United States District Court, E.D. Kentucky, Northern Division
CHARLESTON LABORATORIES, INC. PLAINTIFF
JOHN F. AMELING, et al. DEFENDANT
MEMORANDUM OPINION & ORDER
L. Bunning, United States District Judge
matter is before the Court upon Plaintiff Charleston
Laboratories, Inc. (“Charleston”) and Defendants
SIDIS Corp., LLC, and Prime DP, LLC (“SIDIS
Defendants”) Motions for Judgment on the Pleadings.
(Docs. # 55 and 62). The SIDIS Defendants seek entry of
judgment on the pleadings in their favor as to all claims
asserted against them in Charleston's First Amended
Complaint (Doc. # 48) and in Defendant Ameling's
Crossclaim (Doc. # 49), on the grounds that they fail to
state a claim upon which relief can be granted. (Doc. # 55).
Charleston seeks entry of judgment on the pleadings in favor
of all claims asserted against the SIDIS Defendants in its
First Amended Complaint (Doc. # 48) and all claims asserted
against Charleston in the SIDIS Defendants' Counterclaims
(Doc. # 50). (Doc. # 62-1 at 1). The Motions are fully
briefed (Docs. # 55, 57, 60, 61, 62, 67, 71, and 72), and
ripe for the Court's review. The Court has jurisdiction
over this matter pursuant to 28 U.S.C. § 1332 and 28
U.S.C. § 2201. For the reasons that follow,
Charleston's Motion for Judgment on the Pleadings (Doc. #
62) is granted in part and denied in part. The SIDIS
Defendant's Motion for Judgment on the Pleadings (Doc. #
55) is granted in part and denied in part. Lastly,
Ameling's Crossclaim (Doc. # 49) is dismissed.
FACTUAL AND PROCEDURAL BACKGROUND
action concerns three agreements: the Stockholders Agreement,
the Heads of Agreement, and the Settlement Agreement. The
parties to those agreements had a troublesome relationship.
Charleston and the SIDIS Defendants are competitors. Ameling
is a former employee and stockholder of Charleston who
entered into two agreements with the SIDIS Defendants.
begin, Charleston is a privately-owned pharmaceutical company
whose stock is the subject of this action. (Doc. 48 at 3). In
2007, Ameling began providing consulting services to
Charleston. Id. at 4. The following year, Ameling
became an employee and stockholder of Charleston.
Id. On May 30, 2008, Ameling entered into the
Stockholders Agreement with other founding shareholders of
Charleston. Id. The SIDIS Defendants are not parties
to the Charleston Stockholders Agreement and are not given
any rights under that Agreement. Id. The purpose of
the Stockholders Agreement was to restrict the transfer of
shares of capital stock of Charleston, except with respect to
certain enumerated transfers. Id. at 5.
1 of the Stockholders Agreement pertaining to restrictions on
the transfer of stock provides that the founding
stockholders, including Ameling, “shall not dispose of
any shares of Common Stock now hereafter owned by them,
whether by sale, exchange, assignment, transfer, gift,
devise, bequest, mortgage, pledge, encumbrance, or otherwise,
except in accordance with the terms and conditions of this
Agreement.” Id. Article 1 of the Stockholders
Agreement further details circumstances in which a founding
shareholder may transfer shares of his common stock.
Id. For example, a founding shareholder may
“sell, assign or transfer any shares held by such
founding shareholder … with prior written notice to
Charleston.” Id. Additionally, a founding
shareholder may “sell, assign or transfer any shares
… by obtaining prior written consent of each of the
founding shareholders.” Id.
2 of the Stockholders Agreement entitles Charleston and the
other founding shareholders the right to receive written
notice of any proposed sale, assignment, or transfer of
shares by a founding shareholder. Id. at 6. Article
2 further provides that in the event that a terminating
founding shareholder “sells, pledges, encumbers,
hypothecates or otherwise transfers any interest, or
purports to sell, pledge, encumber, hypothecate or
otherwise transfer any interest in, any of his or her
Shares, except as permitted by an in full compliance with the
terms of this Agreement, ” Charleston has a right to
repurchase the stock. (Doc. 62 at 5). Lastly, Article 5
provides that in the event of a violation of those
provisions, the other parties to the Stockholders Agreement,
including Charleston, are entitled to specific performance of
the Agreement in any court of competent jurisdiction.
was once both a founding shareholder and employee of
Charleston. Id. at 16. Ameling allegedly purported
to transfer an interest in his shares of common stock to the
SIDIS Defendants in connection with issues that arose between
Charleston and another one of Charleston's founding
shareholders, Dr. Ray Takigiku (“Takigiku”).
