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King v. Standard M S Processing, Inc.

United States District Court, District of Nevada

December 9, 2014

DEBORAH A. KING, Plaintiffs,
v.
STANDARD M S PROCESSING, INC, Defendants.

ORDER

Presently before the court is defendant Standard M s Processing, Inc.’s (“Standard’s”) motion to dismiss or stay the proceeding or in the alternative, request for a more definite statement. (Doc. # 17). Plaintiff King filed a response in opposition, (doc. # 24), and Standard filed a reply, (doc. # 25).

I. Background

Standard enacted the company’s stock option plan in April 2010. (Doc. # 14). On January 21, 2011, Standard amended its articles of incorporation (“the amendment.”) Id. The amendment increased the number of shares available under the stock option plan from 3 million to 13.5 million. Id. The board of directors approved the amendment. No stockholder vote was held. (See id.).

The amendment provided authority for the company to issue up to 500 million shares of common stock and 50 million shares of preferred stock. These shares could be issued subject to the discretion of the board of directors.

Plaintiff’s husband is a former chief executive officer and director of Standard. Id. On or about January 21, 2011, plaintiff’s husband entered into an individual stock option agreement with Standard pursuant to the amendment (“the individual agreement.”) Id. Under the individual agreement, plaintiff’s husband was granted 3.5 million options to purchase Standard’s common stock at $0.51 per share. That same day, plaintiff’s husband assigned his options to plaintiff. Id.

Between April 25, 2011 and September 9, 2011, plaintiff exercised her rights under the agreement and sold 40, 655 Standard options/shares. Id. On April 11, 2014, Standard filed a Form 10-K, its “annual report, ” for 2013. The report included a note to the company financials which stated that the amendment was invalid because it was not approved by the stockholders, as required by the terms of the stock option plan. Id.

After learning of the statements in the April 11, 2014 Form 10-K, plaintiff learned that, in February 2014, another option holder attempted to exercise 310, 000 options. Standard refused to comply with the exercise, claiming that, because the amendment increasing the number of shares was invalid, Standard had insufficient shares to issue the stockholder.

On May 14, 2014, plaintiff filed the instant action for declaratory relief and anticipatory repudiation. Plaintiff is a Georgia resident. Defendant Standard is a Nevada corporation.

On June 14, 2014, plaintiff allegedly sought to buy 250, 000 shares of stock. Standard has failed to honor her request. Standard’s April 11, 2014 Form 10-K indicated that there were only 200, 000 shares available to satisfy options it had granted plaintiff and others under the amendment. On June 25, 2014, plaintiff amended her complaint to include a breach of contract claim stemming from the June 14, 2014, attempted exercise. (Doc. # 14).

On July 16, 2014, Standard filed a notice of related cases. (Doc. # 16). The instant action is related to Standard M s Processing, Inc. v. Flechner, case no. 31-cv-2014-900345.00, a complaint for declaratory judgment in the Circuit Court of Etowah County, Alabama.[1] Standard filed the complaint on April 29, 2014. The action was removed to the Northern District of Alabama on May 28, 2014.

The instant action is also related to Flechner v. Standard M s Processing, Inc., case no. 1:14-cv-01213, filed in the United States District Court for the District of Colorado on April 29, 2014. There are pending motions to remand the Alabama case to state court and to transfer it to the District of Colorado.

Based on this procedural history, defendant has filed the instant motion to dismiss or stay the proceeding or in the alternative, request for a more definite statement. (Doc. # 17).

II. Legal Standard

A court may dismiss a plaintiff's complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). A properly pled complaint must provide “[a] short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While Rule 8 does not require detailed factual allegations, it demands “more than labels and conclusions” or a “formulaic recitation of the elements of a cause of action.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citation omitted). “Factual allegations must be enough to rise above the speculative level.” Twombly, 550 U.S. at 555. Thus, to ...


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