RONALD E. BUSH, Magistrate Judge.
Now pending before the Court is Defendants' (1) Rule 12(b)(6) Motion to Dismiss Damage Claims; (2) Rule 12(b)(7) Motion to Dismiss Damage Claims; and (3) Rule 12(b)(1) Motion to Dismiss Claims for Dissolution of Partnership, Wind-Up, and Settlement of Partnership Accounts, and Constructive Trust (Docket No. 6). Having carefully considered the record, participated in oral argument, and otherwise being fully advised, the undersigned enters the following Memorandum Decision and Order:
1. Plaintiffs Ben Thomas and Linda Ferris (collectively "Plaintiffs") and Defendants Bob Thomas and Kelly Thomas (collectively "Defendants") are partners in the Thomas Brothers Ranch partnership (the "Partnership"). See Compl., ¶ 7 (Docket No. 1). The Partnership has no partnership agreement. See id. at ¶ 8.
2. The Partnership owns a substantial ranch in Oreana, Idaho. See id. at ¶ 9. The Defendants live on the ranch with their adult sons, operating a separate cattle grazing operation. See id. at ¶¶ 10-11. Plaintiff Ben Thomas lives in Woodland, Washington; Plaintiff Linda Ferris lives in Palmer, Alaska. See id. at ¶¶ 1-2.
3. According to Plaintiffs, Defendant Bob Thomas "makes decisions regarding the [P]artnership, and does not allow or accept oversight regarding his decisions" which, in turn, alienates Plaintiffs from the Partnership's business. Id. at ¶¶ 12-13. Plaintiffs contend that "[t]his alienation has allowed [Defendants] to violate their duties to the [P]artnership through allowing the use of [P]artnership property to operate other cattle grazing operations and as a personal residence and source of funds." Id. at ¶ 14. For example:
a. Defendants "have built their personal residence on the ranch property and have not compensated the [P]artnership for their use." Id. at ¶ 15.
b. Defendant Bob Thomas "has denied access to the ranch property and the books of the partnership, because [Plaintiffs] were unwilling to sign a personal guaranty for additional financing." Id. at ¶ 16.
c. Defendant Bob Thomas "increased the [P]artnership's line of credit significantly over the last year, with no input or consent from [Plaintiffs]." Plaintiffs believe that "this line of credit supports [Defendants'] lifestyle on the ranch, and the separate grazing operation, rather than the [Partnership]." Id. at ¶¶ 17-18.
4. Plaintiffs claim to have put money into the Partnership throughout its existence. See id. at ¶ 20.
5. The Partnership turned a profit for the past four to five years, but no money has been paid to Plaintiffs. See id. at ¶ 21.
6. The parties dispute the best use of the Partnership's real property — Plaintiffs "believe it could be put to better use as vacation property or hunting grounds in addition other valuable uses," while Defendants "believe it should be continued to be used for their cattle gazing operation and personal residence." Id. at ¶¶ 22-24. Plaintiffs "believe that to continue to use the ranch for cattle grazing and as [Defendants'] residence would be to commit waste upon the property." Id. at ¶ 25. Plaintiffs submit that "there is a clear conflict between that which is best for the [P]artnership and that which most benefits [Defendants] and their family." Id. at ¶ 26.
7. Plaintiffs believe that the total value of the Partnership, minus liabilities, is in excess of $4.6 million. See id. at ¶ 27.
8. Through this action, Plaintiffs assert the following claims: (1) Dissolution of Partnership, Wind-Up, and Settlement of Partnership Accounts (Count I); (2) Violation of Statutory Duties/Breach of Fiduciary Duty (Count II); (3) Conversion of Partnership Property (Count III); (4) Unjust Enrichment (Count IV); (5) Constructive Trust (Count V); (6) Trespass to Partnership Realty (Count VI). See id. at ¶¶ 28-50.