Id. at 11. During the dispute between Charleston and
Takigiku, Charleston learned that Ameling and the SIDIS
Defendants had allegedly entered into an agreement titled the
“Heads of Agreement” on November 13, 2008.
Id. Allegedly, the SIDIS Defendants believed that
the Heads of Agreement effectuated a transfer of
Ameling's shares in Charleston to the SIDIS Defendants.
Id. However, Ameling allegedly denied transferring
any interest in his Charleston shares to the SIDIS
Defendants. Id. at 12.
Ameling and the SIDIS Defendants entered into a Settlement
Agreement on August 23, 2010. Id. The Settlement
Agreement expressly terminated the earlier Heads of Agreement
between Ameling and the SIDIS Defendants. Id. The
Settlement Agreement further explained that the SIDIS
Defendants do not have any rights, including an ownership
interest, in or to, Ameling's shares. Id.
However, pursuant to the Settlement Agreement, Ameling agreed
to pay certain amounts of money-not to exceed $5 million-to
the SIDIS Defendants if and when Ameling received any
consideration in connection with his ownership of
Charleston's shares. Id.
failed to give Charleston written notice prior to entering
into either the Heads of Agreement or the Settlement
Agreement, as required by the Stockholders Agreement.
Id. at 13. Ameling also failed to obtain prior
written consent of Charleston and each of the other founding
stockholders. Id. Therefore, neither Charleston nor
the other founding shareholders had any opportunity to
approve or reject the Settlement Agreement or exercise their
right to purchase Ameling's shares. Id.
discovery of Ameling's purported transfer of an interest
in Charleston shares to the SIDIS Defendants, Charleston
asserted its rights pursuant to the Stockholders Agreement by
filing this action and seeking relief against both Ameling
and the SIDIS Defendants. Id. at 16. However,
Charleston and Ameling have since resolved their dispute.
Id. at 17. On April 19, 2017, Charleston and Ameling
entered into a Resolution, resolving all disputes between
Amended Complaint (Doc. # 48) alleges two counts. First,
Count One seeks a declaratory judgment, wherein Charleston
seeks a declaration that the Heads of Agreement and the
Settlement Agreement “are and always have been null and
void and unenforceable to the extent that either purports to
transfer any interest in the shares of common stock of
Charleston to the SIDIS Defendants, or pledge or otherwise
encumber the proceeds of any disposition of the shares,
including the Ameling shares.” Id. at 20.
Charleston also seeks a declaration that the SIDIS Defendants
never “had any right, title, or interest in or to such
shares or the proceeds of any disposition of the shares,
including Ameling shares.” Id.
Two seeks specific performance of the Stockholders Agreement.
Id. at 20. The Stockholders Agreement provides that
in the event of a violation of the provisions, the parties to
the Stockholders Agreement, including without limitation,
Charleston, are entitled to specific performance of the
Stockholders Agreement. Id. at 21. Charleston
asserts that Ameling's signing of the Heads of Agreement
and the Settlement Agreement constituted a violation of the
Stockholders Agreement. Id. Thus, Charleston argues
that it is entitled to an order restraining the SIDIS
Defendants from claiming or obtaining any right, title, or
interest in or to any shares of common stock of Charleston,
including any right to any proceeds of any disposition of the
Ameling shares. Id.
response, the SIDIS Defendants asserted a Counterclaim
against Charleston and present a somewhat differing factual
scenario than that alleged by Charleston. To begin, the SIDIS
Defendants note that Ameling also worked with the SIDIS
Defendants. (Doc. # 50 at 19). While working for the SIDIS
Defendants, Ameling spent a significant amount of time
working on Charleston-related matters while utilizing the
SIDIS Defendants' resources. Id. While working
for the SIDIS Defendants, Ameling led them to believe that
Charleston would compensate them for their work. Id.
