Albergo v. Cuxhaven Holdings, LTD et al, No. 3:2011cv01787 - Document 66 (S.D. Cal. 2011)
Court Description: ORDER denying Defendant William Scott's Motions to Dismiss under rule 12(b)(1) and (6) and for Rule 11 sanctions re 52 , 53 . Signed by Judge Dana M. Sabraw on 12/15/11. (lao)
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Albergo v. Cuxhaven Holdings, LTD et al Doc. 66 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 ROBERT ALBERGO, CASE NO. 11CV1787 DMS (MDD) Plaintiff, 12 ORDER DENYING DEFENDANT WILLIAM SCOTT’S MOTIONS TO DISMISS UNDER RULE 12(b)(1) AND (6) AND FOR RULE 11 SANCTIONS vs. 13 14 15 CUXHAVEN HOLDINGS, LTD. et al., Defendants. 16 In this fraudulent transfer action, Defendant William Scott filed motions to dismiss pursuant 17 to Federal Rule of Civil Procedure 12(b)(1) and (6) and for sanctions pursuant to Rule 11. Plaintiff 18 opposed the motions and Defendant replied. For the reasons which follow, the motions are DENIED. 19 Based on the allegations in the complaint and the record established in support of the 20 temporary restraining order and preliminary injunction issued in Plaintiff’s favor, Plaintiff paid 21 $1,000,000.00 in 2006 for stock in Immunosyn Corporation (“Immunosyn”), sold to him by James 22 Miceli, Douglas A. McClain Sr., and an alleged agent, Jochen Brenner. Plaintiff claims he purchased 23 the stock in reliance on fraudulent statements and ultimately lost over $775,000.00. He filed another 24 action in this Court regarding his purchase of said stock. See Albergo v. Immunosyn Corp., 09cv2653 25 DMS (MDD). On July 13, 2011, the Court issued an Order in that action granting Plaintiff Albergo 26 and co-Plaintiff David Irwin’s amended motion for a writ of attachment in the amount of $625,000.00. 27 On August 6, 2011, Plaintiff filed the instant action. He alleged that in 2006 he became a 28 creditor of James T. Miceli, Douglas A. McClain, Sr., Douglas A. McClain, Jr., Cuxhaven Holdings, -1- 11cv1787 Dockets.Justia.com 1 Ltd., Padmore Holdings, Ltd., Argyll Equities, LLC, and/or Argyll Biotechnologies, LLC 2 (collectively, herein, “Debtors”). 3 Defendants, including Mr. Scott, in violation of the California Uniform Fraudulent Transfers Act 4 (“UFTA”). The transfer to Mr. Scott took place on August 15, 2007. (Compl. at 3.) In support of 5 preliminary injunctive relief, Plaintiff argued the Debtors transferred the stock without receiving 6 reasonably equivalent value in return, as evidenced by the letters from Mr. Miceli and the transfers 7 to Mr. Miceli’s family members. In support of his allegation that the Debtors were insolvent, Plaintiff 8 cited to a letter from Debtors’ counsel, dated December 10, 2008, stating “Argyll is out of money and, 9 as far as I know, Jim Miceli and Doug McClain, Jr. are out of money . . ..” Plaintiff alleged that 10 Defendants, including Mr. Scott, knew that Debtors were insolvent, and that they had unpaid 11 judgments and active litigation pending against them. (Compl. at 9.) Plaintiff further alleged that the 12 Debtors’ transfers to Defendants were made “to hinder, delay or defraud Plaintiff” as the Debtors’ 13 creditor. (Id.) Subsequently, the Debtors transferred Immunosyn stock to 14 Mr. Scott filed a motion under Rule 12(b)(1) to dismiss the UFTA claim against him based on 15 lack of subject matter jurisdiction. Unlike state courts, "[f]ederal courts are courts of limited 16 jurisdiction. They possess only that power authorized by Constitution and statute, which is not to be 17 expanded by judicial decree. It is to be presumed that a cause lies outside this limited jurisdiction, and 18 the burden of establishing the contrary rests upon the party asserting jurisdiction." Kokkonen v. 19 Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (citations omitted). A federal court must 20 satisfy itself of its jurisdiction over the subject matter before proceeding to the merits of the case. 21 Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 577, 583 (1999). Plaintiff bears the burden of 22 demonstrating that jurisdiction is properly before the Court. See Thornhill Publ'g Co. v. General Tel. 23 & Elec. Corp., 594 F.2d 730, 733 (9th Cir. 1979). 24 Federal jurisdiction over this case is based on diversity pursuant to 28 U.S.C. Section 1332(a). 