Atlas Biologicals v. Biowest

50 F.4th 1307

• Court: Court of Appeals for the Tenth Circuit
• Decided: October 11, 2022
• Docket: 20-1401
• Status: Published

Opinion

Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 1 FILED United States Court of Appeals Tenth Circuit PUBLISH October 11, 2022 UNITED STATES COURT OF APPEALS Christopher M. Wolpert FOR THE TENTH CIRCUIT Clerk of Court _________________________________

ATLAS BIOLOGICALS, INC., a Colorado corporation,

Plaintiff Counter Defendant - Appellee,

v. No. 20-1401

THOMAS JAMES KUTRUBES, an individual,

Defendant,

and

BIOWEST, LLC, a Missouri limited liability company,

Defendant Counter Plaintiff - Appellant. _________________________________

Appeal from the United States District Court for the District of Colorado (D.C. No. 1:18-CV-00969-CMA-MEH) _________________________________

Andrew B. Reid, Reid Law, LLC, Boulder, Colorado, for Defendant Counter Plaintiff - Appellant.

John D. Root, Lind Ottenhoff & Root, LLP, Windsor, Colorado, for Plaintiff Counter Defendant - Appellee. _________________________________

Before HOLMES, Chief Judge, BALDOCK, and MATHESON, Circuit Judges. _________________________________ Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 2

HOLMES, Chief Judge. _________________________________

At face value, this case is about whether a stock transfer is valid under

Colorado law. But to answer this question, we must first answer certain Article III

jurisdictional questions. This dispute arises from a closely related but independent

proceeding. There, Plaintiff-Appellee Atlas Biologicals, Inc. (“Atlas”) sued its

former employee Thomas Kutrubes for various federal intellectual-property claims.

Mr. Kutrubes, seemingly as an attempt to thwart Atlas’s ability to collect a likely

judgment against him, transferred his 7% interest in Atlas to Atlas’s rival Defendant-

Appellant Biowest, LLC (“Biowest”). Once Atlas found out about this alleged

transfer, it sought a writ of attachment in the district court against Mr. Kutrubes’s

interest in Atlas, which the district court granted. But in granting the writ, the district

court explained that it did not know what interest Mr. Kutrubes still had in Atlas and

raised the idea of Atlas filing a separate declaratory judgment action.

Atlas did so, and that is the lawsuit before us. And we now must decide

whether the district court properly found in favor of Atlas in this action in light of the

fact that it did not have an independent source of federal jurisdiction to decide the

question of state law that the action presented—a question that implicated a third

party not involved in the initial suit, Biowest. Reviewing these matters de novo, we

conclude that the district court acted properly and within the scope of its jurisdiction,

and we further agree with the district court’s resolution of the merits. Accordingly,

exercising jurisdiction under 28 U.S.C. § 1291, we affirm.

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I

To understand the contours of this case, one must understand the proceedings

in a related case. Atlas “specializes in the production of bovine serum-based

products that are used for cell culture and research in the medical, veterinary,

and biological sciences.” Atlas Biologicals, Inc. v. Kutrubes (Atlas I), No. 15-CV-

00355, 2019 WL 4594274, at *1 (D. Colo. Sept. 23, 2019) (unpublished) (footnote

omitted). Mr. Kutrubes “began working for Atlas as an intern in 2005 and was hired as

an employee in 2006, initially serving as a regional sales manager.” Id. at *2. Several

years later, Mr. Kutrubes became a shareholder and ultimately came to own a 7% stake in

Atlas. He also was eventually promoted to National Sales Manager and was

subsequently elected to Atlas’s Board of Directors.

Nevertheless, Mr. Kutrubes began “developing a business plan to compete

with Atlas while he was still in Atlas’s employ.” Id. In late 2014, Mr. Kutrubes

began taking steps to formalize his venture, and he ultimately incorporated a business

in Colorado—Peak Serum, Inc. (“Peak Serum”). Around this time and while still

employed at Atlas, Mr. Kutrubes began emailing himself “certain information,

documentation, and data,” such as “Atlas’s customer contact lists, a supplier

agreement; its quality manual; its organizational chart; a contract manufacturing

statement; proofs of labels; a marketing brochure; and email exchanges

about Atlas’s products, among others.” Id.

However, as a part of his job description, Mr. Kutrubes had signed a document

stating that he “[u]nderst[ood] and [would] adher[e] to company policies and

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procedures,” which included “a policy entitled ‘Control of

Confidentiality/Proprietary Information’ that prohibited all employees from

disclosing without the company’s prior written authorization any ‘Confidential and/or

Proprietary Information.’” Id. (first alteration in original). He also sent emails to

Atlas’s customers and suppliers in an attempt to secure business for Peak Serum. Mr.

Kutrubes later admitted that he breached his duty of loyalty to Atlas during this time.

On December 16, 2014, Mr. Kutrubes tendered his resignation letter, with an

intended effective date of December 19. He also requested the company to buy out

his 7% stake for $224,000.00 based on “the recent appraisal of the company at

$3,200,000.00.” Id. A few days after Mr. Kutrubes gave notice of his resignation,

Atlas discovered that Mr. Kutrubes had been sending company documents to his

personal email account and had been attempting to solicit Atlas’s clients and

suppliers. As a result, “Atlas ‘decline[d] [Mr. Kutrubes’s] resignation’ and ‘instead

terminate[d] his directorship and employment for cause’ on December 27, 2014.” Id.

at *3 (first and third alterations in original). In a letter detailing its findings, Atlas

demanded Mr. Kutrubes cease using all materials obtained from Atlas, return those

materials to the company, abandon all plans to start a similar business as Atlas, and

surrender all shares to Atlas.

On February 20, 2015, Atlas sued Mr. Kutrubes and Peak Serum in the District

of Colorado. After more than a year of discovery, Atlas filed an amended complaint

in which it asserted various intellectual-property claims, such as claims for federal

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trademark infringement and misappropriation of trade secrets. The district court

conducted a five-day bench trial between March 5, 2018, and March 9, 2018.

On April 4, 2018, Mr. Kutrubes purportedly sold his 7% interest in Atlas to

Biowest. See Aplt.’s App., Vol. II, at 46–50 (Stock Sale and Purchase Agreement,

executed Apr. 4, 2018). The next day, Mr. Kutrubes, through counsel, notified Atlas that

he had sold his shares to Biowest. “Biowest did not receive delivery of an indorsed

certificate for [Mr.] Kutrubes’s shares,” because “Atlas had not created stock certificates

for [Mr.] Kutrubes’s shares at the time of the Purported Transfer,” and only did so after

Mr. Kutrubes had transferred the shares. Atlas Biologicals, Inc. v. Kutrubes (Atlas II),

474 F. Supp. 3d 1188, 1192 (D. Colo. 2020).

In response, Atlas filed “an Emergency Ex Parte Motion for Pre-Judgment

Attachment and Injunctive Relief Against Further Conveyances of Assets by [Mr.]

Kutrubes,” in which it argued the “transfer was unsuccessful (i.e., not completed) because

‘no endorsed share certificate ha[d] been tendered nor a request for a transfer on the

books and records of Atlas . . . ha[d] been made.’” Atlas I, 2019 WL 4594274, at *5

(second and third alterations and omission in original) (quoting Atlas’s emergency

motion). And Atlas requested, as relief, “prejudgment attachment of [Mr.] Kutrubes’s

shares of its stocks pursuant to Colorado Rule of Civil Procedure 102(c).” Id. In

response, Mr. Kutrubes argued he had successfully transferred his stock to Biowest and

requested an “injunction preventing Atlas and its shareholders [and] officers . . . from

holding any shareholder meetings, amending corporate bylaws, or otherwise taking

actions that would impact any minority shareholder until such time as the dispute with

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respect to ownership of shares is resolved.” Id. (alteration and omission in original). The

district court “issued a Writ of Attachment on April 24, 2018, that ordered the Sheriff of

Larimer County, Colorado, to ‘attach and safely keep any stock of [Atlas] owned by [Mr.

Kutrubes].’” Id. (first alteration in original) (quoting writ of attachment).

The district court nevertheless noted at the hearing concerning the issuance of

the writ of attachment, that it did not know whether the transfer of stock was valid—

whether it had been “consummated in full.” Aplt.’s App., Vol. IV, at 144. Because

of this uncertainty as to the validity of the transfer, the district court told the parties

the following:

So I am going to issue an order of pre- judgment attachment as to whatever interest remains in Mr. Kutrubes for the 7 percent of stock that he owns in Atlas. I don’t know what that is, and that is not going to be decided by me unless you all file a separate action in this Court for either declaratory judgment or for further undoing the fraudulent conveyance.

Id. (emphasis added). Atlas “informed the Court that it had served the Writ of

Attachment on [Mr.] Kutrubes on May 3, 2018, and that it had ‘surrendered

[Mr. Kutrubes’s] stock certificates to the Larimer County Sheriff on May 9,

2018.’” Atlas II, 474 F. Supp. 3d at 1191.

The next day, Atlas sued Biowest and Mr. Kutrubes. Atlas sought “declaratory

relief pursuant [to] Fed. R. Civ. P. 57 to void the purported transfer of stock [from

Mr. Kutrubes to Biowest] under Article 8 of the Colorado Uniform Commercial Code

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[i.e., CUCC] or, in the alternative, to avoid and recover a fraudulent transfer pursuant

to the Colorado Uniform Fraudulent Conveyances Act C.R.S. §§ 38-8-101[,] et

seq. (CUFTA).” Id.

On June 25, 2018, Biowest filed a motion to dismiss Atlas’s claims pursuant to

Fed. R. Civ. P. 12(b)(1) on the grounds that the district court lacked subject-matter

jurisdiction over the case and that Atlas lacked standing to sue Biowest. See Atlas II,

No. 18-CV-00969, 2019 WL 1200809, at *2, *4 (D. Colo. Mar. 14, 2019) (unpublished).

Biowest also argued that, if the district court indeed had subject-matter jurisdiction, the

suit should be dismissed for failure to state a claim.

The district court rejected Biowest’s argument “that the Court does not have

ancillary jurisdiction over the action because it is ‘separated’ from the Primary Suit

[i.e., Atlas I], relies on state claims, and lacks ‘an independent federal jurisdiction

basis.’” Id. at *5. The district court explained that “this case ‘involves the second,

less common purpose—ancillary jurisdiction over collateral proceedings,’”; that is,

jurisdiction “to enable a court to function successfully, that is, to manage its

proceedings, vindicate its authority, and effectuate its decrees.” Id. at *5–6 (quoting

Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 380 (1994)). Therefore,

the court reasoned that it was “satisfied that it has ancillary jurisdiction over” Atlas’s

claims because Atlas “seeks to avoid an allegedly fraudulent transfer of stock to

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Defendant Biowest, LLC from Defendant Kutrubes, against whom [Atlas] seeks a

judgment in the Primary Suit [i.e., Atlas I].” 1 Id. at *6.

Next, the district court concluded that Atlas indeed had standing to sue

Biowest for a declaratory judgment to void the transfer. Because the declaratory

judgment was ostensibly brought under Colorado’s Uniform Declaratory Judgments

Law, Colo. Rev. Stat. §§ 13-51-101, et seq., the district court looked to Colorado’s

law of standing, which states that “a plaintiff must assert a legal basis on which a

claim for relief can be grounded. The plaintiff must allege an injury in fact to a

legally protected or cognizable interest.” Atlas II, 2019 WL 1200809, at *7 (quoting

Farmers Ins. Exch. v. Dist. Ct. for the Fourth Jud. Dist., 862 P.2d 944, 947 (Colo.

1993)). And the district court explained that under Colorado law a declaratory

judgment was appropriate “when the rights asserted by the plaintiff are present and

cognizable ones . . . [and] a declaratory judgment would effect a change in the

plaintiff’s present rights or status.” Id. (emphasis omitted) (quoting Farmers Ins.

