IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
R. WAYNE KLEIN, as Receiver, MEMORANDUM DECISION AND ORDER GRANTING PLAINTIFF’S Plaintiff, MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS v. Case No. 2:19-cv-00532-DN-CMR RANDALE JOHNSON, an individual, District Judge David Nuffer Defendant. Magistrate Judge Cecilia M. Romero
Plaintiff R. Wayne Klein was appointed as receiver in United States v. RaPower-3, LLC, et al., Case No. 2:15-cv-00828-DN-EJF (D. Utah) (“RaPower-3”), over RaPower-3, LLC (“RaPower”), International Automated Systems Inc. (“IAS”), LTB1 LLC (“LTB1”), their subsidiaries and affiliates (collectively, the “Receivership Entities”), and the assets of Neldon Johnson and R. Gregory Shepard.1 As the receiver in RaPower-3, Plaintiff moved to cancel IAS shares.2 That motion was granted.3 For the benefit of the receivership estate, Plaintiff subsequently initiated this case to recover funds that are alleged to have been improperly transferred to Defendant from the Receivership Entities.4 Defendant asserted counterclaims against Plaintiff for inverse
1 Corrected Receivership Order (“RaPower-3 Receivership Order”), ECF no. 491 in RaPower-3, filed Nov. 1, 2018. 2 Receiver’s Motion for Order Canceling Shares of International Automated Systems, Inc. (“Motion to Cancel IAS Shares”), ECF no. 682 in RaPower-3, filed May 27, 2019. 3 Order Canceling International Automated System Inc.’s Shares (“IAS Cancellation Order”), ECF no. 719 in RaPower-3, filed July 8, 2019. 4 Complaint, docket no. 2, filed July 26, 2019. condemnation and a Bivens violation of due process relating to the cancellation of the IAS shares.5 Plaintiff now seeks dismissal of Defendant’s counterclaims under Federal Rule of Civil Procedure 12(b)(1) (“Motion”).6 Because subject matter jurisdiction over Defendant’s counterclaims is lacking, Plaintiff’s Motion7 is GRANTED. Defendant’s counterclaims8 are
DISMISSED without prejudice. STANDARD OF REVIEW Plaintiff moves to dismiss Defendant’s counterclaims under FED. R. CIV. P. 12(b)(1),9 which is “jurisdictional in nature.”10 In responding to the Motion, Defendant argues that “[u]nder the standards of review for a motion to dismiss . . . the allegations of the counterclaim must be taken as true and the court must draw all reasonable inferences in favor of the non-moving party.”11 Defendant is mistaken. Defendant identifies the standard of review for a motion under FED. R. CIV. P. 12(b)(6),12 which differs from the standard of review on Plaintiff’s Motion made under Rule 12(b)(1). A Rule 12(b)(1) motion to dismiss may take one of two forms: The motion may be a
facial attack that “questions the sufficiency of the complaint;”13 Or, the motion may be a factual
5 Answer, Jury Demand and Counterclaim (“Counterclaim”) at 10-14, docket no. 9, filed Aug. 19, 2019. 6 Plaintiff’s 12(b)(1) Motion to Dismiss Defendant’s Counterclaims (“Motion”), docket no. 13, filed Sept. 9, 2019. 7 Id. 8 Counterclaim at 10-14. 9 Motion. 10 Satterfield v. Malloy, 700 F.3d 1231, 1234 (10th Cir. 2012). 11 Opposition to Plaintiff’s Motion to Dismiss (“Response”) at 7, docket no. 14, filed Sept. 23, 2019. 12 GFF Corp. v. Associated Wholesale Grocers, Inc., 130 F.3d 1381, 1384 (10th Cir. 1997). 13 Holt v. United States, 46 F.3d 1000, 1002 (10th Cir. 1995). attack that “challenge[s] the facts upon which subject matter jurisdiction depends.”14 When the challenge to the complaint is a facial challenge, “a district court must accept the allegations in the complaint as true.”15 However, on a factual challenge, the court is not required to accept the complaint’s allegations as true and “may not presume” that they are true.16 A factual Rule
