CLVM LLC v. Handel

• Decision Date: 05 August 2022
• Docket Number: Civil Action 22-cv-00141-RMR-MEH
• Parties: CLVM LLC d/b/a Valimenta Labs, and EMEK BLAIR, Plaintiffs, v. ERIC VAN HANDEL, and CHARLES BARKER, Defendants.
• Court: U.S. District Court — District of Colorado

CLVM LLC d/b/a Valimenta Labs, and EMEK BLAIR, Plaintiffs,
v.
ERIC VAN HANDEL, and CHARLES BARKER, Defendants.

Civil Action No. 22-cv-00141-RMR-MEH

United States District Court, D. Colorado

August 5, 2022

RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

Michael E. Hegarty, United States Magistrate Judge.

Before the Court are three pending motions: (1) Defendant Eric Van Handel's Motion to Dismiss First Amended Complaint (ECF 37); (2) Defendant Charles Barker's Motion to Dismiss for Failure to Serve Process (ECF 43); and (3) Plaintiffs' Motion to Voluntarily Dismiss Declaratory Judgment Claim (ECF 48). These motions follow the filing of Plaintiffs' First Amended Complaint (“FAC”), a consequence of this Court's prior recommendation on Mr. Van Handel's previous motion to dismiss. ECF 27 (recommendation); ECF 31 (order adopting recommendation). Plaintiffs CLVM LLC d/b/a Valimenta Labs (“CLVM”) and Emek Blair reassert their claims for breach of contract, fraudulent misrepresentation, and declaratory judgment and add two new claims for fraudulent inducement and conspiracy to commit fraud. ECF 35. They also added Mr. Barker as a Defendant. Mr. Van Handel's motion argues for dismissal of all claims. ECF 37. Mr. Barker's motion contends he was not properly served with the FAC. ECF 43. Most

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recently, Plaintiffs' motion attempts to voluntarily dismiss their declaratory judgment claim. ECF 48. The time for briefing has expired on all pending motions. Because the FAC does not correct the previous pleading defects, this Court respectfully recommends granting Mr. Van Handel's motion, denying Plaintiffs' motion, and denying as moot Mr. Barker's motion.

FACTUAL BACKGROUND

To begin, the Court notes that the allegations made in the FAC do not materially differ from the allegations in the original Complaint. As such, much of the Court's recitation of facts below mirrors the factual background in its previous recommendation. With that understanding, the following are factual allegations (as opposed to legal conclusions, bare assertions, or conclusory allegations) made by Plaintiffs in their FAC, which are taken as true for analysis under Fed.R.Civ.P. 12(b)(6) pursuant to Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

CLVM is a Colorado limited liability company that is owned by Emek Blair. ECF 35 at 1, ¶¶ 1-2. On or about December 22, 2015, CLVM entered into a Promissory Note and Equity Option Agreement (“Note”) by and between Mr. Van Handel and Mr. Barker. Id. at 2, ¶ 7. Mr. Barker and Mr. Van Handel, referred to as “Lenders” under the Note, agreed to provide three hundred thirty-five thousand dollars ($335,000.00) in exchange for five percent interest per annum or, in the alternative, an option (“Option”) to purchase a combined sixteen percent equity interest in CLVM, with each holding eight percent of the total shares. Id. at ¶ 9. Mr. Van Handel tendered the entire amount on behalf of both Lenders (“Loan”). Id. at ¶ 10. The Note specifically provided that if the “Lenders fail to exercise the Option .... CLVM promises to pay ERIC VAN HANDEL the principal sum of [$335,000.00], with interest on the principal balance from December 1, 2015, until paid at the rate of five percent (5%) per annum.” Id. at ¶ 11. Mr. Barker provided no consideration for the Note. Id. at ¶ 13.

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Rather, Mr. Van Handel and Mr. Barker entered into a Collateralized Promissory Note, dated December 1, 2015, in which Mr. Barker agreed to pay Mr. Van Handel one hundred sixtyseven thousand five hundred dollars ($167,500.00) with interest at a rate of five percent per annum until the Loan was repaid (“Barker Note”). Id. at 2-3, ¶ 14. Mr. Van Handel acknowledged that he was the sole lender entitled to payment of the Loan. Id. at 3, ¶ 17.

CLVM began repaying the Loan in December 2016. Id. at ¶ 20. Although CLVM made the payments to both Mr. Van Handel and Mr. Barker, Mr. Van Handel requested that most of the payments be made to Mr. Barker. Id. CLVM agreed to this because the Barker Note provided that “any money received [by Mr. Barker] by CLVM LLC shall be distributed directly to Eric Van Handel until such time [as] Eric Van Handel has been paid in full including interest.” Id. Despite making the payments, CLVM learned that Mr. Barker never paid any money he received from CLVM to Mr. Van Handel, nor has he paid any money to Mr. Van Handel pursuant to the Barker Note. Id. at 4, ¶ 21.

