Drobot v. Growth Commercial Capital, Inc.

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GREGORY G. DROBOT, an individual, Plaintiff, v. GROWTH COMMERCIAL CAPITAL, INC., an Oregon corporation, and BEN LOONEY, an individual, Defendants.

No. 3:22-cv-01481-SB

United States District Court, D. Oregon

April 4, 2023

FINDINGS AND RECOMMENDATION

HON STACIE F. BECKERMAN, UNITED STATES MAGISTRATE JUDGE

Gregory Drobot (“Drobot”) filed this action against Growth Commercial Capital, Inc. (“GCC”) and Ben Looney (“Looney”) (together “Defendants”), alleging a claim for breach of a Business Term Loan Agreement dated June 24, 2021 (the “June Agreement”). Defendants filed a motion to dismiss Drobot's complaint under Federal Rule of Civil Procedure (“Rule”) 12(b)(1) for lack of subject matter jurisdiction, and under Rule 12(b)(7) for failure to join a party required under Rule 19.^[1] The parties have not consented to the jurisdiction of a magistrate judge under 28 U.S.C. § 636. For the reasons explained below, the Court recommends that the district judge deny Defendants' motion to dismiss.

BACKGROUND^[2]

Drobot alleges that he is a resident of Kirkland, Washington, and thus is a citizen of Washington. (Compl. ¶ 6, ECF No 1.) Looney is a resident of Oregon City, Oregon, and citizen of Oregon. (Id. ¶ 5.) GCC is an Oregon corporation with a principal place of business in Oregon City, Oregon. (Id. ¶ 4.)

On June 24, 2021, Drobot and Defendants executed the June Agreement, under which Defendants borrowed $150,000 from Drobot. (Id. ¶ 9; id. Ex. A at 1-2.) The June Agreement, which Defendants “prepared and drafted,” referred to Drobot as the lender located at a Bandon, Oregon address, and Looney and GCC together as the borrower located at an Oregon City, Oregon address. (Id. ¶ 9; id. Ex. A at 1.) In exchange for the loan, Defendants promised to pay Drobot $225,000 on or before July 31, 2021. (Id. ¶ 10; id. Ex. A at 1.)

The June Agreement also provided that Defendants were entitled to “two, [two]-week options to extend the loan term” but they would “accrue an additional $25,000 fee per extension, to be paid back at loan maturity.” (Id. Ex. A at 1; id. ¶ 10.) Thus, “[i]f extension number one [was] utilized, $250,000 [would] be due August 15th, 2021,” and “[i]f extension number two [was also] utilized, $275,000 [would] be due August 31st, 2021.” (Id. Ex. A at 1.)

The June Agreement further provided that Drobot was entitled to late fees if Defendants defaulted on their repayment obligations. (Id. Ex. A at 1; id. ¶ 14.) Specifically, and as relevant here, if Defendants properly exercised their right to both two-week extensions and failed to pay Drobot $275,000 on or before August 31, 2021, Defendants would “accrue a 2% compounding late fee, per week.” (Id. Ex. A at 1; id. ¶¶ 12-14.) The June Agreement provided that the first late fee for “2% of the total loan balance” would be assessed on September 1, 2021, and additional fees would be assessed “every Monday [thereafter] until the balance [was] paid back . . . in full.” (Id. Ex. A at 1.)

The June Agreement provided that the loan was “unsecured.” (Id. Ex. A at 1.) Drobot, however, “reserve[d] the right to file a lien[] against [GCC] and any of the personal guarantor's personal or business assets, . . . includ[ing] a residential development located at 23000 and 23010, West Linn, OR 97068, if full payment [was] not repaid within the term of the loan.” (Id.)

Defendants exercised their right to both extensions of the loan term but failed to pay Drobot $275,000 on or before August 31, 2021. (Id. ¶¶ 12-14.) Drobot began assessing late fees on September 1, 2021. (Id. ¶ 14.) The following year, on September 12, 2022, and after Drobot “made repeated demands” for repayment in full and Drobot's counsel “made a final demand for repayment,” Defendants' counsel “notified [Drobot] that [Defendants] do not intend to make any additional payments for amounts still owing to [Drobot] under the terms of the [June] Agreement.” (Id. ¶¶ 15-17.)

Drobot filed the present action on October 3, 2022. Defendants' motion to dismiss followed.

DISCUSSION

Defendants move to dismiss Drobot's complaint under Rule 12(b)(1) for lack of subject matter jurisdiction and under Rule 12(b)(7) for failure to join a required party under Rule 19.

(Defs.' Mot. Dismiss (“Defs.' Mot.”) at 1, 4, 9, ECF No. 4.) The Court first addresses Defendants' Rule 12(b)(1) motion, which presents a threshold question regarding whether Drobot's complaint appropriately invokes this Court's diversity jurisdiction under 28 U.S.C. § 1332(a)(1).

