Near v. Crivello et al
MEMORANDUM AND ORDER denying 25 Motion to Dismiss the counterclaims; granting in part and denying in part 27 Motion for Judgment on the pleadings filed by defendants Titan Global Holdings, Inc., Frank Crivello, David Marks, and Bryan Chance. Pla intiff is granted until 12/11/2009, to cure his pleading deficiences by filing an amended complaint; denying 41 Motion for Leave to conduct jurisdictional discovery; denying 14 Motion to Dismiss by defendant Goldberg Kohn Bell Black Rosenbloom & Moritz, Ltd.; and denying 20 Motion to Dismiss. Signed by District Judge John W. Lungstrum on 11/25/2009. (ses)
IN THE UNITED STATES DISTRICT COURT F O R THE DISTRICT OF KANSAS
P H IL L IP L. NEAR,
) ) P l a in tif f , ) ) v. ) ) F R A N K CRIVELLO; TITAN GLOBAL ) H O L D IN G S , INC.; DAVID MARKS; ) B R Y A N CHANCE; GREYSTONE ) B U S I N E S S CREDIT, LLC; and ) G O L D B E R G KOHN BELL BLACK ) R O S E N B L O O M & MORITZ, LTD., ) ) D e f e n d a n ts . ) ) _______________________________________)
C a s e No. 09-2233-JWL
M E M O R A N D U M AND ORDER P la in t if f Phillip Near brings this diversity action alleging state-law claims against T ita n Global Holdings, Inc. ("Titan") and three individuals associated with Titan, Frank C riv ello , David Marks, and Bryan Chance (collectively, "the Titan defendants"); G re ys to n e Business Credit, LLC ("Greystone"); and Goldberg Kohn Bell Black R o sen b lo o m & Moritz, Ltd. ("Goldberg Kohn"). The case revolves around Titan's a g re e m e n t to purchase Crescent Fuels, Inc. ("Crescent"), a fuel distributor located in K a n sa s, from plaintiff. Greystone was involved as a potential lender for the transaction, a n d Goldberg Kohn, a Chicago law firm, acted as Greystone's counsel. Plaintiff asserts a claim against Titan for breach of contract, and claims against the Titan defendants for
f ra u d u le n t misrepresentation, fraud by silence, fraudulent inducement, and negligent m is re p re se n ta tio n . Plaintiff also asserts claims against all defendants for conversion and fo r conspiracy to effect a conversion, and against Goldberg Kohn for breach of fiduciary d u ty, all stemming from plaintiff's allegation that Goldberg Kohn refused to return to p la in tif f a stock certificate issued by Crescent to Titan. Titan asserts counterclaims a g a in s t plaintiff for fraudulent misrepresentation, fraud by silence, fraudulent in d u c e m e n t, and negligent misrepresentation. T h is matter is presently before the Court on motions to dismiss filed by Greystone (D o c . # 20), Goldberg Kohn (Doc. # 14), and plaintiff (Doc. # 25); a motion for ju d g m e n t on the pleadings filed by the Titan defendants (Doc. # 27); and a motion for le a v e to conduct jurisdictional discovery filed by Greystone (Doc. # 41). The motions to dismiss by Greystone and Goldberg Kohn are denied, based on the Court's c o n c lu s io n s that it may exercise personal jurisdiction over those defendants and that p lain tiff has sufficiently pleaded his conspiracy claim against Greystone. Greystone's d is c o v e ry motion is also denied. Plaintiff's motion to dismiss Titan's counterclaims is d e n i e d , based on the Court's conclusion that Titan has sufficiently pleaded its claims ag ains t plaintiffs, including with respect to the particularity requirement of Rule 9(b). F inally, the Titan defendants' motion for judgment on the pleadings on plaintiff's tort c la im s is granted in part and denied in part. Plaintiff's claim for negligent
m is re p re se n ta tio n is dismissed to the extent based on representations concerning
p ro m i se s of future action, and plaintiff's claim for punitive damages is also dismissed to the extent based on his claim for negligent misrepresentation. The Court also c o n c lu d e s that plaintiff has not adequately pleaded his reliance on post-agreement re p re se n ta tio n s , his reasonable diligence as an element of his claims for fraud by silence, th e existence of an agreement among the Titan defendants in support of his conspiracy claim , and the details of most of the alleged misrepresentations as required by Rule 9(b); th o se claims are therefore subject to dismissal, although plaintiff is granted leave to a m e n d his complaint by December 11, 2009, to cure those pleading deficiencies.
G re ys to n e moves to dismiss the claims against it for lack of personal jurisdiction p u rs u a n t to Fed. R. Civ. P. 12(b)(2). Greystone also seeks leave to conduct jurisdictional d is c o v e ry prior to the Court's ruling on its motion to dismiss. In addition, Greystone m o v e s to dismiss plaintiff's conspiracy claim pursuant to Fed. R. Civ. P. 12(b)(6), on the b a s i s that plaintiff has failed to allege sufficient facts concerning the existence of an a g re e m e n t among the alleged conspirators to support a plausible conspiracy claim. A. Personal Jurisdiction Standards
A lth o u g h a plaintiff bears the burden of establishing personal jurisdiction over a d e f e n d a n t, see OMI Holdings, Inc. v. Royal Ins. Co., 149 F.3d 1086, 1091 (10th Cir. 1 9 9 8 ), in the preliminary stages of litigation this burden is "light." Intercon, Inc. v. Bell
A tla n tic Internet Solutions, Inc., 205 F.3d 1244, 1247 (10th Cir. 2000) (quoting Wenz v. M e m e ry Crystal, 55 F.3d 1503, 1505 (10th Cir.1995)). Where, as here, there has been n o evidentiary hearing, and the motion to dismiss for lack of personal jurisdiction "is d e c id e d on the basis of affidavits and other written material, the plaintiff need only make a prima facie showing that jurisdiction exists." See id. The allegations in the complaint m u s t be taken as true to the extent they are uncontroverted by the defendant's affidavits. Id . Moreover, if the parties present conflicting affidavits, "all factual disputes must be re so lv e d in the plaintiff's favor, and the plaintiff's prima facie showing is sufficient n o tw ith s ta n d in g the contrary presentation by the moving party." Id. Only the well pled fa cts of plaintiff's complaint, however, as distinguished from mere conclusory a lle g a tio n s , must be accepted as true. Id. In addition, an affidavit submitted by a party m u s t comply with the requirements of Fed. R. Civ. P. 56(e), i.e., it must be based on p e rs o n a l knowledge, set forth admissible facts, and show affirmatively that the affiant i s competent to testify to the matters stated therein. See FDIC v. Oaklawn Apts., 959 F .2 d 170, 175 n.6 (10th Cir. 1992). T o obtain personal jurisdiction over a nonresident defendant in a diversity action, " a plaintiff must show both that jurisdiction is proper under the laws of the forum state a n d that the exercise of jurisdiction would not offend due process." Intercon, Inc. v. Bell A tla n tic Internet Solutions, Inc., 205 F.3d 1244, 1247 (10th Cir. 2000). Because K a n sa s's long-arm statute permits the exercise of any jurisdiction that is consistent with
th e United States Constitution, the personal jurisdiction inquiry under Kansas law c o lla p s e s into the single due process inquiry. See OMI Holdings, Inc. v. Royal Ins. Co. o f Canada, 149 F.3d 1086, 1090 (10th Cir. 1998). The Due Process Clause permits the exercise of personal jurisdiction over a n o n re sid e n t defendant so long as the defendant purposefully established "minimum c o n ta c ts " with the forum state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1 9 8 5 ); accord Intercon, Inc. v. Bell Atlantic Internet Solutions, Inc., 205 F.3d 1244, 1 2 4 7 (10th Cir. 2000) (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 2 9 1 (1980)). This standard may be met in two ways. First, a court may exercise specific ju ris d ic tio n if a defendant has "purposefully directed his activities at residents of the f o r u m , and the litigation results from alleged injuries that arise out of or relate to those a c tiv itie s." Intercon, 205 F.3d at 1247 (quoting Burger King Corp., 471 U.S. at 472); a c c o rd Doering v. Copper Mountain, Inc., 259 F.3d 1202, 1210 (10th Cir. 2001). S ec o n d , a court may exercise general jurisdiction if the defendant's contacts with the f o ru m state, while unrelated to the alleged activities upon which the claims are based, a re nonetheless "continuous and systematic." Intercon, 205 F.3d at 1247 ("When a p la in tif f 's cause of action does not arise directly from a defendant's forum-related a c tiv itie s, the court may nonetheless maintain general personal jurisdiction over the d e f e n d a n t based on the defendant's business contacts with the forum state."); accord D o e rin g , 259 F.3d at 1210.
