The Pelican cases inches forward, with Robert V. Brazell, Stephen Norris, Talos Partners, and Rama Ramachandran filing their Answer with Counterclaim [PDF] to Pelican's First Amended Complaint. The counterclaim alleges fraud. Pelican has quickly filed a motion to dismiss the counterclaim [PDF]. And Darl McBride has filed a Reply Memorandum of Law [PDF] in support of his motion to dismiss for lack of jurisdiction.
I call it inching forward because it's still in the preliminary maneuvering stage, as the case gels, with the defendants having now separated themselves into three distinct groups, as I'll show you. It's about trying to narrow things down, figuring out what really needs to go forward, if anything, and what -- or who -- can be pared away from the case.
Thanks to Google Scholar, which now lets you search for judicial rulings, you can look for the rulings in the cases cited. I think you'll find it is a lot easier to find decisions than in plain search. For example, here's
Lewis v. Rosenfeld. So have fun with that new research tool. Don't miss the advanced section. It's fun. They have only rulings, not complete dockets. Probably because rulings are free, I'm thinking, but whatever the reason, I'm really thrilled to see Google doing this.
Here are all the filings:
It is all very much lawyer jockeying for position by all sides. By all, I mean there is the plaintiff, Pelican Equity. Then the defendants have now grouped themselves into three separate entities, each with its own strategy. There is Darl, who just really would prefer not to even have to answer the complaint or have anything to do with this NY case. So his lawyers are arguing jurisdiction.
11/13/2009 - 35 - ANSWER to Amended Complaint., COUNTERCLAIM against Pelican Equity, LLC. Document filed by Robert V. Brazell, Stephen L. Norris, Talos Partners, LLC, Rama Ramachandran. Related document: 30 Answer to Amended Complaint, Counterclaim,, filed by Talos Partners, LLC, Stephen L. Norris, Rama Ramachandran, Robert V. Brazell.(Ringer, James) (Entered: 11/13/2009)
11/13/2009 - 36 - REPLY MEMORANDUM OF LAW in Support re: 26 MOTION to Dismiss for Lack of Jurisdiction.. Document filed by Darl McBride. (Niehaus, Paul) (Entered: 11/13/2009)
11/14/2009 - 37 - NOTICE OF CHANGE OF ADDRESS by Kevin Patrick
McBride on behalf of Darl McBride. New Address: McBride Law, PC, [address, phone]. (McBride, Kevin) (Entered: 11/14/2009)
11/17/2009 - 38 - MOTION to Dismiss Counterclaim. Document filed by Pelican Equity, LLC. Responses due by 11/24/2009(Altman, Steven) (Entered: 11/17/2009)
11/17/2009 - 39 - DECLARATION of Eric Rosenberg in Support re: 38 MOTION to Dismiss Counterclaim.. Document filed by Pelican Equity, LLC. (Attachments: # 1 Exhibit A: Complaint, # 2 Exhibit B: Answer, # 3 Exhibit C: Amended Complaint, # 4 Exhibit D: Answer and Counterclaim, # 5 Exhibit E:Letter to Court, # 6 Exhibit F: Answer and Amended Counterclaim)(Altman, Steven) (Entered: 11/17/2009)
11/17/2009 - 40 - MEMORANDUM OF LAW in Support re: 38 MOTION to Dismiss Counterclaim.. Document filed by Pelican Equity, LLC. (Altman, Steven) (Entered: 11/17/2009)
11/18/2009 - 41 - REPLY MEMORANDUM OF LAW in Support re: 31 MOTION to Dismiss Plaintiff's First Amended Complaint.. Document filed by Bryan Cave LLP. (Harper, Gerard) (Entered: 11/18/2009)
11/20/2009 - 42 - NOTICE of Motion and Declaration of James E. Nesland to Withdraw as Co-Counsel for Plaintiff Pelican Equity LLC. Document filed by Pelican Equity, LLC. (Attachments: # 1 Exhibit A)(Nesland, James) (Entered: 11/20/2009)
11/20/2009 - 43 - MOTION for James E. Nesland to Withdraw as Attorney For Plaintiff Pelican Equity LLC. Document filed by Pelican Equity, LLC. (Attachments: # 1 Text of Proposed Order)(Nesland, James) (Entered: 11/20/2009)
Then there is the law firm that Pelican is accusing of various things, including malpractice. It has also filed a motion to dismiss [PDF] just with respect to the firm, arguing that it didn't know anything about what was happening, so it really can't be part of any conspiracy. They are relying on Iqbal if you recall, among other things.
