United States District Court, D. Colorado
ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR
S. KRIEGER CHIEF UNITED STATES DISTRICT JUDGE
MATTER comes before the Court pursuant to a Motion for
Summary Judgment by Defendants Linsley, Guarnera, Broadlands
and Northern Zinc, LLC. Star Mountain Resources, Inc.
(“Star Mountain”) (#82). In addition to that Motion
for Summary Judgment, the Court has reviewed the briefing and
exhibits submitted by the parties (#86 and #87).
Court exercises jurisdiction in this matter pursuant to 28
U.S.C. § 1332. Colorado law applies to the claims
asserted in this diversity case.
Summary of Relevant Material Facts
Court begins with a brief summary of the relevant material
facts and elaborates as necessary in its analysis. Undisputed
facts are treated as true, and disputed facts
are construed most favorably to the non-movant, SGS
Acquisition Company (“SGS”).
late 2013 and early 2014, SGS became interested in purchasing
a closed zinc mine known as the Balmat mine located in
upstate New York. To acquire the mine, on February 20, 2014,
SGS entered into a Letter of Intent (the “LOI”)
with Hudbay Minerals Inc. (“Hudbay”) to acquire
all issued and outstanding shares and intercorporate debt of
Balmat Holding Corporation and St. Lawrence Zinc Company (for
convenience, the Court will use the term “Hudbay”
to also refer to the object of the contemplated purchase).
The SGS LOI provided that the sale price was $13 million,
with $3 million to be paid on closing (to be financed through
an initial public offering), $5.5 million when SGS decided to
put the mine in production, and $4.5 million in periodic
installments out of net cash flow from the mine's
operations. The LOI gave SGS an exclusive 75-day window to
conduct its due diligence and determine whether it wanted to
proceed with the deal.
told David Linsley, Bernard Guarnera, and the firm with which
they were associated, Centurion Private Equity Partners
(“Centurion”), about the mine being offered for
sale. Apparently, SGS did not intend to operate the mine, but
instead wished to sell its acquisition or ownership rights to
some third party - in essence, flipping the interest in the
mine for a premium sale price. It approached Centurion for
assistance in finding an interested third party buyer.
Centurion agreed to solicit a buyer in exchange for payment
of a procurement commission. For that purpose, SGS and
Centurion also entered into a “Non-Compete and Non
Disclosure Agreement” (the “NDA”) which was
intended to cover information about the mine learned by
Centurion as a result of the arrangement.
March and April 2014, Mr. Linsley dealt with SGS on behalf of
Centurion, which focused its efforts on an entity referred to
as the “Korean client.” There were many
communications between Mr. Linsley on behalf of Centurion,
and Jeremy Read on behalf of SGS, but by April 24, no deal
had been struck between the Korean client and SGS and SGS
informed Mr. Linsley that it no longer interested in dealing
with Centurion or the Korean client. The 75-day exclusivity
window in the LOI expired on May 2, 2014, without a sale to
SGS or extension of the LOI.
7, 2014, Northern Zinc, LLC (“Northern Zinc”) (an
entity in which Mr. Linsley and Mr. Guarnera had some
ownership interest) made an offer to purchase the Hudbay
interests. Hudbay accepted the offer on July 8, 2014, and the
sale closed in November 2015, with the shares being
transferred to Star Mountain Resources Inc.
that Mr. Guarnera, Mr. Linsley, and Centurion improperly
deprived SGS of its opportunity to acquire the Balmat mine,
SGS filed the instant lawsuit on October 4, 2016. SGS's
Second Amended Complaint (#58) asserted five
claims, all arising under Colorado state law: (i) Intentional
Interference with Prospective Business Relations against Mr.
Linsley and Mr. Guarnera; (ii) Intentional Interference with
Contract against Mr. Linsley and Mr. Guarnera; (iii)
of Fiduciary Duty against Mr. Linsley and Mr. Guarnera; (iv)
Misappropriation of Trade Secrets, ostensibly against all
Defendants; and (v) Misappropriation of Business Value
against Mr. Linsley and Mr. Guarnera. SGS also asserted a
vicarious liability “claim” against Defendant
Broadlands Mineral Advisory Services
(“Broadlands”) for indemnification for acts by
Mr. Guarnera. Mr. Linsley, Mr. Guarnera and Broadlands
seek summary judgment on all claims against them
(#82). The parties agree that Colorado law
governs the determination of all of those claims.
Standard of Review
of the Federal Rules of Civil Procedure facilitates the entry
of a judgment only if no trial is necessary. See White v.
