United States Court of Appeals
For the First Circuit
Nos. 00-1834
00-1835
DONAL B. BARRETT,
Plaintiff, Appellant,
v.
VICTOR J. LOMBARDI, JR., ET AL.,
Defendants, Appellees.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Rya W. Zobel, U.S. District Judge]
Before
Selya, Circuit Judge,
Cyr, Senior Circuit Judge,
and Boudin, Circuit Judge.
W.P. Colin Smith, Jr. for appellant.
Alan R. Curhan, with whom Burns & Levinson and Gadsby
Hannah, LLP were on brief, for appellees.
January 17, 2001
SELYA, Circuit Judge. Smarting from the sting of a
failed business relationship, plaintiff-appellant Donal B.
Barrett sued his erstwhile co-venturer, Victor J. Lombardi, Jr.,
and one of Lombardi's companies, Veritas Offshore, Ltd.
(Veritas). Acting on the defendants' joint dispositive motion,
the district court determined (1) that it lacked in personam
jurisdiction over Veritas, and (2) that, for jurisdictional and
other reasons, the complaint stated no claim against Lombardi
upon which relief could be granted. Barrett appeals from the
order of dismissal. We affirm in part and reverse in part.
I. BACKGROUND
In order to place these appeals into perspective, we
recount the facts as alleged by the appellant in the operative
pleading (the first amended complaint), as supplemented by his
affidavit in opposition to the joint motion to dismiss.
In November 1995, the appellant and Edward Dyman
organized NetFax, Inc., a Delaware corporation, for the purpose
of developing and commercially exploiting new technologies for
Internet facsimile transmission conceived by Frederick Murphy
(Dyman's brother-in-law). Murphy himself soon joined the
enterprise. The company established a base of operations in
Cambridge, Massachusetts, and installed the appellant as its
chairman. All the "founder's stock" stood in Dyman's name
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(although the appellant maintains that Dyman held the shares as
his nominee).
In short order, Lombardi tried to insinuate himself
into the business, touting his expertise and connections.
Gulled by Lombardi's rodomontade and eager to bring him into the
fold, the appellant directed Dyman to transfer a substantial
number of NetFax shares to Veritas. These transfers occurred in
March 1996 and periodically thereafter, involving an aggregate
of 4,046,666 shares (about 30% of the founder's stock). In the
same general time frame, Dyman also transferred substantial
amounts of stock to the appellant and to Murphy, retaining only
a token amount for himself.
The marriage did not go well. In time, disputes over
how to manage the affairs of the fledgling company led to the
appellant's ouster as NetFax's chairman. Lombardi took his
place. That change in command culminated in the execution of a
separation agreement (the Agreement), dated July 31, 1998. In
the Agreement, Lombardi promised, among other things, to grant
the appellant a warrant, expiring July 31, 2000, for the
purchase of 1,000,000 shares of NetFax stock at a price of
$0.001 per share. The appellant never received the warrant.
Lombardi's ascension to the throne failed to improve
NetFax's fortunes and the company suspended operations in
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September 1998. Six months later, the appellant went to court.
Invoking diversity jurisdiction, 28 U.S.C. § 1332(a), he filed
suit against Lombardi and Veritas in the United States District
Court for the District of Massachusetts.
The appellant's first amended complaint contains five
statements of claim. The first four charge federal securities
fraud, deceptive trade practices, common law deceit, and common
law misrepresentation, respectively. All of these counts derive
from falsehoods attributed to Lombardi, including exaggerations
about his supposed expertise and his failure to disclose his
checkered financial past (a history that, as the appellant
belatedly learned, involved a number of questionable stock deals
and a personal bankruptcy). The fifth statement of claim,
sounding in contract, concerns Lombardi's refusal to deliver the
warrant.