25 Under section 1332(a), jurisdiction exists in cases of complete diversity, where each of the plaintiffs 26 is a citizen of a different state from each of the defendants, and the amount in controversy exceeds 27 $75,000. See also Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996). Mr. Scott argues that the amount 28 ///// -2- 11cv1787 1 in controversy as to the claim asserted against him does not exceed $75,000 because he sold the stock 2 he received from the Debtors for only $41,484.21. 3 On a 12(b)(1) motion, 4 6 Where the plaintiff originally files in federal court, the amount in controversy is determined from the face of the pleadings. The amount in controversy alleged by the proponent of federal jurisdiction -- typically the plaintiff in the substantive dispute -controls so long as the claim is made in good faith. To justify dismissal, it must appear to a legal certainty that the claim is really for less than the jurisdictional amount. 7 Geographic Expeditions, Inc. v. Estate of Lhotka ex rel. Lhotka, 599 F.3d 1102, 1106 (9th Cir. 2010) 8 (internal quotation marks and citations omitted). Under this standard, the good faith allegations in the 9 complaint as to the amount in controversy “suffice to establish the jurisdictional amount unless it 5 10 appears legally certain that the amount in dispute is $75,000 or less.” Id. at 1107. 11 “The amount in controversy is simply an estimate of the total amount in dispute, not a 12 prospective assessment of defendant's liability.” Lewis v. Verizon Commc’ns, Inc., 627 F.3d 395, 400 13 (9th Cir. 2010). Plaintiff’s allegation of the jurisdictional amount is based on his theory of recovery 14 in this case. The parties agree that under the applicable standard, the judgment based upon the value 15 of the asset transferred, “shall be for an amount equal to the value of the asset at the time of the 16 transfer, subject to adjustment as the equities may require.” Cal. Civ. Code § 3439.08(c). 17 relevant time for stock valuation is therefore when it was transferred to Mr. Scott, and not when he 18 sold it. Plaintiff’s allegation that the amount in controversy exceeds $75,000 (Compl. at 3), is based 19 on his valuation of the Immunosyn stock when it was transferred to Mr. Scott. According to Plaintiff, 20 Mr. Miceli sold the stock at $5 per share during the same time he gifted 200,000 shares to Mr. Scott 21 and his children. The 22 Mr. Scott has not come forward with any evidence or argument to show that Plaintiff’s 23 valuation was made in bad faith. His motion is based on (a) equitable adjustment that potentially 24 could be applied to the judgment, (b) the contention that he was an innocent third-party transferee, and 25 (c) arguments that Plaintiff’s valuation of the stock is unreasonable. These defenses are unavailing. 26 A potential defense that could foreclose or reduce a claim for relief does not preclude federal 27 jurisdiction, even if it is apparent on the face of the complaint. Geographic Expeditions, 599 F.3d at 28 1108. -3- 11cv1787 1 4 [J]ust because a defendant might have a valid defense that will reduce recovery to below the jurisdictional amount does not mean the defendant will ultimately prevail on that defense. Further, if a district court had to evaluate every possible defense that could reduce recovery below the jurisdictional amount the district court would essentially have to decide the merits of the case before it could determine if it had subject matter jurisdiction. Id. Accordingly, Mr. Scott has not met his burden to show to a legal certainty that the amount in 5 controversy on the claim asserted against him is less than $75,000. His motion to dismiss under Rule 6 12(b)(1) is therefore DENIED. 2 3 7 Alternatively, Mr. Scott seeks to dismiss the complaint under Rule 12(b)(6) for lack of factual 8 allegations in support of the claim asserted against him. A Rule 12(b)(6) motion to dismiss tests the 9 sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal is 10 warranted where the complaint lacks a cognizable legal theory. Shroyer v. New Cingular Wireless 11 Serv., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (internal quotation marks and citation omitted); see 12 Neitzke v. Williams, 490 U.S. 319, 326 (1989) ("Rule 12(b)(6) authorizes a court to dismiss a claim 13 on the basis of a dispositive issue of law"). Alternatively, a complaint may be dismissed where it 14 presents a cognizable legal theory yet fails to plead essential facts under that theory. Robertson v. 15 Dean Witter Reynolds, Inc.,749 F.2d 530, 534 (9th Cir. 1984); see also Shroyer, 622 F.3d at 1041. 