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Vogel v. Albert

United States District Court, D. Maryland

September 15, 2016



          DEBORAH K. CHASANOW, United States District Judge.

         Presently pending and ready for resolution are (1) the motion to dismiss or alternatively for summary judgment filed by Defendants David Albert and David Albert & Associates (“Defendants”) (ECF No. 5), and (2) a renewed joint motion to seal by Plaintiff Richard Vogel (“Plaintiff”) and Defendants (ECF No. 11). The motions have been briefed, and the court now rules, no hearing being deemed necessary. Local Rule 105.6. For the following reasons, the motion to dismiss or alternatively for summary judgment will be DENIED, and the motion to seal will be GRANTED.

         I. Background

         The complaint alleges that Plaintiff was the founder, President, CEO, Secretary, majority shareholder, and sole voting shareholder of Innovative Therapies, Inc. (“ITI”), a Delaware corporation. (ECF No. 1 ¶¶ 1, 5, 9). In 2007, Plaintiff and ITI retained Defendants to provide legal advice related to changing ITI's corporate structure. (Id. ¶ 10). In 2011, Plaintiff again sought to restructure. Acting on Defendants' advice, Plaintiff drafted and ITI's Board approved the issuance of new stock in several different forms without providing notice to ITI's non-voting shareholders. (Id. ¶¶ 15-16). Even though those shareholders lacked voting rights under ITI's certificate of incorporation, Delaware law required that they be given the opportunity to vote on an action, like this one, that would increase the aggregate number of authorized shares. (Id. ¶ 18). The issuance of stock and the resolution passed by the Board were thus void under Delaware law. (Id. ¶ 19). This mistake resulted in the distribution of a greater portion of ITI's equity than planned; excessive distribution of dividends to Plaintiff as a majority shareholder, which he later repaid; a significant loss in profit for shareholders when ITI was sold to Cardinal Health (“Cardinal”) in 2014; costs for services to correct the stock split; and additional legal costs for Plaintiff and ITI. (Id. ¶¶ 20-26).

         As part of the Agreement and Plan of Merger for the sale to Cardinal, Plaintiff signed a release dated August 29, 2014 (the “Release”). (ECF No. 5-3). The Release named as parties Cardinal, ITI, and Plaintiff, “as an individual and as the representative for all of the Stockholders.” (Id. at 1). The stockholders are the “Releasors” under the Release. The other three parties and their specified associates are the “Releasees.” (Id.). Plaintiff both releases certain other parties as a stockholder and is released by the stockholders in his other capacities. (Id. ¶¶ 2-3).

         The Release contains several definitions. First, the “Company Releasees” are ITI and “its Subsidiaries and each of their respective individual, joint or mutual, past, present, and future representatives, officers, directors, employees (both current and former), predecessors, successors, and assigns.” (Id. ¶ 2). Second, the “Vogel Releasees” are Plaintiff and “his respective past, present, and future representatives, affiliates, subsidiaries, insurers, attorneys, successors and assigns.” (Id. ¶ 3). Third, the Releasees are released by the Releasors from the “Released Claims, ” which include, as relevant here:

[A]ny and all claims, demands, proceedings, causes of action, orders, obligations, damages, interest, contracts, agreements, debts, liabilities, attorneys' fees, and expenses, whatsoever, whether in law or equity, whether known or unknown, suspected or unsuspected, which such Releasor now has, has ever had or may hereafter have against the respective [] Releasees arising contemporaneously with or prior to the Closing or on account of or arising out of any matter, cause, or event occurring contemporaneously with or prior to the Closing, including, but not limited to, . . . (c) breach of fiduciary duty, . . . (f) any amendment, whether effective or ineffective, to the Company's Certificate of Incorporation or Bylaws, (g) the capitalization of the Company, (h) the Performance Unit Plan (including any amendments thereto) and the Performance Units issued thereunder . . . . Further, Releasor waives the right to recover from any complaints, charges, lawsuits, administrative proceedings . . ., False Claims Act proceedings or qui tam proceedings, filed by the Releasor or by any federal or state agency on the Releasor's behalf, concerning the Releasees (as defined below) or any Released Claims.

(Id. ¶ 2). The Release also states that it “may not be changed except in a writing signed by the person(s) against whose interest such a change will operate.” (Id. ¶ 10).

