United States District Court, D. Colorado
EUGENE F. FERRARO, an individual, Plaintiff,
CONVERCENT, INC., a Delaware corporation, O'NEAL PATRICK QUINLAN, III, an individual, STEVE FOSTER, an individual, and NEBBIOLO VENTURES, LLC, a Colorado limited liability company, Defendants.
ORDER ON PARTIAL MOTIONS TO DISMISS
Brooke Jackson, United States District Judge.
matter is before the Court on two motions: (1) defendants
Convercent, Quinlan, and Foster's partial motion to
dismiss plaintiff's complaint, ECF No. 15; and (2)
defendant Nebbiolo Ventures's partial motion to dismiss
the complaint, ECF No. 19. For the reasons stated below,
Convercent, et al.'s motion is GRANTED in part and DENIED
in part, and Nebbiolo's motion is GRANTED.
Ferraro founded a company in 1994 that eventually became
known as Convercent, Inc. (referred to as
“Convercent” or “the Company”). ECF
No. 1 at 4. The Company offered phone and web hotline
services for anonymous whistleblowers, along with
investigative, consulting, and training services.
Id. In 2012, as part of an effort to find outside
investors, one of Mr. Ferraro's employees, Mr. Foster,
introduced Mr. Ferraro to a consulting firm called Nebbiolo,
led by Mr. Quinlan. Id. Mr. Quinlan promised Mr.
Ferraro that Nebbiolo would quickly increase the
Company's value. Id. at 5-6. Mr. Foster
represented to Mr. Ferraro that he had performed the
requisite due diligence on Nebbiolo and its members, and he
told Mr. Ferraro that the firm was reputable and accredited
despite his knowledge that the contrary was true.
Id. at 6. In fact, according to Mr. Ferraro,
Nebbiolo was not an accredited investor and had only existed
for four months, while Mr. Quinlan and a previous firm had
been the focus of a lawsuit that included allegations of
fraud against Mr. Quinlan personally. Id. at 6.
Furthermore, Mr. Foster did not disclose that he had recently
made more than a $60, 000 investment in (or loan to)
Nebbiolo. Id. at 7.
reliance on Mr. Foster's and Mr. Quinlan's
representations, Mr. Ferraro entered into a Professional
Services Agreement (“PSA”) with Nebbiolo in 2012.
Id. at 8. Under the PSA, Nebbiolo would provide
financial and management consulting services in exchange for
a fee and equity in the Company; Mr. Quinlan would replace
Mr. Ferraro as the Company's CEO; and Mr. Foster would be
the “one authorized representative” of the
Company to whom Nebbiolo would report. Id. Mr.
Quinlan “repeatedly assured” Mr. Ferraro that his
“continued employment was guaranteed.”
Id. Thereafter, Mr. Quinlan replaced Mr. Ferraro as
CEO and the Company paid Nebbiolo its consulting fee and sold
Nebbiolo stock for an equity position in the Company.
Id. at 8-9. However, because Nebbiolo claimed it
lacked the funds to purchase the Company's stock outright
at the time the PSA was signed, Mr. Ferraro accepted a
four-year note for $1.95 million from Nebbiolo for the stock
purchase. Id. at 9.
Mr. Quinlan began spending “significant amounts of
company funds, ” Mr. Ferraro discussed with Mr. Foster
whether he should terminate the PSA for non-performance.
Id. Mr. Foster urged him “to give Nebbiolo
time to perform.” Id. At the same time,
unbeknownst to Mr. Ferraro, Mr. Quinlan and Mr. Foster
created and back-dated a stock purchase agreement, giving
Nebbiolo additional time to achieve its objectives, changing
the terms of a previously-existing promissory note, and
reducing Nebbiolo's purchase price of company shares.
Id. at 10. Mr. Ferraro claims he accepted this
agreement only under duress. Id.
Mr. Ferraro entered an employment agreement to serve as
Convercent's Chief Ethics Officer for three years.
Id. at 11. The agreement contained no renewal
provision, but Mr. Quinlan assured Mr. Ferraro that it would
be renewed if the Company were not sold by the end of the
agreement's three-year term. Id. The agreement
also required the Company to pay Mr. Ferraro $5, 000 per
month for each month he remained a guarantor on certain
corporate loans if the loans were not satisfied by July 2013.
Id. at 12. When Mr. Ferraro sought to renew this
agreement in 2015 he was assured that his position was
secure, and that the agreement would be renewed. Id.
at 14. In March 2015 Mr. Ferraro learned that Mr. Quinlan had
taken $65, 000 of company funds for personal use without the
Board of Directors' knowledge. Id. at 14. As
Chief Ethics Officer, Mr. Ferraro sought to investigate the
matter, but he was prevented from doing so. Id.
January 2016 Mr. Ferraro was informed that the Company would
not be renewing his employment agreement. Id. at 15.
Mr. Ferraro was told that the Company could hire and employ
four people for what he was being paid, and that he no longer
provided value or services the Company needed. Id.
at 15-16. His last day of employment was January 3,
2016. Id. at 18. He did not receive any customary
outplacement services, such as severance pay or a letter of
reference. Id. at 15. Mr. Ferraro requested that the
Board of Directors investigate his termination and Mr.
Quinlan's use of company funds. Id. at 16. The
Company denied wrongdoing related to Mr. Ferraro's
termination and characterized Mr. Quinlan's use of funds
as a loan, but it did not verify that it had conducted an
investigation into either. Id. at 17-19.
Ferraro filed suit in March 2017, asserting a total of twelve
claims. ECF No. 1. Convercent, Mr. Quinlan, and Mr. Foster
move to dismiss plaintiff's claim of wrongful discharge
in violation of public policy against Mr. Quinlan, his breach
of contract claim against Convercent, and his civil
conspiracy claim against Mr. Quinlan and Mr. Foster. ECF No.
15. Nebbiolo moves to dismiss plaintiff's claim against
it for violation of the Colorado Organized Crime Control Act
(COCCA). ECF No. 19. The motions have been fully briefed.
See ECF Nos. 15, 18, 19, 23, 24, 30.
STANDARD OF REVIEW
survive a 12(b)(6) motion to dismiss, the complaint must
contain “enough facts to state a claim to relief that
is plausible on its face.” Ridge at Red Hawk,
L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir.
2007) (quoting Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 570 (2007)). A plausible claim is a claim that
“allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While
the Court must accept the well-pleaded allegations of the
complaint as true and construe them in the light most
favorable to the plaintiff, Robbins v. Wilkie, 300
F.3d 1208, 1210 (10th Cir. 2002), purely conclusory
allegations are not entitled to be presumed true,
Iqbal, 556 U.S. at 681. However, so long as the
plaintiff offers sufficient factual allegations such that the
right to relief is raised above the speculative level, he has
met the threshold pleading standard. See, e.g.,
Twombly, 550 U.S. at 556; Bryson v.
Gonzales, 534 F.3d 1282, 1286 (10th Cir. 2008).
Wrongful Discharge Claim Against Mr.
Ferraro asserts that he was fired for trying to exercise his
right to investigate Mr. Quinlan's unauthorized use of
Convercent funds and another Convercent employee's
facilitation of that use. ECF No. 1 at 24. This, he claims,
was a violation of public policy, therefore constituting the
tort of wrongful discharge. Convercent, Mr. Quinlan, and Mr.
Foster move to dismiss this claim as against Mr. Quinlan,
contending that ...