PHILIP A. BRIMMER, United States District Judge
This matter is before the Court on the Motion to Dismiss the Complaint Pursuant to Fed. R. Civ. P. 12(b)(6) [Docket No. 56] filed by defendant Computershare Trust Company, Inc. ("Computershare").
Advanced Bio/Chem, Inc. was established in 2004 and later changed its name
When it was established in 2004, IEAM's lone asset was 15 million shares of restricted stock in Power3 Medical Products ("Power3"), which shares were valued at $45 million. Id. at 7, ¶ 23. On August 1, 2004, John Mazzuto was appointed a director of IEAM. Id. On October 7, 2004, IEAM purchased all outstanding stock in EMC Packaging, Inc. ("EMC") by paying EMC's shareholders 2.2 million shares of IEAM stock. Id. at 7, ¶ 24. On October 15, 2004, Mr. Mazzuto was appointed vice chairman of IEAM's board of directors and, on December 15, 2005, Mr. Mazzuto was elected CEO and president of IEAM. Id. at 7, ¶ 25. James Margulies was IEAM's CFO and general counsel. Docket No. 1-5 at 2.
On November 1, 2003, IEAM and Computershare executed the Stock Transfer Agency Agreement (the "Agreement") [Docket No. 1-2]. Pursuant to the Agreement, Computershare was required to provide transfer agent services to IEAM, Docket No. 1-2 at 3, 18-19, and Computershare received $7,800 per year from IEAM for its services. Id. at 20.
Article 5 of the Agreement contains a provision limiting Computershare's liability (the "exculpatory clause"):
Id. at 7-8. Article 7 of the Agreement states that IEAM agrees to defend, indemnify, and hold harmless Computershare from any loss or damage incurred by Computershare or relating to Computershare's provision of services; "provided, however, that no Indemnified Party shall have the right to be indemnified hereunder for any liability to the extent finally determined by a court of competent jurisdiction that such Losses have resulted directly from the gross negligence or willful misconduct of such Indemnified Party." Id. at 10. The Agreement states that Colorado law governs the agreement. Id. at 14.
Plaintiff alleges that Computershare owed IEAM various extra-contractual duties. Plaintiff alleges that Computershare owed IEAM a duty to act in accordance with the Securities Transfer Association, Inc. ("STA")
In November 2004, IEAM issued its 2004 Stock Option Plan (the "Plan") and, on January 25, 2005, IEAM filed a form S-8 registration statement for the Plan with the United States Securities and Exchange Commission ("SEC").
There is some dispute as to whether IEAM provided the Plan to Computershare. Plaintiff's complaint does not explicitly allege that IEAM provided the Plan to Computershare. However, the complaint suggests that the Plan was filed with the SEC and was therefore publicly available. See id. at 10, ¶ 36 (stating that the Agreement
Beginning in January 2005, Mr. Mazzuto and Mr. Margulies directed Computershare to issue unrestricted plan shares of IEAM stock to ineligible recipients. Docket No. 1 at 8, ¶ 30. The typical process for issuing these shares was as follows: Mr. Mazzuto or Mr. Margulies would send a signed letter (collectively, the "issuance letters") to Computershare directing it to issue a certain number of IEAM shares to a particular recipient. See generally Docket No. 1-6. Many of the letters referred to the Plan and/or the S-8 registration statement. See, e.g., id. at 4 ("Please issue Twenty Thousand (20,000) shares of [IEAM] common stock pursuant to our [IEAM] 2004 Stock Option Plan. These shares should be issued free trading via electronic transfer pursuant to the following instructions pursuant to the previously provided S-8 registration statement dated January 24, 2005"). These letters would sometimes be accompanied by fabricated minutes from an IEAM board meeting. Docket No. 1 at 8, ¶ 31. Computershare would then issue the shares to the recipient named in the issuance letters (the "recipient"). Id. Most recipients sold the shares on the open market. Id. at 9, ¶ 32. Using this process, Mr. Mazzuto and Mr. Margulies caused the issuance of approximately 43 million shares of unrestricted IEAM stock between January 24, 2005 and January 16, 2008. Id. at 9, ¶ 31. On or about September 7, 2005, share issuances exceeded the Plan's 15 million limit on restricted shares. Id.
Plaintiff alleges that Computershare issued shares regardless of whether board minutes, counsel opinion, or other confirmation was attached to the issuance letters, which was in violation of the Agreement and Computershare's "extra-contractual duties." Id. at 8-9, ¶ 31. Plaintiff alleges that Computershare issued unrestricted, free-trading stock, which was contrary to the terms of the Plan, and that 70% of the recipients were ineligible to receive such shares under the Plan, either because they were entities or natural persons who did no bona fide work for IEAM. Id. Plaintiff asserts that IEAM relied on Computershare's expertise as a transfer agent to ensure that the stock issuances were proper pursuant to the Plan. Id. at 17, ¶ 60.
Plaintiff alleges that Mr. Mazzuto and Mr. Margulies caused IEAM shares to be issued pursuant to an illegal scheme (the "Mazzuto scheme") aimed at manipulating IEAM's stock price in order to profit from the illegal transfer and sale of IEAM stock. Id. at 3-4, ¶¶ 11-13. Plaintiff contends that, through Computershare's participation, the Plan was "illegally converted into the means by which
During Mr. Mazzuto's and Mr. Margulies' tenure with IEAM, Jerome Davis and
On November 14, 2007, an IEAM shareholder brought a class action against IEAM, Mr. Mazzuto, Mr. Margulies, and other IEAM executives (the "class action") in the United States District Court for the Southern District of New York, Mallozzi v. Industrial Enterprises of America, Inc., No. 07-cv-10321 (S.D.N.Y.) (Docket No. 1). The class action complaint alleged that IEAM shareholders suffered damages as a result of Mr. Mazzuto's and Mr. Margulies' actions in issuing IEAM shares. Docket No. 1 at 18, ¶ 66. The named plaintiffs' second amended complaint asserted claims for violation of § 10(b) and § 20(a) of the Securities and Exchange Act. Mallozzi, (Docket No. 120 at 37-41.
