United States District Court, D. Kansas
MEMORANDUM AND ORDER
KATHRYN H. VRATIL UNITED STATES DISTRICT JUDGE.
21, 2015, Pipeline Productions, Inc. and Backwood
Enterprises, LLC sued Horsepower Entertainment and The
Madison Companies, LLC. Complaint (Doc. #1). On June
19, 2017, OK Productions, Inc. and Brett Mosiman joined as
plaintiffs. Amended Complaint (Doc. #56). On August
30, 2019, plaintiffs added as defendants Kaaboo LLC,
KaabooWorks Services LLC (“KWS”), KaabooWorks
LLC, Kaaboo Del Mar LLC (“KDM”) and WarDawgz,
LLC. Second Amended Complaint (Doc. #570)
(“SAC”). Plaintiffs allege that defendants
reneged on their promise to partner in the production of a
music festival, and bring claims for breach of contract
(Count I), breach of fiduciary duty (Count II), fraud (Count
III), tortious interference (Count IV) and successor
liability (Count V). This matter is before the Court on
Defendants' Motion To Dismiss Plaintiffs' Second
Amended Complaint (Doc. #614) filed October 11, 2019.
For reasons stated below, the Court sustains defendants'
motion in part.
summarized, plaintiffs' SAC alleges as
Mosiman is a producer of live music festivals, and is the
principal of OK Productions, Backwood Enterprises and
Pipeline Productions - music festival entities. Bryan Gordon,
Seth Wolkov and Rob Walker own Madison, which is a venture
capital firm. In turn, Madison wholly owns its music festival
business, Horsepower. In November 2014, Madison and
Horsepower formed Kaaboo and KDM. In June 2015, Madison and
Horsepower formed KaabooWorks and KWS. In December 2016,
Gordon, Wolkov and Walker (the owners of Madison), along with
Barbara O'Hare, formed WarDawgz.
January 2014, Mosiman met Gordon, who expressed interest in
producing music festivals by using Mosiman's reputation
in the live music business and Madison's significant
resources. Gordon proposed that Madison, Horsepower and the
Mosiman companies produce music festivals on an ongoing
basis, including the Thunder festival. On July 28, 2014,
after months of negotiating and substantial due diligence,
Gordon (on behalf of Madison and Horsepower) and Mosiman (on
behalf of Backwood and Pipeline) entered into a non-binding
letter of intent (“LOI”) for Madison and
Horsepower to purchase 51 per cent of plaintiffs' music
August 28, 2014, Mosiman emailed Gordon to inform him of a
“major concern” regarding the LOI and Thunder.
Specifically, Mosiman would not be able to follow through
with artist offers if the parties did not consummate the LOI.
Accordingly, Mosiman asked whether Madison and Horsepower
would partner on Thunder regardless whether they completed
the deal. Gordon gave Mosiman his assurance that Madison and
Horsepower would cover the finances for Thunder even if the
LOI fell through. Having this commitment, plaintiffs began to
book artists to appear at Thunder.
October 23, 2014, approximately a week before the LOI was set
to expire, Madison and Horsepower proposed a substantially
different agreement for significantly less money. Plaintiffs
rejected the proposal, which constituted a revocation of the
November 4, 2014, Mosiman proposed to Gordon a new agreement
between Backwood/Pipeline and Madison/Horsepower for the
limited purpose of owning and producing the Thunder festival.
Mosiman's proposal gave Gordon two options. On behalf of
Madison and Horsepower, Gordon agreed to a modified version
of “Option B.” Under this final version
(“the Agreement”), Madison and Horsepower would
pay Backwood and Pipeline $750, 000 for a 51 per cent
interest in Thunder, fund $500, 000 of operating capital for
the festival and pay Backwood and Pipeline $80, 000 to
produce and operate Thunder. On November 6, 2014, Mosiman
sent an email to Gordon seeking confirmation of
Madison/Horsepower's acceptance, which Gordon provided.
