Carson v. Lynch Multimedia Corp.
| Decision Date | 03 November 2000 |
| Docket Number | No. 00-2131-JWL.,00-2131-JWL. |
| Citation | 123 F.Supp.2d 1254 |
| Parties | Robert C. CARSON, individually, Robert C. Carson Revocable Trust, by and through its CoTrustees Robert C. Carson and June M. Carson, Carson Communications, L.L.C., and Carson Consulting, Plaintiffs, v. LYNCH MULTIMEDIA CORPORATION, Lynch Interactive Corporation, Mario J. Gabelli, Robert E. Dolan, Robert A. Hurwich, and Mary J. Carroll, Defendants. |
| Court | U.S. District Court — District of Kansas |
Robert O. Lesley, Joan K. Rowland, Stinson, Mag & Fizzell, P.C., Kansas City, MO, for plaintiffs.
Kenneth E. Holm, Boddington & Brown, Chtd., Kansas City, KS, Jeff C. Spahn, Jr., Martin, Pringle, Oliver, Wallace & Swartz, L.L.P., for Wichita, KS, Lynch Multimedia Corp., Lynch Interactive Corp., defendants.
Jeff C. Spahn, Jr., Martin, Pringle, Oliver, Wallace & Swartz, L.L.P., Wichita, KS, Michael Thompson, Brian D. Martin, Blackwell Sanders Peper Martin LLP, Kansas City, MO, for Mario J. Gabelli, Robert E. Dolan, Robert A. Hurwich, Mary J. Carroll, defendants.
This matter is before the court on defendants Robert Dolan, Robert Hurwich, Mary Carroll, Lynch Interactive Corporation and Lynch Multimedia Corporation's motion to dismiss for failure to state a claim (Doc. 22), and defendant Mario Gabelli's separate motion to dismiss for failure to state a claim (Doc. 25). For the reasons set out below, both motions are denied.
The court will dismiss a cause of action for failure to state a claim only when it appears beyond a doubt that the plaintiff can prove no set of facts in support of the theory of recovery that would entitle him or her to relief, Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Maher v. Durango Metals, Inc., 144 F.3d 1302, 1304 (10th Cir.1998), or when an issue of law is dispositive. Neitzke v. Williams, 490 U.S. 319, 326, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989). The court accepts as true all well-pleaded facts, as distinguished from conclusory allegations, and all reasonable inferences from those facts are viewed in favor of the plaintiff. Intercon, Inc. v. Bell Atlantic Internet Solutions, Inc., 205 F.3d 1244, 1247 (10th Cir.2000). The issue in resolving a motion such as this is not whether the plaintiff will ultimately prevail, but whether he or she is entitled to offer evidence to support the claims. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974).
CLR Video, L.L.C. ("CLR") is a Kansas limited liability company created in July, 1995 by Lynch Multimedia Corporation ("Lynch Multimedia"), Rainbow Corporation ("Rainbow") and the Robert C. Carson Revocable Trust ("Carson Trust"). Pursuant to the CLR operating agreement, Lynch Multimedia holds a 60% interest in CLR and Rainbow and the Carson Trust both hold a 20% interest. The CLR operating agreement provides that CLR shall be managed by a five member Board of Managers, with Lynch Multimedia appointing three members and Rainbow and Carson Trust each appointing one member. The three members appointed by Lynch Multimedia were defendants Robert Dolan, Robert Hurwich and Mary Carroll. Plaintiff Robert Carson served as the president and general manager of CLR. Pursuant to a management agreement entered into on April 1, 1999 between CLR and Carson Communications, Carson Communications retained CLR as the manager of its business.
On April 12, 1999, Lynch Multimedia filed a lawsuit against Carson Communications, the Carson Trust and Robert Carson alleging that the defendants breached their fiduciary duties to CLR by taking a business opportunity belonging to CLR without first offering it to CLR. In November, 1999, the CLR board of managers terminated Robert Carson as president and general manager of CLR and replaced him with Mary Armstrong. In December, 1999, Ms. Armstrong terminated the joint management agreement, effective January 1, 2000. Subsequently, CLR relocated and severed its ties with Carson Communications.