Exch., 862 P.2d at 947).

With this in mind, the district court concluded that Atlas had standing to sue

“because the declaratory judgment that it seeks—that purported transfer of stock

1 The district court did find that it did not have jurisdiction over Atlas’s claim for “civil conspiracy,” because it is an “entirely new and original” theory of liability, and the Supreme Court has “cautioned against the exercise of jurisdiction over proceedings that are ‘entirely new and original’ . . . or where ‘the relief sought is of a different kind or on a different principle’ than that of the prior decree.” Atlas II, 2019 WL 1200809, at *6 (omission in original) (quoting Peacock v. Thomas, 516 U.S. 349, 358 (1996)). 8 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 9

from Defendant [Kutrubes] to Defendant Biowest, LLC ‘is void and of no effect,’ . . .

would effect a change in its present rights or status.” Id. at *8. Specifically, the

district court explained that Atlas’s status as issuer of the stock is affected by whether

the transfer was valid because if it was valid, Atlas would be required to register the

transfer. And also, the writ of attachment was predicated on an understanding that

the transfer was invalid and Atlas had already surrendered the shares to the Larimer

County police department. Id. 2

On April 19, 2019, Atlas moved for summary judgment on its claim for

declaratory relief to void the stock transfer. In response, Mr. Kutrubes argued that

2 The district court also denied Biowest’s motion to dismiss as to Atlas’s first three claims. First, it concluded that Atlas had stated a claim for a declaratory judgment against Biowest and Mr. Kutrubes because it “alleges that the transfer of stock from Defendant Kutrubes to Defendant Biowest, LLC was ineffectual under the [C]UCC because Defendant Biowest, LLC does not possess a stock certificate and Plaintiff has not registered any certificate in Defendant Biowest, LLC’s name.” Atlas II, 2019 WL 1200809, at *9. Second, the district court concluded that Atlas had stated a claim for actual fraud, because Mr. Kutrubes transferred “his shares ‘with the actual intent to hinder, delay, or defraud [Plaintiff].’” Id. (alteration in original). The district court also explained that Atlas could bring this claim against Biowest because “CUFTA allows for a judgment ‘against a person other than the debtor’ if that person ‘also acts with wrongful intent’” and “Defendant Biowest, LLC acted with actual intent to defraud Plaintiff” when it accepted the transfer with knowledge of the ongoing trial and the likelihood of a judgment against Mr. Kutrubes. Id. at *10. Lastly, the district court concluded that Atlas had stated a constructive fraud claim against Mr. Kutrubes and Biowest. Although noting that “the citations to CUFTA’s remedy provisions in Plaintiff’s Complaint are significantly flawed,” it explained that Plaintiff has adequately alleged that Defendant Biowest, LLC may be liable for a judgment for the value of the stocks transferred pursuant to Section 38-8- 109(2). Id. at *10–11. Section 38-8-109(2) states that an aggrieved creditor “may recover judgment for the value of the asset transferred . . . or the amount necessary to satisfy the creditor’s claim, whichever is less,” and that this judgment may be entered against “[t]he first transferee of the asset.” Id. at *11 (alteration and omission in original) (quoting Colo. Rev. Stat. § 38-8-109(2), -109(2)(a)). 9 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 10

“the transfer was valid because Defendants substantially complied with the [C]UCC

and an equitable transfer of stock occurred.” Atlas II, 474 F. Supp. 3d at 1191–92.

And Biowest, for its part, “argue[d] that Plaintiff’s Motion should be denied

because, inter alia, Article 8 of the [C]UCC is irrelevant to the transfer of ownership

of stock and an equitable transfer of stock occurred.” Id. at 1192. However, the

district court granted summary judgment in favor of Atlas. At the outset, it did reject

Atlas’s arguments that the shares were certificated securities because its bylaws

required its stock certificate to be “certificated”; instead, the district court found that

the shares were uncertificated securities at the time of the transfer because Atlas only

created the stock certificates for the shares after the alleged transfer. Id. at 1193.

Yet, concluding that “Article 8 of the [C]UCC governs the Purported Transfer

and its delivery requirements must be satisfied for legal ownership of stock to

transfer,” the district court found that the transfer did not meet the requirements for

delivery of uncertificated securities under Article 8. Id. at 1194. The [C]UCC

provides that delivery of an uncertificated security to a purchaser occurs when either

of the following conditions is satisfied: (1) “The issuer registers the purchaser as the

registered owner, upon original issue or registration of transfer; or (2) Another

person, other than a securities intermediary, either becomes the registered owner of

the uncertificated security on behalf of the purchaser or, having previously become

the registered owner, acknowledges that it holds for the purchaser.” Id. (quoting

Colo. Rev. Stat. § 4-8-301 (2019)).

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The district court concluded that neither of the foregoing two conditions was

met. The district court determined that the first condition was not satisfied because

Atlas did not register Biowest as the registered owner of the security and rejected

Biowest’s argument that Atlas’s purported obligation to register satisfied this

condition. Next, the district court explained that the second condition—which, as

applied here, would mean that Mr. Kutrubes held the stock for Biowest—was not

satisfied, because Atlas never received any statement that Mr. Kutrubes held the

stock for the benefit of Biowest. And Mr. Kutrubes indicated he was the owner of

the stock and did not mention that he owned it for the benefit of Biowest when he

made a shareholder request to Atlas on June 18, 2019. 3 Because Biowest did not

satisfy either condition for delivery of uncertificated securities, the district court

concluded that “ownership of [Mr.] Kutrubes’s stock did not transfer to Biowest.”

Id. at 1195.

The district court also rejected the contention that the stock had been equitably

transferred to Biowest. Even though, reasoned the court, “Colorado recognizes

equitable transfer of corporate stock and that the adoption of the [C]UCC does not

abrogate the principle allowing such equitable transfer, ‘equitable title claims are

recognized in Colorado only where the rights of third parties would not be affected,’”

3 Specifically, on that date in June 2019, Mr. Kutrubes provided a signed and dated form to Atlas stating that he was a current shareholder of Atlas, and had been so for nine years, and that he owned 52,689 shares. He sought to examine certain financial records of the company to “review and ascertain the value of [his] shares and the financial status of the company.” Aplt.’s App., Vol. II, at 265. 11 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 12

and the court concluded that the doctrine did not apply here because the claim would

affect Atlas’s rights as a third party. Id. (quoting Mortg. Invs. Corp. v. Battle

Mountain Corp. (Mortg. Invs. II), 93 P.3d 557, 560 (Colo. Ct. App. 2003)).

Therefore, the district court granted summary judgment on Atlas’s declaratory

judgment claim that the stock transfer was void.

On September 18, 2020, upon a stipulated motion by the parties, the district

court certified its order as final pursuant to Fed. R. Civ. P. 54(b) and entered a final

judgment pursuant to Fed. R. Civ. P. 54(b) on the declaratory judgment claim. See

Aplt.’s App., Vol. III, at 153–55 (order on certification of finality); id. at 156 (Final

Judgment). And, following the grant of an extension on the Fed. R. Civ. P. Rule 4

appeal deadline, Biowest filed its Notice of Appeal. See id. at 157–64 (motion for

extension); see also id. at 169–71 (Corrected Notice of Appeal).

Notably, a few days after the court certified its order in the instant case as

final, the district court in Atlas I entered judgment “in favor of Atlas [] on its claims

for federal trademark infringement; Colorado common law trademark and trade name

infringement; misappropriation of trade secrets; and breach of fiduciary duty.” Atlas

I, 2019 WL 4594274, at *23. Specifically, the district court ordered “that a final

judgment shall be entered against Defendants Thomas James Kutrubes, Peak Serum,

Inc., and Peak Serum, LLC in the amount of $2,048,180.50.” 4 Id. And Mr. Kutrubes

4 At oral argument, we questioned the parties about how the outcome of Mr. Kutrubes’s appeal would affect the supplemental enforcement jurisdiction of the district court at issue in this appeal. Both parties seemed to agree that if the panel in Atlas I reversed the district court’s judgment in its entirety, such that there would be 12 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 13

and his companies appealed. See Atlas I, No. 19-1404, 2022 WL 2840484 (10th Cir.

July 21, 2022) (unpublished). In a recently issued unpublished decision, a panel of

our court affirmed the district court’s judgment. Id. at *1, *9.

II

This appeal presents three issues. First, we must decide whether the district

court properly extended supplemental ancillary jurisdiction to the proceedings

initiated by Atlas. Second, we must determine whether Atlas had standing to sue

Biowest even though Biowest was not a party in the original litigation. Because we

answer both of these inquires in the affirmative, we last turn to the underlying merits

of this suit—whether the stock transfer between Mr. Kutrubes and Biowest was

consonant with Colorado law. We conclude it was not; it is therefore void.

Therefore, we affirm the district court’s grant of summary judgment in favor of

Atlas.

A

We first turn to whether the district court had subject-matter jurisdiction to

hear this case. We begin by outlining what is required for federal courts to have

jurisdiction and sketch the contours of when courts may possess supplemental

no judgment against Mr. Kutrubes, this case would be moot and there would be no ancillary enforcement jurisdiction. But, as noted, that did not happen. The panel who heard Mr. Kutrubes’s appeal affirmed the district court’s judgment. See Atlas I, No. 19-1404, 2022 WL 2840484, at *1,*9 (10th Cir. July 21, 2022) (unpublished). Therefore, because there remains an outstanding judgment against Mr. Kutrubes, this case is not moot and, as will be discussed below, the district court properly exercised ancillary enforcement jurisdiction over Atlas’s claim in this case. 13 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 14

jurisdiction over claims that traditionally fall outside the ambit of federal jurisdiction.

This will be followed by further discussion of the species of supplemental

jurisdiction that we have before us: ancillary enforcement jurisdiction. Next, we will

conclude that this case was indeed within the district court’s ancillary enforcement

jurisdiction. And finally, we will consider Biowest’s arguments to the contrary.

“Federal courts are courts of limited jurisdiction. They possess only that

power authorized by Constitution and statute . . . which is not to be expanded by

judicial decree.” Kokkonen, 511 U.S. at 377 (citations omitted); see Owen Equip. &

Erection Co. v. Kroger, 437 U.S. 365, 374 (1978) (“It is a fundamental precept that

federal courts are courts of limited jurisdiction. The limits upon federal jurisdiction,

whether imposed by the Constitution or by Congress, must be neither disregarded nor

evaded.”). Accordingly, “[i]t is to be presumed that a cause lies outside this limited

jurisdiction . . . and the burden of establishing the contrary rests upon the party

asserting jurisdiction.” Kokkonen, 511 U.S. at 377 (citation omitted); see also

McNutt v. Gen. Motors Acceptance Corp. of Indiana, 298 U.S. 178, 182 (1936) (“It is

incumbent upon the plaintiff properly to allege the jurisdictional facts, according to

the nature of the case.”); id. at 189 (“[The plaintiff] must allege in his pleading the

facts essential to show jurisdiction.”).

“But sometimes the federal courts are permitted to entertain a claim or

an incidental proceeding that does not satisfy requirements of an independent basis

of subject matter jurisdiction.” 13 Charles Alan Wright & Arthur R. Miller,

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FEDERAL PRACTICE AND PROCEDURE § 3523.2 (3d ed.), Westlaw (database updated

May 2022). This “supplemental jurisdiction” is most commonly used in the context

of extending jurisdiction over non-federal question or non-diverse claims asserted in

federal court. For example, “in any civil action of which the district courts have

original jurisdiction,” § 1367 of Title 28 permits federal courts to exercise

supplemental jurisdiction over certain claims that do not independently satisfy the

requirements for subject-matter jurisdiction, stating the following: “the district courts

shall have supplemental jurisdiction over all other claims that are so related to claims

in the action within such original jurisdiction that they form part of the same case or

controversy under Article III of the United States Constitution.” 28 U.S.C. §

1367(a).

