Rensch v. Reger et al

Filing 66

MEMORANDUM OPINION AND ORDER : 1. The Northern Oil Defendants' motion to dismiss [Doc. No. 52] is GRANTED; 2. Voyager's motion to dismiss [Doc. No. 49] is GRANTED; and 3. This action is DISMISSED WITH PREJUDICE (Written Opinion). Signed by Judge Susan Richard Nelson on 5/7/12. (LPH)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Donald Rensch, derivatively on behalf of
Nominal Defendant Northern Oil & Gas,
Inc.,
Plaintiff,

Civil No. 10-3679 (SRN/JJK)

MEMORANDUM OPINION
AND ORDER

v.
Michael L. Reger, Ryan R. Gilbertson,
James R. Sankovitz, and Voyager Oil &
Gas, Inc.,
Defendants,
and,
Northern Oil & Gas, Inc.,
Nominal Defendant.

Hart L. Robinovitch, Zimmerman Reed, PLLP, 14646 N. Kierland Blvd., Suite 145,
Scottsdale, AZ 85254; and Eric L. Zagar, and Ligaya T. Hernandez, Kessler Topaz
Meltzer & Check, LLP, 280 King of Prussia Road, Radnor, PA 19087, for Plaintiff.
Wendy J. Wildung, Faegre & Benson LLP, 2200 Wells Fargo Center, 90 South Seventh
St., Minneapolis, MN 55402-3901, for Defendants Michael L. Reger, Ryan R. Gilbertson,
James R. Sankovitz, and Nominal Defendant Northern Oil & Gas, Inc.
Rachna B. Sullivan, and Lousene M. Hoppe, Fredrikson & Byron, P.A., 200 South Sixth
St., Suite 4000, Minneapolis, MN 55402-1425, for Defendant Voyager Oil & Gas, Inc.

SUSAN RICHARD NELSON, United States District Judge
This matter is before the Court on the separate motions to dismiss brought by (1)
Defendants Northern Oil & Gas, Inc., Michael L. Reger, Ryan R. Gilbertson, and James
R. Sankovitz (collectively, “the Northern Oil Defendants” and, with the exception of

Northern Oil & Gas, the “Officer Defendants”) to dismiss for failure to state a claim and
on other grounds (Doc. No. 52); and (2) Defendant Voyager Oil & Gas, Inc., to dismiss
Count III for failure to state a claim (Doc. No. 49). For the reasons stated below, this
Court grants both motions and dismisses this action.
I.

FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Donald Rensch, as a shareholder of Nominal Defendant Northern Oil &

Gas, Inc. (“NOG”), originally filed this shareholder’s derivative action against (1) the
Northern Oil Defendants and another former Defendant, Chad D. Winter, (2) former
Defendants Joseph A. Geraci, II, and Douglas M. Polinsky, and (3) Voyager Oil & Gas,
Inc., and former Defendants James Randall Reger, James Russell Reger, and Weldon W.
Gilbertson (“the Voyager Defendants”), essentially alleging (1) that the individual
Defendants either usurped a corporate opportunity by forming Plains Energy Investments,
Inc., and its successor Voyager Oil & Gas, Inc., each an alleged “direct competitor of
NOG,” or aided and abetted such usurpation; and (2) that Voyager tortiously interfered
with NOG’s prospective business relationships. (Doc. No. 1, ¶ 1.)
NOG, a Minnesota corporation, is in the business of acquiring, developing and
exploiting oil and natural gas properties, particularly in the Bakken and Three
Forks/Sanish formations within the Williston Basin, a large basin in eastern Montana and
western North and South Dakota that is estimated to contain substantial energy reserves.
(Id. ¶ 20.) NOG was formed in 2006 by the following Defendants and former
Defendants: Michael L. Reger (“M. Reger”), NOG’s Chairman and CEO; Ryan R.