On May 1, 2009, IEAM filed a voluntary Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the District of Delaware (the "Delaware bankruptcy court"). Docket No. 1 at 1, ¶ 1; see also In re Indus. Enters. of Am., No. 09-11508-BLS (Bankr.D.Del. May 1, 2009) (Docket No. 1). On May 11, 2009, the Delaware bankruptcy court issued an order authorizing the joint administration of IEAM's bankruptcy case with other related cases. In re Pitt Penn Holding Co., Inc., No. 09-11475-BLS (Bankr.D.Del.May 11, 2009) (Docket No. 21).
On July 7, 2009, the Delaware bankruptcy court granted the named plaintiffs in the class action relief from the automatic stay for purposes of consummating a settlement. Mallozzi, Docket No. 109 at 1-2. On December 12, 2010, IEAM and class members agreed to a settlement (the "class action settlement"). Docket No. 1 at 18, ¶ 67. On June 1, 2011, the court in the class action issued an order approving the class action settlement. Mallozzi, (Docket No. 134). Pursuant to Fed. R. Civ. P. 23, the court certified the class as "all persons who purchased or otherwise acquired any common stock of IEAM during the period from December 4, 2006 through and including November 7, 2007, and were damaged thereby." Id. (Docket No. 134 at 3).
On April 30, 2011, IEAM filed an adversary proceeding (the "Delaware adversary proceeding") against Computershare and three other defendants in the Delaware bankruptcy court. Docket No. 1 at 1, ¶ 2; Indus. Enters. of Am. v. Computershare Trust Co., Inc. ("IEAM"), No. 11-51877-BLS (Bankr.D.Del. April 30, 2011) (Docket No. 1). On January 20, 2012, IEAM filed an amended complaint in the Delaware adversary proceeding. IEAM, (Docket No. 60).
Based upon his conduct related to IEAM stock, Mr. Mazzuto was charged in New York state court with, among other things, grand larceny, scheme to defraud, scheme to defraud through securities fraud, falsifying business records, conspiracy, and securities fraud. Docket No. 1 at 5-6, ¶ 20. Mr. Mazzuto pled guilty and was sentenced to prison. Id. Mr. Mazzuto testified that, as a result of such conduct, he received $10.5 million. Id. Based upon his conduct related to IEAM stock, Mr. Margulies was charged with grand larceny, scheme to defraud, scheme to defraud through securities fraud, falsifying business records, and conspiracy. Id. at 6-7, ¶ 21. Mr. Margulies was found guilty of those charges at trial and was sentenced to prison. Id. At trial, the evidence established that Mr. Margulies was issued 717,500 unrestricted shares of IEAM stock, which he immediately sold on the open market. Id. Mr. Margulies received more than $5 million as a result of his and Mr. Mazzuto's conduct related to IEAM stock. Id.
On October 30, 2013, plaintiff filed the present case on behalf of IEAM and as an assignee of certain of IEAM's shareholders. Docket No. 1 at 1. Plaintiff asserts Colorado-law claims against Computershare for fraud, professional negligence, negligence, constructive fraud/unjust enrichment, and breach of contract (in the alternative). Id. at 18-22. Plaintiff asserts claims under 11 U.S.C. §§ 544, 548, 550 and Colo. Rev. Stat. §§ 38-8-105, 38-8-106 for recovery of fees IEAM paid to Computershare, id. at 23-27. Plaintiff seeks, among other things, restitution from Computershare for the full value of the improperly issued shares. Id.
To survive a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a complaint must allege enough factual matter that, taken as true, makes the plaintiff's "claim to relief ... plausible on its face." Khalik v. United Air Lines, 671 F.3d 1188, 1190 (10th Cir.2012) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged — but it has not shown — that the pleader is entitled to relief." Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks and alteration marks omitted); see also Khalik, 671 F.3d at 1190 ("A plaintiff must nudge [his] claims across the line from conceivable to plausible in order to survive a motion to dismiss." (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955)). If a complaint's allegations are "so general that they encompass a wide swath of conduct, much of it innocent," then plaintiff has not stated a plausible claim. Khalik, 671 F.3d at 1191. (quotations omitted). Thus, even though modern rules of pleading are somewhat forgiving, "a complaint still must contain either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory." Bryson v. Gonzales, 534 F.3d 1282, 1286 (10th Cir. 2008) (alteration marks omitted).
It is unclear to what extent plaintiff asserts his claims for relief on behalf of class member IEAM shareholders. The class members assigned to IEAM any claims they possessed arising out of or relating to the transfer of IEAM stock, assets, or property, Mallozzi, (Docket No. 127-1 at 21), which confers upon IEAM the right to bring whatever claims class members have relating to the transfer of IEAM stock, assets, or property. The question therefore becomes what claims IEAM can bring on behalf of the class members or, in other words, what claims the class members have against Computershare. The complaint does not identify what assigned claims are asserted on behalf of the class members or articulate a theory by which Computershare is liable to the class members. Rather, plaintiff alleges only that he brings this case "on behalf of IEAM and as an assignee of IEAM's shareholders." Docket No. 1 at 1.
Computershare argues that, because IEAM shareholders were not party to the Agreement and because plaintiff has failed to plead that Computershare owed a duty in tort to IEAM shareholders, plaintiff has failed to state any claims against Computershare on behalf of the class members. Docket No. 56 at 8, 12. Computershare argues, in the alternative, that whatever claims plaintiff asserts on behalf of the class members are derivative in nature. Docket No. 61 at 9. Plaintiff does not dispute that he cannot assert a claim for breach of contract on behalf of the class members, but argues that the Uniform Commercial Code ("UCC") as adopted in Colorado placed upon Computershare certain duties to IEAM shareholders. Docket No. 60 at 8-9. Plaintiff's argument does not, however, address the relevant threshold question, namely, whether the class members have standing to bring claims against Computershare.
There are two types of shareholder actions. Derivative actions are those "brought by a shareholder on behalf of the corporation to recover for harm done to the corporation." Cohen v. Mirage Resorts, Inc., 119 Nev. 1, 62 P.3d 720, 732 (2003) (citing Kramer v. W. Pac. Indus., 546 A.2d 348, 351 (Del.1988)); see also Kamen v.
