1 UNITED STATES DISTRICT COURT
2 DISTRICT OF NEVADA
3 * * *
4 THOMAS K. KURIAN, an individual, Case No. 2:19-cv-01757-GMN-EJY
5 Plaintiff, ORDER 6 v.
7 SNAPS HOLDING COMPANY, a North Dakota domestic corporation, 8 Defendant. 9 10 Before the Court is Plaintiff Thomas K. Kurian’s Motion for Leave to Amend Complaint to 11 Add Parties (ECF No. 17). The Court has considered Plaintiff’s Motion, Defendant SNAPS Holding 12 Company’s (“SNAPS”) Response (ECF No. 19), and Plaintiff’s Reply (ECF No. 21). The Court 13 finds as follows. 14 I. BACKGROUND 15 This case commenced in the Eighth Judicial District Court for Clark County, Nevada, in June 16 2019, and was subsequently removed to this Court based on diversity jurisdiction, which is not 17 threatened by the proposed First Amended Complaint (“FAC”) as the added party remains 18 completely diverse from all other parties. In his Motion, Plaintiff argues that (i) the request to amend 19 is timely under the Scheduling Order (ECF No. 15), (ii) Fed. R. Civ. P. 15(a)(2) provides a liberal 20 standard for amendment, (iii) “the Supreme Court of North Dakota … concluded ‘SNAPS exercises 21 total control over the management and activities of IDA [of Moorhead Corporation (“IDA”)] and 22 was the alter ego of IDA’”;1 and (iv) adding IDA as a defendant is proper because IDA is the alter 23 ego of SNAPS. 24 In the facts section of the FAC Plaintiff alleges, in sum, that (i) IDA “is the alter ego of 25 SNAPS who exercises total control over the management and activities of IDA;” (ii) IDA, as the 26 alter ego of SNAPS, breached a Spectrum Manager Lease Agreement (the “Agreement”) by failing
27 1 The case Plaintiff attaches to its Motion is SNAPS Holding Company v. Leach, 895 S.W.2d 763 (N.D. 2017), 1 to build out or provide “substantial services to two-third[s] of the leased area population … as per 2 the parties’ agreement;” (iii) SNAPS and IDA operated stations that fail “to comport with FCC 3 acceptance in violation of” the Agreement; and, (iv) “SNAPS and IDA operated Permanent Stations” 4 in a manner that put Plaintiff’s “license in danger” creating “potential legal liabilities” for Plaintiff. 5 Plaintiff then alleges that SNAPS and IDA, as its alter ego, breached the Agreement (the first cause 6 of action), interfered with Plaintiff’s prospective economic opportunity (the third cause of action), 7 and breached the covenant of good faith and fair dealing (the fourth cause of action). Plaintiff further 8 seeks injunctive relief (the sixth cause of action), and asserts a cause of action titled “Alter Ego 9 Piercing the Corporate Veil (the seventh cause of action). Plaintiff’s second cause of action for 10 fraud/misrepresentation states that “SNAPS induced Plaintiff to enter into an agreement with 11 SNAPS by making false representations as to its true intentions surrounding the Agreement” and 12 that therefore SNAPS and its alter ego, IDA, have injured Plaintiff. Plaintiff’s fifth cause of action 13 for declaratory relief states only that there exists “an actual, real and substantial controversy … 14 between Plaintiff[] and “Defendant ….” ECF No. 17-1. 15 In opposition, SNAPS argues that Plaintiff fails to assert facts sufficient to assert any claim 16 against IDA and the single assertion of alter ego does not save the FAC from this fatality. SNAPS 17 points out that the Agreement is between Plaintiff and SNAPS only and that the FAC should be 18 denied as futile. 19 II. DISCUSSION 20 Whether Plaintiff’s separate cause of action title “Alter Ego Piercing the Corporate Veil” is 21 a claim or a remedy is not an issue the Court reaches in this Order because, for the reasons stated 22 below, Plaintiff’s proposed FAC fails to state sufficient facts upon which an alter ego claim or 23 remedy could be granted. 24 Rule 15(a)(2) of the Federal Rules of Civil Procedure is liberally construed and amendment 25 of a complaint should be granted “when justice so requires.” Id.; Eminence Capital, LLC v. Aspeon, 26 Inc., 316 F.3d 1048, 1051 (9th Cir. 2003). However, when a proposed amendment is futile, 27 1 amendment is properly denied. Gardner v. Martino, 563 F.3d 981, 990 (9th Cir. 2009). That is, a 2 court may dismiss a cause of action for “failure to state a claim upon which relief can be granted.” 3 Fed.R.Civ.P. 12(b)(6). 4 A properly pled claim must include “[a] short and plain statement of the claim showing that 5 the pleader is entitled to relief.