Washburn v. C6-Zero, LLCWashburn v. C6-Zero, LLC
I. INTRODUCTION
This matter is before me on a motion (Doc. 232) to dismiss filed by defendant Marvin Odum. Plaintiff Tali Washburn has filed a resistance (Doc. 237) and Odum has filed a reply (Doc. 240). Oral argument is not necessary. See Local Rule 7(c).
II. BACKGROUND
This lawsuit, which invokes the court’s diversity jurisdiction under
- Count I – wage claims under Iowa Code Chapter 91A
- Count II – breach of contract
- Count III – fraudulent misrepresentation
- Count IV – civil conspiracy
- Count V – punitive damages
Count VI – contract reformation (fraud) - Count VII – alter ego liability
- Count VIII – joint and several liability
- Count IX – quantum meruit
- Count X – conversion
- Count XI – unjust enrichment
Doc. 194. Odum seeks dismissal of all counts against him.
III. APPLICABLE STANDARDS
The Federal Rules of Civil Procedure authorize a pre-answer motion to dismiss for “failure to state a claim upon which relief can be granted.”
Under
Federal Rule of Civil Procedure 8(a)(2) , a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” As the Court held in [Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 167 L.Ed.2d 929 (2007)], the pleading standard Rule 8 announces does not require “detailed factual allegations,” but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation. Id., at 555, 127 S. Ct. 1955 (citing Papasan v. Allain, 478 U.S. 265, 286, 106 S. Ct. 2932, 92 L.Ed.2d 209 (1986)). A pleading that offers “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” 550 U.S. at 555, 127 S. Ct. 1955. Nor does a complaint suffice if it tenders “naked assertion[s]” devoid of “further factual enhancement.” Id., at 557, 127 S. Ct. 1955.To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” Id., at 570, 127 S. Ct. 1955. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id., at 556, 127 S. Ct. 1955. The plausibility standard is not akin to a “probability requirement,” but it asks for more than a sheer possibility that a defendant has acted unlawfully. Ibid. Where a complaint pleads facts that are “merely consistent with” a defendant‘s liability, it “stops short of
the line between possibility and plausibility of ‘entitlement to relief.’” Id. at 557, 127 S. Ct. 1955 (brackets omitted).
Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009).
Courts assess “plausibility” by “‘draw[ing] on [their own] judicial experience and common sense.’” Whitney v. Guys, Inc., 700 F.3d 1118, 1128 (8th Cir. 2012) (quoting Iqbal, 556 U.S. at 679). Also, courts “‘review the plausibility of the plaintiff‘s claim as a whole, not the plausibility of each individual allegation.’” Id. (quoting Zoltek Corp. v. Structural Polymer Grp., 592 F.3d 893, 896 n.4 (8th Cir. 2010)). While factual plausibility is typically the focus of a Rule 12(b)(6) motion to dismiss, federal courts may dismiss a claim that lacks a cognizable legal theory. See, e.g., Somers v. Apple, Inc., 729 F.3d 953, 959 (9th Cir. 2013); Commonwealth Prop. Advocates, L.L.C. v. Mortg. Elec. Registration Sys., Inc., 680 F.3d 1194, 1202 (10th Cir. 2011); Target Training Intern., Ltd. v. Lee, 1 F. Supp. 3d 927, 937 (N.D. Iowa 2014).
In considering a Rule 12(b)(6) motion to dismiss, ordinarily the court “cannot consider matters outside the pleadings without converting the motion into a motion for summary judgment.” McMahon v. Transamerica Life Ins. Co., No. C17-149-LTS, 2018 WL 3381406, at *2 n.2 (N.D. Iowa July 11, 2018); see
When a complaint does not state a claim for relief that is plausible on its face, the court must consider whether it is appropriate to grant the pleader an opportunity to replead. The rules of procedure permit a party to respond to a motion to dismiss by amending the challenged pleading “as a matter of course” within 21 days. See
whether the pleader chose to stand on its original pleadings in the face of a motion to dismiss that identified the very deficiency upon which the court dismissed the complaint; reluctance to allow a pleader to change legal theories after a prior dismissal; whether the post-dismissal amendment suffers from the same legal or other deficiencies as the dismissed pleading; and whether the post-dismissal amendment is otherwise futile.
