United States District Court, D. Colorado
LIST INTERACTIVE, LTD. d/b/a UKnight Interactive, and LEONARD S. LABRIOLA Plaintiffs,
KNIGHTS OF COLUMBUS, THOMAS P. SMITH, JR., and, MATTHEW A. ST. JOHN, Defendants.
BROOKE JACKSON, UNITED STATES DISTRICT JUDGE
R. Brooke Jackson This matter is before the Court on two
pending motions: individual defendants Thomas Smith, Jr. and
Matthew St. John's motion to dismiss under Rule 12(b)(2)
for lack of personal jurisdiction, ECF No. 20, and defendant
the Knights of Columbus' motion to dismiss under Rule
12(b)(6) and to strike under Rule 12(f), ECF No. 23. For the
reasons below, the Court GRANTS the individual
defendants' motion to dismiss [ECF No. 20] and GRANTS IN
PART and DENIES IN PART the Knights of Columbus' motion
to dismiss and to strike portions of plaintiffs' amended
complaint [ECF No. 23]. Accordingly, the Court dismisses
defendants Mr. Smith and Mr. St. John from this action and
dismisses Claim One and Claim Eight of plaintiffs'
amended complaint asserted against defendant the Knights of
in this action are List Interactive, Ltd., d/b/a UKnight
Interactive (“UKnight”)-a Colorado-based company
that designs web systems-and the company's Colorado-based
manager, Mr. Leonard Labriola. Am. Compl., ECF No. 15, at
¶¶3-4, 12. They allege that in September of 2011
UKnight reached an agreement with defendant the Knights of
Columbus-a 501(c)(8) tax-exempt religious and charitable
organization registered in Connecticut-whereby the Knights of
Columbus would announce to the broader Knights of Columbus
fraternity that UKnight would be the designated vendor for
the fraternity's members-only life insurance business.
Id. at ¶¶5, 17-18.
Knights of Columbus, however, never did so. Plaintiffs
subsequently brought suit against the organization and
defendants Mr. Smith and Mr. St. John-the Knights of
Columbus' Executive Vice President/Chief Insurance
Officer and Direct of Insurance Marketing, respectively.
Id. at ¶¶6-7. Far from a simple contract
dispute, plaintiffs also allege, among other things, that
during their dealings with defendants the Knights of Columbus
stole UKnights' trade secrets, and that plaintiffs
discovered that the Knights of Columbus was running its life
insurance business fraudulently. See Id. at
¶¶31-47. Plaintiffs contend that the Knights of
Columbus breached its agreement with UKnight and stole
UKnight's system for its own use to prevent a widespread
fraudulent scheme from being exposed. See generally
“Knights of Columbus” Organization
discussing plaintiffs' allegations and the background of
this case in greater depth, it is important to explain a
little bit about how the Knights of Columbus is organized. As
mentioned above, the Knights of Columbus is a 501(c)(8)
tax-exempt religious and charitable fraternity. Id.
at ¶5. As a 501(c)(8) organization, the Knights of
Columbus must provide some form of life insurance for its
members. See 26 U.S.C. § 501(c)(8)(B) (defining
a “[f]raternal beneficiary societ[y]” as
“providing for the payment of life, sick, accident, or
other benefits to the members of such society, order, or
association or their dependents”).
to qualify for 501(c)(8) tax-exempt status the Knights of
Columbus must be organized under the “lodge
system.” Id. § 501(c)(8)(A). Basically
that means that two things must be true: first, there must be
some kind of “parent” organization; and second,
there must be “subordinate” branches (i.e.,
lodges) that are largely self-governing but nonetheless are
chartered by the parent organization to carry out its
mission. See 26 C.F.R. § 1.501(c)(8)-1
(“Operating under the lodge system means carrying on
its activities under a form of organization that comprises
local branches, chartered by a parent organization and
largely self-governing, called lodges, chapters, or the
seems clear enough. However, a point of contention in this
case (and a relevant one at that, see infra) has
been how to refer to this “parent” organization
appropriately in order to distinguish it from the broader
association of organizations and individuals it oversees. In
other words, when the parties refer to defendant “the
Knights of Columbus, ” do they mean the separate,
“parent” organization in Connecticut with whom
plaintiffs allegedly struck a deal back in September of 2011,
or are they referring to the broader fraternal organization
as a whole, sometimes referred to as “The Order of the
Knights of Columbus” or simply “The Order?”
their part, plaintiffs refer to the “Knights of
Columbus' as the broader fraternal organization comprised
of the parent organization and “constituent local
councils, assemblies, independent general insurance agents,
and members.” ECF No. 15 at ¶5. By contrast, they
refer to the “parent” organization as the Knights
of Columbus Supreme Council, which they refer to in shorthand
as “KC Supreme” or simply “Supreme.”