But there is another species of supplemental jurisdiction—ancillary or

ancillary enforcement jurisdiction—that allows federal courts to extend jurisdiction

over “related proceedings that are technically separate from the initial case that

invoked federal subject matter jurisdiction.” 13 Wright & Miller, supra, § 3523.2.

The Supreme Court explained “that a federal court may exercise ancillary jurisdiction

‘(1) to permit disposition by a single court of claims that are, in varying respects and

degrees, factually interdependent; and (2) to enable a court to function successfully,

that is, to manage its proceedings, vindicate its authority, and effectuate its

decrees.’” Peacock v. Thomas, 516 U.S. 349, 354 (1996) (quoting Kokkonen, 511

U.S. at 379–380).

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We focus on this second form of supplemental jurisdiction—ancillary

enforcement jurisdiction. Because we have previously described ancillary

enforcement jurisdiction as an “ill-defined concept,” we pause here to provide some

clarity to an otherwise nebulous aspect of our federal courts’ jurisdiction. Sandlin v.

Corp. Interiors Inc., 972 F.2d 1212, 1215 (10th Cir. 1992) (quoting 6 Charles Alan

Wright & Arthur R. Miller, FEDERAL PRACTICE AND PROCEDURE § 1444 (2d ed.

1990)). Not governed by 28 U.S.C. § 1367, ancillary enforcement jurisdiction is a

creature of the common law and thus is governed by caselaw. See Boim v. Am.

Muslims for Palestine, 9 F.4th 545, 551 (7th Cir. 2021) (“Congress codified much of

the first category in the supplemental jurisdiction statute, 28 U.S.C. § 1367, while the

latter category—at times called ‘ancillary enforcement jurisdiction’—remains

grounded in federal common law.”); Butt v. United Brotherhood of Carpenters &

Joiners of Am., 999 F.3d 882, 886–87 (3d Cir. 2021) (“Unlike the sources of

jurisdiction conferred by 28 U.S.C. § 1367, ancillary enforcement jurisdiction

focuses on ‘the power [of federal courts] to enforce their judgments and ensur[es]

that they are not dependent on state courts to enforce their decrees.’” (alterations in

original) (footnote omitted) (quoting Nat’l City Mortg. Co. v. Stephen, 647 F.3d 78,

85 (3d Cir. 2011))); Nat’l City Mortg. Co., 647 F.3d at 85 (“‘Ancillary enforcement

jurisdiction is . . . a creature of necessity,’ . . . giving federal courts the power to

enforce their judgments and ensuring that they are not dependent on state courts to

enforce their decrees. Ancillary jurisdiction is a common law doctrine that survived

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the codification of supplemental jurisdiction in 28 U.S.C. § 1367.” (first omission in

original) (citations omitted) (quoting Peacock, 516 U.S. at 359)).

We have explained that “[a]ncillary jurisdiction rests on the premise that a

federal court acquires jurisdiction of a case or controversy in its entirety.” Jenkins v.

Weinshienk, 670 F.2d 915, 918 (10th Cir. 1982). In line with this proposition, we

have explained that “a court may decide collateral matters necessary to render

complete justice,” id., and “[w]ithin a federal court’s ancillary jurisdiction is the

power to conduct proceedings necessary to protect and give effect to its judgments,”

Sandlin, 972 F.2d at 1216. See Peacock, 516 U.S. at 354 (explaining ancillary

jurisdiction “enable[s] a court to function successfully, that is, to manage its

proceedings, vindicate its authority, and effectuate its decrees” (quoting

Kokkonen, 511 U.S. at 379–80)); see also Loc. Loan Co. v. Hunt, 292 U.S. 234, 239

(1934) (“That a federal court of equity has jurisdiction of a bill ancillary to an

original case or proceeding in the same court, whether at law or in equity, to secure

or preserve the fruits and advantages of a judgment or decree rendered therein, is

well settled.”); 13 Wright & Miller, supra, § 3523.2 (explaining that a district court

“may hear collateral proceedings when necessary to allow it to vindicate its role as a

tribunal”). Therefore, “if a federal court had jurisdiction of the principal action, it

may hear an ancillary proceeding, regardless of the citizenship of the parties, the

amount in controversy, or any other factor that normally would determine subject

matter jurisdiction.” 13 Wright & Miller, supra, § 3523.2.

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But the matter of which ancillary proceedings fall within this form of

supplemental jurisdiction is less clear. The Supreme Court has “approved the

exercise of ancillary jurisdiction over a broad range of supplementary proceedings

involving third parties to assist in the protection and enforcement of federal

judgments—including attachment, mandamus, garnishment, and the prejudgment

avoidance of fraudulent conveyances.” Peacock, 516 U.S. at 356. Thus, while it is

“[w]ithout doubt [that] a federal court has jurisdiction to enjoin actions that threaten

to interfere with an order it has entered,” 13 Wright & Miller, supra, § 3523.2, the

Supreme Court nevertheless has outlined certain types of enforcement proceedings

that do not fall within the ambit of supplemental ancillary jurisdiction. For example,

in Kokkonen, the Supreme Court explained that ancillary jurisdiction does not extend

to a breach of a settlement agreement that arose from a stipulation of dismissal under

Federal Rule of Civil Procedure 41(a)(1)(ii), which did not reserve jurisdiction to the

district court to enforce the agreement or even refer to the settlement agreement. 511

U.S. at 376–78. The Court explained that “the power asked for here is quite remote

from what courts require in order to perform their functions,” because “the terms of

the settlement agreement had [not] been made part of the order of dismissal” and

therefore, “the only order here was that the suit be dismissed, a disposition that is in

no way flouted or imperiled by the alleged breach of the settlement agreement.” Id.

at 380–81.

The Court recognized another boundary by holding that ancillary supplemental

jurisdiction did not extend to enforcing a judgment for breach of fiduciary duties

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against a third party who was found by the district court not to be a fiduciary.

Peacock, 516 U.S. at 357–60. The Court explained that it has never recognized

extending supplemental jurisdiction “beyond attempts to execute, or to guarantee

eventual executability of, a federal judgment,” and it has “never authorized the

exercise of ancillary jurisdiction in a subsequent lawsuit to impose an obligation to

pay an existing federal judgment on a person not already liable for that judgment.”

Id. at 357 (emphasis added); see H.C. Cook Co. v. Beecher, 217 U.S. 497, 498–99

(1910) (concluding that a plaintiff could not collect on the judgment by suing the

individual directors of the defendant corporation, alleging that they had authorized

and knowingly permitted the corporation to become insolvent, because the suit was

not ancillary to the judgment in the former suit). Further, the Court “cautioned

against the exercise of jurisdiction over proceedings that are “‘entirely new and

original,’” or where ‘the relief [sought is] of a different kind or on a different

principle’ than that of the prior decree.” Peacock, 516 U.S. at 358 (alteration in

original) (first quoting Krippendorf v. Hyde, 110 U.S. 276, 285 (1884); and then

quoting Dugas v. Am. Sur. Co. of New York, 300 U.S. 414, 428 (1937)).

Notably, in Ellis v. All Steel Construction, Inc., however, we made clear that

the third-party boundary of “Peacock . . . is not implicated in actions to reach and

collect assets of the judgment debtor held by a third party; it is only when the

plaintiff seeks to hold the third party personally liable on the judgment that an

independent jurisdictional basis is required.” 389 F.3d 1031, 1034 (10th Cir. 2004)

(emphasis added). This distinction is evident from the fact that Peacock itself

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explicitly recognized “the exercise of ancillary jurisdiction over a broad range of

supplementary proceedings involving third parties to assist in the protection and

enforcement of federal judgments—includ[ed] attachment, . . . and the prejudgment

avoidance of fraudulent conveyances.” 516 U.S. at 356 (emphasis added).

Our sister circuits likewise have interpreted Peacock as not affecting the

ability of federal courts to hear ancillary proceedings to enforce judgments against

third parties. See Nat’l Mar. Servs., Inc. v. Straub, 776 F.3d 783, 787 (11th Cir.

2015) (“In contrast with Peacock, the district court had ancillary jurisdiction over

this supplementary proceeding because [plaintiff] sought to disgorge [defendant] of a

fraudulently transferred asset, not to impose liability for a judgment on a third party.

Unlike the defendant in Peacock, [defendant] is not personally liable for the

judgment against [a separate defendant in the primary action] . . . [defendant in the

supplemental action’s] liability is limited instead to the proceeds that [defendant in

the primary action] fraudulently transferred to him.”); Epperson v. Ent. Express, Inc.,

242 F.3d 100, 106–07 (2d Cir. 2001) (concluding that the district court had ancillary

enforcement jurisdiction where one party only attempted to void the allegedly

fraudulent conveyances of defendant to and among other defendant parties, in order

to ensure the plaintiff’s collectability of the default judgment); Thomas, Head &

Greisen Emps. Tr. v. Buster, 95 F.3d 1449, 1454–55 (9th Cir. 1996) (distinguishing

plaintiffs’ fraudulent conveyance claims from the veil-piercing claim at issue in

Peacock, and holding that a district court has enforcement jurisdiction over a

judgment creditor’s fraudulent conveyance claims against transferees who were not

20 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 21

parties to the underlying action); see also Gambone v. Lite Rock Drywall, 288 F.

App’x 9, 12 (3d Cir. 2008) (unpublished) (“[A]ncillary jurisdiction lets prevailing

litigants go to the District Court that entered their judgment for help in resolving

matters related to its enforcement. Accordingly, so long as the plaintiffs’ demand for

injunctive relief qualifies as a post-judgment enforcement proceeding, which is a

proceeding that functions as a means for executing a judgement, the District Court

has subject matter jurisdiction”).

We conclude that the district court had ancillary subject matter jurisdiction

over Atlas’s declaratory judgment claim to void the stock transfer to Biowest. In

Atlas I, the district court issued a writ of attachment, and concluded that “whatever

Atlas [] stock that Defendant Thomas James Kutrubes owns is subject to attachment .

. . ,” and commanded the Sheriff of Larimer County to “attach and safely keep any

stock of Atlas [] owned by Defendant Thomas James Kutrubes.” Aplt.’s App., Vol.

IV, at 92 (Writ of Attachment, filed Apr. 24, 2018). Atlas filed this suit, seeking

declaratory relief, to “void the purported transfer of stock under Article 8 of the

[CUCC] or, in the alternative, to avoid and recover a fraudulent transfer pursuant to

the Colorado Uniform Fraudulent Conveyances Act . . . .” Aplt.’s App., Vol. II, at 4

(Amended Complaint, filed Mar. 18, 2019). The district court concluded that it

indeed had jurisdiction over “these three claims [because] Plaintiff seeks to avoid an

allegedly fraudulent transfer of stock to Defendant Biowest, LLC from Defendant

Kutrubes, against whom Plaintiff seeks a judgment in the Primary Suit [i.e., Atlas I].”

21 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 22

Atlas II, 2019 WL 1200809, at *6. Specifically, it explained these claims are “within

the scope of the ancillary enforcement jurisdiction of this Court.” Id.

The district court is correct. To be sure, the nature of this case is unique. But

it nevertheless falls within the core of those situations under which ancillary

enforcement jurisdiction appropriately extends to third parties. As mentioned above,

we have concluded that “[w]ithin a federal court’s ancillary jurisdiction is the power

to conduct proceedings necessary to protect and give effect to its judgments.”

Sandlin, 972 F.2d at 1216. And we have made clear that ancillary enforcement

jurisdiction is appropriate in actions “to reach and collect assets of the judgment

debtor held by a third party.” Ellis, 389 F.3d at 1034; cf. Peacock, 516 U.S. at 357

(noting the Court has never recognized extending supplemental jurisdiction “beyond

attempts to execute, or to guarantee eventual executability of, a federal judgment”).