9. Defendants now move to dismiss Plaintiffs' Complaint, arguing that (1) certain of Plaintiffs' causes of action (identified by Defendants as "damage claims") are unaccompanied by sufficiently-detailed allegations and should be dismissed for failure to state a claim, putting into question the amount-in-controversy requirement for subject matter jurisdiction; and (2) the Partnership — not Plaintiffs — is the only party that can bring the damage claims, and the Partnership's corresponding joinder in the action as a plaintiff would destroy complete diversity, leaving this Court without subject matter jurisdiction. See Mem. in Supp. of Mot. to Dismiss, pp. 2-10 (Docket No. 7).
FRCP 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief," in order to "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While a complaint attacked by an FRCP 12(b)(6) motion to dismiss "does not need detailed factual allegations," it must set forth "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id.
To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." Id. at 570. When reviewing a complaint under this Rule, all allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party. See Thompson v. Davis, 295 F.3d 890, 895 (9
A dismissal without leave to amend is improper unless it is beyond doubt that the complaint "could not be saved by any amendment." Harris v. Amgen, Inc., 573 F.3d 728, 737 (9
FRCP 19, which governs the compulsory joinder of parties, presents a three-step inquiry. "First, the court must determine whether a nonparty should be joined under [FRCP] 19(a)." EEOC v. Peabody W. Coal Co., 610 F.3d 1070, 1078 (9
Fed. R. Civ. P. 19(a)(1).
Second, if the nonparty (or "absentee") is required and should be joined, the court must determine if it is feasible to do so. See Peabody, 610 F.3d at 1078.
Finally, "[i]f a person who is required to be joined if feasible cannot be joined, the court must determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed." Fed. R. Civ. P. 19(b). The factors under FRCP 19(b) to determine whether the party is indispensable are: (1) the prejudice to any party or to the absent party; (2) whether relief can be shaped to lessen prejudice; (3) whether a judgment rendered in the person's absence would be adequate; and (4) whether the plaintiff would have an adequate remedy if the action were dismissed for nonjoinder, i.e., whether there exists an alternative forum. See Fed. R. Civ. P. 19(b)(1-4). "There is no prescribed formula for determining in every case whether a person is an indispensable party." Provident Tradesmen Bank & Trust Co. v. Patterson, 390 U.S. 102, 118 n.14 (1968). To the contrary, "[FRCP] 19(b) requires the district court to analyze various equitable considerations within the context of particular litigation, rather than to decide a purely legal issue." Walsh v. Centeio, 692 F.2d 1239, 1242 (9
If the threshold requirements of FRCP 19(a) are not met, an FRCP 19(b) inquiry is unnecessary. See Temple v. Synthes Corp., Ltd., 498 U.S. 5, 7 (1990). The movant bears the burden of proof as to both parts of the analysis. See 7 Wright, Miller & Kane, Federal Practice and Procedure: Civil 3d § 1609 at 129. A "dismissal for failure to join an indispensable party should only be ordered where the movant has carried the burden of producing evidence which shows the nature of the interest possessed by the absentee and that protection of that interest will be impaired by the absence." Generadora De Electricidad Del Caribe, Inc. v. Foster Wheeler Corp., 92 F.Supp.2d 8, 14 (D. Puerto Rico 2000).
Federal courts have original jurisdiction over civil actions that either (1) arise under federal law ("federal question jurisdiction"), or (2) involve claims for more than $75,000 between parties of diverse citizenship ("diversity jurisdiction"). See 28 U.S.C. §§ 1331, 1332(a). Defendants' Motion to Dismiss seeks to persuade the Court that there is no subject matter jurisdiction over the entirety of Plaintiffs' claims due to a lack of diversity jurisdiction (there is no dispute that Plaintiffs' claims do not implicate federal question jurisdiction).
