiff improperly splits his claims, the court must ask: “whether, assuming the first
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suit was already final, the second suit would be precluded under res judicata analysis.”
Id. at 1218 (quoting Hartsel Springs, 296 F.3d at 987 n.1).
Res judicata, also known as claim preclusion, requires four elements: (1) finality
of the first judgment; (2) identity of subject matter; (3) identity of claims for relief; and
(4) identity or privity between parties to the actions. Hartsel Springs, 296 F.3d at 987
(citing Cruz v. Benine, 984 P.2d 1173, 1176 (Colo. 1999)). However, a final judgment is
not required in the claim-splitting context. Katz, 655 F.3d at 1218.
In this case, the identity of parties element is met because each defendant listed
in the State Court complaint is also listed in the complaint filed with this Court.
Additionally, despite Plaintiff asserting, with no supporting facts, that Defendants cannot
show identity of subject matter, the subject matter in each case stems from Plaintiff’s
employment agreement with the “Defendant Corporations.” Further, all but two of the
claims in the instant case are the same claims for relief that Plaintiff filed in the State
Court. The two additional claims Plaintiff includes in the instant case—
misrepresentation and negligence—are issues that could have been raised in State
Court because they arise from the same set of facts. In fact, Plaintiff filed a motion to
amend in State Court in which he attempted to assert his negligence claim. The State
Court denied this motion without prejudice, and specifically stated that the “issue may
be raised again if the derivative claim survives the motion to dismiss.” The fact that
Plaintiff was denied leave to amend, and particularly because Plaintiff’s motion was
denied without prejudice, does not give him the right to file a second lawsuit based on
the same facts. See Hartsel Springs, 296 F.3d at 989.
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Plaintiff argues that the statute of limitations was running on his negligence claim
and, thus, “he was required to bring his claim in another case.” However, Plaintiff
cannot file two substantially identical complaints in order to evade procedural
restrictions. In any event, the State Court asserted that Plaintiff can raise the issue
again; and, if Plaintiff was concerned with the statute of limitations running, in spite of
the State Court’s holding, he could have filed a motion to toll the statute of limitations in
State Court, rather than bringing a separate action in federal court.
Moreover, the State Court has already ruled on several of Plaintiff’s claims.
Because claim preclusion prevents a plaintiff from re-litigating claims already decided,
Plaintiff cannot re-litigate these same claims in federal court. Consumers Gas & Oil,
Inc. v. Farmland Indus., Inc., 815 F. Supp. 1403, 1412 (D. Colo. 1992).
Accordingly, claim splitting and res judicata preclude Plaintiff from re-litigating his
claims in this Court. Because Plaintiff’s claims are dismissed based on claim splitting
and res judicata, the Court need not consider Defendants’ additional arguments that
they are entitled to dismissal under the Colorado River and Rooker Feldman doctrines.
B.
MOTION FOR SANCTIONS
Defendants contend that “[t]he instant action is groundless, frivolous, and serves
only to harass the Loeb Defendants and needlessly increase the cost of litigation in
violation of Fed. R. Civ. P. 11(b)(1).” Defendants argue they are entitled to fees and
costs incurred by them in having to defend this duplicative suit. Plaintiff responds by
asserting the filing of this case “was made necessary after the State court declined to
allow amendment of the complaint to include the legal malpractice claim.”
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Rule 11 permits a court to impose sanctions on an attorney where a claim is
“presented for any improper purpose, such as to harass, cause unnecessary delay, or
needlessly increase the cost of litigation.” Fed. R. Civ. P. 11(b)(1), (c)(2). It is unclear
whether attorney’s fees should be awarded pursuant to Rule 11. If Defendants believe
such attorney’s fees are merited, they are to file a brief with supporting facts and law by
no later than July 30, 2015. Plaintiff is to file a response by August 13, 2015.
IV.
CONCLUSION
Based on the foregoing, the Court ORDERS that Defendants’ Motion to Dismiss
or, in the Alternative for Abstention, (Doc. # 7) is GRANTED. Pursuant to Fed. R. Civ.
P. 54(d)(1), the Court awards costs to Defendants. This case is DISMISSED WITH
PREJUDICE. It is
FURTHER ORDERED that Defendants’ Motion for Sanctions Pursuant to Rule
11 (Doc. # 8) is DENIED WITHOUT PREJUDICE. The Court retains jurisdiction to
decide this matter.
DATED: June
30
, 2015
BY THE COURT:
_______________________________
CHRISTINE M. ARGUELLO
United States District Judge
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