E v e n if a defendant's actions created sufficient minimum contacts, the court must s till consider whether the exercise of personal jurisdiction "would offend traditional n o tio n s of `fair play and substantial justice.'" Intercon, 205 F.3d at 1247 (quoting Burger K in g Corp., 471 U.S. at 476). This inquiry requires a determination of whether the " e x erc is e of personal jurisdiction over [the] defendant is reasonable in light of the c irc u m s ta n c es surrounding the case." Id. (citing Burger King Corp., 471 U.S. at 4777 8 ); accord Peay, 205 F.3d at 1212. B. Jurisdiction Analysis
G reysto n e, a limited liability company formed in Delaware with its headquarters in New York, argues that plaintiff has not shown that it had sufficient contacts with K a n sa s to support personal jurisdiction in this case. According to its affidavit, Greystone d o e s not conduct business and does not have any property or employees in Kansas. G re ys to n e concedes that it sent two employees to Kansas on one occasion to conduct due d ilig e n c e for a possible loan to Titan for the purchase of Crescent, that it hired an a p p ra is e r who performed work in Kansas for that due diligence work, that it received due d ilig e n c e documents sent from Kansas, and that it directed a very small number of d o c u m e n ts and communications into Kansas. Greystone argues, however, that such c o n ta c ts are not sufficient to confer specific jurisdiction in this case. T h e Court disagrees with Greystone that it did not have sufficient minimum c o n ta c ts with Kansas in connection with plaintiff's claims. According to the
u n c o n tro v e rte d allegations of the complaint and the facts properly submitted by plaintiff th ro u g h the affidavit of an officer of Crescent, Greystone had the following contacts with K a n s a s in connection with plaintiff's transaction with Titan, which the Court deems su ff icien t to establish personal jurisdiction over Greystone: Greystone and Goldberg K o h n (as Greystone's agent1 ) monitored the negotiations for the purchase of Crescent a n d the preparation of the stock purchase agreement, and was aware made aware of the ter m s of the purchase. Greystone and Goldberg Kohn requested and received documents f ro m Kansas in the course of their due diligence work, and they requested the creation o f an on-line depository for the review of documents located in Kansas. Employees of G re ysto n e visited Kansas on at least one occasion, viewed assets in Kansas, met with p la in tif f , and discussed the contemplated transaction and Greystone's financing of the
Greystone does not dispute that Goldberg Kohn acted as its agent. Nor does G r e ys to n e dispute that Goldberg Kohn's contacts with Kansas in connection with these c la im s may be attributed to Greystone for purposes of personal jurisdiction. See, e.g., C o r y v. Aztec Steel Building, Inc., 2005 WL 1799207, at *4 (D. Kan. Apr. 5, 2005) ("An a g e n t's contacts with the forum state may be imputed to a nonresident corporation for lo n g -a rm jurisdiction.") (citing Kuenzle v. HTM Sport-Und Freizeitgerate AG, 102 F.3d 4 5 3 , 458-59 (10th Cir. 1996)), aff'd, 468 F.3d 1226 (10th Cir. 2006); K.S.A. § 603 0 8 (b )(1 ) (Kansas long-arm statute confers jurisdiction over any nonresident who "in p e rs o n or through an agent or instrumentality" does any of the enumerated acts). Instead, G r e ys to n e merely argues that Goldberg Kohn's contacts are not sufficient in themselves, as shown by Goldberg Kohn's own motion to dismiss. Whether or not Goldberg Kohn's c o n ta c ts would be sufficient by themselves to confer jurisdiction, the Court considers the c o n ta c ts of both Greystone and Goldberg Kohn as its agent in determining whether G reyston e's contacts are sufficient. Moreover, even if Goldberg Kohn's contacts were n o t attributed to Greystone, the Court would nonetheless conclude that Greystone's own c o n tac ts are sufficient to confer jurisdiction over it. 7
tra n sa c tio n . Employees of Greystone and Goldberg Kohn made frequent inquiries to C re sc e n t's employees in Kansas concerning the details of the business of Crescent and t h e documents provided by Crescent. Employees of Greystone and Goldberg Kohn e n g a g e d in e-mail and other communications with Crescent's employees in Kansas. G re ysto n e and Goldberg Kohn engaged appraisers, inspectors, and title companies to p e r f o r m due diligence work in Kansas. Greystone and Goldberg Kohn were closely in v o lv e d in the transaction and controlled the flow and details of closing documents for th e transaction. Goldberg Kohn agreed to accept delivery of stock certificates to hold in escrow for purposes of the closing on the transaction to purchase Crescent, a Kansas c o m p a n y, and Goldberg Kohn refused to return one certificate to Crescent. T h e Court also rejects Greystone's argument that its conduct was not purposefully d i r e c te d at Kansas, the forum state. All of the cited conduct related directly to the p u rc h a se of a company located in Kansas, and Greystone directed communications and d u e diligence activities into Kansas to facilitate its own business as a lender to Titan for th e purchase of Crescent. According to plaintiff's facts, which must be credited at this tim e , Greystone was closely involved in the entire transaction. Greystone's contacts with K a n s a s were certainly not random or fortuitous or unilaterally created by other parties. G re ysto n e further asserts that plaintiff's claims did not arise out of these contacts w ith Kansas as required for the exercise of specific jurisdiction. Greystone notes that p l a i n t if f ' s claims against it relate only to the conversion of the stock certificate, and it
arg u e s that its contacts prior to the execution of the purchase agreement are therefore u n r e l a te d to those claims. The Court does not agree, however, that the alleged
c o n v e rs io n can be so easily segregated in this manner. As alleged by plaintiff, the w ro n g f u l acts by defendants were all interrelated. Greystone was closely involved in the e n tire transaction, and the alleged conversion of the stock certificate occurred in c o n n e ctio n with the closing of that transaction. Greystone allegedly conspired to effect th a t conversion, which was facilitated by misrepresentations by the other defendants. G re ys to n e allegedly had knowledge that its financing was a part of the contemplated tra n s a c tio n , and the lack of financing contributed to plaintiff's assertion that his o w n e rs h ip interest was therefore converted. Accordingly, the Court concludes that G re ysto n e 's contacts with Kansas are sufficiently linked to plaintiff's claims against it. F in a lly, the Court rejects Greystone's argument that this Court's exercise of p e rs o n a l jurisdiction would offend traditional notions of fair play and substantial justice. G re ysto n e has not shown that the burden on Greystone in litigating in this forum would b e so unreasonable as to offend due process. C. Sufficiency of Conspiracy Allegations
I n addition, plaintiff argues that the contacts with Kansas of the other defendants, w h o are alleged co-conspirators, may also be attributed to Greystone for purposes of p e rs o n a l jurisdiction. Greystone does not take issue with that general statement of the la w . See Melea, Ltd. v. Jawer SA, 511 F.3d 1060, 1069 (10th Cir. 2007) ("The existence
