UMDA’s lawsuit against its former CEO is dismissed

U.S. District Court for the NMI designated judge Consuelo B. Marshall has dismissed a lawsuit filed by United Micronesia Development Association Inc. against its former president and chief executive officer, David L. Wickline.

In an order on Tuesday, Marshall dismissed with prejudice UMDA’s claims for declaratory relief, fraud, and wrongful dilution. Dismissed with prejudice means UMDA cannot re-file the lawsuit.

In the same order, Marshall dismissed without prejudice UMDA’s claims for breach of fiduciary duty, unjust enrichment, and injunctive relief. The judge gave UMDA no later than Oct. 22, 2014, to submit an amended complaint.

Dismissed without prejudice allows UMDA to re-file the case on those claims in the future.

UMDA sued Wickline “to protect its shareholders from dilution of their interests in the company, to recover substantial damages that UMDA discovered during the course of its investigation, and to stop Wickline from working behind the scene to undermine shareholder confidence.”

Wickline also sued UMDA, seeking monetary damages. The cases are now consolidated.

Wickline, through counsel Colin Thompson, moved to dismiss UMDA’s complaint.

UMDA alleged three causes of action against Wickline: no right to any additional compensation, no right to travel pass or employment, and no right to UMDA stock options.

In dismissing the declaratory relief claims, Marshall said such claims are “superfluous” and unnecessary to settle aspects of a controversy that’s already before the court.

Accordingly, Marshall said the court declines to exercise jurisdiction over UMDA’s declaratory action claims, and dismissed them with prejudice.

With respect to the fraud claim, the judge ruled that a two-year statute of limitations applies to UMDA’s claim.

Marshall said that UMDA had specific opportunities to discover Wickline’s alleged fraud well before January 2012, the expiration of the statute of limitations.

Therefore, Marshall said, the court is not persuaded by UMDA’s claim that its first reasonable opportunity to discover the purported fraud was in February 2012, when Wickline sought to exercise the disputed stock options.

Marshall said UMDA further delayed bringing its fraud claim until the lawsuit was filed on Jan. 13, 2014.

On breach of fiduciary duty claim, the judge noted that there are no specific factual allegations that Wickline breached his contract of service generally or failed to faithfully fulfill his other required duties.

“In fact, plaintiff alleges that UMDA continued to utilize Wickline’s services even after UMDA was allegedly made aware of Wickline’s disloyalty,” she said.

Marshall said as a result of Wickline’s disloyalty, UMDA pleads only that Wickline demanded 150,000 shares of UMDA stock for $5 per share, demanded an additional $600,000 in compensation, and demanded retention of the United Airlines travel pass until its expiration in 2018.

Marshall said UMDA alleges that it refused to pay Wickline any of the severance and compensation he is now seeking.

“Assuming plaintiff’s allegations are true, UMDA was not damaged by Wickline’s alleged breaches of the fiduciary duty of loyalty,” she said.

On unjust enrichment claim, Marshall said that UMDA failed to allege that any of the compensation it paid Wickline resulted from or was related to Wickline’s allegedly disloyal or fraudulent activities.

On injunction relief matter, UMDA seeks to stop Wickline’s communications with shareholders where he might challenge the position of current UMDA directors.

Marshall said there is no allegation that Wickline’s communications threaten UMDA’s constitutional rights, or that a restraint of this speech is compelling.

Marshall said the complaint fails to provide any facts upon which the court could conclude that UMDA is entitled to prior restraint of their former director’s communications.

With respect to dilution issue, UMDA alleges that UMDA and its shareholders were damaged by Wickline’s “self-dealing” because his “purported 150,000 shares” diluted the value of the shares of other UMDA shareholders.

Marshall said UMDA’s allegations are insufficient to state a claim.

First, the judge said, the complaint alleges that UMDA did not award, nor honor, Wickline’s alleged self-grant of stock options.

Marshall said an award of stock options or dilution of shares is necessarily a corporation action, not an action that an individual director can orchestrate without the corporation’s approval.

Marshall said Wickline could not (and UMDA alleges he could not) award himself stock options.