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Alattar v. Bell

United States District Court, D. Colorado

May 30, 2014

KHALED ALATTAR, Plaintiff,
v.
AARON BELL, CHRISTOPHER BELL, RACHEL BELL and WILLIAM BELL, Defendants.

ORDER

KATHLEEN M. TAFOYA, Magistrate Judge.

This matter is before the court on "Luxeyard, Inc.'s Motion to Intervene" (Doc. No. 43, filed Mar. 20, 2014). "Defendants' Response to LuxeYard, Inc.'s Motion to Intervene" was filed on April 10, 2014. (Doc. No. 54.) "LuxeYard's Reply in Support of its Motion to Intervene" was filed on April 24, 2014. (Doc. No. 56.) For the following reasons, Luxeyards' Motion to Intervene is GRANTED.

BACKGROUND

In December 2010, Plaintiff Khaled Alattar conceived the idea of LuxeYard, an online purveyor of luxury goods that follows the "flash sale" retail model. Plaintiff partnered with a business associate, Amir Mireskandari, to form LY Retail LLC to develop Plaintiff's idea and the domain name www.luxeyard.com was activated in May 2011.

In August 2011, Plaintiff and Mireskandari recognized that LY Retail needed additional capital to become fully operational and for future growth. As such, Plaintiff and Mireskandari approached Frederick Huttner and Kevan Casey, who laid out a plan to convert LY Retail into a publicly traded company through a reverse merger.[1] In this case, LY Retail was to be acquired by Top Gear, a publicly traded "shell" company. Allegedly, unbeknownst to Plaintiff, Casey and Huttner's true plan was to use LuxeYard to engage in an illegal "pump and dump" scheme, rather than to finance LuxeYard's operations and future growth.

The reverse merger was executed on November 8, 2011. Shortly thereafter Casey and Huttner allegedly financed and executed an aggressive marketing campaign to artificially inflate, or "pump, " the price of LuxeYard's stock. Shortly thereafter Casey, Huttner, and other affiliates, including the defendants named in this case, allegedly sold, or "dumped, " a large volume of supposedly unrestricted LuxeYard shares that Plaintiff alleges should have been sale-restricted. Following this sell-off, LuxeYard's stock price plummeted from a high of over $2.00 per share to $.10 per share.

Based on these facts, Plaintiff asserts state law conspiracy, aiding and abetting, and unjust enrichment claims against Defendants for their alleged involvement in the "pump and dump" scheme perpetrated principally by Casey, Huttner and other affiliates. Casey, Huttner, and a number of their other affiliates have been named as Defendants in a related Texas state court case.[2] (Am. Compl. ΒΆ 5.)

LEGAL STANDARD

Federal Rule of Civil Procedure 24(a)(2) provides that, on timely motion, the court must permit intervention as of right to anyone who:

[C]laims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant's ability to protect its interest, unless existing parties adequately represent that interest.

Fed.R.Civ.P. 24(a)(2). Under Tenth Circuit law interpreting this rule, "an applicant may intervene as a matter of right if (1) the application is timely, (2) the applicant claims an interest relating to the property or transaction which is the subject of the action, (3) the applicant's interest may be impaired or impeded, and (4) the applicant's interest is not adequately represented by existing parties." Elliott Indus. Ltd. P'ship v. B.P. Am. Prod. Co., 407 F.3d 1091, 1103 (10th Cir. 2005).

Federal Rule of Civil Procedure 24(b)(1)(B) provides that, on timely motion, the court may permit intervention to anyone who "has a claim or defense that shares with the main action a common question of law or fact." Fed.R.Civ.P. 24(b)(1)(B). The decision whether or not to grant a motion for permissive intervention under Rule 24(b) is within the district court's sound discretion. See, e.g., City of Stilwell v. Ozarks Rural Elec. Co-op. Corp., 79 F.3d 1038, 1043 (10th Cir. 1996). In exercising this discretion, "the court must consider whether the intervention will unduly delay or prejudice the adjudication of the original parties' rights." Fed.R.Civ.P. 24(b)(3).

ANALYSIS

As an initial matter, Defendants argue the Motion to Intervene should be denied because LuxeYard failed to comply with Fed.R.Civ.P. 24(c), which requires that a motion to intervene "be accompanied by a pleading that sets out the claim or defense for which intervention is sought." The failure to attach such a pleading can be fatally defective to a motion to intervene. ...


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