ShareCor, L.L.C. v. Santa Rosa Consulting, Inc. et al

Filing 33

RULING/ORDER denying without prejudice 3 and 11 Motion to Dismiss for Failure to State a Claim. It is further ordered ShareCor shall have 21 days from the date of entry of this Ruling to file an amended complaint. In response to ShareCor's a mended complaint, Defendants may re-urge their respective Motions to Dismiss. In the event Rule 12(b)(6) Motions are re-filed, the Court orders all of the parties to fully address which states veil piercing law applies to ShareCor's claims based upon the parties' Agreement and proper contract interpretation. Signed by Judge James J. Brady on 02/24/2017. (EDC)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

SHARECOR, L.L.C.

CIVIL ACTION

VERSUS
NO. 16-519-JJB-RLB
SANTA ROSA CONSULTING, INC. and
SANDLOT SOLUTIONS, INC.
RULING
Pending before the Court is Defendant Santa Rosa Consulting, Inc’s Motion to
Dismiss for Failure to State a Claim Under Fed. R. Civ. P. 12(b)(6) 1 and Defendant
Sandlot Solutions, Inc.’s Rule 12(b)(6) Motion to Dismiss.2 Plaintiff ShareCor, L.L.C. has
filed Oppositions3 to both Motions, to which the Defendants have each filed their
respective Reply Briefs.4 For the following reasons, the Defendants’ Motions shall be
denied without prejudice.
I.

FACTS AND PROCEDURAL BACKGROUND5
ShareCor, a Louisiana limited liability company with its principal place of business

in Metairie, Louisiana, operates an administrative claims-based data collection, data
processing, data reporting, and data delivery service for healthcare facilities. In order to
expand its operations, ShareCor entered into a Sandlot Solutions Subscription Services
Agreement (“Agreement”), with Sandlot Solutions, Inc. (“Sandlot”), a Delaware
corporation with its principal place of business in Irving, Texas, and Santa Rosa

1

Doc. 3.
Doc. 11.
3 Doc. 16 and Doc. 21.
4 Doc. 14, Doc. 20 (Supplemental Reply Brief), and Doc. 26.
5 The factual background is taken from the allegations plead in ShareCor’s Petition. Doc. 1-1.
2

1

Consulting, Inc. (“Santa Rosa”), a Delaware corporation with its principal place of
business in Franklin, Tennessee.

Pursuant to the Agreement, Sandlot was to provide

ShareCor “Implementation and Configuration Services” and “Subscription Services” for
an initial five year term. Santa Rosa, an affiliate of Sandlot, agreed to step into the shoes
of Sandlot in the event a “Release Condition” as set forth in the Agreement was triggered
during the initial term. Specifically, Santa Rosa agreed to provide “the same level of
service and functionality to [ShareCor’s] Participants that Sandlot agreed to provide under
this Agreement” for a period of one year.
ShareCor claims that while it fulfilled its obligations under the Agreement, both
Sandlot and Santa Rosa failed to do so, and therefore, have breached the Agreement.
ShareCor further contends that Sandlot fraudulently induced it to enter into a Change
Order in January of 2016 by withholding the fact that it was on the verge of ceasing its
business operations. Pursuant to the Change Order, the parties revised certain goals
and goal payments, ShareCor waived its claims against Sandlot in connection with
Sandlot’s failure to meet the goals or delivery schedule, and ShareCor agreed to pay
Sandlot an additional $179,280 in recognition of progress. According to ShareCor, it
never would have agreed to the Change Order had it known the true state of Sandlot’s
business; therefore, the Change Order is void due to fraud and/or error.

Shortly

thereafter, ShareCor notified the Defendants of the specific breaches to the Agreement
and its intention to hold the Defendants liable.
On June 21, 2016, ShareCor filed a Petition6 in the 19th Judicial District Court
against the Defendants asserting state law breach of contract claims and a single

6

ShareCor, L.L.C. versus Santa Rosa Consulting, Inc. and Sandlot Solutions, Inc., Docket No. 649316,
Section 23, 19th Judicial District Court, Parish of East Baton Rouge, State of Louisiana.

