Marks v. Hellmont

Opinion

5 THE DISTRICT OF GUAM 6 7 ROBERT JAY MARKS, CIVIL CASE NO. 19-000142

8 Plaintiff,

vs. 9 ORDER ON DEFENDANT’S MOTION TO DISMISS 10 LARS FILIP HELLMONT, DR. DEIDER NEUPER, as Trustee for BH Stiftung, and 11 FUJITA PROPERTY GUAM, INC.,

12 Defendant.

13 This matter is before the court on Defendant Fujita Property Guam, Inc.’s motion to 14 dismiss Plaintiff Robert Marks’s Amended Complaint. Def.’s Mot. to Dismiss, ECF No. 37. For 15 the following reasons, the court DENIES the motion and REMANDS the case to the Superior 16 Court of Guam. 17 18 I. Factual Background and Procedural History 19 A. Superior Court of Guam Proceedings 20 This case arises from an employment contract dispute between Plaintiff Robert Mark, a 21 Guam citizen, and Defendant Lars Hellmont, a citizen of Sweden and the United States. Pl.’s 22 Am. Compl. ¶¶ 1-3, ECF No. 20. In early 2014, Lars was working on behalf of BH Stiftung (BH 23 Trust), a Switzerland-based trust. Id. ¶¶ 7, 55. On March 13, 2014, Lars sent an email (the 24 “Original Agreement”) to Marks, purportedly offering Marks employment as the “administrator 25 26 of the trust and its two affiliated Foundations.” Id. Ex. A. The Original Agreement was addressed 27 to “Mr. Robert Marks, C/O Fujita Property Guam Inc.” and the signature line at the bottom listed on May 15, 2014 and would receive an $80,000.00 signing bonus with an $825,000.00 salary for 1 2 two years. Id. 3 Marks moved to Guam and provided his “professional and business executive 4 management services” to Defendants1 for several years; however, Marks alleges he was never 5 paid. Id. ¶¶ 9-12, 17-19. Marks complained several times to Lars, but Lars provided excuses and 6 requested extensions for payment. For example, Lars told Marks he would have to see if he could 7 “release Zurich [sic] funds or advance on the Zurich payment first prior to get together and sign 8 in a non-taxable [sic] jurisdiction” or that Marks should be patient because Lars could “only push 9 10 so hard with the Trust Administrator.” Id. ¶¶ 17-21. 11 Endeavoring to collect on his compensation, Marks allegedly committed Lars to pay $1.6 12 million to satisfy the terms of the Original Agreement (the “Substitute Agreement”) in December 13 2016. Id. ¶ 22. Seeking additional security, Marks sent Lars two draft promissory notes on 14 January 28, 2019 requesting payment under the Substitute Agreement. Id. ¶¶ 23-26. 15 By June of 2019, no payment had occurred under the Original Agreement, the Substitute 16 Agreement, or the promissory notes, and Marks finally raised the possibility of litigation with 17 18 Lars. Id. at ¶¶ 26-28. Asking Marks to hold off on a lawsuit to see if they could “try to settle 19 without lawyers,” Lars exchanged proposed settlement documents with Marks on June 10, 2019. 20 Id. at ¶¶ 29-34. These negotiations fell through, and on September 11, 2019, Marks filed a 21 lawsuit in Superior Court of Guam, naming Lars and Dr. Deider Neuper2 as Defendants. See 22 Pl.’s Compl., ECF No. 1 at 4-7. 23

