Todd O'Gara & Wanu Water, Inc. v. Hunter (In re Hunter)

• Citation: 610 B.R. 479
• Decision Date: 08 November 2019
• Docket Number: Ad. Proc. No. 18-6036,Case No. 18-51081
• Court: United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — Middle District of North Carolina
• Parties: IN RE Gregory Bowman HUNTER, Sr., Debtor. Todd O'Gara and Wanu Water, Inc., Plaintiffs, v. Greg Hunter, Defendant.

610 B.R. 479

IN RE Gregory Bowman HUNTER, Sr., Debtor.Todd O'Gara and Wanu Water, Inc., Plaintiffs,

v.Greg Hunter, Defendant.

Case No. 18-51081

Ad. Proc. No. 18-6036

United States Bankruptcy Court, M.D. North Carolina, Winston-Salem Division.

Signed November 8, 2019

Ross Joseph Bromberger, Mel J. Garofalo, Hedrick Gardner Kincheloe & Garofalo LLP, Frederick T. Smith, Seyfarth Shaw LLP, Charlotte, NC, William J Hanlon, Seyfarth Shaw LLP, Boston, MA, for Plaintiffs.

Ross Joseph Bromberger, Mel J. Garofalo, Eric Robert Schaefer, Hedrick Gardner Kincheloe & Garofalo LLP, Charlotte, NC, William J Hanlon, Seyfarth Shaw LLP, Boston, MA, for Defendant.

MEMORANDUM OPINION AND ORDER

LENA MANSORI JAMES, UNITED STATES BANKRUPTCY JUDGE

This adversary proceeding comes before the Court upon Greg Hunter's motion to dismiss under Federal Rule of Bankruptcy Procedure 7012. After consideration of the record and for the reasons stated herein, the Court will dismiss the adversary complaint with leave to amend.

BACKGROUND

Plaintiff Wanu Water, Inc.¹ ("Wanu"), founded in 2010 by Plaintiff Todd O'Gara ("O'Gara"), creates and sells nutrient-infused water that is formulated for health-conscious consumers (Docket No. 1, ¶ 10). In 2013, Wanu appointed Defendant Greg Hunter ("Hunter") to its board of directors, but he was removed from the board in September 2016, prior to the end of his term (Docket No. 1, ¶¶ 14, 17). Notwithstanding, Wanu granted Hunter the stock shares he would have been entitled to had he remained on the board through his term (Docket No. 1, ¶ 17).

Plaintiffs allege that approximately two years later, during a seven–week period in August and September 2018, Hunter launched a campaign with certain other stockholders to discredit O'Gara with an intent to injure both O'Gara and Wanu by driving down the value of the equity (Docket No. 1, ¶ 31). Hunter sent a series of harassing, passive-aggressive emails to former and current Wanu board members, stockholders, and investors. Many of these emails raised allegations concerning O'Gara's educational background or contained questions pertaining to wrongdoing, as well as questions about the governance of Wanu and various voting agreements (Docket No. 1, ¶¶ 35–81).

On September 28, 2018, Plaintiffs filed a six–count civil action against Hunter in the United States District Court for the Middle District of North Carolina (Case No. 1:18-cv-00825, the "District Court Complaint"), asserting claims for tortious interference with business relations, tortious interference with contract, negligent misrepresentation, violation of unfair competition laws, libel, and civil conspiracy (Docket No. 1, Ex. A). On October 17, 2018, Hunter filed a voluntary petition for relief under chapter 7 of the Bankruptcy Code. Plaintiffs filed this adversary proceeding on December 11, 2018, objecting to the discharge of the claims brought in the District Court Complaint under 11 U.S.C. § 523(a)(6). The next day, Plaintiffs filed a motion for withdrawal of reference; the District Court denied that motion by order dated April 30, 2019. Hunter now seeks dismissal of the § 523(a)(6) complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure, incorporated by reference in Federal Rule of Bankruptcy Procedure 7012.

STANDARD OF REVIEW

Rule 12(b)(6) of the Federal Rules of Civil Procedure requires dismissal of a complaint if it "fail[s] to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). In evaluating a motion to dismiss, a court must "test the sufficiency of the complaint to see if it alleges a claim for which relief can be granted." Dolgaleva v. Va. Beach City Pub. Sch., 364 F. App'x 820, 825 (4th Cir. 2010). A motion under Rule 12(b)(6) should be granted if the complaint does not allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Accordingly, the factual allegations must "be enough to raise a right to relief above the speculative level" and advance the plaintiff's claim "across the line from conceivable to plausible." Id. at 555, 570, 127 S.Ct. 1955. As explained in Ashcroft v. Iqbal,

A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.

556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotations and citations omitted).

