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Blehm v. McIntyre

December 19, 2008

CLAYTON BLEHM, DBA FDC INVESTMENTS, INC., PLAINTIFF,
v.
BETSY MCINTYRE, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge

UNITED STATES' MOTION TO DISMISS AND DENYING DEFENDANT QUIKSILVER'S ORDER GRANTING DEFENDANT MOTION TO DISMISS

On August 4, 2008, Defendant Quiksilver, Inc. ("Quiksilver") filed a motion to dismiss Plaintiff Clayton Blehm's Complaint. On August 28, 2008, Defendant Betsy McIntyre ("McIntyre"), later substituted by the United States, also filed a motion to dismiss Plaintiff's Complaint. Plaintiff did not file an opposition to either motion. For the reasons discussed below, the United States' motion is GRANTED. Quiksilver's motion is DENIED.

I. BACKGROUND

A. Factual Background

The following facts are taken from the Complaint. The Court makes no finding as to the truthfulness of the allegations of the Complaint.

Plaintiff Clayton Blehm formerly served as the Chief Financial Officer of DC Shoes, Inc. ("DC Shoes") and on its Board of Directors. (Compl. ¶ 6.) In 1999, Plaintiff, the other DC Shoes owners, and Defendant Quiksilver met to discuss the possible sale of DC Shoes to Quiksilver. (Compl. ¶ 7.) These discussions were unsuccessful. (Id.)

In 2001, the Internal Revenue Service ("IRS") audited DC Shoes (Compl. ¶ 15) and reclassified Plaintiff as an employee of the company (Compl. ¶ 17). McIntyre was the IRS Revenue Agent assigned to the matter. (Compl. ¶ 14.) Previously, Plaintiff had been classified as an independent contractor through his personal services corporation, FDC Investments, Inc. (Compl. ¶ 17.) As a result of this reclassification, in April, 2002, the IRS determined that DC Shoes owed $1.8 million, in addition to penalties and interest, for its failure to withhold payroll taxes related to Plaintiff's employment. (Compl. ¶ 18.)

In March, 2002, Billabong, Inc. ("Billabong") expressed interest in purchasing DC Shoes. (Compl. ¶ 8.) During the spring and summer of 2002, Plaintiff negotiated a deal with Billabong and met with Billabong representatives to discuss operations and a sales campaign. (Compl. ¶¶ 9, 12.) The sale of DC Shoes to Billabong was finalized on June 4, 2002. (Compl. ¶ 10.)

On June 30, 2002, the other owners of DC Shoes, Damon Way and Kenneth Block, met with Plaintiff. (Compl. ¶ 20--21.) Way and Block allegedly expressed their belief that Plaintiff's actions led to the IRS determination and, as a result, terminated Plaintiff. (Compl. ¶ 21.) Following Plaintiff's termination, the DC Shoes-Billabong deal fell through. (Compl. ¶ 23.)

Plaintiff filed a lawsuit against DC Shoes and Billabong on October 2, 2002, alleging wrongful termination. (Compl. ¶ 26.) Plaintiff and DC Shoes ultimately settled the suit on August 20, 2003. (Compl. ¶ 27.) Under the terms of the Settlement Agreement, Plaintiff agreed to resign from the Board and sell his stock back to DC Shoes for $4.5 million. (Def.'s Request for Judicial Notice ("RJN"), Ex. 3 ("Settlement Agreement") ¶ D.) DC Shoes also agreed to pay Plaintiff $10.5 million in cash consideration for the releases stipulated in the Settlement Agreement. (Settlement Agreement ¶ 7.1.) Additionally, the Settlement Agreement provided that "DC Shoes shall acknowledge and agree that (i) the claim made by the Internal Revenue Service for unpaid taxes relating to Blehm's prior employment with DC Shoes, in the approximate amount of $1,800,000, plus all applicable interest and penalties (the "IRS Claim") is the sole responsibility of DC Shoes, and (ii) none of the FDC Parties shall have any liability or obligation to DC Shoes in connection with the IRS Claim." (Settlement Agreement ¶ 5.)

In January, 2004, Quiksilver, Inc. agreed to purchase DC Shoes. (Compl. ¶ 29.) The deal closed later that spring. (Id.) According to the Complaint, DC Shoes formally refused to pay Plaintiff's employment taxes to the IRS in late 2004. (Compl. ¶ 32.)

B. Procedural Background

On August 17, 2006, Plaintiff brought an action against DC Shoes and its principals (the "DC Parties") in California Superior Court, County of San Diego, North County Branch (the "State Court action"). (Def.'s RJN, Ex. 8 ("State Court Complaint").) Plaintiff asserted claims of breach of contract, intentional concealment, intentional misrepresentation, breach of fiduciary duty, and related causes of action. (See State Court Compl.) Plaintiff's breach of contract and intentional concealment claims went to trial in October, 2007, and the Superior Court entered judgment in favor of the DC Parties on all remaining claims on January 4, 2008. (Def.'s RJN, Ex. 9 ("State Court Judgment").) Plaintiff untimely filed a notice of appeal on July 2, 2008 (Def.'s RJN, Ex. 12) and a motion for a new trial on July 15, 2008 (Def.'s RJN, Ex. 10). On September 16, 2008, the Superior Court denied Plaintiff's motion for a new trial. (Def.'s Second Supp. RJN, Ex. A.) On October 20, 2008, the California Court of Appeal dismissed Plaintiff's appeal. (Def.'s Supp. RJN, Ex. A.)

Plaintiff filed the instant lawsuit in California Superior Court, County of San Diego, North County Branch, on May 29, 2008. Plaintiff alleged fraud and conspiracy against Defendants McIntyre and Quiksilver. (Compl. ΒΆ 44--63.) On July 8, 2008, the United States, on behalf of McIntyre, removed the case to federal ...


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