Id. at ¶5 & n.1. Throughout plaintiffs'
briefs, then, KC Supreme and Supreme refer to defendants'
“national headquarters council and insurance company
located in New Haven, Connecticut” with whom UKnight
allegedly formed a contract. Id. at ¶5.
are two problems with plaintiffs' labels. First, although
plaintiffs bring several claims against KC Supreme (as
opposed to the Knights of Columbus), see, e.g., ECF No. 15 at
¶¶122-38 (Claim Five, Six, and Seven), “KC
Supreme” is not a named defendant in this action
whereas the Knights of Columbus is. Second, and perhaps more
importantly, there is no such organization called “KC
Supreme.” Rather, as defendant explained during oral
arguments, the “Supreme Council” of the Knights
of Columbus refers instead to an unincorporated governing
body of the broader fraternity that meets annually to discuss
and vote on fraternity issues. This body, which is partially
comprised of individuals from the “lodges, ” is
separate from the Board of Directors of the Knights of
Columbus as well as from the “parent”
organization headquartered in New Haven with whom plaintiffs
those problems, it is nevertheless clear that when plaintiffs
refer to “KC Supreme” what they really intend to
do is to single out the New Haven-based “Knights of
Columbus” parent organization that effectively runs the
fraternity's insurance business. Accordingly, throughout
this order when I refer to “defendant the Knights of
Columbus” or simply “the Knights of Columbus,
” I will be referring to the parent organization
headquartered in New Haven with whom plaintiffs allege they
negotiated a contract. To distinguish that organization from
what is the broader fraternity comprised of this parent
company, the lodges, local members, and agents, I will refer
to those entities collectively as the “the
back to the controversy at hand. From plaintiffs' amended
complaint it appears that the events giving rise to this suit
began back in the summer of 2011. Id. at ¶16.
On August 5, 2011 plaintiffs allege the Mr. Labriola e-mailed
the Knights of Columbus to outline a proposal for how
“the many, fractionated parts of the [Order]”
could use UKnight's single online platform for purchases
of life insurance and, by so doing, significantly increase
the fraternity's membership and sales of the Knights of
Columbus' financial products. Id.
this e-mail, plaintiffs allege that they were contacted by
representatives of the Knights of Columbus and invited to New
Haven for high-level meetings that would span three days.
Id. at ¶17. These meeting commenced on
September 8, 2011. Id. By September 10 the Knights
of Columbus allegedly informed UKnight that it was that
organization's choice to be the Order's designated
vendor. Id. at ¶¶17-18. The Knights of
Columbus then allegedly offered to make a formal announcement
to that effect in exchange for UKnight's incorporating
some suggestions by the Knights of Columbus' legal
department into its platform. Id. Over the next few
days, weeks, and months, plaintiffs allege that the Knights
of Columbus repeatedly intimated that it would make this
announcement in the near future, even going so far as to send
UKnight necessary data files to bring all 15, 392 local
councils onto the network. Id. at ¶¶17-20.
of 2012 the Knights of Columbus' legal department
allegedly finalized the modifications it wished to see in
UKnight's platform. Id. at ¶18. Two months
later in August of 2012 the Knights of Columbus approved
those modifications. Id. All that was left,
according to plaintiffs, was for the Knights of Columbus to
subsequently make the announcement it had promised and to
then instruct the Order to adopt plaintiffs' system.
neither that announcement nor that instruction ever came.
Instead, plaintiffs allege, the Knights of Columbus
continually provided excuses for why it could not make an
announcement, and it strung plaintiffs along by reiterating
to them that an announcement was imminent. See Id.
at ¶¶29-30. For instance, in November of 2013
representatives of the Knights of Columbus informed UKnight
that the Knights of Columbus could not make an announcement
at its meeting that month because it had to focus instead on
humanitarian needs following the then-recent typhoon in the
Philippines. Id. at ¶29. Similarly, in December
of 2013 after Mr. Labriola e-mailed the Knights of Columbus
complaining about how UKnight was suffering financial
hardship from these delays, plaintiffs claim that the Knights
of Columbus reassured them that everything was on track, and
that “we can get back to business in the next few
days.” Id.at ¶30. According to
plaintiffs, however, days turned to weeks, weeks to months,
and months to years without any announcement. Plaintiffs also
claim that despite their attempts to obtain a written
contract spelling out in black and white the parties'
agreement, the Knights of Columbus refused. See Id.
at ¶¶ 26-28.
as the years dragged on with no announcement the parties'
relationship soured. For example, on January 24, 2014
plaintiffs contend that Mr. Smith falsely informed a Knights
of Columbus Operations Committee meeting in New Haven that
Mr. Labriola had lied to him and his agents about money.