Computershare argues that, because derivative claims belong to the corporation, any derivative claims plaintiff attempts to assert on behalf of the class members are duplicative of claims asserted on behalf of IEAM. Docket No. 61 at 10. The Court agrees. By virtue of the fact that plaintiff brings all claims on behalf of IEAM, IEAM has not refused to assert any rights belonging to the corporation that would otherwise give rise to a derivative claim. See Kamen, 500 U.S. at 96, 111 S.Ct. 1711 (holding that the purpose of the Fed. R. Civ. P. 23.1 demand requirement is to "affor[d] the directors an opportunity to exercise their reasonable business judgment and waive a legal right vested in the corporation [and] it is only when demand is excused that the shareholder enjoys the right to initiate suit on behalf of his corporation in disregard of the directors' wishes" (quotations omitted)). Moreover, to the extent plaintiff attempts to bring a derivative claim on behalf of the class members, plaintiff fails to satisfy the pleading requirements of Fed. R. Civ. P. 23.1. Thus, to whatever extent plaintiff attempts to bring derivative claims on behalf of the class members, such claims are dismissed
The question therefore becomes whether the facts alleged in plaintiff's complaint would confer standing on the class members to bring a direct action against Computershare. "For a plaintiff to have standing to bring an individual action, he must be injured directly or independently of the corporation." Kramer, 546 A.2d at 351 (emphasis in original); see also Franchise Tax Bd. of Cal. v. Alcan Aluminium Ltd., 493 U.S. 331, 336, 110 S.Ct. 661, 107 L.Ed.2d 696 (1990) (holding that shareholders with "direct, personal interest in a cause of action" have standing to bring a direct action, even when the corporation's rights are also implicated). This requires a plaintiff to establish that "the actions of the third party that injure the corporation... cause[d] him injury as a stockholder, unique to himself and not suffered by the other stockholders." Nicholson v. Ash, 800 P.2d 1352, 1357 (Colo.App.1990). "A shareholder does not acquire standing to maintain a direct action when the alleged injury is inflicted on the corporation and the only injury to the shareholder is the indirect harm which consists of the diminution in the value of his or her shares." Lapidus v. Hecht, 232 F.3d 679, 683 (9th Cir.2000) (citing Elster v. Am. Airlines, Inc., 100 A.2d 219, 222 (Del.Ch.1953)); see also Bixler v. Foster, 596 F.3d 751, 757 (10th Cir. 2010) (applying Colorado law and holding that diminution in value of shares is not a direct and personal injury, but an injury to the corporation). Here, plaintiff alleges that IEAM shares were traded at a market value of $450 million, but, by April 2009, "the market value of those shares was $0, representing a cumulative loss to public shareholders of $450 million." Docket No. 1 at 17, ¶ 62. The diminution in value of IEAM shares does not, by itself, constitute an injury sufficient to confer standing on the class members to assert a direct action. See Bixler, 596 F.3d at 757. Plaintiff's breach of contract and tort claims allege that "IEAM suffered monetary losses and liability including, but not limited to, approximately $88 million from the Computershare issuances" as well as "monetary losses and liability including, but not limited to, the fees and commissions earned by Computershare from IEAM." Docket No. 1 at 20, ¶¶ 81-82; see also id. at 21, ¶ 87; id. at 22, ¶¶ 92, 96; id. at 23, ¶ 101. Plaintiff's fraudulent transfer claims seek the return of fees IEAM paid Computershare. Id. at 24-27. Such losses are, on their face, losses to IEAM and plaintiff does not identify any facts that suggest otherwise. Plaintiff's complaint does not plead facts upon which to conclude that the shareholders have a direct, personal interest in the claims asserted against Computershare. Cf. Faro v. Corporate Stock Transfer, Inc., 883 So.2d 896, 898 (Fla.Dist.Ct.App.2004) (holding that, pursuant to Uniform Commercial Code, "wrongful refusal by the transfer agent to register a requested transfer makes the agent liable to the damaged shareholder"). Plaintiff does not, for example, allege in support of his fraud claim that IEAM shareholders relied on any representations made by Computershare. See, e.g., Docket No. 1 at 20, ¶ 80 ("IEAM justifiably relied on the material and false representations and/or omissions made by Computershare to its extraordinary detriment"). Thus, plaintiff has not pled sufficient facts upon which to conclude that the class members have standing to assert direct claims against Computershare.
Plaintiff's argument that Computershare owed the class members a duty in tort does not compel a different conclusion. Assuming, without deciding, that plaintiff is correct, direct actions can only be brought where a third party violates a duty owed to a stockholder and the stockholder suffers an injury "unique to himself and not suffered by the other stockholders." See Nicholson, 800 P.2d at 1357. Because plaintiff
Computershare argues that plaintiff's claims for negligence and professional negligence asserted on behalf of IEAM are barred by Article 5 of the Agreement. Docket No. 56 at 9. Plaintiff responds by arguing that, under Colorado law, exculpatory clauses do not provide a shield against willful and wanton negligence and that he has sufficiently pled that Computershare acted recklessly or purposefully with respect to its obligations under the UCC, STA guidelines, and Plan. Docket No. 60 at 6-7. The Court does not interpret plaintiff's argument as disputing that the exculpatory clause bars his claims for negligence and professional negligence; rather, plaintiff appears to contend that his negligence and professional negligence claims allege that Computershare engaged in grossly negligent conduct, which is explicitly exempted from the Agreement's exculpatory clause.
The Court first considers whether Article 5 is enforceable to relieve Computershare of liability for conduct constituting ordinary negligence and professional negligence. "The scope and validity of an exculpatory clause are questions of law." McShane v. Stirling Ranch Prop. Owners Assoc., Inc., ___ P.3d ___, ___, 2015 WL 1843807, at *1 (Colo.App. April 23, 2015). Although exculpatory clauses are generally disfavored in Colorado, they are not void under all circumstances. Squires v. Breckenridge Outdoor Educ. Ctr., 715 F.3d 867, 872 (10th Cir.2013). Colorado courts consider four factors in determining whether an exculpatory clause is enforceable: "(1) the existence of a duty to the public; (2) the nature of the service performed; (3) whether the contract was fairly entered into; and (4) whether the intention of the parties is expressed in clear and unambiguous language." Jones v. Dressel, 623 P.2d 370, 376 (Colo.1981); see also Squires, 715 F.3d at 872.
