Monus v. Colorado Baseball 1993, Inc.

• Decision Date: 29 November 1993
• Citation: 103 F.3d 145
• Parties: Fed. Sec. L. Rep. P 99,364, 96 CJ C.A.R. 2051 NOTICE: Although citation of unpublished opinions remains unfavored, unpublished opinions may now be cited if the opinion has persuasive value on a material issue, and a copy is attached to the citing document or, if cited in oral argument, copies are furnished to the Court and all parties. See General Order of
• Court: U.S. Court of Appeals — Tenth Circuit

Page 145

103 F.3d 145

Fed. Sec. L. Rep. P 99,364, 96 CJ C.A.R. 2051

NOTICE: Although citation of unpublished opinions remains unfavored, unpublished opinions may now be cited if the opinion has persuasive value on a material issue, and a copy is attached to the citing document or, if cited in oral argument, copies are furnished to the Court and all parties. See General Order of November 29, 1993, suspending 10th Cir. Rule 36.3 until December 31, 1995, or further order.

Nathan H. MONUS, Plaintiff-Appellant, v. COLORADO BASEBALL 1993, INC., a Colorado corporation Colorado Baseball Partnership 1993, Ltd., a Colorado limited partnership; Paul A. Jacobs; Oren L. Benton; Charles K Monfort; Jerry D. Mcmorris; Stephen S. Kurtz, Defendants-Appellees.

No. 95-1099.

D.C. No. 93-S-2160

United States Court of Appeals, Tenth Circuit.

Dec. 17, 1996.

Before TACHA, HOLLOWAY, and BRISCOE, Circuit Judges.

ORDER AND JUDGMENT ^*

Plaintiff-Appellant Nathan H. Monus appeals from a judgment of the district court granting defendants-appellees' motion for summary judgment and motion to dismiss for failure to plead fraud with particularity. We have jurisdiction under 28 U.S.C. § 1291.

I

This case arises out of the early days of the Colorado Rockies baseball franchise. Plaintiff Nathan Monus was part of the early ownership group.

The following organizational structure was put together. The team was to be owned by a limited partnership--defendant Colorado Baseball Partnership 1993, Ltd.,which came into existence by January 25, 1991. I App. at 122; II App. at 764. The sole general partner of the limited partnership was defendant Colorado Baseball 1993, Inc., a corporation which owned 28.57% of the limited partnership. The stock in this corporation was owned by five men as follows: John M. Antonucci 35.7%; Michael I. Monus ("Mickey," plaintiff's son) 35.7%; Nathan H. Monus ( plaintiff-appellant) 11.9%; John R. Antonucci (father of John M. Antonucci) 11.9%; and Cary Teraji 4.8%. The 71.43% of the Colorado Baseball Partnership 1993, Ltd. limited partnership remaining in addition to the 28.57% owned by the general partner was divided up among the limited partners--including defendants Oren L. Benton, Charles K. Monfort, and Jerry D. McMorris. I App. at 122.

Defendant Paul A. Jacobs is an attorney who was involved in the ownership efforts and who served as counsel to the various entities until he became general counsel and executive vice president of the Rockies. II App. at 320. Defendant Stephen S. Kurtz is an accountant who was involved in various business efforts involving the franchise. The defendants will be referred to collectively as the Rockies Defendants, except for defendant Kurtz, who is represented by separate counsel and will therefore be referred to only individually. When necessary, the other individual defendants will be referred to by name.

On July 29, 1992, Mickey Monus, plaintiff's son, flew to Colorado from his home in Youngstown, Ohio, and went to the Denver office of defendant Colorado Baseball 1993, Inc. for the purpose of advising that he needed to sever his connections with the Colorado Rockies. ¹ II App. at 280. Present at that meeting were Mickey, Jacobs, Kurtz, John M. Antonucci and David Karzmer, a friend of Mickey. The result of this meeting was an agreement dated July 29, 1992, whereby Mickey agreed to transfer his stock to defendants Jacobs and Kurtz. I App. at 123-25.

Mickey Monus claimed, however, in an affidavit that defendant Jacobs had proposed that Mickey's interest in the Rockies would be severed through a "parking" arrangement, whereby Mickey's interest would be removed in name only. II App. at 281. According to Mickey, it was understood by all present, including defendants Jacobs and Kurtz, that the "parking" of the stock "would be temporary until such time as [Mickey] could receive a release from his financial obligations under certain bank notes as well as receive actual value for his ownership interests at a fair market value." Id. Mickey also said that the purchase of his interest was "never intended to be a final sale." Id. There is nothing in the sale agreement that indicates this alleged understanding.

Later that same day, a telephone call was placed to plaintiff Nathan Monus who was vacationing in Barcelona, Spain. Plaintiff Monus initially spoke with John M. Antonucci, who informed plaintiff that there was a meeting ongoing among Antonucci, Mickey, Jacobs and Kurtz. During the conversation with plaintiff Nathan Monus, attorney Jacobs "instructed [Nathan] that it was imperative and essential to the well-being of Colorado Baseball 1993, Inc. that [Nathan] sever his ownership interests therein," according to Nathan's affidavit. II App. at 276.