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While 6 Federal Rule of Civil Procedure 8 does not require detailed factual allegations, the Rule demands 7 more than “labels and conclusions” or a “formulaic recitation of the elements of a cause of action.” 8 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). “Factual allegations must be enough 9 to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. Thus, to state a 10 claim and survive a motion to dismiss, the complaint must allege sufficient facts to “state a claim to 11 relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (citation omitted). 12 In Iqbal, the Supreme Court outlined the two-step approach district courts apply when 13 considering motions to dismiss—that is, whether a party has stated a claim upon which relief may 14 be granted. First, the Court must accept as true all well-pled factual allegations in the complaint, 15 while legal conclusions are not entitled to the same assumption of truth. Id. Mere recitals of the 16 elements of a cause of action, supported only by conclusory statements, are insufficient to meet this 17 standard. Id. Second, the Court must consider whether the factual allegations in the complaint allege 18 a plausible claim for relief. Id. at 679. A claim is facially plausible when the plaintiff's complaint 19 alleges facts that allows the Court to draw a reasonable inference that the defendant is liable for the 20 alleged misconduct. Id. at 678. Where the complaint does not “permit the court to infer more than 21 the mere possibility of misconduct, the complaint has alleged, but it has not shown, that the pleader 22 is entitled to relief.” Id. at 679 (internal quotations and alterations omitted). When the allegations 23 in a complaint have not crossed the line from conceivable to plausible, plaintiff's claim must be 24 dismissed. Twombly, 550 U.S. at 570; see also Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir.2011) 25 (“First, to be entitled to the presumption of truth, allegations in a complaint or counterclaim may not 26 simply recite the elements of a cause of action, but must contain sufficient allegations of underlying 27 facts to give fair notice and to enable the opposing party to defend itself effectively. Second, the 1 factual allegations that are taken as true must plausibly suggest an entitlement to relief, such that it 2 is not unfair to require the opposing party to be subjected to the expense of discovery and continued 3 litigation.”). 4 Here, Plaintiff’s proposed FAC seeks to include IDA as a defendant based on the contention 5 that IDA is the alter ego of SNAPS.
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1 UNITED STATES DISTRICT COURT
2 DISTRICT OF NEVADA
3 * * *
4 THOMAS K. KURIAN, an individual, Case No. 2:19-cv-01757-GMN-EJY
5 Plaintiff, ORDER 6 v.
7 SNAPS HOLDING COMPANY, a North Dakota domestic corporation, 8 Defendant. 9 10 Before the Court is Plaintiff Thomas K. Kurian’s Motion for Leave to Amend Complaint to 11 Add Parties (ECF No. 17). The Court has considered Plaintiff’s Motion, Defendant SNAPS Holding 12 Company’s (“SNAPS”) Response (ECF No. 19), and Plaintiff’s Reply (ECF No. 21). The Court 13 finds as follows. 14 I. BACKGROUND 15 This case commenced in the Eighth Judicial District Court for Clark County, Nevada, in June 16 2019, and was subsequently removed to this Court based on diversity jurisdiction, which is not 17 threatened by the proposed First Amended Complaint (“FAC”) as the added party remains 18 completely diverse from all other parties. In his Motion, Plaintiff argues that (i) the request to amend 19 is timely under the Scheduling Order (ECF No. 15), (ii) Fed. R. Civ. P. 15(a)(2) provides a liberal 20 standard for amendment, (iii) “the Supreme Court of North Dakota … concluded ‘SNAPS exercises 21 total control over the management and activities of IDA [of Moorhead Corporation (“IDA”)] and 22 was the alter ego of IDA’”;1 and (iv) adding IDA as a defendant is proper because IDA is the alter 23 ego of SNAPS. 24 In the facts section of the FAC Plaintiff alleges, in sum, that (i) IDA “is the alter ego of 25 SNAPS who exercises total control over the management and activities of IDA;” (ii) IDA, as the 26 alter ego of SNAPS, breached a Spectrum Manager Lease Agreement (the “Agreement”) by failing