2

business enterprise claim (“SBE”). On August 4, 2016, Santa Rosa removed the action
to the Middle District of Louisiana. Defendants now seek dismissal of ShareCor’s SBE
claim on Rule 12(b)(6) grounds. Defendants further contend that dismissal is warranted
because under the terms of the parties’ Agreement and Louisiana’s choice of law
principles, Delaware law, which does not recognize SBE claims, applies in this case, and
ShareCor has failed to state a viable alter ego claim under Delaware law.
II.

INITIAL MATTER: JUDICIAL NOTICE
Under Rule 201 of the Federal Rules of Evidence, a court may judicially notice a

fact that is “not subject to reasonable dispute” in that it is either “(1) generally known within
the trial court’s territorial jurisdiction; or (2) can be accurately and readily determined from
sources whose accuracy cannot reasonably be questioned.”7 ShareCor asks the Court
to take judicial notice of (1) allegations in the Texas State Court Petition, Robert Porr v.
Sandlot Sol’ns, Inc.; Santa Rosa Consulting, Inc., Joseph Casper, No. 153-284548-16,
District Court, Tarrant County, Texas; and (2) certified copies of the Annual Franchise
Tax Reports filed with the Delaware Secretary of State by Sandlot and Santa Rosa in
2016.
As for the allegations in the Porr Petition, ShareCor argues that they “clearly
support ShareCor’s assertion that Santa Rosa dominated and controlled Sandlot and the
intertwined finances of the two entities.”8 The Court construes this argument as ShareCor
asking the Court to take judicial notice of the allegations as proof of the truth of the facts
stated therein. While it is true that a court may take judicial notice of the fact that related
litigation or filing exists in a different forum, “courts generally cannot take notice of facts

7
8

Fed.R.Evid. 201(b).
Doc. 16, p. 8; Doc. 21, pp. 7-8.

3

asserted in those pleadings or orders as they ‘are usually disputed and almost always
disputable.’”9 Therefore, the Court will not take judicial notice of the factual allegations
of the Porr Petition.
Turning to ShareCor’s second request, the certified copies of the Annual Franchise
Tax Reports filed with the Delaware Secretary of State are public documents. The
document bears a government seal and signature, and its accuracy cannot be reasonably
questioned. Accordingly, the Court shall take judicial notice of the Annual Franchise Tax
Reports.
III.

RULE 12(b)(6) STANDARD
When deciding a Rule 12(b)(6) motion to dismiss, “[t]he ‘court accepts all well-

pleaded facts as true, viewing them in the light most favorable to the plaintiff.’” 10 The
Court may consider “the complaint, its proper attachments, ‘documents incorporated into
the complaint by reference, and matters of which a court may take judicial notice.’”11 “To
survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead ‘enough facts to state
a claim to relief that is plausible on its face.’”12 In Bell Atlantic Corp. v. Twombly, the
United States Supreme Court set forth the basic criteria necessary for a complaint to
survive a Rule 12(b)(6) motion to dismiss.13 “While a complaint attacked by a Rule
12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff’s
obligation to provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels

9

Hoffman v. Bailey, Civ. Action No. 13-5153, 2016 WL 409613, *8 (E.D.La. Feb. 3, 2016)(quoting Ferguson
v. Extraco Mortg. Co., 264 Fed.Appx. 351, 352 (5th Cir. 2007)).
10
In re Katrina Canal Breaches Litigation, 495 F.3d 191, 205 (5th Cir. 2007)(quoting Martin K. Eby Constr.
Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004)).
11
Randall D. Wolcott, M.D., P.A. v. Sebelius, 635 F.3d 757, 763 (5th Cir. 2011)(quoting Dorsey v. Portfolio
Equities, Inc., 540 F.3d 333, 338 (5th Cir. 2008)).
12 In re Katrina Canal Breaches Litigation, 495 F.3d at 205 (5th Cir. 2007)(quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)).
13 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (hereinafter Twombly).

