BGH Holdings, LLC v. D.L. Evans Bank

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BGH HOLDINGS LLC, et al., Plaintiffs, v. D.L. EVANS BANK, Defendant.

No. C18-1408RSL

United States District Court, W.D. Washington, Seattle

May 3, 2023

ORDER ON SUMMARY JUDGMENT

Robert S. Lasnik United States District Judge

This matter comes before the Court on defendant's “Renewed and Amended Motion for Summary Judgment” (Dkt. # 158) and plaintiffs' “Motion to Continue Hearing on Defendant's Motion for Summary Judgment” (Dkt. # 165). Having reviewed the submissions of the parties and the remainder of the record, the Court denies plaintiffs' motion to continue and grants in part and denies in part defendant's motion for summary judgment for the reasons stated herein.

I. Background

On January 13, 2010, defendant DL Evans Bank (the “Bank”) obtained a default judgment against plaintiff Henry Dean in a Blaine County, Idaho court in the amount of $1,063,503.16 (“Idaho Default Judgment”). See Dkt. # 32-1 (Ex. A). On October 4, 2010, the Bank domesticated the Idaho Default Judgment in King County Superior Court of Washington. See id. (Ex. B). The Bank renewed and extended the Idaho Default Judgment in the Blaine County District Court on January 5, 2015. Id. (Ex. C). The Bank then renewed and extended the foreign Idaho Default Judgment in King County Superior Court on January 23, 2015. Id. (Ex D). On August 2, 2018, the Bank sought and obtained a writ of execution in the King County Superior Court. Dkt. # 5-1 (Ex. A). In August 2018, the King County Sheriff levied upon the writ of execution, allegedly entering plaintiffs' residence to seize personal property including certain stock shares and stock options, as well as personal, business, and legal records. Dkt. # 4 at ¶ 2.6. Plaintiffs subsequently filed this federal lawsuit against the Bank, bringing claims under 42 U.S.C. § 1983 for violations of their Fourth Amendment and Fourteenth Amendment rights (id. at ¶¶ 4.1-5.15), for conversion (id. at ¶¶ 6.1-6.2), for unjust enrichment (id. at ¶¶ 7.1-7.2), and for declaratory and injunctive relief regarding the right of execution under the Idaho Default Judgment (id. at ¶¶ 8.-8.2). The Bank raised counterclaims against plaintiffs for declaratory judgment regarding the existence and validity of the debt (Dkt. # 18 at ¶¶ 30-44), declaratory judgment regarding enforcement of the Idaho Default Judgment in Washington (id. at ¶¶ 45-52), fraudulent transfers (id. at ¶¶ 53-77), and injunctive relief to prevent further fraudulent transfers (id. at ¶¶ 78-82).

On May 23, 2019, the parties filed cross-motions for partial summary judgment. See Dkts. # 31, 33. Upon review of the parties' cross-motions and the underlying complaint, the Court viewed “the gravamen of plaintiffs' complaint as a challenge to the King County Superior Court's issuance of a writ of execution on a state law judgment,” and highlighted that the “Court is precluded from reviewing that judgment and its execution” per the Rooker-Feldman doctrine. Dkt. # 107 at 3. The Court addressed each of plaintiffs' causes of action in turn and ordered plaintiffs to show cause why all but one of the causes of action (plaintiffs' § 1983 claim) should not be dismissed for lack of subject matter jurisdiction. Dkt. # 107.

On December 30, 2019, plaintiffs filed their response to the Court's Order to Show Cause. Dkt. # 109. On February 6, 2020, plaintiffs filed a motion to dismiss the Bank's counterclaims for lack of subject-matter jurisdiction. Dkt. # 132.

On September 27, 2021, the Court entered its Order Regarding Plaintiffs' Response to Order to Show Cause, dismissing plaintiffs' claims under the Rooker-Feldman doctrine with the exception of plaintiffs' § 1983 claim, which the Court allowed to move forward “to the extent it pertains to the Bank's alleged conduct in enforcing the writ of execution during the entrance and search of plaintiffs' residence.” Dkt. # 149 at 6. In its Order, the Court also denied plaintiffs' motion to dismiss defendant's counterclaims. Id. at 14.

On August 25, 2022, the Court entered an amended scheduling order that did not reopen discovery or extend the deadline for amending pleadings, but did reset the deadline to file dispositive motions. Dkt. # 155. On November 23, 2022, the Bank filed the instant renewed summary judgment motion on plaintiffs' sole remaining claim and the Bank's fraudulent transfer counterclaims. Dkt. # 158. On December 1, 2022, plaintiffs filed a “Motion to Add Affirmative Defense to Their Answer to Counterclaim.” Dkt. # 161. On December 13, 2022, plaintiffs filed the instant motion to continue summary judgment. Dkt. # 165.