“12(b)(1) motion is considered a ‘speaking motion’ and can include references to evidence extraneous to the complaint.”17 And the court enjoys “wide discretion to . . . resolve disputed jurisdictional facts.18 Plaintiff’s Motion is a factual challenge under Rule 12(b)(1) because it challenges the facts underlying the purported jurisdiction over Defendant’s counterclaims.19 Plaintiff argues that the counterclaims are barred under the Barton doctrine and the RaPower-3 Receivership Order.20 Plaintiff also argues that he is immune from suit as a receiver.21 Defendant argues in response that the Barton doctrine barring jurisdiction does not apply because Plaintiff’s actions were ultra vires.22 Defendant also argues that the issue of Plaintiff’s immunity is not properly raised on a motion to dismiss.23
14 Id. 15 Id. 16 Id. at 1003. 17 Wheeler v. Hurdman, 825 F.2d 257, 259 n.5 (10th Cir. 1987). 18 Id. 19 Motion at 3-11. 20 Id. at 7-11. 21 Id. at 11-12. 22 Response at 2-3 23 Id. at 3-7. DISCUSSION Defendant’s counterclaims are barred by the Barton Doctrine and the RaPower-3 Receivership Order Plaintiff argues that Defendant’s counterclaims should be dismissed because Defendant did not obtain leave to bring them.24 The United States Supreme Court held in Barton v. Barbour that “before suit is brought against a receiver[,] leave of the court by which he was appointed must be obtained.”25 The Barton doctrine bars claims based on a receiver’s actions arising from their official duties, out of a concern that allowing receivers to be vulnerable to suit would render the courts unable to “preserve and distribute” relevant property.26 Defendant contends that the Barton doctrine does not apply if a receiver acted ultra vires.27 But Defendant does not clarify which specific acts were outside of Plaintiff’s court-
appointed authority. In the RaPower-3 Receivership Order, the court ordered Plaintiff to “provide a recommendation” regarding whether IAS should be “liquidated or dissolved.”28 The Receivership Order further directed that, should liquidation be appropriate, “the Receiver shall propose a liquidation plan.”29 Plaintiff followed this directive and drafted a plan of liquidation30 and moved for the cancellation of IAS shares.31 The liquidation plan was adopted32 and the court—not the
24 Motion at 7-11. 25 Barton v. Barbour, 104 U.S. 126, 128 (1881). 26 Id. at 136. 27 Opposition to Plaintiff’s Motion to Dismiss at 3. 28 Receivership Order ¶ 85. 29 Id. 30 Receiver’s Accounting, Recommendation on Publicly-Traded Status of International Automated Systems, and Liquidation Plan, ECF no. 552 in RaPower-3, filed December 31, 2018. 31 Motion to Cancel IAS Shares at 1. 32 IAS Cancellation order at 1. Plaintiff—cancelled the IAS shares.33 Plaintiff’s acts were not ultra vires. They were within the scope of Plaintiff’s court-appointed authority. Therefore, the Barton doctrine applies to Defendant’s counterclaims. And because Defendant did not seek leave to file the counterclaims in RaPower-3, the Barton doctrine bars the counterclaims.
Additionally, and separate from the Barton doctrine, the court in RaPower-3 ordered that ancillary “actions of any nature involving [] the Receiver in his capacity as Receiver” are “stayed until further order of this Court.”34 That stay of actions has not been lifted as to Defendant’s counterclaims. Therefore, Defendant’s counterclaims violate the stay of actions imposed in RaPower-3.
