Lopez, Sr. v. Cruz

• Court: Superior Court of Guam
• Decided: December 18, 2014
• Docket: CV1179-11
• Status: Unknown

Opinion

SUPERIOR COURT OF 'l I'; Us' ": 98 1 f_ f , 1

2 Li I ,l 'CO U R T L

5 IN THE SUPERIOR COURT O F GUAM

6 JOSEPH D. LOPEZ, SR., ) 7 CIVIL CASE NO. CV1179-11 PLAINTIFF, ) 8 DECISION AND ORDER: 9 V. ) DEFENDANT PAUL ROMIAS'S

10 MOTIONS TO ASSERT ADRIAN P. CRUZ, PAUL ROMIAs, AND RLC ) INTERNATIONAL, LLC, ) COUNTERCLAIMS AND 11 FOR SUMMARY JUDGMENT 12 DEFENDANTS.

13 ) ADRIAN P. CRUZ, ) 14

15 COUNTER-CLAIM PLAI NTIFF, ) ) 16 V.

17 ) JOSEPH D. LoPEz, SR., ) 18 COUN T E R- CLAIM DEFENDANT. ) 19

20 ADRIAN P. CRUZ, )

21 CROSS-CLAIM PLA INTI FF, ) 22 ) V. 23 ) PAUL RoMIAs, AND RLC INTERNATIONAL, LLC, ) CROSS-CLAIM DEFENDANTS.

LOPEZ v . CRUZ ET AL,CV1179-11 Decision and Order. Motions to Assert Counterclaims and for Summary Judgment Page 1 of 9 I. INTRODUCTION 1 This matter came before the Honorable Maria T. Cenzon for a Motion Hearing 2

3 on September 19, 2014. Joseph D. Lopez, Sr. ("Plaintiff") was represented by Attorney 4 William M. Fitzgerald and Paul Romias ("Defendant Romias") was represented by 5 Attorney Jon A. Visosky. Adrian P. Cruz ("Defendant Cruz") and RLC International 6

7 ("Defendant RLC") did not appear. After hearing oral argument on Defendant 8 Romias's Motion to Assert Counterclaims and his Motion for Summary Judgment, the 9 Court GRANTED the Motion to Assert Counterclaims from the bench and took the 10

11 Motion for Summary Judgment under advisement. The Court now issues this Decision 12 and Order DENYING the Motion for Summary Judgment. 13 II. FACTUAL AND PROCEDURAL BACKGROUND 14

15 Plaintiff filed a Complaint in this matter on July 20, 2011 for claims arising from 16 a business venture known as RLC International, LLC and entered into with Paul 17 Romias and Adrian P. Cruz. Plaintiff alleges: Defendants Romias, Cruz, and RLC 18

19 committed fraud and misrepresentation upon Plaintiff (Count I); breached a "Re- 20 Purchase of Member's Interest Agreement" executed as part of Plaintiff's 21 disassociation from Defendant RLC (Count II); he is entitled to reimbursement from 22

23 Defendants Cruz and Romias, jointly and severally, for payments he made towards 24 Defendant RLC's loan from Bank of Guam (Count III); Defendants Cruz and Romias i 25 are personally liable to Plaintiff for unlawfully conveying assets belonging to RLC

(Count IV) and breaching their duties of care (Count V) and loyalty (Count VI).

LOPEZ v.CRUz ET AL,CV1179-11 Decision and Order Motions to Assert Counterclaims and for Summary Judgment Page 2 of 9 Until the instant Motions were filed, progress in this matter, aside from a bench I

2 trial scheduled for July 16-18, 2014, had been delayed for a number of reasons; 3 including the recusal of four judges of the Superior Court of Guam before reaching the 4 undersigned, the bankruptcy of Defendant Cruz in 2013, and attempts at mediation in 5 6 2013.

