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Munson v. Indigo Acquisition Holdings, LLC

Supreme Court of North Dakota

July 30, 2019

Wayne Munson, Plaintiff and Appellant
v.
Indigo Acquisition Holdings, LLC, Akoya Capital, LLC, and Denny Chandler, Defendants and Appellees

          Appeal from the District Court of Burleigh County, South Central Judicial District, the Honorable James S. Hill, Judge.

          Chad C. Nodland, Bismarck, ND, for plaintiff and appellant.

          Jason R. Asmus (argued) and Charles B. Rogers (on brief), Minneapolis, MN, for defendants and appellees.

          OPINION

          VandeWalle, Chief Justice.

         [¶1] Wayne Munson appealed from a district court judgment granting Indigo Acquisition Holdings' (IAH) motion for judgment on the pleadings. We conclude that the transaction at issue is exempt under the North Dakota Securities Act. We affirm.

         I

         [¶2] In 2009, Munson and other employees of Indigo Signworks entered into an agreement to participate in a Stock Appreciation Rights (SAR) program rather than receive bonuses. Under the program, Munson would be paid for his SARs if Indigo Signworks was sold. In 2016, IAH, a Delaware corporation, purchased Indigo Signworks. Munson and other employees participating in the SAR program were paid for their SARs and had the opportunity to reinvest in IAH's membership units. On October 28, 2016, Munson purchased 12, 500 Class A Units of IAH. In July 2018, Munson left his employment at Indigo Signworks to begin a competing sign company. IAH alleged this new business violated Munson's obligations under IAH's Amended LLC Agreement and filed suit in Delaware.

         [¶3] In September 2018, Munson served IAH with a complaint seeking to void his purchase of the IAH Units. Munson argued the IAH Units he purchased are unexempt, unregistered securities under the North Dakota Securities Act. On October 1, IAH served their answer on Munson via U.S. Mail. At the time of IAH's answer, Munson had not yet filed the pleadings. After Munson filed the pleadings, IAH again served Munson via U.S. Mail on November 9. The district court found this paper service appropriate because Munson's counsel was not enrolled as a service contact for Munson under Odyssey, North Dakota's electronic service system.

         [¶4] Accompanying IAH's November answer was a motion for judgment on pleadings pursuant to N.D.R.Civ.P. 12(c). In January 2019, the district court entered judgment dismissing the case. In its memorandum and decision, the court found the only issue raised in Munson's complaint was whether the purchase of IAH Units was an exempt transaction under the North Dakota Securities Act. After finding the transaction exempt under N.D.C.C. ch. 10-04 as a matter of law, the court dismissed the case under N.D.R.Civ.P. 12(c), or alternatively, under N.D.R.Civ.P. 56.

         [¶5] On appeal, Munson argues his purchase of IAH Units is not exempt under the North Dakota Securities Act; that IAH did not provide proper service under N.D.R.Civ.P. 5(b) and N.D.R.Ct. 3.2 and 3.5; and that the district court abused its discretion in denying his amended complaint. IAH argues this Court does not have subject matter jurisdiction to determine the enforceability of the LLC Member Agreement because Munson did not raise it in his complaint and the issue is currently being litigated in Delaware.

         II

         [¶6] A party may move for judgment on the pleadings under Rule 12(c), N.D.R.Civ.P. However, a court should not dismiss a pleading under N.D.R.Civ.P. 12(c) unless it appears beyond doubt that no set of facts support a party's claim which would entitle him to relief. Kuntz v. State, 2019 ND 46, ¶ 25, 923 N.W.2d 513. We view pleadings in the light most favorable to the pleading party and the allegations are taken as true. Id. If matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56. White v. T.P. Motel, L.L.C., 2015 ND 118, ¶ 15, 863 N.W.2d 915; N.D.R.Civ.P. 12(d).

         [¶7] Summary judgment under N.D.R.Civ.P. 56 "is a procedural device for promptly resolving a controversy on the merits without a trial if there are no disputed issues of material fact and inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law." Davidson v. State ex rel. N.D. State Bd. of Higher Ed., 2010 ND 68, ¶ 11, 781 N.W.2d 72. All parties must be given a reasonable opportunity to present to the court all the material that is pertinent to the motion. White, 2015 ND 118, ¶ 15, 863 N.W.2d 915. A district court's decision on a motion for summary judgment is a question of law reviewed de novo on the record. Baker v. Sabinash, 2015 ND 153, ¶ 5, 864 N.W.2d 436.

         [¶8] In this case, materials outside of the pleadings, including IAH's answer and attached exhibits, were presented to and not excluded by the district court. Because the court considered materials outside of the pleadings, the motion must be treated as one for summary judgment under N.D.R.Civ.P. 56. The court found there were no disputed issues of material fact and that the only legal issue raised ...


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