Bard v. GSV Asset Management, LLC
- William Orrick
- 3:23-cv-00488
- U.S. District Court · Northern District of California
- 9
In Bard v. GSV Asset Management, Judge Orrick granted GSVAM and Moe’s dismissal motion without prejudice and denied SuRo and Klein’s motion as moot.
Bard’s fraud-based, reformation, and punitive-damages claims against GSVAM and Moe were dismissed without prejudice. Bard’s claims against SuRo and Klein had already been voluntarily dismissed with prejudice, making their motion to dismiss moot. The order did not address the breach-of-contract and breach-of-implied-covenant claims against GSVAM.
What happened
In Bard v. GSV Asset Management, LLC, Stephen D. Bard sued GSV Asset Management, LLC, Michael T. Moe, SuRo Capital Corporation, and Mark Klein over a Repurchase Agreement involving payments for Bard’s former interest in GSVAM. Bard alleged that GSVAM stopped making payments and that revenue calculations improperly reduced what he was owed.
GSVAM and Moe asked the court to dismiss Bard’s claims for reformation, fraud, aiding and abetting fraud, and punitive damages. The court found that Bard had not alleged enough specific facts showing that GSVAM and Moe knew about or participated in Klein’s alleged misrepresentation, and that he had not adequately explained why he reasonably relied on an oral statement instead of putting it in the written agreement. The court also dismissed the punitive-damages request because it depended on the fraud claims.
Bard later voluntarily dismissed all claims against SuRo and Klein with prejudice, so Judge Orrick denied their motion to dismiss as moot. The court granted GSVAM and Moe’s motion to dismiss without prejudice, meaning the dismissed claims were not finally barred by this order.
The detailed version
- Bard v. GSV Asset Management, LLC · No. 3:23-cv-00488
- William Orrick
- June 29, 2023
Background
Stephen D. Bard sued GSV Asset Management, LLC (GSVAM), Michael T. Moe, SuRo Capital Corporation (SuRo), and Mark Klein. The lawsuit arose from a September 2017 Repurchase Agreement under which Bard surrendered his interest in GSVAM in exchange for recurring payments of approximately $29,000 until the debt was paid. The agreement allowed the recurring payments to be reduced if trailing twelve-month revenue from specified entities fell below $2.5 million.
SuRo later ended its contract with GSVAM and hired several former GSVAM personnel. In September 2022, GSVAM stopped making payments to Bard. Bard alleged that GSVAM claimed its relevant revenue had fallen and refused to provide financial information required by the agreement. He also alleged that Klein made an oral representation that Moe would transfer his individual interests in entities listed in the agreement’s annex to GSVAM, and that the written agreement failed to include that arrangement.
Motions and procedural history
GSVAM and Moe moved to dismiss Bard’s claims for reformation, fraud, aiding and abetting fraud, and punitive damages. Their motion did not seek dismissal of Bard’s breach-of-contract or breach-of-implied-covenant claims against GSVAM. SuRo and Klein separately moved to dismiss the two claims asserted against them.
At a hearing, the court ordered initial disclosures and gave Bard permission to amend his complaint. Bard then voluntarily dismissed all claims against SuRo and Klein, with prejudice. The court therefore treated SuRo and Klein’s motion to dismiss as moot. Bard also filed an amended complaint against GSVAM, Moe, and three new defendants. The court stated that the GSVAM and Moe motion might have become moot because of changes in the amended complaint, but granted it to the extent it was not moot.
Court’s analysis
Under Rule 12(b)(6), the court must dismiss a claim that does not allege enough facts to make the requested relief plausible. Fraud claims also must satisfy Rule 9(b), which requires the circumstances of the alleged fraud to be stated with particularity.
The court held that Bard’s fraud claims against GSVAM and Moe did not meet that standard. Bard identified an alleged misrepresentation by Klein during an August 2017 telephone call and alleged that Klein acted as GSVAM’s and Moe’s agent. But Bard did not plead enough facts showing that GSVAM or Moe knew about Klein’s representation or that the representation should be attributed to them. The court also found that Bard did not adequately plead reasonable reliance, considering his experience as a high-level officer of two financial-services companies and his history with the defendants. The court said he needed to explain why he reasonably relied on an oral representation instead of ensuring that it was included in the written agreement.
The court reached the same conclusion on aiding and abetting fraud. Bard did not adequately allege that GSVAM and Moe knew about the fraud or substantially assisted it. The court also dismissed the reformation request because that remedy was based on fraud or mistake and Bard had not pleaded the alleged real agreement, the way the written agreement differed from it, and the circumstances of the alleged mistake with the required specificity.
Because the fraud claims were dismissed, the court dismissed Bard’s request for punitive damages as well. The court noted that SuRo and Klein had raised a statute-of-limitations defense to the fraud claim, but did not address that issue because their motion had become moot. The court said it would consider that defense in the future if it was raised again.
Disposition
The court granted GSVAM and Moe’s motions to dismiss without prejudice. It denied SuRo and Klein’s motion to dismiss as moot. The court’s order did not dismiss Bard’s breach-of-contract or breach-of-implied-covenant claims against GSVAM, which GSVAM and Moe’s motion had not challenged.
Read the full 9-page opinion on CourtListener, the free public archive maintained by the Free Law Project.