And then there are the
'Talos defendants', as Pelican calls them, all the rest of the defendants, who share legal counsel and one strategy. They are the ones raising the counterclaim, and so far they are the only ones who can, because they are unique in actually answering the complaint. If the motions to dismiss are not granted, then the others, no doubt, will cook up some counterclaims too. But this is where things stand for now. With all sides trying, in essence, to figure out who actually has to do what and what is the case really going to be about.
Mainly, the arguments are about elements. What's that? Well, if you want to accuse someone of fraud, you have to claim that the person did all the things that are required to state a claim for fraud. Those things that have to be part of what you claim they did are called the elements. It's sort of like touching all the bases in baseball. You don't get the home run if you didn't touch second base.
For example, there are elements for fraud.
Pelican says the counterclaim against it for fraud should be dismissed, on the basis that the Talos defendants haven't touched all the bases, so to speak. Darl is doing the same thing, saying he can't be dragged into this because Pelican hasn't demonstrated that he's done all the things one has to do to get dragged from Utah to litigation in New York State, and Pelican is saying the exact opposite.
Remember when the Talos guys claimed in their answer to the complaint that Pelican was guilty of fraud and that the litigation was part of the con? Pelican uses that to point out that if so, it's fatal to their counterclaim of fraud, in that one element of establishing a claim for fraud is reliance on whatever the fraudster said. There could be no reliance by the defendants on anything said by Pelican in the litigation, Pelican says, and no damages either, and both elements, among others, are required to sustain a claim of fraud.
If the court agrees with Darl, he gets cut free by New York, but he could conceivably be sued in Utah. If the court agrees with Bryan Cave, the law firm, they get out, period. But if the court agrees with neither, then they'll be in the same boat as the Talos people, and each will have to answer the complaint, and that is when we will finally find out if Darl really did put up that skylinecowboy.com smear site.
Even trying to figure out how to explain it all is complicated, because the law is complicated, and there are so many parties and several different strategies. I thought the best way would be to show you a couple of rulings in some other cases, where the court explained how these types of allegations are handled in New York State, where this litigation is beginning. And since I know you are more interested in Darl McBride than the others, I will focus on that one piece.
If you recall, McBride is arguing about jurisdiction, claiming he has no ties to New York and had no reason to think that anything he's ever done would get him sued there. Here's a ruling in a case titled In Re: Terrorist Attacks on September 11, 2001 [PDF] which goes into jurisdictional requirements. The ruling in that case sets forth what you have to do if a New Yorker wants to sue a non-New Yorker, beginning on page 12. It explains that New York State has what is called the long-arm statute, C.P.L.R. 302(a)(2) which provides for personal jurisdiction over a person who commits a "tortious act" within New York State. I explained it a bit earlier. It's a law that makes sure that if you travel to that state and defraud a resident there, you can't run to Utah or any other state as if you'd crossed the border to Mexico and were now unreachable. If you saw the movie, The Shawshank Redemption, you'll know what I mean. Remember the ending, on the beach in Mexico, with the stolen money? New York's long-arm statute was devised to at least make you reachable in any state, provided certain elements are in the picture.
Now, the ruling in In Re: Terrorist Attacks explains that the tortious conduct can be by you or by your agent, and a co-conspirator can be considered your agent. So if you are part of a conspiracy, if anyone else in the conspiracy commits a tortious act against a New York person, that person can sue you too, even though you didn't do it personally. Naturally, that is Pelican's position with respect to Darl. Darl's position, naturally, is that it's up to Pelican to establish that there even was a conspiracy and that he was part of it, which he holds they have failed to do.
Here are the elements to plead conspiracy in New York, again from that ruling:
"To plead a valid cause of action for conspiracy... a plaintiff must allege the primary tort and four elements: '(a) a corrupt agreement between two or more persons, (b) an overt act in furtherance of the agreement, (c) the parties' intentional participation in the furtherance of a plan or purpose, and (d) the resulting damage or injury.'" Chrysler Capital Corp., 778 F. Supp. at 1267 (quoting Kashi v. Gratsos, 790 F.2d 1050, 1055 (2d Cir. 1986)). Further, "[t]o warrant the inference that a defendant was a member of the conspiracy, Plaintiffs must show that '(a) the defendant had an awareness of the effects in New York of its activity; (b) the activity of the co-conspirators in New York was to the benefit of the out-of-state conspirators; and (c) the co-conspirators acting in New York acted 'at the direction or under the control' of or 'at the request of or on behalf of' the out-of-state defendant." You will see how Darl's attorneys handle these elements, claiming Pelican has failed to prove them adequately. In addition to these elements, the person must have had minimum contacts with the state and jurisdiction must be reasonable, harmonious with the Constitution's Fourteenth Amendment's due process standards. That is explained more fully on page 13 onward. So, hopefully when you read the Darl filing, you'll know why he is saying what he is saying.
