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