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DTC Energy Group, Inc. v. Hirschfeld

United States District Court, D. Colorado

November 6, 2018

DTC ENERGY GROUP, INC., a Colorado corporation, Plaintiff,
ADAM HIRSCHFELD, an individual, JOSEPH GALBAN, an individual, and ALLY CONSULTING, LLC, a Wyoming limited liability company formerly known as Wyodak Staffing, LLC, Defendants.



         This matter is before the Court on Plaintiff's Motion for Leave to File Second Amended Complaint [#72][1] (the “Motion”). Defendants filed a Response [#75] in opposition to the Motion, and Plaintiff filed a Reply [#76]. The Motion is thus fully briefed and ripe for resolution. For the reasons set forth below, the Motion [#72] is GRANTED.

         I. Background

         Plaintiff filed suit on July 14, 2017, alleging that Defendants Adam Hirschfeld (“Hirschfeld”) and Joseph Galban (“Galban”) misappropriated confidential information and trade secrets to benefit Plaintiff's competitor, Defendant Ally Consulting, LLC (“Ally”). In the present Motion [#72], Plaintiff moves for leave to file its Second Amended Complaint [#72-1], which seeks to add: (1) Craig Hirschfeld, Joseph Johnson, Katie Stromstad, Ross Rhinehart, and Ally Energy Services, Inc. as new Defendants; (2) new claims consisting of conversion and violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961-1968, and Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030; and (3) new factual allegations. The three current Defendants oppose the Motion [#72], arguing that Plaintiff's amendments are made in bad faith, are unduly delayed, and are futile. See Response [#75]. The Court has not yet entered a scheduling order, nor has it set a deadline to join parties and amend pleadings, and therefore, Plaintiff's motion is timely. See Minute Order [#74]. Thus, the Court considers any arguments raised by the parties related to whether justice would be served by amendment. See Fed. R. Civ. P. 15(a)(2).

         II. Legal Standard

         The Court has discretion to grant a party leave to amend its pleadings. Foman v. Davis, 371 U.S. 178, 182 (1962); see Fed. R. Civ. P. 15(a)(2) (“The court should freely give leave when justice so requires.”). The purpose of the rule is to provide litigants “the maximum opportunity for each claim to be decided on its merits rather than on procedural niceties.” Minter v. Prime Equip. Co., 451 F.3d 1196, 1204 (10th Cir. 2006). “Refusing leave to amend is generally only justified upon a showing of undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies by amendments previously allowed, or futility of amendment.” Frank v. U.S. West, Inc., 3 F.3d 1357, 1365 (10th Cir. 1993) (citation omitted). “[Defendants] bear the burden of showing that the proposed amendment is sought in bad faith [or is] futile.” Corp. Stock Transfer, Inc. v. AE Biofuels, Inc., 663 F.Supp.2d 1056, 1061 (D. Colo. 2009) (citing Fluker v. Fed. Bureau of Prisons, No. 07-cv-02426-CMA-CBS, 2009 WL 1065986, at *4 (D. Colo. Apr. 21, 2009)).

         III. Analysis

         A. Futility

         An amendment is futile only if it would not survive a motion to dismiss. See Bradley v. Val-Mejias, 379 F.3d 892, 901 (10th Cir. 2004) (citing Jefferson Cty. Sch. Dist. v. Moody's Inv'rs Servs., 175 F.3d 848, 859 (10th Cir. 1999)). “In ascertaining whether plaintiff['s] proposed amended complaint is likely to survive a motion to dismiss, the court must construe the complaint in the light most favorable to plaintiff[ ], and the allegations in the complaint must be accepted as true.” Bennett v. Wells Fargo Home Mortg., No. 16-cv-03185-CMA-KLM, 2017 WL 4675524, at *1 (D. Colo. Oct. 18, 2017) (citing Murray v. Sevier, 156 F.R.D. 235, 238 (D. Kan. 1994)). Moreover, “[a]ny ambiguities must be resolved in favor of plaintiff[ ], giving [plaintiff] ‘the benefit of every reasonable inference' drawn from the ‘well-pleaded' facts and allegations in [the] complaint.” Id. Defendants challenge the proposed additions of RICO and CFAA claims, arguing that they are futile, but make no such argument regarding the proposed conversion claim. See Response [#75].

         1. RICO Claim

         As noted above, Plaintiff seeks leave to add a new statutory claim against Defendants under RICO. See Second Am. Compl. [#72-1]. Plaintiff alleges that Defendants engaged in a coordinated scheme to form Defendant Ally and transform it into a direct competitor of Plaintiff's. Reply [#76] at 6. Plaintiff alleges that Defendants “hijacked” its resources, confidential information, and employees, all while still employed by Plaintiff. Id. Further, Plaintiff alleges that Defendants utilized Plaintiff's resources and information in order to carry out their alleged fraudulent scheme. Id.

         Defendants argue that the alleged RICO claim in the Second Amended Complaint is legally and factually insufficient to survive a motion to dismiss. Response [#75] at 10. Specifically, Defendants state that (1) Plaintiff does not have any trade secrets; (2) Plaintiff has provided little or no information as to why the alleged predicate acts would survive an inquiry into a valid RICO claim; and (3) Plaintiff's claim is subject to dismissal because there is no requisite enterprise. Id. at 10-13. Essentially, Defendants argue that Defendant Ally and its employees were operating within the permissible bounds of regularly conducted business practices.

         To state a claim under RICO, Plaintiff must plead “sufficient facts to make plausible (1) conduct; (2) of an enterprise; (3) through a pattern[;] (4) of racketeering activity.” Christou v. Beatport, LLC, 849 F.Supp. 2d. 1055, 1077 (D. Colo. 2012) (citing Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985)). Racketeering activity is defined “to mean any of numerous acts ‘chargeable' or ‘indictable' under enumerated state and federal laws, including . . . federal mail and wire fraud statutes.” Christou, 849 F.Supp. 2d. at 1077-78; see also 18 U.S.C. §§ 1341 and 1343. Plaintiff must also meet the requirements of Fed.R.Civ.P. 9(b), which states: “In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” See Pine Tel. Co., Inc. v. Alcatel Lucent USA Inc., 617 Fed.Appx. 846, 860 (10th Cir. 2015) (citation omitted). The Second Amended Complaint must “set forth the time, place and contents of the false representations, the identity of the party making the false statements, and the consequences thereof.” Lawrence Nat'l Bank v. Edmonds, 924 F.2d 176, 180 (10th Cir. 1991).

         First, Defendants argue that the RICO claim is subject to dismissal because Plaintiff does not have any actual trade secrets. Response [#75] at 11. Defendants, however, do not cite to any case law supporting this proposition. Additionally, Plaintiff argues that its trade secret claims have nothing to do with its independent RICO claim. Reply [#76] at 4. To support a RICO claim, Plaintiff is merely required to plead sufficient facts to make plausible conduct of an enterprise through a pattern of racketeering activity. Christou, 849 F.Supp. 2d. at 1077. Defendants fail to explain how these elements necessarily require allegations regarding ...

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