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Gilbertson (“R. Gilbertson”), NOG’s President (and a director since March 2007); and
Douglas M. Polinsky, and Joseph A. Geraci, II, two former directors of NOG. (Id. ¶¶ 9,
20.)
Voyager, a Delaware corporation, is also in the business of energy exploration and
production, focusing primarily on the oil shale resources in Montana and North Dakota.
(Id. ¶ 15, 29, & 30.) Voyager was formed in April 2010, when Plains Energy
Investments, Inc. merged with another corporation. Plains Energy was founded in 2008
by Defendant James R. Sankovitz, and by former Defendants James Randall Reger (“J.
Reger”), and Weldon W. Gilbertson (“W. Gilbertson”). (Id., ¶¶ 7, 10 & 11.) J. Reger
then served as the CEO and a director of Plains Energy, and W. Gilbertson served as
Plains Energy’s President until it became Voyager. (Id. ¶¶ 7, 10.) J. Reger is also the
father of M. Reger, one of the co-founders of NOG, and W. Gilbertson is also the father
of NOG’s co-founder, R. Gilbertson. (Id. ¶¶ 6, 7, 9, 10.)
M. Reger, NOG’s CEO and Chairman, and his wife are affiliated with Reger Gas
Investments, an early investor in Plains Energy and thus a current shareholder of
Voyager.1 M. Reger, the son of J. Reger, one of the founders of Plains Energy, is also the
brother of Defendant James Russell Reger (“J.R. Reger”), the CEO of Voyager since
December 31, 2009 (as well as a director since April 16, 2010). (Id. ¶¶ 6-8.)
The original individual Defendants also included two current officers of NOG.
The first, James R. Sankovitz, is NOG’s COO and Secretary since March 2010 as well as
1

All references to a person’s “current” position refer to the date the original
derivative Complaint was filed.
3

its General Counsel since 2008. (Id. ¶ 11.) Sankovitz also co-founded Plains Energy and
served as its Secretary and General Counsel until April 2010, when Plains Energy merged
with ante4, Inc. to form Voyager. (Id.) He is also the managing member of a limited
liability company that was an early investor in Plains Energy. (Id.)2 Thus the officers of
NOG when the original Complaint was filed included M. Reger, R. Gilbertson, Sankovitz
and Winter. (Id. ¶ 16.)3
In his three-count Complaint in this shareholder derivative action, Plaintiff
originally alleged, on behalf of NOG, that (1) the Officer Defendants (then also including
Winter) usurped a corporate opportunity of NOG, and thereby breached their fiduciary
duties of loyalty to NOG; (2) J. Reger, J.R. Reger, W. Gilbertson, Polinsky and Geraci
aided and abetted the Officer Defendants’ breaches of their fiduciary duties; and (3)
Voyager tortiously interfered with a prospective business relationship of NOG. (Id. ¶¶
39-51.)
Various groups of Defendants then brought three separate motions to dismiss.
(Doc. Nos. 15, 19 & 26.) This Court granted all three motions and dismissed the
2

The second officer of NOG, former Defendant Chad D. Winter, has served
as NOG’s CFO since March 2010 and had served as its Vice President of Operations
from 2007 to 2008. (Id. ¶ 12.) Winter is also the organizer of a limited liability company
that was an early investor in Plains Energy and that now owns shares of Voyager. (Id.)
3

The last two original individual Defendants were two former directors of
NOG. The first, Douglas M. Polinsky, co-founded NOG and served as a director until
May 3, 2007. (Id. ¶ 13.) Polinsky is also the president of a corporation that was an early
investor in Plains Energy and thus is a current owner of shares of Voyager. (Id.) The
second, Joseph A. Geraci, II, also was a co-founder of NOG and a director until 2007.
(Id. ¶ 14.) Geraci is also the managing director of a limited partnership that was an early
investor in Plains Energy and thus is a current shareholder of Voyager. (Id.)
4