II. Plaintiffs' Motion to Continue

The Court first addresses plaintiffs' motion to continue, which is brought under Federal Rule of Civil Procedure 56(d). This rule provides:

If a nonmovant shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition, the court may: (1) defer considering the motion or deny it; (2) allow time to obtain affidavits or declarations or to take discovery; or (3) issue any other appropriate order.

Fed. R. Civ. P. 56(d). Here, plaintiffs acknowledge that “[t]here has been sufficient time for both parties to conduct discovery” but identifies two reasons why the Court should continue the motion. Dkt. # 165 at 4. First, plaintiffs argue that no summary judgment motion should be considered until after the Court rules on plaintiffs' motion seeking to amend their affirmative defenses. Id. at 3-4. This argument is easily dispensed with, as the Court has ruled on plaintiffs' motion and denied leave to amend. See Dkt. # 175.

Second, plaintiffs ask that the summary judgment motion be continued until after the Washington state courts have issued a decision in a new lawsuit brought by plaintiffs,^[1]alleging that (1) the Idaho Default Judgment was void for lack of personal jurisdiction and (2) “the writs of execution were invalid because the Idaho default judgment was not validly renewed or revived.” Dkt. # 165 at 5. Plaintiffs argue that “[t]hese determinations are relevant, and potentially dispositive to all issues in this case.” Id. at 4. Specifically, plaintiffs argue that if any of the state court judgements are void, “then Defendant has no right to collect or enforce its Idaho Judgment in Washington.” Id. However plaintiffs have made no showing that the validity of the state court judgments regarding the debt have any bearing on the remaining claims in this litigation.^[2]

Plaintiffs' only remaining claim is a 42 U.S.C. § 1983 claim alleging Fourth Amendment violations “to the extent it pertains to the Bank's alleged conduct in enforcing the writ of execution during the entrance and search of plaintiffs' residence.” Dkt. # 149 at 2, 6. The validity of the writ or underlying judgment is not relevant to plaintiffs' claim or defendant's defense. Defendant seeks summary judgment only on its fraudulent transfer counterclaims. See Dkt. # 158. As discussed below, the validity of the underlying state court judgments are also not relevant to these claims. See section IV.B.ii.b.

Accordingly, plaintiffs have not met their burden of demonstrating that they “cannot present facts essential to justify [their] opposition” and their motion to continue is denied. Fed.R.Civ.P. 56(d).

A. Plaintiffs' Subject Matter Jurisdiction Claims

Plaintiffs' “Memorandum of Authorities Supporting Their Motion to Continue Motion on Summary Judgment,” states that the Court “exercised ancillary jurisdiction over [defendant's state law counterclaims] based on it having jurisdiction over [plaintiffs'] 42 U.S.C. §1983 claims.” Dkt. # 174 at 3. Plaintiffs go on to argue that “[t]his exercise of ancillary jurisdiction by this Court runs contrary to the vast body of law that severely limits federal jurisdiction to enforce state law collection efforts on state court judgments” and that under Peacock v. Thomas, 561 U.S. 349 (1996), “the Defendant's counterclaims and third-party claims should . . . be dismissed.” Id. at 3, 6.

As a threshold matter, plaintiffs appear to base their argument on the premise that state court judgments cannot be enforced in federal court. See Dkt. # 174 at 3-4. However, defendant is not seeking to enforce its state court judgment here. Thus, the relevance of many of plaintiffs' cited cases is unclear.

Furthermore, plaintiffs' argument regarding ancillary jurisdiction appears to conflate the two different flavors of ancillary jurisdiction. On the one hand, there is the “common-law doctrine of ancillary jurisdiction over related claims, codified as part of a federal court's supplemental jurisdiction under 28 U.S.C. § 1367.” K.C. ex rel. Erica C. v. Torlakson, 762 F.3d 963, 964 (9th. Cir. 2014) (emphasis in original). On the other hand, there is “the more obscure doctrine of ancillary jurisdiction over collateral proceedings,” which “remains a matter of case law.” Id. (emphasis in original). The first type of ancillary jurisdiction (commonly referred to as “supplemental jurisdiction” today), operates to “permit disposition by a single court of claims that are, in varying respects and degrees, factually interdependent.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 379 (1994). The second type of ancillary jurisdiction “enable[s] a court to function successfully, that is, to manage its proceedings, vindicate its authority, and effectuate its decrees.” Id. at 380.

The primary case cited by plaintiffs, Peacock v. Thomas dealt with the second type of ancillary jurisdiction - a court's exercise ofjurisdiction over collateral proceedings.^[3]561 U.S. 349. Specifically, the Court was considering “whether federal courts possess ancillary jurisdiction over new actions in which a federal judgment creditor seeks to impose...