Free Reply to Response to Motion - District Court of Colorado - Colorado

Case 1:03-cv-02669-MSK-PAC

Document 102

Filed 08/05/2005

Page 1 of 11

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Case No. 03-cv-2669-MSK-PAC LEPRINO FOODS COMPANY, Plaintiff, v. BIG-D CONSTRUCTION CORP. - CALIFORNIA, a Utah corporation; BIG-D CONSTRUCTION CORP., a Utah corporation; and Does 1-100, inclusive, Defendants/Counterclaimants,

BIG-D CONSTRUCTION CORP. - CALIFORNIA, a Utah corporation; BIG-D CONSTRUCTION CORP., a Utah corporation; and Does 1-100, inclusive, Third Party Plaintiffs, v. MARELICH MECHANICAL CO., INC. dba UNIVERSITY MARELICH MECHANICAL, a California corporation, Third Party Defendant.

MARELICH MECHANICAL CO., INC. dba UNIVERSITY MARELICH MECHANICAL, a California corporation, Third Party Plaintiff/Counterclaimant, v. BIG-D CONSTRUCTION CORP. - CALIFORNIA, a Utah corporation; FEDERAL INSURANCE COMPANY, an Indiana corporation; FRICK COMPANY, and Roes 20 through 80, inclusive, Counterdefendant/Third Party Defendants. REPLY OF PLAINTIFF TO "DEFENDANTS BIG-D CONSTRUCTION CORP AND BIG-D CONSTRUCTION CORP ­ CALIFORNIA' OPPOSITION TO LEPRINO S FOODS COMPANY' MOTION TO AMEND PLEADINGS" (DOCUMENT 95) S

Case 1:03-cv-02669-MSK-PAC

Document 102

Filed 08/05/2005

Page 2 of 11

Plaintiff Leprino Foods Company (" Leprino" or " Plaintiff" through its counsel, ), submits the following as its reply to " Defendants Big-D Construction Corp and Big-D Construction Corp-California' Opposition to Leprino Foods Company' Motion to s s Amend Pleadings"(" Response" ): PRELIMINARY STATEMENT 1. Leprino timely filed its Motion for Leave pursuant to the Court' Second s

Amended Scheduling Order on July 1, 2005. 2. In their Response, Defendants Big-D Construction Corp.-California and

Big-D Construction Corp. (collectively hereinafter referred to as " Big-D" only object to ) the portion of Leprino' Motion for Leave that relates to the addition of related entities as s defendants, i.e., Big-D Corporation and Big-D Capital Corp.1 They do not dispute any other parts of Leprino' Motion for Leave or any other part of Leprino' proposed s s Supplemental and Amended Complaint and, as such, the Court should deem the Motion for Leave confessed in all of those other respects. 3. The addition of Big-D Corporation and Big-D Capital Corp. is necessary, in

part, because of the conflicting information provided by Big-D in Defendants'Corporate Disclosure Statement and responses to Plaintiff' written discovery concerning the s identity of the parent business entity of Big-D Construction Corp.-California. Big-D even concedes that conflicting information on that issue was given to Leprino. Response at p. 4). (See

1

Leprino reminds the Court that Big-D filed its motion to add Marelich Mechanical Co., Inc. (" UMM" a ), completely unrelated party, just prior to the expiration of the previous deadline for adding additional parties and amending pleadings. Despite Leprino' objection, the Court allowed the addition of UMM. s

2

Case 1:03-cv-02669-MSK-PAC

Document 102

Filed 08/05/2005

Page 3 of 11

4.

Big-D states as its basis for opposing Leprino' Motion for Leave that s

Leprino' Supplemental and Amended Complaint is futile, because it would be subject s s to dismissal. (See Response at p. 1). Big-D' arguments center solely on the merits of the claims. As discussed more fully below, the issue of futility as outlined by Big-D cannot be resolved at this juncture. Depending on what facts develop through

discovery, Big-D will have the opportunity to raise and argue the merits of Leprino' s alter-ego allegations at a later time. COLORADO LAW SUPPORTS LEPRINO' JOINDER OF BIG-D CORPORATION S AND BIG-D CAPITAL CORP. AND ITS CLAIMS OF ALTER-EGO LIABILITY 5. Big-D' strained interpretation of the standard for adding parties and the s

applicable case law does not change the only proper ruling the Court can and should make, which is to grant Leprino' Motion for Leave and accept Leprino' Supplemental s s and Amended Complaint as filed. Leprino' Motion for Leave was filed pursuant to Fed. s R. Civ. P. 15 (a) and (d). Rule 15(a) provides that leave to amend shall be " freely given when justice so requires." The United States Supreme Court emphasized that the mandate of freely allowing leave to amend when justice requires is to be heeded by the Amendments of pleadings are courts. Foman v. Davis, 371 U.S. 178, 182 (1962). " liberally allowed in recognition of one of the basic policies of the rules of civil procedure- ` that pleadings are not an end in themselves, but are only a means to assist in the presentation of a case to enable it to be decided on the merits.' Pumpco, Inc. v. " Schenker Int' Inc., 204 F.R.D. 667, 669 (D. Colo. 2001) (internal citation omitted). l, 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. Frank v. U.S. West, 3