o f a conspiracy and acts of a co-conspirator within the forum may, in some cases, subject a n o th e r co-conspirator to the forum's jurisdiction."). Nor does Greystone dispute that th e Titan defendants' contacts with Kansas would be sufficient to confer specific ju ris d ic tio n over Greystone. G re ys to n e 's only argument against such attribution of contacts in this case is that p la in tif f has not provided or pleaded sufficient facts to support the allegation of the e x is t e n c e of an agreement between Greystone and the other defendants. "In order for p erso n al jurisdiction based on a conspiracy theory to exist, the plaintiff must offer more than `bare allegations' that a conspiracy existed, and must allege facts that would support a prima facie showing of a conspiracy." Id.; accord American Land Program, Inc. v. B o n a v e n tu r a Uitgevers Maatschappij, N.V., 710 F.2d 1449, 1454 (10th Cir. 1983) (q u o tin g Baldridge v. McPike, Inc., 466 F.2d 65, 68 (10th Cir. 1972)); see also Ten Mile In d u s . Park v. Western Plains Serv. Corp., 810 F.2d 1518, 1524 (10th Cir. 1987) (in su p p o rt of jurisdiction, only well-pled facts, as distinguished from mere conclusory a lleg a tio n s, must be accepted as true). In addition, the Supreme Court recently
c o n f irm e d that merely conclusory allegations are not entitled to the presumption of truth a t the pleading stage and are not sufficient to state a claim for relief; rather, the plaintiff m u s t plead facts in sufficient detail to establish a plausible right to relief. See Ashcroft v . Iqbal, 129 S. Ct. 1937, 1949-50 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U .S . 544, 555-57 (2007)). Applying these standards in the context of an antitrust claim,
th e Supreme Court held that a plaintiff may not merely allege the existence of a c o n sp ira c y, but must plead sufficient factual matter to suggest that an agreement was a c tu a lly made. See Twombly, 550 U.S. at 556-57. There is no reason to believe that th e se same standards should not also govern a plaintiff's allegations in support of ju ris d ic tio n . See, e.g., Watkins v. Kajima Int'l, 2009 WL 3053856, at *6 (M.D. Tenn. S ep t. 18, 2009) (pleading deficient under Twombly did not provide minimum contacts n ec essa ry to support the assertion of personal jurisdiction). G re ys to n e argues that plaintiff has only conclusorily alleged the existence of an a g re e m e n t involving Greystone, without supporting facts to give rise to a plausible c o n sp ira c y claim. The Court concludes, however, that plaintiff has sufficiently pleaded f a c t s to support a plausible assertion of a conspiracy involving Greystone. According t o plaintiff's uncontroverted allegations and its affidavit, Greystone had an existing b u s in e ss relationship with Titan, and principals of the two companies were personal f rie n d s; throughout the relevant period, Greystone and its attorneys were closely in v o lv e d in the transaction, which contemplated Greystone's financing and acquisition o f a significant liability of Crescent's; Greystone did not provide financing or eliminate th e debt; Greystone and its attorneys nonetheless wrongly refused to return the stock c e rtif ic a te made out to Titan; and Greystone actively participated in the looting of a n o th e r company purchased by Titan with Greystone's financing, which conduct injured p la in tif f and facilitated the overall scheme to defraud plaintiff. Thus, plaintiff has not
m e re ly attempted to tie an otherwise innocent and uninvolved party to the scheme th ro u g h a conclusory allegation that a conspiracy existed; rather, plaintiff has specifically a lle g e d wrongful conduct by Greystone, and the totality of the allegations give rise to a p la u sib le inference that a conspiracy existed involving Greystone. G re ysto n e has not provided any other reason why its co-conspirators' contacts w ith Kansas should not be considered by the Court in evaluating Greystone's contacts w ith Kansas. Accordingly, the Court concludes that the exercise of specific jurisdiction o v e r Greystone is further supported by consideration of the Titan defendants' contacts w ith Kansas. The Court denies Greystone's motion to dismiss plaintiff's claims for lack o f personal jurisdiction. M o re o v e r, because plaintiff has adequately pleaded the existence of a conspiracy, th e Court denies Greystone's motion to dismiss the conspiracy count for failure to state a claim. D. Motion for Leave to Conduct Jurisdictional Discovery
T h e Court also denies Greystone's motion for leave to conduct jurisdictional d isc o v e ry prior to the Court's ruling on its motion to dismiss.2 This is not a case in w h ich a plaintiff needs discovery in order to find contacts with the forum state to support ju ris d ic tio n over the defendant. In this case, even if Greystone could discover additional
In a telephone hearing, the Court previously denied this motion to the extent that G re ys to n e requested a stay of the briefing on its jurisdiction motion. 12
f a cts to controvert the affidavit submitted by plaintiff, that affidavit would still be c re d ite d over Greystone's own affidavits at this stage of the litigation. Greystone has not c ite d any authority that would require that a defendant be given leave to conduct ju ris d ic tio n a l discovery. Moreover, Greystone will not suffer any substantial prejudice lik e that suffered by a plaintiff whose claim is barred by an adverse jurisdictional ruling, a s Greystone may still challenge the Court's exercise of personal jurisdiction over it after d isco v ery in the normal course. For these reasons, the Court denies Greystone's d is c o v e ry motion.
Goldberg Kohn's Motion to Dismiss
G o ld b e rg Kohn moves to dismiss plaintiff's claims against it (conversion, c o n sp ira c y, breach of fiduciary duty) for lack of personal jurisdiction pursuant to Fed. R . Civ. P. 12(b)(2). Goldberg Kohn, a law firm located in Chicago, Illinois, acted as G re ys to n e 's attorneys in conducting due diligence concerning possible financing by G r e ys to n e of Titan's purchase of Crescent. Goldberg Kohn argues that its employees n e v e r visited Kansas as a part of that work and that it directed only a small number of c o m m u n ic a tio n s into Kansas in performing due diligence; thus, Goldberg Kohn argues th a t it did not have minimum contacts with Kansas sufficient to support the exercise of sp e c if ic jurisdiction over it.3
The Court rejects plaintiff's assertion of general jurisdiction over Goldberg Kohn (continued...) 13
T h e Court disagrees, however, and it concludes, based on the same contacts by G o ld b e rg Kohn listed above with respect to Greystone's motion, see supra Part I.B, that G o ld b e rg Kohn had sufficient contacts with Kansas to support personal jurisdiction over it consistent with due process. Moreover for the same reasons stated with respect to G r e ys to n e , the Court concludes that Goldberg Kohn's contacts with Kansas are s u f f ic ie n tly related to plaintiff's claims against it, and that plaintiff's allegations c o n c e rn in g the existence of a conspiracy involving Goldberg Kohn are sufficient to s u p p o r t attribution of the other defendants' contacts to Goldberg Kohn for this analysis. M o r e o v e r, Goldberg Kohn, a law firm that advertises a national law practice, has not s h o w n that this Court's exercise of jurisdiction over it in this forum would be so b u r d e n so m e and unreasonable as to violate due process. The Court denies Goldberg K o h n 's motion to dismiss based on a lack of personal jurisdiction.
