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NordAq Energy, Inc. v. Devine

United States District Court, D. Alaska

January 25, 2019

NORDAQ ENERGY, INC., Plaintiff and Counter Defendant,
v.
PAUL L. DEVINE, et al., Defendants and Counter Plaintiffs, and PAUL L. DEVINE, Third-Party Plaintiff,
v.
NUOXIN CO., LTD., et al., Third-Party Defendants, and JOHN EDWARD AITKEN KIDD, Third-Party Plaintiff,
v.
NUOXIN CO., LTD., et al., Third-Party Defendants.

          ORDER RE MOTIONS TO DISMISS

          SHARON L. GLEASON UNITED STATES DISTRICT JUDGE

         This order addresses each of the following motions:

         At Docket 209 is Plaintiff NordAq Energy, Inc.'s (“NordAq”) motion under Rule 12(b)(6) to dismiss in part Defendant Paul L. Devine's counterclaims filed within his Second Amended Counterclaim (Docket 200). Mr. Devine opposed at Docket 238. NordAq replied at Docket 270.

         At Docket 211 is NordAq's motion under Rule 12(b)(6) to dismiss in part Defendant John Edward Aitken Kidd's counterclaims filed within his First Amended Counterclaim (Docket 199). Mr. Kidd opposed at Docket 239. NordAq replied at Docket 271.

         At Docket 215 is Third-Party Defendant David Pfeiffer's motion under Rule 12(b)(6) to dismiss the claims against Mr. Pfeiffer in Mr. Devine's Second Amended Third-Party Complaint (Docket 201). Mr. Devine opposed at Docket 240. Mr. Pfeiffer replied at Docket 274.

         At Docket 216 is Mr. Pfeiffer's motion under Rule 12(b)(6) to dismiss the claims against Mr. Pfeiffer in Mr. Kidd's Second Amended Third-Party Complaint (Docket 202). Mr. Kidd opposed at Docket 241. Mr. Pfeiffer replied at Docket 275.

         At Docket 217 is NordAq's second motion under Rule 12(b)(6) for partial dismissal or under Rule 12(c) for partial judgment on the pleadings of Mr. Kidd's First Amended Counterclaim (Docket 199) for conversion against NordAq. Mr. Kidd opposed at Docket 253. NordAq replied at Docket 269.

         At Docket 219 is Third-Party Defendant Robert Warthen's motion under Rule 12(b)(6) to dismiss the claims against Mr. Warthen in Mr. Kidd's Second Amended Third-Party Complaint (Docket 202). Mr. Kidd opposed at Docket 254. Mr. Warthen replied at Docket 278.

         At Docket 221 is Third-Party Defendant Doris Cheng's motion under Rules 12(b)(6) and 9(b) to dismiss the claims against Ms. Cheng in Mr. Devine's Second Amended Third-Party Complaint (Docket 201). Mr. Devine opposed at Docket 255. Ms. Cheng replied at Docket 273.

         At Docket 223 is Ms. Cheng's motion under Rule 12(b)(6) to dismiss the claims against Ms. Cheng in Mr. Kidd's Second Amended Third-Party Complaint (Docket 202). Mr. Kidd opposed at Docket 256, and corrected his opposition at Docket 259. Ms. Cheng replied at Docket 272.

         At Docket 226 is Nuoxin Co., Ltd.'s (“Nuoxin”) motion under Rules 12(b)(6), 9(b), and 12(b)(2) to dismiss the claims against Nuoxin in Mr. Devine's Second Amended Third-Party Complaint (Docket 201). Mr. Devine opposed at Docket 257. Nuoxin replied at Docket 276.

         At Docket 228 is Nuoxin's motion under Rules 12(b)(6), 9(b), and 12(b)(2) to dismiss the claims against Nuoxin in Mr. Kidd's Second Amended Third-Party Complaint (Docket 202). Mr. Kidd opposed at Docket 258. Nuoxin replied at Docket 277.

         Oral argument on the foregoing motions was held on August 16, 2018, at Anchorage, Alaska.