Most relevant here, the Supreme Court has approved of the exercise of

supplemental jurisdiction over a claim to avoid a fraudulent transfer of assets to a

third party. See Dewey v. W. Fairmont Gas Coal Co., 123 U.S. 329, 332–33 (1887)

(concluding that the district court had ancillary jurisdiction over a suit brought under

West Virginia law allowing “a creditor, before obtaining a judgment or decree for his

claim, [to] institute any suit to avoid a gift, conveyance, assignment, or transfer . . .

.”); cf. Riggs v. Johnson Cnty., 73 U.S. (6 Wall.) 166, 187 (1867) (“Process

subsequent to judgment is as essential to jurisdiction as process antecedent to

judgment, else the judicial power would be incomplete and entirely inadequate to the

purposes for which it was conferred by the Constitution.”).

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Although this case concerns the predicate issue of whether any sort of transfer

actually occurred, deciding this question through a declaratory judgment is essential

to the district court deciding the entire case before it. That is, whether the transfer to

Biowest was effective under Colorado law determines whether the district court’s

writ of attachment attached to anything at all. This is true even though Biowest is not

mentioned in the writ of attachment ordered by the district court, because the relief

sought by Atlas in this case against Biowest is necessarily tied to vindicating the

relief already ordered in the principal action (i.e., Atlas I) against Mr. Kutrubes.

Unlike in Peacock, the district court had ancillary jurisdiction over this

proceeding because Atlas asked the district court to answer the question about the

validity of the transfer and thus the writ of attachment—not to impose liability on a

third party. See Epperson, 242 F.3d at 107 (“In the present proceeding, Appellants

seek only to void the allegedly fraudulent conveyances of [judgment debtor] to and

among [third parties] in order to ensure the collect[a]bility of the default judgment

against [judgment debtor]. Their fraudulent conveyance claims do not seek to hold

[third parties] liable for the existing judgment . . . . Accordingly . . . Appellants’

claims for fraudulent conveyance were within the scope of the enforcement

jurisdiction of the district court.” (footnotes omitted)). Thus, in order to fully

effectuate the district court’s order attaching “whatever Atlas [] stock that Defendant

Thomas James Kutrubes owns,” the district court must determine the validity of any

transfer to Biowest of the attached property under Colorado law and, relatedly,

whether Atlas was obligated to register the shares purportedly transferred to Biowest.

23 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 24

Therefore, this is the very sort of proceeding that would allow the district court to

decide the entire case and assure that its judgments are followed—viz., the type of

case that fits nicely and properly within the compass of ancillary enforcement

jurisdiction.

Biowest’s arguments to the contrary are unavailing. First, Biowest argues that

Atlas only invoked 28 U.S.C. § 1367’s supplemental jurisdiction and did not allege

common law ancillary jurisdiction. See Aplt.’s Opening Br. at 17–20. And, because

it “was Atlas’s duty to assert the proper jurisdictional basis for its claims and it failed

to assert common law ancillary jurisdiction,” the “District Court should not have

considered that as a basis for its jurisdiction.” Id. at 22. Biowest correctly observes

that “[t]he burden of establishing subject matter jurisdiction is on the party asserting

jurisdiction.” Aplt.’s Reply Br. at 1 (quoting Port City Props. v. Union Pac. R.R.

Co., 518 F.3d 1186, 1189 (10th Cir. 2008)). Consequently, when a party

championing subject-matter jurisdiction “fails to lead” in identifying the proper

jurisdictional theory, “we have no duty to follow.” Raley v. Hyundai Motor Co., Ltd.,

642 F.3d 1271, 1275 (10th Cir. 2011) (emphasis added). In other words, in such

circumstances, a federal court is not obliged “to conjure up possible theories” to

support subject-matter jurisdiction. Id.; see, e.g., Patrick G. by & through Stephanie

G. v. Harrison Sch. Dist. No. 2, 40 F.4th 1186, 1214–15 (10th Cir. 2022) (“[The

plaintiffs] make no meaningful argument—supported by authority or even logic—for

why this claim is viable (i.e., not moot) . . . . At the end of the day, the [the

24 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 25

plaintiffs] must convince us that jurisdiction is present, and we will not make

arguments in this respect for them.”).

That does not mean, however, that—when a party stumbles and falls in

advancing the jurisdictional ball—federal courts lack the discretion to identify a valid

theory to support their jurisdiction. More specifically, just as federal courts have the

“discretion to decline to consider . . . arguments that might have supported”

jurisdiction, where a jurisdictional proponent fails to properly advance them, it

logically follows that they have the discretion to consider such jurisdiction-

supportive arguments in a like situation. U.S. ex rel. Ramseyer v. Century

Healthcare Corp., 90 F.3d 1514, 1518 n.2 (10th Cir. 1996), superseded by statute on

other grounds, False Claims Act, Pub. L. No. 111-203, 124 Stat. 1376, as recognized

in U.S. ex rel. Reed v. KeyPoint Gov’t Sols., 923 F.3d 729, 764–65 (10th Cir. 2019)

(emphasis added); see Daigle v. Shell Oil Co., 972 F.2d 1527, 1539 (10th Cir. 1992)

(“[W]e may depart from the general waiver rule [to consider arguments supportive of

subject-matter jurisdiction] in our discretion, particularly when we are presented with

a strictly legal question the proper resolution of which is beyond doubt or when

manifest injustice would otherwise result.” (emphasis added)); cf. 13D Charles Alan

Wright & Arthur R. Miller, FEDERAL PRACTICE AND PROCEDURE § 3567.3 (3d ed.),

Westlaw (database updated April 2022) (“[R]efusing to exercise [supplemental]

jurisdiction under [28 U.S.C.] § 1367(c) is a discretionary—and not a

jurisdictional—decision.” (emphasis added)). Stated otherwise, where a federal

court’s subject-matter jurisdiction is challenged, as here—while independently

25 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 26

assessing whether there is a proper basis for jurisdiction—a federal court is not

limited to the jurisdictional theories that the jurisdictional proponent advances. To

the contrary, it has the discretion to identify a proper ground for subject-matter

jurisdiction that the proponent did not identify. That is precisely the discretion that

the district court exercised here, and we have no reason to think that the court abused

its discretion.

Furthermore, the authority identified by Biowest underscores that the burden

shouldered by the party asserting jurisdiction is to properly plead—and, at the

appropriate procedural juncture, actually produce evidence of—facts supporting

federal jurisdiction. See, e.g., Port City Props., 518 F.3d at 1189. Here, although it

appears to be uncontested that Atlas mistakenly pointed to 28 U.S.C. § 1367 for the

source of supplemental jurisdiction, Atlas nevertheless alleged sufficient facts to

support ancillary common law jurisdiction—thereby, shouldering (at least in material

respects) its jurisdictional burden. See Aplt.’s App., Vol. I, at 17–35 (Complaint,

filed Apr. 25, 2018). Most relevant, Atlas pleaded that Mr. Kutrubes admitted that he

knew that a judgment would be entered against him in the other case (i.e., Atlas I);

Mr. Kutrubes purportedly then transferred his shares to Biowest; Atlas sought a writ

of attachment against Mr. Kutrubes’s stock; and Atlas had not received valid

instructions to register the shares. See Aplt.’s App., Vol. II, at 7–11, 13. In support

of its allegations, Atlas filed multiple exhibits comprised of documents from the

original case detailing the back and forth between the parties regarding the purported

stock transfer to Biowest and filings regarding the writ of attachment. See id. at 21–

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61; cf. Smith v. United States, 561 F.3d 1090, 1098 (10th Cir. 2009) (“In evaluating a

Rule 12(b)(6) motion to dismiss, courts may consider not only the complaint itself,

but also attached exhibits . . . and documents incorporated into the complaint by

reference . . . .” (citations omitted)). Although Atlas inexplicably did not mention in

its amended complaint that the writ of attachment was indeed granted, it provided

sufficient facts to show that the district court had supplemental ancillary jurisdiction

to hear its case.

Next, Biowest argues that, although it “does not contest a federal district

court’s equitable jurisdiction to enforce its orders and judgments,” Biowest “does

contest the District Court’s assumption of ancillary subject matter jurisdiction over

claims at law in a separate action.” Aplt.’s Opening Br. at 23; see Aplt.’s Reply Br.

at 7 (arguing “equitable ancillary enforcement claims (including a properly plead

CUFTA claim) cannot provide a jurisdictional basis for the declaratory judgment

claim on the contract, also a claim at law rather than equity, even if considered

together”). But Biowest points to no authority that shows that this distinction

matters. Cf. Hunt, 292 U.S. at 239 (“That a federal court of equity has jurisdiction of

a bill ancillary to an original case or proceeding in the same court, whether at law or

in equity, to secure or preserve the fruits and advantages of a judgment or decree

rendered therein, is well settled.” (emphasis added)). And when considering

ancillary enforcement jurisdiction’s purpose to enable courts to effectuate their

orders, the law and equity distinction is seemingly inapposite; it is not consonant

with comprehensively achieving the purpose of ancillary jurisdiction.

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In line with this, Biowest’s arguments that Atlas’s declaratory judgment is

necessarily “new and original,” because it arises as a claim at law, fails. Aplt.’s

Opening Br. at 25–26 (quoting Peacock, 516 U.S. at 358). Specifically, in an attempt

to argue that the declaratory judgment concerns a “new and original” claim, Biowest

contends that “the Agreement and Assignment was executed and the Shares

transferred prior to the entry of the Atlas One Writ which ran against only Atlas

stock, if any, held by [Mr.] Kutrubes at the time of entry, and therefore did not cover

the previously transferred Shares.” Id. at 24. But this attempt to show that the

dispute is “new and original” actually frames how this dispute relates to the original

case, and it simply papers over the question that the district court used its

supplemental ancillary jurisdiction to decide: that is, whether there actually was a

legally effective transfer of shares by Mr. Kutrubes in the first place and, by

extension, whether any such transfer actually did occur prior to the issuance of the

writ of attachment. The fact that the answer to this question—which relates to the

utility of the writ of attachment issued in Atlas I to enforce the district court’s

judgment in that case—requires looking to Colorado law does not make this a “new

or original” suit, disconnected from Atlas I. Instead, this lawsuit is compatible with

the general aim of ancillary jurisdiction to allow courts to decide an entire case

without requiring litigants to start over in state court. Thus, Biowest cannot show

that the nature of this case puts it outside of the proper bounds of a federal court’s

supplemental jurisdiction. The district court correctly exercised subject-matter

jurisdiction over Atlas’s declaratory judgment claim.

28 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 29

B

Having determined that the district court properly extended supplemental

ancillary enforcement jurisdiction to Atlas’s declaratory judgment claim, we next

turn to whether Atlas had standing to sue Biowest. This question is necessarily

interwoven with the supplemental ancillary enforcement jurisdictional inquiry. But

to answer this question, we must untangle the state and federal threads that supply the

basis of the district court’s federal jurisdiction and pinpoint the exact basis on which

Atlas’s claim rests. To do this, we start by summarizing the relevant law of standing.

Next, we will explain how federal standing law interacts with state standing law.

Then, we will examine how standing works in the declaratory judgment context.

Next, we will conclude that Atlas indeed had standing to sue Biowest. And finally,

we will consider and dispose of Biowest’s sole argument in response to Atlas’s

standing.

“Article III of the Constitution limits the jurisdiction of federal courts to

‘Cases’ and ‘Controversies.’” Susan B. Anthony List v. Driehaus, 573 U.S. 149, 157

(2014) (quoting U.S. Const. art. III, § 2). The doctrine of standing works by

“identify[ing] those disputes which are appropriately resolved through the judicial

process,” and in doing so, assures that federal courts only hear cases consistent with

the jurisdictional limits articulated in the Constitution. Id. (alteration in original)

(quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992)). Accordingly, the

Supreme Court has described standing as “the irreducible constitutional minimum,”

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and “the core component of standing is an essential and unchanging part of the case-

or-controversy requirement of Article III.” Lujan, 504 U.S. at 560.