24 25 1 The Amended Complaint (ECF No. 20) lumps Defendant Lars Hellmont, Defendant Deider Neuper, and 26 Defendant Fujita Property Guam, Inc. together and refers to them collectively as “LARS.” The name “Lars” as used in this Order represents Defendant Lars Hellmont in his individual capacity. 27 2 The settlement documents list Defendant Dr. Deider Neuper as Trustee of BH Trust. Pl.’s Am. Compl. ¶ 30. B. Removal and Joinder of Defendant Fujita 1 2 On October 11, 2019, Lars removed the matter to this court pursuant to 28 U.S.C. § 1446 3 on the basis of diversity jurisdiction. See Notice of Removal, ECF No. 1. On June 19, 2020, 4 Plaintiff filed an Amended Complaint and joined Defendant Fujita Property Guam, Inc. Pl’s Am. 5 Compl., ECF No. 20. 6 C. Fraudulent Joinder and Fujita’s Motion to Dismiss 7 Fujita Property Guam, Inc., is a real estate management and development company 8 incorporated in Guam with head offices in Guam; consequently, Fujita’s presence destroys 9 10 complete diversity in this case. See id. ¶ 5. After the joinder of a non-diverse defendant in a 11 removed diversity case, “the district court has two options…the court may deny joinder, or 12 permit joinder and remand the action to the State court.” Morris v. Princess Cruises, Inc., 236 13 F.3d 1061, 1068 (9th Cir. 2001) (internal citations omitted). 14 However, shortly after its joinder, Fujita filed a motion to dismiss the claims against 15 Fujita under the doctrine of “fraudulent joinder.” Def.’s Mot. to Dismiss, ECF No. 37. Fujita 16 argues there is no possibility that Marks can recover from Fujita, and thus Marks fraudulently 17 18 joined Fujita to force the case back to the Superior Court of Guam; consequently, the court 19 should ignore Fujita’s citizenship for purposes of this lawsuit. On the other hand, Marks argues 20 the Amended Complaint adequately shows he may possibly recover against Fujita. To bolster his 21 argument, Marks has filed three motions seeking to supplement the record with new documents 22 recently obtained in discovery. On March 3, 2021, the court granted Marks’s first and second 23 motions to supplement and allowed Fujita to file a sur-reply. ECF No. 107. Marks filed a third 24 25 motion to supplement on February 17, 2021, which remains pending. ECF No. 98. 26 II. Discussion 27 A. Legal Standard party named in the state court complaint and retain federal jurisdiction if the non-diverse party is 1 2 joined as a sham or if the joinder is fraudulent.” Plute v. Roadway Package System, Inc., 141 F. 3 Supp. 2d 1005, 1008 (N.D. Cal. 2001). Joinder is fraudulent when “the plaintiff fails to state a 4 cause of action against a resident defendant, and the failure is obvious according to the settled 5 rules of the state…”. Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998). 6 On the other hand, “[i]f there is doubt as to whether plaintiff[s] have stated a cause of 7 action, the joinder is not fraudulent, and the case should be remanded.” Parks v. New York Times 8 Company, 308 F.2d 474, 478 (5th Cir.1962). Stated another way, “if there is a possibility that a 9 10 state court would find that the complaint states a cause of action against any of the resident 11 defendants, the federal court must find that the joinder was proper and remand the case to the 12 state court.” Grancare, LLC v. Thrower by and through Mills, 889 F.3d 543, 548 (9th Cir. 2018) 13 (internal quotations omitted). The bar is high; “[t]here is a presumption against finding 14 fraudulent joinder, and defendants who assert that plaintiff has fraudulently joined a party carry a 15 heavy burden of persuasion.” Nishimoto v. Federman–Bachrach & Assocs., 903 F.2d 709, 712 n. 16 3 (9th Cir. 1990). It requires “a near certainty” that joinder of the party was fraudulent. Lewis v. 17 18 Time, Inc., 83 F.R.D. 455, 466 (E.D. Cal. 1979), aff'd, 710 F.2d 549 (9th Cir. 1983). 19 In analyzing whether a plaintiff’s case presents a possibility of recovery against a 20 defendant, the court may go “somewhat further” than the pleadings as “[t]he defendant [] is 21 entitled to present the facts showing the joinder to be fraudulent.” Ritchey, 139 F.3d at 1318. A 22 court may consider affidavits or other evidence to determine if the joinder was a sham, including 23 the consideration of “summary judgment-type evidence such as affidavits and deposition 24 25 testimony.” Morris, 236 F.3d at 1068 (internal quotations omitted). Despite the consideration of 26 “summary judgment-type evidence,” the court is to only engage in a “summary inquiry [] 27 appropriate only to identify the presence of discrete and undisputed facts that would preclude make the requisite decision in a summary manner itself points to an inability of the removing 1 2 party to carry its burden.” Id. “[A]ll disputed questions of fact and all ambiguities in the 3 controlling state law in favor of the non-removing party.” Plute, 141 F. Supp. 2d at 1008. 4 While the “fraudulent joinder standard shares some similarities with the analysis under 5 Rule 12(b)(6)…the test for fraudulent joinder and for failure to state a claim under Rule 12(b)(6) 6 are not equivalent.” Grancare, 889 F.3d at 549. Fraudulent joinder is a “jurisdictional inquiry” 7 and not an “adjudication on the merits” and is more akin to the “wholly insubstantial and 8 frivolous” standard for dismissing claims under Rule 12(b)(1) for lack of federal question 9 10 jurisdiction.” Id. While a Rule 12(b)(6) motion analyzes the sufficiency of a claim, fraudulent 11 joinder analyzes the viability of the claim; “arguments [that] go to the sufficiency of the 12 complaint, rather than to the possible viability of [] claims [] do not establish fraudulent joinder.” 13 Id. at 552. Moreover, “[a]ll doubts concerning the sufficiency of a cause of action because of 14 inartful, ambiguous or technically defective pleading must be resolved in favor of remand” and a 15 “lack of clear precedent does not render the joinder fraudulent.” Plute, 141 F. Supp. 2d at 1008 16 (referencing Gaus v. Miles, Inc., 980 F.2d 564, 566–67 (9th Cir. 1992)). 17 18 B. Analysis 19 The framework above requires the court to analyze the current record to determine 20 whether Marks has any possible chance of succeeding against Fujita on his claims in the 21 Amended Complaint, which assert eight violations of Guam law.3 Fujita presents three main 22 arguments for why Marks has no possibility of recover on any of the claims presented in the 23 Amended Complaint: (1) Fujita was not a party to any contract at all, and thus cannot be held 24 25