Titan Defendants' Motion for Judgment on the Pleadings
T h e Titan defendants seek judgment on the pleadings pursuant to Fed. R. Civ.
(...continued) b a se d on the firm's pro hac vice appearances in five cases in this district in the last five ye a rs. Plaintiff has not provided any evidence of the extent of Goldberg Kohn's contacts w ith the state in those cases; thus, plaintiff has not established that Goldberg Kohn's co n tacts with Kansas have been systematic and continuous, as required for the Court's e x e rc is e of general jurisdiction. 14
1 2 (c ) with respect to plaintiff's tort claims under Kansas law.4 A. Governing Standards
A motion for judgment on the pleadings under Rule 12(c) is analyzed under the s a m e standard that applies to a motion to dismiss for failure to state a claim under Fed. R . Civ. P. 12(b)(6). See Park Univ. Enterprises, Inc. v. American Cas. Co., 442 F.3d 1 2 3 9 , 1244 (10th Cir. 2006). The Court will dismiss a cause of action for failure to state a claim only when the factual allegations fail to "state a claim to relief that is plausible o n its face," Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007), or when an issue o f law is dispositive, see Neitzke v. Williams, 490 U.S. 319, 326 (1989). The complaint n e e d not contain detailed factual allegations, but a plaintiff's obligation to provide the g ro u n d s of entitlement to relief requires more than labels and conclusions; a formulaic re c ita tio n of the elements of a cause of action will not do. See Bell Atlantic, 550 U.S. a t 555. The court must accept the facts alleged in the complaint as true, even if doubtful in fact, see id., and view all reasonable inferences from those facts in favor of the p la in tif f , see Tal v. Hogan, 453 F.3d 1244, 1252 (10th Cir. 2006). Viewed as such, the " [ f ]a c tu a l allegations must be enough to raise a right to relief above the speculative
The parties have analyzed the tort claims brought by plaintiff and Titan under K a n s a s law; accordingly, the Court will also apply Kansas law to those claims. See K la x o n Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941) (forum state's choice-oflaw rules determine which state's substantive law applies); Ling v. Jan's Liquors, 237 K a n . 629, 634-35, 703 P.2d 731, 735 (1985) (in Kansas, tort claims are governed by the law of the state in which the tort occurred). 15
le v e l." Bell Atlantic, 550 U.S. at 555. The issue in resolving a motion such as this is " n o t whether [the] plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claims." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 5 1 1 (2002) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). B. Fraud and Negligent Misrepresentation Claims Generally
T h e Titan defendants raise a number of arguments in seeking judgment on p la in tif f 's claims for fraudulent misrepresentation, fraud by silence, fraudulent in d u c e m e n t, and negligent misrepresentation. 1. STATEMENTS OF OPINION OR OPTIMISM
D e f e n d ants argue first that particular alleged misrepresentations are not actionable b e c au s e they represent mere statements of opinion or corporate optimism concerning f u tu re events. See Timi v. Prescott State Bank, 220 Kan. 377, 389, 553 P.2d 315, 325 (1 9 7 6 ) ("To constitute actionable fraud the representation must relate to past or present f a ct, as opposed to mere opinions or puffing or promised action in the future.") (citation o m itte d ). Defendants challenge plaintiff's claims based on alleged representations that d e f e n d a n ts had a long history of past successes; that Titan was the perfect entity to p u rc h a se Crescent; that Titan would provide a platform for continued expansion by C re sc e n t; that Titan's previous acquisition of another distributor would provide synergy f o r future growth, and that Titan wanted to merge the two distributors; that renewable
e n e rg y was the next "dot-com"; and that the company would be successful in the future.5 F ir st, the Court notes that the alleged misrepresentations concerning defendants' fin an ci al prowess and history of success state present facts and do not relate to future a c tio n ; thus, plaintiff's claims based on those representations are not precluded on this b asis. With respect to the remaining statements, the Court concludes that plaintiff's c la im s are not subject to dismissal at this time. The general rule in Kansas that s ta te m e n ts of opinion are not actionable is subject to exceptions. As the Kansas S u p r e m e Court has stated: "The rule is tempered by the fact all statements must be c o n sid e re d in the context of the circumstances under which they are made and where the ter m s of dealing are not equal, and the representor has superior knowledge of the subject, a statement which would otherwise be one of opinion will be regarded as one of fact." F is h e r v. Mr. Harold's Hair Lab, Inc., 215 Kan. 515, 523, 527 P.2d 1026, 1033 (1974) (c itatio n s omitted); see also Goff v. American Sav. Ass'n of Kan., 1 Kan. App. 2d 75, 79, 5 6 1 P.2d 897, 901 (1977) ("Many factors must be considered in determining whether a s ta te m e n t is a matter of fact or matter of opinion and whether or not a plaintiff has a right to rely on the statement."). Plaintiff has alleged in his complaint that the Titan
d e f en d a n ts superior knowledge and were in a position of superiority over plaintiff.
In its actual substantive counts, plaintiff alleged that defendants "[p]articularly, b u t without exclusion," made certain enumerated misrepresentations. Thus, in their m o tio n , defendants targeted representations made both in the counts and elsewhere in th e complaint. In this argument, defendants cite representations alleged in su b p a ra g ra p h s 100(a), (e), and (h), and paragraphs 25-31, 45, and 62 of the complaint. 17
D e f en d a n ts have not suggested or argued that the alleged statements of opinion could not s a tis f y this exception as a matter of law. Accordingly, the Court rejects this basis for d i sm is s a l of any of plaintiff's claims. 2. PROMISES OF FUTURE ACTION
T h e Titan defendants next attack plaintiff's claims based on an alleged m isre p re se n tatio n that defendants would retain plaintiff to run Crescent. Because this a lleg e d fraud relates to a promise concerning future events, plaintiff must eventually p ro v e not merely a breach of that promise, but a misrepresentation of defendant's present inten t to perform at the time of the promise. See Modern Air Conditioning, Inc. v. C in d e re lla Homes, Inc., 226 Kan. 70, 78, 596 P.2d 816, 824 (1979). Defendants argue th a t plaintiff has not pleaded sufficient facts to support a plausible claim that defendants h a d a present intention not to retain plaintiff, particularly in light of the fact (as noted in p la in tif f 's complaint) that plaintiff was not terminated until March 31, 2009, well after e x e cu tio n of the purchase agreement and nearly two months after Crescent declared b a n k r u p t c y. T h e Court rejects this argument. Plaintiff has pleaded specific facts in support o f his allegations that defendants made numerous misrepresentations to him, schemed to induce him into entering into the agreement, failed to reduce Crescent's debt as p ro m is e d , conspired to deprive him of his ownership interest, looted another company to the detriment of Crescent, and planned to ruin Crescent. A reasonable jury could
p la u sib ly infer from these facts, if proven, that defendants did not intend to keep plaintiff f o r more than a short time after the purchase of Crescent.6 The Court denies this portion o f the Titan defendants' motion to dismiss. 3. DUPLICATIVE OF CONTRACT CLAIM
D e f e n d a n ts next seek dismissal of plaintiff's claims based on alleged statements t h a t plaintiff would be paid cash and Titan stock and be released from personal g u a ra n tie s in exchange for his interest in Crescent; that Greystone or Titan would pay d o w n a particular loan to Crescent; and that Greystone had committed to providing f u n d in g to take out that loan. Defendants argue that such statements are not actionable b e c au s e they conflict with provisions of the purchase agreement and are thus duplicative o f plaintiff's contract claim.7 K a n sa s law is not as restrictive with respect to this issue as defendants suggest. " [ W ]h e n the same conduct could satisfy the elements of both a breach of contract or of a n independent tort, unless the conduct is permitted by the express provisions of a c o n tra c t, a plaintiff may pursue both remedies." Bittel v. Farm Credit Servs. of Cent.