Although neither party addresses these factors, the Court finds that the balance of factors dictates that the exculpatory clause is enforceable to bar plaintiff's negligence and professional negligence claims. As for the first Jones factor, the Colorado Supreme Court has noted that a public duty is implicated when, among other things, the party seeking the benefit of an exculpatory clause is in an industry that is "suitable for public regulation," performs a service of great importance or a service that is a practical necessity to members of the public, possesses a decisive advantage in bargaining strength, or maintains control over the person or property likely to be harmed by the carelessness of its agents. Jones, 623 P.2d at 376-77 (quoting Tunkl v. Regents of Univ. of Cal., 60 Cal.2d 92, 32 Cal.Rptr. 33, 383 P.2d 441, 444 (1963)). Although the securities industry may, in a general sense, be heavily regulated, the specific service that Computershare provides is not a practical necessity to members of the public, a fact which does not give rise to a disparity in bargaining strength. Thus, this factor weighs in favor of enforcing the exculpatory clause. Cf. id. at 377; Chadwick v. Colt Ross Outfitters, Inc., 100 P.3d 465, 469 (Colo.2004) ("Colt Ross provides a recreational service, neither publicly regulated nor of great public importance").
As to the second Jones factor, courts inquire as to whether utilizing the service provided by the party seeking to enforce the exculpatory clause is a matter of choice or necessity. McShane, ___ P.3d at ___,
As to the third Jones factor, "[a] contract is fairly entered into if one party is not so obviously disadvantaged with respect to bargaining power that the resulting contract essentially places him at the mercy of the other party's negligence." Hamill v. Cheley Colorado Camps, Inc., 262 P.3d 945, 949 (Colo.App.2011). Here, plaintiff's complaint does not allege any facts suggesting that the services Computershare provided could not have been obtained elsewhere or that the parties' bargaining power was otherwise unequal when they entered into the Agreement. See id. at 949-50. Thus, this factor weighs in favor of enforcing the exculpatory clause.
As to the fourth Jones factor, an exculpatory clause "need not contain any magic words to be valid; in particular, it need not specifically refer to waiver of `negligence' claims." Wycoff v. Grace Cmty. Church of Assemblies of God, 251 P.3d 1260, 1265 (Colo.App.2010). Rather, the relevant inquiry is whether "the intent of the parties was to extinguish liability and whether this intent was clearly and unambiguously expressed," which requires consideration of the agreement's actual language, length, and complication as well as "any likelihood of confusion or failure of a party to recognize the full extent of the release provisions." Squires, 715 F.3d at 872-73 (quotations omitted). Here, Article 5 states that Computershare "shall not be liable for any action taken or omitted to be taken in connection with this Agreement, except that Computershare shall be liable for direct losses incurred by the Company arising out of Computershare's gross negligence or willful misconduct." Docket No. 1-2 at 7. Although this provision does not specifically mention ordinary negligence, the fact that the clause exempts gross negligence implies that the waiver excuses Computershare from liability for other types of negligence. Other language in Article 6 reinforces that intent. Article 5, ¶ 2 specifically extinguishes Computershare's liability for the conduct giving rise to plaintiff's negligence and professional negligence claims, namely, "the authority of the Company to request such issuance" of any shares and "[a]cting upon any oral instruction, writing or document reasonably believed by Computershare to be genuine and to have been given, signed or made by an Officer." Docket No. 1-2 at 8. Thus, because the agreement explicitly relieves Computershare of liability for the relevant conduct, the Court finds that the parties intended, through Article 5, to relieve Computershare of liability for the conduct giving rise to plaintiff's negligence and professional negligence claims and did so in a clear and unambiguous manner. See McShane, ___ P.3d at ___, 2015 WL 1843807, at *5; cf. Wycoff, 251 P.3d at 1265 (rejecting exculpatory clause as void in part because contractual language "made no reference to the relevant activity").
Upon review of the Jones factors, the Court finds that the exculpatory provisions as set forth in Article 5 of the Agreement are valid and enforceable. Plaintiff's negligence and professional negligence claims are therefore barred by the Agreement.
Even assuming that Article 5 did not bar plaintiff's negligence claims, plaintiff fails to establish the existence of a tort duty upon which to base such claims. A plaintiff alleging negligence must establish "the existence of a duty, a breach of
A tort duty may be derived from "a legislative enactment of the standard of conduct or from a judicially imposed standard." Dare v. Sobule, 674 P.2d 960, 963 (Colo.1984). Plaintiff appears to contend that Computershare's alleged duty is created by the UCC, STA guidelines, and the Plan. Docket No. 60 at 6. However, plaintiff cites no statute — and the Court is aware of none — adopting the STA guidelines or stating that a corporation's internal stock plan places a duty of care on transfer agents. Although plaintiff argues that the UCC, specifically Colo. Rev. Stat. § 4-8-208, requires a transfer agent to "have reasonable grounds to believe that the certified security is in the form and within the amount the issuer is authorized to issue," Docket No. 60 at 5, § 4-8-208 sets forth the warranties that a transfer agent makes to a purchaser of a certificated security. See § 4-8-208 ("A person signing a security certificate as authenticating trustee, registrar, transfer agent, or the like, warrants to a purchaser for value of the certificated security...."). IEAM was the issuer, not the purchaser, of the shares at issue in this case; thus, § 4-8-208 does not apply to IEAM's claims against Computershare.
When a court imposes a duty of care, "the question is essentially one of fairness under contemporary standards — that is, would reasonable persons recognize and agree that a duty of care exists." Greenberg v. Perkins, 845 P.2d 530, 536 (Colo.1993). A court should base its determination on factors such as "the risk involved, the foreseeability and likelihood of injury as weighed against the social utility of the defendant's conduct, the magnitude of the burden of guarding against the harm, and the consequences of placing the burden of a duty on the defendant." Ryder v. Mitchell, 54 P.3d 885, 890 (Colo.2002). Courts may also consider "competing individual and social interests implicated by the particular facts of the case." Id. "Upon finding the existence of a duty, a court must then consider the scope of that duty and define the applicable standard of care." Greenberg, 845 P.2d at 536.