I. SUBJECT MATTER JURISDICTION

A. Applicable Law

“Rule 12(b)(1) jurisdictional attacks can be either facial or factual.” San Diego Cnty.Credit Union v. Citizens Equity First Credit Union, 60 F.4th 481, 497 (9th Cir. 2023) (quoting White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000)). “If the defendant makes a factual challenge, ‘the defendant may introduce testimony, affidavits, or other evidence to dispute the truth of the allegations that, by themselves, would otherwise invoke federal jurisdiction.'” Pangang, 6 F.4th at 954 (quoting Terenkian v. Republic of Iraq, 694 F.3d 1122, 1131 (9th Cir. 2012)). When a defendant makes a factual attack on subject matter jurisdiction, “no presumptive truthfulness attaches to plaintiff's allegation,” id. (quoting Terenkian, 694 F.3d at 1131), and “the plaintiff bears the burden of proving by a preponderance of the evidence that each of the requirements for subject-matter jurisdiction has been met.” San Diego Cnty. Credit, 60 F.4th at 497 (quoting Leitev. Crane Co., 749 F.3d 1117, 1121 (9th Cir. 2014)).

B. Analysis

Defendants make a factual challenge to Drobot's “claim to Washington citizenship” (Defs.' Mot. at 5), and submit declarations and exhibits to dispute the truth of Drobot's claim. (See Decl. Ben Looney Supp. Defs.' Mot. Dismiss (“Looney Decl.”) ¶¶ 1-4 & Exs. 1-2, ECF No. 5; Decl. Daniel DiCicco Supp. Defs.' Mot. Dismiss (“DiCicco Decl.”) ¶¶ 1-3 & Exs. 1-7, ECF No. 6; Cover Sheet Ex. 3 Decl. Benjamin Looney (“Looney Decl. Ex. 3”) at 1-3, ECF No. 7; Suppl. Decl. Ben Looney Supp. Defs.' Mot. Dismiss (“Suppl. Looney Decl.”) ¶¶ 1-4 & Exs. 1-2, ECF No. 12.) Drobot likewise submits evidence in response to Defendants' motion and in support of his claim that at all material times, he was (and continues to be) a citizen of Washington. (See Decl. Gregory Drobot Supp. Pl.'s Resp. Opp'n Mot. Dismiss (“Drobot Decl.”) ¶¶ 1-20 & Exs. 1-7, ECF No. 10.)

There is no dispute that Defendants are Oregon citizens, that the amount in controversy exceeds $75,000, that Defendants' Rule 12(b)(1) motion and factual attack on subject matter jurisdiction concerns only whether Drobot is a Washington citizen, and that no presumptive truthfulness attaches to Drobot's alleged state citizenship. The relevant question, then, is whether Drobot has satisfied his burden of proving by a preponderance of the evidence that he is a Washington citizen. SeeSan Diego Cnty. Credit, 60 F.4th at 497 (“If the factual basis for jurisdiction is disputed, the plaintiff bears the burden of proving by a preponderance of the evidence that each of the requirements for subject-matter jurisdiction has been met.”) (simplified); 28 U.S.C. § 1332(a)(1) (conferring jurisdiction on district courts where the plaintiff alleges that the parties are completely diverse and the amount in controversy exceeds $75,000); NewGen, LLC v. Safe Cig, LLC, 840 F.3d 606, 611 (9th Cir. 2016) (“The party seeking to invoke the district court's diversity jurisdiction always bears the burden of both pleading and proving diversity jurisdiction.”).

As explained below, the Court concludes that Drobot has carried his burden of proving by a preponderance of the evidence that he is a Washington citizen. The Court therefore recommends that the district judge deny Defendants' motion to dismiss pursuant to Rule 12(b)(1).

“[F]or diversity of citizenship, ‘a person is domiciled in a location where he or she has established a fixed habitation or abode in a particular place, and [intends] to remain there permanently or indefinitely[.]'” Chambers v. Knight, No. 20-56141, 2021 WL 4811360, at *1 (9th Cir. Oct. 15, 2021) (quoting Lew v. Moss, 797 F.2d 747, 749-50 (9th Cir. 1986)). In Lew, the Ninth Circuit addressed “factors for determining an individual's domicile.” Id. (citing Lew, 797 F.2d at 749-50). The Ninth Circuit explained that although “no single factor [is] controlling,” Lew, 797 F.2d at 750, these factors are relevant to a court's determination of an individual's domicile: (1) current residence, (2) location of spouse and family, (3) location of real and personal property, (4) place of employment or business, (5) payment of taxes, (6) location of bank and brokerage accounts, (7) automobile registration and driver's license, (8) voting registration and practices, and (9) membership in unions and other organizations. Id. (citations omitted).

The parties agree as to the relevancy of these factors. (See Pl.'s Resp. Opp'n Defs.' Mot. Dismiss (“Pl.'s Resp.”) at 5-6, ECF No. 9, quoting Lew; Defs.' Reply Pl.'s Opp'n Mot. Dismiss (“Defs.' Reply”) at 5-6, ECF No. 11, citing the same factors). The parties did not submit evidence specifically addressing factors (8) and (9). As such, the Court's analysis focuses on factors (1) through (7). On balance, these factors demonstrate that Drobot is domiciled in Washington.

Drobot declares under penalty of perjury that he has been a resident of Washington since 2016, he intends to remain in Washington “indefinitely,” and he currently resides at his “home located at 11250 108th Ave NE, in Kirkland Washington, [along] with [his] wife and child.” (Drobot Decl. ¶ 2.) Drobot also declares that he and his wife-the latter of whom is a full-time employee at Microsoft's campus in Redmond, Washington,...