7 Defendant Romias then filed the instant Motions to Assert Counterclaims and 8 for Summary Judgment (as two separate documents) on June 2, 2014. Plaintiff filed his 9

10 Oppositions to the Motions on July 7, 2014 and Defendant Romias filed his Replies on

11 July 14, 2014. The Court heard oral argument on both motions at a Motion Hearing on 12 September 19, 2014 and ruled from the bench on the Motion to Assert Counterclaims. 13

14 This written Decision and Order now follows to memorialize the Court's grant of the

15 Motion to Assert Counterclaims and adjudicate the Motion for Summary Judgment 16 previously taken under advisement after the Motion Hearing. The Court also issues 17

18 further orders as part of its Conclusion and Further Orders at Section V infra to

19 expedite resolving this matter after the more than three years since the Complaint was 20 filed. 21 III. LAW AND ANALYSIS: MOTION TO ASSERT COUNTERCLAIMS 22 a. DEFEENDANT' S COUNTERCLAIMS ARE PERMITTED BY LAW AND THEIR 23 ASSERTION WOULD NOT BE FUTILE. 24 Plaintiff conceded at oral argument that the proposed counterclaims were not 25

26 futile due to being brought outside of a shareholder derivative action, and were

permitted by the Uniform Limited Liability Company Act ("ULLCA").

LOPEZ V. CRUZ ET AL, CV1179-11 Decision and Order: Motions to Assert Counterclaims and for Summary Judgment Page 3 of 9 The Court concurs that Plaintiff's citation to Zeller v. Work Wear Corp., 450 1

2 F.Supp. 891, 896 (S.D.N.Y. 1978) is unpersuasive in light of the adoption of the ULLCA 3 in the Commonwealth of the Northern Mariana Islands on May 28, 2004 through 4 Public Law 14-11. Defendant Romias's proposed counterclaims (see Motion to Assert 5 6 Counterclaims, Exhibit "1" (June 2, 2014)) for breaching the articles of organization and

7 the operating agreement are statutory causes of action codified in Sections 409 and 410 8 of the ULLCA as breaches of the duties of loyalty and care. The rule established in 9

10 Zeller, requiring such claims be brought within a shareholder derivative action is

11 negated by the ULLCA. Therefore, an amendment to the pleadings to assert these 12 counterclaims can be addressed by the Court and would not be futile. 13

14 b . CONSIDERATION OF THE FIVE FOMAN FACTORS DO NOT GIVE THE COURT

15 CAUSE TO DENY THE AMENDMENT.

16 Although not briefed by the Parties in their moving papers, except indirectly on

17 the argument of futility, any leave to amend the pleadings to assert counterclaims 18 requires the Court consider the five Foman factors adopted in Arashi v. Nakashima, 2005 19 Guam 21 J[ 16 (citing Foman v. Davis, 371 US 178, 182 (1962)). Findings of. 1) undue 20

21 delay, 2) bad faith or dilatory motive by movant, 3) a movant's repeated failure to cure 22 deficiencies by earlier-requested amendments, 4) undue prejudice to the non-moving

party, and 5) futility of the amendment would give the Court cause to deny the

amend ment .

Simply stated, the amendment is not futile as discussed in M.a supra. Movant's

delay is not undue given this matter's procedural history of unintentional default by LOPEZ V. CRUZ ET AL, CV117 9-11 Decision and Order: Motions to Assert Counterclaims and for Summary Judgment Page 4 of 9 Defendant Romias, the disqualification of four earlier-assigned judges in the Superior 1

2 Court of Guam, the bankruptcy of Defendant Adrian P. Cruz, and the time spent in 3 pursuit of mediation. The Court finds no bad faith, dilatory motive, or undue prejudice 4 reflected in the record or alleged by Plaintiff. Finally, there were no earlier-requested 5 6 amendment(s) to the pleadings in this matter. Therefore, the Court finds no reason 7 under Arashi and Foman to deny the Motion to Assert Counterclaims. 8 IV. LAW AND ANALYSIS: MOTION FOR SUMMARY JUDGMENT 9 a . PLAINTIFF' S CLAIMS AGAINST A FELLOW MEMBER OF THE LIMITED 10 LIABILITY CORPORATION ARE LEGALLY COGNIZABLE. 11 Counts IV through VI of the Complaint (July 20, 2011) allege the Plaintiff's 12

13 fellow members in RLC International, LLC unlawfully conveyed assets of the LLC,