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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
R. WAYNE KLEIN, as Receiver, MEMORANDUM DECISION AND ORDER GRANTING PLAINTIFF’S Plaintiff, MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS v. Case No. 2:19-cv-00532-DN-CMR RANDALE JOHNSON, an individual, District Judge David Nuffer Defendant. Magistrate Judge Cecilia M. Romero
Plaintiff R. Wayne Klein was appointed as receiver in United States v. RaPower-3, LLC, et al., Case No. 2:15-cv-00828-DN-EJF (D. Utah) (“RaPower-3”), over RaPower-3, LLC (“RaPower”), International Automated Systems Inc. (“IAS”), LTB1 LLC (“LTB1”), their subsidiaries and affiliates (collectively, the “Receivership Entities”), and the assets of Neldon Johnson and R. Gregory Shepard.1 As the receiver in RaPower-3, Plaintiff moved to cancel IAS shares.2 That motion was granted.3 For the benefit of the receivership estate, Plaintiff subsequently initiated this case to recover funds that are alleged to have been improperly transferred to Defendant from the Receivership Entities.4 Defendant asserted counterclaims against Plaintiff for inverse
1 Corrected Receivership Order (“RaPower-3 Receivership Order”), ECF no. 491 in RaPower-3, filed Nov. 1, 2018. 2 Receiver’s Motion for Order Canceling Shares of International Automated Systems, Inc. (“Motion to Cancel IAS Shares”), ECF no. 682 in RaPower-3, filed May 27, 2019. 3 Order Canceling International Automated System Inc.’s Shares (“IAS Cancellation Order”), ECF no. 719 in RaPower-3, filed July 8, 2019. 4 Complaint, docket no. 2, filed July 26, 2019. condemnation and a Bivens violation of due process relating to the cancellation of the IAS shares.5 Plaintiff now seeks dismissal of Defendant’s counterclaims under Federal Rule of Civil Procedure 12(b)(1) (“Motion”).6 Because subject matter jurisdiction over Defendant’s counterclaims is lacking, Plaintiff’s Motion7 is GRANTED. Defendant’s counterclaims8 are
DISMISSED without prejudice. STANDARD OF REVIEW Plaintiff moves to dismiss Defendant’s counterclaims under FED. R. CIV. P. 12(b)(1),9 which is “jurisdictional in nature.”10 In responding to the Motion, Defendant argues that “[u]nder the standards of review for a motion to dismiss . . . the allegations of the counterclaim must be taken as true and the court must draw all reasonable inferences in favor of the non-moving party.”11 Defendant is mistaken. Defendant identifies the standard of review for a motion under FED. R. CIV. P. 12(b)(6),12 which differs from the standard of review on Plaintiff’s Motion made under Rule 12(b)(1). A Rule 12(b)(1) motion to dismiss may take one of two forms: The motion may be a
facial attack that “questions the sufficiency of the complaint;”13 Or, the motion may be a factual
5 Answer, Jury Demand and Counterclaim (“Counterclaim”) at 10-14, docket no. 9, filed Aug. 19, 2019. 6 Plaintiff’s 12(b)(1) Motion to Dismiss Defendant’s Counterclaims (“Motion”), docket no. 13, filed Sept. 9, 2019. 7 Id. 8 Counterclaim at 10-14. 9 Motion. 10 Satterfield v. Malloy, 700 F.3d 1231, 1234 (10th Cir. 2012). 11 Opposition to Plaintiff’s Motion to Dismiss (“Response”) at 7, docket no. 14, filed Sept. 23, 2019. 12 GFF Corp. v. Associated Wholesale Grocers, Inc., 130 F.3d 1381, 1384 (10th Cir. 1997). 13 Holt v. United States, 46 F.3d 1000, 1002 (10th Cir. 1995). attack that “challenge[s] the facts upon which subject matter jurisdiction depends.”14 When the challenge to the complaint is a facial challenge, “a district court must accept the allegations in the complaint as true.”15 However, on a factual challenge, the court is not required to accept the complaint’s allegations as true and “may not presume” that they are true.16 A factual Rule
“12(b)(1) motion is considered a ‘speaking motion’ and can include references to evidence extraneous to the complaint.”17 And the court enjoys “wide discretion to . . . resolve disputed jurisdictional facts.18 Plaintiff’s Motion is a factual challenge under Rule 12(b)(1) because it challenges the facts underlying the purported jurisdiction over Defendant’s counterclaims.19 Plaintiff argues that the counterclaims are barred under the Barton doctrine and the RaPower-3 Receivership Order.20 Plaintiff also argues that he is immune from suit as a receiver.21 Defendant argues in response that the Barton doctrine barring jurisdiction does not apply because Plaintiff’s actions were ultra vires.22 Defendant also argues that the issue of Plaintiff’s immunity is not properly raised on a motion to dismiss.23