26 3 The Amended Complaint lists eight causes of action under Guam law: (1) breach of contract for the Original Agreement, (2) breach of the covenant of good faith and fair dealing for the Original Agreement, (3) breach of 27 contract for the Substitute Agreement, (4) breach of the covenant of good faith and fair dealing for the Substitute Agreement, (5) fraud in the inducement for the Original Agreement, (6) fraud in the performance for the Original liable for any breach; (2) the claims alleging fraud are not pled with sufficient particularity; and 1 2 (3) the Guam statute of limitations for claims based in contract has run. 3 1. Fujita as a non-party (applicable to Counts I-IV of the Amended Complaint).

4 In Guam, a party may only be held liable for a breach of contract if it was a party to that 5 contract. See Hemlani v. Hemlani, 2015 Guam 16, ¶ 19 (Guam Apr. 29, 2015). Fujita contends 6 the record shows it was never a party to any employment contract with Marks. Fujita’s name 7 never appeared in any of the communications between Lars and Marks, and Fujita was not a 8 signatory on any of documents that the two exchanged. Additionally, Lars never was an officer 9 10 or director4 of Fujita from 2012-2016 and consequently had no authority to bind Fujita; even if 11 he had, there is no indication that Fujita ratified Lars’s actions. Marks does not contest the facial 12 validity of these points. Rather, he argues that Fujita could still be on the hook for the breach of 13 the employment contract if Fujita was the “alter ego” of Lars. 14 Guam appears to have recognized the “alter ego doctrine” in Guam Economic 15 Development Authority v. Island Equipment Co., Inc., 1998 WL 270280, 1998 Guam 7 (May 28, 16 1998). In that case, Island Equipment, Inc. was attempting to enforce a consent judgment it had 17 18 obtained against several parties, including an individual defendant named “Go.” Id. at *1. During 19 its attempts to enforce the judgment, Island Equipment discovered two things: (1) Go was the 20 president of a corporation named RSG Philippines, and (2) Guam Visitor’s Bureau (GVB) and 21 Guam Economic Developmental Authority (GEDA) owed RSG money after RSG provided 22 marketing and liaison services in the Philippines. Id. at *1. Island Equipment obtained a writ of 23 execution ordering GEDA and GVB to pay the debt to satisfy the consent judgment against Go. 24 25 Id. GEDA and GVB moved to quash the writ; the trial court denied the motion, finding that RSG 26