“To establish Article III standing, a plaintiff must show (1) an ‘injury in fact,’

(2) a sufficient ‘causal connection between the injury and the conduct complained

of,’ and (3) a ‘likel[ihood]’ that the injury ‘will be redressed by a favorable

decision.’” Susan B. Anthony List, 573 U.S. at 157–58 (alteration in original)

(quoting Lujan, 504 U.S. at 560–61). As to the injury-in-fact requirement, we have

explained, “[t]o satisfy the first of these three elements, a plaintiff must offer

something more than the hypothetical possibility of injury. The alleged injury must

be concrete, particularized, and actual or imminent.” Colorado Outfitters Ass’n v.

Hickenlooper, 823 F.3d 537, 544 (10th Cir. 2016). And for the second element,

“there must be a causal connection between the injury and the conduct complained

of—the injury has to be ‘fairly . . . trace[able] to the challenged action of the

defendant, and not . . . th[e] result [of] the independent action of some third party not

before the court.’” Lujan, 504 U.S. at 560 (alterations and omissions in original)

(quoting Simon v. E. Ky. Welfare Rts. Org., 426 U.S. 26, 41–42 (1976)). Finally, as

to the redressability prong, “it must be ‘likely,’ as opposed to merely ‘speculative,’

that the injury will be ‘redressed by a favorable decision.’” Id. at 561 (quoting

Simon, 426 U.S. at 38, 43).

“The party invoking federal jurisdiction bears the burden of establishing these

elements.” Id. And because “they are not mere pleading requirements but rather an

indispensable part of the plaintiff’s case, each element must be supported in the same

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way as any other matter on which the plaintiff bears the burden of proof, i.e., with the

manner and degree of evidence required at the successive stages of the litigation.”

Id.

With this broad sketch of what is required to have Article III standing in mind,

we now turn to the wrinkle presented by this suit: the relationship between Article III

standing and the state law of standing. As a leading treatise suggests “for the most

part, there is no question. Standing in federal courts is a matter of federal law.” 13B

Charles Alan Wright & Arthur R. Miller, FEDERAL PRACTICE AND PROCEDURE §

3531.14 (3d ed.), Westlaw (database updated June 2022). But this axiom is not

absolute and does not comprehensively answer the question regarding the source of

law concerning standing in at least two circumstances where federal courts typically

apply state substantive law: that is, under diversity jurisdiction, 28 U.S.C. § 1332;

and, as most relevant here, under supplemental jurisdiction.

In particular, we and other courts have understood that the relevant state’s law

of standing should be applied—in addition to federal standing law—in considering

claims in such settings that are derived from state law. See City of Moore v.

Atchison, Topeka, & Santa Fe Ry. Co., 699 F.2d 507, 511 (10th Cir. 1983) (“State

law determines who has standing to challenge the constitutionality of a state statute

on the ground that it violates a state constitution.”); St. Francis Reg’l Med. Ctr. v.

Blue Cross & Blue Shield of Kansas, Inc., 49 F.3d 1460, 1465–66 (10th Cir. 1995)

(concluding that a state claim before the court through supplemental jurisdiction

31 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 32

requires examining “the threshold issue of standing” under state law); see also

Westborough Mall, Inc. v. City of Cape Girardeau, Mo., 693 F.2d 733, 747–48 (8th

Cir. 1982) (looking to “Missouri law . . . in order to [determine] standing” to bring a

state law claim heard through supplemental jurisdiction); cf. Swanson v. Bixler, 750

F.2d 810, 813 (10th Cir. 1984) (“Whether a complainant is the real party in interest

under state law is generally resolved by inquiring whether he or she

has standing under state law.”); cf. also Williams v. Mayor & City Council of

Baltimore, 289 U.S. 36, 47–48 (1933) (“We have assumed, without deciding, that the

respondents, though without standing to invoke the protection of the Federal

Constitution, will be heard to complain of a violation of the Constitution of the state.

Their standing for that purpose, at least in the state courts, is a question of state

practice.”); Time Warner Ent. Co., L.P. v. Everest Midwest Licensee, L.L.C., 381

F.3d 1039, 1044 (10th Cir. 2004) (“State law claims before a federal court on

supplemental jurisdiction are governed by state law.” (footnote omitted)). “Federal

concepts of standing developed to regulate enforcement of federal rights do not

represent any independent interest of the federal courts that justifies disregarding

state law in this context.” 13B Wright & Miller, supra, § 3531.14.

However, although state standing rules must be met when courts consider state

causes of action, “state rules that recognize standing need not be honored if Article

III requirements are not met.” Id. (emphasis added); see Hutchinson v. Pfeil, 211

F.3d 515, 523 (10th Cir. 2000) (“‘Standing [under Article III] is, of course, a

threshold issue in every case before a federal court,’ and diversity claims are no

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exception. Thus, the jurisdictional deficiency discussed above in connection with the

[federal claim] would be equally fatal to the proposed [state claim], which rests on

the same speculative injury.” (first alteration in original) (citations omitted) (quoting

Wolfe v. Gilmour Mfg. Co., 143 F.3d 1122, 1126 (8th Cir. 1998))). Therefore,

because the relief sought by Atlas necessarily turns on a question of state law, we

must be satisfied that Atlas had standing to bring its claim under both the standing

doctrine of Colorado and Article III.

Although “Colorado standing jurisprudence does not duplicate all the features

of federal standing doctrine,” similar considerations underlie both Colorado and

federal standing law. City of Greenwood Vill. v. Petitioners for Proposed City of

Centennial, 3 P.3d 427, 436 n.7 (Colo. 2000); see also Maurer v. Young Life, 779

P.2d 1317, 1324 n.10 (Colo. 1989) (“Although the federal-court doctrine of standing

has a different constitutional basis and is not co-extensive with [Colorado’s] standing

inquiry . . . , we have previously relied on the standing decisions of the United States

Supreme Court for guidance in construing standing principles generally applicable

under both the federal and Colorado law of standing.” (citation omitted)). The

Colorado Supreme Court has noted that “[i]n Colorado, parties to lawsuits benefit

from a relatively broad definition of standing.” Ainscough v. Owens, 90 P.3d 851,

855 (Colo. 2004).

Standing in Colorado requires satisfying two requirements. First, similar to

federal standing, a plaintiff “must demonstrate that he or she will suffer an ‘injury in

fact’ from the challenged action,” and “[i]njuries need not be economic in character;

33 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 34

harm to intangible values can satisfy the injury-in-fact requirement.” City of

Greenwood, 3 P.3d at 437. But unlike federal standing requirements, the Colorado

Supreme Court has explained that “[o]ur standing doctrine does not require” “an

injury that is both ‘concrete and particularized,’ on the one hand and ‘actual or

imminent, not conjectural or hypothetical’ on the other.” Id. at 437 n.8. Second, a

plaintiff must “demonstrate that the injury he or she has suffered is to a legally

protected right.” Id. at 437. “This is a question of whether the plaintiff has a claim

for relief under the constitution, the common law, a statute, or a rule or regulation.”

Ainscough, 90 P.3d at 856. “A legally protected interest may be tangible or economic

such as ‘one of property, one arising out of contract, one protected against tortious

invasions, or one founded on a statute which confers a privilege.’” Id.

(quoting Wimberly v. Ettenberg, 570 P.2d 535, 537 (Colo. 1977)). And it

“encompass[es] all rights arising from constitutions, statutes, and case law.” Id.

“These two considerations provide the framework for determining whether the

asserted legal basis for a claim—whether constitutional, statutory, or otherwise—can

properly be understood as granting [the plaintiff] a right to judicial relief” under

Colorado law. Bd. of Cnty. Comm’rs, La Plata Cnty. v. Bowen/Edwards Assocs.,

Inc., 830 P.2d 1045, 1052–53 (Colo. 1992) (alteration in original) (quoting O’Bryant

v. Pub. Utilities Comm’n, 778 P.2d 648, 652 (Colo.1989)). Nevertheless, it is

important to be aware of the Colorado Supreme Court’s admonition that “[a]lthough

necessary, the test in Colorado has traditionally been relatively easy to satisfy.”

Ainscough, 90 P.3d at 856.

34 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 35

Under federal and Colorado law, standing must be assessed in the context of

the claim the plaintiff seeks to bring. The sole claim before us is Atlas’s declaratory

judgment claim. The federal declaratory judgment statute alone does not provide

jurisdiction, and, therefore in assessing whether Atlas has standing, we must look to

the nature of the dispute and to the “character of the threatened action.” Medtronic,

Inc. v. Mirowski Fam. Ventures, LLC, 571 U.S. 191, 197 (2014) (quoting Pub. Serv.

Comm’n of Utah v. Wycoff Co., 344 U.S. 237, 248 (1952)). Similarly, the Colorado

Declaratory Judgment Act creates no rights and is solely remedial. See Romer v.

Fountain Sanitation Dist., 898 P.2d 37, 41 (Colo. 1995) (“C.R.C.P. 57 establishes

the procedural mechanism for implementation of the Declaratory Judgment Act.

C.R.C.P. 57(k) expressly provides that the rule is remedial. The rule neither

expressly nor by implication expands the interests of parties, governmental or

private, who seek the benefits of the remedy established thereby.”). Consequently,

like the federal inquiry, in assessing standing under state law in the declaratory

judgment context, we look to the nature of the underlying dispute. 5

5 The record reflects some confusion concerning whether the federal declaratory judgment statute, see 28 U.S.C. § 2201(a)—as opposed to Colorado’s declaratory judgment statute, see Colo. Rev. Stat. § 13-51-105—supplies the proper statutory framework for the consideration of Atlas’s claim for relief. Atlas’s complaint states that “[t]his lawsuit is an action for declaratory relief pursuant [to] Fed. R. Civ. P. 57 . . . .” Aplt.’s App., Vol. II, at 4. Rule 57 says that its “rules govern the procedure for obtaining a declaratory judgment” under the federal statute, 28 U.S.C. § 2201. Fed. R. Civ. P. 57. However, notably, the district court explained that “[t]his claim is apparently brought under Colorado’s Uniform Declaratory Judgments Law, Colo. Rev. Stat. §§ 13-51-101, et seq., and Colorado Rule of Civil 35 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 36

Procedure 57.” Atlas II, 2019 WL 1200809, at *7. And the district court further noted that “[a]s the Biowest Defendants concede, Plaintiff’s First Claim is necessarily a state claim ‘since federal ancillary jurisdiction is cited in the Complaint by the Plaintiff as the only basis for this Court’s jurisdiction over Plaintiff’s claims.’” Id. at *7 n.7. Biowest nevertheless states that the federal declaratory judgment standard should govern. Aplt.’s Opening Br. at 28–29; see Aplt.’s Reply. Br. at 10– 12. Atlas, on the other hand, argues that the Colorado declaratory judgment standard should apply. See Aplee.’s Resp. Br. at 33. Ultimately, dispelling this apparent confusion is not material to our resolution of this appeal. In particular, this minor imbroglio has no impact on the federal jurisdictional questions before us.

As we have discussed, supra, the district court acted in this case with federal subject matter jurisdiction—admittedly, jurisdiction of a somewhat unique type, that is, ancillary enforcement jurisdiction, which does not depend on the presence of an independent basis for federal jurisdiction in the instant lawsuit and, in fact, may involve, as here, entirely state substantive law. Furthermore, as for the standing question, the federal and Colorado declaratory judgment statutes, as suggested supra, are both strictly procedural—that is, without inherent substantive dimensions. See, e.g., Aetna Life Ins. Co. of Hartford, Conn. v. Haworth, 300 U.S. 227, 240 (1937) (noting that “the operation of the Declaratory Judgment Act is procedural only”); Medtronic, Inc., 571 U.S. at 199 (“We have long considered ‘the operation of the Declaratory Judgment Act’ to be only ‘procedural.’” (quoting Aetna Life, 300 U.S. at 240)); Romer, 898 P.2d at 41. Therefore, irrespective of whether the federal or Colorado declaratory judgment statute was the operative one, our focus in the standing inquiry would be the same: that is, the substantive dispute underlying the declaratory judgment action. In other words, in all events, our focus would remain on determining whether Atlas had standing to litigate its substantive state law claims under the standing requirements of Colorado and federal law.