The defendants denied the material averments of the
complaint and, in due course, filed a motion to dismiss. The
district court determined that it lacked in personam
jurisdiction over Veritas; that, in all events, the appellant's
first four counts were vulnerable because he was not the real
party in interest (Dyman, after all, had transferred the
shares); and that those counts also failed because of an
insufficient showing of damages. These determinations left
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standing only the breach of contract claim (count five). As to
that cause of action, the court focused on the price to be paid
for the underlying stock — 1,000,000 shares at $0.001 per share
— and, by a process of simple multiplication, ascertained that
the dispute involved only $1,000. Starting from that premise,
the court ruled that it lacked subject-matter jurisdiction by
reason of an inadequate amount in controversy.
Having disposed of all the appellant's claims, the
court granted the motion to dismiss and entered judgment in the
defendants' favor. The appellant then moved unsuccessfully for
relief from the judgment. The district court denied that motion
out of hand. These appeals — one taken upon the initial entry
of judgment and the second upon the denial of reconsideration —
followed.
II. CLAIMS AGAINST VERITAS
In our view, efficient resolution of the claims against
Veritas does not require us to go beyond the district court's
determination that it lacked in personam jurisdiction over that
defendant. We confine our discussion accordingly.
A. The Motion to Dismiss.
Veritas is a foreign corporation headquartered in the
Cayman Islands. Since there is no evidence that it regularly
conducts business in Massachusetts, the appellant must establish
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a basis for the exercise of specific jurisdiction. See
Donatelli v. Nat'l Hockey League, 893 F.2d 459, 462-63 (1st Cir.
1990) (elucidating concepts of "general" and "specific" personal
jurisdiction, and distinguishing between them). To achieve this
goal, the appellant must present sufficient facts to satisfy two
cornerstone conditions: "first, that the forum in which the
federal district court sits has a long-arm statute that purports
to grant jurisdiction over the defendant; and second, that the
exercise of jurisdiction pursuant to that statute comports with
the strictures of the Constitution." Pritzker v. Yari, 42 F.3d
53, 60 (1st Cir. 1994). In this case, then, the appellant
cannot hale Veritas into the district court unless he can
satisfy the rigors of both the Massachusetts long-arm statute
and the United States Constitution.
Compliance with the state standard for personal
jurisdiction necessitates a showing that the cause of action
arises from the defendant's "transacting any business" in
Massachusetts, Mass. Gen. Laws ch. 223A, § 3(a), or from a
tortious in-state "act or omission," id. § 3(c). Compliance
with the federal constitutional standard involves a somewhat
more extensive showing. That showing has three aspects:
First, the claim underlying the litigation
must directly arise out of, or relate to,
the defendant's forum-state activities.
Second, the defendant's in-state contacts
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must represent a purposeful availment of the
privilege of conducting activities in the
forum state, thereby invoking the benefits
and protections of that state's laws and
making the defendant's involuntary presence
before the state's courts foreseeable.
Third, the exercise of jurisdiction must, in
light of the Gestalt factors, be reasonable.
United Elec., Radio & Mach. Workers v. 163 Pleasant St. Corp.,
960 F.2d 1080, 1089 (1st Cir. 1992).
We have developed a taxonomy that provides a variable
set of guidelines, each corresponding to a particular level of
analysis, for use when a trial court adjudicates a motion to
dismiss for want of personal jurisdiction. See Foster-Miller,
Inc. v. Babcock & Wilcox Can., 46 F.3d 138, 145-47 (1st Cir.
1995); Boit v. Gar-Tec Prods., Inc., 967 F.2d 671, 674-78 (1st
Cir. 1992). The most conventional of these methods — and the
one that applies here — authorizes the district court to
restrict its inquiry to whether the plaintiff has proffered
evidence which, if credited, suffices to support a finding of
personal jurisdiction. Rodriguez v. Fullerton Tires Corp., 115
F.3d 81, 83-84 (1st Cir. 1997); Foster-Miller, 46 F.3d at 145.
To make this prima facie showing, the plaintiff cannot
rest upon mere averments, but must adduce competent evidence of
specific facts. Foster-Miller, 46 F.3d at 145; Boit, 967 F.2d
at 675. When he does so, the court must accept the proffer at
face value. Foster-Miller, 46 F.3d at 145. Determining the
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adequacy of this prima facie jurisdictional showing is a
quintessentially legal determination — a determination which, on
appeal, engenders de novo review. Rodriguez, 115 F.3d at 84.