However, Charleston failed to pay them for any of the
services that they provided Charleston or Ameling.
Id. In an attempt to settle disputes between
themselves and Ameling, the SIDIS Defendants and Ameling
entered into a Settlement Agreement. Id.
SIDIS Defendants allege that on or about July 18, 2014,
Ameling transferred the majority of his shares to the John F.
Ameling Trust without first disclosing the transfer to the
SIDIS Defendants or making any payments to the SIDIS
Defendants in connection with that transfer. Id. at
21. The SIDIS Defendants argue that Charleston and Ameling
are engaged in a scheme to deprive them of payments to which
they are entitled to under the Settlement Agreement.
Id. To support their assertion, the SIDIS Defendants
point to an agreement between Charleston and Ameling, whereby
Charleston purchased all of Ameling's shares in exchange
for $5.40 per share. Id. at 23. Ameling then sent
the SIDIS Defendants a check for $0.68 to satisfy
Ameling's obligations under the Settlement Agreement.
Id. However, the SIDIS Defendants refused to accept
the check, claiming that the check did not fulfill
Ameling's obligations. Id. at 24. Aside from
this offer, the SIDIS Defendants allege that Ameling has
never made or offered to make a payment pursuant to the
Settlement Agreement or to honor any other obligations under
that Agreement. Id. Thus, the SIDIS Defendants argue
that by entering into the Stock Repurchase Agreement,
Charleston and Ameling engaged in a series of transactions
designed to allow Ameling to evade his obligations under the
Settlement Agreement and to defraud the SIDIS Defendants.
Id. at 25.
SIDIS Defendants' Counterclaim against Charleston alleges
four separate counts: (1) Count One: Tortious Interference
with Contract; (2) Count Two: Fraudulent Transfer; (3) Count
Three: Civil Conspiracy; and (4) Count Four: Punitive
Damages. Charleston has moved for judgment on the pleadings
with respect to all four counts, which will be addressed
Standard of Review
motion for judgment on the pleadings pursuant to Rule 12(c)
is subject to the same standard of review as a motion to
dismiss under Rule 12(b)(6).” Warrior Sports, Inc.
v. Nat'l Collegiate Alethic Ass'n, 623 F.3d 281,
284 (6th Cir. 2010). Thus, “all well-pleaded material
allegations of the pleadings of the opposing party must be
taken as true, and the motion may be granted only if the
moving party is nevertheless clearly entitled to
judgment.” Tucker v. Middleburg-Legacy Place,
539 F.3d 545, 549 (6th Cir. 2008). “A motion for
judgment on the pleadings is appropriately granted when no
material issue of fact exists and the party making the motion
is entitled to judgment as a matter of law.”
reasons stated herein, Charleston's Motion for Judgment
on the Pleadings (Doc. # 62) is granted in part and
denied in part. The SIDIS Defendant's Motion for
Judgment on the Pleadings (Doc. # 55) is granted in
part and denied in part. Lastly, Ameling's
Crossclaim (Doc. # 49) is dismissed.
considering the issues raised in the Motions for Judgment on
the Pleadings and Ameling's Crossclaim, the Court must
determine which state's law governs. As a federal court
sitting in diversity, this Court must apply “the choice
of law rules of the forum state.” Hayes v.
Equitable Energy Res. Co., 266 F.3d 560, 566 (6th Cir.
2001) (citing Klaxon Co. v. Stentor Elec. Mfg., 313
U.S. 487, 796 (1941)). Therefore, Kentucky choice-of-law
underlying dispute in this case involves the interpretation
of various contracts. In Kentucky, the law governing a
contract dispute is that of the state with “the most
significant relationship to the transaction and the
parties.” Pedicini v. Life Ins. Co. of Ala.,
682 F.3d 522, 526 (6th Cir. 2012) (quoting State Farm
Mut. Auto. Ins. Co. v. Marley, 151 S.W.3d 22, 42 (Ky.
2004)). The parties have agreed that the Stockholders
Agreement “shall be deemed to be made under and
governed by and construed in accordance with the laws of the
state of Delaware.” (Doc. # 1-1 at 10). Additionally,
the parties have also ...