Complaint without prejudice, explaining that a fundamental problem precluded relief on
the essential claim of usurpation of a corporate opportunity, on which the other claims
depended. (Doc. No. 44.)
Plaintiff then filed a Verified Amended Shareholder Derivative Complaint (the
“Amended Complaint”). (Doc. No. 46.) With respect to the main claim of usurpation,
Plaintiff refocused his Complaint to now allege that Sankovitz–during the period from
April 18, 2008 until April 16, 2010, when he served both as NOG’s General Counsel as
well as Plains Energy’s General Counsel and Secretary–usurped corporate opportunities
of NOG (1) by participating in the formation of Plains Energy (along with the fathers of
Defendants M. Reger and R. Gilbertson), and (2) by directing and approving Plains
Energy’s business activities of acquiring properties for energy production. (Doc. No. 46,
¶¶ 22, 23.) The usurpation claim is also directed at R. Gilbertson and M. Reger.
In addition, Plaintiff dropped several individual Defendants, and modified the
aiding and abetting claim so as to be directed at R. Gilbertson and M. Reger (rather than
five other former individual Defendants), claiming that they assisted Sankovitz’s alleged
usurpation. Finally, Plaintiff also dropped the tortious interference claim against
Voyager, replacing it with a claim that Voyager itself, as successor to Plains Energy, also
aided and abetted Sankovitz’s breach of fiduciary duties. (Doc. No. 46.)
By separate motions, the Northern Oil Defendants as well as Voyager now move
to dismiss.

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II.

DISCUSSION
The Northern Oil Defendants move to dismiss the Complaint for failure to state a

claim, for failure to plead the necessary facts showing that demand upon NOG’s Board of
Directors should be excused, and for failure to plead facts showing Plaintiff’s standing as
a shareholder. (Doc. No. 52.) The Northern Oil Defendants first contend that Plaintiff’s
Complaint fails to satisfy the pleading standards under Rules 8(a)(2) and 12(b)(6). (Doc.
No. 53, at 4.) The Northern Oil Defendants also argue that “Plaintiff failed to make presuit demand upon NOG’s directors, or to plead facts showing that demand should be
excused.” (Id. at 4.) Finally, the Northern Oil Defendants assert that Plaintiff has failed
to plead facts showing that he was a NOG shareholder at the time of the transactions he
complains about, and that he has continuously owned NOG stock until the present. (Id. at
5.) Defendant Voyager moves to dismiss Count III, which alleges that Voyager aided and
abetted Sankovitz’s alleged usurpation, for failure to state a claim on which relief may be
granted. (Doc. No. 49.) Voyager contends that Plaintiff has failed to plead facts
establishing three essential elements of that claim. (Doc. No. 51, at 1.)
But the Court need not decide most of these issues, because Plaintiff’s allegations,
even after amendment, suffer from a fundamental deficiency, now requiring dismissal of
the action. As the Northern Oil Defendants contend, “[n]ot only does the Amended
Complaint fail to plead facts showing that a corporate opportunity of NOG was actually
usurped by Plains Energy, it fails to plead facts showing that any of NOG’s fiduciaries
acted wrongfully.” (Doc. No. 53, at 13.)

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“To survive a Rule 12(b)(6) motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).4 Thus, the plaintiff must plead “factual
content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id. Such plausibility does not require probability of success,
“but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id.
“Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability,”
it fails to meet the requisite plausibility standard. Id.
The Iqbal Court provided an analytical framework for addressing Rule 12(b)(6)
motions. First, a court should separate and discard legal conclusions from the well-pled
facts. Id. at 678-79. (The Court clarified that “bare assertions” or “bald allegations” may
be rejected due to their “conclusory nature,” “rather than their extravagantly fanciful
nature.” Id. at 681.) Second, a court should determine whether the well-pleaded facts
state a plausible claim for relief. Id. at 679. “[W]here the well-pleaded facts do not
4