The case cited by defendants, Whitten v. Farmland Indus., 759 F. Supp. 1522 (D. K a n . 1991), was decided on summary judgment; the fact that plaintiff failed to produce e v id e n c e to support a present intent to deceive in that case does bear on whether plaintiff f a ile d to plead a plausible claim in this case. B o th plaintiff and Titan have referred to the stock purchase agreement, a copy o f which plaintiff provided to the Court. In deciding a motion on the pleadings, the C o u rt may refer to an indisputably authentic copy of a document that is cited in the c o m p la in t and central to the parties' claims. See MacArthur v. San Juan County, 309 F .3 d 1216, 1221 (10th Cir. 2002). 19
K a n ., 265 Kan. 651, 660, 962 P.2d 491, 498 (1998). More recently, in Burcham v. U n is o n Bancorp, Inc., 276 Kan. 393, 77 P.3d 130 (2003), the Kansas Supreme Court a g a i n rejected an argument that tort claims were subsumed into a contract claim because th e y were based on the same conduct. See id. at 413-15, 77 P.3d at 145-46. In allowing th e tort claims, the Burcham court noted that the duties that the plaintiff attempted to im p o se were not those bargained for in the contract and were not negated in the contract. S e e id. at 414-15, 77 P.3d at 146. S im ila rly, in the present case the agreement did not expressly permit the alleged c o n d u c t by defendants (failing to reduce or eliminate the loan and guaranties, failing to p ro v id e financing), and the terms of the agreement were not coextensive with the scope o f the alleged misrepresentations. For instance, section 2.1 of the agreement (cited by d e f e n d a n t s) states the purchase price (cash and Titan stock), but does not address p la in tif f 's guaranties. Defendants note that section 2.2(b) provides that Titan may a rra n g e for bridge financing; however, that provision does not negate the representation th a t Titan or Greystone would in fact acquire the loan. Section 2.2(c)'s promise that p la in tif f 's guaranty would be reduced to a certain amount does not preclude a further p ro m i s e that the guaranty would be extinguished. The Court rejects this basis for d i sm is s a l of some of plaintiff's claims. 4. RELIANCE ON POST-AGREEMENT STATEMENTS
In paragraphs 58 through 60 of the complaint, plaintiff alleges that defendants
m a d e certain misrepresentations relating to "another scheme" devised after December 1 , 2008. The Titan defendants argue, as a matter of law, that plaintiff cannot have relied to his detriment on such representations because they occurred after the execution of the sto c k purchase agreement and because, as alleged by plaintiff, any money raised in re lia n c e on those statements was ultimately returned.8 P la in tif f does not allege that he relied on defendants' misrepresentations only by e n te rin g into the agreement. In the substantive counts of the complaint, plaintiff alleges th a t representations were material to his decision to execute the agreement "and make th o u s a n d s of dollars in payments from Crescent to the Defendants." In his brief, plaintiff a ss e rts that he did rely on post-agreement misrepresentations, but he does not identify a n y such actions taken in reliance. In light of plaintiff's own allegation that money ra ise d in reliance on these representations was returned, the Court agrees with defendants th a t plaintiff has not pleaded a plausible claim that he relied to his detriment on the posta g re e m e n t misrepresentations identified in paragraphs 58 through 60 of the complaint. A c c o rd in g ly, plaintiff's claims based on those representations are subject to d ism iss al. It is not clear that plaintiff could not allege a plausible claim, however. T h e re f o re the Court grants plaintiff leave, until December 11, 2009, to amend his
The Titan defendants seek the dismissal of claims based on the representations a lle g e d in subparagraphs 100(c), (d), and (f) of the complaint on this basis. It is not c le a r, however, that plaintiff intended to limit those allegations to the representations a lle g e d in paragraphs 58 through 60. Thus, the Court considers only the allegations c o n ta in e d in paragraphs 58 through 60. 21
c o m p la in t to make clear his detrimental reliance on any post-agreement representations b y defendants.9 C. Negligent Misrepresentation 1. PROMISES OF FUTURE ACTION
T h e Titan defendants assert that plaintiff may not maintain a claim for negligent m isrep rese n tatio n based on certain alleged statements (alleged in subparagraphs 109(a), (b ), (c), (e), and (g) of the complaint) that constitute promises of actions in the future. It is true that, under Kansas law, a person cannot negligently misrepresent a present in te n t to perform in the future. See Bittel, 265 Kan. at 665, 962 P.2d at 501, quoted in W ilk in s o n v. Shoney's, Inc., 269 Kan. 194, 221-22, 4 P.3d 1149, 1167 (2000). T h e Court concludes that the representations alleged in subparagraphs 109(a) and 109(e)-- th at Titan would provide a platform for Crescent's continued expansion and that T itan 's acquisition of the other distributor would provide synergy--are actually s ta te m e n ts of opinion and do not constitute representations of a present intent to take c e rta in action in the future. Thus, plaintiff's claim based on those alleged
r e p re s e n ta tio n s are not subject to dismissal on this basis. P la in tif f argues that the other statements relate to the existing fact that Titan has
The Titan defendants' argument that the Court should deny plaintiff's request for a n opportunity to amend, which plaintiff made without an accompanying motion or p ro p o s e d amendment, is hardly persuasive in light of defendants' similarly "cursory" re q u e st to amend if necessary in response to plaintiff's motion to dismiss the c o u n t e rc la im s . 22
th e financial wherewithal to complete the transaction. The Court disagrees. The s ta te m e n ts alleged in subparagraphs 109(b), (c), and (g)--that Near would receive c e rta in compensation, that Greystone or Titan would pay down the Crescent loan, that T ita n would continue to employ plaintiff--clearly represent promises of future action. T h e re f o re , the Titan defendants are awarded judgment on plaintiff's negligent m is re p r e s e n ta tio n claim to the extent based on those alleged statements. 2. PUNITIVE DAMAGES
D e f en d a n ts seek judgment on plaintiff's claim for punitive damages based on the u n d e rlyin g tort of negligent misrepresentation. As defendants note, Kansas courts have n o t permitted the recovery of punitive damages for negligent misrepresentation. See J o h n so n v. Geer Real Estate Co., 239 Kan. 324, 329, 720 P.2d 660, 664 (1986) (re v e rsin g award of punitive damages based on negligent misrepresentation); Sheldon v . Vermonty, 53 F. Supp. 2d 1157, 1169 (D. Kan. 1999) (citing Johnson in ruling that p u n itiv e damages are unavailable with respect to a claim for negligent
m is re p re s e n ta tio n ), aff'd in part and rev'd in part on other grounds, 246 F.3d 682 (10th C ir. 2000). Accordingly, defendants' motion is granted with respect to this claim.1 0 D. Fraud by Silence
T o establish fraud by silence under Kansas law, plaintiff must show, among other
Although plaintiff alleged willful and wanton conduct in his fraud counts, he did n o t do so in his negligent misrepresentation count. 23