On June 18, 2019, CLVM paid the remaining principal on the Loan plus five percent interest to Mr. Van Handel. Id. at ¶ 22. However, he refused to cash the check. Id. Instead, on July 17, 2019, Mr. Barker attempted to exercise the Option and indicated that Mr. Van Handel also wished to exercise the Option. Id. at ¶ 23. CLVM rejected this request because the Lenders had already chosen the repayment of the Loan. Id. at ¶ 24. By March 2020, both Mr. Van Handel and Mr. Barker were represented by counsel, and Mr. Van Handel knew that Mr. Barker was contemplating a lawsuit against Plaintiffs regarding obligations under the Note (“Barker Litigation”). Id. at ¶ 25. In March 2020, Plaintiffs and Mr. Van Handel engaged in a mediation regarding his claim for an eight percent interest in CLVM. Id. at ¶ 26. Despite communicating with Mr. Barker, Mr. Van Handel did not invite him to participate in the mediation. Id. at ¶ 27. Mr. Van

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Handel never disclosed during the mediation that Mr. Barker planned on initiating litigation. Id. at 5, ¶ 28. Plaintiffs did not realize that Mr. Barker intended to initiate the Barker Litigation, or they would not have mediated without his involvement. Id. at 4, ¶ 27.

Despite believing that Mr. Van Handel was the only Lender entitled to repayment under the Note, Plaintiffs “wanted to ensure that any potential settlement would extinguish the Promissory Note in its entirety.” Id. at 5, ¶ 29.^[1] Accordingly, Plaintiffs requested, and Mr. Van Handel agreed, that Mr. Van Handel would execute an affidavit stating that all obligations to him under the Note would be satisfied upon payment under a settlement agreement. Id. at ¶ 30. On March 19, 2020, the parties entered into a Mutual Release and Settlement Agreement (“Settlement Agreement”). Id. at ¶ 32. It provided that Plaintiffs would pay Mr. Van Handel five hundred forty thousand dollars ($540,000.00) in exchange for the execution of a broad, general release. Id. at 6, ¶ 36. The release included all claims related to the Note. Id. This included a warranty that Mr. Van Handel had “the sole and exclusive right to receive the Settlement Sum,” and that “no other person or entity has, or has had, any interest in the claims, demand, or obligations or causes of action referred to in this [Settlement] Agreement . . . .” Id. at 5-6, ¶¶ 33-34. Mr. Van Handel also signed an affidavit (“Affidavit”), which provided:

1. In or around December 2015, I provided $335,000 to CLVM LLC pursuant to [the Note]

2. The Note was executed by myself and Charles Barker (“Barker”), as “Lender,” and Emek Blair on behalf of CLVM LLC, as “Borrower.”

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4. On March 6, 2020, Emek Blair and I participated in a mediation concerning the rights and obligations of myself as a Lender and CLVM as Borrower

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under the Note and as a result a settlement was reached under which I agreed to satisfaction of all amounts due to me, Eric Van Handel, under the Note.

5. Upon payment by Blair of all sums described in that certain Mutual Release and Settlement Agreement dated effective March 19, 2020, all of CLVM LLC's obligations to Eric Van Handel under the Note have been fully satisfied and resolved.

Id. at 7, ¶ 41.

Based on Mr. Van Handel's representations in the Settlement Agreement and the Affidavit, Plaintiffs “believed that the Loan was fully repaid since [Mr.] Van Handel was the only Lender entitled to repayment under the Note.” Id. at ¶ 44. However, when Mr. Van Handel signed the Settlement Agreement and the Affidavit, he knew that Mr. Barker was preparing to take a contrary position in the Barker Litigation and concealed that information from Plaintiffs. Id. at 8, ¶ 48. On April 7, 2020, Mr. Barker initiated the Barker Litigation against Plaintiffs, alleging that the Note was not extinguished by the Settlement Agreement. Id. at ¶ 49. During his deposition in the Barker Litigation, Mr. Van Handel testified that (1) Mr. Barker, not Mr. Van Handel, loaned CLVM the $167,500; (2) Mr. Barker is entitled to repayment under the Note; and (3) the Note was not repaid under the Settlement Agreement. Id. at 9, ¶ 51. These statements and others, Id. at ¶¶ 52-53, allegedly contradict Mr. Van Handel's sworn Affidavit. Id. at ¶ 54.

Plaintiffs allege that Mr. Van Handel “has not extinguished the Barker Note-despite being fully repaid under the Note and not being owed anything by [Mr.] Barker-so that [Mr.] Barker can maintain his contention that the Option remains open and that CLVM is indebted to him.” Id. at ¶ 56. They contend that Mr. Van Handel signed the Settlement Agreement knowing he would take a contrary position later, and that he and Mr. Barker...