Plaintiff stated that he relied on representations of Jacobs that he should sign an agreement of sale and that he relied on Jacobs's representations based upon his understanding that Jacobs was "acting as [his] legal counsel." Id. An agreement was faxed to plaintiff and he executed it and faxed it back to Jacobs. Plaintiff states that at no time was he lead to believe that the consideration provided for in the transfer agreement was to be the entire consideration for the transfer of his ownership in Colorado Baseball 1993, Inc. Id. at 276-77. He further says that he "was actively lead to believe that at a later date, additional consideration would be provided to him that would reflect fair market value of his shares." Id. at 277.

On September 2, 1992, defendants Jacobs and Kurtz assigned to Defendants Benton, McMorris, and Monfort the stock interests acquired from the Monuses on July 29. In exchange, Defendants Benton, McMorris and Monfort paid off a $19.4 million loan from Centre Capital. Plaintiff asserts, however, that he did not receive the $100.00 consideration set forth in the agreement, see Affidavit of Nathan Monus, II App. at 277; that his indebtedness on the loan was not canceled until September 2, 1992; and that Kurtz and Jacobs never received the stock, which remained with Morgan Guarantee, to which it had been pledged, until September 2, 1992. Brief of Plaintiff-Appellant Nathan Monus at 15.

Plaintiff Nathan Monus filed this suit in October 1993 naming as defendants Colorado Baseball 1993, Inc., Colorado Baseball Partnership 1993, Ltd., Paul A. Jacobs, Oren L. Benton, Charles K. Monfort, Jerry D. McMorris, and Stephen S. Kurtz. Nathan Monus's complaint averred that the defendants had, under their scheme, proposed the plan by which both Nathan and Mickey Monus would "park" their ownership interests with Jacobs and Kurtz for token consideration and that the ownership interests would later be resold for its true value. Plaintiff alleged 2 counts of breach of contract and 1 count each of the following: civil liability under Rule 10b-5 of the Securities Exchange Act of 1934, attorney malpractice, breach of fiduciary duty, unjust enrichment, common law fraud (intentional and/or negligent), and tortious interference with contract. I App. at 1-19. As to 2 counts, rescission of the sale of Nathan's

793 shares in Colorado Baseball 1993, Inc. and restoration of the shares were sought. Punitive damages, attorneys' fees and costs were also demanded. Alternatively, compensatory and punitive damages, costs, interest and attorneys' fees were sought. Id. at 19.

On March 17, 1994, the district court orally dismissed, pursuant to Fed.R.Civ.P. 12(b)(6), the securities fraud and common law fraud claims of Nathan Monus's complaint for failing to allege fraud with particularity as required by Fed.R.Civ.P. 9(b). VII App. at 2338. On January 20, 1995, by stipulation all of the claims except the two breach of contract claims were dismissed as to defendant Kurtz only. Id. at 2344. On January 27, 1995, the district court granted summary judgment to all defendants on the remaining claims in plaintiff's complaint. Plaintiff appeals the district court's dismissal of the securities fraud and common law fraud claims and the grant of summary judgment as to the other claims.

II

DISMISSAL OF THE FRAUD CLAIMS

A

We review de novo the dismissal of a claim for failure to plead fraud with particularity as required by Fed.R.Civ.P. 9(b), treating such dismissal as a dismissal for failure to state a claim under Fed.R.Civ.P. 12(b)(6). Seattle-First National Bank v. Carlstedt, 800 F.2d 1008, 1011 (10th Cir.1986) (per curiam). Our role is to review plaintiff's complaint to determine if it is legally sufficient.

Rule 9(b) provides that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." The particularity requirement applies to both common law fraud and securities fraud claims. Barrett v. Tallon, 30 F.3d 1296, 1300 (10th Cir.1994) (common law fraud); Farlow v. Peat, Marwick, Mitchell & Co., 956 F.2d 982, 986 (10th Cir.1992) (securities fraud). As we noted in Seattle-First, 800 F.2d at 1011, approving Judge Doyle's analysis of Rule 9(b) in Trussell v. United Underwriters, Ltd., 228 F.Supp. 757, 774-75 (D.Colo.1964):

Rule 9(b) does not, however, require the pleading of detailed evidentiary matter, nor does it require any particularity in connection with an averment of intent, knowledge, or condition of mind. It only requires identification of the circumstances constituting fraud or mistake. That requirement means, in the instant case, that individual plaintiffs should identify particular defendants with whom they dealt directly, and from whom they purchased stock; that individual plaintiffs should designate the occasions on which affirmative misstatements were allegedly made to them--and by whom; and that individual plaintiffs should designate what affirmative misstatements or half-truths were directed to them--and how.

However, it has been noted that "[s]ince the rule is a special pleading requirement and contrary to the general approach of simplified pleading adopted by the Federal Rules, ... its...