In the circumstances at bar, the district court
correctly found the appellant's proffer wanting. The appellant
failed even to allege — let alone offer competent proof — that
Veritas had conducted any business in Massachusetts or that it
had any significant ties to the state. Indeed, the appellant's
only mention of Veritas in either his amended complaint or in
his affidavit in opposition to the motion to dismiss indicated
that Veritas was the transferee and holder of the NetFax shares,
and that he believed it to be owned and managed by Lombardi.
The mere acceptance of shares transferred from within the forum
state, without more, does not constitute a minimum contact
sufficient to subject a foreign corporation to jurisdiction in
that state's courts. E.g., Shaffer v. Heitner, 433 U.S. 186,
216 (1977). Nor will the fact that the transferee is
beneficially owned or controlled by a person or entity who does
business in the forum state suffice to tip the jurisdictional
balance. See Keeton v. Hustler Magazine, Inc., 465 U.S. 770,
781 n.13 (1984) ("[N]or does jurisdiction over a parent
corporation automatically establish jurisdiction over a wholly
owned subsidiary."); Cent. States, S.E. & S.W. Areas Pension
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Fund v. Reimer Express World Corp., 230 F.3d 934, 944 (7th Cir.
2000) (similar).
In the face of these powerful precedents, the appellant
attempts to bolster his position by noting that his opposition
to the motion to dismiss portrayed Lombardi as an agent of
Veritas (so that business transacted by Lombardi in
Massachusetts could be attributed to Veritas). This attempt
fizzles. In order to defeat a motion to dismiss for want of in
personam jurisdiction, a plaintiff must do more than simply
surmise the existence of a favorable factual scenario; he must
verify the facts alleged through materials of evidentiary
quality. See Foster-Miller, 46 F.3d at 145; Boit, 967 F.2d at
675. Thus, allegations in a lawyer's brief or legal memorandum
are insufficient, even under the relatively relaxed prima facie
standard, to establish jurisdictional facts. Cf. Fragoso v.
Lopez, 991 F.2d 878, 887 (1st Cir. 1993) (explaining that
statements in a brief are not adequate to forestall summary
judgment); Kelly v. United States, 924 F.2d 355, 357 (1st Cir.
1991) (similar).
That ends this aspect of the matter. Because the
appellant placed insufficient facts before the district court to
satisfy the minimum requirements for the exercise of personal
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jurisdiction, the court appropriately granted Veritas's motion
to dismiss.
B. The Motion for Relief from Judgment.
Following the district court's order of dismissal, the
appellant moved for relief from judgment.1 He submitted with the
motion a new affidavit asserting that Veritas was subject to in
personam jurisdiction in Massachusetts because it functioned as
Lombardi's "alter ego." The appellant posits that this neoteric
submission bridged the jurisdictional gap, and that the district
court therefore should have vacated its order of dismissal. He
is wrong.
A motion for relief from judgment cannot be used merely
to reargue a point already decided. See Cody, Inc. v. Town of
Woodbury, 179 F.3d 52, 56 (2d Cir. 1999); Cashner v. Freedom
Stores, Inc., 98 F.3d 572, 577 (10th Cir. 1996). Given the lack
of exceptional circumstances justifying extraordinary relief
under subsection (6) of Rule 60(b), Ahmed v. Rosenblatt, 118
1 To be precise, the appellant filed a motion seeking (1)
"reconsideration of the [district] court's judgment dated
February 23, 2000," or (2) "to alter or amend [that] judgment,"
or (3) "reconsideration under Rule 60(b)." We do not spend any
time on the first two options. After all, new matters cannot be
asserted as of right on a motion for reconsideration, Appeal of
Sun Pipe Line Co., 831 F.2d 22, 25 (1st Cir. 1987), and the ten-
day window for filing motions to alter or amend, Fed. R. Civ. P.
