Simplot Livestock Co. v. Sutfin

SIMPLOT LIVESTOCK CO.and J.R. SIMPLOT COMPANY, Plaintiffs, v. DAN SUTFIN, ARTHUR SUTFIN, and JOAN SUTFIN, Defendants.

Case No. 1:18-cv-0086-EJL-CWD

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF IDAHO

September 6, 2018

MEMORANDUM DECISION AND ORDER

INTRODUCTION

Pending before the Court are two Motions to Dismiss (Dkts. 5, 13) filed by Defendants, Dan Sutfin, Arthur Sutfin, and Joan Sutfin (collectively "Sutfins"). Plaintiffs, Simplot Livestock Co. ("Simplot Livestock") and J.R. Simplot Company ("J.R. Simplot") filed responsive briefing (Dkts. 9, 15) and the Motions are now ripe for decision. Having fully reviewed the docket herein, the Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the Court conclusively finds that the decision-making process would not be significantly aided by oral argument, the Motions shall be decided on the record before this Court without oral argument.

BACKGROUND

On February 20, 2018, the above-captioned dispute was removed to federal court. (Dkt. 1.) The original Complaint was filed in state court in Elmore County and alleged a single claim of "Pierce the Corporate Veil" against the three Sutfins Defendants. (Dkt. 1-3.) The relief sought is essentially a declaration that the Defendants are individually liable for "any obligations owed by Sutfin Land & Livestock" to the Plaintiffs as well as costs and fees. (Id.)

As alleged in the Complaint, the underlying obligation owed by Sutfin Land & Livestock to the Plaintiffs is premised upon a Cattle Feeding, Finance, and Security Agreement ("Agreement") dated June 9, 2014. (Id. at ¶ 7.) Further, that Agreement is the subject of a separate lawsuit in the United States District Court for the State of Idaho, Simplot Livestock Co., et al. v. Sutfin Land & Livestock, Case No. 1:16-cv-00139-EJL-REB ("Simplot I"). Plaintiffs attempted to amend the complaint in Simplot I to include a veil piercing claim but their motion was denied on the basis of timeliness. (Id. at ¶ 17.)

The previous lawsuit, Simplot I, is still being litigated. On August 17, 2018, United States Magistrate Judge Ronald E. Bush issued a 30-page Report and Recommendation (Dkt. 47) on the parties' cross-motions for summary judgment. As relevant herein, Judge Bush recommends denying summary judgment on Plaintiffs' breach of contract claim finding there are material disputes of fact that must be resolved by the fact-finder at trial. (Id.). In short, the amount, if any, that Sutfin Land & Livestock owes to Plaintiffs under the Agreement is still in dispute.

On February 21, 2018, Defendants filed a Motion to Dismiss Plaintiffs' Complaint in the above-captioned case ("Simplot II"). (Dkt. 5.) Defendants contend that piercing the corporate veil is not an independent claim but is dependent on, or derivate of, a separate, underlying claim. (Dkt. 5-1.) Accordingly, Defendants seek dismissal on the basis that the claim is not one upon which relief can be granted and, in addition, this lawsuit, Simplot II, is impermissibly duplicative of another federal action, Simplot I. (Id.)

In response, Plaintiffs both filed a brief in opposition to the Motion to Dismiss (Dkt. 9) as well as a new pleading, the First Amended Complaint, asserting a total of three claims against the same three Sutfin Defendants: (1) pierce the corporate veil; (2) intentionally fraudulent transfers, and (3) constructively fraudulent transfers. (Dkt. 8.) Plaintiffs allege that Sutfin Land & Livestock owes them $1,041,119.21 under the Agreement. (Dkt. 8, ¶ 26). Plaintiffs ask the Court to pierce the corporate veil and allow Plaintiffs to hold the Sutfins personally liable for the corporation's debts. (Id. at ¶ 30.) Plaintiffs further allege that Defendant Dan Sutfin transferred the assets of Sutfin Land & Livestock, including $100,000 in cash, and is operating the same business under a new name- all with the intent or effect of avoiding payment of the debt owed to Plaintiffs. (Id. ¶¶ 20-25.)

Defendants responded to Plaintiffs' First Amended Complaint with a second Motion to Dismiss. (Dkt. 13). Defendants seek to dismiss: (1) the entire Amended Complaint on the basis that this lawsuit is impermissibly duplicative of Simplot I; (2) Count One, the piercing the corporate veil claim, as to all Defendants; and (3) Counts Two and Three, intentionally fraudulent transfers and constructively fraudulent transfers, as to Defendants Arthur Suftin and Joan Suftin. (Dkt. 13-1.)