All that said, we observe that because the declaratory judgment statutes are strictly procedural, a reasonable argument could be made that Atlas was right to reference (albeit indirectly) the federal declaratory judgment statute as the applicable one. That is because in an analogous context, where federal courts apply state law, the Supreme Court explained that “[u]nder the Erie doctrine, federal courts sitting in diversity apply state substantive law and federal procedural law.” Gasperini v. Ctr. for Humans., Inc., 518 U.S. 415, 427 (1996); see Utica Lloyd’s of Texas v. Mitchell, 138 F.3d 208 (5th Cir. 1998) (concluding that a party could not rely on Texas’s declaratory judgment act to authorize attorney’s fees in a diversity case because the statute is not substantive law). However, because the resolution of this question regarding the operative declaratory judgment statute is not ultimately material to our resolution of this appeal, we need not (and thus do not) definitively opine on the matter. 36 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 37

In the declaratory judgment context, the Colorado Supreme Court has

explained that “[w]hat is required for purposes of satisfying the standing requirement

is that the plaintiff demonstrate that there is an existing legal controversy that can be

effectively resolved by a declaratory judgment, and not a mere possibility of a future

legal dispute over some issue.” Bd. of Cnty. Comm’rs, 830 P.2d at 1053. At least in

the context of challenging a regulatory scheme, the court has explained that “[t]he

injury-in-fact element of standing is established when the allegations of the

complaint, along with any other evidence submitted on the issue of standing,

establishes that the regulatory scheme threatens to cause injury to the plaintiff’s

present or imminent activities.” Id. (emphasis added). And, for the legally protected

interest, the court explained that “[a]n affirmative answer to this question,” “whether

the plaintiff’s interest emanates from a constitutional, statutory, or judicially created

rule of law that entitles the plaintiff to some form of judicial relief,” in the

declaratory judgment context, means “simply that the party seeking judicial relief has

stated a claim by demonstrating the existence of a legal right or interest which has

been arguably violated by the conduct of the other party.” Id. (quoting

O’Bryant, 778 P.2d at 653).

Under these principles, we conclude that Atlas has standing under Colorado

law. First, if the stock transfer between Mr. Kutrubes and Biowest is valid, this

would threaten to cause injury to Atlas. As will be discussed further below, the

legally effective transfer of the shares to Biowest would hinder Atlas’s ability as a

37 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 38

judgment creditor to collect on its Atlas I judgment, and also the transfer could

possibly open Atlas, as the stock issuer, to liability for not properly registering the

transfer. As to the second prong, Atlas has a legally protected interest in determining

whether the transfer was valid because, at the very least, Atlas has a statutory interest

under Colorado law in determining whether it has a duty to register the share transfer.

Therefore, Atlas has standing to sue under Colorado law.

The federal declaratory judgment statute provides that as to “a case of actual

controversy within its jurisdiction, . . . , any court of the United States, upon the

filing of an appropriate pleading, may declare the rights and other legal relations of

any interested party seeking such declaration, whether or not further relief is or could

be sought.” 28 U.S.C. § 2201(a). Put another way, “federal courts can issue

declaratory judgments if there is an actual dispute between adverse litigants and if

there is a substantial likelihood that the favorable federal court decision will bring

about some change.” Erwin Chemerinsky, CONSTITUTIONAL LAW: PRINCIPLES AND

POLICIES (2011); id. (“[D]eclaratory judgments exist so that people can know their

rights in advance.”). 6

The Supreme Court has made clear that “an appropriate action for declaratory

relief can be a case or controversy under Article III.” MedImmune, Inc. v.

6 “The Declaratory Judgment Act provides that a court ‘may declare the rights and other legal relations of any interested party,’ 28 U.S.C. § 2201(a) (emphasis added), not that it must do so.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 136 (2007) (second emphasis added). “This text has long been understood 38 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 39

Genentech, Inc., 549 U.S. 118, 126 (2007) (citing Nashville, C. & St. L. Ry. v.

Wallace, 288 U.S. 249 (1933)). Although predating the modern standing

formulation, the Supreme Court in Aetna Life Insurance Co. of Hartford, Connecticut

v. Haworth, 300 U.S. 227 (1937), generally explained what type of cases are

appropriately within a federal court’s declaratory judgment power. Specifically, the

Court made clear that “[w]here there is such a concrete case admitting of an

immediate and definitive determination of the legal rights of the parties in an

adversary proceeding upon the facts alleged, the judicial function may be

appropriately exercised[,] although the adjudication of the rights of the litigants may

not require the award of process or the payment of damages.” Id. at 241.

More recently, although recognizing that “Aetna and the cases following it do

not draw the brightest of lines between those declaratory-judgment actions that

satisfy the case-or-controversy requirement and those that do not,” the Court

explained, “[o]ur decisions have required that the dispute be ‘definite and concrete,

touching the legal relations of parties having adverse legal interests’; and that it be

‘real and substantial’ and ‘admi[t] of specific relief through a decree of a conclusive

‘to confer on federal courts unique and substantial discretion in deciding whether to declare the rights of litigants.’” Id. (quoting Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995)); accord Cardinal Chem. Co. v. Morton Int’l, Inc., 508 U.S. 83, 95 n.17 (1993); Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494–496 (1942). The Supreme Court has explained that it is “‘consistent with the statute,’ . . . ‘to vest district courts with discretion in the first instance, because facts bearing on the usefulness of the declaratory judgment remedy, and the fitness of the case for resolution, are peculiarly within their grasp.’” MedImmune, 549 U.S. at 136 (quoting Wilton, 515 U.S. at 289).

39 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 40

character, as distinguished from an opinion advising what the law would be upon a

hypothetical state of facts.’” MedImmune, 549 U.S. at 127 (second alteration in

original) (quoting Aetna Life, 300 U.S. at 240–41); see id. (“Basically, the question in

each case is whether the facts alleged, under all the circumstances, show that there is

a substantial controversy, between parties having adverse legal interests, of sufficient

immediacy and reality to warrant the issuance of a declaratory judgment.” (quoting

Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941))).

Applying the declaratory judgment “case and controversy” requirements to the

Supreme Court’s teachings on standing, we turn to whether Atlas has sufficiently

alleged it has suffered a sufficient injury-in-fact. Biowest argues there was no

standing because “Atlas was not a party to the Stock Sales Agreement and

Assignment between [Mr.] Kutrubes and Biowest . . . and therefore does not have an

interest in the contract nor standing to bring the claim.” Aplt.’s Opening Br. at 28–

29 (citation omitted).

Although Atlas makes clear in its first amended complaint that it seeks

declaratory judgment to answer the question of whether the transfer of Mr.

Kutrubes’s shares in Atlas to Biowest is void and of no effect, Aplt.’s App., Vol. II,

at 16–17, its pleadings are admittedly less clear on what would be the exact injury

suffered by Atlas if the transfer was not voided. It alludes to the fact it “has not

received valid instructions to register the purported transfer of [Mr.] Kutrubes’[s]

Atlas stock to Biowest,” id. at 13, and the transfer, therefore, is “void because it was

never completed as provided under Article 8 of the [CUCC],” id. at 16. Touching on

40 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 41

the question of injury in a somewhat clearer fashion in the same pleading, Atlas does

aver that the “[t]ransfer, if completed and not avoided, would render [Mr.] Kutrubes

insolvent,” and because Mr. Kutrubes “admitted and acknowledged that he would

become liable in damages to Atlas in [Atlas I],” presumably Atlas would have greater

difficulty collecting on that judgment than it otherwise would have because Mr.

Kutrubes would be impoverished following the effective transfer of shares to

Biowest. Id. at 18. However, to the extent that Atlas’s amended complaint is

somewhat vague about its purported injury, it is not fatally so. We have explained

that “[a]t the pleading stage, general factual allegations of injury resulting from the

defendant’s conduct may suffice.” Kansas Nat. Res. Coal. v. United States Dep’t of

Interior, 971 F.3d 1222, 1231 (10th Cir. 2020) (quoting Lujan, 504 U.S. at 561).

And Atlas’s briefing clarifies the exact nature of its injury.

Specifically, substantially tracking the injuries that the district court identified,

see Atlas II, 2019 WL 1200809, at *8, Atlas first explains that “[r]esolving whether

the writ attached [to] the stock or not is related to Atlas’s interests under the writ of

attachment” and this would require determining “if the stock was transferred, and to

do that, the court had to decide the declaratory judgment issue.” Aplee.’s Resp. Br.

at 34, 36. Atlas also points out that “[e]ven a contingent liability qualifies as an

actual, imminent, and concrete injury sufficient to trigger standing to bring a

declaratory judgment action.” Id. at 37. Next, Atlas argues that it has an interest as

the issuer of the stock under Article 8 of the CUCC, and it has a duty to register a

transfer “only if certain pre-conditions are met.” Id. at 38. So not only would a

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declaratory judgment determine whether such conditions have been met, it would

also relieve Atlas of “conflicting demands placed upon it: compliance with court

orders and enforcement of the writ of attachment on the one hand, and threats from

Biowest to litigate on the other.” Id.

We conclude that Atlas has made a sufficient showing of a cognizable injury.

Especially with the result of the trial in Atlas I, Atlas has an interest to know whether

the transfer was legally effective and, as a result, whether the shares could be used to

satisfy the Atlas I judgment if they remain possessed by Mr. Kutrubes. That is, if Mr.

Kutrubes validly transferred his shares to Biowest, then Atlas’s ability to collect on

its judgment in Atlas I against Mr. Kutrubes is significantly impaired. And similarly,

Atlas has a particularized and specific interest in knowing whether it was required to

follow the district court’s writ of attachment to turn over the shares to Laramie

County Sheriff, or if on the other hand, it was required to record the transfer to

Biowest who, thus, would have control of the shares in question.

In a roughly analogous context, we have concluded that an insurer could

pursue a declaratory judgment claim against another insurer to determine their

relative liability for an insurance claim, because the insurer was “not seeking to

enforce rights as an insured under the [other insurer’s] policy; it is suing . . . insurer-

to-insurer. [The insurer] seeks a judicial determination of how its policy interacts

with the [the other insurer’s] policy.” Philadelphia Indem. Ins. Co. v. Lexington Ins.

Co., 845 F.3d 1330, 1335 (10th Cir. 2017). And we explained that there was

standing because “this action is not one to enforce a contract but rather seeks a

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declaration of the relative rights and duties of [the insurers].” Id. at 1336 (alteration

in original) (quoting United Servs. Auto. Ass’n v. Royal-Globe Ins. Co., 511 F.2d

1094, 1096 (10th Cir. 1975)). As we explain further below, the standing

determination of Philadelphia Indemnity belies the notion that Biowest advances—

that is, the idea that just because Atlas has no direct interest in the contractual

arrangement between Mr. Kutrubes and Biowest for the share transfer, that it lacks

standing to seek a declaration regarding its relative rights regarding this arrangement.

It is true that Atlas’s interest in determining whether the share transfer was

valid has not yet resulted in an injury. However, we do not deem this to be a material

impediment to a plaintiff possessing Article III standing. We “have recognized that

contingent liability may present an injury in fact.” Protocols, LLC v. Leavitt, 549

F.3d 1294, 1299 (10th Cir. 2008); see id. at 1300 (noting that the Supreme Court

found New York had standing to challenge the line-item veto because the President’s

veto “reviv[ed] . . . a substantial contingent liability [which] immediately and directly

affects the borrowing power, financial strength, and fiscal planning of the [plaintiff]”

(quoting Clinton v. City of New York, 524 U.S. 417, 431 (1998))).