Mosiman then asked Gordon, as the controlling owner, about
booking Carrie Underwood - to which Gordon responded,
“Do it, Please!” On November 19, 2014, Madison
and Horsepower created four entities to produce Thunder, all
with different variations of the name “Thunder on the
Mountain.” In reliance on the Agreement, plaintiffs
spent over 4, 000 hours producing Thunder, which included
making industry commitments to artists, selling tickets,
engaging vendors, creating infrastructure and marketing.
During this time, Mosiman obtained commitments from
approximately 50 artists, including Carrie Underwood, Zac
Brown, Big & Rich, the Eli Young Band and Sarah Evans.
Pursuant to the Agreement, Madison and Horsepower funded
$272, 000 by making deposit payments directly to artists.
Madison and Horsepower also exercised significant control
over Thunder's operations - Gordon decided which bands to
book and how much to pay them, and he was heavily involved in
marketing and scheduling.
December 12, 2014, Madison and Horsepower sent various draft
documents to formalize the Agreement, which reflected the key
terms that they had negotiated. The documents included an
additional $150, 000 in payments to plaintiffs, and several
other new terms.
the parties began selling tickets, plaintiffs updated Madison
and Horsepower daily about advance sales. From this
information, plaintiffs were able to forecast that like most
new festivals, Thunder would operate at a loss in 2015. On
March 29, 2015, just months before the start of the festival,
Madison and Horsepower became increasingly nervous and
attempted to change the terms of the Agreement. On April 7,
2015, plaintiffs' counsel emailed
Madison/Horsepower's counsel to reiterate the terms of
the Agreement and demand performance. Plaintiffs' counsel
also warned of the significant financial and reputational
damage that plaintiffs would incur if Madison and Horsepower
did not perform.
April 14, 2015, while plaintiffs continued to produce
Thunder, Madison and Horsepower filed a lawsuit in Delaware,
in which they denied and repudiated the Agreement, the
promises that Gordon had made and the five months of
performance that had already occurred. On April 15, 2015,
Suzanne Land, a Madison consultant who was now in charge of
Thunder, notified plaintiffs of the lawsuit and that Madison
and Horsepower would no longer participate in Thunder. Land
gave plaintiffs two options: (1) execute a fully-secured
promissory note for an alleged loan that never existed; or
(2) face scorched-earth litigation from Gordon, Madison and
Horsepower. Madison and Horsepower refused to provide the
remaining payments, reneged on their responsibility for
Thunder losses and simply walked away. They did not attempt
to mitigate Thunder losses or reimburse Thunder ticket
holders, vendors or sponsors. Defendants also sent defamatory
letters to artist agencies about their relationship with
plaintiffs, knowing that the letters would substantially harm
April 2015, the second round of artist payments became due.
Because Madison and Horsepower had breached the Agreement,
plaintiffs had to borrow money from other festivals in an
attempt to keep Thunder afloat. Plaintiffs searched for an
alternative financial partner, but could not find one in the
short time before the festival. Accordingly, plaintiffs could
not satisfy the contracts with Thunder artists, and the
artists consequently refused to appear. As a result,
plaintiffs had to cancel Thunder.
addition to breaching the Agreement, Madison and Horsepower
attempted to destroy plaintiffs' businesses by hiring
away their key partners, employers and agents. Using Madison
and Horsepower email addresses and letterhead, defendants
communicated with plaintiffs' partners, employees and
agents about positions and consulting deals with defendants.
in order to become judgment-proof, Gordon, Wolkov and Walker
(the owners) transferred Madison/Horsepower's music
festival business to several other entities that they owned
after this litigation began. Specifically, they transferred
the music festival business - without receiving value in
return - to KaabooWorks, including its assets, employees and
the Kaaboo marks and goodwill. Around the same time, the same
individuals (Gordon, Wolkov and Walker) then transferred
ownership of KaabooWorks itself to WarDawgz. Finally, the
owners of WarDawgz (Gordon, Wolkov, Walker and O'Hare)
transferred KaabooWorks to Kaaboo, which WarDawgz also owns.
