Citation Edit

Buckles Management, LLC v. Investordigs, LLC, 728 F.Supp.2d 1145 (D. Colo. July 20, 2010) (full-text).

Factual Background Edit

In July 2008, plaintiff Cook agreed to provide consultation services to InvestorDigs for a period of 120 days in exchange for a 2% ownership interest. InvestorDigs received a total of $450,000 in funds from plaintiffs. The plaintiffs claim that the funds constituted loans, while InvestorDigs says that the funds were for the purchase of ownership interests in InvestorDigs. During this period, InvestorDigs began to lease commercial space from Focus Business Park, who claimed InvestorDigs failed to pay all amounts owed under the lease. After the business relationship fell apart, the parties met to discuss how to end their relationship.

Ultimately plaintiff sued for enforcement of alleged settlement agreement, breach of loans and lease agreement, unjust enrichment, and accounting.

District Court Proceedings Edit

Plaintiffs sought enforcement of the parties’ alleged settlement agreement. Defendants’ answer to the complaint did not plead a statute of frauds defense. A party is required to set forth affirmatively all matters which it intends to use as an avoidance or affirmative defense in responding to a pleading.[1] The statute of frauds defense is a defense specifically enumerated as an affirmative defense covered by Fed. R. Civ. P., Rule 8(c). If such defenses are not affirmatively pleaded, asserted with a motion under Rule 12(b), or tried by the express or implied consent of the parties, such defense are deemed to have been waived and may not thereafter be considered as triable issues in the case.

Strict adherence to the pleading requirement is inappropriate when the purpose of the requirement has been fulfilled. The purpose of the pleading an affirmative defense is to give then opposing party notice of the defense and a chance to argue, if he can, why the imposition of the defense would be inappropriate. The Tenth Circuit has held that the purposes behind the notice pleading requirements are served if the plaintiff is put “on notice well in advance of trial that defendant intends to present a defense in the nature of an avoidance.”

The Colorado Court of Appeals has noted that whether an e-mail constitutes a “writing” is an unsettled question of law. The Seventh Circuit has determined that an e-mail satisfied the applicable statute of frauds. The defendants wrote an e-mail indicating that InvestorDigs’ counsel was in the process of drafting documents to memorialize those terms. Judge Brimmer concluded that the e-mails might satisfy the writing requirements and, as such, the plaintiff’s breach of contract claim survived Fed. R. Civ. P., Rule 12(b)(6) dismissal. An e-mail exchange may satisfy a statute of frauds writing requirement. Whether the parties have entered into a contract is a question of fact. Assuming that e-mail to be a writing under the statute of frauds, a genuine issue of fact remains whether the e-mail was sufficient to evidence a contract.

The Electronic Signatures in Global and National Commerce Act (E-Sign Act) provides that "a signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic records was used in its formation."[2] An “electronic signature" is "an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record."[3]

While the e-mail of settlement terms may constitute a writing under Colo. Rev. Stat. §38-10-112, it is not “subscribed by the party charged therewith.” The only evidence indicated that the electronic signature at issue was not “executed or adopted by a person with the intent to sign the record” pursuant to 15 U.S.C. §7006(5). The electronic signature on the e-mail in this case was not valid or enforceable in that it does not constitute a writing “subscribed by the party charged therewith.”

Defendants did not challenge this assertion but instead contend that Plaintiffs’ claim was only against InvestorDigs, and that the plaintiffs claim for relief for breach of contract related to the loan agreements should be dismissed under the statute of frauds.

Every contract for a lease for a period of more than one year is void unless the contract or some note or memorandum thereof expressing the consideration is in writing and subscribed by the party by whom the lease is to be made.[4] The e-mail in question was subject to interpretation, whether it was sufficient to evidence a contract was a question of fact that precluded summary judgment. Whether the e-mail was subscribed by the party by whom the lease was to be made was also a disputed issue of fact and precluded summary judgment as matter of law. The dismissal of plaintiffs’ breach of contract claim regarding the lease agreement on a statute of frauds grounds pursuant to Colo. Rev. Stat. §38-10-108 was not warranted.

Plaintiffs also sought relief for unpaid goods and services provided to defendants “including, without limitation, the loan of $450,000, leased office space and consulting services." Plaintiffs submit a Security Agreement and Secured Promissory Note in which Onit Solutions was purportedly given a security interest in the assets of IvestorDigs in exchange for a secured promissory note. Although the defendants may not have been parties to the alleged loan agreement, the alleged lease or the consulting agreement, the theory of unjust enrichment was an alternative basis for recovery not grounded on the alleged contracts; it was a “judicially-created remedy designed to undo the benefit to one party that comes at the unfair detriment of another." It was an equitable remedy and does not depend on any contract, oral, or written.

The defendants were entitled to summary judgment on plaintiff’s claim for an accounting of defendant InvestorDigs’ assets. The defendants also were entitled to summary judgment on plaintiffs’ claim for breach of contract of the settlement agreement, for relief for breach of contract of the loans and for breach of contract of the lease. However, the defendants were not entitled to summary judgment on the claim for relief for unjust enrichment and for an accounting.

References Edit

  1. Fed. R. Civ. P., Rule 8(c).
  2. 15 U.S.C. §7001(a).
  3. Id. §7006(5).
  4. Colo. Rev. Stat. §38-10-108.

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