         After the Release was raised in pre-suit discussions relating to this dispute, Plaintiff and Cardinal signed an Amendment to the Agreement and Plan of Merger (“Amendment”) in June 2015. (ECF No. 5-4). In Paragraph 3.c of the Amendment, Cardinal and Plaintiff included a “Clarification of Prior Release” that states:

[N]othing in the August 2014 Release or in this Amendment was or is intended to release any claims that Vogel or any other Stockholder Releasor has or had against any attorney or accountant who represented ITI, Vogel, and/or any other Stockholder Releasor prior to Closing in connection with the authorization or issuance of any shares, any amendments or restatements of the articles of incorporation of ITI stock splits, creation or elimination of any classes or categories of shares or shareholders, transfers of shares, or any matters relating to the capitalization of ITI (the “Advisor Claims”), specifically including, but not limited to, any claims whatsoever against [Defendants]; and to the extent necessary to give effect to subsection (ii) immediately preceding this clause, the August 2014 Release is amended to explicitly exclude any release of [Defendants], and that amendment shall be nunc pro tunc to the date of the August 2014 Release.

(Id. ¶ 3.c). Under Paragraph 3.d. of the Amendment, “[a]ny claims that ITI has or had against any of the [Defendants] are irrevocably assigned to Vogel.” (Id. ¶ 3.d).

         Plaintiff filed this suit alleging a single count of negligent legal malpractice on his own behalf and as the assignee of ITI's legal claims. (ECF No. 1 ¶¶ 27-32). Defendants filed the instant motion to dismiss, or in the alternative, for summary judgment, on November 23, 2015, raising the defense that Plaintiff released all claims against them as Vogel Releasees under the Release. (ECF No. 5). Plaintiff responded and Defendants replied. (ECF Nos. 12; 13).

         II. Standard of Review

         Defendants' motion is styled as a motion to dismiss, or in the alternative, for summary judgment. A court may, without converting a motion to dismiss into a motion for summary judgment, “consider documents attached to the complaint as well as those attached to the motion to dismiss, so long as they are integral to the complaint and authentic.” Philips v. Pitt Cnty. Mem'l Hosp., 572 F.3d 176, 180 (4th Cir. 2009) (citation omitted). “An affirmative defense, such as release, is not ordinarily considered on a motion to dismiss because the plaintiff is not required to negate it in the complaint.” Alexander v. UIP Prop. Mgmt., No. DKC-14-2469, 2015 WL 1472004, at *3 (D.Md. Mar. 30, 2015); see Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir. 2007). An affirmative defense can be considered on a motion to dismiss only “if all facts necessary to the affirmative defense ‘clearly appear on the face of the complaint.'” Goodman, 494 F.3d at 464 (quoting Richmond, Fredericksburg & Potomac R.R. v. Forst, 4 F.3d 244, 250 (4th Cir. 1993)). “[A] movant cannot merely show that the elements of the defense appear on the face of the complaint or in properly considered documents, but must also ‘show that the plaintiff's potential rejoinder to the affirmative defense was foreclosed by the allegations in the complaint.'” Alexander, 2015 WL 1472004, at *2 (quoting Goodman, 494 F.3d at 466). Here, although the parties have stipulated to the authenticity of Defendants' exhibits (ECF No. 5-1, at 2 n.2), the exhibits are integral only to Defendants' defense, not the complaint. Defendants' motion will be construed as a motion for summary judgment.

         A motion for summary judgment will be granted only if there exists no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986); Emmett v. Johnson, 532 F.3d 291, 297 (4th Cir. 2008). A dispute about a material fact is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Liberty Lobby, 477 U.S. at 249. In undertaking this inquiry, a court must view the facts and the reasonable inferences drawn therefrom “in the light most favorable to the party opposing the motion, ” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)); see also EEOC v. Navy Fed. Credit Union, 424 F.3d 397, 405 (4th Cir. 2005), but a “party cannot create a genuine dispute of material fact through mere speculation or compilation of inferences, ” Shin v. Shalala, 166 F.Supp.2d 373, 375 (D.Md. 2001).

         “Defendants bear the burden of proving that the elements of release are satisfied.” Auslander v. Helfand, 988 F.Supp. 576, 580 (D.Md. 1997) (citing Allen v. Zurich Ins. Co., 667 F.2d 1162, 1164 (4th Cir. 1982)). “A defendant asserting an affirmative defense in a summary judgment motion must initially prove that no disputed material fact exists regarding the defense, ” at which point “the burden shifts to the plaintiff to demonstrate specific disputed material facts precluding application of the affirmative defense; if the ...

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