United States District Court, D. Colorado
KENT D. BAUMGARDNER, Plaintiff,
PATRICK S. CANNON and WESTERN REFRACTORY CONSTRUCTION, INC., Defendants.
ORDER ON PENDING MOTIONS
William J. Martínez, Judge
Kent Baumgardner (“Plaintiff”) sues Defendant
Western Refractory Construction, Inc. (“Western
Refractory”) and its president, Defendant Patrick S.
Cannon (“Cannon”; together with Western
Refractory, “Defendants”), for breach of
contract, breach of fiduciary duty, and fraud under Colorado
state law. Each of these causes of action flows from
Plaintiff's allegation that he was not paid the full
amounts Defendants owed him under a “Phantom Stock Unit
originally filed this lawsuit in Colorado state court.
(See ECF No. 1-1.) Defendants removed to this Court
under 28 U.S.C. §§ 1332(a)(1) and 1441(b). (ECF No.
1.) Defendants then filed their Motion to Dismiss, arguing
that the Agreement is governed by the Employee Retirement
Income Security Act of 1974 (“ERISA”), 29 U.S.C.
§§ 1001 et seq., and that ERISA preempts
Plaintiff's state-law causes of action. (See ECF
No. 9.) In the middle of briefing on that motion, Plaintiff
filed an amended complaint (ECF No. 17) but the parties
stipulated that Defendants' Motion to Dismiss may be
treated as if filed against the amended complaint
(see ECF No. 20). Moreover, after the parties
finished briefing the Motion to Dismiss, Plaintiff filed a
Motion for Leave to File Second Amended Complaint and Jury
Demand (“Motion to Amend”). (ECF No. 57.)
Motion to Dismiss and the Motion to Amend are both ripe for
ruling. For the reasons explained below, the Court finds that
Plaintiff's currently operative complaint (the first
amended complaint) plausibly pleads that the Agreement is not
governed by ERISA. The Court therefore denies Defendants'
Motion to Dismiss. As for the Motion to Amend, it seeks to
add an ERISA cause of action in the alternative, and a
request for exemplary damages. The Court grants the Motion to
Amend as to the first request, but denies it without
prejudice as to the second.
Federal Rule of Civil Procedure 12(b)(6), a party may move to
dismiss a claim in a complaint for “failure to state a
claim upon which relief can be granted.” The 12(b)(6)
standard requires the Court to “assume the truth of the
plaintiff's well-pleaded factual allegations and view
them in the light most favorable to the plaintiff.”
Ridge at Red Hawk, LLC v. Schneider, 493 F.3d 1174,
1177 (10th Cir. 2007). In ruling on such a motion, the
dispositive inquiry is “whether the complaint contains
‘enough facts to state a claim to relief that is
plausible on its face.'” Id. (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). Granting a motion to dismiss “is a harsh
remedy which must be cautiously studied, not only to
effectuate the spirit of the liberal rules of pleading but
also to protect the interests of justice.” Dias v.
City & Cnty. of Denver, 567 F.3d 1169, 1178 (10th
Cir. 2009) (internal quotation marks omitted). “Thus,
‘a well-pleaded complaint may proceed even if it
strikes a savvy judge that actual proof of those facts is
improbable, and that a recovery is very remote and
unlikely.'” Id. (quoting Twombly,
550 U.S. at 556).
Documents Outside the Pleadings
ask the Court to consider the Agreement as part of the Rule
12(b)(6) analysis, although the Agreement was not attached to
the complaint. (See ECF No. 9 at 4 n.2; ECF No.
9-1.) The Court may consider a document outside the pleadings
even in a Rule 12(b)(6) analysis if the document is (1)
“mentioned in the complaint, ” (2) “central
to [the] claims [at issue], ” and (3) not challenged as
inauthentic. Toone v. Wells Fargo Bank, N.A., 716
F.3d 516, 521 (10th Cir. 2013).
the Agreement is repeatedly “mentioned in the
complaint” by name. (ECF No. 17 ¶¶ 8-11.) The
Agreement is also “central” because the complaint
alleges that Defendants breached the Agreement. (Id.
¶¶ 12-25.) Finally, Plaintiff does not challenge as
inauthentic the copy of the Agreement that Defendants
attached to their Motion to Dismiss. Thus, the Court may
consider the Agreement while remaining within the restraints
of a proper Rule 12(b)(6) analysis.
is an Alaska resident. (ECF No. 17 ¶ 1.) Defendant
Cannon is a Colorado resident. (Id. ¶ 3.)
Defendant Western Refractory is a Colorado corporation with
its principal place of business in Colorado. (Id.
has been working at Western Refractory since 1984.
(Id. ¶ 6.) In 2005, Plaintiff and Western
Refractory entered into the first version of the Agreement.
(Id. ¶ 8.) In subsequent years, the parties
amended and restated the Agreement several times.
(Id. ¶¶ 9-11.) A version dating from
August 2011 is the currently effective version. (Id.
Agreement announces that it is “intended to provide for
the payment of performance-based compensation to [Plaintiff]
while he is an employee of the Company.” (ECF No. 9-1,
Recitals, ¶ B.) The Agreement provides that, prior to
Plaintiff's termination or a change in control of the
company, Plaintiff “will be paid an amount equal to 20%
of Company's Adjusted Earnings (the ‘Annual
Bonus'). [This payment] will be paid in cash, in a lump
sum no later than 2 1/2 months after the close of the Fiscal
Year for which the payment is determined.”
(Id. § 5.1.) The Agreement also contains
contingencies for handling Plaintiff's bonus if he is
terminated for cause, terminated other than for cause, or if
there is a change in control of the company. (Id.
§§ 5.1(ii), 6.) The Agreement includes a noncompete
covenant enforceable during the term of Plaintiff's
employment and for two years after his termination, along
with a separate contingency for handling bonus payments if
Plaintiff is fired for violating the noncompete covenant.
(Id. §§ 7, 8.)
in the Agreement, Plaintiff acknowledges that his annual
bonuses “have been paid in full through December 31,
2010.” (Id. § 14(a).)
the Agreement contains the following choice-of-law provision:
This Agreement is subject to ERISA as this law applies to an
unfunded plan or arrangement maintained by Company or an
affiliate primarily for the purpose of providing deferred
compensation for a select group of management or highly
compensated employees. To the extent not preempted by ERISA,
the laws of the State of Colorado shall govern this Agreement
without regard to conflicts of laws principles.
(Id. § 16.)
alleges that, from 2005 until 2017, he received what he
thought to be the appropriate Annual Bonus amount. (ECF No.
17 ¶ 15.) But, in January 2017, he learned that Cannon
“had been usurping Western Refractory's profits and
assets for his personal use without reimbursing Western
Refractory, thereby artificially deflating the Adjusted
Earnings of Western Refractory and reducing [Plaintiff's]
Annual Bonus.” (Id. ¶ 16.)
resigned from Western Refractory on March 31, 2017.
(Id. ¶ 23.) He now brings claims for breach of
contract, breach of ...