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Adams v. Klein

United States District Court, D. Delaware

August 30, 2019

MARK ADAMS, AV SELECT INVESTMENTS, LLC, DR. GREGORY SIMONIAN, WADE HARTMAN, and FRANK EDWARD SMITH, Plaintiffs,
v.
JOHN H. KLEIN, Defendant.

          MEMORANDUM ORDER

         Presently before me are Plaintiff Mark Adams' Motion to Dismiss Counterclaims (D.I. 18) and Plaintiffs' Motion for Leave to File Amended Complaint and Join Additional Defendant (D.I. 41). The Parties have briefed the issues. (D.I. 19, 30, 36, 41, 50). For the reasons discussed below, I will grant-in-part and deny-in-part Plaintiff Adams' Motion to dismiss and I will grant Plaintiffs' motion to amend the complaint.

         I. Background

         Cambridge Therapeutic Technologies ("CTT"), a Delaware corporation and successor to Cambridge Therapeutic Technologies NJ, was founded by Defendant John Klein. (D.I. 1 at ¶¶ 20-21, 34). Mr. Klein formed CTT in 2011 for the purpose of developing and commercializing "Compliance PACs," which are" calendarized dosing packs for individual combinations of generic prescription medications that are typically prescribed together." (Id. at ¶¶ 21-22). Mr. Klein served as CTT's CEO. (Id. at ¶ 19). In December 2017, CTT's board of managers, by written consent, terminated Mr. Klein's five-year employment agreement "for cause." (Id. at ¶ 143; D.I. 9 at CC ¶¶ 62-63). The Board's specific rationale for its "for cause" determination was not mentioned in the written consent document. (D.I. 9 at CC ¶ 65). Mr. Klein was replaced as CEO by Plaintiff Adams. (D.I. 1 at¶ 146).

         The Complaint, filed on August 27, 2018, alleges claims related to allegations that Mr. Klein solicited investments from Plaintiffs in furtherance of "a fraudulent Ponzi scheme." (Id. at ¶ 1). In response, Mr. Klein filed an Answer responding to those claims and raised two counterclaims against Plaintiff Adams. (D.I. 9). Specifically, Mr. Klein alleges counts of abuse of process and tortious interferences against Mr. Adams. (Id. at CC ¶¶ 78-98).

         II. Legal Standard

         A. Motion to Dismiss for Failure to State a Claim

         When reviewing a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the Court must accept the complaint's factual allegations as true. See Bell Ail. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007). Rule 8(a) requires "a short and plain statement of the claim showing that the pleader is entitled to relief." Id. at 555. The factual allegations do not have to be detailed, but they must provide more than labels, conclusions, or a "formulaic recitation" of the claim elements. Id. ("Factual allegations must be enough to raise a right to relief above the speculative level... on the assumption that all the allegations in the complaint are true (even if doubtful in fact)."). Moreover, there must be sufficient factual matter to state a facially plausible claim to relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The facial plausibility standard is satisfied when the complaint's factual content "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. ("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." (internal quotation marks omitted)).

         B. Amendment

         Under Federal Rule of Civil Procedure 15(a)(2), Plaintiffs may amend their pleading with the court's leave. The "grant or denial of an opportunity to amend is within the discretion of the District Court. . . ." Shane v. Fauver, 213 F.3d 113, 115 (3d Cir. 2000). A court should "freely give leave when justice so requires." Fed.R.Civ.P. 15(a)(2). "Amendment, however, is not automatic." Szubielski v. Pierce, 152 F.Supp.3d 227, 232 (D. Del. 2016). Leave to amend may be denied upon a showing of "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of the allowance of the amendment, futility of amendment, etc." Foman v. Davis, 371 U.S. 178, 182 (1962). "Futility of amendment occurs when the complaint, as amended, does not state a claim upon which relief can be granted." Szubielski, 152 F.Supp.3d at 233.

         III. Analysis

         A. Motion to Dismiss Counterclaims

         Plaintiff Adams moves to dismiss each of Mr. Klein's counterclaims for failure to state a claim. (D.I. 19 at 9-15). I will grant Mr. Adams' motion as to the abuse of process claim and deny his motion as to the tortious interference claims.

         1. Abuse of Process Claim

         Mr. Klein has failed to state a claim of abuse of process. "[T]he essential elements of the tort are: 1) an ulterior purpose; and 2) a wi[l]lful act in the use of the process not proper in the regular conduct of the proceedings." Nix v. Sawyer,466 A.2d 407, 412 (Del. Super. Ct. 1983). "Some form of coercion to obtain collateral advantage, not properly involved in the proceeding itself, must be shown, such as obtaining the surrender of property or the payment of money by the use of the process as a threat or club. In other words, a form of extortion is required." Korotki v. Hiller & Arban, LLC, 2016 WL 3637382, at *2 (Del. Super. Ct. July 1, 2016). An abuse of process claim can arise only by showing a "perversion" of the process itself. Preferred Inv. Servs., Inc. v. T& H Bail Bonds, Inc., 2013 WL 3934992, at *23 (Del. Ch. July 24, 2013), aff'd sub nom. Preferred Inv. Servs., Inc. v. T & H Bail Bond, ...


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