16 Mr. Scott’s motion is based on the latter ground. In this regard, "to survive a motion to 17 dismiss, a complaint must contain sufficient factual matter to state a facially plausible claim to relief." 18 Shroyer, 622 F.3d at 1041, citing Ashcroft v. Iqbal, 556 U.S. 662, __, 129 S. Ct. 1937, 1949 (2009). 19 “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw 20 the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 129 S. Ct. at 21 1949, citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). “Determining whether a complaint 22 states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court 23 to draw on its judicial experience and common sense.” Iqbal, 129 S. Ct. at 1950. 24 In reviewing a motion to dismiss under Rule 12(b)(6), the Court must assume the truth of all 25 factual allegations and must construe them in the light most favorable to the nonmoving party. Cahill 26 v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Legal conclusions need not be taken 27 as true merely because they are couched as factual allegations. Twombly, 550 U.S. at 555. Similarly, 28 ///// -4- 11cv1787 1 "conclusory allegations of law and unwarranted inferences are not sufficient to defeat a motion to 2 dismiss." Pareto v. Fed. Deposit Ins. Corp., 139 F.3d 696, 699 (9th Cir. 1998). 3 Mr. Scott complains that the complaint does not cite to legal authority for the fraudulent 4 conveyance claim. This is not required. See Fed. R. Civ. Proc. 8(a). Furthermore, as Plaintiff has 5 moved for preliminary injunctive relief, all parties are well aware that the fraudulent conveyance claim 6 is based on UFTA. Mr. Scott next contends that no factual allegations are provided in support of the 7 allegation that Defendant Cuxhaven Holdings, Ltd., which transferred the stock to him, is Mr. Miceli’s 8 alter ego. This is not so. (See Compl. at 3.) Mr. Scott further maintains that no facts are alleged in 9 support of the allegations of Defendants’ knowledge or intent. “Malice, intent, knowledge, and other 10 conditions of a person’s mind may be alleged generally.” Fed. R. Civ. Proc. 9(b). Accordingly, 11 Defendants’ knowledge and intent are sufficiently alleged. Mr. Scott’s remaining argument that 12 Plaintiff’s allegations are too threadbare is rejected. Notice pleading does not require a plaintiff to 13 plead detailed factual allegations, Twombly, 550 U.S. at 555, or all the facts necessary to carry his 14 burden, Al-Kidd v. Ashcroft, 580 F.3d 949, 977 (9th Cir. 2009), rev’d on other grounds, __ U.S. __, 15 131 S. Ct. 2074 (2011). The complaint contains sufficient factual matter to meet the notice pleading 16 requirements after Iqbal. Moreover, following Plaintiff’s successful motion for preliminary injunctive 17 relief, there is little question that his claims are at least “facially plausible.” See Shroyer, 622 F.3d at 18 1041. Defendant’s motion to dismiss under Rule 12(b)(6) is DENIED. 19 Finally, Mr. Scott filed a motion for sanctions against Plaintiff and his counsel pursuant to Rule 20 11. He argues that sanctions are warranted because Plaintiff’s allegation of the amount in controversy 21 is contradicted by the evidence of the proceeds from Mr. Scott’s sale of the Immunosyn stock, and that 22 Plaintiff’s counsel refused to dismiss Mr. Scott after evidence of the proceeds was brought to his 23 attention. Although Plaintiff apparently erroneously alleged that Mr. Scott sold his Immunosyn stock 24 for more that $75,000, sanctions are unwarranted. As discussed above, the alleged error is irrelevant 25 to the analysis of the amount of controversy. Accordingly, Defendant’s motion for sanctions is 26 DENIED. Plaintiff’s request to sanction the defense counsel for bringing the motion for sanctions is 27 also DENIED. 28 ///// -5- 11cv1787 1 2 3 For the foregoing reasons, Defendant William Scott’s motions to dismiss under Rule 12(b)(1) and (6) and for sanctions under Rule 11 are DENIED. IT IS SO ORDERED. 4 5 DATED: December 15, 2011 6 7 HON. DANA M. SABRAW United States District Judge 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -6-
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