59(e), had closed by the time that the appellant filed his
motion. Accordingly, we treat the appellant's motion, favorably
to him, as one filed under Rule 60(b).
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F.3d 886, 891 (1st Cir. 1997), the appellant's cryptic motion in
this case necessarily invoked subsection (1) of Rule 60(b).
That subsection permits a court to relieve a party from a final
judgment on the ground of "mistake, inadvertence, surprise, or
excusable neglect." Fed. R. Civ. P. 60(b)(1). The second
affidavit, however, includes nothing that indicates why the
information that it contains was omitted from the appellant's
first affidavit. This brings the appellant's case within the
ambit of our holding in Mas Marques v. Digital Equipment Corp.,
637 F.2d 24 (1st Cir. 1980).
In Mas Marques, as here, the plaintiff filed a motion
and affidavit after the entry of judgment. Id. at 28. There,
as here, the late affidavit contained no explanation for the
plaintiff's failure to submit the critical information to the
court at an earlier date. Id. at 29. There, as here, the
plaintiff made no assertion that further facts became known to
him only after judgment had been entered. Id. Given those
omissions, the district court concluded that the tardy affidavit
did not warrant relief under Rule 60(b). We agreed, stating:
In these circumstances, particularly where
[the plaintiff] should have been aware of
the deficiencies in his case before the
entry of judgment, relief under Rule 60(b)
would not have been justified. . . . A
defeated litigant cannot set aside a
judgment . . . because he failed to present
on a motion for summary judgment all of the
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facts known to him that might have been
useful to the court.
Id. at 29-30 (citations, internal quotation marks, and emphasis
omitted).
Mas Marques controls here. Because the appellant has
given no acceptable reason for the delay in presenting the
second affidavit to the district court, we cannot say that the
court abused its discretion in refusing to reopen the
jurisdictional question. See 12 James Wm. Moore et al., Moore's
Federal Practice ¶ 60.41[1][c][ii] (3d ed. 1999) ("Courts
repeatedly deny relief when they find that the facts and
circumstances demonstrate a lack of diligence in pursuing . . .
litigation.").
The appellant strives to avoid this result in two ways.
First, he asks for leniency on the basis that he originally
filed suit pro se. This request seems disingenuous. While pro
se litigants sometimes are accorded a measure of latitude in
procedural matters, e.g., Instituto de Educacion Universal Corp.
v. United States Dep't of Educ., 209 F.3d 18, 23 (1st Cir.
2000), no such latitude is warranted where, as here, the
unrepresented party is himself a lawyer.2 Godlove v. Bamberger,
2The appellant is a Harvard-trained attorney admitted to the
bars of New York, Massachusetts, and the District of Columbia.
He has practiced securities law for some thirty-five years.
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Foreman, Oswald & Hahn, 903 F.2d 1145, 1148 (7th Cir. 1990).
And at any rate, by the time the motion to dismiss was argued,
the appellant had retained counsel who appeared on his behalf.
Under the circumstances, the appellant is not entitled to any
special solicitude.
The appellant's second initiative consists of a plea,
made in his Rule 60(b) motion, that the district court ought not
to have dismissed the complaint without affording him the
opportunity to conduct discovery about Veritas and its business
activities. This plea lacks merit. If a party needs
jurisdictional discovery, that party has an obligation to
request it in a timely manner. Rodriguez, 115 F.3d at 86;
Whittaker Corp. v. United Aircraft Corp., 482 F.2d 1079, 1086
(1st Cir. 1973). The appellant failed to fulfill this
obligation: to the contrary, he did not seek additional
discovery at any time prior to the entry of an adverse judgment.
This was plainly too late. 3 See Rodriguez, 115 F.3d at 86.
3
The appellant's dilatoriness is all the more striking
because ample opportunity for discovery existed prior to the
lower court's ruling. The original complaint was filed by the
plaintiff on March 29, 1999; the defendants' joint motion was
filed on September 9, 1999; and the district court rendered its
decision on February 23, 2000.
