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Baumgardner v. Cannon

United States District Court, D. Colorado

June 6, 2018



          William J. Martínez, Judge

         Plaintiff 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 Agreement” (“Agreement”).

         Plaintiff 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.)

         The 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.


         A. General Standard

         Under 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).

         B. Documents Outside the Pleadings

         Defendants 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).[1]

         Here, 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.

         II. FACTS

         Plaintiff 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. ¶ 2.)

         Plaintiff 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. ¶ 11.)

         The 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.)

         Elsewhere in the Agreement, Plaintiff acknowledges that his annual bonuses “have been paid in full through December 31, 2010.” (Id. § 14(a).)

         Finally, 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.)

         Plaintiff 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.)

         Plaintiff resigned from Western Refractory on March 31, 2017. (Id. ΒΆ 23.) He now brings claims for breach of contract, breach of ...

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