4

and conclusions, and a formulaic recitation of the elements of a cause of action will not
do.”14 A complaint is also insufficient if it merely “tenders ‘naked assertion[s]’ devoid of
‘further factual enhancement.’”15 However, “[a] claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.”16 In order to satisfy the plausibility
standard, the plaintiff must show “more than a sheer possibility that a defendant has acted
unlawfully.”17 “Furthermore, while the court must accept well-pleaded facts as true, it will
not ‘strain to find inferences favorable to the plaintiff.’”18 On a motion to dismiss, courts
“are not bound to accept as true a legal conclusion couched as a factual allegation.”19
IV.

ANALYSIS
The parties not only contest the viability of ShareCor’s claims, but the applicable

law that controls ShareCor’s claims in light of the parties’ Agreement. Considering that
none of the parties have adequately briefed the issue of which law governs the claims,
specifically why the “general provisions” of Section 19 of the Agreement do not apply to
all of the parties or the entire Agreement,20 the Court shall assess ShareCor’s claims
under both Louisiana’s single business enterprise (SBE) theory and Delaware’s alter ego
theory.

14

Twombly, 550 U.S. at 555 (internal citations and brackets omitted).
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citations omitted)(hereinafter “Iqbal”)(quoting
Twombly, 550 U.S. at 557).
16 Id. (citing Twombly, 550 U.S. at 556).
17 Id.
18 Taha v. William Marsh Rice Univ., 2012 WL 1576099 at *2 (S.D. Tex. May 3, 2012) (quoting Southland
Sec. Corp. v. Inspire Ins. Solutions, Inc., 365 F.3d 353, 361 (5th Cir. 2004)).
19 Twombly, 550 U.S. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)).
20 Santa Rosa and Sandlot argue that the Fifth Circuit decision, Energy Coal S.P.A. v. Citgo Petroleum
Corp., 836 F.3d 457 (5th Cir. 2016), is dispositive of this issue. Unlike the named defendant in Energy
Coal, Santa Rosa and Sandlot were both signatories to the Agreement at issue in this case. Therefore,
one of the threshold issues before the Court is contract interpretation.
15

5

Turning to ShareCor’s SBE claim, Louisiana courts have identified the following 18
factors to be considered in analyzing whether two entities constitute a SBE:
1. corporations with identity or substantial identity of ownership, that is,
ownership of sufficient stock to give actual working control; 2. common
directors or officers; 3. unified administrative control of corporations
whose business functions are similar or supplementary; 4. directors and
officers of one corporation act independently in the interest of that
corporation; 5. corporation financing another corporation; 6. inadequate
capitalization (‘thin incorporation’); 7. corporation causing the
incorporation of another affiliated corporation; 8. corporation paying the
salaries and other expenses or losses of another corporation; 9.
receiving no business other than that given to it by its affiliated
corporations; 10. corporation using the property of another corporation
as its own; 11. noncompliance with corporate formalities; 12. common
employees; 13. services rendered by the employees of one corporation
on behalf of another corporation; 14. common offices; 15. centralized
accounting; 16. undocumented transfers of funds between corporations;
17. unclear allocation of profits and losses between corporations; and
18. excessive fragmentation of a single enterprise into separate
corporations.21
As the parties all seem to recognize, the foregoing list is “illustrative and is not intended
as an exhaustive list of relevant factors.”22 Furthermore, “[n]o one factor is dispositive of
the issue of ‘single business enterprise.’”23
Although Delaware has not adopted the SBE theory as a means of piercing the
corporate veil, it does recognize the alter ego theory as grounds for doing so. To state a
viable alter ego claim under Delaware law, the plaintiff must allege: (1) that the
Defendants “operated as a single economic entity” and (2) that an “overall element of
injustice or unfairness … [is] present.”24 The relevant factors for assessing whether one

