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Solid Q Holdings LLC v. Arenal Energy Corp.

United States District Court, D. Utah, Central Division

May 23, 2017

SOLID Q HOLDINGS, LLC, Plaintiff,
v.
ARENAL ENERGY CORPORATION; RICHARD REINCKE; ERIC JOHNSON; BRIAN CHAPLIK; GUS SHOUSE; TOM BUIEL; and CHRIS COTA, Defendant.

          MEMORANDUM DECISION AND ORDER DENYING [64] MOTION TO RECONSIDER

          David Nuffer District Judge

         District Judge David Nuffer Defendant Richard Reincke moves for reconsideration of an earlier motion.[1] Plaintiff Solid Q Holdings, LLC (Solid Q), responds in opposition.[2] Reincke did not reply in support of his motion and the time for doing so has expired.[3]

         Because the forum selection clause does not cover securities law claims and because Solid Q sufficiently alleged fraud under the securities laws, the Motion to Reconsider is DENIED.

         BACKGROUND

         Solid Q filed suit in the Fourth Judicial District Court in the State of Utah on August 1, 2013 (State Complaint).[4] The State Complaint brings four causes of action against Arenal Energy Corporation, Richard Reincke, Eric Johnson, and Lars Johnson.[5] The first cause of action is against Arenal for breach of the Promissory Note (Note).[6] The second cause of action is against Reincke and Eric Johnson for breach of the Note.[7] And the third and fourth causes of action are against the individual defendants for, respectively, civil conspiracy[8] and fraud.[9]

         This federal case (Federal Complaint) has three causes of action.[10] The first, for violation of § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5;[11] the second, for control person liability under § 10(b) and Rule 10b-5;[12] and the third, for Utah securities violations.[13]

         Reincke filed a Motion to Dismiss[14] the Federal Complaint. In the Motion, Reincke argued that a forum selection clause in the Note requires “any disputes to be heard exclusively within [Utah] state court, not federal court.”[15] Reincke argues that all three securities claims must be heard by a Utah state court. The forum selection clause states:

This Note will be governed by, construed and enforced in accordance with federal law and the laws of the State of Utah. Jurisdiction shall lie exclusively within the courts of the State of Utah.[16]

         The Memorandum Decision and Order Denying [54] Motion to Dismiss (Order) reviewed relevant Utah case law, and determined that the phrase “[t]his Note” limited the scope of the forum selection clause to actions related to the Note itself (i.e. contractual claims) and therefore did not apply to Solid Q's securities claims.[17]

         DISCUSSION

         Reincke makes numerous arguments for reconsideration of the Motion to Dismiss. Solid Q refutes most of Reincke's arguments on their substance. Solid Q also argues that Reincke's arguments are procedurally flawed because they rehash arguments already considered in the Order.

         “A motion for reconsideration is appropriate where the court has misapprehended the facts, a party's position, or the controlling law.”[18] They are “inappropriate vehicles to reargue an issue previously addressed by the court when the motion merely advances new arguments, or supporting facts which were available at the time of the original motion.”[19] In short, “[a]bsent extraordinary circumstances . . ., the basis for the second motion must not have been available at the time the first motion was filed.”[20]

         Solid Q is correct.[21] Much of Reincke's Motion is an attempt to reargue issues previously addressed. Notwithstanding, even when the issues are considered anew, the outcome does not change.

         1. Baldwin does not apply.

         Reincke argues that, similar to Baldwin v. Aviva Life & Annuity Company, [22] the forum selection clause in this case covers tort claims.[23] Solid Q argues that Baldwin does not apply.[24]

         Baldwin is distinguishable in important ways.[25] The forum selection clause in Baldwin stated that “‘any and all disputes which may arise with respect to this Contract' are to be litigated in the ‘District Court of Polk County, Iowa.'”[26] The court determined that the clause in question was “sufficiently broad” to cover tort claims.[27]

         “This Note”[28] is narrower than “any and all dispute.” As previously held, it is not sufficiently broad to include securities claims.[29] And this clause states that jurisdiction of actions on the Note-presumably that seek to govern, construe and enforce it-are to be brought in Utah state courts, while the Baldwin clause embraced “disputes which may arise with respect to this Contract.” “[D]isputes . . . with respect to” a document may extend beyond actions to govern, construe and enforce. Therefore, Solid Q is not required by Baldwin to submit its securities claims in a Utah state court.

         2. The “Default” provision does not expand the scope of the forum selection clause.

         Referring to the Default provision in the Note, Reincke argues that Solid Q's securities claims arise out of the Note because the

Note IS the security on which Plaintiff's [sic] base their [sic] federal and state securities claims, and the alleged “false or misleading” “warranty, representation or statement[s] made or furnished to Lenders by Borrower or on Borrower's behalf under this Note” ARE the alleged “misrepresentations and omissions” that form the factual basis of Plaintiff's securities claims.[30]

         Solid Q does not respond to this argument.

         At the outset, whether the Note is the security is not as clear as Reincke would make it seem. In fact, his fellow defendant Arenal Energy Corporation persuasively argued that “the promissory note is not a security within the meaning of federal securities laws.”[31]

         But even if it were, the analysis above would not change. The Note would still be a contract. And the question would still be whether the language in the forum selection clause covers non-contract based claims. In this case, it does not.

         3. But even if the forum selection clause covers securities claims, Solid Q successfully pleaded that it was fraudulently obtained.

         Solid Q argues that even if the Note's forum selection clause covers the securities claims, the clause does not apply because it was ...


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