14 Id. 15 Id. 16 Id. at 1003. 17 Wheeler v. Hurdman, 825 F.2d 257, 259 n.5 (10th Cir. 1987). 18 Id. 19 Motion at 3-11. 20 Id. at 7-11. 21 Id. at 11-12. 22 Response at 2-3 23 Id. at 3-7. DISCUSSION Defendant’s counterclaims are barred by the Barton Doctrine and the RaPower-3 Receivership Order Plaintiff argues that Defendant’s counterclaims should be dismissed because Defendant did not obtain leave to bring them.24 The United States Supreme Court held in Barton v. Barbour that “before suit is brought against a receiver[,] leave of the court by which he was appointed must be obtained.”25 The Barton doctrine bars claims based on a receiver’s actions arising from their official duties, out of a concern that allowing receivers to be vulnerable to suit would render the courts unable to “preserve and distribute” relevant property.26 Defendant contends that the Barton doctrine does not apply if a receiver acted ultra vires.27 But Defendant does not clarify which specific acts were outside of Plaintiff’s court-
appointed authority. In the RaPower-3 Receivership Order, the court ordered Plaintiff to “provide a recommendation” regarding whether IAS should be “liquidated or dissolved.”28 The Receivership Order further directed that, should liquidation be appropriate, “the Receiver shall propose a liquidation plan.”29 Plaintiff followed this directive and drafted a plan of liquidation30 and moved for the cancellation of IAS shares.31 The liquidation plan was adopted32 and the court—not the
24 Motion at 7-11. 25 Barton v. Barbour, 104 U.S. 126, 128 (1881). 26 Id. at 136. 27 Opposition to Plaintiff’s Motion to Dismiss at 3. 28 Receivership Order ¶ 85. 29 Id. 30 Receiver’s Accounting, Recommendation on Publicly-Traded Status of International Automated Systems, and Liquidation Plan, ECF no. 552 in RaPower-3, filed December 31, 2018. 31 Motion to Cancel IAS Shares at 1. 32 IAS Cancellation order at 1. Plaintiff—cancelled the IAS shares.33 Plaintiff’s acts were not ultra vires. They were within the scope of Plaintiff’s court-appointed authority. Therefore, the Barton doctrine applies to Defendant’s counterclaims. And because Defendant did not seek leave to file the counterclaims in RaPower-3, the Barton doctrine bars the counterclaims.
Additionally, and separate from the Barton doctrine, the court in RaPower-3 ordered that ancillary “actions of any nature involving [] the Receiver in his capacity as Receiver” are “stayed until further order of this Court.”34 That stay of actions has not been lifted as to Defendant’s counterclaims. Therefore, Defendant’s counterclaims violate the stay of actions imposed in RaPower-3. Because the Barton doctrine bars Defendant’s counterclaims, and because the counterclaims violate the stay of actions imposed in RaPower-3, subject matter jurisdiction over the counterclaims is lacking. Defendant fails to address how Plaintiff is not immune from suit or how orders entered in RaPower-3 may be challenged in this separate action Defendant’s counterclaim for inverse condemnation alleges a violation of constitutional rights by the cancellation of the IAS shares under a takings theory.35 Defendant’s counterclaim for a Bivens violation alleges that the cancellation of the IAS shares violated Defendant’s due process rights.36 Plaintiff argues that Defendant cannot succeed on either counterclaim because the cancellation of the IAS shares was court ordered and because Plaintiff is immune from suit.37
33 Id. at 5. 34 RaPower-3 Receivership Order ¶ 44. 35 Answer, Jury Demand and Counterclaim at 11. Argument that IAS shareholders would lose property that they valued was raised in RaPower-3. Opposition to Receiver’s Motion for an Order Canceling Shares of International Automated Systems Inc. at 3, Docket No. 690 in RaPower-3, filed June 7, 2019. That argument was rejected. IAS Cancellation Order at 2 n. 7. 36 Answer, Jury Demand and Counterclaim at 12. 37 IAS Cancellation Order. Defendant’s counterclaims effectively seek collateral review of judicial orders entered in RaPower-3 relating to Plaintiff's authority as a receiver and the cancellation of IAS shares. But “a receiver who faithfully and carefully carries out the orders of his appointing judge must share the judge’s absolute immunity.”** This is the case even where constitutional violations are alleged.*? Defendant fails to address how Plaintiff, acting as a receiver under court authority, is not immune from suit. And Defendant cites no legal authority that this separate action may challenge orders entered in RaPower-3. Therefore, subject matter jurisdictional over Defendants’ counterclaims is lacking. ORDER IT IS HEREBY ORDERED that Plaintiffs Motion“*° is GRANTED. Defendant’ counterclaims“! are DISMISSED without prejudice for lack of subject matter jurisdiction. Signed December 6, 2019 BY THE COURT Pad Mae David Nuffer United States District Judge
38 Swain v. Seaman, 505 F. App'x 773, 775 (10th Cir. 2012) (unpublished) (quoting T & W Inv. Co. v. Kurtz, 588 F.2d 801, 802 (10th Cir. 1978)). 39 Id. 40 Plaintiffs 12(b)(1) Motion to Dismiss Defendant’s Counterclaims, docket no. 13, filed Sept. 9, 2019 41 Answer, Jury Demand and Counterclaim at 10-14, docket no. 9, filed Aug. 19, 2019.