Plaintiff appears to argue that the Rule 12(b)(6) pleading requirements of
Twombly and Iqbal do not apply here in this diversity action. (Doc. No. 62, at 31 (stating
that he “need only satisfy the requirements of” Rule 8’s “short and plain statement”
standard “because Plaintiff seeks relief under state law”).) But the Federal Rules of Civil
Procedure, and federal law interpreting and applying those rules, govern in every action
in federal court regardless of the source of the law governing the substantive claims.
Even where a complaint is filed originally in state court, but then removed, that complaint
must satisfy the current federal pleading standard as defined by the U.S. Supreme Court’s
decisions in Twombly and Iqbal. See Willy v. Coastal Corp., 503 U.S. 131, 134-35
(1992) (noting that under Rule 81(c), the federal rules “‘apply to civil actions removed . .
. from the state courts and govern procedure after removal’”). See generally 14C Charles
Alan Wright, et al., Federal Practice and Procedure § 3738 (4th ed. 2009) (noting settled
rule that removed actions “will be governed by the Federal Rules of Civil Procedure and
all other provisions of federal law relating to procedural matters”).
7

permit the court to infer more than the mere possibility of misconduct,” the complaint
fails to survive. Id. For example, where the alleged conduct was consistent with
unlawful action, yet was “not only compatible with, but indeed was more likely explained
by, lawful” behavior, the conduct does not plausibly suggest a claim on which relief may
be granted. Id. at 679-80 (discussing allegations at issue in Twombly).
Count I, the main claim of usurpation of a corporate opportunity, and upon which
the other claims of aiding and abetting depend, is directed at the Officer Defendants, that
is, Sankovitz, M. Reger, and R. Gilbertson. Under Minnesota state law, if a corporate
officer or director usurps a corporate opportunity, the officer or director may be held
liable to the corporation:
[O]ne entrusted with the active management of a corporation, such as
an officer or director, occupies a fiduciary relationship to the corporation
and may not exploit his position as an ‘insider’ by appropriating to himself
a business opportunity properly belonging to the corporation. If such a
business opportunity is usurped for personal gain, it is equally well
recognized that the opportunity and any property or profit acquired becomes
subject to a constructive trust for the benefit of the corporation.
Miller v. Miller, 222 N.W.2d 71, 78 (Minn. 1974). And, of course, a corporate fiduciary
may be held liable for usurpation where he exploits a corporate opportunity by
establishing his own corporation to which he then diverts the opportunity, at least where
the fiduciary owns and controls that other corporation. Id.
Here, in the original Complaint, Plaintiff alleged a usurpation of NOG’s corporate
opportunities by various officers and directors of Plains Energy and Voyager, Plains
Energy’s successor by merger with ante4, Inc. Plaintiff’s claims of usurpation did not,

8

however, focus on particular business opportunities of NOG that either Plains Energy or
Voyager usurped, that is, the acquisition and development of specific energy-producing
properties. Rather, Plaintiff premised his usurpation claims on the creation itself of the
allegedly-competing corporations. (Doc. No. 1, ¶ 32, ¶ 42; Doc. No. 35, at 27, 28.)
This Court dismissed the Complaint because in our free enterprise economy, the
mere existence of a competitor is not legally wrongful, assuming of course that the
entities compete on a level playing field. United Wild Rice, Inc. v. Nelson, 313 N.W.2d
628, 633 (Minn. 1982) (“Competition is favored in the law.”). Moreover, a usurpation
claim may not be premised on the mere creation of entities without also establishing that
those entities then in fact usurped particular opportunities from the plaintiff corporation.
Insofar as a plausible claim of usurpation requires that the alleged wrongdoer in fact
usurped a business opportunity of another, the Court found Plaintiff’s theory of liability
“problematic from the start as it rests only on the allegation that the Officer Defendants
created entities that at most could potentially usurp an opportunity belonging to NOG.”
(Doc. No. 44, at 10.) “And even if Plains Energy did in fact acquire energy-producing
properties that were in NOG’s line of business, the mere fact that one corporation rather
than another succeeded in acquiring such a property, by itself, discloses nothing more
than its success in the marketplace.” (Id. at 10-11.)
In short, a usurpation claim requires some wrongful conduct by the alleged
usurper. Miller, 222 N.W.2d at 81. And the mere fact that corporate officers or directors
establish additional businesses similar to that of the corporation is not necessarily