Despite these transactions, nothing about Madison's music
festival business actually changed except its name. Contracts
and agreements that previously belonged to Madison and
Horsepower now belong to Kaaboo. The executives and employees
of Madison and Horsepower hold those same positions for the
new Kaaboo entities and they all use the same offices,
computers, servers and cloud-based platforms. As a result,
Madison and Horsepower have almost no assets or employees,
and no longer work in the music festival industry.
defendants file a motion to dismiss for lack of personal
jurisdiction under Fed.R.Civ.P. 12(b)(2), plaintiffs must
establish personal jurisdiction over each defendant.
Rockwood Select Asset Fund XI (6)-1, LLC v. Devine,
Millimet & Branch, 750 F.3d 1178, 1179-80 (10th Cir.
2014). At these preliminary stages of litigation,
plaintiffs' burden to prove personal jurisdiction is
light. AST Sports Sci., Inc. v. CLF Distrib. Ltd.,
514 F.3d 1054, 1056 (10th Cir. 2008). To defeat the motion,
plaintiffs need only make a prima facie showing of personal
jurisdiction. Id. They can do so by showing facts,
via affidavit or other written materials, that if true would
support jurisdiction over each defendant. Id. When
evaluating the prima facie case, the Court must resolve all
factual disputes in favor of plaintiffs. Id.
Failure To State A Claim
ruling on a motion to dismiss under Fed.R.Civ.P. 12(b)(6),
the Court assumes as true all well-pleaded factual
allegations and determines whether they plausibly give rise
to an entitlement of relief. Ashcroft v. Iqbal, 556
U.S. 662, 679 (2009). To survive a motion to dismiss, a
complaint must contain sufficient factual matter to state a
claim which is plausible - and not merely conceivable - on
its face. Id. at 679-80; Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). To determine whether
a complaint states a plausible claim for relief, the Court
draws on its judicial experience and common sense.
Iqbal, 556 U.S. at 679. Plaintiffs make a facially
plausible claim when they plead factual content from which
the Court can reasonably infer that defendants are liable for
the misconduct alleged. Id. at 678. However,
plaintiffs must show more than a sheer possibility that
defendants have acted unlawfully - it is not enough to plead
facts that are “merely consistent with”
defendants' liability. Id. (quoting
Twombly, 550 U.S. at 557). Where the well-pleaded
facts do not permit the Court to infer more than the mere
possibility of misconduct, the complaint has alleged - but
has not “shown” - that the pleader is entitled to
relief. Id. at 679. The degree of specificity
necessary to establish plausibility and fair notice depends
on context; what constitutes fair notice under Fed.R.Civ.P.
8(a)(2) depends on the type of case. Robbins v.
Okla., 519 F.3d 1242, 1248 (10th Cir. 2008).
Court need not accept as true those allegations which state
only legal conclusions. See Iqbal, 556 U.S. at 678;
Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir.
1991). Rather, plaintiffs bear the burden of framing their
complaint with enough factual matter to suggest that they are
entitled to relief; it is not enough to make threadbare
recitals of a cause of action accompanied by conclusory
statements. Twombly, 550 U.S. at 556. A pleading
that offers labels and conclusions, a formulaic recitation of
the elements of a cause of action or naked assertions devoid
of further factual enhancement will not stand.
Iqbal, 556 U.S. at 678.
the statute of limitations is an affirmative defense, the
Court may appropriately resolve a statute of limitations
question on a Rule 12(b) motion “when the dates given
in the complaint make clear that the right sued upon has been
extinguished.” Aldrich v. McCulloch Props.,
Inc., 627 F.2d 1036, 1041 n.4 (10th Cir. 1980).
Fed.R.Civ.P. 12(b)(2), defendants assert that the Court
should dismiss Kaaboo, KDM, KaabooWorks, KWS and WarDawgz
because the Court lacks personal jurisdiction over these
defendants. Moreover, under Fed.R.Civ.P. 12(b)(6), defendants
assert that the Court should dismiss several of
plaintiffs' causes of action because they fail to state a
claim upon which relief can be granted.
Personal Jurisdiction Over Kaaboo, KDM, ...