         BACKGROUND

         This order addresses the second round of motions to dismiss that have been filed in this case. NordAq initiated this case by filing a complaint against Paul Devine on November 18, 2016; on August 31, 2017, Mr. Devine filed a Second Amended Answer with First Amended Counterclaims.[1] NordAq filed a motion to dismiss the First Amended Counterclaims on September 14, 2017.[2] An order addressing NordAq's motion to dismiss Paul Devine's First Amended Counterclaim (Docket 101) was entered on February 27, 2018.[3]

         Much of the relevant background to this dispute is set out in the Court's prior order and is not repeated here. In that order, the Court dismissed Mr. Devine's tort claims seeking indemnification, tortious and intentional interference claims, tort-based claims related to incentive pay, and RICO claims. The remaining claims pleaded by Mr. Devine-consisting of claims for fraud and intentional misrepresentation, conversion, third party beneficiary claims, and related conspiracy claims-were dismissed with leave to amend.[4] NordAq's motion did not seek dismissal of Mr. Devine's breach of contract claim.

         After the Court entered its order, two answers with counterclaims and two third-party complaints were filed. On March 13, 2018, Mr. Devine filed a Second Amended Answer and Second Amended Counterclaim against NordAq, [5] and Johnathan Kidd filed a First Amended Answer and First Amended Counterclaim against NordAq.[6] On March 19, 2018, Mr. Devine filed a Second Amended Third-Party Complaint against Nuoxin Co., Ltd., Doris Cheng, and David Pfeiffer, [7] and Mr. Kidd filed a Second Amended Third-Party Complaint against Nuoxin, Ms. Cheng, Mr. Pfeiffer, and Mr. Warthen.[8]

         Now before the Court are several motions to dismiss various claims raised in these four pleadings, each of which is discussed in turn below.

         LEGAL STANDARDS

         Many of the relevant legal standards were set out in this Court's prior order at Docket 194 and are not repeated here.

         Before a court may dismiss any portion of a complaint for failure to state a claim upon which relief may be granted, the court must provide the plaintiff with a statement of the deficiencies in the complaint and an opportunity to amend or otherwise address the problems, unless to do so would be futile.[9] Granting leave to amend may be futile where a plaintiff's attorneys are aware “that identical claims pled as they were in Plaintiff's complaint have repeatedly failed as a matter of law.”[10] A “district court's ‘decision to dismiss the [second] amended complaint with prejudice [may be] appropriate in light of [plaintiffs'] repeated failure to cure the deficiencies in [their] pleadings.'”[11]

         DISCUSSION

         1. NordAq's motion for partial dismissal of Paul L. Devine's Second Amended Counterclaim

         At Docket 209, NordAq moves to dismiss a portion of the Second Amended Counterclaim that Mr. Devine filed after the Court's order on NordAq's first motion to dismiss.[12] At issue in this motion are the following claims for relief: fraud and misrepresentation (intentional and negligent), acting-in-concert (or civil conspiracy), and punitive damages. In support of the motion, NordAq argues that Mr. Devine's tort-based counterclaims continue to be improperly based upon NordAq's alleged contractual promises, alleged misrepresentations regarding things Nuoxin would do for NordAq, and statements or promises that NordAq maintains are not actionable, such as concern for Mr. Devine's well-being. NordAq maintains all of these claims should be dismissed with prejudice, as further attempts to state valid counterclaims for these causes of action would be futile.[13]

         There are several aspects to Mr. Devine's fraud/intentional misrepresentation counterclaim. First, Mr. Devine maintains that acting through Doris Cheng, NordAq agreed with him to modify his employment agreement and to pay him as a consultant with an increased incentive bonus. He alleges that NordAq made these promises, but they were misrepresentations and fraudulent because, according to Mr. Devine, NordAq never intended to honor them. Mr. Devine appears to argue that he should be able to maintain tort claims for this alleged conduct because he is unable to maintain them as breach of contract claims in light of the terms of the 2012 employment contract, which he maintains expressly prohibited oral modification.[14] But this argument is without merit; even if the 2012 employment contract prohibited oral modification, that does not mean that an alleged breach of a subsequent oral modification of that agreement sounds in tort. NordAq is entitled to dismissal with prejudice of this aspect of the fraud/misrepresentation claim.