9

wrongful. Id. at 83.
In the Amended Complaint, the usurpation claim is now directed at three Officer
Defendants, rather than four, with the primary focus on Sankovitz. Furthermore, Plaintiff
now appears to focus only on the period from April 18, 2008 until April 16, 2010, that is,
the period between when Plains Energy was incorporated and when it became Voyager
by merger. (Doc. No. 46, ¶¶ 23, 34.) During that time, “Sankovitz served as Plains
Energy’s Secretary and General Counsel,” and “also served as NOG’s General Counsel.”
(Id.)
Finally, Plaintiff has replaced the general allegations that NOG’s corporate
opportunities were usurped by the mere creation of Plains Energy and Voyager with the
allegation that the Officer Defendants usurped an opportunity of NOG by acquiring
“‘approximately 50,000 net acres in two separate prospect areas.’” (Doc. No. 46, ¶ 27.)5
It appears that the two areas are (1) the Tiger Ridge area, with respect to which Plains
Energy had entered into a joint venture with Hancock Resources, and (2) the Heath Shale,
with respect to which Plains Energy was acquiring acreage “both within and outside” of
its joint venture with Hancock. (Id. ¶¶ 28, 29.) It also appears that Plains Energy was
pursuing operations in the Bakken area of the Williston Basin. (Id. ¶ 30.) (See generally
id. ¶ 33 (discussing four areas of property in which Voyager, soon after its creation out of
5

Nevertheless, the Amended Complaint retains some of the allegations that
this Court rejected earlier. In fact, the Amended Complaint opens with the allegation that
it seeks to remedy alleged wrongs “in connection with the formation, capitalization, and
operation of Plains Energy. (Doc. No. 46, ¶ 1 (emphasis added).) And Count I asserts
that the Officer Defendants engaged in such a usurpation by, in part, taking for
themselves the “opportunity to invest in the equity of Plains Energy.” (Id. ¶¶ 57, 58.)
10

Plains Energy, was conducting energy exploration as of May 18, 2010).)
Plaintiff alleges that Sankovitz, as an officer of NOG, should have presented these
opportunities to NOG, but rather, as the Secretary and General Counsel of Plains Energy,
acquired the properties for Plains Energy. (Id. ¶ 56.)6 He further alleges that Sankovitz
usurped an opportunity of NOG by investing in the equity of Plains Energy rather than
offering that opportunity to NOG. (Id. ¶ 57.)
The Court first observes that, despite the Amended Complaint’s specification of
several particular properties that Plaintiff alleges were usurped, it is still far from clear
that NOG and Plains Energy operated in the same line of business. Although Plaintiff
alleges as much, it appears that he defines that line too broadly as “the ‘oil and natural gas
exploration opportunities.’” (Id. ¶ 37.) As the Amended Complaint itself discloses, NOG
sought to acquire and develop energy assets that exhibit economically producible
hydrocarbons. (Id. ¶ 14.) But NOG’s business appears rather focused:
“Our business focus is on the oil and gas industry in a limited number of
6

In fact, Plaintiff alleges that “[a]s Plains Energy’s Secretary and General
Counsel, Sankovitz personally directed and approved” Plains Energy’s acquisition of the
property at issue. (Doc. No. 46, ¶ 27.) But the Court simply is not required to accept
Plaintiff’s argument that because “Sankovitz was one of only three Plains Energy
officers, in addition to being its co-founder, Secretary and General Counsel, there can be
no doubt that Sankovitz personally approved and directed the foregoing acquisitions.”
(Doc. No. 62, at 13.) Plaintiff contends that “what is ‘implausible’ is Defendants’
inference that Sankovitz was not personally involved in Plains Energy’s acquisitions.”
(Doc. No. 62, at 37 (emphasis in original).) But it is far from self-evident that the duties
of General Counsel–presumably a legal position–or even a corporate Secretary, extend to
finding and exploiting business opportunities, particularly where Plains Energy at that
time had a CEO and a President plainly qualifying as officers. (Doc. No. 1, ¶¶ 7, 10
(alleging that after Plains Energy was created, J. Reger then served as the CEO and a
director, and W. Gilbertson served as President until it became Voyager).) .
11

