Ramos v. Whole Hemp Co.
| Decision Date | 27 August 2020 |
| Docket Number | Civil Action No. 19-cv-03268-CMA-KMT |
| Parties | JUANITA RAMOS, an individually and derivatively on behalf of defendant WHOLE HEMP COMPANY LLC d/b/a FOLIUM BIOSCIENCES, Plaintiff/Counter-Defendant, v. WHOLE HEMP COMPANY LLC d/b/a FOLIUM BIOSCIENCES, FOLIUM EQUITY HOLDING LLC, KASHIF SHAN, and QUAN NGUYEN, Defendants/Counter-Claimants. |
| Court | U.S. District Court — District of Colorado |
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Before the court is "Nominal Defendant Whole Hemp Company LLC's Motion to Dismiss the Derivative Claims Set Forth in Claims I-III of the Amended Complaint and Claims I-II in their Entirety." (["Motion"], Doc. No. 33.) Plaintiff has responded in opposition to the Motion, and Nominal Defendant has replied. (["Response"], Doc. No. 36; ["Reply"], Doc. No. 41.) For the following reasons, it is RECOMMENDED that the Motion be GRANTED in part, and DENIED in part.
Plaintiff Juanita Ramos brings this action, directly, as well as derivatively, on behalf of her former employer, Whole Hemp Company, LLC d/b/a Folium Biosciences ["Folium," or "the LLC"], asserting claims against Folium, Folium Equity Holding LLC ["Folium Equity"], Kashif Shan, and Quan Nguyen. (["Complaint"], Doc. No. 31.) Folium is a Colorado limited liability company that produces, manufactures, and distributes bulk cannabinoid extracts ["CBD"] derived from hemp. (Id. at ¶¶ 2, 18.) Folium Equity is said to be the sole owner of Folium. (Id. at ¶¶ 119-23.) Kashif Shan is the Chief Executive Officer of Folium, and Quan Nguyen is the LLC's Senior Vice President of Business Development. (Id. at ¶¶ 20-21, 61.) Prior to Folium Equity's acquisition of Folium, Shan and Nguyen were the LLC's "largest shareholders and most senior officials." (Id. at ¶ 4.)
Ramos began working for Folium, on April 25, 2017, as its Executive Vice President of Governmental Affairs. (Id. at ¶ 40.) According to the Amended Complaint, approximately two months after starting at Folium, Ramos was granted a one percent membership interest in the LLC, as a "reward" for her "outstanding" work performance, and "as an incentive to continue at her prior high level." (Id. at ¶¶ 41-42.) In addition, Kashif Shan reportedly "promised" Plaintiff that, as a member of the LLC, she would receive monthly distributions, "just like everybody else." (Id. at ¶ 43.) Plaintiff's "membership interest in Folium" was said to be "memorialized" by a document, entitled "Written Consent of the Majority of the Members of Whole Hemp LLC" ["Written Consent"]. The Written Consent, which was purportedly signed by eight individuals—including Shan, Nguyen, and Ramos—confirms Plaintiff's "1.0% membership interest in [Folium], which will be taken from the 35.0315% membership interest currently retained by Kashif Shan." (Compl. Ex. B at 1, 6-7.) Pursuant to the terms of the Written Consent, Ramos "agree[d] to sign the attached [Operating Agreement],"and agree[d] to be bound to the terms of the Operating Agreement." (Id. at 1.) Although there is no date of execution, the Written Consent states its effective date to be July 28, 2017. (Id.)
After signing the Written Consent, Ramos reportedly asked Shan and Nguyen for a copy of the Operating Agreement "on several occasions," but to no avail. (Compl. ¶ 51.) She alleges that the Operating Agreement was, in fact, "never provided to [her]." (Id. at ¶¶ 45, 51.) In addition, Plaintiff complains that, to date, she has received only one distribution check with respect to her equity interest in Folium, notwithstanding the representations made by Shan. (Id. at ¶ 54.) Plaintiff likewise complains that Folium, at the direction of Shan and Nguyen, "recently purported to sell 100% of its equity" to Folium Equity "without her consent." (Id. at ¶¶ 11-12, 122-23.) Ramos is adamant that the "purported sale" to Folium Equity, an entity which is said to be "controlled by Shan and Nguyen," is "invalid." (Id. at ¶ 12.)