Plaintiff, as the party attempting to establish the existence of a duty of care, fails to address the relevant factors, a failure which is, by itself, a sufficient basis to reject plaintiff's argument that the claimed duty exists. As the Tenth Circuit has noted, it is not incumbent on a court to put the picture of a party's arguments together or otherwise advocate on a party's behalf, and the Court declines to do so in this case. See Bird v. Regents of N.M. State Univ., 619 Fed.Appx. 733, 746-48, 2015 WL 4646437, at *10 (10th Cir. Aug. 6, 2015) (unpublished). Although at least one treatise considers the STA guidelines to "represent the custom and practice in the industry," see Mark S. Rhodes, Transfer of Stock § 1:6 (7th ed. 2015), plaintiff cites no case — and the Court has found none — where a court has looked to the STA guidelines to establish a common law tort duty.
Plaintiff's breach of contract claim alleges that Computershare failed to satisfy its obligations under the Agreement and "did not provide the services it agreed to provide pursuant to the terms of the agreement." Docket No. 1 at 23, ¶ 100. Specifically, plaintiff argues that the issuance letters directed Computershare to issue free trading shares "pursuant to [IEAM's] 2004 Stock Option plan" and to issue shares "pursuant to the previously provided S-8 registration statement dated January 24, 2005." Id. (quoting Docket No. 1-6).
Computershare argues that plaintiff fails to identify a specific provision of the Agreement that it breached. Docket No. 61 at 2. Computershare argues, without dispute, that plaintiff's complaint does not allege that Computershare was provided a copy of the Plan and further argues that the Agreement does not require Computershare to search IEAM's public filings for certain documents. Docket No. 56 at 2; see also Docket No. 60 at 3-4. Computershare contends that the Agreement does not place upon it an obligation to become aware of what restrictions IEAM placed on its shares, to only issue shares conforming to the Plan, and to refuse to follow IEAM's officers' directives if such directives were contrary to the Plan. Docket No. 56 at 2; Docket No. 61 at 2-3.
The Court agrees with Computershare. Article 3 of the Agreement, the only portion of the Agreement upon which plaintiff's complaint relies, provides that Computershare shall transfer
Plaintiff does not argue that the issuance letters were not properly endorsed. Although it is not entirely clear who has the obligation of ensuring that documents sufficiently support the requester's authority to issue the instructions, by virtue of the fact that Computershare, at its discretion, may require additional documentation in support of transfer requests, it appears that it is IEAM who has this obligation, not the other way around. Although Computershare may refuse to transfer shares if it is not satisfied that the transfer is legally authorized — which Article 3, ¶ 1 indicates may occur if Computershare deems the transfer improper, unauthorized, or not in compliance with Computershare's procedures —, the agreement does not identify, let alone suggest, a circumstance where Computershare would be contractually obligated to refuse to transfer shares. Article 3, ¶ 1 contains no terms suggesting that Computershare is obligated to investigate each transfer request or that Computershare is obligated to determine whether a properly endorsed transfer request is in conformance with a corporation's employee benefits stock plan. In other words, Article 3 does not contain any language suggesting that, when the Plan or S-8 registration statement is invoked in an issuance letter, Computershare is contractually obligated to refuse to issue shares until it independently determines whether the requested issuance complies with the Plan or S-8 registration statement. If such an obligation exists in the Agreement, plaintiff fails to identify it, and no such obligation is apparent to the Court. Article 3 of the Agreement grants Computershare the right to request more information from IEAM and the right to refuse to transfer shares, but does not obligate it to do so under the circumstances alleged in plaintiff's complaint. Plaintiff fails to identify contractual provisions suggesting otherwise and, as a result, fails to state a claim for breach of contract.
The remainder of the Agreement is consistent with Computershare's position. The scope of services Computershare is obligated to provide is set forth in Schedule A of the Agreement. Nothing in Schedule A suggests that Computershare will provide a service by which it independently confirms the propriety of each stock issuance against an employee stock option plan. See Docket No. 1-2 at 18.
Plaintiff argues that the Court should interpret the issuance letters as commanding Computershare to issue shares "only if [the issuance] compl[ies] with the Stock Option Plan." Docket No. 60 at 4-5. This interpretation of the issuance letters defies common sense. Plaintiff alleges that Mr. Mazzuto's and Mr. Margulies' goal was to "artificially inflate IEAM's stock price so that they could illegally cash in on this through the perversion of IEAM's S-8 Stock Option Plan." Docket No. 1 at 6, ¶ 20. Plaintiff's interpretation of the issuance letters suggests that Mr. Mazzuto and Mr. Margulies had a psychologically conflicted, self-confessional intent to cause Computershare to uncover their scheme. The logical and obvious interpretation of the letters is the opposite — that Mr. Mazzuto's and Mr. Margulies' references to the Plan and the S-8 registration statement were intended to convey their view that such documents permitted the issuances. More importantly, plaintiff concedes that the issuance letters do not themselves place a contractual obligation on plaintiff and, as discussed above, nothing in the Agreement obligates Computershare to independently verify the propriety of Mr. Mazzuto's and Mr. Margulies' issuance requests against the Plan. Thus, plaintiff's argument is without merit.
Plaintiff next argues that the Court should look to the STA guidelines in resolving any ambiguity in the agreement. Docket No. 60 at 5. Plaintiff's argument is somewhat difficult to interpret. To the extent plaintiff argues that the Agreement should be interpreted in light of the STA guidelines, plaintiff's argument is unsupported. Assuming, without deciding, that the STA guidelines are evidence of industry standards, plaintiff does not identify any particular term in the Agreement that has an alternate meaning when interpreted in light of the STA guidelines. See Employment Television Enters., LLC v. Barocas, 100 P.3d 37, 43 (Colo.App.2004). Thus, plaintiff fails to show how interpreting the Agreement in light of the STA guidelines would lead to a different result.