properties, initially in Montana and North Dakota. Larger companies have
the ability to manage their risk by diversification. However, we will lack
diversification, in terms of both the nature and geographic scope of our
business.”
(Id. ¶ 18 (quoting NOG’s Form 10-K filed on March16, 2009) (emphases added).)
In contrast to NOG, Plains Energy focused on
leaseholds unable to meet their drilling commitments and willing to assign
their interests in acreage that is either subject to drilling or soon to be
drilled. By taking advantage of distressed situations, we believe we will be
able to immediately provide working interest capital by assuming existing
leasehold interests.
(Id. ¶ 30.) Plains Energy thus sought to commit “capital to known drilling situations”
such that it could achieve “a quick turn on capital.” (Id.) In short, it is not clear that the
properties Plains Energy acquired, and that Plaintiff claims were usurped, would have
been the type of properties in which NOG would have been interested.
In any event, even assuming that NOG and Plains Energy operate in the same line
business in the same geographic area, there remains a fundamental problem with
Plaintiff’s allegations–there is nothing alleged, or that may even be inferred from the
allegations, that is wrongful. At bottom, the Amended Complaint reduces to the
following allegations: (1) NOG was in the business of energy exploration in a particular
area, as was Plains Energy; (2) Plains Energy succeeded in acquiring certain energyproducing properties; (3) Sankovitz was an “officer” of both entities at the relevant time;
and (4) Sankovitz acquired the properties on behalf of Plains Energy, rather than on

12

behalf of NOG.7
This argument, without any allegations of actual wrongdoing, does not plausibly
plead a claim for usurpation of NOG’s corporate opportunity. As this Court previously
observed, our economic and legal system favor free enterprise and competition. NOG
and Plains Energy were free to compete in the acquisition of energy-producing properties
within the geographic areas at issue. Plaintiff does not–and presumably could not
rationally–allege that NOG somehow was entitled to a monopoly, or even a right of first
refusal, on all such properties within that area, regardless of whatever other energy
exploration companies also sought to operate in that area. And the simple fact that an
officer or director of NOG was also an officer or director of Plains Energy does not, by
itself, restrict that freedom. “As a general rule, corporate officers and directors, so long
as they act in good faith toward their company and its associates, are not precluded from
engaging in a business similar to that carried on by their corporation, either on their own
7

Although Plaintiff argues that Sankovitz, in his role as NOG’s General
Counsel, was an “officer” of NOG and thus owed NOG certain fiduciary duties, any such
allegation must be discounted as a legal conclusion. Moreover, at oral argument, counsel
for Plaintiff stated that NOG’s proxy statement for 2009 identified Sankovitz as an
“officer” of NOG. Although counsel also stated that he would provide the Court with an
affidavit attesting to that assertion and attach a copy of that proxy statement, no such
submission was ever filed. One of the documents submitted by the Northern Oil
Defendants is a NOG Proxy Statement identifying Sankovitz as one of the “Directors and
Executive Officers” having beneficial ownership of NOG common stock, but as of “April
1, 2011.” (Doc. No. 54, Ex. 5 (misidentified as Ex. 4 in the Affidavit).) By that time,
however, it is undisputed that Sankovitz was serving as NOG’s Chief Operating Officer,
not just its General Counsel. Moreover, under Minnesota law, under which NOG is
incorporated, there is no mandatory corporate officer position of General Counsel, nor
any provision that General Counsel is one of the permissible “other officers.” Minn. Stat.
§§ 302A.301 (requiring only officers that perform the functions of “chief executive
officer and chief financial officer”), .311 (permitting “other officers”).
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behalf or for another corporation of which they are likewise directors or officers.” 3
William M. Fletcher, Fletcher Cyclopedia of the Law of Corporations § 856 (2010 rev.
vol.); accord Miller v. Miller, 222 N.W.2d 71 (Minn. 1974).
Although simultaneous service for two corporations in similar lines of business
might expose such an officer or director to liability under certain circumstances, here the
Amended Complaint is devoid of any facts supporting a claim that the acquisition of any
particular property by Plains Energy was wrongful and to the detriment of NOG.8 There
are no allegations even hinting at any actionable wrong, for example, either (1) that
Sankowitz improperly used NOG’s funds or other assets in acquiring the land for Plains
Energy; (2) that Sankowitz misappropriated confidential NOG information in order to
acquire the land, Diedrick v. Helm, 14 N.W.2d 913, 920 (Minn. 1944) (“The fact that an
officer or director, through his connection with the corporation, gained knowledge of a
noncorporate opportunity does not bar him from acquiring it individually.”); or (3) that
NOG’s other officers and directors were in fact ignorant of Sankovitz’s activities on
behalf of Plains Energy.
In Miller, the Minnesota Supreme Court, after surveying the “three variant but
often overlapping tests or standards” for a claim of usurpation of a corporate opportunity,