Case 1:03-cv-02669-MSK-PAC

Document 102

Filed 08/05/2005

Page 4 of 11

Inc., 3 F.3d 1357, 1365 (10th Cir. 1993). Moreover, when a motion for leave to amend is filed prior to the expiration of the Court' deadline for such amendments, such as s Leprino' Motion for Leave, it is governed by Fed. R. Civ. P. 15(a) and the movant is not s required to establish good cause sufficient to modify the scheduling order. Fernandez v. Bridgestone/Firestone, Inc., 105 F. Supp. 2d 1194, 1195 (D. Colo. 2000). 6. Fed. R. Civ. P. 15(d) provides that " [u]pon motion of a party the court may,

upon reasonable notice and upon such terms as are just, permit the party to serve a supplemental pleading setting forth transactions or occurrences or events which have happened since the date of the pleading sought to be supplemented." Big-D does not argue or even attempt to dispute the supplemental nature of the inconsistent information provided by Big-D concerning the identity of Big-D Construction Corp.-California' s parent entity, which necessitated, in part, Leprino' Motion for Leave. Accordingly, the s Court should deem the Motion to Leave conceded by Big-D and accept Leprino' s Supplemental and Amended Complaint as filed pursuant to Rule 15(d). 7. Big-D fails to accurately articulate Colorado law on piercing the corporate

veil. " When the corporate structure is used so improperly that the continued recognition of the corporation as a separate entity would be unfair, the corporate entity may be disregarded and corporate principals held liable for the corporation' actions." Micciche s v. Billings, 727 P.2d 367, 372-73 (Colo. 1986). Therefore, if it is shown that shareholders used the corporate entity as a mere instrumentality for the transaction of their own affairs without regard to separate and independent corporate existence, or for the purpose of defeating or evading important legislative policy, or in order to perpetrate a fraud or wrong on another, equity will permit the corporate form to 4

Case 1:03-cv-02669-MSK-PAC

Document 102

Filed 08/05/2005

Page 5 of 11

be disregarded and will hold the shareholders personally responsible for the corporation' improper actions. s Id. at 373. Thus, contrary to Big-D' contention, fraud is not a necessary element each s time a party seeks to impose liability under a alter-ego theory or seeks to pierce the corporate veil of a wrongdoing company. There are also ten different factors a court should consider when determining whether a subsidiary is an instrumentality of the parent corporation, which is primarily a question of fact. See Fish v. East, 114 F.2d 177, 191 (10th Cir. 1940), cited with approval in Friedman & Son, Inc. v. Safeway Stores, 712 P.2d 1128, 1131 (Colo. App. 1985). Accordingly, the Court cannot resolve Big-D' allegations regarding the futility of Leprino' Supplemental and Amended s s Complaint in relation to Leprino' Motion for Leave. s 8. An injustice would result if the Court does not allow Leprino to add Big-D

Corporation and Big-D Capital Corp. and to pursue liability against those entities by piercing the corporate veil. The principal action needs to resolve the alter-ego issues to prevent the parent entities from later arguing they were not afforded an opportunity to defend the litigation or from asserting a statute of limitations defense. 9. Contrary to Big-D' contention, Leprino' proposed Supplemental and s s

Amended Complaint sufficiently states a claim for piercing the corporate veil of Big-D Construction Corp.-California. The Federal Rules of Civil Procedure establish a liberal system of notice pleading. Applicable law only requires Leprino to give a short and plain statement of the claim showing that it is entitled to relief. See, e.g., Fed. R. Civ. P. 8(a). While fraud can be a reason for the corporate veil to be pierced, it is not the only reason. Additionally, Leprino does not have to plead fraud with particularity to 5

Case 1:03-cv-02669-MSK-PAC

Document 102

Filed 08/05/2005

Page 6 of 11

maintain its claims to pierce the corporate veil of Big-D Construction Corp.-California.2 Big-D and the related entities are well apprised of the claims against them and have been aware of the discovery that has transpired thus far in the case. 10. While Leprino' alter-ego liability claims against Big-D Capital Corp. and s