Most relevant here was our discussion in Protocols of the Supreme Court’s

decision in Aetna Life. We highlighted that the Supreme Court has acknowledged

that a contingent liability can be a basis for Article III standing in the declaratory

judgment context. See id. at 1300. We observed that the Court had found that the

complaint “presented a controversy because the parties ‘had taken adverse positions

with respect to their existing obligations,’” and a declaratory judgment could

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“‘definitely and finally adjudicate[ ]’ the rights of the parties.” Id. (alteration in

original) (quoting Aetna Life, 300 U.S. at 242–43). Accordingly, we reasoned that

“[b]y holding that Aetna’s contingent liability presented a ‘controversy’ under Article

III, the Court necessarily held that standing can be predicated on such liability.” Id.

Similar reasoning leads us to conclude that a declaratory judgment to avoid

contingent liability would provide the basis here for Article III standing. The

contingent liability that Atlas seeks to avoid by having the stock transfer declared

void through a declaratory judgment action “has created an actual and imminent

injury.” Id. at 1301. Therefore, Atlas satisfies the injury-in-fact element of standing.

Significantly, Biowest only contests that element—i.e., injury-in-fact. That is

likely wise. We independently discern with little difficulty no obstacle to standing

stemming from the other elements. 7 So, we center our remaining discussion on

explaining why Biowest’s injury-in-fact challenge is without merit.

7 Of course, even absent a specific challenge from Biowest, we must independently ensure that the other elements of standing as to Atlas are satisfied. And they are. The second element requires that “there must be a causal connection between the injury and the conduct complained of—the injury has to be ‘fairly . . . trace[able] to the challenged action of the defendant, and not . . . th[e] result [of] the independent action of some third party not before the court.’” Lujan, 504 U.S. at 560 (alterations and omissions in original) (quoting Simon, 426 U.S. at 41–42). We previously determined in Philadelphia that where two insurers disputed “their relative responsibilities to pay for [a] loss” from a fire that there was a sufficient causal relation in the sought-after declaratory relief because their “interests are adverse . . . . One insurer or the other will bear the loss or they will share it in some manner.” 845 F.3d at 1332, 1335. This is similar to this case because Atlas and Biowest’s interest are adverse to one another—that is, determining the validity of the 44 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 45

Biowest argues here, as it did in the district court, that Atlas does not have

standing because it was not a party to the contract and, therefore, has no legally

enforceable right. See Aplt.’s Opening Br. at 28–29; Aplt.’s Reply Br. at 9 (“Under

Colorado law, a non-party or beneficiary to a contract lacks sufficient privity of

contract and interest to assert a claim on the contract.”); id. at 11 (“Atlas was not a

party to the Stock Sales Agreement and Assignment between [Mr.] Kutrubes and

Biowest . . . and therefore does not have an interest in the contract nor standing to

bring the claim.” (citation omitted)). But these statements reflect a fundamental

misunderstanding of what this case is about. Atlas does not claim to be a party or

beneficiary to the contract. Instead, Atlas seeks to determine whether the transfer at

the core of the contract was valid. The answer to this question determines who

transfer will necessarily result in one of them being injured. Therefore, Atlas has satisfied the traceability prong.

Furthermore, as to the redressability prong, “it must be ‘likely,’ as opposed to merely ‘speculative,’ that the injury will be ‘redressed by a favorable decision.’” Lujan, 504 U.S at 561 (quoting Simon, 426 U.S. at 38, 43). Again, Philadelphia provides guidance. There, we concluded that “[b]ecause Philadelphia’s injury is causally connected to how its policy interacts with [the other insurer’s] policy, a judicial determination of the insurers’ respective responsibilities under the policies will redress and resolve this dispute.” Philadelphia, 845 F.3d at 1335. Here, this prong is satisfied because if the transfer is found to be valid, then Atlas must certificate the shares and register the transfer; whereas, if the transfer is void, Atlas has no duty to register the transfer and instead may satisfy its Atlas I judgment against Mr. Kutrubes (at least in part) through reclaiming the shares.

Therefore, because Atlas meets the three requirements, Atlas has standing to bring this declaratory judgment claim to have the district court determine the respective legal rights of both parties in relation to the share transfer.

45 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 46

exactly owns Mr. Kutrubes’s shares and thus whether the writ of attachment actually

attached to anything. And it also will decide whether the transfer, if valid, required

Atlas to register the transfer of the shares. Therefore, Atlas does not seek the direct

benefit of the contract; rather, it seeks to determine whether the contract is valid and

affects its rights.

We have concluded, in the declaratory judgment context, that a plaintiff that is

neither a party to, nor third-party beneficiary of, a defendant’s contract nevertheless

has standing to seek a declaratory judgment regarding the contract. In this regard,

recall that, in Philadelphia, we determined that one insurance company had standing

to sue even though it was not a party to or third-party beneficiary of the disputed

contract because “[i]ts alleged injury is financial, definite, and concrete” and its

“interests [were] adverse” to the opposing party where “[o]ne insurer or the other

[would] bear the loss or they [would] share it in some manner.” 845 F.3d at 1335.

As discussed above, the validity of the contract directly affects Atlas’s rights, and,

therefore, Biowest’s argument that Atlas may not challenge the validity of a contract

that it was not party to is unavailing.

***

Therefore, we conclude that Atlas has standing to bring this declaratory

judgment claim to have the district court determine the respective legal rights of both

parties in relation to the share transfer.

46 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 47

C

We next turn to the merits of this case and thus whether the transfer between

Mr. Kutrubes and Biowest was valid under Colorado law. We begin by first detailing

what Colorado law requires for a stock transfer to be valid. We next turn to the

merits of the district court’s decision. And finally, we consider three of Biowest’s

arguments that the district court erred in concluding that the transfer was invalid.

The Colorado Supreme Court has made clear that “[t]itle to corporate stock in

Colorado can only be transferred as provided by statute.” Quandary Land Dev. Co.

v. Porter, 408 P.2d 978, 981 (Colo. 1965). It further explained that “[t]he statutory

methods are exclusive and any attempt or desire to convey stock by other means

merely results in a naked promise to transfer ownership in the future.” Id.; see

Mortg. Invs. II, 93 P.3d at 560 (affirming trial court’s conclusion that individual who

purportedly purchased shares of the defendant corporation but failed to obtain stock

certificates “did not acquire ownership” of the property because he “did not comply

with Article 8”).

Article 8 of the CUCC governs the transfer of shares in a corporation. See

Colo. Rev. Stat. §§ 4-8-101, et seq.; see also Mortg. Invs. Corp. v. Battle Mountain

Corp. (Mortg. Invs. I), 70 P.3d 1176, 1187 (Colo. 2003) (concluding that Article 8

“governs acquisition of legal ownership of certificated shares of a corporation and

generally requires that a purchaser receive the security certificate or certified stock of

the corporation”). Most relevant here, “[a] person acquires a security or an interest

47 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 48

therein, under this article, if . . . [t]he person is a purchaser to whom a security is

delivered pursuant to section 4-8-301.” 8 § 4-8-104(a)(1) (emphasis added). The

Comment to § 4-8-301 explains that “[d]elivery is used in Article 8 to describe the

formal steps necessary for a purchaser to acquire a direct interest in a security.” § 4-

8-301 cmt. (emphasis added).

Because Mr. Kutrubes’s shares were uncertificated, 9 Article 8 contemplates

two ways that delivery could occur. First, “[d]elivery of an uncertificated security to

a purchaser occurs when . . . [t]he issuer registers the purchaser as the registered

owner, upon original issue or registration of transfer.” § 4-8-301(b)(1). Or when

“[a]nother person, other than a securities intermediary, either becomes the registered

8 Section 4-8-104 also contemplates acquiring a security by acquiring a security entitlement. § 4-8-104(a)(2). But because this case is about whether Mr. Kutrubes validly transferred the security itself, acquiring a security entitlement is not implicated here. 9 Atlas also argues in the alternative that the stock certificates could be deemed certificated because “Atlas’s bylaws specified the shares were to be certificated.” Aplee.’s Resp. Br. at 47. The district court, however, rejected this argument. See Atlas II, 474 F. Supp. 3d at 1193. In doing so, the court offered the following reasoning: “Atlas admits that it created stock certificates for [Mr.] Kutrubes’s shares only after the Purported Transfer took place. Therefore, [Mr.] Kutrubes’s shares were not represented by a certificate at the time of the Purported Transfer. Accordingly, they were uncertificated securities under the [C]UCC.” Id. Atlas fails to show why the district court erred in concluding that the shares were in fact uncertificated. “‘Certificated security’ means a security that is represented by a certificate.” § 4-8-102(a)(4). Atlas does not point to any authority supporting the proposition that the mere statement in a company’s bylaws that shares should be certificated means that the shares “were represented by a certificate,” even if, as here, no share certificates were printed at the time of the alleged transfer. Therefore, absent authority to support it, Atlas’s alternative ground for supporting the district court’s judgment is not sufficiently firm for us to rely on it, and we do not do so.

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owner of the uncertificated security on behalf of the purchaser or, having previously

become the registered owner, acknowledges that it holds for the purchaser.” § 4-8-

301(b)(2).

Mr. Kutrubes’s attempted transfer of his shares to Biowest did not constitute a

delivery of uncertificated securities under § 4-8-301. First, in the instant action,

neither party disputes that Atlas is the issuer of Mr. Kutrubes’s stock, and that it did

not register Biowest as the registered owner. See Aplt.’s App., Vol. III, at 149.

Thus, the district court correctly concluded the first condition was not met. See id. at

150. And regarding the second condition, again, Atlas never registered Mr. Kutrubes

as the owner of the uncertificated securities on behalf of Biowest. Furthermore, Mr.

Kutrubes did not claim to hold his shares on behalf of Biowest. 10 Accordingly, there

is no basis for application of the second condition for delivery either. Therefore, Mr.

Kutrubes’s attempted transfer of his shares to Biowest did not constitute a delivery of

uncertificated securities under § 4-8-301.

Biowest’s arguments to the contrary are unavailing. We explain why in the

following order. First, we will consider Biowest’s argument that common law

10 Mr. Kutrubes own actions further negate such an idea, and further undermine the assertion that the assignment to Biowest was final and irrevocable. Recall that more than one year after the purported transfer, on June 18, 2019, Mr. Kutrubes held himself out as the owner of the shares in his “Request for Inspection and Copying of Corporate Records.” Aplt.’s App., Vol. II, at 252–53. 49 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 50

doctrines of property supersede Article 8. Next, we will examine whether Atlas

violated its duty to register the transfer. Finally, we consider whether the doctrine of

equitable transfer applies.

First, Biowest’s argument that it owns the shares regardless of whether the

alleged transfer complied with Article 8 fails. Biowest argues that “the District Court

confuses the distinction between ownership of stock in a corporation and the

subsequent registration of stock on the corporate records of the issuer.” Aplt.’s

Opening Br. at 31; see id. (“By analogy, the Article 8 process of registration and

delivery of stock occurs after a sale of shares and is akin to recording a real estate

deed after a property has been purchased.”). In line with this argument, Biowest

contends that the district court incorrectly applied the law of “basic ownership of

property” when it looked to Article 8 because “a present and irrevocable assignment

of [Mr. Kutrubes’s] interest in the Shares to Biowest, prior to those Shares being

certificated (after the fact) by Atlas, governs their ownership.” Id. at 33–34; see

Aplt.’s Reply Br. at 13 (“The assignment constituted a final transfer of [Mr.]

Kutrubes’s 7% ownership interest in Atlas to Biowest.”); id. (“By its plain language,

execution of an irrevocable assignment of interest is sufficient when there are no

actual stock certificates.”).