In this action, Plaintiff also alleges that, throughout her employment with Folium, Shan and Nguyen were "engaged in extensive criminal conspiracies to enrich themselves, at the expense of [Folium] members (such as herself) and in violation of the law." (Id. at ¶¶ 4, 62.) Specifically, Plaintiff alleges that "Kashif Shan and Quan Nguyen, through Folium," engaged in various "illegal conduct," including the interstate transport of "illegal hemp biomass;" the interstate shipment of "CBD products with mislabeled ingredients;" the "[i]llegal[]" shipment of "CBD Oil and Isolates" to certain foreign countries; and the operation of "a secret, unlicensed, and unpermitted extracting facility." (Id. at ¶¶ 6, 64-96.) The Amended Complaint likewise alleges that Shan and Nguyen, through the LLC, "defrauded investors, employees, the Internal Revenue Service, and members of Folium (including Ramos)" by, among other things, "[f]alsely representing that [Folium] was in compliance with the law[,] . . . [d]iverting a substantialpercentage of Folium's CBD products for personal sale, . . . and failing to make [equity] distributions in violation of their fiduciary duties." (Id. at ¶¶ 7, 97-108.) Plaintiff further alleges that Shan and Nguyen "used Folium employees" to unlawfully "surveil[]" other employees, including herself. (Id. at ¶¶ 8, 109-12.) She claims that, on one occasion, Shan and Nguyen "asked her to find someone to kidnap or kill a former employee with whom they had a dispute." (Id. at ¶ 9.)
On August 28, 2018, Plaintiff was fired from her position with Folium for "stealing from the company and working with competitors." (Id. at ¶ 54.) Ramos now alleges that the purported basis for her termination was "false." (Id.) She claims that she was, in fact, fired "in retaliation for her refusal to go along with the illegal conduct in which Shan was engaged, including [] kidnapping or murder[,]" and because Shan was "concerned that [she] would report on the illegal activity she witnessed at Folium to government agencies and others." (Id. at ¶ 55.) According to Plaintiff, following her termination, Folium's legal counsel "denied that she had any equity in the company and refused to discuss severance with her." (Id. at ¶ 58.)
Approximately fifteen months after her termination, on November 18, 2019, Plaintiff, through her attorney, reportedly "made a demand on Folium to bring suit against Shan and Nguyen relating to the allegations in this Complaint." The demand letter was sent by Federal Express to the respective registered agents for Folium and Folium Equity, and by email to Folium's counsel. (Id.) Later that same day, November 18, 2019, Plaintiff commenced this derivative and direct action. (Doc. No. 1.)
In the Amended Complaint, which was filed on January 31, 2020, Plaintiff asserts the following causes of action: (1) violations of the Racketeer Influenced and Corrupt OrganizationsAct ["RICO"], 18 U.S.C. § 1961 et seq., against Shan and Nguyen; (2) violations of the Colorado Organized Crime Control Act ["COCCA"], Colo. Rev. Stat. § 18-17-101 et seq., against Shan and Nguyen; (3) breach of fiduciary duty against Shan and Nguyen; (4) violations of the Wiretap Act, 18 U.S.C. § 2511 et seq., against Shan, Nguyen, and Folium; (5) breach of contract by Shan, Nguyen, and Folium; (6) declaratory judgments, pursuant to 28 U.S.C. § 2201 and Colo. Rev. Stat. §§ 13-51-101 et seq., against all Defendants; (7) an accounting of Folium's financial statements, records, and member communications against Shan, Nguyen, and Folium; and (8) judicial dissolution of Folium. (Compl. ¶¶ 124-80.) Ramos pleads her first three claims for relief directly and derivatively; the remaining causes of action are lodged as direct claims only. (Id. at ¶¶ 125, 138, 151; 158-80.)
On February 22, 2020, Folium filed the present Motion, asking to dismiss each of the derivative claims set forth in the Amended Complaint, pursuant to Federal Rules of Civil Procedure 12(b)(6), for failure to comply with the derivative action pleading requirements set out in Federal Rule of Civil Procedure 23.1 and Colorado Revised Statute § 7-80-714. (Mot. 5-6, 12-14.) Folium argues, specifically, that Plaintiff has failed to show "a sufficient written demand" was made upon it to pursue derivative litigation. (Id. at 12-14.) The LLC also argues that Ramos "is not a fair and adequate plaintiff to bring derivative claims" on its behalf, as is required by Rule 23.1. (Id. at 6, 14-17.) In addition, Folium seeks dismissal of the RICO and COCCA claims, in their entirety, on the basis that Ramos lacks standing to bring those claims. (Id. at 6, 17-19.)
Federal Rule of Civil Procedure 12(b)(6) provides that a defendant may move to dismiss a claim for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). "The court's function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the plaintiff's complaint alone is legally sufficient to state a claim for which relief may be granted." Dubbs v. Head Start, Inc., 336 F.3d 1194, 1201 (10th Cir. 2003) (quotation marks omitted).
"A court reviewing the sufficiency of a complaint presumes all of plaintiff's factual allegations are true and construes them in the light most favorable to the plaintiff." Hall v. Bellmon, 935 F.2d 1106, 1109 (10th Cir. 1991). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Plausibility, in the context of a motion to dismiss, means that the plaintiff pleaded facts which allow "the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. The Iqbal evaluation requires...
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