Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_11-cv-01479/USCOURTS-azd-2_11-cv-01479-0/pdf.json

Nature of Suit Code: 160
Nature of Suit: Stockholder's Suits
Cause of Action: 28:1332 Diversity-Breach of Contract

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 The facts in this section are alleged in Plaintiff’s complaint and taken as true for

purposes of this Order. 

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Christoph Hagemann, a German citizen;

Eva Weidlich, a German citizen; Sonja

Hagemann, a German citizen, 

Plaintiffs, 

vs.

Russell Ritchie, et al., 

Defendants. 

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No. CV-11-1479-PHX-GMS

ORDER

Pending before the Court are Defendants’ Motion for Judgment on the Pleadings on

Fraud Claim (Doc. 31) and Plaintiffs’ Motion for Leave to File Amended Complaint (Doc.

34). For the reasons discussed below, Plaintiffs’ Motion for Leave to File Amended

Complaint is granted, and Defendants’ Motion for Judgment on the Pleadings on the Fraud

Claim is denied as moot. 

BACKGROUND1

In early 2008, Helmut Hagemann, who is not a party to this action, earned certain

options to obtain stock in a company called J.S. Elekta, Ltd., a Cyprus LLC. J.S. Elekta held,

as its primary asset, an ownership interest in ICHUA Ltd., another Cyprus LLC, which was

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 At some point, Helmut Hagemann gifted this interest to his children, who are the

Plaintiffs in this action.

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at the time the sole shareholder of Intellecom, a Ukraine LLC. Also in early 2008, a corporate

restructuring of Intellecom occurred. This restructuring was facilitated by an agreement

called the Project Limes Frame Agreement (“Limes Agreement”), which incorporated several

separately negotiated agreements between various stakeholders.

On March 19, 2008, Helmut Hagemann, Kurt Hiete and Defendant Scott Ritchie, on

behalf of Defendant Russell Ritchie, negotiated, prepared and executed a document entitled

“Settlement Agreement.” The Settlement Agreement provided that a new entity would be

formed to hold “at least 50% of the total shareholder rights in Elekta.” This new entity was

referred to in the Settlement Agreement as the Ritchie Group. The Settlement Agreement

further provided that Russell Ritchie was to grant Hiete and Hagemann “1,500 shares in the

Ritchie Group, which equals 24% of th Ritchie Group.” Helmut Hagemann and Hiete agreed

between themselves that Hagemann would obtain 1147 of the 1500 shares pledged to them

in the Settlement Agreement, and that Hagemann would accordingly have an 18.12%

ownership interest in the Ritchie Group.2

 The Settlement Agreement was attached to and

incorporated into the Limes Agreement, which was executed by Helmut Hagemann,

Plaintiffs, Russell Ritchie, and several others on April 8, 2008.

Under the Limes Agreement, an entity referred to both as “Ritchie NewCo” and as

“EHI,” would obtain a 23.2% share of an entity called “NewCo II,” which later became LMS

2 Beteilligungs GmbH, a German LLC (“LMS 2”). LMS 2 acquired certain shareholder

rights of ICHUA, and EHI obtained an interest in LMS 2 equivalent to 50% or more of the

shareholder rights held by JS Elekta prior to the execution of the Limes Agreement.

On September 20, 2008, Russell Ritchie sent to Helmut Hagemann via email a draft

Operating Agreement for EHI. This draft Operating Agreement identified Helmut Hagemann

as holding 1147 shares. These 1147 shares reflect an 11.65% ownership in EHI, not the

18.12% ownership interest contemplated by the Settlement Agreement. In total, Scott

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Ritchie, Cliff Nordyke (Russell Ritchie’s son-in-law), and a company owned and controlled

by Russell Ritchie, were listed as holding an ownership in EHI that was 11.525% greater

than the ownership listed for them in the Settlement Agreement. Plaintiffs allege in their

complaint that during the course of negotiating the Limes Agreement, Scott Ritchie made one

or more false and material misrepresentations of present facts to Hagemann that Scott Ritchie

knew was false, including that the value of the 1147 shares in EHI pledged to Plaintiffs and

their predecessor in interest were worth 18.12% of EHI. 