Defendants raise two arguments. First, that the amount in controversy is not met because the claims that seek money damages (the "damage claims") fail to state a claim owing to the absence of particularized allegations — i.e., that, without these claims, there is no dollar amount that is in controversy, let alone the requisite $75,000 jurisdictional amount in controversy. Second, that the Partnership itself is a necessary and indispensable party, which if added as a plaintiff to the action would destroy diversity of citizenship between the parties. Though these arguments may have traction in limited respects, they do not compel dismissal of Plaintiffs' Complaint for lack of subject matter jurisdiction.
According to Defendants, of the six causes of action identified within Plaintiffs' Complaint, four are damage claims: (1) Violation of Statutory Duties/Breach of Fiduciary Duty (Count II); (2) Conversion of Partnership Property (Count III); (3) Unjust Enrichment (Count IV); and (4) Trespass to Partnership Realty (Count VII). See Mem. in Supp. of Mot. to Dismiss, p. 5 (Docket No. 7). Defendants contend that Plaintiffs bring these damage claims so that they can dissolve and wind up the Partnership in federal court rather than in the state district court of the county where the Partnership's ranch is actually located. See id. at p. 2. In other words, Defendants hint that Plaintiffs' damage claims are a contrivance to implicate diversity jurisdiction. See id. ("... Plaintiffs have alleged a number of damage claims, and based on this assert that the Court has subject matter jurisdiction over the dispute by virtue of diversity of the parties and the allegation of a sufficient amount of damages. Absent the damage claims, the Court would not have subject matter jurisdiction."). Each of the damage claims fails to meet FRCP 8(a)(2)'s pleading standards, according to Defendants, and therefore should be dismissed under FRCP 12(b)(6), which in turn would deprive this Court of subject matter jurisdiction due to the absence of the required amount in controversy. These damage claims are addressed below.
Under Idaho's Revised Uniform Partnership Act ("RUPA"), partners owe each other (and the partnership itself) a number of statutory duties, including:
See, e.g., I.C. §§ 53-3-401(f), (g), 403(b), 404(b)(1), (2), (c), (d). In their Complaint, Plaintiffs allege that, in violation of the above-referenced duties, Defendants have:
See Compl., ¶¶ 11, 14-18, 24-26 (Docket No. 1); see also Opp. to Mot. to Dismiss, pp. 4-7 (Docket No. 10). Plaintiffs further allege that Defendants' conduct has caused damage in excess of $75,000, considering that the Partnership itself is valued in excess of $4.6 million. See id. at ¶¶ 27, 36.
Practically speaking, because Plaintiffs have stated a claim for violation of statutory duties/breach of fiduciary duty along with corresponding damages in excess of $75,000, any argument that Plaintiffs' entire Complaint should be dismissed for lack of diversity jurisdiction by reason of an insufficient amount in controversy (which arguably may have been the primary goal of Defendants' Motion to Dismiss, see supra) is overstated and misses the point. Even so, for housekeeping purposes, the undersigned will examine the allegations supporting the remaining damage claims for completeness under the Rules as well.
For example, conversion under Idaho law is "a distinct act of dominion wrongfully asserted over another's personal property in denial of or inconsistent with rights therein." Peasley Transfer & Storage Co. v. Smith, 976 P.2d 605, 616 (Idaho 1999); see also U.S. Welding, Inc. v. Battelle Energy Alliance, LLC, 728 F.Supp.2d 1110, 1118 (D. Idaho 2010). Plaintiffs' Complaint repeatedly alleges that Defendants have converted "[P]artnership property," yet fails to identify with any degree of specificity what that property actually entails. See, e.g., Compl., ¶ 38 (Docket No. 1). As the Court stated during oral argument, the dominion over chattel — not real property — is necessary to support a conversion claim. As currently pled, Plaintiffs' Complaint formulaically states a claim for conversion, but doesn't tether it to understood, identifiable property. Therefore, Plaintiffs' conversion claim is dismissed without prejudice. Plaintiffs are granted leave to amend their Complaint to address these concerns. Defendants' Motion to Dismiss is granted in this limited respect.
