Fenzel v. Group2 Software, LLC et al
Filing
57
MEMORANDUM AND ORDER GRANTING IN PART and DENYING IN PART 51 Plaintiff's motion for leave to file a second amended complaint, STRIKING Count 9, and INSTRUCTING Plaintiff to provide the Clerk a completed summons for Defendant Deven. Signed by Chief Judge Deborah K. Chasanow on 6/24/14. (sat, Chambers)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
JERRY FENZEL
:
v.
:
Civil Action No. DKC 13-0379
:
GROUP2 SOFTWARE, LLC ET AL.
:
MEMORANDUM OPINION AND ORDER
Presently pending and ready for resolution is the motion to
file a second amended complaint filed by Plaintiff Jerry Fenzel.
(ECF No. 51).
necessary.
The court now rules, no hearing being deemed
Local Rule 105.6.
For the following reasons, the
motion will be granted in part and denied in part.
I.
Background
On February 12, 2014, a scheduling order was issued which
set the deadline for moving for joinder of additional parties
and amendment of pleadings at April 28, 2014.
(ECF No. 39).
the
a
day
of
complaint.
the
deadline,
(ECF No. 49).
Plaintiff
filed
second
On
amended
The next day, a paperless order was
entered directing the Clerk of Court to mark the second amended
complaint as filed in error as it was not filed in accordance
with Fed.R.Civ.P. 15(a)(1) and (2).
motion
for
leave
to
file
a
That day, Plaintiff filed a
second
amended
complaint.
He
explained that he erroneously interpreted the scheduling order
to mean that before the April 28 deadline pleadings could be
amended and parties joined without needing to seek further leave
from
the
court.
Plaintiff
seeks
to
file
a
second
amended
complaint to add Deven Software, LLC (“Deven”) as a defendant
and
add
two
conveyance
counts
and
against
civil
all
Defendants
conspiracy.
Plaintiff
for
fraudulent
represents
that
Deven was formed while this lawsuit was pending and is solely
owned by Defendant Thomas Bowen.
Plaintiff recently discovered
that the website for Group 2 has been removed from the internet
and
it
appears
that
Group
2
is
no
longer
a
going
concern.
Deven’s website includes numerous references to Group 2 and the
Deven’s
executives
and
owners
are
the
same
as
Group
2’s.
Plaintiff has reason to believe that Deven is the recipient of
all or substantially all of the assets of Group 2 and that such
transfers were made for no consideration.
The Federal Rules of Civil Procedure provide that a party
may amend his complaint as a matter of course within 21 days of
serving it or within 21 days of a responsive pleading or Rule
12(b) motion.
Fed.R.Civ.P. 15(a)(1).
Once the right to amend
as a matter of course expires, “a party may amend its pleading
only with the opposing party’s written consent or the court’s
leave.”
obtain:
Fed.R.Civ.P.
the
requires.”
court
Id.
15(a)(2).
will
freely
Leave
give
is
it
not
“when
difficult
to
justice
so
Denial of leave to amend should occur “only
2
when the amendment would be prejudicial to the opposing party,
there has been bad faith on the part of the moving party, or the
amendment would be futile.”
Johnson v. Oroweat Foods Co., 785
F.2d 503, 509 (4th Cir. 1986).
federal
policy
instead
of
Harvey,
in
favor
disposing
438
F.3d
of
Rule 15, thus, reflects “the
resolving
of
them
404,
on
426
cases
on
their
technicalities.”
(4th
Cir.
2006)
merits
Laber
(en
v.
banc).
Determinations of futility under Rule 15(a) are governed by the
standard for motions to dismiss.
Classen Immunotherapies, Inc.
v. King Pharms., Inc., 403 F.Supp.2d 451, 459 (D.Md. 2005).1
Defendants
futile
contend
because
that
Plaintiff
amending
has
failed
the
to
fraudulent conveyance and civil conspiracy.
civil
conspiracy
claim
is
not
viable
complaint
state
would
claims
be
for
They argue that the
because
Plaintiff,
by
arguing a conspiracy between Bowen, Group 2, and Deven, is in
effect arguing that Bowen conspired with himself because Bowen
is the owner of Deven and Group 2.
Defendants point to the
“intracorporate conspiracy doctrine,” which “recognizes that a
corporation cannot conspire with its agents because the agents’
1
A party who fails to obey a scheduling order may incur
sanctions, Fed.R.Civ.P 16(f), to including striking pleadings in
whole or in part.