York Int'l Corp., 45 F.3d 357, 360 (10th Cir. 1995).
Thus, the primary question presented to the Court in
considering a Motion for Summary Judgment or a Motion for
Partial Summary Judgment is: is a trial required?
is required if there are material factual disputes to
resolve. As a result, entry of summary judgment is authorized
only “when there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a
matter of law.” Fed.R.Civ.P. 56(a); Savant Homes,
Inc. v. Collins, 809 F.3d 1133, 1137 (10th Cir. 2016). A
fact is material if, under the substantive law, it is an
essential element of the claim. See Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is
genuine if the conflicting evidence would enable a rational
trier of fact to resolve the dispute for either party.
Becker v. Bateman, 709 F.3d 1019, 1022 (10th Cir.
consideration of a summary judgment motion requires the Court
to focus on the asserted claims and defenses, their legal
elements, and which party has the burden of proof.
Substantive law specifies the elements that must be proven
for a given claim or defense, sets the standard of proof, and
identifies the party with the burden of proof. See
Anderson, 477 U.S. at 248; Kaiser-Francis Oil Co. v.
Producer's Gas Co., 870 F.2d 563, 565 (10th Cir.
1989). As to the evidence offered during summary judgment,
the Court views it the light most favorable to the non-moving
party, thereby favoring the right to trial. See Tabor v.
Hilti, Inc., 703 F.3d 1206, 1215 (10th Cir. 2013).
for summary judgment generally arise in one of two contexts -
when the movant has the burden of proof and when the
non-movant has the burden of proof. Each context is handled
differently. When the movant has the burden of proof, the
movant must come forward with sufficient, competent evidence
to establish each element of its claim or defense.
See Fed. R. Civ. P. 56(c)(1)(A). Presumably, in the
absence of contrary evidence, this showing would entitle the
movant to judgment as a matter of law. However, if the
responding party presents contrary evidence to establish a
genuine dispute as to any material fact, a trial is required
and the motion must be denied. See Leone v. Owsley,
810 F.3d 1149, 1153 (10th Cir. 2015); Schneider v. City
of Grand Junction Police Dep't, 717 F.3d 760, 767
(10th Cir. 2013).
different circumstance arises when the movant does not have
the burden of proof. In this circumstance, the movant
contends that the non-movant lacks sufficient evidence to
establish a prima facie case. Celotex Corp. v.
Catrett, 477 U.S. 317, 325 (1986). The moving party must
identify why the respondent cannot make a prima
facie showing; that is, why the evidence in the record
shows that the respondent cannot establish a particular
element. See Collins, 809 F.3d at 1137. If the
respondent comes forward with sufficient competent evidence
to establish a prima facie claim or
defense, then a trial is required. Conversely, if the
respondent's evidence is inadequate to establish a
prima facie claim or defense, then no factual
determination of that claim or defense is required and
summary judgment may enter. See Shero v. City of Grove,
Okla., 510 F.3d 1196, 1200 (10th Cir. 2007).
Intentional Interference with Contract (Count II)
Court begins its analysis with SGS's claim against Mr.
Linsley and Mr. Guarnera for intentional interference with
contract. The contract in question is the SGS
elements of the tort of intentional interference with
contractual obligations under Colorado law are: (1) the
defendant was aware of a contract between two parties, (2)
the defendant intended that one of the parties breach the
contract, and (3) the defendant induced the party to breach
or make it impossible for the party to perform the
contract. Krystkowiak v. W.O. Brisben Cos.,
Inc., 90 P.3d 859, 871 (Colo. 2004); Lutfi v.
Brighton Cmty. Hosp. Ass'n, 40 P.3d 51, 58
(Colo.App. 2001). Mr. Linsley and Mr. Guarnera essentially
contend that summary judgment is appropriate on SGS's
tortious interference with contract claim because SGS has not
come forward with evidence to establish that they made it
impossible for SGS to perform under the LOI.
summarized, the LOI called for SGS to make an initial payment
of $3 million to complete the first step of the Hudbay
acquisition. The sale was not consummated, and the question
presented is whether SGS has produced competent evidence that
would suggest that Mr. Linsley and Mr. Guarnera engaged in
actions that prevented SGS from making that payment and
consummating the sale. SGS contends that Mr. Linsley and Mr.