Further, "`[t]he substance of an action for unjust enrichment lies in a promise, implied by law, that a party will render to the person entitled thereto that which in equity and good conscience belongs to the latter.'" Great Plains Equip., Inc. v. Northwest Pipeline Corp., 979 P.2d 627, 640 (Idaho 1999) (quoting Smith v. Smith, 511 P.2d 294, 301 (Idaho 1973)). Unjust enrichment allows recovery where the defendant has received a benefit from the plaintiff that would be inequitable for the defendant to retain without compensating the plaintiff for the value of the benefit. See Vanderford Co., Inc. v. Knudson, 165 P.3d 261, 271 (Idaho 2007). "[U]njust enrichment consists of three elements: (1) there was a benefit conferred upon the defendant by the plaintiff; (2) appreciation by the defendant of such benefit; and (3) acceptance of the benefit under circumstances that would be inequitable fo the defendant to retain the benefit without payment to the plaintiff for the value thereof." Id. at 272 (citing Aberdeen-Springfield Canal Co. v. Peiper, 982 P.2d 917, 923 (1999)). Here, Plaintiffs Complaint alleges matter-of-factly that "[Defendants] received benefits conferred upon [them] at the expense of [Plaintiffs] through [their] wrongful use and misappropriation of partnership property" and that "[Defendants'] acceptance of those benefits, without full compensation to [Plaintiffs], is just and inequitable." Compl., ¶¶ 41-42 (Docket No. 1). As before, there is no clear definition of the nature of the benefit that undergirds Plaintiffs' unjust enrichment claim. See supra. At the same time, Plaintiffs have alleged that "the [P]artnership turned a profit for the past four to five years, but no money has been paid to [Plaintiffs]." Compl., ¶ 21 (Docket No. 1). Therefore, while Plaintiffs' unjust enrichment clam may be lacking certain particulars informing the claim in every respect, it is not so amorphous as to require its dismissal at this stage of the litigation. Therefore, Defendants' Motion to Dismiss is denied in this respect.
Finally, under Idaho law, the elements of trespass are: "(1) an invasion, (2) which interferes with the right of exclusive possession of the land, and (3) which is a direct result of some act committed by the defendant." Kayser v. McClary, 875 F.Supp.2d 1167, 1195 (D. Idaho 2012). "A trespass may be committed by the continued presence on the land of a structure, chattel, or other thing which the actor has tortiously placed there, whether or not the actor has the ability to remove it." Restatement (Second) of Torts § 161 (1965). In support of their trespass claim, Plaintiffs have alleged that Defendants "have built structures unrelated to [P]artnership business on [P]artnership land and have operated their cattle grazing business on [P]artnership land." Compl., ¶ 47 (Docket No. 1). This is sufficient to assert a claim for trespass under Idaho law. Therefore, Defendants' Motion to Dismiss is denied in this respect.
The Partnership, Defendants contend, is the real party in interest and an indispensable party for those damage claims involving Partnership property, such that its addition as a plaintiff to this action would destroy diversity jurisdiction and this Court's subject matter jurisdiction. See Mem. in Supp. of Mot. to Dismiss, pp. 2, 9-11 (Docket No. 7).
This argument fails because it parts ways with the express permission granted under RUPA for claims to be brought between partners to, inter alia, (1) enforce a partner's rights under Idaho Code §§ 53-3-401, 53-3-403, and 53-3-404 (notably, these are the same Code sections referenced within Plaintiffs' claim for violation of statutory duties/breach of fiduciary duty in Count II (see supra)) and, (2) enforce the rights and otherwise protect the interests of the partner, including rights and interests arising independently of the partnership relationship. See I.C. § 53-3-405(b)(2),(3). Thus, at the very least, the Idaho Legislature's adoption of RUPA endorses Plaintiffs' ability to bring their violation of statutory duties/breach of fiduciary duty claim — a damages claim — against Defendants without naming the Partnership as a party. With that claim intact in its currently pled state (including the requisite amount in controversy (see supra)), diversity jurisdiction is satisfied. Plaintiffs (from Washington and Alaska respectively) and Defendants (from Idaho) are citizens from different states. See 28 U.S.C. § 1332(a)(1).
