Billing Assocs. Nw. v. Addison Data Servs.

BILLING ASSOCIATES NORTHWEST, LLC, a Washington limited liability company, Plaintiff, v. ADDISON DATA SERVICES, LLC., a Texas limited liability company; LESLIE W. KREIS, Jr., a Texas resident; MENEDOZA LINE CAPITAL, LLC, a limited liability company; DAVID DURHAM, KORENVAES HORIZON PARTNERS, L.P, a limited partnership; CHRISTOPHER HARPER, a Texas resident; CORBETT CAPITAL LLC, a limited liability company; PAT CRAINE, a Texas resident; JOE CRAINE, a Texas resident; and JOHN/JANE DOES, fictitious names for persons receiving constructive trust property, Defendants.

No. C20-1854RSM

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

February 22, 2023

ORDER GRANTING MOTIONS TO DISMISS

RICARDO S. MARTINEZ UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

This matter comes before the Court on Defendant Addison Data Services' (“ADS”) Motion to Dismiss the Second Amended Complaint, Dkt. #47, and Defendants LLC Members (“Remaining Defendants”)'s similar Motion, Dkt. #49, brought under Rule 12(b)(6). Plaintiff Billing Associates Northwest (“Billing Associates”) has failed to file a timely opposition to these Motions. See Dkts. #54 (Minute Order) and #58 (“Order Denying Plaintiff's Motion for Extension of Time”). The Court has reviewed the materials and finds that oral argument is not necessary. For the reasons stated below, the Court GRANTS Defendants' Motions and dismisses Plaintiff's claims without leave to amend.

II. BACKGROUND^[1]

Plaintiff Billing Associates is a Washington limited liability company that provides contract procurement and sales representative services. See Dkt. #43 at 4. “ADS DEL” is a Delaware limited liability company that subsequently assigned its rights and duties to ADS, a Texas limited liability company. Id. at 6-7. ADS provides submetering and billing services to landlords. Id. at 2. On January 3, 2011, ADS and Billing Associates signed an agreement (“Agreement”) for Billing Associates to sell ADS's services to Washington landlords. Id. at 6; Dkt. #36-1. The Agreement states that Texas law applies to all legal issues. Dkt. #36-1 at ¶ 9. ADS provided services to landlords by allocating property-wide utility bills between each tenant, billing each tenant for their share, and collecting payments on behalf of the landlords. See Dkt. #43 at 6. Pursuant to the Agreement, ADS was to deposit the payments received into a Trust Account, and transfer its apportioned fees to its Operating Account. ADS was owned and managed by the other Defendants in the case (“Remaining Defendants”). See id. at 8.

On June 20, 2014, Billing Associates terminated the Agreement due to alleged ADS breaches. Id. at 7. ADS filed for Chapter 7 Bankruptcy on July 18, 2014. Id. at 10-11. Subsequently, an automatic stay was ordered, and a Chapter 7 trustee (“Trustee”) was appointed. Billing Associates filed a claim in the bankruptcy proceeding. A Settlement Agreement was reached in May 2015, in which Billing Associates' unsecured claims in the bankruptcy case were liquidated and parties agreed to a mutual release of all claims (“Release”). See Dkt. #36-4. During the bankruptcy proceedings, Billing Associates suspected that ADS may have transferred funds from the Trust Account to its Operating Account and Remaining Defendants. See Dkt. #1 at 6; Dkt. #43 at 16. Billing Associates asserts that it could not investigate this further due to the automatic stay, which was in place until December 27, 2016. #43 at 16. After the stay was lifted, Plaintiff received further information revealing that ADS transferred funds for its own (and the Remaining Defendants' benefit) instead of reimbursing the landlords and Billing Associates. Id.

The bankruptcy case was reopened in mid-2020 at Billing Associates' request, asserting that its claims against Remaining Defendants were not listed in the initial petition. Id. at 17. On May 12, 2021, the Bankruptcy Court approved the sale of all of ADS's claims previously not administered to Billing Associates and subsequently a final report was filed on November 17, 2021. See Dkt. #36-5. The Bankruptcy Court closed the case for a second time on August 10, 2022. See Dkt. #36-7.