Big-D Corporation are sufficiently pleaded, in the event the Court determines that additional information is necessary, Leprino requests leave of Court to further supplement its alter-ego allegations. Interestingly, even though Leprino asserted claims of alter-ego liability against Big-D Construction Corp. in its original complaint and indicated its intent to pierce the corporate veil of Big-D Construction Corp.-California, prior to Big-D filing its Response, Big-D never raised any objection to the sufficiency of Leprino' pleadings. Only now, after two years of litigation and after Big-D' piecemeal s s disclosure of its corporate layers and identities, Big-D raises an objection concerning the pleading of the alter-ego liability. Considering Big-D' litigation of this case, Big-D s clearly had notice of, and understood, the theories of liability asserted. None of the BigD entities are prejudiced by the Court granting Leprino' Motion for Leave. There are s still several months remaining before the deadline for completion of discovery. BIG-D' CONFLICTING DISCLOSURES TO LEPRINO NECESSITATED, IN PART, S LEPRINO' MOTION FOR LEAVE S 11. In " Defendants' Responses to Plaintiff' First Set of Interrogatories and s

Second Set of Requests for Production of Documents and/or Tangible Things," Big-D identified Big-D Corporation, a Utah corporation, as the sole stockholder of Big-D

Big-D' citation to an unpublished case from the Southern District of New York is unpersuasive, nons binding and fails to change the notice pleading requirements of Colorado law.

2

6

Case 1:03-cv-02669-MSK-PAC

Document 102

Filed 08/05/2005

Page 7 of 11

Construction Corp.-California. However, in its corporate disclosure statement, Big-D identified Big-D Capital Corp. as the parent company of both Big-D Construction Corp.California and Big-D Construction Corp.3 Big-D admits that contradiction, which was raised to Big-D' counsel on June 30, 2005. While Big-D' response attempts to make s s a big deal about the filing of Big-D' corrected corporate disclosure statement prior to s the filing of Leprino' Motion for Leave, Big-D seems to ignore that both documents s were filed within an hour of each other on the afternoon of July 1, 2005. 12. Big-D argues that Leprino should be faulted and prejudiced for not alerting

Big-D to its inconsistent representations earlier; however, that assertion is disingenuous and merely an attempt by Big-D to shift blame from its own failures in making inconsistent representations. Big-D is the one that made the conflicting disclosures and Big-D should take responsibility for the inconsistency of its disclosures. 13. It is important to note that Big-D' conflicting disclosures as to the parent s

entity of Big-D Construction Corp.-California continue to this day. In its responses to Plaintiff' written discovery, Big-D identifies Big-D Corporation, a Utah corporation, as s the sole stockholder of Big-D Construction Corp.-California. In its corrected corporate disclosure statement filed on July 1, 2005, Big-D identifies Big-D Corporation, a corporation formed under the laws of the State of Wyoming as the parent entity. This type of piecemeal disclosure of conflicting information is one of the reasons underlying Leprino' Motion for Leave. s

3

If Big-D had timely filed a correct corporate disclosure statement as required by Fed. R. Civ. P. 7.1, instead of filing it approximately one and one half years late, this discrepancy could have been resolved earlier.

7

Case 1:03-cv-02669-MSK-PAC

Document 102

Filed 08/05/2005

Page 8 of 11

BIG-D' RESPONSE OTHERWISE FAILS TO PRESENT ANY JUSTIFICATION WHY S LEPRINO' MOTION FOR LEAVE SHOULD NOT BE GRANTED S 14. Big-D also asserts that Leprino' only reason for asserting alter-ego s

theories of liability against Big-D Construction Corp., Big-D Corporation, and Big-D Capital Corp. is to ensure its ability to collect a recovery. While Big-D contends this constitutes an improper reason, the ability to pierce the corporate veil ensures that stockholders are personally liable for corporate wrongdoing. Micciche v. Billings, 727 P.2d 367, 372-73 (Colo. 1986). Deliberate undercapitalization, when done for the

purpose of defeating a rightful claim, is one type of wrongdoing that piercing the corporate veil intends to vindicate. See Fish v. East, 114 F.2d 177, 191 (10th Cir. 1940). 15. Big-D' Response incorrectly cites to Lowell Staats Mining Co., Inc. v. s