Guarnera interfered with the LOI by representing to it that
Centurion “was obtaining financing (and in fact the
Koreans would do the deal)” and that SGS relied on
those representations such that, after negotiations with
Centurion fell through, they were unable to “find[ ]
other financing” before the LOI expired.
against Mr. Guarnera:
evidence in the record shows any act by Mr. Gaurnera that can
reasonably be construed as making any representation to SGS
about obtaining financing during the SGS LOI period.
According to Mr. Linsley's declaration - which SGS has
not disputed - Mr. Guarnera was simply a consultant to
Centurion. There is no evidence that Mr. Guarnera made
representations to SGS concerning obtaining financing;
rather, all such communication with Centurion was with
Mr. Linsley, and at most, Mr. Guarnera was copied as
a recipient on such communications. Thus, there is no showing
that Mr. Guarnera ever represented to SGS that Centurion was
obtaining funding with the purpose of hindering SGS's
ability to perform under its SGS LOI. Accordingly, Mr.
Guarnera is entitled to summary judgment on SGS's claim
against him for Intentional Interference With Contract.
against Mr. Linsley
noted, above, Mr. Linsley conducted the communications with
SGS on behalf of Centurion. In early March 2014, after the
SGS LOI was executed, SGS, through Mr. Read, wrote to Mr.
Linsley expressing SGS's interest in “selling out
to the Koreans and walking away if it were made worthwhile
for us.” He also advised that SGS was talking to
another entity - Glencore - and that SGS's Canadian
brokers were also “keen to introduce capital, ”
indicating that SGS was pursuing several different sets of
possible investors in addition to Centurion's Korean
client. In late March, Mr. Linsley advised that the Korean
client was “happy to do a deal” with SGS and
requested that SGS provide a copy of the LOI, but, as
discussed below, it appears that Mr. Read initially either
ignored or denied that request. Following a conversation on
March 27, 2014 between Mr. Read and Mr. Linsley, Mr. Read
e-mailed Mr. Linsley stating that SGS needed a firm decision
in the “short term” as to the structure of the
deal. He acknowledged that SGS could ask for an extension of
the LOI deadline with Hudbay, but that it would need
justification. Mr. Read then spelled out terms of the deal
that would be acceptable to SGS.
Linsley responded on April 8, 2014 by again requesting a copy
of the SGS LOI, and he explained that the Koreans are
“keen to do this deal” but indicated that they
could not understand why they were unable to see the LOI and
related documents. Between April 8 and 16, 2014, Mr. Linsley
made a proposal on behalf of the Korean client, but it was
rejected by SGS. By April 16, 2014, Mr. Read appeared to
begin taking steps to distance from Centurion, telling Mr.
Linsley that “[g]iven the huge differences between what
we put on the table and apparent position of your investors,
we don't think it fruitful to come back with another
structure.” Although he indicated that SGS would remain
open to another offer, he stated “[we] must assume that
you won't be able to come up which an acceptable plan and
make appropriate arrangements, which are agreeable to us in
April 23, 2014, Mr. Read again wrote to Mr. Linsley, stating
that other SGS officials had become persuaded that there were
other “credible investors who are serious about
investing on acceptable terms, ” and suggesting that,
if Centurion wanted to do the deal, “you have to give
me something in writing with which I can try to change my
colleagues' view.” (At another point in the same
communication, Mr. Read again emphasized that SGS had
“real potential investors in place” and assured
Mr. Linsley that, to the extent Centurion was “waiting
for our deal to fall over… it will not.”) Mr
Linsley offered to send over a proposal subject to another
site visit, but Mr. Read rejected the offer. Finally, on
April 24, 2014, Mr. Read wrote to Mr. Linsley indicating that
SGS was no longer interested in pursuing a deal with
Centurion, stating that “we want to concentrate efforts
on parties that we believe will invest alongside us.”
foregoing evidence is not sufficient to demonstrate a triable
issue of fact as to whether Mr. Linsley's communications
with SGS operated to prevent SGS from finding other
financing. From the outset, the SGS LOI expressly represented
that SGS's willingness to buy Hudbay was not dependent
upon SGS obtaining financing. (Instead, it contemplated that
SGS would finance the initial $3 million payment through an
initial public offering.) Even during SGS's negotiations
with Centurion, Mr. Read made clear to Mr. Linsley that SGS
was also courting other interested investors who were
themselves capable of reaching a deal. Whether Mr. Read's
representations were true - that other investors did indeed
exist - or simply stalking horses intending to induce
Centurion into agreeing to a deal is irrelevant: Mr. Linsley
can hardly be said to have intentionally interfered with
SGS's deal with Hudbay ...