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Consequently, we cannot fault the district court for denying the
motion for relief from judgment.4
III. THE CLAIMS AGAINST LOMBARDI
Our conclusion that the district court lacked
jurisdiction over Veritas, see supra Part II, impacts the
appellant's other claims as well. That holding leaves Lombardi
as the sole defendant. Personal jurisdiction over him is not a
problem. The district court found, preliminarily, that it had
such jurisdiction, and Lombardi does not now contest that
finding. We return, then, to the claims limned in the amended
complaint.
A. The First Four Counts.
As to the first four counts of the amended complaint,
the appellant has thus far sought rescission — and only
rescission — as a remedy. The district court highlighted this
narrow focus, observing that these counts "contain[] no explicit
statement of harm or loss." The appellant's brief on appeal
likewise emphasizes this focus, and his counsel twice reaffirmed
at oral argument in this court that rescission was the goal of
4
Given this holding, we need not evaluate whether the
additional facts contained in the second affidavit, if
seasonably placed before the court, would have made a
dispositive difference on the jurisdictional question. We do
note, however, that the contents of that affidavit appear more
conclusory than factual.
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the first four counts. Finally, the appellant presented no
developed argumentation in support of a claim for money damages
in either the district court or this court.5 Thus, no claim for
money damages is properly in the case at this juncture. See
Gooley v. Mobil Oil Corp., 851 F.2d 513, 515 (1st Cir. 1988)
(discussing pleader's obligation to allege "each material
element necessary to sustain recovery").
Nor are the first four counts viable in respect to the
prayer for rescission. When a party seeks to rescind a contract
for the transfer of property, a court ordinarily can enforce
rescission only as between the party who surrendered the
property (or persons claiming by, through, or under that party)
and the party who holds the property. Here, Dyman (who
delivered the disputed stock) is not a party, and Veritas (which
now holds the stock) is not properly before the court. To cinch
matters, none of the counts in question either state facts
sufficient to place the appellant in Dyman's shoes or delineate
any theory under which rescission might be ordered in the
5
Although the prayer for relief inscribed at the tail end of
the amended complaint made a passing reference to money damages
regarding one of the four counts, the appellant did not pursue
this vague allusion either here or below. Consequently, the
averment lacks the capacity to transform the character of the
first four counts. See Aulson v. Blanchard, 83 F.3d 1, 7 (1st
Cir. 1996) (deeming waived an allegation made by the plaintiff
in the trial court but not thereafter pressed).
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absence of both the transferor and the transferee. 6
Consequently, the district court's decision to dismiss the first
four counts of the amended complaint in their entirety passes
muster.
Before leaving this topic, we hasten to add an
acknowledgment that, even without Dyman and Veritas in the case,
some claim theoretically might lie on the appellant's behalf
within the framework of the first four counts of the amended
complaint. Thus, we do not foreclose the possibility that, on
remand, the district court, in its discretion, might yet permit
the complaint to be further amended. We do not pursue the point
for we must deal with matters as they were when the trial court
ruled, not with matters as they might become.
B. Count Five.
Count five is a different kettle of fish. That count
embodies a claim for specific performance of the warrant
provision of the Agreement executed in connection with the
appellant's removal as NetFax's guiding light. The pertinent
provision states that Lombardi "shall grant to Mr. Barrett a
warrant to acquire One Million (1,000,000) shares of [NetFax's]
6Indeed, the appellant apparently recognizes this
shortcoming. See Appellant's Brief at 32 (indicating that
"Veritas has to be before the Court" in order to effectuate
rescission).
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common stock . . . at an exercise price of $.001 per share."
The appellant alleges that Lombardi never delivered the warrant
and seeks specific performance of this covenant.
The district court ruled that it did not have subject-
matter jurisdiction over this count because "the total contract
price is $1,000," and "that amount . . . clearly falls short of
the $75,000 minimum amount in controversy required" as a
precondition for federal diversity jurisdiction under 28 U.S.C.
§ 1332(a). We review this determination de novo. Bull HN Info.