th in g s , that defendants "had knowledge of material facts which plaintiff did not have and w h ic h plaintiff could not have discovered by the exercise of reasonable diligence." See M ille r v. Sloan, Listrom, Eisenbarth, Sloan and Glassman, 267 Kan. 245, 260, 978 P.2d 9 2 2 , 932 (1999). The Titan defendants assert that they are entitled to judgment on p la in tif f 's fraud by silence claim because plaintiff failed to plead that he could not have d isco v ere d the allegedly concealed facts through the use of reasonable diligence.1 1 In h is response, plaintiff does not address whether this element must be pleaded in the c o m p lain t. U n d e r Fed. R. Civ. P. 9(b), fraud must be pleaded with particularity. That rule is often applied more liberally to fraud by silence claims because it may be difficult to id e n tif y exactly when, where, and by whom a representation should have been made. S e e Capital Solutions, LLC v. Konica Minolta Bus. Solutions U.S.A., Inc., 2009 WL 1 6 3 5 8 9 4 , at *6 (D. Kan. June 11, 2009). The Court concludes, however, that a plaintiff s h o u ld allege with particularity any "facts that would have prevented it from knowing [ th e concealed fact] and must also allege that its ignorance was not the result of its own la c k of diligence," as such facts should be known to the plaintiff. See Zurn
C o n s tr u c to r s , Inc. v. B.F. Goodrich Co., 746 F. Supp. 1051, 1056 (D. Kan. 1990); see
The Court rejects defendants' alternative argument that plaintiff cannot satisfy th is element in light of plaintiff's citation in his complaint to publicly-available d o c u m e n ts containing the allegedly concealed facts (relating to troubles experienced by M r. Crivello). The Court cannot say as a matter of law that a reasonably diligent person w o u ld have discovered these documents. 24
a l so Evans v. Pearson Enters., 434 F.3d 839, 851 (6th Cir. 2006) (affirming dismissal o f fraudulent concealment claim based on plaintiff's failure to plead her exercise of due d ilig e n c e ). Plaintiff did not make any allegations relating to his satisfaction of the due d ilig e n c e element. Accordingly, plaintiff's fraud by silence claim is subject to dismissal. T h e Court grants plaintiff leave, however, to amend his complaint by December 11, 2 0 0 9 , to cure this pleading deficiency. E. Conversion 1. INTANGIBLE RIGHTS
T h e Titan defendants seek judgment on plaintiffs' claim that they converted p la in tif f 's right of ownership in Crescent. In his complaint, plaintiff alleged that G o l d b e r g Kohn failed to return to him a stock certificate issued by Crescent to Titan. D e f en d a n ts argue that plaintiff cannot maintain a claim for conversion based on the re te n tio n of a certificate issued to Titan and not on the retention of a certificate issued to plaintiff (which would show plaintiff's right of ownership). " C o n v e rs io n is the unauthorized assumption of right of ownership over personal p ro p e rty belonging to another." Farrell v. General Motors Corp., 249 Kan. 231, 245, 8 1 5 P.2d 538, 548 (1991) (emphasis deleted). The Kansas Supreme Court has noted that " [ a ]n action will not lie for conversion of a mere debt or chose in action." Temmen v. K e n t-B r o w n Chevrolet Co., 227 Kan. 45, 50, 605 P.2d 95, 99 (1980) (quoting 18 Am.
J u r. 2d Conversion § 10). Although the Kansas Supreme Court has not addressed the c o n v e r s i o n of intangible rights, the Kansas Court of Appeals has done so in two p u b lis h e d cases. See Farmers State Bank v. FFP Operating Partners, L.P., 23 Kan. A p p . 2d 712, 714-14, 935 P.2d 233, 235-36 (1997); Farm Bur. Mut. Ins. Co. v. Carmody, 3 2 Kan. App. 2d 754, 759-61, 88 P.3d 1250, 1254-55 (2004). I n FFP, the court of appeals rejected the argument "that only tangible personal p ro p e rty is subject to conversion," and it held that a perfected security interest in p e rs o n a l property represented a form of property and could therefore be converted. See F F P , 23 Kan. App. 2d at 714-15, 935 P.2d at 235-36. The court thus affirmed a verdict a g a in s t a defendant who converted a bank's security interest in inventory by selling and d is c a rd in g that inventory. See id. In Carmody, a PIP insurer claimed that an attorney c o n v e rte d its interest in PIP settlement proceeds, created by statutory lien, by distributing th e proceeds to other parties. See Carmody, 32 Kan. App. 2d at 759-61, 88 P.3d at 12545 5 . The court did not hold or suggest that intangible rights may not be converted as a g e n e ra l rule. Rather, the court noted that the lien statute did not create an immediate o w n e rs h ip interest, but required additional steps for the creation of a lien; and that the s ta tu te provided for subrogation only to a certain extent, which amount had not yet been d e te rm in e d in the present case. See id. at 760-61, 88 P.3d at 1255. Accordingly, the c o u rt held that the insurer's statutory lien "was an inchoate, intangible `property', the e x a ct amount of which was unknown and which was not amenable to conversion." See
id . at 761, 88 P.3d at 1255. Together, the two cases demonstrate that, under Kansas law, in ta n g ib le property rights may be subject to conversion, so long as there exists a present p ro p e rty interest. See also, e.g., IBD, Inc. v. Enterprise Bus. Solutions, LLC, 2009 WL 9 2 9 0 7 2 , at *4-6 (Kan. Ct. App. Apr. 3, 2009) (unpub. op.) (rejecting appeal on c o n v e rsio n instruction, thereby permitting verdict for conversion of intangible property su ch as customer lists and software). D e f en d a n ts rely on an unpublished opinion by the court of appeals in Moeller v. K a in , 2008 WL 4416042 (Kan. Ct. App. Sept. 26, 2008) (unpub. op.). In Moeller, the c o u rt cited FFP in noting that intangible personal property may be the subject of c o n v e rs io n claim, but it added the following: In order to be subject to a claim for conversion, however, the intangible p ro p e rty must be merged with tangible property capable of being c o n v e rte d , i.e., a document. See Restatement (Second) of Torts § 242, c o m m e n t (1965); 18 Am. Jur. 2d Conversion § 7, p.159. Id . at * 5. Defendants argue that the document allegedly kept from plaintiff here--the s to c k certificate issue to Titan--did not evidence plaintiff's right of ownership in C re sc e n t, and thus there is no merged document that was converted. The Restatement s e c tio n cited by Moeller, however, disposes of defendants' argument. Section 242 provides: (1 ) Where there is conversion of a document in which intangible rights a r e merged, the damages include the value of such rights. (2 ) One who effectively prevents the exercise of intangible rights of the k in d customarily merged in a document is subject to liability similar to 27
th a t for conversion, even though the document is not itself converted. R e sta tem e n t (Second) of Torts § 242; see also id. illus. 2 (corporation that refuses to re g is te r a transfer of stock on its books is subject to liability, similar to that for c o n v e rs io n , for interfering with the transferee's rights as a stockholder). Similarly, the le g a l encyclopedia cited in Moeller states that "an action may be maintained for the c o n v e rs io n of corporate stock, even for unissued stock certificates." 18 Am. Jur. 2d C o n v e rs io n § 12 (footnotes omitted). Thus, the authorities on which the Moeller court re lie d indicate that a plaintiff may maintain a claim, similar to a conversion claim, for in ter f e re n c e with intangible rights, such as the right of ownership in a company, even if th e particular document evidencing that right has not been converted. K a n sa s courts have routinely followed the Restatement's provisions concerning th e tort of conversion. See, e.g., Scholfield Bros. v. State Farm Mut. Auto. Ins. Co., 242 K an . 848, 850, 752 P.2d 661, 663 (1988) (citing Restatement (Second) of Torts § 222A); S n id e r v. MidFirst Bank, 42 Kan. App. 2d 265, 275, 211 P.3d 179, 186 (2009) (quoting R e sta te m e n t § 228). As noted above, the Kansas Supreme Court has cited the
c o n v e rs io n chapter of Am. Jur. 2d with approval. See Temmen, 227 Kan. at 50, 605 P.2d a t 99 (quoting 18 Am. Jur. 2d Conversion § 10). Moreover, in FPP the court of appeals a llo w e d a claim for the conversion of intangible rights (a security interest) without the c o n v e rs io n of the actual document evidencing those rights. See FFP, 23 Kan. App. 2d a t 714-15, 935 P.2d at 235-36. Therefore, the Court concludes that the Kansas Supreme