8

Plaintiff alleges that as a result of the usurpation, “NOG has been deprived
of development and acreage opportunities . . . and has been deprived of the opportunity to
invest in Plains Energy.” (Doc. No. 46, ¶ 59.) The Prayer for Relief seeks “damages
sustained” as a result of Defendants’ misconduct. (Id. at 19.) But the Amended
Complaint does not articulate any particular damages that NOG allegedly suffered by not
being presented with the alleged corporate opportunities with respect to Plains Energy’s
acquisition of the properties at issue.
14

adopted an approach that “combine[d] the ‘line of business’ test with the ‘fairness’ test”
so as to create a “two-step process for determining the ultimate question of when liability
for a wrongful appropriation of a corporate opportunity should be imposed.” 222 N.W.2d
71, 79, 81 (Minn. 1974).9 The threshold question is whether the business opportunity at
issue is “also a ‘corporate’ opportunity,” that is, “whether the business opportunity is of
sufficient importance and is so closely related to the existing or prospective activity of the
corporation as to warrant judicial sanctions against its personal acquisition by a managing
officer or director of the corporation.” Id. at 81.10 As discussed above, there are
insufficient facts pled to support the claim that NOG, with its focus on “a limited number
of properties,” such that it would “lack diversification, in terms of both the nature and
geographic scope,” would have viewed the acquisitions by Plains Energy as a “corporate
opportunity” of NOG where Plains Energy was focused on “distressed situations,” that is,
“leaseholds unable to meet their drilling commitments and willing to assign their interests
in acreage that is either subject to drilling or soon to be drilled.” And as also discussed
above, there are no facts pled to support the claim that Sankovitz, then serving as NOG’s
“General Counsel,” would be a “managing officer or director” of NOG so as to owe it

9

The court found that the third major test–the “‘interest or expectancy’ test,
which precludes acquisition by corporate officers of the property of a business
opportunity in which the corporation has a ‘beachhead’ in the sense of a legal or equitable
interest or expectancy growing out of a preexisting right or relationship”–was too
restrictive. Id. at 79, 80.
10

Where the court determines as a matter of law that the business opportunity
was not a corporate opportunity, it need not proceed to the second prong of the Miller
test. NeoNetworks, Inc. v. Cree, 2008 WL 2104161, *5 (Minn. App. May 20, 2008).
15

various fiduciary duties.
But even if the allegations of the Amended Complaint could be deemed to have
satisfied the applicable pleading standard with respect to this threshold inquiry, those
allegations would also have to satisfy that standard with respect to “the second step,”
which “involves close scrutiny of the equitable considerations existing prior to, at the
time of, and following the officer’s acquisition.” Id.
Significant factors which should be considered are the nature of the
officer’s relationship of the management and control of the corporation;
whether the opportunity was presented to him in his official or individual
capacity; his prior disclosure of the opportunity to the board of directors or
shareholder and their response; whether or not he used or exploited
corporation facilities, assets, or personnel in acquiring the opportunity;
whether his acquisition harmed or benefitted the corporation; and all other
facts and circumstances bearing on the officer’s good faith and whether he
exercised the diligence, devotion, care, and fairness toward the corporation
which ordinarily prudent men would exercise under similar circumstances
in like positions.
Id. at 81-82.
Plaintiff emphasizes that these inquiries are ordinarily fact issues, such that the
Court should not presently resolve factual disputes. (Doc. No. 62, at 33.) Such factors do
generally present fact issues. See Miller, 222 N.W.2d at 81-82. But the issue here, unlike
that on a motion for summary judgment, is not whether there is any “genuine dispute as to
any material fact.” Fed. R. Civ. P. 56(a). The issue is whether Plaintiff has alleged
sufficient facts, which if taken as true, support a plausible claim; that is, whether the
Amended Complaint shows an unlawful usurpation. Plaintiff also argues that he need not
prove his claims at the pleading stage, but only allege facts showing his claims are

