United States District Court, D. Utah
MEMORANDUM DECISION AND ORDER
BENSON UNITED STATES DISTRICT JUDGE
the court are two motions to dismiss counterclaims: one filed
by Insurance Investment Company (Dkt. No. 10) and the other
filed by E. Rod Ross. (Dkt. No. 29.) The Motions have been
fully briefed by the parties, and the court has considered
the facts and arguments set forth in those filings. Pursuant
to civil rule 7-1(f) of the United States District Court for
the District of Utah Rules of Practice, the Court elects to
determine the motion on the basis of the written memoranda
and finds that oral argument would not be helpful or
necessary. DUCivR 7-1(f).
Bryner has owned Preferred Stock in Insurance Investment
Company (“IIC”) since 1969. (Counterclaim at
¶ 21.) In 1996, Ms. Bryner transferred two thirds of her
stock in equal shares to her two daughters, Dianne Price and
Arlene Carle. (Id. at ¶ 22.) At all relevant
times, IIC was a closely held corporation. (Id. at
¶ 99.) The majority of the shares were held and
controlled by third-party defendant E. Rod Ross and his
family. (Id.) Mr. Ross was also the President of
IIC. (Id. at ¶ 15.)
primary asset of IIC was the stock it owned in its subsidiary
company Equitable Life & Casualty Insurance Company
(“ELC”). (Id. at ¶ 14.) Prior to
March of 2017, Ms. Bryner and her daughters (collectively,
“Counterclaimants”) owned common stock in ELC, in
addition to their Preferred Stock in IIC. (Id. at
Articles of Incorporation for IIC provided that Preferred
Stock had a six percent per share dividend preference and a
right to share in the equity of the company upon any
liquidation, dissolution, or winding up of the company.
(Id. at ¶¶ 17, 18.) At the time
Counterclaimants first acquired their shares of Preferred
Stock, the IIC Articles of Incorporation stated that the
corporation's duration would be 99 years (which would end
in December 2035). (Id. at ¶¶ 32-33.) In
2014, IIC amended its Articles of Incorporation, without
Counterclaimants' consent, to change the
corporation's duration to perpetual existence.
Counterclaimants first acquired the Preferred Stock, IIC
acknowledged the equity rights associated with the Preferred
Stock. In 1997, the company went silent on the issue.
(Id. at ¶¶ 26-27.) IIC tried to buy out
Counterclaimants several times. Counterclaimants rejected the
offers because they believed the offers did not adequately
represent the equity value associated with the shares.
(Id. at ¶¶ 27-31.)
March of 2017, ELC effectuated a reverse stock split, without
Counterclaimants' consent, reducing the number of
outstanding shares from 399, 069.22 to 20. (Id. at
¶ 42.) The reverse stock split eliminated all fractional
shares, which forced a cash payout to Counterclaimants and
terminated their ownership in ELC. (Id. at
April of 2017, without Counterclaimants' consent, IIC was
sold through a merger transaction. (Id. at
¶¶ 50-51.) A third party buyer created a new
entity-Equitable Family Insurance Group, Inc.
(“EFIG”)-to merge into IIC, which effectuated a
purchase of 90% of the Ross family's ownership in IIC.
(Id. at ¶¶ 52-53.) By structuring the
transaction as a merger in which IIC was the remaining
entity, IIC avoided paying out the equity rights associated
with the Preferred Stock. (Id. at ¶ 54.) As
part of the transaction, the surviving corporation's name
was changed to Equitable Family Insurance Group, Inc.
(Id. at ¶ 56.) Mr. Ross retained a 10%
ownership in the surviving corporation, and the remainder of
his and his family's shares were cashed out in the
transaction. (Id. at ¶¶ 57-59.)
3, 2017, Counterclaimants were informed that their stock had
been cancelled as a result of the merger. They were told that
they would be paid $75 per share for their holdings and were
informed of their right to dissent under Utah law.
(Id. at ¶¶ 61-64.) Counterclaimants
believe that their shares were worth $4455.27 per share at
the time of the merger. (Id. at ¶ 86.) In May
2017, Counterclaimants exercised their dissenter's rights
and rejected the $75 per share offer. In July 2017, IIC sent
a letter to Counterclaimants, stating that the fair market
value of the shares was $0.31 per share. (Id. at
initiated this suit in state court to determine the fair
market value of the shares, pursuant to the dissenter's
rights provisions in the Utah State Code. (Dkt. No. 2.)
Counterclaimants removed the case and made counterclaims for
a fair valuation, judicial declaration of dissolution of IIC,
breach of the implied covenant of good faith and fair
dealing, and unjust enrichment/ quantum meruit against IIC,
as well as breach of fiduciary duty and unjust enrichment/
quantum meruit claims against Mr. Ross.
moves, pursuant to Rule12(b)(6) of the Federal Rules of Civil
Procedure, to dismiss the Third Cause of Action (Breach of
Implied Covenant of Good Faith and Fair Dealing), Fourth
Cause of Action (Unjust Enrichment/Quantum Meruit), and Fifth
Cause of Action (Judicial Declaration) of the Counterclaim.
(Dkt. No. 10.) Mr. Ross similarly seeks dismissal of the
Counterclaim against him. (Dkt. No. 29.)
12(b)(6) allows a party to move for dismissal when a
complaint “fail[s] to state a claim upon which relief
can be granted.” Fed.R.Civ.P. 12(b)(6). A complaint
should be dismissed when plaintiffs fail to allege
“enough facts to state a claim to relief that is
plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 554, 570 (2007). “A claim has
facial plausibility when the plaintiff pleads factual content
that allows the Court to draw ...