14 breached their duty of care, and breached their duty of loyalty. Defendant's Motion for 15 Summary Judgment relies upon provisions of the ULLCA distinguishing the personal 16

17 liability of a manager or member from the liability of the LLC itself: "[a] member or

18 manager is not personally liable for a debt, obligation, or liability of the company 19 solely by reason of being or acting as a member or manager." ULLCA Sect. 303(a). This 20 exemption is not blanket immunity for all conduct of a member while ostensibly 21

22 engaged in the LLC's ordinary course of business: indeed, ULLCA Sect. 409(c) 23 prohibits members from "engaging in grossly negligent or reckless conduct, intentional 24 misconduct, or a knowing violation of law" and the ULLCA explicitly provides that 25

26 such behavior may give rise to "an action against a limited liability company or 27 another member for legal or equitable relief." ULLCA Sect. 410(a) (emphasis added). 28 LOPEZ v. CRUZ ET AL,CV1179-11 Decision and Order. Motions to Assert Counterclaims and for Summary Judgment Page 5 of 9 Possible causes of act ion and remedies under t he ULLCA are "governed by 1

2 other law" under Sect. 410(b) but are nevertheless explicitly permitted by the ULLCA. 3 Defendant's argument that there is no legal basis for Plaintiff's causes of action in 4 Counts IV to VI is unavailing when Plaintiff pled the Defendants acted "unlawfully" in 5 6 Count IV and pled in Counts V and VI the Defendants breached their duties of care 7 and loyalty-duties imposed by ULLCA Sect. 409(a) upon all members and owed to

the LLC and their fellow members. 9

10 b . FACTUAL SPECIFICS NOT INCLUDED IN PLAINTIFF'S COMPLAINT, STANDING

11 ALONE, WOULD NOT JUSTIFY GRANTING SUMMARY JUDGMENT.

12 Defendant Romias's Motion for Summary Judgment references Plaintiff's

13 Complaint for failing to cite specific facts. He asserts that this lack of specificity meets 14 the movant's burden for summary judgment since he has pointed out the "absence of 15

16 evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 US 317,

17 325 (1986). A citation to the lack of evidence in Defendant's Complaint, as proof of 18 Plaintiff's inability to prevail on the merits and to illustrate the undisputed facts 19 relevant to a summary judgment motion, is improper in this instance. Plaintiff's 20

21 Complaint was only required to include in each count "a short and plain statement of 22 the claim showing that the pleader is entitled to relief." GRCP 8(a)(2). The Court 23 reviews Plaintiff's Complaint for its legal sufficiency, not its factual 24

comprehensiveness.

The lack of evidence in a complaint cannot be utilized as the evidentiary basis

for a summary judgment motion when it is movant's burden to demonstrate that the LOPEZ V.CRUZ ETAL, CV1179-11 Decision and Order. Motions to Assert Counterclaims and for Summary Judgment Page 6of9 non-moving party would be " unable to produce evidence in support of [the] 1

2 allegation." Celotex at 319 (emphasis added). The withholding of facts in a complaint 3 may be the result of strategic decisions, considerations of conciseness, or the need to 4 engage in discovery. When pleading, a claimant is not required to cite specific and 5 6 voluminous facts in support of their legal claim; an inability at the time of pleading or an 7 unwillingness to include detailed factual statements is not indicative of a claimant's 8 later ability to produce supporting evidence at a trial o n t he merits. Defendant 9

10 Romias's characterization of Plaintiff's Complaint as containing "conclusory

11 allegations" is correct when virtually nothing more is required to invoke judicial 12 adjudication; however, these "condusory allegations" are not properly considered or 13

14 referenced in a motion for summary judgment when movant must "demonstrate the

15 absence of a genuine issue of material fact. Celotex at 323. 16 c. THE EFFECT OF THE MEMBERSHIP REPURCHASE AGREEMENT UPON THE 17 PARTIES IS A DISPUTED FACT AFFECTING PLAINTIFF' S CLAIMS. 18 The Parties conceded at oral argument that discovery in this matter was not 19 complete. Minute Sheet, Motion Hearing at 2:42:45 (Sept. 19, 2019). Procedurally, 20