Even assuming that plaintiff sufficiently stated a claim that Computershare breached an obligation under the Agreement, as discussed above, the exculpatory clause is enforceable and limits Computershare's ability accordingly. In arguing that his breach of contract claim does not fall within the exculpatory clause, plaintiff attempts to characterize his claim as asserting that Computershare failed to follow the instructions set forth in the issuance letters, and not that Computershare failed to ensure that IEAM had the authority to issue the relevant shares. Docket No. 60 at 4 n.7. Plaintiff's argument is unavailing. Not only does plaintiff fail to identify a contractual provision supporting his theory of liability, but the issuance letters themselves do not direct or place a contractual duty on Computershare to refrain from issuing shares until it is independently satisfied that the issuances complied with the Plan. See Docket No. 60 at 4 n.5. Because plaintiff's breach of contract claim arises from actions taken or not taken in connection with the Agreement and from IEAM — acting through Mr. Mazzuto and Mr. Margulies — exceeding its authority under the Plan to issue shares, Article 5, ¶¶ 1 and 2 relieve Computershare of liability for such a claim. Computershare's motion to dismiss is granted as to plaintiff's breach of contract claim.
Plaintiff's unjust enrichment claim seeks "restitution for the value of the
Plaintiff points out that it is permitted to plead an unjust enrichment claim in the alternative to its breach of contract claim. Docket No. 60 at 3 n.2. Although it may be appropriate to assert both a breach of contract claim and an unjust enrichment claim in the same complaint, see Hemmann Mgmt. Servs. v. Mediacell, Inc., 176 P.3d 856, 860 (Colo.App.2007), Computershare argues that, because IEAM's and Computershare's relationship is expressly governed by the Agreement, plaintiff cannot bring an unjust enrichment claim based upon conduct covered by the Agreement. Docket No. 56 at 9. Plaintiff responds that its unjust enrichment claim "covers conduct outside the express contract" because, in addition to asserting that Computershare breached the Agreement, plaintiff also asserts that Computershare violated its duties under the UCC and state tort law. Docket No. 60 at 3 n.2. Plaintiff's theory misses the mark. Plaintiff's unjust enrichment claim asserts that, in return for its role in facilitating the illegal issuance of stock, Computershare received fees and commissions at IEAM's expense. Docket No. 1 at 22, ¶ 94. Computershare issued stock pursuant to the Agreement. The Agreement set forth the fees due Computershare for its services. Article 5 of the Agreement explicitly sets forth the terms under which Computershare is liable for failing to perform its contractual obligations, including that "[a]ny liability of Computershare shall be limited to the amount of fees paid by the Company to Computershare in the preceding twelve (12) months for the Services." Docket No. 1-2 at 7. Plaintiff does not allege that its unjust enrichment claim arises based upon conduct that occurred after the contractual relationship between IEAM and Computershare expired. Thus, the conduct giving rise to plaintiff's unjust enrichment claim is covered by the Agreement. See Greenway Nutrients, Inc. v. Blackburn, 33 F.Supp.3d 1224, 1261-62 (D.Colo.2014) ("There was an express contract covering any claim for loss of good and services.... Therefore, an unjust enrichment claim for goods or services is precluded"); Interbank, 77 P.3d at 817 ("the contracts contemplated payment from tap fees to be collected over time").
As for the second exception, the threshold determination is not the adequacy of the remedy under an express contract, but rather its enforceability. Id. at 818-19. Plaintiff does not assert that any aspect of the Agreement is unenforceable. Thus, plaintiff's unjust enrichment claim is precluded by the Agreement. Cf. Rossetti Assocs., Inc. v. Santa Fe 125 Denver, LLC, No. 09-cv-0033-WJM-BNB, 2011 WL 834177, at *7 (D.Colo. March 4, 2011) (dismissing breach of contract claim and concluding that, "because there is an enforceable
Computershare's motion to dismiss as to plaintiff's unjust enrichment claim is granted.
Computershare argues that plaintiff fails to state a claim for fraud. Docket No. 56 at 10. A claim for fraud requires a plaintiff to prove that (1) the defendant knowingly made a false representation of material fact; (2) plaintiff was unaware of its falsity; (3) the representation was intended to induce plaintiff to act; and (4) plaintiff was damaged by acting in reliance on the representation. Vinton v. Virzi, 269 P.3d 1242, 1247 (Colo.2012). Under Federal Rule of Civil Procedure 9(b), "fraud or mistake" must be pled with particularity, meaning that a plaintiff must, at the minimum, "set forth the time, place and contents of the false representation, the identity of the party making the false statements and the consequences thereof." United States ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 727 (10th Cir.2006) (quoting Koch v. Koch Indus., 203 F.3d 1202, 1236 (10th Cir.2000)). Although a plaintiff may plead "[m]alice, intent, knowledge, and other conditions of a person's mind" generally, Rule 9(b) "merely excuses a party from pleading discriminatory intent under an elevated pleading standard. It does not give him license to evade the less rigid-though still operative-strictures of Rule 8." Ashcroft, 556 U.S. at 686-87, 129 S.Ct. 1937.
Plaintiff alleges that IEAM reasonably relied on Computershare's expertise as a transfer agent to, among other things, "check the types of shares being issued (as well as the overall among of the shares issued) against the basic terms of [the] Plan." Docket No. 1 at 17, ¶ 60. Plaintiff alleges that, "[b]y the simple act of issuing and transferring the S-8 shares in question, Computershare — as a professional transfer agency — represented to IEAM that it had checked the credentials of those directing the issuances, the bona fides of the recipients, and the number of shares authorized, and that the issuances were, in fact, proper under the Plan." Id. at 19, ¶ 75. Thus, plaintiff's position appears to be that Computershare's act of issuing stock as directed by the issuance letters constitutes a representation that the shares "conformed in both form and amount with the S-8 and the Stock Option Plan," were "being issued and transferred to eligible recipients," and conformed to the STA guidelines. Docket No. 60 at 10-11.