C o u rt would recognize a claim for liability, similar to that for conversion, for the in te rf e re n c e with the exercise of the intangible rights of ownership in a company, even w ith o u t conversion of the particular certificate evidencing the plaintiff's ownership rig h ts . Accordingly, defendants' motion for judgment on the claims designated as " c o n v ers io n " claims by plaintiff is denied. 2. DUPLICATIVE OF CONTRACT CLAIM
T h e Titan defendants also assert that plaintiff's conversion claim improperly d u p lic a t e s his contract claim, but they do not explain how the claims are duplicative. D e f en d a n ts have not shown that the stock purchase agreement expressly allows for the re ten tio n of the stock certificate in these circumstances; therefore, plaintiff may maintain b o th his tort and contract claims. See supra Part III.B.3.1 2 The Court also rejects d e f e n d a n ts' argument that the retention of the stock certificate and the interference with p la in tif f 's ownership rights represents a mere debt to plaintiff that may not be converted. T h e Court denies defendants' motion for judgment on this basis. F. Conspiracy
P la in tif f has alleged a claim against all defendants for conspiracy to effect the c o n v e rs io n of his ownership rights in Crescent. The Titan defendants seek judgment on th a t claim on the basis that plaintiff has failed to plead sufficient facts to support a
Because the purchase agreement here did not expressly govern the return of the s to c k certificate to plaintiff, the case of Regal Ware, Inc. v. Vita Craft Corp., 2006 WL 6 3 4 6 8 7 9 (D. Kan. Sept. 19, 2006), cited by defendants, is inapposite. 29
p l a u s ib l e claim that an agreement existed between and among the alleged conspirators, a s required by the United States Supreme Court's decisions in Bell Atlantic and Iqbal.1 3 T h e Court agrees that plaintiff's pleading is deficient in this regard. The
c o m p la in t contains only conclusory allegations that all defendants generally agreed a m o n g themselves. Plaintiff insists that his complaint includes specific, detailed factual a ll e g a tio n s about defendants' schemes to wrong him. Those facts relate to what d ef en d an ts may have done in furtherance of the agreement, however, and do not support th e existence of the agreement itself. P la in tif f has alleged the general positions held by Messrs. Crivello, Marks, and C h a n c e in relation to Titan, but he has not included any facts to distinguish their actions re g a rd in g plaintiff and Crescent. For instance, as noted below, plaintiff has generally n o t alleged which individuals made which alleged misrepresentations. See infra Part III.G . Thus, there is no factual basis for the Court or a jury to conclude that an actual a g re e m e n t existed among these individuals, as opposed to action by any one of them on b e h a lf of Titan or action by Titan generally. The conspiracy involving Greystone and G o ld b e rg Kohn is distinguishable. As explained above, see supra Parts I.C, II, those two d e f en d a n ts have not been tied into the conspiracy merely through potentially innocent c o n d u c t and a conclusory claim of an agreement; rather, plaintiff alleged specific
Because the Court rejected defendants' arguments for judgment on plaintiff's c o n v e rs io n claim, it also rejects defendants' argument that the conspiracy claim does not re s t on a valid underlying tort claim. 30
w ro n g f u l conduct by those defendants, which supports a plausible inference that they w e r e acting in concert with the other defendants who were perpetrating wrongs against p la in tif f . With respect to the individuals, however, plaintiff has not provided facts that c o u ld raise the inference that each individual was not innocently attempting to transact b u s in e ss for Titan, but had agreed with the others to injure plaintiff. Plaintiff may not c re a te that required inference by the mere allegation that an agreement did exist. A c c o rd in g ly, plaintiff's conspiracy claim against the Titan defendants is subject to dismissal. The Court grants plaintiff leave, however, until December 11, 2009, to a m e n d his complaint to attempt to allege sufficient facts to support his claim that a c o n sp ira c y existed. G. Pleading with Particularity Under Rule 9(b)
F in a lly, the Titan defendants argue that plaintiff's fraud and misrepresentation c la im s are subject to dismissal under Fed. R. Civ. P. 9(b), which provides that in alleging f ra u d , a party must state the circumstances constituting fraud with particularity. To c o m p ly with the rule, a complaint alleging fraud must "set forth the time, place and c o n ten ts of the false representation, the identity of the party making the false statements a n d the consequences thereof." See Tal v. Hogan, 453 F.3d 1244, 1263 (10th Cir. 2006). T h e Court agrees that plaintiff has generally failed to comply with Rule 9(b) in p le a d in g his affirmative fraud claims. In a single paragraph of the complaint, paragraph 4 5 , plaintiff alleges specific misrepresentations by Mr. Crivello at a meeting in Kansas
in September 2008; plaintiff's claim based on those representations is sufficiently p le a d ed . With respect to the remaining alleged misrepresentations, plaintiff has not id e n t if ie d which of the Titan defendants made the statement or when or where it was m a d e . Tenth Circuit law clearly requires such particularity. Plaintiff's references to K a n s a s generally and a broad pre- and post-agreement time frame are insufficient. See D & K Ventures, LLC v. MGC, LLC, 2009 WL 1505539, at *7 (D. Kan. May 27, 2009) (f in d in g insufficient particularity to the extent it was unclear which alleged m isre p re se n tatio n s preceded the parties' agreement, in light of the alleged reliance in e x e c u t in g the agreement). Nor may plaintiff simply allege misrepresentations by the T ita n defendants generally without identifying the particular speaker. See id. (Rule 9(b) re q u ire s identification of particular corporate officers who made each alleged oral m i s re p r e s e n t a ti o n ) . A c c o r d in g ly, plaintiff's affirmative misrepresentation claims are subject to d is m is s a l under Rule 9(b), with the exception of the representations alleged in paragraph 4 5 of the complaint. Plaintiff is granted leave to amend his complaint, by December 11, 2 0 0 9 , to comply with Rule 9(b).1 4 Because plaintiff's negligent misrepresentation claim refers back to the same f a c tu a l allegations of fraudulent misrepresentations by defendants, plaintiff will n ec essa rily elaborate on the bases for the former claim in amending the latter. A c c o rd in g ly, the Court need not determine whether Rule 9(b) applies to negligent m isrep rese n tatio n claims. See Benchmark Electronics, Inc. v. J.M. Huber Corp., 343 F .3 d 719, 723 (5th Cir. 2003) (although Rule 9(b) does not apply to negligent m is re p re se n ta tio n claims by its terms, court applies the rule where the fraud and (continued...) 32
D e f e n d a n ts have not responded to plaintiff's argument that he has sufficiently p le a d ed the details of his claim for fraud by silence. In light of the relaxed standard for s u c h a claim under Rule 9(b), see supra Part III.D, the Court rejects this basis for d is m is s a l as it relates to the fraud by silence claim. As set forth above, however, the c la im does not fully comply with Rule 9(b) because plaintiff has failed to include any alleg atio n s relating to the due diligence element (although plaintiff may amend to cure th a t deficiency). See supra Part III.D.