Id. at ¶48. It was during that meeting that the
Knights of Columbus had most recently promised to UKnight
that it would make its long-awaited formal announcement about
adopting UKnight's platform. Id. at ¶49.
Mr. Smith's comments, however, allegedly “poisoned
the atmosphere against UKnight[.]” Id.
Needless to say, no announcement was made during that
plaintiffs claim, Mr. Smith contacted them and demanded that
Mr. Labriola never speak to many of UKnight's most
important customers again, including (1) anyone at the
Knights of Columbus in New Haven, (2) any general agent of
the Order, and (3) any state council officer within the
Order. Id. at ¶50. Apparently in an effort to
maintain what business relationship the parties had remaining
at that point, UKnight claims that it acceded to Mr.
Smith's demands. Id. at ¶51.
all that a deal was apparently still on the table. Indeed,
soon thereafter plaintiffs allege that the Knights of
Columbus hired a technology consultant, Mr. Ian Kinkade, to
evaluate UKnight's system and then report back to the
Operations Committee with comments about how the system
performed. Id. at ¶52. Mr. Kinkade's
comments were apparently quite positive, which motivated the
Knights of Columbus to again call a vote to move forward with
the announcement. Id. Again, however, that vote
the Knights of Columbus apparently reversed its decision to
take a vote the very next day, deciding that it would conduct
a complete survey of all current UKnight subscribers to make
sure this was the system it wanted to use. Id.
UKnight subsequently provided the Knights of Columbus with a
survey that plaintiffs claim “overwhelmingly confirmed
that UKnight was an outstanding tool[.]” Id.
at ¶53. Plaintiffs claim that they were again optimistic
that an announcement was imminent.
again, in hindsight, one wasn't. Nevertheless, in early
2015 members of the Knights of Columbus (including Mr. St.
John and Mr. Kinkade) traveled to Dallas, Texas (the home of
UKnight's other two partners) to meet with UKnight
partner and technology manager Terry Clark about moving
forward with an announcement. Id. at ¶56.
According to plaintiffs, however, the Knights of
Columbus' (or, at the very least, Mr. St. John's)
motivations for travelling to Dallas were actually quite
nefarious. That is, plaintiffs allege that Mr. St. John
instructed Mr. Kinkade to stay behind after the parties'
meeting to see if he could dive deeper into the inner
workings of UKnight's system so that the Knights of
Columbus could hire another developer to replicate
UKnight's platform for the organization. See id.
after becoming apprised of what Mr. St. John was attempting
to do, someone at UKnight contacted Mr. St. John and asked
him to send a “scope of work” document in order
to clarify the Knights of Columbus' intentions.
Id. at ¶57. Mr. St. John allegedly repeatedly
refused to do so. Id. Instead, plaintiffs allege,
Mr. St. John demanded that UKnight provide him with all of
its strategies, design data, and internal system
information so that he could better understand how and what
UKnight planned to do with its system. Id.
Apparently taken aback by Mr. St. John's demand and
believing it was a not-so-covert attempt to obtain
UKnight's trade secrets, plaintiffs refused. Id.
at ¶¶57-58. They nonetheless reiterated an earlier
proposal they had made whereby Mr. Labriola and Mr. Clark
would travel to New Haven to work with Mr. St. John's
team to clear up any issues the parties had. Id.
According to plaintiffs, “[t]his proposal was
ignored.” Id. at ¶58.
months later, specifically on January 4, 2016, the
parties' relationship officially ended. On that date,
plaintiffs allege that Mr. St. John sent Mr. Labriola and Mr.
Clark an e-mail in which he asserted that the parties
“have not had any contractual relationship, ” and
that “the Knights of Columbus has never conferred
official or preferred vendor status on UKnight.”
Id. Mr. St. John then explained that the Knights of
Columbus had decided to enlarge its search for a potential
vendor, and that UKnight should no longer use the Knights of
Columbus' name in any of its business solicitations.