But Pelican is the plaintiff, remember, and so that means that in any motion to dismiss his complaint it's all tilted in his favor, as that court explained in its decision on page 19, that a complaint can be dismissed "only if it appears beyond doubt" that a plaintiff "can prove no set of facts" that would entitle him to relief. Of course, that is now subject to the Iqbal standard, which is exactly why Bryan Cave cited it. I'm explaining this to you, or actually letting the court decision do so, but all the lawyers in the Pelican case know that these are the elements. When they draft a complaint or a motion to dismiss, they aren't just saying anything that happens to pop into their head. They are trying to touch all the bases by demonstrating either that all the elements necessary to state a claim are provided adequately, or on the other side, that some needed element is missing. As you read the documents, you'll see those patterns now.
And here, from the opinion in another New York case Fezzani v. Bear Stearns [PDF], a case alleging fraud, although unsuccessfully, we find out what the standard is for a motion to dismiss and some specifics about civil conspiracy claims in New York State:
A. Motion to Dismiss Standard You'll see Pelican uses the elements needed to succeed with a civil conspiracy claim in its motion to dismiss the counterclaim, as does McBride in reverse in his filing.
The Defendants have moved to dismiss the complaint. On a motion to dismiss, the Court
must accept as true the factual allegations in the complaint, and must draw all inferences in the
plaintiffs favor. See Allaire Corp. v. Okumus, 433 F.3d 248, 249-50 (2d Cir. 2006). To survive
dismissal, a complaint must plead enough facts to be plausible on its face. Ruotolo v. City of
New York, 514 F.3d 184, 188 (2d Cir. 2008) (citing Bell Atlantic Corp. v. Twombly, 127 S. Ct.
1955, 1974 (2007)). The Court may dismiss a claim where it "appears beyond doubt" that the
plaintiff can prove no facts that would entitle him to relief. Allen v. WestPoint-Pepperell, Inc.,
945 F.2d 40, 44 (2d Cir. 1991) (citation omitted)....
C. The Elements of the Causes of Action Alleged in the Amended Complaint....
ii. Common Law Fraud
To state a claim for fraud under New York law, a plaintiff must allege "a material, false representation, an intent to defraud thereby, and reasonable reliance on the representation, causing damage to the plaintiff." May Dept. Stores Co. v. Int'l Leasing Corp., Inc., 1 F.3d 138, 141 (2d Cir. 1993)....
iii. Civil Conspiracy to Defraud
While New York law does not contain an actionable tort of conspiracy alone, a plaintiff
may still plead the tort of civil conspiracy "in order to connect someone to an otherwise
actionable tort committed by another and establish that those actions were part of a common
scheme." Lewis v. Rosenfeld, 138 F. Supp. 2d 466, 479 (S.D.N.Y. 2001). Thus, to state a claim
for conspiracy a plaintiff must allege both a primary tort and also show the four elements of a
conspiracy, namely: "(1) a corrupt agreement between two or more parties; (2) an overt act in
furtherance of the agreement; (3) the parties' intentional participation in the furtherance of a plan
or purpose; and (4) resulting damage or injury." Best Cellars Inc. v. Grape Finds at Dupont, Inc.
90 F. Supp. 2d 431, 446 (S.D.N.Y. 2000)....
Under New York law, there is no claim for civil conspiracy. Rosenfeld, 138 F. Supp. 2d at 479.
The alleged conspiracy must connect the actions of separate defendants with an otherwise actionable tort. Id. The tort here is clearly for fraud. One of the four elements that plaintiffs
must show to allege a conspiracy is that Bear Stearns took an overt act in furtherance of the
conspiracy. Best Cellars Inc., 90 F. Supp. 2d 446...
To state a proper claim the plaintiff must allege both a
primary tort and also show the four elements of a conspiracy: "(1) a corrupt agreement between
two or more parties; (2) an overt act in furtherance of the agreement; (3) the parties' intentional
participation in the furtherance of a plan or purpose; and (4) resulting damage or injury." Best Cellars, 90 F. Supp. 2d at 446....