Hagemann and Plaintiffs have repeatedly demanded a revised ownership percentage

in EHI, but their demand has been refused. Although EHI sold a significant portion of its

assets in LMS 2 in late 2008, no proceeds of that sale were distributed to Hagemann or any

of the Plaintiffs. On July 27, 2011, Plaintiffs filed their Complaint in this action. Count I of

the Complaint is a claim for unjust enrichment against all Defendants except Russell Ritchie.

Count II is a breach of contract claim against Russell Ritchie. Count III is a fraud claim

against Scott Ritchie. Defendant now moves for judgment on the pleadings on the fraud

claim. (Doc. 31).

DISCUSSION

I. Legal Standard

A motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure

12(c) “is properly granted when, taking all the allegations in the non-moving parties’s

pleadings as true, the moving party is entitled to judgment as a matter of law.” Fajardo v.

County of L.A., 179 F.3d 698, 699 (9th Cir. 1998); see Elvig v. Calvin Presbyterian Church,

375 F.3d 951, 955 (9th Cir. 2004) (stating that in ruling on a Rule 12(c) motion the court

must accept as true all allegations in the plaintiff’s complaint and treat as false the allegations

in the defendant’s answer that contradict the plaintiff’s allegations). In other words, dismissal

pursuant to Rule 12(c) is inappropriate if the facts as pled would entitle the plaintiff to a

remedy. Merchants Home Delivery Serv., Inc. v. Hall & Co., 50 F.3d 1486, 1488 (9th Cir.

1995). 

Certain elements of fraud claims carry a higher standard of pleading under the Federal

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Rules Civil Procedure: “In alleging fraud or mistake, a party must state with particularity the

circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions

of a person’s mind of a person may be alleged generally.” FED. R. CIV. P. 9(b). Under this

rule, a plaintiff “must state the time, place, and specific content of the false representations

as well as the identities of the parties to the misrepresentation.” Schreiber Distrib. Co. v.

ServWell Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986); see also Vess v. Ciba-Geigy

Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (“Averments of fraud must be accompanied

by the who, what, when, where, and how of the misconduct charged.”) (internal quotations

omitted).

II. Analysis

In the Complaint, Plaintiffs allege that during the course of negotiating the Limes

Agreement, Scott Ritchie made “one or more false and material misrepresentations of present

facts” that he knew was false, including that “the value of the 1,147 shares in the EHI

pledged to plaintiffs and [Hagemann] were worth 18.12% of EHI.” (Doc. 1, ¶ 89). Plaintiffs

further allege that Ritchie made such representations intending that Hagemann rely on them,

and that Hagemann did, in fact, so rely. (Id. at ¶ 90). As stated by Defendants, however,

“[t]he times, dates, places and other details of [Ritchie’s ]alleged fraudulent statements are

not provided” in Plaintiffs’ Complaint. (Doc. 31 at 8). Plaintiffs have therefore failed to state

a fraud claim for which relief can be granted.

Plaintiffs, however, have attached a proposed amended complaint to their Response

to Defendants’ motion to dismiss in which they appear to have remedied the defects in their

initial complaint. (See Doc. 34-1, ¶¶ 59–68). Plaintiffs request leave to file the proposed

amended complaint. (Doc. 34 at 9–10). Defendant Scott Ritchie “has no objection to an

amendment of the Complaint.” (Doc. 38 at 4). The Court will therefore grant Plaintiffs leave

to file their proposed amended complaint, Doc. 34-1, and dismiss Defendants’ Motion for

Judgment on the Pleadings as moot. 

IT IS THEREFORE ORDERED that Plaintiffs’ Motion for Leave to File Amended

Complaint (Doc. 34) is GRANTED.

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IT IS FURTHER ORDERED that Defendants’ Motion for Judgment on the

Pleadings on Fraud Claim (Doc. 31) is denied as moot. 

IT IS FURTHER ORDERED that Plaintiffs shall file and serve the proposed

amended pleading (Doc. 34-1) on all parties within (14) fourteen days of the filing of this

Order as required by LRCiv. 15.1.

DATED this 8th day of May, 2012.

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