Sys., Inc. v. Hutson, 229 F.3d 321, 328 (1st Cir. 2000); Allen
v. R & H Oil & Gas Co., 63 F.3d 1326, 1336 (5th Cir. 1995). We
conclude that the district court erred by focusing on the
exercise price for the shares rather than the value of the
warrant itself.
The Supreme Court erected the framework for determining
whether a cause of action satisfies the jurisdictional minimum
in St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283
(1938). The Court laid down a general rule to the effect that
the amount specified by the plaintiff controls, as long as that
amount is asserted in good faith. Id. at 288. Hence, a court
can dismiss an action for insufficiency of the amount in
controversy only when, "from the face of the pleadings, it is
apparent, to a legal certainty, . . . that the plaintiff never
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was entitled to recover" a sum equal to, or in excess of, the
jurisdictional minimum. Id. at 289. On this record, we do not
believe that the district court supportably could say to a legal
certainty that the appellant was not entitled to recover more
than $75,000 (or property worth more than that amount) under
count five. We explain briefly.
As said, count five involves a warrant to acquire
1,000,000 shares of stock at an exercise price of $.001 per
share. The value of a warrant is typically the difference
between the market value (during the currency of the warrant
period) of the shares to which the warrant pertains and the
exercise price payable for those shares. See, e.g., Niagara
Hudson Power Corp. v. Leventritt, 340 U.S. 336, 343-44 (1951);
Custom Chrome, Inc. v. Comm'r, 217 F.3d 1117, 1125 (9th Cir.
2000); SEC v. Warde, 151 F.3d 42, 46 n.1 (2d Cir. 1998); Swiss
Bank Corp. v. Dresser Indus., Inc., 141 F.3d 689, 691 (7th Cir.
1998). In his first affidavit, dated October 11, 1999, the
appellant estimated the value of NetFax's patented technology at
somewhere between $10,000,000 and $100,000,000, and the market
value of NetFax stock at somewhere between $0.34 and $2.26 per
share. Even taking the low-end valuation, the shares to which
the warrant pertained theoretically were worth $340,000 at that
point. On this set of assumptions, the value of the warrant
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(the spread between market value and exercise price) would have
been $339,000. This is a sum well above the requisite
jurisdictional minimum.
We recognize, of course, that the party invoking
jurisdiction has the burden to show that it is proper. E.g.,
Viqueira v. First Bank, 140 F.3d 12, 16 (1st Cir. 1998). In an
amount-in-controversy case, however, all the plaintiff must do
to carry this burden in the face of a motion to dismiss is to
set forth facts which, if true, would prevent the trier from
concluding to a legal certainty that the potential recovery is
capped at a figure below the jurisdictional minimum. See Dep't
of Recreation & Sports v. World Boxing Ass'n, 942 F.2d 84, 88
(1st Cir. 1991). Here, the appellant did supply some
information bearing on the value of the warrant, and Lombardi
proffered nothing to contradict these figures or otherwise
establish that the appellant, even if successful in recovering
the property (the warrant), would wind up with a prize worth
less than $75,000. We do not think that the district court, on
this bareboned record and without conducting an evidentiary
hearing, could simply brush aside the appellant's estimates as
"based entirely on speculation" and declare to a legal certainty
that the warrant was worth less than the required jurisdictional
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amount. For this reason, we hold that the district court erred
in dismissing count five of the amended complaint.7
IV. CONCLUSION
We need go no further. For the reasons stated, we
sustain the determination that Veritas was not properly before
the court and, accordingly, we affirm so much of the lower
court's order as dismissed, without prejudice, the claims
against Veritas. We also affirm the district court's dismissal
of the first four counts of the amended complaint as to
Lombardi. We hold, however, that the court erred in concluding
on this meager record that it lacked subject-matter jurisdiction
over the fifth count of the amended complaint. We therefore
reverse so much of the order of dismissal as pertains to that
count and remand for further proceedings consistent with this
opinion.
Affirmed in part, reversed in part, and remanded. No costs.
7
There is a wrinkle here. According to the terms of the
Agreement, the warrant expired during the pendency of this
appeal. We leave the legal significance (if any) of this new
development to the parties and the district court.
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