This case was originally filed on November 28, 2020. Dkt. #1. On July 2, 2021, the Court dismissed all claims with leave to amend. Dkt. #28. On November 16, 2022, the Court again dismissed all claims with leave to amend. Dkt. #42. In that Order, the Court found it highly likely that Billing Associates released its claims by signing a Settlement Agreement and Release that were subsequently approved by the Bankruptcy Court. Id. at 4-5 (citing In re Shoot the Moon, LLC, 635 B.R. 568, 574 (Bankr. Mont. 2022); Skilstaf, Inc. v. CVS Caremark Corp., 669 F.3d 1005, 1008 (9th Cir. 2012)). The Court found that the applicable statute of limitations barred Billing Associates' claims and that its failure to take available actions to equitable toll the deadline also supported dismissal. Id. at 6. The Court found Texas's “one-satisfaction” rule as a third independent basis to dismiss Billing Associates' claims against ADS. Id. at 6-7 (citing Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 303 (Tex. 2006)).

Finally, the Court found that the claims against the Remaining Defendants were similarly barred by the statute of limitations and for failure to show a duty owed by the Remaining Defendants to Billing Associates rather than to the bankruptcy Trustee. Id. at 7. Leave to amend was granted a second time.

Plaintiff's Second Amended Complaint includes the same claims that ADS breached a fiduciary duty owed to Billing Associates and that the Remaining Defendants aided and abetted in ADS's breach. See Dkt. #43. Additional facts have been added about the Trustee's failure to pursue claims against the Remaining Defendants and about bankruptcy counsel's conflicts of interest. See, e.g., id. at 13. Certain other additional facts were added to respond to the statute of limitations issue, addressed below.

III. DISCUSSION

A. Legal Standard under Rule 12(b)(6)

In making a 12(b)(6) assessment, the court accepts all facts alleged in the complaint as true, and makes all inferences in the light most favorable to the non-moving party. Baker v. Riverside County Office of Educ., 584 F.3d 821, 824 (9th Cir. 2009) (internal citations omitted). However, the court is not required to accept as true a “legal conclusion couched as a factual allegation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The complaint “must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Id. at 678. This requirement is met when the plaintiff “pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. The complaint need not include detailed allegations, but it must have “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. Absent facial plausibility, a plaintiff's claims must be dismissed. Id. at 570.

B. Settlement Agreement (“Release”)

The Court previously dismissed Billing Associates' claims against ADS due to the abovementioned Settlement Agreement and Release approved by the Bankruptcy Court. Dkt. #42 at 4-5. The Second Amended Complaint fails to add sufficient new alleged facts to alter this finding.

ADS now repeats that Billing Associates fully released its claims by signing the Settlement Agreement and Release. See Dkt. #47 at 16-20. The Release provides that TBA Groups, on behalf of Billing Associates, shall have “allowed, unsecured claims” in an amount specified, and that “TBA Groups, and the Trustee [for ADS] each release the others from any and all liabilities, [and] claims ... arising on or before the Effective Date.” See Dkt. #36-2 at 3. This Release was subject to the Bankruptcy Court's approval, which followed in 2015. See Dkt. #36-4 at 2. ADS calls this an unambiguous agreement, and the Court agrees. The allegation in the Second Amended Complaint that “[d]uring the discussions among the Trustee, Billing Associates, and the common attorney, both the Trustee and the common attorney understood and represented that Billing Associates was not releasing ADS or the non-ADS Defendants,” is not plausible given the fact that Billing Associates received a liquidated claim in ADS's bankruptcy and the previous pleading history of this litigation, and in any event such is contrary to the final language of the Release.

Dismissal under Rule 12(b)(6) is appropriate when the “asserted claims are barred by a release or other provision in a prior settlement agreement between the litigants.” In re Shoot the Moon, supra. The Court continues to find that dismissal of ADS is appropriate based on the Release for the reasons stated in its prior Order.

C. Statute of Limitations

Billing Associates originally pled that it learned of facts necessary to bring its claims against ADS during ADS's bankruptcy (“[w]hile the Trustee was pursuing claims against some of the ADS Managers,” Dkt. #29 at ¶ 34); Plaintiff nevertheless filed this case four years after the dismissal of ADS's bankruptcy and argued for equitable tolling. The Court found insufficient pled facts, accepted as true, to warrant equitable tolling. Now, in the Second Amended Complaint, Plaintiff states “[a]fter the ADS BK was initially closed in December 2016, Billing Associates received further information for the first time” that supports the claim against ADS. Dkt. #43 at ¶ 86.

ADS argues Billing Associates should not be permitted to plead facts directly inconsistent with prior pleading under the doctrine of judicial estoppel. Dkt. #47 at 23 (citing inter alia, ...