A plaintiff may only plead the tort of civil conspiracy where the plaintiff can allege a
primary tort and also show the four elements of a conspiracy: (1) a corrupt agreement between
two or more parties; (2) an overt act in furtherance of the agreement; (3) the parties' intentional
participation in the furtherance of a plan or purpose; and (4) resulting damage or injury. See
Chrysler Capital Corp. v. Century Power Corp., 778 F. Supp. 1260, 1267 (S.D.N.Y. 1991).
If you look at the case referenced, Best Cellars, it talks about jurisdiction also:
Best Cellars maintains, however, that the Court has jurisdiction over the defendants pursuant to New York's long-arm statute, N.Y. C.P.L.R. § 302(a), which provides in pertinent part: With this background, if you've read this first, I think you'll find reading the filings more meaningful and hopefully more interesting. I think the part McBride might worry about is this bit:
As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary ... who in person or through an agent:
The jurisdictional test must be met for each cause of action asserted. See N.Y. C.P.L.R. § 302(c)....
1. transacts any business within the state or contracts anywhere to supply goods or services in the state; or
2. commits a tortious act within the state ...; or
3. commits a tortious act without the state causing injury to person or property within the state .... if he
(i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or
(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce ....
Section 302(a)(2) requires a non-resident domiciliary to have purposely committed a tortious act while he or she -- or his or her agent -- is physically present in New York State. See Bensusan, 126 F.3d at 28-29. An "articulable nexus" must also exist between the act and the claim asserted. McGowan v. Smith, 52 N.Y.2d 268, 272, 437 N.Y.S.2d 643, 645, 419 N.E.2d 321, 323 (1981).
The term "agent" in § 302(a)(2) has customarily been interpreted fairly broadly, see Grove Press, Inc. v. Angleton, 649 F.2d 121, 122 (2d Cir. 1981), and has been held to include co-conspirators, see, e.g, American Broad. Co. v. Hernreich, 338 N.Y.S.2d 146, 148, 40 A.D.2d 800, 801 (1st Dep't 1972); Cleft of the Rock Found. v. Wilson, 992 F. Supp. 574, 581 (E.D.N.Y. 1998); Chrysler Capital Corp. v. Century-Power Corp., 778 F. Supp. 1260, 1266 (S.D.N.Y. 1991) (citing Lehigh Valley Indus., Inc. v. Birenbaum, 389 F. Supp. 798, 806-07 (S.D.N.Y. 1975), aff'd, 527 F.2d 87 (2d Cir. 1975)). "[A]cts committed in New York by the co-conspirator of an out-of-state defendant pursuant to a conspiracy may subject the out-of-state defendant to jurisdiction under CPLR 302(a)(2)." Id.; see Andre Emmerich Gallery, Inc. v. Segre, No. 96 Civ. 889 (CSH), 1997 WL 672009, at *5-6 (S.D.N.Y. Oct. 29, 1997).
To establish jurisdiction over a nonresident defendant on the basis of the New York acts of a co-conspirator, the plaintiff must: (1) establish a prima facie case of conspiracy; (2) allege specific facts warranting the inference that the defendant was a member of the conspiracy; and (3) demonstrate the commission of an overt act in New York during, and pursuant to, the conspiracy. See Allstate Life Ins. Co. v. Linter Group Ltd., 782 F. Supp. 215, 221 (S.D.N.Y. 1992); Chrysler Capital, 778 F. Supp. at 1266.
Under New York law, a prima facie showing of a conspiracy requires allegation of a primary tort and four additional elements: (1) a corrupt agreement between two or more parties; (2) an overt act in furtherance of the agreement; (3) the parties' intentional participation in the furtherance of a plan or purpose; and (4) resulting damage or injury. See Chrysler Capital, 778 F. Supp. at 1267 (citing Kashi v. Gratsos, 790 F.2d 1050, 1055 (2d Cir. 1986)).
The requisite relationship between the defendant and its New York co-conspirators is established by a showing that "(a) the defendant had an awareness of the effects in New York of its activity; (b) the activity of the co-conspirators in New York was to the benefit of the out-of-state conspirators; and (c) the co-conspirators acting in New York acted 'at the direction or under the control,' or 'at the request of or on behalf of the out-of-state defendant." Chrysler Capital, 778 F. Supp. at 1268-69 (quoting Dixon v. Mack, 507 F. Supp. 345, 350 (S.D.N.Y. 1980)).