Meighan v. TransGuard Ins. Co. of Am., 978 F. Supp. 2d 974, 982 (N.D. Iowa 2013).
IV. DISCUSSION
Odum seeks dismissal of all claims against him for failure to state a claim. Washburn acknowledges that the court has previously dismissed Counts I through VI and VIII through XI against other individual defendants and acknowledges that the same grounds may exist to dismiss those direct claims against Odum. Therefore, she focuses her resistance on Count VII, alter ego liability, maintaining that Odum should be held personally responsible for Counts I through VI and VIII through XI against C6-Zero through application of the alter ego doctrine.
I agree that Washburn’s allegations fall short of alleging stand-alone or direct claims against Odum on Counts I through VI and VIII through XI, for the reasons articulated in Odum’s motion (Doc. 232) and in my previous rulings dismissing those claims against individual defendants. See Docs. 180, 228. Therefore, the only count at issue is Count VII, based on alter ego liability. As discussed in a previous order, the Southern District of Iowa has observed there are generally two scenarios in which the Iowa Supreme Court has recognized that piercing the corporate veil or applying alter ego liability is appropriate. See United States v. Huyser, 4:23-cv-144, 2024 WL 5054962, at *22 (S.D. Iowa Sept. 30, 2024). The first is when there is a unity of interest and identity between the owner and entity that the corporate entity and person cannot be separated.
The Iowa Supreme Court has explained as follows with regard to piercing the corporate veil:
A court may disregard a corporate structure by piercing the corporate veil only under circumstances ‘where the corporation is a mere shell, serving no legitimate business purpose, and used primarily as an intermediary to perpetuate fraud or promote injustice.” C. Mac Chambers Co. v. Iowa Tae Kwon Do Acad., Inc., 412 N.W.2d 593, 597 (Iowa 1987) (quoting Briggs, 262 N.W.2d at 810).
The burden is on the party seeking to pierce the corporate veil to show the exceptional circumstances required. C. Mac Chambers, 412 N.W.2d at 598. Factors that would support such a finding include (1) the corporation is undercapitalized; (2) it lacks separate books; (3) its finances are not kept separate from individual finances, or individual obligations are paid by the corporation; (4) the corporation is used to promote fraud or illegality; (5) corporate formalities are not followed; and (6) the corporation is a mere sham.” Id. (citing Briggs, 262 N.W.2d at 810).
In re Marriage of Ballstaedt, 606 N.W.2d 345, 349 (Iowa 2000). This list is not exhaustive, but a guideline. Boyd. v. Boyd & Boyd, 386 N.W.2d 540, 544 (Iowa Ct. App. 1986).
Odum argues Washburn fails to state a claim of alter ego liability against him because Odum is not alleged to have been intertwined or essentially the same as C6-Zero and he is not alleged to have an obligation to fund C6-Zero, was not an active participant in corporate affairs and was not in a position to recognize when something was amiss.1
One of Odum’s primary arguments is that Washburn’s allegations fail to state a claim because many do not allege “facts” related to Odum, but statements that others told her about Odum. See Doc. 194 at ¶¶ 76, 79, 118, 168-71, 236, 320, 457, 459, 466-68, 471-75. For example, instead of alleging Odum’s approval was necessary to hire Washburn, she alleges Koehn told her he needed the approval of Odum and Pulver before she could be hired. Id. at ¶¶ 320, 467. She also draws heavily on inferences rather than directly alleging Odum’s role. See id. at ¶¶ 469-70, 476-81, 485. The only direct allegations Washburn makes about Odum’s role in C6-Zero are the following:
- In Defendants’ initial disclosures, Koehn and Pulver provided Plaintiff with a document entitled “C6 Zero Principal Actors” stating that Marvin Odum, the former CEO of Royal Dutch Shell, is an investor and principal actor in this matter. Id. at ¶ 486.