STANDARD OF REVIEW

A motion to dismiss made pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of a party's claim for relief. When considering such a motion, the Court's inquiry is whether the allegations in the pleading are sufficient under applicable pleading standards. Federal Rule of Civil Procedure 8(a) sets forth minimum pleading rules, requiring only a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2).

In general, a motion to dismiss will only be granted if the complaint fails to allege "enough facts to state a claim to relief that is plausible on its face." Bell. Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a 'probability standard,' but asks for more than a sheer possibility that a defendant has acted lawfully." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citations omitted).

Although the Court "must take all of the factual allegations in the complaint as true" it is "not bound to accept as true a legal conclusion couched as a factual allegation." Twombly, 550 U.S. at 555. Therefore, "conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim." Caviness v. Horizon Comm. Learning Cent., Inc., 590 F.3d 806, 811-12 (9th Cir. 2010) (citation omitted).

ANALYSIS

1. Defendants' Motion to Dismiss (Dkt. 5) is Denied as Moot.

As a preliminary matter, Defendants' first Motion to Dismiss (Dkt. 5) is denied as moot. This Motion is directed at the Complaint, which has been superseded by Plaintiffs' Amended Complaint. "[T]he general rule is that an amended complaint supersedes the original complaint and renders it without legal effect Lacey v. Maricopa Cnty., 693 F.3d 896, 927 (9th Cir.2012); see also Valadez-Lopez v. Chertoff, 656 F.3d 851, 857 (9th Cir.2011) ("[I]t is well-established that an amended complaint supersedes the original, the latter being treated thereafter as non-existent.") (quotation marks omitted).

Further, while the same alleged deficiencies present in the original Complaint are also present in the Amended Complaint, Defendants have addressed these alleged deficiencies in their second Motion to Dismiss. (Dkt. 13.) Accordingly, the Court will focus its analysis on the First Amended Complaint (Dkt. 8) and the arguments raised in the Defendants' Motion to Dismiss Amended Complaint (Dkt 13).

2. Defendants' Second Motion to Dismiss (Dkt. 13) is Granted in Part and Denied in Part.

The instant lawsuit was removed to federal court on the basis of diversity jurisdiction. (Dkt. 1). Plaintiffs are Nevada corporations transacting business in Idaho and Defendants are citizens and residents of California. (Id. at ¶¶ 6-10.)

"Under the Erie doctrine, federal courts sitting in diversity apply state substantive law and federal procedural law." Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427 (1996). Accordingly, and as set forth below, the Court applies federal procedural law tothe issue of whether the instant case is impermissibly duplicative. Nonetheless, in doing so, the Court must also consider Idaho law as it applies to: (1) claim preclusion, (2) the substantive claims at issue, and (3) choice-of-law rules.

A. This Lawsuit is Not Impermissibly Duplicative of Simplot I.

Defendants argue that this entire case should be dismissed on the basis that it is duplicative of another federal case, Simplot I. Put another way, Defendants argue that Plaintiffs should not be allowed to split their claims into two separate actions.

The anti-claim-splitting doctrine prevents a party from maintaining "two separate actions involving the same subject matter at the same time in the same court and against the same defendant." See Adams v. California Dept. of Health Services, 487 F.3d 684, 688 (9th Cir. 2007), overruled on other grounds by Taylor v. Sturgell, 533 U.S. 880, 904 (2008) (quoting Walton v. Eaton Corp., 563 F.2d 66, 70 (3d Cir.1977) (en banc)). To determine whether an action is barred under this doctrine, "the appropriate inquiry is whether, assuming that the first suit were already final, the second suit could be precluded pursuant to claim preclusion." Id. at 689 (quoting Hartsel Springs Ranch of Colo., Inc. v. Bluegreen Corp., 296 F.3d 982, 987 n. 1 (10th Cir. 2002)).

The doctrine of claim-splitting is the notion that a party is "not at liberty to split up his demand, and prosecute it . . . piecemeal, or present only a portion of the grounds upon which special relief is sought, and leave the rest to be presented in a second suit, if the first fails. There would be no end to litigation if such a practice were permissible." United States v. Haytian Republic, 154 U.S. 118, 125 (1894) (quoting Stark v. Starr, 94 U.S. 477, 482 (1876)). The reasons behind the rule against claim-splitting are to "protect the Defendantfrom being harassed by repetitive actions based on the same claim" and to promote judicial economy and convenience. Clements v. Airport Auth. of Washoe Cnty., 69 F.3d 321, 328 (9th Cir. 1995).

District courts retain broad discretion when faced with duplicative or successively-filed lawsuits. See Adams v. California Dept. of Health Services, 487 F.3d at 688 (...