Pioneer Uravan, Inc., 878 F.2d 1259, 1256 (10th Cir. 1989) for the proposition that possible difficulty in enforcing a judgment is not the type of injustice that warrants a piercing of the corporate veil. Big-D fails to acknowledge that Lowell Staats is actually citing to Luckett v. Bethlehem Steel Corp., 618 F.2d 1373, 1379 (10th Cir. 1980), which applies Oklahoma law, not Colorado law. 16. In its argument to prevent the addition of Big-D Capital Corp. as a

defendant, Big-D contends that Big-D Capital Corp. is the parent of Big-D Corporation, which prevents it from having a parent-subsidiary relationship with Big-D Construction Corp.-California.4 However, Big-D Capital Corp. as the sole owner of Big-D

4

Contrary to Big-D' assertion, Defendants' Response to Plaintiff' First Set of Interrogatories and s s Second Set of Requests for Production of Documents and/or Tangible Things do not identify Big-D

8

Case 1:03-cv-02669-MSK-PAC

Document 102

Filed 08/05/2005

Page 9 of 11

Corporation, which is the sole owner of Big-D Construction Corp.-California, can still be liable under an alter-ego theory. Multiple layers of hollow entities cannot thwart the piercing of corporate veils to remedy the wrongs inflicted on an aggrieved party. 17. Furthermore, Big-D improperly asks for affirmative relief from the Court in

its Response. First, Big-D asks the Court not add Big-D Capital Corp. as a defendant, because of the representations that Big-D Corporation is the parent company of Big-D Construction Corp.-California. However, as discussed above, Big-D Capital Corp. may still be liable under an alter-ego theory. Additionally, the question of why Big-D Capital Corp. was purportedly incorrectly identified as the parent company of Big-D Construction Corp.-California is a further topic of discovery, since Leprino believes that issue goes to Big-D' practice of ignoring corporate formalities all the way up the ladder s of its parents and subsidiaries. Second, Big-D asks the Court to dismiss Big-D However, discovery in the case has so far

Construction Corp. from the lawsuit.

revealed that the various Big-D entities and their representatives use the names of the Big-D entities interchangeably, orally and in writing. Specifically, Big-D Construction Corp.-California has been referred to as Big-D Construction Corp., and vice versa. The presence of Big-D Construction Corp. in this action is necessary to have a complete adjudication of the claims asserted against the various parties.

Capital Corp. as the parent entity of Big-D Corporation. Big-D' Response to the Motion for Leave is the s first time Big-D Capital Corp. was identified as the parent entity of Big-D Corporation. Again, here is an example of piecemeal information being provided to Leprino, which may be the basis for further supplementation and amendment of Leprino' pleadings. s

9

Case 1:03-cv-02669-MSK-PAC

Document 102

Filed 08/05/2005

Page 10 of 11

WHEREFORE, Plaintiff respectfully requests that the Court grant the Motion for Leave and accept Plaintiff' Supplemental and Amended Complaint and Jury Demand s as filed. Alternatively, if the Court deems that additional allegations are necessary as to the alter-ego issues, Leprino respectfully requests that the Court grant it leave to file a Supplemental Complaint to assert such allegations. Respectfully submitted this 5th day of August, 2005. LEPRINO FOODS COMPANY

By:

s/ Michael G. Bohn One of Its Attorneys Michael G. Bohn Bret M. Heidemann Campbell Bohn Killin Brittan & Ray, LLC 270 St. Paul Street, Suite 200 Denver, Colorado 80206 Telephone: (303) 322-3400 Facsimile: (303) 322-5800 [email protected] [email protected] Patrick T. Markham, Esq. Jacobson & Markham 8880 Cal Center Drive, #100 Sacramento, California 95826 Telephone: (916) 854-5969 Facsimile: (916) 854-5965 [email protected]

10

Case 1:03-cv-02669-MSK-PAC

Document 102

Filed 08/05/2005

Page 11 of 11

CERTIFICATE OF SERVICE I hereby certify that on the day 5th day of August, 2005, I electronically filed the foregoing REPLY OF PLAINTIFF TO "DEFENDANTS BIG-D CONSTRUCTION CORP AND BIG-D CONSTRUCTION CORP ­ CALIFORNIA' OPPOSITION TO LEPRINO S FOODS COMPANY' MOTION TO AMEND PLEADINGS" (DOCUMENT 95) with the S Clerk of Court using the CM/ECF system which will send notification of such filing to the following email addresses: Francis (Frank) J. Hughes [email protected] Patrick Quinn Hustead [email protected] Peter J. Ippolito [email protected] Richard Carl Kaufman [email protected] John David Mereness [email protected] Daniel James Nevis [email protected] and I hereby certify that I have served the document to the following non-CM/ECF participants by depositing said document in the United States mail, postage pre-paid, properly addressed to: Federal Insurance Company P.O.Box 1615 Warren, NJ 07061-1615 s/ Cori Atteberry Cori Atteberry, Legal Assistant