United States District Court, D. Arizona
GH CAMPBELL SENIOR UNITED STATES DISTRICT JUDGE
Stephan Herold sued Defendants Andlinger & Company,
Andlinger Capital VP360 (together “Andlinger”),
Charles Ball, VP 360 Holdings (“VP 360”) LLC, and
Complete Integrated Solutions (“CIS”) for breach
of contract, fraudulent concealment, tortious interference,
and fraudulent transfer arising from a failed financing deal
for Herold's company, Visual Pro 360, Inc. (“Visual
Pro”). Doc. 1. Andlinger, Ball, and VP360 move to
dismiss under Rule 12(b)(2), and (6). Doc. 20. Defendants
also seek sanctions. Docs. 20, 41. The motions are fully
briefed, and oral argument will not aid in the Court's
decision. See Fed. R. Civ. P. 78(b); LRCiv 7.2(f).
For the reasons that follow the Court will grant
Court accepts Plaintiff's factual allegations as true for
purposes of this motion to dismiss. Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). Because all Defendants
argue that Herold's claims are now precluded based on a
prior state adjudication, the Court includes a detailed
account of the prior proceedings.
is the owner of Visual Pro, an Arizona company that provides
mobile video technology for security and safety purposes,
such as police body cameras. Doc. 1 ¶ 1. In 2014, Herold
began discussions with Ball, managing director of Andlinger
& Company, regarding Andlinger & Company potentially
investing in Visual Pro. Id. ¶¶ 2, 8. In
November 2014, Herold, Ball, and Visual Pro's chief
executive officer, Jeff White, signed an agreement binding
them to “exclusive negotiations concerning $2.3 million
in equity funding” for Visual Pro. Id. ¶
2. Ball told Herold that the agreement was necessary to
protect both parties because Andlinger would invest time and
money in due diligence and Herold would forego other sources
of financing and divulge confidential Visual Pro information.
Id. ¶ 16.
after entering into the agreement, Herold turned negotiations
over to White. Id. ¶ 19. In January 2015, Ball
and White secretly formed CIS, a Delaware limited liability
company, and in February 2015 they transferred the $2.3
million to CIS with Andlinger & Company and White as 70%
and 30% owners respectively. Id. ¶ 2, 35.
Before the money was transferred to CIS, Herold suspected
that a side deal existed and initiated Chapter 7 bankruptcy
proceedings on behalf of Visual Pro to protect its assets.
Id. ¶ 26. Ball and White also took Visual Pro
property, including its tradenames and other intellectual
property, websites, databases, equipment, inventory,
customers, and employees. Id. ¶¶ 2-3, 23,
29, 32. Ball and White subsequently registered CIS in Arizona
and began business operations in Tempe. Id. ¶
2. Visual Pro's loss of the financing deal and its other
property forced it into bankruptcy and “destroyed the
value of” Herold's employment and stock contracts
with Visual Pro. Id. ¶¶ 2, 4.
12, 2016, Herold, his ex-wife, and another equity holder in
Visual Pro filed a complaint in Maricopa County Superior
Court against White, CIS, and Andlinger. Doc. 20-1 at 2-15;
see Herold v. White, CV2016-006544 (Maricopa Cty.
Superior Ct. May 12, 2016). The complaint asserted eight
claims: conversion, misappropriation, tortious interference,
fraudulent concealment, common law fraud, negligent
misrepresentation, breach of fiduciary duty, and unjust
moved to dismiss for lack of personal jurisdiction. Doc. 20-1
at 17-28. After an evidentiary hearing, the court granted the
motion, finding Andlinger lacked minimum contacts with
Arizona sufficient to support jurisdiction. Doc. 20-1 at
44-50. Herold repeatedly sought reconsideration on several
different grounds, including “newly discovered
evidence.” Id. at 64-66; Doc. 20-2 at 2-4,
37-39, 52. The court denied reconsideration and entered final
judgment in favor of the Andlinger defendants on February 21,
2017. Doc. 20-2 at 57-58. Herold did not appeal, and the
state court later denied his request to reopen the time to
file an appeal. Doc. 20-2 at 60-63.
defendants White and CIS moved to dismiss the state action
for failure to state a claim. The court converted the motion
to one for summary judgment and granted the motion on all but
two claims. Doc. 20-1 at 52-62. The court found that all
claims against CIS failed because Herold and the other
plaintiffs alleged no damages from CIS's conduct that
were personal to them - the claims “belong[ed] only to
Visual Pro.” Doc. 20-1 at 53. With respect to
Herold's claims against White, the court found: (1) the
misappropriation and conversion claims failed because the
property belonged to Visual Pro's bankruptcy estate, not
Herold; (2) Herold failed to present evidence supporting a
successor liability theory; (3) the fraudulent concealment
claim failed for four independent reasons; (4) the fraud and
negligent misrepresentation claims failed because Herold
presented no evidence of reasonable reliance on any false
representation causing injury; (5) the unjust enrichment
claim failed because Herold did not allege that he conferred
any benefit on White; and (6) Herold created a triable issue
on his breach of fiduciary duty and tortious interference
State Case Settlement.
and the other plaintiffs in the state case entered into a
settlement agreement with White and CIS. Doc. 41-1 at 145-58.
A notice of settlement was filed on January 17, 2018, and the
superior court removed the case from the active calendar
pending dismissal on March 19, 2018. Doc. 47-4 at 9, 11. In
the interim, Herold filed a motion to reinstate the case on
the active calendar because the defendants violated the terms
of the settlement agreement by sending the settlement check
to a third party instead of the agreed upon trust account.
Doc 47-4 at 1. On April 26, 2018, the court reinstated the
case to the court's active calendar and set the case for
trial. Doc. 41-1 at 160-68.
December 15, 2016, the bankruptcy court approved a settlement
agreement in Visual Pro's Chapter 7 bankruptcy
proceedings. Doc. 20-2 at 98-111; In re Visual Pro 360,
Inc., 2:15-bk-00968-GBN (U.S. Bankr. Ct. D. Ariz.). The
agreement is signed by White individually and on behalf of
CIS and VP360 Holdings, a representative of Andlinger Capital
VP360, a representative of Andlinger and Company, Visual
Pro's Chapter 7 trustee, and a representative of
Southstar Financial, LLC. Doc. 20-2 at 109-11. The agreement
is not signed by Herold and does not refer to him.
March 8, 2018, another judge of this Court dismissed
Herold's attempt to appeal the bankruptcy court's
approval of the settlement. Doc. 41-1 at 141-68.
Dismissal of CIS
September 21, 2018, Herold and CIS stipulated to a dismissal
of CIS with prejudice, and the Court granted the dismissal.
Doc. 48; Doc. 49. Accordingly, the Court will ...