21 motion for summary judgment, on the grounds of "absence of evidence" is not rip 22 when incomplete discovery makes it impossible for Defendant Romias to confident) 23 represent to the Court that no evidence in support of Plaintiff's claims exist. Critically 24

25 Defendant's Motion for Summary Judgment and Plaintiff's Complaint reference a "Re

26 Purchase of Member's Interest Agreement" (see Ded. of Joseph D. Lopez, Sr., Exhibit 27 "C " (Sept. 8, 2011)). Both Parties admit the Agreement was validly executed, bu t 28 LOPEZ v.CRUZ ET AL,CV1179-11 Decision and Order: Motions to Assert Counterclaims and for Summary Judgment Page 7 of 9 Defendant submits no proof t hat a necessary condition precedent before the full 1

2 agreement became binding ever occurred. Id. J[ 2 ("Sale Conditioned Upon Release o 3 [Joseph D. Lopez, Sr.] from Personal Guaranty."). In fact, Plaintiff states in his Motion 4 for Summary Judgment that RLC Intl. was unable to obtain this required release and 5 6 only able to negotiate a reduction of Plaintiff's liability from the full $150,000 t

7 $50,000. Mot. for Summary Judgment at 4 (June 2, 2014)("the Bank of Guam neve 8 Romias separately, released Lopez fromand hisarranged guarantywith ... [but] bothgenerously Lopez andnegotiated Romias to with hold Cruz, them responsibl Lopez, ande 9

11 for only 1/3 share each ($50,000.00 each) of the RLC $150,000.00 debt, instead of holdin 12 each liable for the entire $150,000.00."). 13

14 binding Defendant's the Part ies, Motion is factuallysimult but Defendant premised uponrepresent aneously the repurchase agreement s t o the fully Court t hat

16 required condition precedent for binding the Parties to the agreement never occurred 17

18 This apparent contradiction is, standing alone, sufficient for the Court to den

19 Defendant's Motion on Counts I and II o f t he Co mplaint - claims which require 20 adjudicating the meaning, validity, scope, and effect of the Repurchase of Member' 21 Interest Agreement. 22

28 LOPEZ V. CRUZ ET AL, CV 117 9-11 Decision and O rder: Motions to Assert Counterclaims and for Summary judgment Page 8 of 9 V. CONCLUSION AND FURTHER ORDERS 1

2 For the foregoing reasons, Defendant Romias's Motion to Assert Counterclaims is 3 GRANTED and his Motion for Summary Judgment is DENIED. In t he int e r e s t o f 4

5 expediting the pr ogr ess of this ma tter , the Cour t HEREBY ORDERS the following: 6 1. As ordered at Motion Hearing, Plaintiff shall submit proof of the discharge in 7 bankruptcy of his claims against Adrian P. Cruz for the Court's review; 8 9 2. Defendant Romias shall file a pleading stating his counterclaims, as permitted by

10 the Court at Motion Hearing and in this Decision and Order by January 5, 2015; 11 3. Counsels in this matter should expeditiously attempt to confer under GRCP 26(f) 12 and CVR 16.1 and 16.2 of the Local Rules of the Superior Court of Guam and 13

14 submit an updated proposed scheduling order and discovery plan, for the Court's 15 review and prior to a scheduling conference, by January 20, 2015; 16 4. The Court has shortened time for these submissions due to the age of this matter 17

18 and its disposition of the instant Motions. 19 A Scheduling Conference is scheduled for February 4, 2015 at 3:30 PM. 20 SO ORDERED this 18th day of December, 2014. 21

SERVICE VIA COURT BOX 23 I acknowledge that & ,copy of the orlglnal hereto was In the 24 °°", " 4 " l l 25

'26 'Ift HONORABLE MARIA T. CENZON D uty Clerk. Supe: for Court of Guam 27 JUDGE, SUPERIOR COURT OF GUAM 28 11 LOPEZ V. CRUZ ETAL,CV1179-11

Decision and O rder. Motions to Assert Counterclaims and for Summary Judgment Page 9 of 9