As to the first element regarding a false representation, plaintiff's position contradicts the plain meaning of the issuance letters, as discussed above. Mr. Mazzuto and Mr. Margulies were not asking Computershare to warrant the legality of the issuance of the shares. Second, plaintiff's position is not supported by the terms of the Agreement, which do not state or imply that Computershare had the responsibility to conduct the type of investigation that plaintiff alleges. As to the second element regarding IEAM's unawareness of the falsity, even assuming that Computershare explicitly made such representations to IEAM, plaintiff's allegation that IEAM was unaware of the falsity of Computershare's representation is conclusory and contradicted by more specific allegations. See Docket No. 1 at 19, ¶ 77. "It is long-settled law that if a party claiming fraud has access to information that was equally available to both parties and would have led to the true facts, that party has no right to rely on a false representation." Vinton, 269 P.3d at 1247. IEAM promulgated the Plan, Docket No. 1 at 8, ¶ 27, and, therefore, had access to the very information that would have led to the conclusion
As to the third element regarding an intent to induce action, plaintiff does not explain what action Computershare intended to induce from IEAM. Plaintiff generally alleges that Computershare's alleged representations were made "with the intent that IEAM would rely upon them" or "with the intent that IEAM would rely on its incorrect knowledge of the true facts." Docket No. 1 at 20, ¶ 78. However, recognizing that intent need not be pled with particularity, such allegations are conclusory and, absent factual allegations establishing what acts the representations were intended to induce, are insufficient to satisfy this element. See Ashcroft, 556 U.S. at 686-87, 129 S.Ct. 1937. Because plaintiff has failed to adequately plead the first three elements of his fraud claim, Computershare's motion as to this claim is granted.
In the alternative, plaintiff's tort-based claims are barred by the economic loss rule. The economic loss rule is intended to maintain a boundary between contract law and tort law. Town of Alma v. AZCO Constr., Inc., 10 P.3d 1256, 1259 (Colo.2000). "[A] party suffering only economic loss from the breach of an express or implied contractual duty may not asset a tort claim for such a breach absent an independent duty of care under tort law." Id. at 1264. In order to be considered independent of contract, a duty of care must satisfy two conditions: "[f]irst, the duty must arise from a source other than the relevant contract"; and "[s]econd, the duty must not be a duty also imposed by the contract." Haynes Trane Serv. Agency, Inc. v. Am. Standard, Inc., 573 F.3d 947, 962 (10th Cir.2009) (citing Town of Alma v. AZCO Constr., Inc., 10 P.3d 1256, 1259-62 (Colo.2000)). In other words, "even if the duty would be imposed in the absence of a contract, it is not independent of a contract that memorializes it." Id. (quotation and citation omitted). As discussed above, plaintiff fails to identify a non-contractual, common law or statutory tort duty that governs the acts and omissions giving rise to plaintiff's negligence, professional negligence, or unjust enrichment claims. As to plaintiff's fraud claim, Colorado courts have held that claims of post-contractual fraud related to the performance of the contract are barred by the economic loss rule, particularly where, as here, a plaintiff alleges only economic losses. See Hamon Contractors, Inc. v. Carter & Burgess, Inc., 229 P.3d 282, 293-94 (Colo.App.2009).
Moreover, the purpose of the economic loss rule is to, among other things, allow the parties to "reliably allocate risks and costs during their bargaining [and] encourage the parties to build the cost considerations into the contract because they will not be able to recover economic damages in tort." BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d 66, 72 (Colo.2004). Article 5 of the Agreement suggests that, by memorializing Computershare's obligations to IEAM and limiting Computershare's liability therefrom, Computershare and IEAM engaged in just such an allocation and cost calculation. See Docket No. 1-2 at 7 ("it being understood that the Services could not be provided to the Company by Computershare at the prices set forth herein without the foregoing liability limitation"). Thus, the Court concludes that, in the alternative, the economic loss rule bars plaintiff's tort-based claims.
Plaintiff's sixth through tenth claims allege that the fees IEAM paid to Computershare pursuant to the Agreement should be voided as fraudulent transfers. Docket
Computershare's next argument is that plaintiff's fraudulent transfer claims are barred by the statute of limitations. Docket No. 56 at 19. Computershare argues that, because plaintiff first asserted fraudulent transfer claims on October 30, 2013 — the day he filed the present case —, plaintiff's fraudulent transfer claims are barred by Colo. Rev. Stat. § 38-8-110 and 11 U.S.C. § 546. Id. at 20. Computershare maintains that, because plaintiff did not assert any fraudulent transfer claims against it in the Delaware bankruptcy proceeding, Computershare has not waived any statute of limitations arguments with respect to such claims. Id. Plaintiff does not dispute that he asserts fraudulent transfer claims against Computershare for the first time in the present case. Rather, plaintiff argues that, had he amended his complaint in the Delaware adversary proceeding to add fraudulent transfer claims, such claims would have related back to the original complaint filed in the Delaware adversary proceeding pursuant to Fed. R. Civ. P. 15(c)(1)(B). Docket No. 60 at 17. Computershare replies that plaintiff's argument is speculative and that Rule 15(c) would not have permitted the addition of fraudulent transfer claims in the manner plaintiff suggests. Docket No. 61 at 11.
As a threshold matter, the Court understands plaintiff to argue that his fraudulent transfer claims are timely in relation to the original complaint in the Delaware adversary proceeding, see Docket No. 60 at 16-17 n.20, not that such claims are timely asserted in this case regardless of whether the claims could have been brought in the adversary proceeding.
Fed. R. Civ. P. 15(c)(1)(B), which is applicable to bankruptcy proceedings pursuant to Fed. R. Bankr. P. 7015, states: "An amendment to a pleading relates back to the date of the original pleading when ... the amendment asserts a claim or defense that arose out of the conduct, transaction, or occurrence set out — or attempted to be set out — in the original pleading."
Benton v. Bd. of Cty. Commr's, No. 06-cv-01406-PSF-MEH, 2007 WL 2071638, at *3 (D.Colo. Nov. 14, 2007); see also Laratta v. Raemisch, No. 12-cv-02079-MSK-KMT, 2014 WL 1237880, at *15 (D.Colo. March 26, 2014) (quoting Benton); In re Bennett Funding Grp. Inc., 275 B.R. 447, 451 (Bankr.N.D.N.Y.2001); In re Universal Factoring Co., Inc., 279 B.R. 297, 303 (Bankr.N.D.Okla.2002). The key consideration is whether the original complaint "gave the Defendant adequate notice of what must be defended against in the Amended Complaint." In re Bennett, 275 B.R. at 451 (collecting cases); see also Baldwin Cty. Welcome Ctr. v. Brown, 466 U.S. 147, 149 n. 3, 104 S.Ct. 1723, 80 L.Ed.2d 196 (1984) ("The rationale of Rule 15(c) is that a party who has been notified of litigation concerning a particular occurrence has been given all the notice that statutes of limitations were intended to provide."); In re Universal, 279 B.R. at 303 ("`[T]he courts also inquire into whether the opposing party has been put on notice regarding the claim or defense raised by the amended pleading. Only if the original pleading has performed that function ... will the amendment be allowed to relate back to prevent the running of the limitations period in the interim from barring the claim or defense.'" (quoting 6A Charles Alan Wright et al., Federal Practice & Procedure § 1497 (2d ed. 1990)).