To determine plausibility, all well-pleaded facts set forth in the complaint are taken as true and viewed in a light most favorable to the plaintiff; however, "legal conclusions, elements of a cause of action, and bare assertions devoid of further factual enhancement" will not constitute well-pleaded facts necessary to withstand a motion to dismiss. Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc. , 591 F.3d 250, 255 (4th Cir. 2009). In other words, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. Assuming the complaint meets the plausibility standard, the plaintiff is not required "to also rebut other possible explanations for the conduct alleged." 2 MOORE'S FEDERAL PRACTICE § 12.34(1)(b) (2019). See Houck v. Substitute Trustee Servs. , 791 F.3d 473, 484 (4th Cir. 2015) (holding that "a plaintiff need not demonstrate ... that alternative explanations are less likely" to survive a motion to dismiss) (quoting Twombly , 550 U.S. at 570, 127 S.Ct. 1955 )). On the other hand, dismissal is proper under Rule 12(b)(6) "if the complaint lacks an allegation regarding an element necessary to obtain relief." 2 MOORE'S FEDERAL PRACTICE § 12.34(4)(a) (2019). See Va. Citizens Def. League v. Couric, 910 F.3d 780, 783–86 (4th Cir. 2018) (finding dismissal under Rule 12(b)(6) proper where plaintiff did not plausibly allege required elements of defamation claim).

In evaluating a Rule 12(b)(6) motion to dismiss, the Court "evaluates the complaint in its entirety, as well as documents attached or incorporated into the complaint." E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc. , 637 F.3d 435, 448 (4th Cir. 2011) ; see also Sec'y of State for Defence v. Trimble Navigation Ltd. , 484 F.3d 700, 705 (4th Cir. 2007) (holding a court "may consider documents attached to the complaint, as well as those attached to the motion to dismiss, so long as they are integral to the complaint and authentic."). As with the complaint itself, the Court construes the facts in attached exhibits in a light most favorable to Plaintiffs. Jeffrey M. Brown Assocs., Inc. v. Rockville Ctr., Inc. , 7 Fed. Appx. 197, 202 (4th Cir. 2001). In evaluating Hunter's motion to dismiss, the Court will consider not only the complaint asserting nondischargeability of the debt owed to Plaintiffs under § 523(a)(6), but also Plaintiffs' underlying District Court Complaint and other attached Exhibits.

In support of the motion to dismiss, and the objection to that motion, Hunter and Plaintiffs each filed requests for judicial notice. Hunter requests this Court take notice of three documents filed in O'Gara v. Binkley , 384 F. Supp. 3d 674 (N.D. Tex. 2019), a case brought by the same Plaintiffs, raising the same causes of actions, against an alleged co-conspirator of Hunter, Joseph Binkley (Docket No. 48). Specifically, Hunter requests this Court take judicial notice of (1) the memorandum opinion and order granting defendant's motion to dismiss, (2) the order of dismissal, and (3) the final judgment entered in that case. In their reply (Docket No. 50), Plaintiffs did not object to Hunter's request, but instead made an additional request that the Court take judicial notice of Plaintiffs' amended complaint against a third alleged member of the conspiracy, Sheldon Coleman. O'Gara v. Coleman , No. 2018-0708 (Del. Ch. Apr. 26, 2019).

While "[o]rdinarily, a court may not consider any documents that are outside of the complaint, or not expressly incorporated therein, on a motion to dismiss[,]" a narrow exception provides that courts may take judicial notice of "relevant facts obtained from the public record" without converting the motion into one for summary judgment, provided these facts "are construed in the light most favorable to the plaintiff along with the well-pleaded allegations of the complaint." Clatterbuck v. City of Charlottesville , 708 F.3d 549, 557 (4th Cir. 2013), abrogated on other grounds by Reed v. Town of Gilbert , ––– U.S. ––––, 135 S. Ct. 2218, 192 L.Ed.2d 236 (2015). In particular, federal courts may take notice of proceedings in other courts "if those proceedings have a direct relation to matters at issue." Colonial Penn Ins. Co. v. Coil , 887 F.2d 1236, 1239 (4th Cir. 1989) (citing St. Louis Baptist Temple, Inc. v. FDIC , 605 F.2d 1169, 1172 (10th Cir. 1979) ); see also Pena v. HSBC Bank USA, Nat. Ass'n , 633 F. App'x 580 (4th Cir. 2015) (taking judicial notice of foreclosure proceedings on a Rule 12(b)(6) motion).

While Federal Rule of Evidence 201 allows a court to take judicial notice of a document filed in another court "to establish the fact of such litigation, courts cannot take judicial notice of the factual findings of another court." S. Bank & Trust Co. v. Alexander (In re Alexander) , 524 B.R. 82, 88 (E.D. Va. 2014) (citing Taylor v. Charter Med. Corp. , 162 F.3d 827, 830 (5th Cir. 1998) ). Courts may only judicially notice a fact "that is not subject to reasonable dispute because...