- Also provided by Koehn and Pulver in their initial disclosures is a document entitled “C6 Zero Executive Framing Document” showing Odum as an owner, investor, and executive team member of C6 Zero, LLC. Id. at ¶ 487.
- According to the C6 Zero Executive Framing Document Odum owned twenty percent (20%) of C6 Zero. Id. at ¶ 488.
Odum was a control person in C6 Zero as he owned more than ten percent (10%) of C6 Zero and he was in a position to influence the decision-making processes of the corporation as previously identified herein. Id. at ¶ 489. - Washburn is informed and believes that Odum, Brand, Koehn, Lavigne and Pulver exercise or exercised complete control over C6-Zero entities. Id. at ¶ 529.
- Odum was listed during the relevant time periods as a member of the executive team of C6 Zero. Id. at ¶ 534.
- Odum, during the relevant time periods, was a twenty percent (20%) investor of C6 Zero. Id. at ¶ 535.
- Upon information and belief Odum made executive management decisions for C6 Zero to include making hiring decisions related to Washburn. Id. at ¶ 536.
- Upon information and belief Odum made capital allocation decisions for C6 Zero. Id. at ¶ 537.
- Odum, Brand, Koehn, Lavigne and Pulver have held themselves out as the owners of the C6-Zero entities. Id. at ¶ 539.
Odum has attached the two referenced documents to his motion, see Docs. 232-2 and 232-3, and argues I may consider them as embraced by the pleadings. See Mattes v. ABC Plastics, Inc., 323 F.3d 695, 698 n.4 (8th Cir. 2003) (“in considering a motion to dismiss, the district court may sometimes consider materials outside the pleadings, such as materials that are necessarily embraced by the pleadings and exhibits attached to the complaint.”). Odum argues these documents do not establish that Odum is a member or manager of C6-Zero as the Executive Framing Document lists Odum as a “to be 5-10% owner” and is also listed under a “Potential C6-Zero Sub company partners Restructuring Current Ownership – As Is.” Doc. 232-2 at 5 (emphases added). Odum points out these documents are undated, fail to indicate an author and are not executed company formation documents, such as an operating agreement. I agree that the documents have little bearing on the issue of stating a claim of alter ego liability for the reasons stated by Odum.
Washburn’s allegations attempting to tie Odum to the comingling of funds and unity of interest and identity with C6-Zero are insufficient to state a claim of alter ego liability against Odum. The allegations she relies on are either conclusory4 or based on statements others made to Washburn about Odum and not allegations made directly about Odum’s role or actions. Accepting these allegations as true, the fact that others told
The other basis for alter ego liability is when the entity was formed without sufficient capital or was solely or predominantly engaged in fraudulent activity. Odum argues Washburn fails to state a claim based on this theory of alter ego liability because Washburn has not alleged Odum is a member of C6-Zero and, as a result, has no obligation to provide capitalization. He also notes that Washburn has not alleged he was an officer/owner who had an obligation to know about the day-to-day activities of C6-Zero or that he was an active participant in corporate affairs or in a position to recognize when something was amiss.
Washburn primarily focuses on her allegations of undercapitalization without any reference to the defendants responsible for sufficiently funding C6-Zero. See Doc. 237 at 9 (citing Doc. 194 at ¶¶ 144-49, 384-88, 396-97, 416-22, 435). The only allegations she cites with respect to Odum are:
- Brand and Koehn claimed Odum needed to approve the terms of her investment with the Company, and Brand claimed Odum was hands-on in managing the company’s finances. Doc. 194 at ¶ 169.
- In response to Washburn’s requests for her back salary and more, Brand and Koehn told Washburn that they did not own the Company outright, and that they had to answer to Marvin Odum, Joe LaVigne, and others. They claimed Odum needed to approve the terms of her royalty payments from the Company, and Brand claimed Odum was hands-on in managing the company’s finances. Id. at 474.
Again, accepting these allegations as true is accepting only that Brand and Koehn told Washburn these things. It is not accepting the truth of what they told her.