Defendants argue that Plaintiff failed to
obey the scheduling order by filing his second amended complaint
on April 29, one day late.
Plaintiff’s tardiness will be
excused. He filed his second amended complaint on the deadline
and, after being told it was not field in accordance with
Fed.R.Civ.P 15(a)(2), refiled it the next day.
3
acts are the corporation’s own.”
Brown,
716
F.3d
342,
352
Painter’s Mill Grille, LLC v.
(4th
Cir.
2013).
There
are
two
important exceptions: (1) “where a co-conspirator possesses a
personal
stake
corporation”;
independent
and
(2)
of
“where
authorized by the corporation.”
Group
2
and
Deven,
the
his
the
relationship
agent’s
Id. at 353.
doctrine
would
the
were
acts
to
not
As an agent of the
prohibit
conspiracy unless one of the exceptions applies.
a
claim
of
There is no
allegation that Bowen’s acts were not authorized by Group 2 or
Deven.
his
And Bowen does not have a personal stake independent of
relationship
to
Deven
individual
conspirator
independent
and
corporation.”
wholly
or
to
Group
2,
“possess
separable
from
which
a
requires
personal
the
interests
the
interest
of
the
Mitchell Tracey v. First Am. Title Ins. Co., 935
F.Supp.2d 826, 846 (D.Md. 2013).
Given that Plaintiff alleges
that Bowen is the sole owner of Group 2, as Group 2’s fortunes
rise,
so
too
do
Bowen’s.
Consequently,
the
intracorporate
conspiracy doctrine bars Plaintiff’s claim and his motion to
amend to add this claim will be denied.
As to the fraudulent conveyance claim, under the Maryland
Uniform Fraudulent Conveyance Act (“MUFCA”), “[e]very conveyance
made . . . with actual intent, as distinguished from intent
presumed in law, to hinder, delay, or defraud present or future
creditors,
is
fraudulent
as
to
4
both
present
and
future
creditors.”
Md. Code Ann., Com. Law § 15-207.
Additionally,
“[e]very conveyance made . . . without fair consideration when
the person who makes the conveyance . . . intends or believes
that he will incur debts beyond his ability to pay as they
mature, is fraudulent as to both present and future creditors.”
Id. § 206.
A plaintiff bringing a claim under the MUFCA must
“allege that a creditor-debtor relationship exists and that the
debtor has fraudulently transferred assets.”
Dixon v. Bennett,
72 Md.App. 620, 623 n.2 (1987), overruled on other grounds by
BAA,
PLC
v.
Acacia
Mut.
Life
Ins.
Co.,
400
Md.
136
(2007)
(citing Md. Code Ann. Com. Law § 15-201, et seq.).
A
fraud
claim
is
subject
standard of Fed.R.Civ.P. 9(b).
alleging
a
particularity
mistake.
person’s
fraud
the
or
to
the
heightened
pleading
Rule 9(b) provides that, “in
mistake,
circumstances
a
party
must
constituting
state
the
fraud
with
or
Malice, intent, knowledge and other conditions of a
mind
may
be
alleged
generally.”
Such
allegations
typically “include the ‘time, place and contents of the false
representation, as well as the identity of the person making the
misrepresentation and what [was] obtained thereby.’”
Superior
Bank, F.S.B. v. Tandem Nat’l Mortg., Inc., 197 F.Supp.2d 298,
313-14 (D.Md. 2000) (quoting Windsor Assocs., Inc. v. Greenfeld,
564 F.Supp. 273, 280 (D.Md. 1983).
The purposes of Rule 9(b)
are to provide the defendant with sufficient notice of the basis
5
for
the
plaintiff’s
claim;
to
protect
the
defendant
against
frivolous suits; to eliminate fraud actions where all of the
facts are learned only after discovery; and to safeguard the
defendant’s reputation.
Harrison v. Westinghouse Savannah River
Co., 176 F.3d 776, 784 (4th Cir. 1999).
objectives,
a
“court
should
hesitate
In keeping with these
to
dismiss
a
complaint
under Rule 9(b) if the court is satisfied (1) that the defendant
has been made aware of the particular circumstances for which
she will have to prepare a defense at trial and (2) that [the]
plaintiff has substantial prediscovery evidence of those facts.”
Id.
