Derrick Johns v. John Kaelblein, III , 644 F. App'x 325 ( 2016 )

Case: 15-50969 Document: 00513441056 Page: 1 Date Filed: 03/28/2016
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 15-50969 FILED
Summary Calendar March 28, 2016
Lyle W. Cayce
Clerk
DERRICK JOHNS,
Plaintiff - Appellant
v.
JOHN P. KAELBLEIN, III,
Defendant - Appellee
Appeal from the United States District Court
for the Western District of Texas
USDC No. 1:15-CV-267
Before WIENER, HIGGINSON, and COSTA, Circuit Judges.
PER CURIAM:*
Plaintiff Derrick Johns cofounded DiFusion Technologies, a medical
device and biomaterials manufacturer. At Johns’ direction, DiFusion’s Board
of Directors hired Defendant John Kaelblein as the company’s President and
Chief Operating Officer. In this role, Kaelblein created an amorphous
“Advances” account that combined deductible business expenses, salary
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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No. 15-50969
advances, and investments, rather than separating and classifying these
corporate expenditures. When DiFusion was later trying to raise capital,
potential investors required more detailed financial information. As part of
restating the financials, Kaelblein, board members, and outside accountants
decided to relabel the “Advances” account as the “Derrick Johns Advance
Account.” According to Johns, however, the funds in that account did not go to
Johns, nor was he aware the account existed. The IRS subsequently began an
investigation into Johns because it believed he was receiving more taxable
income than he reported. Johns alleged the investigation could have been
avoided had Kaelblein provided him with a W-2 form reporting the $642,861
in supposed salary advances from the account. 1
Johns filed this diversity suit alleging the following claims: (1) breach of
fiduciary duty; (2) negligence based on a common law duty and negligence per
se; (3) negligent misrepresentations made to Johns when Kaelblein provided
him with inaccurate W-2 forms; and (4) derivative torts such as conspiracy and
aiding and abetting. The district court dismissed the case for failure to state
any viable claims. Reviewing the complaint, record, and relevant law, we
affirm largely for the reasons stated by the district court.
First, the district court correctly dismissed the breach of fiduciary duty
claim on the ground that Kaelblein did not owe Johns a fiduciary duty. As
President and COO, Kaelblein certainly owed fiduciary duties to the company.
But that does not translate into a duty to Johns as one of the cofounders of the
company. Indeed, as the district court noted, a separate duty to an individual
founder of the company would likely create a conflict. Texas law does not
impose a fiduciary duty under these circumstances. See Crim Truck & Tractor
1 These facts are based on Johns’ allegations, which we must accept as true in
reviewing the case at the pleadings stage. We suspect that Kaelbein, the Board, and the IRS
have a quite different version of events.
2
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Co. v. Navistar Intern. Transp. Corp., 823 S.W.2d 591, 593 (Tex. 1992) (noting
that while “certain informal relationships” may give rise to a fiduciary duty, a
prior business relationship, even a “cordial one, of long duration,” will not
create such a duty).
Second, we affirm the dismissal of Johns’s negligence claim based on a
statutory duty of care which is the only negligence claim he tries to revive on
appeal. 2 The statute Johns invokes, TEX. BUS. ORGS. CODE § 3.105, 3 does not
impose a duty on an officer like Kaelblein; it instead authorizes an officer like
Kaelblein to rely on information provided by others unless he has knowledge
that would make such reliance unreasonable. Id. And no Texas case has ever
recognized that the statute gives rise to a duty under negligence law.
Third, Johns’s negligent misrepresentation claim was correctly
dismissed for failure to plead justifiable reliance. 4 In his response to
Kaelblein’s motion to dismiss, Johns stated in a conclusory fashion that he
“would have taken any number of steps to rectify the situation and avoid an
IRS investigation” had Kaelblein furnished accurate W-2s. Johns left the court
with nothing but conjecture as to what those “steps” might have been.
2 Johns argues for the first time in his reply brief that the economic loss rule does not
apply to his common law duty of care claim and it therefore should not have been dismissed
on those grounds. We will generally not consider an argument raised for the first time in a
reply brief and will not do so here. See United States v. Rodriguez, 602 F.3d 346, 360 (5th Cir.
2010).
3 TEX. BUS. ORGS. CODE ANN. § 3.105 (West 2006).
4 The lack of justifiable reliance was one of two grounds on which the district court
dismissed the negligent misrepresentation claim. It also held that Kaelblein needed to have
a pecuniary interest in the misrepresentation. Kaelblein now concedes that this was error
as Texas law also recognizes a claim for negligent misrepresentation when the challenged
statement is made in connection with one’s employment. See McCamish, Martin, Brown &
Loeffler v. F.E. Appling Interests, 991 S.W.2d 787, 791 (Tex. 1999) (noting that a
misrepresentation must be made “in the course of his business, profession or employment, or
in any transaction in which he has a pecuniary interest”) (emphasis added).
3
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Lastly, Johns’s inability to establish any of the above underlying torts
dooms his derivative claims for conspiracy and aiding and abetting. See
Meadows v. Hartford Life Ins. Co., 492 F.3d 634, 640 (5th Cir. 2007) (noting
that “if a plaintiff fails to state a separate underlying claim on which the court
may grant relief” then derivative torts claims also fail).
The district court therefore is AFFIRMED.
4