27 1 The case Plaintiff attaches to its Motion is SNAPS Holding Company v. Leach, 895 S.W.2d 763 (N.D. 2017), 1 to build out or provide “substantial services to two-third[s] of the leased area population … as per 2 the parties’ agreement;” (iii) SNAPS and IDA operated stations that fail “to comport with FCC 3 acceptance in violation of” the Agreement; and, (iv) “SNAPS and IDA operated Permanent Stations” 4 in a manner that put Plaintiff’s “license in danger” creating “potential legal liabilities” for Plaintiff. 5 Plaintiff then alleges that SNAPS and IDA, as its alter ego, breached the Agreement (the first cause 6 of action), interfered with Plaintiff’s prospective economic opportunity (the third cause of action), 7 and breached the covenant of good faith and fair dealing (the fourth cause of action). Plaintiff further 8 seeks injunctive relief (the sixth cause of action), and asserts a cause of action titled “Alter Ego 9 Piercing the Corporate Veil (the seventh cause of action). Plaintiff’s second cause of action for 10 fraud/misrepresentation states that “SNAPS induced Plaintiff to enter into an agreement with 11 SNAPS by making false representations as to its true intentions surrounding the Agreement” and 12 that therefore SNAPS and its alter ego, IDA, have injured Plaintiff. Plaintiff’s fifth cause of action 13 for declaratory relief states only that there exists “an actual, real and substantial controversy … 14 between Plaintiff[] and “Defendant ….” ECF No. 17-1. 15 In opposition, SNAPS argues that Plaintiff fails to assert facts sufficient to assert any claim 16 against IDA and the single assertion of alter ego does not save the FAC from this fatality. SNAPS 17 points out that the Agreement is between Plaintiff and SNAPS only and that the FAC should be 18 denied as futile. 19 II. DISCUSSION 20 Whether Plaintiff’s separate cause of action title “Alter Ego Piercing the Corporate Veil” is 21 a claim or a remedy is not an issue the Court reaches in this Order because, for the reasons stated 22 below, Plaintiff’s proposed FAC fails to state sufficient facts upon which an alter ego claim or 23 remedy could be granted. 24 Rule 15(a)(2) of the Federal Rules of Civil Procedure is liberally construed and amendment 25 of a complaint should be granted “when justice so requires.” Id.; Eminence Capital, LLC v. Aspeon, 26 Inc., 316 F.3d 1048, 1051 (9th Cir. 2003). However, when a proposed amendment is futile, 27 1 amendment is properly denied. Gardner v. Martino, 563 F.3d 981, 990 (9th Cir. 2009). That is, a 2 court may dismiss a cause of action for “failure to state a claim upon which relief can be granted.” 3 Fed.R.Civ.P. 12(b)(6). 4 A properly pled claim must include “[a] short and plain statement of the claim showing that 5 the pleader is entitled to relief.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While 6 Federal Rule of Civil Procedure 8 does not require detailed factual allegations, the Rule demands 7 more than “labels and conclusions” or a “formulaic recitation of the elements of a cause of action.” 8 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). “Factual allegations must be enough 9 to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. Thus, to state a 10 claim and survive a motion to dismiss, the complaint must allege sufficient facts to “state a claim to 11 relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (citation omitted). 12 In Iqbal, the Supreme Court outlined the two-step approach district courts apply when 13 considering motions to dismiss—that is, whether a party has stated a claim upon which relief may 14 be granted. First, the Court must accept as true all well-pled factual allegations in the complaint, 15 while legal conclusions are not entitled to the same assumption of truth. Id. Mere recitals of the 16 elements of a cause of action, supported only by conclusory statements, are insufficient to meet this 17 standard. Id. Second, the Court must consider whether the factual allegations in the complaint allege 18 a plausible claim for relief. Id. at 679. A claim is facially plausible when the plaintiff's complaint 19 alleges facts that allows the Court to draw a reasonable inference that the defendant is liable for the 20 alleged misconduct. Id. at 678. Where the complaint does not “permit the court to infer more than 21 the mere possibility of misconduct, the complaint has alleged, but it has not shown, that the pleader 22 is entitled to relief.” Id. at 679 (internal quotations and alterations omitted). When the allegations 23 in a complaint have not crossed the line from conceivable to