Id. Soon after Mr. St. John sent that e-mail the
Knights of Columbus allegedly hired Mr. Kinkade (i.e., its
former technology consultant) to become the
organization's new Director of eBusiness. Id. at
¶59. The proverbial straw that broke the camel's
back for plaintiffs occurred soon thereafter in April of 2016
when the Knights of Columbus allegedly sent several potential
vendors a Request for Proposal that included UKnight's
specific design elements and internal workings. Id.
Allegations of a Fraudulently-Run Insurance Business
makes this case more than a simple breach of contract or
theft of trade secret suit are the allegations plaintiffs
make next. During the course of the parties' dealings
plaintiffs contend that they discovered that the Knights of
Columbus had been running and was continuing to run its
insurance business fraudulently. Id. at
¶¶31-47. For example, plaintiffs claim that while
the events described above were unfolding they were informed
by numerous members of the Order in New Jersey, Illinois, and
Texas that the Knights of Columbus continually and creatively
inflated the background and number of the members on its
rolls. See, e.g., id. at ¶40.
According to plaintiffs, this was a deliberate scheme by the
Knights of Columbus to prop up their insurance business by
mischaracterizing their risk pool and thereby deceiving
ratings agencies, reinsurers, and, importantly, their current
and prospective members. See Id. at ¶¶31-
allegations on this point are lengthy and numerous. See,
e.g., id. at ¶¶31-47, 84-94. However,
for purposes of the two pending motions the Court need not
discuss in any greater depth these allegations of fraud
except to point out that plaintiffs allege that the Knights
of Columbus continually pushed off an announcement and
thereafter sought to reproduce UKnight's system
“in-house” or with a different company because
they feared that doing business with UKnight would expose
their allegedly fraudulent scheme. See, e.g.,
January 24, 2017 plaintiffs brought suit against the Knights
of Columbus, Mr. St. John, and Mr. Smith. Compl. ECF No. 1.
Roughly two and half weeks after filing suit plaintiffs
amended their complaint. ECF No. 15.
amended complaint, which is the operative pleading in this
action, asserts eight claims for relief: (1) claims under the
Racketeer Influenced and Corrupt Organizations Act
(“RICO”), 18 U.S.C. §§ 1962(c) and (d),
against all three defendants, id.
¶¶62-103; (2) a claim for breach of contract
against the Knights of Columbus, id.at
¶¶104-10; (3) a claim for promissory estoppel
against the Knights of Columbus, id. at
¶¶111-15; (4) a claim for misappropriation of trade
secrets under C.R.S. § 7-74-101, et seq.,
against the Knights of Columbus and Mr. St. John,
id. at ¶¶116-21; (5) a claim for
intentional interference with prospective business
relationship against the Knights of Columbus, id. at
¶¶122-25; (6) a claim for fraudulent
misrepresentation against the Knights of Columbus,
id. at ¶¶126-33; (7) a claim for negligent
misrepresentation against the Knights of Columbus,
id. at ¶¶134-38; and (8) a claim for
slander pro quod against the Knights of Columbus and
Mr. Smith, id. at ¶¶139-43.
days after plaintiffs filed their amended complaint
defendants Mr. Smith and Mr. St. John filed a motion to
dismiss under Rule 12(b)(2). ECF No. 20. The very next day
the Knights of Columbus filed a motion to dismiss of their
own under Rule 12(b)(6) to dismiss Claim One (RICO), Claim
Two (breach of contract), Claim Three (promissory estoppel),
and Claim Eighth (slander). ECF No. 23. They also seek to
strike from the amended complaint paragraphs 1, 31-47, 84-86,
and 89-101 as “immaterial, impertinent, and
scandalous” under Rule 12(f). Id. In early
spring of this year both motions to dismiss became ripe. ECF
Nos. 20, 23, 35-36, 42-43. Oral arguments on these motions
were held on July 20, 2017. ECF No. 53. The Court apologizes
for the delay in getting to these motions.
court may, in its discretion, address a Rule 12(b)(2) motion
based solely on the documentary evidence on file or by
holding an evidentiary hearing. See FDIC v. Oaklawn
Apartments, 959 F.2d 170, 174 (10th Cir. 1992). Where
the court rules on the motion based only on the documentary
evidence before it, the plaintiff may meet its burden with a
prima facie showing of personal jurisdiction. See Benton
v. Cameco Corp., 375 F.3d 1070, 1074 (10th Cir. 2004).
