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Amro International, S.A. v. Sedona Corp.

July 16, 2010

AMRO INTERNATIONAL, S.A. ET AL., PLAINTIFFS,
v.
SEDONA CORP. ET AL., DEFENDANTS.



The opinion of the court was delivered by: Laura Taylor Swain, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiffs Amro International, S.A., Roseworth Group, Ltd., Cambois Finance, Inc., and Rhino Advisors, Inc. (collectively, "Plaintiffs" or the "Amro Parties") assert a claim for breach of contract against Sedona Corporation (the "Corporate Defendant") and nine former officers and directors of Sedona Corporation, Marco A. Emrich, Laurence L. Osterwise, R. Barry Borden, William K. Williams, Michael A. Mulshine, Jack Pellici, Robert M. Shapiro, James A. Womble, and James C. Sargent (the "Individual Defendants," collectively "Defendants"). Plaintiffs seek compensation for attorney's fees incurred in defending themselves in an action brought by the Corporate Defendant, on the grounds that the Corporate Defendant wrongfully asserted claims that it had allegedly released. The Court has subject matter jurisdiction over the action pursuant to 28 U.S.C. § 1332.

Defendants have moved to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). The Court has considered thoroughly the parties' submissions. For the following reasons, Defendants' motion is denied with respect to the Corporate Defendant and is granted with respect to the Individual Defendants.

BACKGROUND

On February 14, 2002, Plaintiffs and the Corporate Defendant entered into a Settlement Agreement ("Settlement Agreement") to resolve the parties' dispute arising out of a Convertible Debentures and Warrants Purchase Agreement that they had previously executed. (Compl. ¶ 1, Ex. A.) The Settlement Agreement provides:

If either party shall commence a Proceeding to enforce any provision of this Agreement, then the prevailing party in such Proceeding shall be reimbursed by the other party for its attorneys [sic] fees and other costs and expenses incurred with the investigation, preparation, and prosecution of such Proceeding. (Settlement Agreement, § 7(e).) Earlier in the same clause, the capitalized term "Proceeding" is defined as follows:

[A]ll legal proceedings concerning the interpretation, enforcement and defense of this Agreement and the transactions contemplated by this Agreement (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees, or agents) (each a 'Proceeding') . . . (Settlement Agreement, § 7(e)(emphasis in original).)*fn1 The Individual Defendants are not parties to the Settlement Agreement.

Plaintiffs executed release agreements with the Corporate Defendant and the Individual Defendants in their individual capacities ("Releases," Compl. Ex. B-D), concurrent with the execution of the Settlement Agreement. The Settlement Agreement refers to the Releases as "a material inducement to the willingness of the parties to enter into [the Settlement Agreement] and the transactions contemplated hereby," and the Releases are annexed to the Settlement Agreement. (Settlement Agreement § 6.) The Releases provide:

Sedona Corporation and its officers and directors in their individual capacity (collectively, the "RELEASORS") . . . waive all claims, offsets, and defenses that they may have or have had against [Plaintiffs] and hereby release, forever discharge and agree to hold harmless [Plaintiffs] from and against all actions, causes of action, claims, suits, contracts, controversies, penalties, offsets, or damages, whether in law or equity, and whether known or unknown, that may have occurred prior to the date of this Release, including, but not limited to, those arising in connection with the Convertible Debentures and Warrants Purchase Agreement. . . (Release 1.) Both the Settlement Agreement and the Releases are governed by New York law. (Settlement Agreement § 7(e), Release 1.)

On May 5, 2003, the Corporate Defendant filed a complaint (the "Sedona Action") against Plaintiffs asserting various tort and contract claims, including securities fraud. (Compl. ¶ 2.) This Court ultimately dismissed the claims asserted in the Sedona Action against the Amro Parties on the grounds that they were precluded by the Releases, Sedona Corp. v. Ladenburg Thalmann & Co., No. 03 Civ. 3120, 2005 WL 1902780, *6 (S.D.N.Y. Aug. 9, 2005), and the Releases were valid and binding on the parties, Sedona Corp. v. Ladenburg Thalmann & Co., No. 03 Civ. 3120, 2009 WL 1492196, *2-3 (S.D.N.Y. May 27, 2009). Plaintiffs assert that the Settlement Agreement and Releases render Defendants liable for their attorney's fees and costs incurred in defending themselves in the Sedona Action; Plaintiffs do not allege any other basis for damages in the Complaint other than litigation expenses. (Compl. ¶¶ 3, 29-36.)

DISCUSSION

In deciding a Rule 12(b)(6) motion to dismiss, the Court accepts as true the non-conclusory factual allegations in the complaint and draws all reasonable inferences in the plaintiff's favor. Roth v. Jennings, 489 F.3d 499, 501 (2d Cir. 2007); see also Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). Although Defendants' memorandum of law makes a single reference to Federal Rule of Civil Procedure 9(b), Defendants have not attempted to demonstrate any basis for the application of the heightened pleading standard to Plaintiffs' breach of contract claim. Plaintiffs' claim does not sound in fraud and, accordingly, the Court determines the sufficiency of Plaintiffs' complaint according to Federal Rule of Civil Procedure 8(a). See Fed. R. Civ. P. 8(a), 9(b). In adjudicating the motion, the Court may consider "any written instrument attached to [the complaint] as an exhibit or any statements or documents incorporated in [the complaint] by reference." Rothman v. Gregor, 220 F.3d 81, 89 (2d Cir. 2000).

With respect to the pleading standards of Rule 8, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Iqbal, 129 S.Ct. at 1949. This plausibility standard does not amount to a "probability requirement," but it calls for more than a "sheer possibility that a defendant has acted unlawfully." Id. (internal quotation marks and citation omitted). "Where a complaint pleads facts that are merely consistent with a defendant's liability, it ...


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