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Beckett v. Brinx Resources, Ltd.

United States District Court, D. Nevada

March 24, 2014

JEFFREY R. BECKETT, Plaintiff,
v.
BRINX RESOURCES, LTD., a Nevada corporation; KENNETH A. CABIANCA, an individual; and GEORGIA KNIGHT, an individual, Defendants.

ORDER

LARRY R. HICKS, District Judge.

Before the Court is Defendant Brinx Resources, Ltd.'s ("Brinx") Motion to Dismiss. Doc. #20.[1] Plaintiff Jeffrey R. Beckett ("Beckett") filed a Response (Doc. #25), to which Brinx replied (Doc. #27). In accordance with the Court's Order granting Beckett leave to file a Sur-Reply, Beckett filed a Sur-Reply. Doc. #38.

Also before the Court is Defendants Kenneth A. Cabianca ("Cabianca") and Georgia Knight's ("Knight") Motion to Dismiss. Doc. #33. Beckett filed a Response (Doc. #35), to which Cabianca and Knight replied (Doc. #37).

Also before the Court is Brinx's Motion for Attorneys' Fees and Costs. Doc. #21. Beckett filed a Response (Doc. #26), to which Brinx replied (Doc. #28).

I. Factual Background

Brinx is a publicly traded oil and gas production and exploration company. Doc. #17, ¶¶ 13, 14. Since Brinx's incorporation in 1998, Cabianca has been the CEO, President, and Chairman of the Board of Directors at Brinx. Id. at ¶ 3. Cabianca appointed Knight to the Board of Directors in 2012. Id. at ¶ 21. Beckett owns 2, 826, 335 Common shares of Brinx stock or approximately 11.5% of the outstanding Common stock in Brinx. Id. at ¶ 26. Cabianca owns 2, 554, 702 Common shares of Brinx stock or approximately 10.4% of the outstanding Common stock in Brinx. Id. at ¶ 27.

Beckett alleges that on February 10, 2012, Cabianca caused Brinx to issue 500, 001 shares of "Series A Preferred Stock" at par value to Cabianca. Id. at ¶ 28. In doing so, Cabianca obtained certain "extraordinary" rights as a shareholder, thereby ensuring his complete dominion and control over Brinx's affairs for his sole benefit. Id. at ¶¶ 29, 30. Beckett further alleges that for the entire period of his ownership interest in Brinx, Cabianca has treated Brinx as his personal "piggy bank." Id. at ¶ 32. On April 16, 2013, Beckett filed a complaint in the Second Judicial District Court of the State of Nevada, in and for the County of Washoe, setting forth various causes of action, including those set forth in the present action. Beckett v. Brinx, et. al, Case No. CV13-00834. In conjunction therewith, Beckett alleges that Brinx and Cabianca willfully failed to inform Brinx's stockholders and the public at large of the aforementioned complaint. Id. at ¶ 35. Beckett further alleges that this is part of a pattern of omitting material facts that would affect a potential investor's decision to purchase or sell Brinx securities. Id. at ¶ 36; see also id. at ¶ 37 (specifying Cabianca's actions in this regard).

On June 26, 2013, Beckett filed a Complaint before this Court alleging five causes of action for violations of (1) Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 ("Securities Act"), 15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5; (2) Section 20a of the Securities Act, 15 U.S.C. § 78t(a); (3) Section 409 of the Sarbanes-Oxley Act of 2002, 15 U.S.C. § 78m(1); (4) Section 11 of the Securities Act, 15 U.S.C. § 77k(a); and (5) Section 15 of the Securities Act, 15 U.S.C. § 77o. Doc. #1. Thereafter, the parties stipulated that Beckett may file a First Amended Complaint ("FAC") and that Beckett's fourth and fifth causes of action shall be dismissed with prejudice. Doc. #14. On August 28, 2013, Beckett filed a FAC, alleging violations of (1) Section 10(b) and Rule 10b-5 of the Securities Act, (2) Section 20a of the Securities Act, and (3) Section 409 of the Sarbanes-Oxley Act. Doc. #17. On September 11, 2013, Brinx filed a Motion to Dismiss for failure to state a claim upon which relief can be granted. Doc. #20. Also on September 11, 2013, Brinx filed a Motion for Attorney's Fees and Costs. Doc. #21. On October 29, 2013, Cabianca and Knight filed a Motion to Dismiss. Doc. #33.

II. Legal Standard

Defendants seek dismissal of Beckett's FAC pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. To survive a motion to dismiss for failure to state a claim, a complaint must satisfy the Federal Rule of Civil Procedure 8(a)(2) notice pleading standard. See Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1103 (9th Cir. 2008). That is, a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). The Rule 8(a)(2) pleading standard does not require detailed factual allegations; however, a pleading that offers "labels and conclusions' or a formulaic recitation of the elements of a cause of action'" will not suffice. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

Furthermore, Rule 8(a)(2) requires a complaint to "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Id. (quoting Twombly, 550 U.S. at 570). A claim has facial plausibility when the pleaded factual content allows the Court to draw the reasonable inference, based on the Court's judicial experience and common sense, that the defendant is liable for the misconduct alleged. See id. at 678-79. "The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." Id. at 678 (internal quotation marks and citation omitted).

In reviewing a motion to dismiss, the Court accepts the facts alleged in the complaint as true. Id. However, "bare assertions... amount[ing] to nothing more than a formulaic recitation of the elements of a... claim... are not entitled to an assumption of truth." Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (citing Iqbal, 556 U.S. at 681) (brackets in original) (internal quotation marks omitted). The Court discounts these allegations because "they do nothing more than state a legal conclusion-even if that conclusion is cast in the form of a factual allegation." Id. (citing Iqbal, 556 U.S. at 681). "In sum, for a complaint to survive a motion to dismiss, the non-conclusory factual content, ' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Id.

III. Discussion

A. Violation of Section 10(b) and Rule ...


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