Plaintiff’s allegations satisfy Rule 9.
substantially
all
of
Group
fraudulently;
identifies
the
2’s
assets
He alleges that
have
participants;
been
alleges
transferred
that
the
transfers were without fair consideration; and indicates that
the transfer was made to hinder, delay, or defraud Plaintiff by
making his ownership interest in Group 2 worthless and Group 2
unable
to
pay
the
debts
it
will
incur
to
Plaintiff.
Additionally, Plaintiff’s motion indicates that it has evidence
of the fraud, specifically the fact that Group 2’s website no
longer
exists,
Deven’s
website
makes
numerous
references
to
Group 2, and Deven’s executives and owners are the same as Group
2’s.
See
Nat’l
Mortg.
Warehouse,
6
LLC
v.
Trikeriotis,
201
F.Supp.2d 499, 505 (D.Md. 2002).
Defendants’ motion to dismiss
on the basis of Rule 9 will be denied.2
Defendants
also
argue
that
denied because of undue delay.
filed
his
first
amended
Plaintiff’s
motion
should
be
On March 7, 2014, Plaintiff
complaint,
wherein
he
alleged
that
“Defendant Bowen transferred substantially all of the assets of
[Group 2] to a successor company for no consideration in an
attempt to prevent Plaintiff from receiving the value of his 15%
ownership
interest
in
[Group
2].”
(ECF
No.
41
¶
21).
Defendants argue that there is nothing to explain why Plaintiff
did not name Deven as a Defendant at that time, a view bolstered
by
the
fact
that
Plaintiff
has
conducted
no
discovery.
Defendants allege that Plaintiff is engaging in strategic delay.
This argument will be rejected.
The time between the first and
second amended complaint is less than two months, not so great a
time to constitute undue delay.
Lastly,
Defendants
argue
that
permitting
the
amendment
would result in undue prejudice to them and the court.
Adding
Deven would prejudice Defendants by requiring them to initiate
2
Defendants contend that Plaintiff has no information, much
less evidence, to support this claim.
They point to discovery
where he states that he does not currently have any documents
reflecting assets allegedly transferred fraudulently.
(ECF No.
55-3, at 2).
But the futility aspect of Rule 15(a)(2) is
evaluated against the standards of a motion to dismiss, which
generally cabins itself to the sufficiency of the allegations
contained in the complaint.
7
or participate in further discovery and motions on a wholly
separate set of operative facts, which do not involve Group 2.
Because a claim for fraudulent conveyance can only be brought by
creditor, Plaintiff’s claim is viable only if a judgment is
entered in his favor in the litigation concerning Group 2’s
obligations to him.
Defendants’ arguments are unconvincing.
the
fraudulent
conveyance
claim’s
viability
It is true that
is
contingent
on
Plaintiff’s success in his claims against Group 2 and Bowen,
thereby creating the possibility that if these claims were part
of one case, discovery and motion practice could occur on a
claim that never had any chance of success.
While the wasted
effort would be frustrating, that possibility is not so certain
as to effect undue prejudice.
There is no indication that these
additional claims and the addition of Deven as a Defendant would
prejudice Group 2 and Bowen’s defense so much as add another
nuisance
to
the
case.
The
principal
dispute
in
this
case
remains the money owed to Plaintiff by Group 2 and Bowen; the
fraudulent
conveyance
and
civil
conspiracy
claims
are
peripheral, and do not drastically alter the character of the
litigation.
Therefore,
for
the
reasons
stated
in
the
foregoing
Memorandum Opinion, it is this 24th day of June, 2014, by the
8
United
States
District
Court
for
the
District
of
Maryland,
ORDERED that:
1.
The
motion
for
leave
to
file
a
second
amended
complaint filed by Plaintiff Jerry Fenzel (ECF No. 51) BE, and
the same hereby IS, GRANTED IN PART AND DENIED IN PART;
2.
The Clerk is directed to detach and file Plaintiff’s
second amended complaint (ECF No. 51-1);
3.
Count 9 containing the allegations of civil conspiracy
(ECF No. 51-1 ¶¶ 59 - 62) IS STRICKEN;
4.
Deven Software, LLC is added as a Defendant to this
action and Plaintiff is instructed to provide the Clerk of Court
a completed summons form for Deven; and
5.
The
clerk
will
transmit
copies
of
the
Memorandum
Opinion and Order to counsel for the parties.
/s/
DEBORAH K. CHASANOW
United States District Judge
9
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