United States District Court, D. Maryland
Xinis United States District Judge.
before the Court is Defendant Artin Afsharjavan's motion
to amend his answer to assert counterclaims (ECF No. 30) and
Plaintiff Robert Ringdahl's motion to quash
Afsharjavan's third-party subpoena. ECF No. 38. The
motions are fully briefed, and no hearing is necessary.
See Loc. R. 105.6. For the following reasons, the
Court denies Afsharjavan's motion to amend and grants in
part and denies in part Ringdahl's motion to quash.
2017, Ringdahl loaned $150, 000 to Binary Group, Inc
(“Binary Group”). ECF No. 2-2 at 1. To induce
Ringdahl to make the loan, Afsharjavan-who held stock in
Binary Group-personally guaranteed the loan and memorialized
its terms in a Guaranty Agreement. ECF No. 2-3 at 1. The
Guaranty Agreement permitted Ringdahl to seek payment from
Afsharjavan upon Binary Group's default on the loan,
regardless of whether Ringdahl pursued remedies against
Binary Group. Id. at 2. Separate from the Guaranty
Agreement, Afsharjavan pledged 450, 000 shares of Binary
Group stock to Ringdahl as security through an Agreement of
Pledge Stock with the understanding that the pledge would
terminate when the loan was paid in full. ECF No. 2-4 at 1.
January 1, 2018, Binary Group defaulted on the loan,
triggering the obligations under the Guaranty Agreement. ECF
No. 2-5 at 1. As a result, Ringdahl filed suit in the Circuit
Court for Montgomery County, Maryland for breach of the
Guaranty Agreement and Agreement of Pledge Stock. ECF No.2.
Afsharjavan, proceeding pro se, removed the action to this
Court. ECF No. 1. The Scheduling Order in this case set
September 10, 2018 as the deadline for amendment of
pleadings. ECF No. 17. On January 20, 2019, well beyond the
amendment deadline and after the close of discovery,
Afsharjavan moved to amend his answer to bring counterclaims
also subpoenaed documents held by third-party Eaglestone Tax
& Wealth Advisors, Inc. (“Eaglestone”). ECF
Nos. 34-35. Afsharjavan sought “[a]ll documents,
communications . . ., and electronically stored information
transmitted between Eaglestone and Robert Ringdahl between
January 1, 2015 [sic] and the present” relating to nine
entities or individuals, including Binary Group and its
stockholders. ECF No. 39-1 at 7. Afsharjavan also requested
the 2016 and 2017 federal and state tax returns for Ringdahl
and Binary Group. Id. Ringdahl moved to quash the
subpoena. ECF No. 38. The Court addresses each motion in
Motion to Amend
Afsharjavan filed his answer on April 13, 2018, he now seeks
to add counterclaims for “bad faith” and breach
of the implied covenant of good faith and fair dealing.
Although Courts “should freely give leave” to
amend “when justice so requires, ” see
Fed. R. Civ. P. 15(a)(2), leave may be denied when amendment
would prejudice the opposing party, the movant has acted in
bad faith, or amendment would be futile. Arora v.
James, 689 Fed.Appx. 190, 190 (4th Cir. 2017).
is futile when it would be subject to dismissal for failure
to state a legally cognizable claim. Oliver v. Dep't
of Pub. Safety & Corr. Servs., 350 F.Supp.3d 340,
346 (D. Md. 2018). The Court, therefore, reviews the proposed
amended counterclaims for legal sufficiency pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure. The Court
takes as true all facts pleaded in the proposed counterclaim
and in the light most favorable to Afsharjavan. See
Ibarra v. United States, 120 F.3d 472, 474 (4th Cir.
1997). Further, because Afsharjavan proceeds pro se, the
Court affords his counterclaims a generous construction while
also being mindful that it cannot allow patently frivolous or
baseless claims to proceed simply because the movant is pro
se. See Hughes v. Rowe, 449 U.S. 5, 9 (1980);
Weller v. Dep't of Soc. Servs., 901 F.2d 387,
391 (4th Cir. 1990).
facts supporting the proposed counterclaims as true and most
favorably to Afsharjavan, the claims are futile. The bad
faith claim is grounded in the notion that Ringdahl caused
Binary Group to default on the loan. ECF No. 30-1 at 8. In
making this claim, Afsharjavan contends that Ringdahl
“breached his duty owed to all shareholders to promptly
pay all outstanding expenses and notes owed by Binary Group
and he participated in self-dealing.” Id. at
Court conceives of two potential ways in which this claim
could be construed. First, if Afsharjavan intends that this
claim covers Binary Group's breach of the promissory note
to Ringdahl, the claim necessarily fails. “Maryland
does not recognize failure to perform a contract as giving
rise to a tort action for ‘bad faith.'”
Republic Ins. Co. v. Bd. of Cty. Comm'rs of St.
Mary's Cty., 68 Md.App. 428, 432 (1986).
Accordingly, on that theory, any proposed counterclaim cannot
proceed as a matter of law.
Afsharjavan appears to be asserting a claim brought on behalf
of “all shareholders, ” which likewise cannot
proceed as a matter of law. It is true that “[a]
majority shareholder owes a fiduciary duty to minority
shareholders not to use his voting power for his own benefit
or for a purpose adverse to the interests of the corporation
and its stockholders.” Mona v. Mona Elec. Grp.,
Inc., 176 Md.App. 672, 697 (2007). Fatal to the claim,
however, is that the proposed counterclaim does not aver
facts plausibly supporting the inference that Ringdahl is a
majority shareholder. Thus, even construing the proposed
amendment most favorably to the “shareholders, ”
it fails as a matter of law and is futile.
Afsharjavan could bridge this factual gap, he has not
demonstrated that he has satisfied the necessary
prerequisites for bringing a derivative action on behalf of
all shareholders. When pursuing a majority shareholder for
breaches of fiduciary duties “on behalf of all
shareholders, ” the movant must first either make a
demand on the board of directors to bring suit or show that
such demand would be futile. See Mona, 176 Md.App.
at 699; Bender v. Schwartz, 172 Md.App. 648, 667
(2007). Afsharjavan has not done either.
and perhaps most fatally, Afsharjavan cannot maintain a
derivative suit as a pro se plaintiff. See Bluefeld v.
Cohen, No. PX 15-2857, 2017 WL 1546406, at *3 (D. Md.
Apr. 27, 2017), aff'd697 Fed.Appx. 788 (4th
Cir. 2017) (citing Phillips v. Tobin, 548 F.2d 408,
411-12 (2d Cir. 1976); Romman ex rel. Yuhe Int'l,
Inc. v. Zhentao Gao, No. 2:11-CV-01178-MMD, 2013 WL
1811972, at *1 (D. Nev. Apr. 29, 2013); Pinnavaia v.
Moody-Stuart, No. 09-03803 CW, 2009 WL 4899218, at *3
(N.D. Cal. Dec. 11, 2009); Weaver v. State of N.Y.,
7 F.Supp.2d 234, 237 (W.D.N.Y. 1998); Robinette v.
Merrill Lynch, No. 3:97-CV-0353D, 1998 WL 641815, at *1
(N.D. Tex. Sept. 16, 1998)). Thus, even if ...