Plaintiff's argument that his fraudulent transfer claims relate back to the original complaint in the Delaware adversary proceeding (the "original complaint") [IEAM, No. 11-51877-BLS (Docket No. 1)] is flawed for multiple reasons. First, his argument is perfunctory and unsupported by specific reference to the original complaint. See Docket No. 60 at 17. Plaintiff does not identify, even with a general citation, any factual allegations that would place Computershare on notice that it may have to defend against a fraudulent transfer claim based upon the fees it received pursuant to the Agreement. Plaintiff's argument is therefore little more than an implicit invitation for the Court to parse the original complaint on plaintiff's behalf in search of support for his position. The Court declines the invitation. Plaintiff's failure to support his argument is, by itself, a sufficient reason to decline to apply the relation back doctrine to plaintiff's fraudulent transfer claims.
Second, even assuming that the Court were to nonetheless compare the original complaint with the facts alleged in support of his fraudulent transfer claims, the allegations underlying plaintiff's fraudulent transfer claims are, generally speaking, little more than a bare recitation of the elements. See Docket No. 1 at 23-26, ¶¶ 102-136. Thus, it is difficult to determine whether the original complaint "fairly discloses the general fact situation out of which the [fraudulent transfer] claims arise," see In re Universal, 279 B.R. at 303, because the applicable facts are difficult to discern from the complaint in the instant case. For example, plaintiff alleges that the Computershare fee transfers were "made while the debtor was insolvent," Docket No. 1 at 24, ¶ 108, but there are no factual allegations supporting a plausible
The Court recognizes that, where allegations of fraud are involved, some courts favor a broad interpretation of the Rule 15(c) relation back standard. See In re Universal, 279 B.R. at 307. However, even when applying such an interpretation to the present case, plaintiff's conclusory and unsupported argument is insufficient to establish that his fraudulent transfer claims arose out of the same conduct, transaction, or occurrence set forth in the original complaint. See In re Bennett, 275 B.R. at 452. Because plaintiff's sixth, seventh, eighth, and ninth claims for relief do not relate back to the original complaint pursuant to Fed. R. Civ. P. 15(c)(1)(B), he could not have asserted such claims in the Delaware adversary proceeding and such claims are barred by the statute of limitations in the present case. Thus, plaintiff's sixth, seventh, eighth, and ninth claims are dismissed.
The Court turns to plaintiff's tenth claim for relief, which seeks to recover the fee transfers from Computershare pursuant to § 550(a). To recover under § 550(a), a plaintiff must establish that a transfer has been avoided under, as relevant here, § 544 or § 548. See In re Jones Storage & Moving, Inc., 2005 WL 2590385, at *2 (Bankr.D.Kan. April 14, 2005) (setting forth elements of § 550 claim). Because plaintiff's claims under § 544 and § 548 are barred by the applicable statute of limitations, plaintiff has failed to establish the requisite elements of a § 550 claim. See In re Sandoval, 470 B.R. 195, 200 (Bankr.D.N.M.2012) ("[§ 550] lists the rules that apply when a trustee is successful in avoiding, among other things, a preference"). Plaintiff's tenth claim for relief is therefore dismissed for failure to state a claim.
For the foregoing reasons, it is
To the extent the following facts are taken from sources outside plaintiff's complaint, when considering a motion to dismiss, a court typically disregards facts supported by documents other than the complaint unless it first converts the motion to dismiss into a motion for summary judgment. Jackson v. Integra Inc., 952 F.2d 1260, 1261 (10th Cir.1991). However, a court may consider documents outside of the complaint on a motion to dismiss in certain instances. Of relevance here is the exception permitting a court to consider documents that are both central to a plaintiff's claims and to which a plaintiff refers in his complaint. GFF Corp. v. Associated Wholesale Grocers, Inc., 130 F.3d 1381, 1384 (10th Cir.1997), as well as documents subject to judicial notice, including court documents and matters of public record. Tal v. Hogan, 453 F.3d 1244, 1265 n. 24 (10th Cir.2006); United States v. Jones, 29 F.3d 1549, 1553 (11th Cir.1994) ("It [is] recognized that a court may take judicial notice of a document filed in another court not for the truth of the matters asserted in the other litigation, but rather to establish the fact of such litigation and related filings." (quotation omitted)). The Court has examined the documents submitted by the parties that are attached to or referenced in the complaint and court filings implicitly or explicitly referred to by the parties and has determined that each of the documents cited in this opinion may appropriately be referenced by the Court without converting the present motion into a motion for summary judgment.
On May 1, 2009, IEAM filed a voluntary Chapter 11 petition, In re Indus. Enters. of Am, Inc., No. 09-11508-BLS (Docket No. 1), which constitutes an order for relief. § 301(b) ("The commencement of a voluntary case under a chapter of this title constitutes an order for relief under such chapter."). On May 3, 2013, the Delaware bankruptcy court appointed plaintiff Chapter 11 trustee. In re Pitt Penn Holding Co., No. 09-11475-BLS (Docket No. 1729). Pursuant to § 546(a)(1)(A), all fraudulent transfer claims were required to be brought by May 1, 2011. Because the appointment of plaintiff as trustee occurred after May 1, 2011, § 546(a)(1)(B) does not apply to extend the statute of limitations. Thus, absent the relation back of plaintiff's sixth, seventh, eighth, and ninth claims for relief, such claims are not timely asserted in this proceeding. Plaintiff's tenth claim for relief, which is brought pursuant to § 550, is addressed below.