plausible, plaintiff's claim must be 24 dismissed. Twombly, 550 U.S. at 570; see also Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir.2011) 25 (“First, to be entitled to the presumption of truth, allegations in a complaint or counterclaim may not 26 simply recite the elements of a cause of action, but must contain sufficient allegations of underlying 27 facts to give fair notice and to enable the opposing party to defend itself effectively. Second, the 1 factual allegations that are taken as true must plausibly suggest an entitlement to relief, such that it 2 is not unfair to require the opposing party to be subjected to the expense of discovery and continued 3 litigation.”). 4 Here, Plaintiff’s proposed FAC seeks to include IDA as a defendant based on the contention 5 that IDA is the alter ego of SNAPS. To state that an alter ego relationship exists, a party must plead 6 that (1) a corporation is influenced and governed by the alleged alter ego; (2) there is such unity of 7 interest and ownership that one is inseparable from the other; and (3) adherence to the corporate 8 fiction of a separate entity would sanction fraud or promote a manifest injustice. Nev. Rev. Stat. 9 78.747(2); Lorenz v. Beltio Ltd., 963 P.2d 488, 496 (Nev. 1998). However, the entirety of Plaintiff’s 10 factual allegations regarding alter ego are found in paragraph 6 of the FAC stating, in a conclusory 11 fashion, that IDA “is the alter ego of SNAPS who exercises total control over the management and 12 activities of IDA.” This conclusory allegation is insufficient to state a claim against IDA based on 13 its alleged alter ego relationship to SNAPS. 14 Plaintiff’s dependence on SNAPS Holding Company v. Leach, infra, does not help. The 15 North Dakota Supreme Court did not decide that IDA was the alter ego of SNAPS. Rather, the 16 decision in SNAPS Holding v. Leach was based on a decision issued by an Arizona state court finding 17 that an action to enforce a judgment obtained by SNAPS against Jim Leach (the former owner of 18 IDA), in a North Dakota court, was unenforceable under Arizona law because (1) “SNAPS exercised 19 total control over the management and activities of IDA and was the alter ego of IDA” and, (2) “both 20 Arizona and North Dakota law prohibit contribution between intentional joint tortfeasors.” 895 21 N.W.2d at 767. 22 The decision by an Arizona state court (to which Plaintiff provides no cite and no cite is 23 found in the North Dakota decision) is not binding on this Court. And, Plaintiff pleads no facts in 24 his proposed FAC upon which the Court may rely to take Plaintiff’s alter ego claim from conceivable 25 to plausible. Plaintiff does not allege how or why potentially holding only SNAPS responsible for 26 a breach of contract, to which IDA is not a party, would result in fraud or injustice. SNAPS also 27 pleads nothing whatsoever upon which the Court can reasonably infer that there is such a unity of 1 president and CEO of SNAPS, at the time of the North Dakota decision cited above, may have 2 entered into a stock purchase agreement of IDA does not mean that the adherence to the corporate 3 fiction of separate entities would sanction a fraud and permit an abuse of the legal benefits of true 4 corporations. In sum, the allegations in paragraph 6 of Plaintiff’s FAC have not crossed the line 5 from conceivable to plausible. Rather, the allegations state only a legal conclusion. As such 6 Plaintiff’s proposed FAC seeking to add IDA as a co-defendant is futile as currently pled. 7 The above said, Plaintiff sought to amend his Complaint before the deadline to file such an 8 amendment expired based on the timeline set forth in the parties’ discovery plan and scheduling 9 order. The Court’s failure to rule on the Motion until after the expiration of that deadline should not 10 prejudice Plaintiff. 11 III. CONCLUSION 12 Accordingly, 13 IT IS HEREBY ORDERED that Plaintiff Motion to Amend Complaint to Add Parties (ECF 14 No. 17) is DENIED without prejudice. Plaintiff shall have ten calendar days from the date of this 15 Order to file a renewed motion to amend the Complaint, if he so chooses, for the sole purpose of 16 attempting to add IDA as a defendant. No parties, claims or causes of action, other than those 17 proposed in Plaintiff’s attachment to ECF No. 17, shall be entertained by the Court. 18 19 DATED: April 21, 2020 20 21
22 ELAYNA J. YOUCHAH 23 UNITED STATES MAGISTRATE JUDGE 24 25 26 27