HOK Sport cites Briggs Transport for the proposition that “[a]n abuse of the corporate privilege may justify piercing the corporate veil as to persons who actively participate in the conduct of corporate affairs and have provided inadequate capitalization.” HOK Sport, Inc., 495 F.3d at 936. In Briggs Transport, the Iowa Supreme Court considered whether Martha Voeltz, who was a corporate officer and stockholder of the defendant corporation, could be held personally liable to the plaintiff through piercing the corporate veil. Briggs Transport Co., Inc. v. Starr Sales Co., Inc., 262 N.W.2d 805, 811 (Iowa 1978). The trial court held she could not because the plaintiff had failed to show she had any active part in the incorporation or business of the corporation. Id. While the Iowa Supreme Court agreed with the trial court’s factual findings relating to Voeltz’s role in the corporation, it disagreed that she could not be held personally liable. The Court reasoned:
an officer and owner of a close corporation is not individually immune from personal liability for actual damages under the doctrine which permits piercing the corporate veil. As a major corporate officer she could not avoid liability by emulating the three fabled monkeys, hearing, seeing and speaking no evil. Nor could she ignore the reality Starr Sales had evaded
the most basic aspects of corporate existence. For example, she had a responsibility to know Starr Sales was without initial capital and that corporate books were nonexistent. When the separate entity privilege is denied, as it should be in this situation, it is clear a shareholder or equitable owner who is also a major officer of a close corporation ordinarily cannot escape personal liability.
Id. Therefore, active participation and providing inadequate capitalization are not necessarily requirements, at least if the defendant is an officer and owner of a close corporation.
Here, Washburn has alleged that Odum was such an officer and owner. See Doc. 194 at ¶ 489 (“Odum was a control person in C6 Zero as he owned more than ten percent (10%) of C6 Zero and he was in a position to influence the decision-making processes of the corporation as previously identified herein.”); ¶ 534 (“Odum was listed during the relevant time periods as a member of the executive team of C6 Zero.”); ¶ 535 (“Odum, during the relevant time periods, was a twenty percent (20%) investor of C6 Zero.”); ¶ 536 (“Upon information and belief Odum made executive management decisions for C6 Zero to include making hiring decisions related to Washburn.”); ¶ 537 (“Upon information and belief Odum made capital allocation decisions for C6 Zero.”); ¶ 539 (“Odum, Brand, Koehn, Lavigne and Pulver have held themselves out as the owners of the C6-Zero entities.”). While the allegations could be more specific, I will not hold Washburn to a higher burden regardless of how far the parties have progressed in discovery, as Odum chose to file his motion as a motion to dismiss rather than a motion for summary judgment.
Washburn has plausibly alleged facts sufficient to state a claim against Odum on alter ego liability. As articulated in prior orders, Washburn has alleged C6-Zero was undercapitalized and failed to maintain separate books, see Doc. 180 at 10-12, and while those allegations do not detail any facts suggesting “active participation” by Odum, the same was true for Martha Voeltz in Briggs Transport. The Court found that, as a major corporate officer, she could not avoid liability through ignorance of corporate actions
V. CONCLUSION
For the reasons stated herein, defendant Odum’s motion (Doc. 232) to dismiss is granted in part and denied in part. It is granted as to Counts I-VI and VIII-XI. It is denied as to Count VII.
IT IS SO ORDERED this 7th day of August, 2026.
__________________________
Leonard T. Strand
United States District Judge
Notes
Doc. 194 at ¶ 538. This allegation does not allege any facts to show a unity of interest between Odum and C6-Zero.There exists, and at all times herein mentioned has existed, a unity of interest and ownership between Odum, Brand, Koehn, Lavigne and Pulver on the one hand, and Entity Defendants, on the other hand, such that the requisite degree of individuality and separateness among these Defendants, and each of them, have ceased, and that Odum, Brand, Koehn, Lavigne and Pulver are the alter egos of Entity Defendants, and Entity Defendants are the alter egos of one another.