         The second aspect of Mr. Devine's fraud/misrepresentation counterclaim alleges that Mr. Pfeiffer, allegedly acting on behalf of NordAq, told Mr. Devine that he was concerned for Mr. Devine's well-being and would carry out Mr. Devine's best interests. The Court agrees with NordAq that such statements, even if made, are not actionable in tort for fraud/misrepresentation.[15]

         Another aspect of Mr. Devine's fraud/misrepresentation claims appears to be for injuries that NordAq incurred, and particularly as to Nuoxin's alleged promises to it. The Court agrees with NordAq's analysis that Mr. Devine lacks standing to assert any claim that NordAq may have against Nuoxin, as it is the corporation itself, and not any individual shareholder, that may have suffered the alleged harm identified by Nuoxin's failure to invest additional monies in NordAq.[16]

         The Court previously dismissed Mr. Devine's negligent misrepresentation claim against NordAq and no material changes have been made to that claim by Mr. Devine after leave to amend was granted. Accordingly, that claim will also be dismissed with prejudice at this time.

         In light of the foregoing, both the related acting-in-concert (civil conspiracy) and punitive damages claims related to the fraud/misrepresentation claims must also be dismissed with prejudice. To the extent Mr. Devine continues to maintain a claim for litigation conduct, including seeking recovery of the attorney's fees awarded against him previously in this case, such allegations fail as a matter of law at this time.[17]

         Accordingly, NordAq's motion to dismiss all of Mr. Devine's fraud/misrepresentation claims, and associated acting-in-concert and punitive damages claims, at Docket 209 will be granted. In light of Mr. Devine's “repeated failure to cure the deficiencies in [his] pleadings, ” these claims will be dismissed with prejudice.[18]

         2. NordAq's Motion for Partial Dismissal of John Kidd's First Amended Counterclaims

         At Docket 211, NordAq moves to dismiss with prejudice all of Mr. Kidd's counterclaims against NordAq apart from the breach of contract claims. This includes Mr. Kidd's claims for fraud/misrepresentation, acting-in-concert, and punitive damages.

         NordAq argues that dismissal of Mr. Kidd's tort counterclaims is warranted for the same basic reasons that it sought dismissal of Mr. Devine's tort counterclaims. One aspect of Mr. Kidd's fraud/misrepresentation counterclaim appears to be that NordAq promised Mr. Kidd that he would receive a salary at an increased rate after the Nuoxin transaction closed in 2014. Similar to Mr. Devine's counterclaim alleging a modified employment contract, this aspect of Mr. Kidd's fraud/misrepresentation counterclaim alleges a breach of contract claim. It is not a viable tort cause of action.

         Another aspect of Mr. Kidd's fraud/misrepresentation claims appears to be for injuries that occurred to NordAq, and particularly as to Nuoxin's alleged promises to it. The Court agrees with NordAq's analysis that Mr. Kidd lacks standing to assert any claim that NordAq may have against Nuoxin and/or Doris Cheng in this regard, as it is the corporation itself, and not any individual shareholder, that may have suffered any alleged compensable harm related to Nuoxin's failure to invest additional monies in NordAq.[19]

         Finally, Mr. Kidd alleges that NordAq committed the torts of fraud and misrepresentation in 2015 through Ms. Cheng when she omitted communicating to Mr. Kidd at that time that NordAq would challenge Mr. Kidd's stock holdings later in 2016. These so-called “promises by omission” are not actionable against NordAq as fraudulent misrepresentations. Mr. Kidd cites to no authority for the proposition that a non-closely held corporation such as NordAq can be held liable in tort when one member of the corporation's board does not share certain information about the corporation's future intended actions with another board member, even if it were to be proven that Ms. Cheng knew in 2015 that NordAq intended to take action against Mr. Kidd's shares later in 2016.[20]

         Because the Court finds that Mr. Kidd has failed to plead any viable claim for fraud/misrepresentation (including any claim for negligent misrepresentation), the corresponding claims for acting-in-concert (or civil conspiracy) and punitive damages will also be dismissed. In addition, any claims related to an alleged “litigation campaign” against Mr. Kidd should be dismissed, for the reasons set out in the Court's prior order of dismissal and in the preceding discussion in this order with respect to Mr. Devine.[21]

         The Court also finds that Mr. Kidd's counterclaims against NordAq should be dismissed with prejudice. Although normally a court should grant at least one opportunity to amend before dismissing a claim with prejudice, here the Court finds that dismissal with prejudice is warranted for the following reasons: the Court has previously issued an order of dismissal as to Mr. Devine's counterclaims, who had pled claims substantially similar to Mr. Kidd's, and granted leave to amend as to those claims. But, as discussed above, Mr. Devine has failed to state viable tort claims on his next attempt, and dismissal of those claims with prejudice will be granted. Mr. Devine and Mr. Kidd are represented by the same attorneys in this case.[22] As such, the Court finds that granting Mr. Kidd leave to amend in an effort to plead a viable claim for fraud/malpresentation against NordAq (either intentional or negligent)[23] would be futile.