The court “tak[es] as true all well-pled (that is,
plausible, non-conclusory, and non-speculative) facts
alleged” in the complaint, and “any factual
disputes in the parties' affidavits must be resolved in
plaintiff's favor.” Dudnikov v. Chalk &
Vermilion Fine Arts, Inc., 514 F.3d 1063, 1070 (10th
Cir. 2008). However, when an evidentiary hearing is held in
order to resolve factual disputes relating to jurisdictional
questions, the plaintiff must prove facts supporting
jurisdiction by a preponderance of the evidence. See
Oaklawn, 959 F.2d at 174.
party has requested a hearing on the personal jurisdiction
motion. The individual defendants have nonetheless both
submitted affidavits in support of their respective
positions. The Court elects to resolve the motion based on
the evidence submitted. Before turning to the merits,
however, I will briefly review here the legal framework for
analyzing personal jurisdiction.
Fourteenth Amendment Due Process and Minimum
to establish personal jurisdiction over an out-of-state
defendant “a plaintiff must show that jurisdiction is
legitimate under the laws of the forum state and that the
exercise of jurisdiction does not offend the due process
clause of the Fourteenth Amendment.” Emp'rs
Mut. Cas. Co. v. Bartile Roofs, Inc., 618 F.3d 1153,
1159 (10th Cir. 2010). Colorado's “long-arm”
statute, C.R.S. § 13-1-124, has been interpreted to
confer the maximum jurisdiction permitted by constitutional
due process. Archangel Diamond Corp. v. Lukoil, 123
P.3d 1187, 1193 (Colo. 2005). Thus, in Colorado, the sole
inquiry is typically whether exercising jurisdiction comports
with due process under the Fourteenth Amendment. See
Process Clause of the Fourteenth Amendment “operates to
limit the power of a State to assert in personam jurisdiction
over a nonresident defendant.” Helicopteros
Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408,
413-14 (1984). In order to exercise jurisdiction, the Supreme
Court has held, the out-of-state defendant must have
“minimum contacts” with the forum state such that
the exercise of jurisdiction does not “offend
traditional notions of fair play and substantial
justice.” Int'l Shoe Co. v. State of Wash.
Office of Unemployment Comp. and Placement, 326 U.S.
310, 323 (1945). Minimum contacts must be based on
“some act by which the defendant purposefully avails
itself of the privilege of conducting activities within the
forum state, thus invoking the benefits and protections of
its laws.” Hanson v. Denkla, 357 U.S. 235, 253
(1958). A defendant's contacts with the forum must be
such that the defendant could “reasonably anticipate
being haled into court there.” World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).
contacts may be established in two ways. First, general
jurisdiction exists where the defendant has “continuous
and systematic” contacts with the forum state such that
exercising personal jurisdiction is appropriate even if the
cause of action does not arise out of those contacts. See
Goodyear Dunlop Tires Operations, S.A. v. Brown, 564
U.S. 915, 919 (2011). Second, specific jurisdiction exists
where the cause of action is “related to” or
“arises out of” the defendant's activities
within the forum state. See Helicopteros Nacionales,
466 U.S. at 414 (citation omitted). In such cases,
jurisdiction is proper “where the contacts proximately
result from actions by the defendant himself . . .
create a ‘substantial connection' with the forum
State.” Burger King Corp. v. Rudzewicz, 471
U.S. 462, 475 (1985) (emphasis in original) (citations
omitted). This inquiry “ensure[s] that an out-of-state
defendant is not bound to appear to account for merely
‘random, fortuitous, or attenuated contacts' with
the forum state.” Dudnikov, 514 F.3d at 1071
(quoting Burger King, 471 U.S. at 475).
burden of proof is on the plaintiff to establish minimum
contacts. OMI Holdings, Inc. v. Royal Ins. Co. of
Canada, 149 F.3d 1086, 1091 (10th Cir. 1998).
“Once the plaintiff establishes minimum contacts, the
defendant is responsible for demonstrating ‘the
presence of other considerations that render the exercise of
jurisdiction unreasonable.'” Alcohol Monitoring
Sys., Inc. v. Actsoft, Inc., 682 F.Supp.2d 1237, 1244-45
(D. Colo. 2010) (quoting Inamed Corp. v. Kuzmak, 249
F.3d 1356, 1360 (Fed. Cir. 2001)). The Supreme Court has
identified the following factors to be considered in this
analysis: (1) the burden on the defendant; (2) the forum
state's interest in adjudicating the dispute; (3) the
plaintiff's interest in obtaining convenient and
effective relief; (4) the interstate judicial ...