Plaintiff's Motion to Dismiss Counterclaims A. Pleading with Particularity Under Rule 9(b)
T itan has brought counterclaims against plaintiff for fraudulent misrepresentation, f ra u d by silence, fraudulent inducement, and negligent misrepresentation. Titan alleges that plaintiff misrepresented that various accounts receivable held by Crescent were v alid , when if fact plaintiff had entered into secret agreements with those debtors re lie v in g them of the debts. Plaintiff moves to dismiss Titan's claims on the basis that they have not been pleaded with particularity as required by Rule 9(b). T h e Court rejects this basis for dismissal and concludes that Titan has met the re q u ire m e n ts of Rule 9(b). Titan's pleading properly includes the maker of the alleged (...continued) n e g lig e n t misrepresentations claims are based on the same set of alleged facts); D&K V e n tu r e s, 2009 WL 1505539, at *8 (declining to resolve question where claims were b ase d on same alleged misrepresentations). 33
m isrep rese n tatio n s (plaintiff, orally and in financial documents for which he vouched); th e ir dates and locations (at meetings in Independence, Kansas, in late July 2008, on A u g u st 6 and 7, 2008, and on September 11 and 12, 2008, involving specific persons); th e ir content (various accounts receivable were valid); why they were fraudulent (p la in tif f 's secret agreements with the debtor); and Titan's action in reliance (entering into the stock purchase agreement with plaintiff and Crescent).1 5 T h e Court does not agree with plaintiff that Titan's pleading had to include details a b o u t the date, location, and participants of the secret meetings in which plaintiff a lle g e d ly forgave various receivables. Tenth Circuit law clearly provides that Rule 9(b) r e q u i r e s that the pleading "set forth the time, place and contents of the false repre se n tatio n , the identity of the party making the false statements and the consequences th e re o f " -- th u s , the pleading must give details about the representation. See Tal, 453 F .3 d at 1263. Titan was not required to plead every fact that supports its claim of fraud. S e e Schwartz v. Celestial Seasonings, Inc., 124 F.3d 1246, 1253 (10th Cir. 1997) (Rule 9 (b) does not require detailed evidentiary matter).
Plaintiff notes Titan's allegation that it questioned Near about accounts re c eiv a b le entries at the September meeting in Independence "as well as on other o c c as io n s ." In its response, Titan appears to limit that reference to the particular m ee tin g s identified by date in the counterclaims. In light of that explanation, Titan's c la im s are limited to representations made at the meetings that occurred in late-July, A u g u st 6 and 7, and September 11 and 12 of 2008. The Court rejects plaintiff's a rg u m e n t that Titan has somehow abandoned its claims based on representations made a t the meetings in July and August. 34
P lain tiff also cites Titan's allegation that plaintiff "and others at Crescent at his d ire c tio n provided financial and accounting information and documentation at Titan," an d he argues that the reference to "others at Crescent" is too vague under Rule 9(b). T h e Court rejects this argument as well. Titan alleged that it acted in reliance on the f in a n c ia l information and documentation that plaintiff provided and for which plaintiff vouched. Thus, Titan is alleging that plaintiff himself made the representations
c o n ta in e d in the documents. Titan was not required to identify the particular persons w h o actually handed over the documents. T h e Court concludes that Titan's counterclaims are not deficient under Rule 9(b), a n d the Court therefore denies that portion of plaintiff's motion to dismiss. B. Failure to State a Claim Under Rule 12(b)(6) 1. DISAVOWAL OF REPRESENTATIONS
P lain tiff also argues that Titan's counterclaims should be dismissed for failure to s ta te a claim under Rule 12(b)(6). Plaintiff first argues as a matter of law that in the p a rtie s' stock purchase agreement he disavowed or disclaimed any prior representations c o n c e rn in g financial matters. See Flight Concepts Ltd. Partnership v. Boeing Co., 38 F .3 d 1152, 1157 (10th Cir. 1994) (citing Kansas cases) (under Kansas law, oral promises m a d e during contract negotiations cannot be construed as fraudulent if they are directly c o n tra d ic te d by the written agreement). Plaintiff relies on section 4.8(iv) of the
a g re e m e n t. Section 4.8 states that plaintiff will deliver certain financial statements to
T ita n that are true, correct and complete; and further provides, notwithstanding that p r o m is e , as follows: (iv ) [plaintiff] and [Titan] acknowledge and agree that given the facts and c irc u m s ta n c es under which this acquisition is made, substantial re s ta te m e n t and adjustment of the Financial Statements are likely to be m a d e to account for fair value in a purchase type transaction, with a ss o c ia te d write down of impaired assets and increase in reserves and c o n tin g e n c ie s, and [plaintiff] has no technical knowledge, and makes no a f firm a tiv e representations or warranties, as to the consequences of such r e sta te m e n t and adjustments. T h e Court concludes that Titan's claim is not foreclosed by this contractual p ro v isio n as a matter of law. The provision clearly states that particular adjustments to th e financial statements are likely, and that plaintiff makes no representations as to the c o n se q u e n ce s of those adjustments. Thus, contrary to plaintiff's argument, this provision d o e s not include a disclaimer of all representations by plaintiff relating to financial d o c u m e n ts or financial matters concerning Crescent. Plaintiff is not entitled to dismissal o f Titan's counterclaims on this basis. 2. CAUSATION
F in a lly, plaintiff argues that Titan cannot have relied on the alleged m is re p re se n ta tio n s by plaintiff as a matter of law. Plaintiff notes that, according to the c o u n te rc la im s , Titan already knew, prior to the transaction, that Crescent was facing b a n k ru p tc y and in a "dire situation" financially; thus, plaintiff argues that Titan cannot h a v e been harmed by any failure to reveal negative financial information in entering into t h e agreement. This argument is without merit, as the true financial condition of 36
C re sc e n t-- h o w dire things really were--could certainly have affected Titan's decision to purchase Crescent. Therefore Titan has adequately stated a claim that it was injured b y plaintiff's fraud and misrepresentations concerning the accounts receivable. P la in tif f also argues as a matter of law that Titan cannot have been harmed by s e c re t agreements between plaintiff and various debtors executed in November 2008, a f te r the execution of the stock purchase agreement. The Court rejects this argument as w e ll. Titan has clearly alleged that plaintiff misrepresented the validity of the accounts re c eiv a b le prior to the execution of the purchase agreement, and it pleaded the s u b s e q u e n t written agreements with the debtors as evidentiary facts supporting that c la im . Titan's counterclaims are not precluded on this basis as a matter of law, and the C o u rt denies plaintiff's motion to dismiss in its entirety.
I T IS THEREFORE ORDERED BY THE COURT THAT the motion to dismiss (D o c . # 20) and the motion for leave to conduct jurisdictional discovery (Doc. # 41) filed b y defendant Greystone Business Credit, LLC are denied.
IT IS FURTHER ORDERED THAT the motion to dismiss filed by defendant G o l d b e r g Kohn Bell Black Rosenbloom & Moritz, Ltd. (Doc. # 14) is denied.
IT IS FURTHER ORDERED THAT the motion for judgment on the pleadings
f ile d by defendants Titan Global Holdings, Inc., Frank Crivello, David Marks, and Bryan C h a n c e (Doc. # 27) is granted in part and denied in part, as set forth herein. Plaintiff is granted until December 11, 2009, in cure his pleading deficiencies by filing an a m e n d e d complaint.
IT IS FURTHER ORDERED THAT plaintiff's motion to dismiss the c o u n t e rc la im s (Doc. # 25) is denied.
IT IS SO ORDERED.
D a te d this 25th day of November, 2009, in Kansas City, Kansas.
s / John W. Lungstrum J o h n W. Lungstrum U n ite d States District Judge
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