Again, when viewing Defendants' Motion to Dismiss as an all-or-nothing attempt to dismiss Plaintiffs' entire Complaint for lack of subject matter jurisdiction, the fact that Plaintiffs' violation of statutory duties/breach of fiduciary duty claim is properly pled necessarily undercuts that effort. But what about the other damage claims? Assuming Plaintiffs insist on these claims' inclusion in this action, must they be brought by the Partnership and, if so, must the Partnership be added to the case? The undersigned is not so convinced.
It is undisputed that partnerships may generally maintain actions against a partner "for a violation of a duty to the partnership, causing harm to the partnership." I.C. § 53-3-405(a). However, whether a partner may maintain an action against another partner for harms to the partnership is less clear. All partners in the Partnership have the ability to act on the Partnership's behalf and have management rights, which would augur in favor of the Plaintiffs' right to pursue such relief in this case. See I.C. § 53-3-301(1) (describing partners' role as agents of partnership); see also I.C. § 53-3-401(f) (guaranteeing each partner "equal rights in the management and conduct of the partnership business"). Such a reading helps explain the Official Comment to Idaho Code § 53-405 — "Actions by Partnership and Partners":
I.C. § 53-405, cmt. 2 (emphasis added).
The Ninth Circuit has not considered whether such language unequivocally allows partners to bring partnership claims against another partner on behalf of the partnership — indeed case law on the issue in other jurisdictions is similarly lacking (as evidenced by the parties' briefing). In one case which has considered the issue — George Wasserman & Janice Wasserman Goldsten Family LLC v. Kay, 14 A.3d 1193 (Md. App. 2011) — the Maryland Court of Special Appeals of Maryland had this to say:
Wasserman, 14 A.3d at 1215-16 (Md. App. 2011).
The logic of the Wasserman court makes intuitive sense.
The quandary, however, need not be resolved here. Notwithstanding the issue surrounding whether certain of the damage claims are exclusively of the Partnership, the Partnership is not indispensable and, as a result, need not be joined in this action. Even if the Partnership is required under FRCP 19(a), its joinder is not "feasible" as it would defeat diversity jurisdiction. See Fed. R. Civ. P. 19(a)(1) ("A person who is subject to service of process and whose joinder will not deprive the court of subject-matter jurisdiction must be joined as a party if. ...") (emphasis added). As such, the question remaining is whether the action should proceed among the existing parties or be dismissed in consideration of the factors outlined under FRCP 19(b). See Fed. R. Civ. P. 19(b).
All of the Partnership's partners are before the Court via this action. Accordingly, all the partners' interests, along with the Partnership's interests, are fully represented and/or can be adequately accounted for as the action progresses toward resolution. See Hooper v. Wolfe, 396 F.3d 744, 749 (6
Based on the foregoing, it is HEREBY ORDERED that Defendants' (1) Rule 12(b)(6) Motion to Dismiss Damage Claims; (2) Rule 12(b)(7) Motion to Dismiss Damage Claims; and (3) Rule 12(b)(1) Motion to Dismiss Claims for Dissolution of Partnership, Wind-Up, and Settlement of Partnership Accounts, and Constructive Trust (Docket No. 6) is GRANTED, in part, and DENIED, in part, as follows:
1. The action is not dismissed for lack of subject matter jurisdiction. In this respect, Defendants' Motion is DENIED; and
2. Plaintiffs' claim for conversion is DISMISSED, without prejudice. Plaintiffs may amend their Complaint to address the shortcomings as discussed herein. In this limited respect, Defendants' Motion to Dismiss is GRANTED.