Yet in making this argument, Biowest does little to engage with the reality

that Article 8 governs the transfer of ownership; instead Biowest only musters

arguments about evidence of ownership of shares. In this regard, Biowest quotes

50 Appellate Case: 20-1401 Document: 010110751168 Date Filed: 10/11/2022 Page: 51

several more-than-a-hundred-year-old Colorado and non-Colorado cases about stock

certificates not being dispositive of ownership. See Aplt.’s Opening Br. at 33 (“[A]

‘certificate [of stock] was not necessary to complete ownership. . . . The fact of

ownership may be inferred from other facts, in the absence of a certificate.’” (second

alteration in original) (quoting Mountain Waterworks Const. Co. v. Holme, 113 P.

501, 506–07 (Colo. 1911) (internal citations omitted))); id. (“The certificate is not the

subject of ownership, but is simply an evidence of ownership.” (quoting Marshall v.

Marshall, 53 P. 617, 619 (Colo. Ct. App. 1898))). Not only do the Colorado cases

pre-date Colorado’s acceptance of the current CUCC by almost a hundred years, see

id. at 35, they also illustrate Biowest’s attempt to sidestep the dispositive issue in the

assessment of who owns the shares: that is, whether the transfer of ownership from

Mr. Kutrubes complied with the CUCC’s transfer requirements. Although Biowest

does argue that the “[r]evised Article 8 deals with the settlement of securities trades,

not the trades or contracts for purchases of securities themselves,” id. at 36, it points

to no authority that anything other than Article 8 governs the transfer of ownership in

this case.

As mentioned above, Colorado caselaw and the CUCC itself make clear that

the requirements of transfer are not some mere formality but instead are necessary

requirements for an interest in stock to transfer. Specifically, the Colorado Supreme

Court has made clear that “[t]itle to corporate stock in Colorado can only be

transferred as provided by statute,” and “[t]he statutory methods are exclusive and

any attempt or desire to convey stock by other means merely results in a naked

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promise to transfer ownership in the future.” Quandary Land Dev., 408 P.2d at 981.

And the CUCC states that “[a] person acquires a security or an interest therein, under

this article, if . . . [t]he person is a purchaser to whom a security is delivered pursuant

to section 4-8-301.” § 4-8-104(a)(1). The Comment to § 4-8-301 explains that

“[d]elivery is used in Article 8 to describe the formal steps necessary for a purchaser

to acquire a direct interest in a security.” § 4-8-301 cmt. (emphasis added).

Biowest’s attempt to distinguish authority that the district court relied on also

fails. Biowest argues that the district court erred in relying on Mortgage Investments

I, 70 P.3d 1176, and Mortgage Investments II, 93 P.3d 557, because in those

decisions “the party seeking to establish ownership of the stock in question never

received books and records necessary to prove he was the owner of uncertificated

shares” and “evidence was presented there at trial that the corporation’s shares were

indeed certificated, therefore requiring the application of [C]UCC Article 8 standards

with respect to transfer and delivery of certificated shares.” Aplt.’s Opening Br. at

31–32. But the fact that Mortgage Investments Corporation’s purported owner never

received the documentation to show he was the owner of the uncertificated shares,

which turned out to be certificated and subject to Article 8’s provisions for that class

of shares, does not mean the district court erred in concluding that Article 8 governs

the transfer here of uncertificated shares.

In sum, Biowest’s reliance on common law principles of property and its

attempt to distinguish the authority that the district court relied on both fail to

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demonstrate that the Article 8 ownership-transfer principles do not govern this stock

transfer.

Putting aside its contention that “the District Court’s order erroneously

conflated the concept of ownership of stock with registration of shares,” Biowest also

argues that the district court erred in concluding the “[s]hares were not registered to

Biowest as a basis for its ruling that [C]UCC Article 8 was not complied with.” Id. at

38. This was error by the court, argues Biowest, because, pursuant to Colo. Rev.

Stat. § 4-8-401, Atlas had a duty to register the shares to Biowest after “[Mr.]

Kutrubes’s attorney notified Atlas of the sale, and provided Atlas with a copy of the

Assignment executed by his client.” Aplt.’s Opening Br. at 39. Further, Biowest

argues the district court incorrectly concluded that neither of these communications

was sufficient because they did not come from an “appropriate person under Colo.

Rev. Stat. § 4-8-107(a), which is the ‘the registered owner of an uncertificated

security.’” Id. at 41. Specifically, it explains that this conclusion ignores “another

basic premise of law – that an attorney is the agent of his client.” Id.

However, as Atlas points out, see Aplee.’s Resp. Br. at 51, a duty to register a

transfer occurs only “if certain preconditions exist. If any of the preconditions do not

exist, there is no duty to register transfer.” Colo. Rev. Stat. Ann. § 4-8-401 cmt.

Among these conditions is that “[t]he . . . instruction is made by the appropriate

person or by an agent who has actual authority to act on behalf of the appropriate

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person,” § 4-8-401(a)(2)—which is defined as “the registered owner of an

uncertificated security,” § 4-8-107(a)(2).

The communications made by Mr. Kutrubes’s attorney and Biowest’s attorney

did not make the correct request and did not come from the correct person

respectively. First, the communication from Mr. Kutrubes’s attorney simply states

that Mr. Kutrubes “transferred [his] stock to a third party, Biowest, LLC” and

attached a copy of the “Transfer and Conveyance of Common Stock.” Aplt.’s App.,

Vol. II, at 131–33 (Letter Re: Atlas Biologicals, Inc.—Stock Transfer, dated Apr. 5,

2018). Nowhere does this letter state that Mr. Kutrubes requests that Atlas register

the transfer.

And an attached form titled “Irrevocable Stock Transfer Power” leaves blank a

line for “[t]he undersigned does hereby irrevocably constitute and appoint . . . an

attorney to transfer the said stock on the books of the within named Company . . . .”

Id. at 134. And, therefore, the form did not designate—and, consequently, did not

allow—Mr. Kutrubes’s attorney to act as his agent who could instruct that the

transfer be registered, even if the attorney had made the proper instruction. The fact

that the transfer form was transmitted by Mr. Kutrubes’s attorney does not mean that

the attorney necessarily had the authority to act as an agent within the contemplation

of the CUCC. This is because, § 4-8-401(a)(2) requires actual authority from an

appropriate person. Mr. Kutrubes’s attorney did not demonstrate to Atlas that he had

the actual authority to order registration of the transfer. If anything, the omission of

the attorney’s name from the stock transfer form creates the opposite inference. So

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even if Mr. Kutrubes’s attorney had uttered the correct instruction for Atlas to

register the transfer to Biowest, the instruction would not have been supported by

evidence that the attorney had the actual authority to act as Mr. Kutrubes’s agent in

issuing it.

Similarly, although Biowest’s attorney explicitly instructed Atlas “to transfer

those shares to Biowest on Atlas’s stock ledger,” Aplt.’s App., Vol. II, at 150 (Email

Re: Atlas Biologicals, Inc., dated Apr. 22, 2018), Biowest was not the registered

owner of the shares, and no document was attached that made clear that Biowest’s

attorney could act as Mr. Kutrubes’s agent. Therefore, because neither Mr.

Kutrubes’s attorney, nor Biowest’s attorney was an appropriate person, Atlas had no

obligation to register the transfer. 11

11 Atlas also argues that another prerequisite required to trigger its duty to register was not satisfied because Biowest was not a protected purchaser. See Aplee.’s Resp. Br. at 51. A protected purchaser is “a purchaser of a certificated or uncertificated security, or of an interest therein, who: (1) Gives value; (2) Does not have notice of any adverse claim to the security; and (3) Obtains control of the certificated or uncertificated security.” § 4-8-303(a). Although Atlas raises reasonable arguments for the first two elements, Aplee.’s Resp. Br. at 52–54, we need not speak definitively to them, because there is no question that Biowest has not satisfied the third prong. Section 4-8-106 defines “control” of uncertificated securities as “(1) The uncertificated security is delivered to the purchaser; or (2) The issuer has agreed that it will comply with instructions originated by the purchaser without further consent by the registered owner.” § 4-8-106(c). As discussed above, “delivery” of the uncertificated stock did not, and has not, occurred. And Atlas did not agree to comply with Biowest’s instructions. Although Biowest contests the first two elements—as to which we forgo opining upon—it does not raise any arguments that it had control of the shares. See Aplt.’s Reply Br. at 24–26. Therefore, focusing on this third element alone, it is clear that Biowest is not a protected purchaser, and, thus, Atlas had no duty to register the transfer on the ground that Biowest was a protected purchaser.

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Finally, Biowest argues that the district court erred in concluding that the

doctrine of equitable transfer did not apply to Mr. Kutrubes’s attempt to transfer his

shares to Biowest. Aplt.’s Opening Br. at 42–44. “Equitable assignment of corporate

stock, where there is a transfer of stock even though there is some technical defect in

the mode of transfer, is recognized in Colorado.” Mortg. Invs. II, 93 P.3d at 560.

However, “equitable title claims are recognized in Colorado only where the rights of

third parties would not be affected.” Id.; cf. id. (“Mortgage Investments was the

holder of a deed of trust granted by BMC [i.e., Battle Mountain Corporation]. Its

rights would be affected by the sale of the corpus of BMC to Tucker, who then

changed the name of the corporation and conveyed and encumbered the property

subject to the deed of trust.”); cf. also Sky Harbor, Inc. v. Jenner, 435 P.2d 894, 897

(Colo. 1968) (ruling that a judgment lien creditor has priority over a person who

holds only an equitable interest in the property).

At the outset, we conclude that the equitable transfer doctrine is not applicable

here because this case is between a transferee (i.e., Biowest) and a third party (i.e.,

Atlas). The Colorado Supreme Court has explained “a party may not assert equitable

title in a dispute between a transferee and a third party.” Mortg. Invs. I, 70 P.3d at

1187; see Arfsten v. Higby, 372 P.2d 166, 168 (Colo. 1962) (recognizing “equitable

titles where rights of third parties are not present”). As Atlas has underscored, the

cases where Colorado courts have applied the equitable title doctrine have concerned

claims between the transferor and transferee, see Aplee.’s Resp. Br. at 55, and those

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cases make clear that third parties were not involved, see Arfsten, 372 P.2d at 168

(“Majority stockholders and corporate officers are not third parties within the

protective coverage of the Uniform Stock Transfer Act.”). Therefore, application of

the equitable transfer doctrine is not appropriate in disputes, like this one, that are not

between the transferor and transferee.

Furthermore, in light of the preceding discussion, there should be no doubt that

Atlas’s rights would be detrimentally affected both as a judgment creditor and as the

issuer of the shares. Biowest’s only argument to the contrary is that “the transfer of

ownership of the Shares from [Mr.] Kutrubes to Biowest occurred upon [Mr.]

Kutrubes’s execution of the Assignment, which was prior to Atlas seeking a pre-

judgment attachment (which it obtained without notifying Biowest of the proceedings

thereby precluding Biowest any opportunity to challenge the attachment).” Aplt.’s

Opening Br. at 44. However, Biowest’s argument assumes a valid transfer of the

shares that, as we discussed, finds no foundation in the controlling statute, Article 8.

Moreover, Biowest points to no authority that supports its suggestion that it

matters—for purposes of applying the equitable transfer doctrine—whether Atlas, as

a holder of third-party interests, secured the writ of attachment shortly before or after

the ostensible transfer of the shares to Biowest. Accordingly, based on the foregoing,

we conclude that this is not a suitable case for application of the equitable transfer

doctrine and accordingly, Biowest’s reliance on it is unavailing.

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In sum, Mr. Kutrubes’s stock transfer was legally invalid. Therefore, Atlas’s

writ of attachment was effective in attaching his shares.

IV

For these reasons, we AFFIRM the district court’s grant of summary judgment

on Atlas’s declaratory judgment claim.