21

Green v. Champion Ins. Co., 577 So.2d 249, 257-58 (La.App. 1 Cir. 3/5/91).
Id. at 258.
23 Id.
24In re CLK Energy Partners, LLC, Bankruptcy No. 09-50616; Adversary No. 09-05042, 2010 WL 1930065,
*6 (W.D.La. May 12, 2010)(quoting Harper v. Delaware Valley Broadcasters, Inc., 743 F.Supp. 1076, 1085
(D.Del. 1990); Fletcher v. Atex, Inc., 68 F.3d 1451, 1457 (2nd Cir. 1995)).
22

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or more companies constitute a single economic entity include the following: “(1)
undercapitalization; (2) failure to observe corporate formalities; (3) nonpayment of
dividends; (4) the insolvency of the debtor corporation at the time; (5) siphoning of the
corporation’s funds by the dominant stockholder; (6) the absence of corporate records;
and (7) the fact that the corporation is merely a façade for the operations of the dominant
stockholder or stockholders.”25 “While the list of factors is not exhaustive and no single
factor is dispositive, some combination is required, and an overall element of fraud,
injustice, or unfairness must always be present.”26
In support of both its SBE and alter ego claims, ShareCor points to its allegation
that the Defendants have “overlapping corporate structure, ownership, administrative
control, and intertwined nature of the business operations and finances.”27

After

reviewing the allegations in its Petition, however, the Court finds that ShareCor has failed
to allege sufficient facts to support this conclusory statement. Although the Court finds
this allegation fails to support a viable SBE or alter ego claim in and of itself, the fact that
the Defendants do share common directors and officers lends itself to ShareCor
potentially stating a viable SBE claim. Similarly, the allegations of the Defendants’
fraudulent behavior combined with the reasonable inferences that could be drawn from
the parties’ Agreement regarding their intermingling of business operations, lends itself
to ShareCor potentially stating a viable alter ego claim.

25

Precht v. Global Tower LLC, Civ. Action No. 2:14-CV-00743, 2016 WL 7443139, *4 (W.D.La. Dec. 22,
2016)(quoting In re Broadstripe, LLC, 444 B.R. 51, 101 (Bankr. D. Del. 2010)).
26 Experian Info. Solns, Inc. v. Lexington Allen, L.P., Civ. Action. No. 4:10-CV-144, 2011 WL 1627115, *3
(E.D.Tex. Apr. 7, 2011)(quoting Blair v. Infineon Technologies AG, 720 F.Supp.2d 462, 471 (D.Del. June
29, 2010)).
27 Doc. 1-1, p. 6, ¶27.

7

Considering that Rule 12(b)(6) motions to dismiss are generally disfavored and it
is not clear that the defects in ShareCor’s pleading are incurable, the Court hereby grants
ShareCor’s request to file an amended complaint to remedy its pleading deficiencies.
V.

CONCLUSION
For those reasons set forth above, it is hereby ordered that the Motion to Dismiss

for Failure to State a Claim Under Fed. R. Civ. P. 12(b)(6)28 filed by Santa Rosa
Consulting, Inc., and the Rule 12(b)(6) Motion to Dismiss29 filed by Sandlot Solutions,
Inc., are hereby DENIED WITHOUT PREJUDICE.
It is further ordered ShareCor shall have 21 days from the date of entry of this
Ruling to file an amended complaint. In response to ShareCor’s amended complaint,
Defendants may re-urge their respective Motions to Dismiss. In the event Rule 12(b)(6)
Motions are re-filed, the Court orders all of the parties to fully address which state’s veil
piercing law applies to ShareCor’s claims based upon the parties’ Agreement and proper
contract interpretation.
Signed in Baton Rouge, Louisiana, on February 24, 2017.





JUDGE JAMES J. BRADY
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

28
29

Doc. 3.
Doc. 11.

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