         3. Motion to Dismiss Claims Against David Pfeiffer in Paul L. Devine's Second Amended Third Party-Complaint

         At Docket 215, David Pfeiffer moves to dismiss Paul Devine's Second Amended Third-Party Complaint (Docket 201) against Mr. Pfeiffer. The motion seeks dismissal of all the claims that Mr. Devine asserted against Mr. Pfeiffer: fraud/misrepresentation, tortious interference with contract, conspiracy and acting-in-concert, conversion, breach of contract, and punitive damages. In his opposition, Mr. Devine indicates that he “drops and no longer asserts his claims for conversion and breach of contract against Mr. Pfeiffer.”[24] Therefore, each of those claims will be dismissed with prejudice.

         With respect to Mr. Devine's fraud/misrepresentation claims against Mr. Pfeiffer, one aspect appears to allege that Mr. Pfeiffer fraudulently misrepresented to Mr. Devine that he would “carry out the best interests of Devine, Kidd, and Clearview by, inter alia, making sure that Devine's and Kidd's monies received from NordAq were properly accounted for via the Clearview entity when in fact Pfeiffer and NordAq would then subsequently claim in this lawsuit that this structure was done in an effort to conceal and misappropriate funds from NordAq.”[25] The Court finds dismissal of these claims is warranted, in part because the third-party complaint contains no allegations that specifically explain what, if anything, Mr. Pfeiffer allegedly did wrong with respect to Clearview, when he committed those alleged wrongs, and how those alleged wrongs harmed Mr. Devine.[26]

         A second aspect of Mr. Devine's fraud/misrepresentation claim alleges that Mr. Pfeiffer told Mr. Devine that he “was concerned for Mr. Devine's wellbeing” and “would not act to take advantage” of Mr. Devine's health issues.[27] This claim relates to the eventual entry of an award of attorney's fees against Mr. Devine in this case that were incurred by NordAq in the default proceedings.[28] As explained above, however, with respect to NordAq, these assertions, even if made by Mr. Pfeiffer, are not actionable fraudulent misrepresentations.[29]

         In light of the Court's prior order on NordAq's motion to dismiss against Mr. Devine, which granted leave to amend, the Court finds that dismissal of these related claims against Mr. Pfeiffer with prejudice is warranted, as according to Mr. Devine an additional opportunity to try to file an amended complaint that would state a viable cause of action for fraud/misrepresentation against Mr. Pfeiffer appears to be futile.[30]

         Mr. Devine also brings a claim for tortious interference with contract against Mr. Pfeiffer. Here, Mr. Devine groups Mr. Pfeiffer together with the other third party defendants he has named-Doris Cheng and Nuoxin-and asserts that they together conspired to cause NordAq to breach its employment contact with Mr. Devine. But as Mr. Pfeiffer correctly notes, Mr. Devine alleges no facts that plausibly explain when, how, and in what manner Mr. Pfeiffer interfered with Mr. Devine's employment contract, his compensation, or any incentive-bonus arrangement that Mr. Devine may have had with NordAq.[31]

         Mr. Devine appears to acknowledge that Mr. Pfeiffer cannot be held liable under this tort when Mr. Pfeiffer was acting as NordAq's agent.[32] But Mr. Devine maintains that he has also pleaded that each of the third-party defendants acted to pursue their own self-interests or the interests of others.[33] However, the allegations he makes in that regard are vague and conclusory. Mr. Devine fails to identify any self-interest that could have motivated Mr. Pfeiffer-that is, Mr. Devine does not explain how Mr. Pfeiffer personally benefitted from allegedly interfering in NordAq's employment contract with Mr. Devine. These same infirmities underlie the acting-in-concert (civil ...


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