Plaintiffs filed their First Amended Complaint ("Complaint") on June 12, 2000. In Count I, the complaint alleges that defendants Dolan, Hurwich and Carroll breached their fiduciary duties as board members by terminating the management agreement, terminating Mr. Carson as president and general manager, severing CLR ties with Carson Communications, and failing to pay Mr. Carson. Count I further alleges that defendant Mario Gabelli, as president of Lynch Interactive Corporation ("Lynch Interactive"), held a "position of influence" over the three directors appointed by Lynch Multimedia and, therefore, owed a fiduciary duty to CLR which he breached by influencing the three defendant board members to take the actions alleged not to be in the interest of CLR. Count II of the complaint alleges that Mr. Carson and CLR entered into a contract providing that Mr. Carson was to serve as president of CLR until September 1, 2002 and that Mr. Carson was to be paid $2,000 per month in compensation for that position. According to the complaint, Mr. Gabelli was aware of this contract and intentionally "exercised improper pressure and influence over the decision making process of the managers and procured CLR's breach" of the contract. Count III of the complaint makes the same allegation of tortious interference with contract in relation to the management agreement and vehicle lease agreement between CLR and Carson Communication.
Count IV of the complaint alleges that Lynch Multimedia, as a majority owner of CLR, owed a fiduciary duty to the Carson Trust to "act in good faith and with due regard to the interests of CLR and its Members." The complaint alleges that Lynch Multimedia breached that duty by terminating the management agreement, terminating Mr. Carson as president and general manager, severing CLR's ties with Carson Communications, and failing to pay Mr. Carson. Count V alleges that defendants Dolan, Hurwich, Carroll and Gabelli entered into a civil conspiracy to "attempt to harm the plaintiffs because of the dispute between the parties" over whether a business opportunity was first offered to CLR before it was taken by Carson Communications.
According to the complaint, Lynch Interactive and Mr. Gabelli published false and defamatory statements about Mr. Carson in the 1999 Annual Report of Lynch Interactive. Based on the annual report, count VI pleads that Lynch Interactive and Mr. Gabelli committed the tort of defamation, Count VII pleads that they committed the tort of negligent defamation, and Count VIII pleads that they committed the tort of false light publicity.
The complaint alleges that Mr. Gabelli owes a fiduciary duty to CLR because the managers appointed by Lynch Multimedia acted "at the behest of Mr. Gabelli" and Mr. Gabelli occupied a "position of influence over the Managers." The complaint also alleges that all three directors are employees of Lynch Interactive and that Mr. Gabelli is Chairman of the Board and Chief Executive Officer of Lynch Interactive.
Mr. Gabelli argues that the facts pled in the complaint, if true, do not show that Mr. Gabelli owed a fiduciary duty to CLR. The plaintiffs respond by citing this court's opinion in Old Colony Ventures I, Inc. v. SMWNPF Holdings, Inc., 910 F.Supp. 543, 546 (D.Kan.1995), defining a fiduciary relationship as "any relationship of blood, business, friendship, or association in which one of the parties reposes special trust and confidence in the other who is in a position to have and exercise influence over the first party" and arguing that Mr. Gabelli had a fiduciary relationship with CLR because of his influence over or control of the decisions made by the majority of the CLR board of managers.
In Denison State Bank v. Madeira, the Kansas Supreme Court explained that "[t]he concept of the fiduciary duty is an equitable one and while no precise definition may be given and strict parameters of the relationship cannot be established for use in all cases, there are certain broad general principles which should be considered in making the determination of whether a fiduciary relationship exists in any particular factual situation." 230 Kan. 684, 691, 640 P.2d 1235 (1982). The court then listed the principles to consider in determining whether a fiduciary relationship should be implied in law:1
A fiduciary relationship imparts a position of peculiar confidence placed by one individual in another. A fiduciary is a person with a duty to act primarily for the benefit of another. A fiduciary is in a position to have and exercise, and does have and exercise influence over another. A fiduciary relationship implies a condition of superiority of one of the parties over the other. Generally, in a fiduciary relationship, the property, interest or authority of the other is placed in the charge of the fiduciary. 230 Kan. at 691-92, 640 P.2d 1235.
At the pleading stage, this court cannot say that it is "beyond a doubt" that plaintiffs cannot prove a set of facts to establish a fiduciary relationship in accordance with their allegations. If, as the complaint alleges, Mr. Gabelli influenced or controlled the majority of the board of managers then Mr. Gabelli may well have exercised influence over or control of CLR. For this reason, the trust and confidence placed in the managers and the duty of the managers to act solely for the benefit of CLR might be imputed to Mr. Gabelli. If the majority of the board was simply the alter ego of Mr. Gabelli, Mr. Gabelli should not be able to hide behind the board managers and claim that the managers alone, and not Mr. Gabelli, owed the fiduciary duty. Under the principles set out in Denison, Mr. Gabelli's alleged influence over or control of the majority of the board and CLR is sufficient to permit plaintiffs to go forward in their attempts to prove an implied fiduciary...
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