16

facially plausible. (Doc. No. 62, at 34.) True enough, but as will be seen, he plainly has
not made that showing.
Here, the Amended Complaint pleads no facts relevant to these equitable factors.
As noted above, the Amended Complaint essentially alleges only that Sankovitz, while
serving as NOG’s General Counsel, acquired energy-producing properties for Plains
Energy, for which he was also serving as Secretary and General Counsel. As in
Twombly, this does “not plausibly suggest [a wrongful acquisition] because it [is] not
only compatible with, but indeed [is] more likely explained by, lawful unchoreographed
free-market behavior.” Iqbal, 556 U.S. at 680 (discussing Twombly).
Plaintiff relies on the standards for usurpation first articulated in Diedrick v. Helm,
14 N.W.2d 913 (Minn. 1944), and later applied in Miller. (Doc. No. 62, at 33-36.) But as
both of those cases demonstrated, not every opportunity exploited by one company was
thereby usurped simply because an officer of that company also served as an officer or
director of another company that alleges the opportunity was properly its own. In
Diedrick, the court examined at some length all of the situations where an officer or
director would not be liable for usurpation even though he exploited a business
opportunity alleged to have been a corporate opportunity. 14 N.W.2d at 919-20
(concluding officers were not liable for usurpation). Likewise, as discussed at length in
this Court’s earlier decision, in Miller, the court also found no liability for usurpation
even though there was extensive familial connections between the various similar
businesses. In short, the simple fact that an officer or director of a corporation engages in

17

actions, for his own personal benefit or that of another corporation, similar to those
undertaken by the corporation, is by itself no basis for liability for usurpation. And here,
that is all that Plaintiff has alleged.
The Amended Complaint focuses on Sankovitz’s service for both corporations at
the same time. There are no allegations, however, that NOG required its officers and
directors to not also serve for other companies in the same business, or even that NOG
somehow was not aware of Sankovitz’s position with Plains Energy between April 2008
and April 2010.11 It is also difficult to accept as plausible the allegation that, during that
period, Sankovitz was usurping NOG’s opportunities for Plains Energy, only to have
NOG then appoint Sankovitz as NOG’s Chief Operating Officer in March 2010. (Doc.
No. 46, ¶ 8.)12
III.

CONCLUSION
Plaintiff’s Amended Complaint fails to allege sufficient facts to support a plausible

claim of usurpation of corporate opportunities, and thus the claim for aiding and abetting
such usurpation also fails. Accordingly, this action will now be dismissed.

11

And given the various relationships, business and familial, between many of
the individual officers and directors at issue, it is difficult to assume that NOG was
ignorant of Plains Energy, its business, and its officers and directors.
12

As noted above, in light of this Court’s conclusion that Plaintiff has failed
to plead a plausible claim of usurpation of any NOG corporate opportunity, this Court
need not address the other issues raised by the parties, including whether demand on
NOG’s board was properly excused so as to permit this derivative shareholder action.
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IV.

ORDER
Based on the foregoing, and all the files, records and proceedings herein, IT IS

HEREBY ORDERED that:
1.

The Northern Oil Defendants’ motion to dismiss [Doc. No. 52] is

GRANTED;
2.

Voyager’s motion to dismiss [Doc. No. 49] is GRANTED; and

3.

This action is DISMISSED WITH PREJUDICE.

LET JUDGMENT BE ENTERED ACCORDINGLY.

Dated: May 7, 2012

s/ Susan Richard Nelson
SUSAN RICHARD NELSON
United States District Judge

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