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Enslein v. Di Mase

United States District Court, W.D. Missouri, Western Division

July 21, 2017

JERALD S. ENSLEIN, in his capacity as Trustee for Xurex, Inc., Plaintiff,
v.
GIACOMO E. DI MASE, et al., Defendants.

          ORDER AND OPINION (1) DENYING DEFENDANT DIETMAR ROSE'S MOTION TO DISMISS, AND (2) DENYING DEFENDANT LEE KRAUS'S MOTION TO DISMISS.

          ORTRIE D. SMITH, SENIOR JUDGE UNITED STATES DISTRICT COURT.

         Pending are Defendant Dietmar Rose's (“Rose”) motion to dismiss (Doc. #25), and Defendant Lee Kraus's (“Kraus”) motion to dismiss (Doc. #20). Both motions are denied.

         I. BACKGROUND

         Plaintiff, acting as bankruptcy trustee for Xurex, Inc., initially filed an adversary proceeding in the underlying bankruptcy proceeding, but the reference was withdrawn and the matter is now pending before this Court. Plaintiff brings several claims against Defendants stemming from the breach of contracts for minimum purchases of Xurex's products, misappropriation of Xurex's trade secrets, breaches of fiduciary duties owed by Defendants to Xurex, aiding and abetting breaches of fiduciary duties, and a civil conspiracy to engage in unlawful conduct. Faced with motions to dismiss, the Court will broadly describe the events leading to Xurex's bankruptcy filing and this lawsuit, and will provide more detail regarding the moving parties' involvement where necessary below.

         Xurex, a Delaware corporation with its principal place of business in Jackson County, Missouri, was in the business of developing, manufacturing, and selling anti- corroision and anti-abrasion chemicals primarily used in the oil and gas industry.[1] After Defendant Joseph Johnston developed a way to commercialize Xurex's technology, Johnston formed DuraSeal Pipe Coatings Company LLC (“DuraSeal Pipe”), which is also a defendant in this matter. Xurex entered into an agreement with DuraSeal Pipe in January 2010 by which DuraSeal Pipe became the exclusive licensee for use of Xurex's technology in North American oil and gas operations. Later that year, Defendant Jose Di Mase learned of Xurex's technology and subsequently acquired DuraSeal Pipe and Johnston's interest in Xurex. Jose Di Mase then created an entity named DuraSeal Holdings S.r.L (“DuraSeal Holdings”), also a defendant, with which Xurex entered into an agreement in December 2010 that made DuraSeal Holdings the exclusive worldwide licensee for applications of Xurex's technology in the oil and gas, automotive, and aerospace industries.[2] Each agreement provided for certain minimum purchases of Xurex's products, and provided royalty payments to Xurex for use of its technology.

         Plaintiff alleges Jose Di Mase used his control of the DuraSeal entities and interest in Xurex to gain control of Xurex's board of directors via litigation in Delaware in 2011. According to Plaintiff, these directors, including Defendants Johnston, Rose, and Robert Olson, then amended prior Xurex agreements with DuraSeal entities, in January 2012, in a manner that financially disadvantaged Xurex, and curtailed Xurex's ability to protect its trade secret information from the DuraSeal entities. Plaintiff alleges these amendments were done at the direction of Jose Di Mase in an effort to cause Xurex to shut down its operations and transfer its assets, rights, and operations to the DuraSeal entities. Following the amendments, Xurex's facility in Albuquerque, New Mexico, was shut down sometime in the spring of 2012, and its operations were relocated to DuraSeal Pipe's facility in Kansas City, Missouri.

         In August or September 2012, Jose Di Mase attempted to purchase Xurex in its entirety, but the offer was rejected by the Xurex board of directors. DuraSeal Pipe filed a declaratory judgment action in Delaware, which allowed Jose Di Mase to gain full control over Xurex by the summer of 2013, and install yet another set of members on the board of directors that included Defendants Giacomo Di Mase (Jose's son), Leonard Kaiser, Tristram Jensvold, and Steve McKeon. At this time, Plaintiff alleges Xurex was no longer manufacturing its own product; rather, DuraSeal Pipe was improperly manufacturing the products itself or outsourcing production to a third party. Plaintiff also alleges Jose Di Mase controlled the boards of the DuraSeal entities, and installed Kraus as a member of both boards.

         Plaintiff alleges the boards of Xurex and the DuraSeal entities conspired to declare Xurex's technology ineffective, shut down Xurex's production lab, cause Xurex to assume liabilities for legal fees and judgments unrelated to its operations, and wrongfully obtain Xurex's lab book, source code, and trade secrets. Finally, in September 2014, Xurex and the DuraSeal entities entered into another contract amendment that “completely eliminated” the DuraSeal entities' obligations to Xurex under prior agreements, ultimately causing Xurex to file for Chapter 7 bankruptcy protection.

         Defendants Rose and Kraus move to dismiss Plaintiff's claims against them. Rose was a member of Xurex's board of directors from approximately September 2011 to June 2013. Since 2013, Kraus has been a member of the board of directors for both DuraSeal entities, and has served as DuraSeal Pipe CEO. Rose and Kraus argue Plaintiff failed to state a claim upon which relief can be granted.

         II. STANDARD

         The liberal pleading standard created by the Federal Rules of Civil Procedure requires Aa short and plain statement of the claim showing that the pleader is entitled to relief.” Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per curiam) (quoting Fed.R.Civ.P. 8(a)(2)). “Specific facts are not necessary; the statement need only 'give the defendant fair notice of what the…claim is and the grounds upon which it rests.'” Id. (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In ruling on a motion to dismiss, the Court Amust accept as true all of the complaint's factual allegations and view them in the light most favorable to the Plaintiff[ ].” Stodghill v. Wellston Sch. Dist., 512 F.3d 472, 476 (8th Cir. 2008).

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

In keeping with these principles a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume ...

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