A plaintiff ultimately bears the burden of establishing jurisdiction over a defendant by a preponderance of the evidence. See Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990); Levisohn, Lerner, Berger & Langsam, 10 F. Supp. 2d at 338-39. With respect to proving a civil conspiracy, Best Cellars' evidentiary burden is more specifically set forth as follows:
As persons do not generally proclaim to the world their evil intentions and designs a conspiracy can rarely be established by direct proof; the law is not insensible to this problem and it recognizes realities; it therefore permits a conspiracy to be shown by circumstantial evidence. This is but a role of necessity; even so, neither conjecture, surmise, nor suspicion can take the place of evidence. The rule carries no such implication or dispensation and the rule permitting proof of a conspiracy by means of circumstantial evidence is but the adoption of a formula that if from an established set of circumstances a fair and reasonable inference or deduction may be drawn as indicating the existence of a fact, it may be considered as proof of the fact.
Cooper v. Maurer, 37 N.Y.S.2d 992, 996 (N.Y. Sup. Ct. 1942); see also Cofacredit, S.A. v. Windsor Plumbing Supply Co., 187 F.3d 229, 240 (2d Cir. 1999) ("As is true in criminal conspiracies, agreements in civil conspiracies will not easily be shown by direct evidence, but may be inferred from circumstantial evidence.")....
C.P.L.R. § 302(a)(3) requires commission of a tortious act outside New York State which causes injury within the State. Additionally, under the prong of § 302(a)(3)(ii), the defendant must expect that the tort will have consequences in the State, and the defendant must derive substantial revenue from interstate commerce.
"[A]cts committed in New York by the co-conspirator of an out-of-state defendant pursuant to a conspiracy may subject the out-of-state defendant to jurisdiction under CPLR 302(a)(2)."
What does it mean, finally, that one of Pelican's lawyers, James Nesland, is leaving? I don't know. The firm that signs all the Pelican documents since the original complaint was filed in June is a New York firm, Altman & Co., and Nesland is in Colorado. He filed a Notice of Appearance as co-counsel in August, but the Altman attorneys continued to sign all the documents, without Mr. Nesland, that I could see in a quick look. So, while there are many possibilities, I think the most likely is that they thought they might need to do something out West, and now they don't think it's going to be needed.
When a lawyer quits, it can be for many other reasons, so I'm just guessing. It could be something personal. Remember in the IBM case where several Boies Schiller lawyers ended up leaving the firm and so had to leave the case? So it could be something like that. Or it could mean he isn't so crazy about representing the client any more, maybe because something has cropped up that creates a conflict of interest or the client won't accept his advice. I noticed that a lawyer in Georgia was sent to jail by a judge for showing up deliberately unprepared because her client in a murder case hadn't paid her, so I think we can assume that isn't the reason here. Or if it were about payment, it would be camouflaged. The client raised no objection, and he still has his New York law firm, so he continues to have representation, which is what the court will care about. And that's the last thing I can think of that it could mean, that the New York and Colorado lawyers don't agree on a strategy, and the client likes the New York firm's strategy better, and so the Colorado guy feels he might as well leave. Whatever the reason is, the court will likely let him. But did you notice that he has to get court approval? Lawyers can't just get in a snit and walk off.
Well. Not without consequences.
Update: The court has granted Mr. Nesland's motion to withdraw, and the Talos defendants have filed their opposition to the motion to dismiss their counterclaim:
11/24/2009 - 44 - ORDER GRANTING MOTION TO WITHDRAW: It is hereby ordered that pursuant to Local Civil Rule 1.4 of the Southern District of New York, the Motion of is granted and James E. Nesland is no longer counsel of record for Plaintiff Pelican Equity, LLC in this action. (Signed by Judge Naomi Reice Buchwald on 11/23/2009) (jpo) (Entered: 11/24/2009)
11/24/2009 - 45 - MEMORANDUM OF LAW in Opposition re: 38 MOTION to Dismiss Counterclaim.. Document filed by Robert V. Brazell, Stephen L. Norris, Talos Partners, LLC, Rama Ramachandran. (Blair, Jeanette) (Entered: 11/24/2009)
11/24/2009 - 46 - DECLARATION of James M. Ringer in Opposition re: 38 MOTION to Dismiss Counterclaim.. Document filed by Robert V. Brazell, Stephen L. Norris, Talos Partners, LLC, Rama Ramachandran. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D)(Blair, Jeanette) (Entered: 11/24/2009)