27 4 Fujita filed a motion (ECF No. 39) asking the court to take judicial notice of the annual business reports for Fujita between 2012 and 2014 to establish that Lars was not an officer or director of record for Fujita. Under Rule 201 of was the alter ego of Go. Id. 1 2 The Supreme Court of Guam upheld the trial court’s denial of the motion to quash. It 3 reasoned a corporate veil is pierced when “(1) that there is such a unity of interest and ownership 4 that the separate personalities of the corporation and the individuals no longer exist and (2) that 5 failure to disregard the corporation would result in fraud or injustice.” Id. at *4 (citing Associated 6 Ins. Underwriters, Inc. v. Guam Int'l Insurers, Inc., Civ. No. 90–00059A (D. Guam App. Div. 7 1991). Among other facts, the court noted that Go was the president of RSG and payments owed 8 to RSG were transferred directly into accounts held in Go’s name; consequently, there was “no 9 10 separate identity between RSG” and Go, and thus “piercing the corporate veil was necessary to 11 avoid a grave injustice and to prevent a fraud.” Id. at *5 12 Other state courts applying the alter ego doctrine have recognized the analysis is a fact- 13 dependent inquiry. For example, Californian courts have reasoned the analysis “encompasses a 14 host of factors” including the following: 15 commingling of funds and other assets, failure to segregate funds of the separate 16 entities, and the unauthorized diversion of corporate funds or assets to other than corporate uses...; the treatment by an individual of the assets of the corporation as 17 his own...; the holding out by an individual that he is personally liable for the 18 debts of the corporation...; confusion of the records of the separate entities...; the identical equitable ownership in the two entities; the identification of the equitable 19 owners thereof with the domination and control of the two entities; identification of the directors and officers of the two entities in the responsible supervision and 20 management...; the use of a corporation as a mere shell, instrumentality or conduit for a single venture or the business of an individual or another corporation...; the 21 concealment and misrepresentation of the identity of the responsible ownership, 22 management and financial interest, or concealment of personal business activities...; the disregard of legal formalities and the failure to maintain arm's 23 length relationships among related entities...; the use of the corporate entity to procure labor, services or merchandise for another person or entity...; the 24 diversion of assets from a corporation by or to a stockholder or other person or 25 entity, to the detriment of creditors, or the manipulation of assets and liabilities between entities so as to concentrate the assets in one and the liabilities in 26 another...; the contracting with another with intent to avoid performance by use of a corporate entity as a shield against personal liability...; and the formation and 27 use of a corporation to transfer to it the existing liability of another person or Zoran Corp. v. Chen, 185 Cal. App. 4th 799, 811–12 (2010) (internal quotations omitted). Even 1 2 “[t]his long list” is “not exhaustive”; the facts to be considered by a court depend on the 3 “particular circumstances of each case.’” Id. 4 As this is usually a fact-intensive inquiry, any determination at this point would be 5 preliminary as limited discovery has occurred. Regardless, the pleadings in this case allege 6 incestuous business arrangements between continuously shifting shell companies, possibly 7 effectuated to minimize tax liability and/or contractual obligations. The Amended Complaint, its 8 attachments, and the exhibits attached to the briefing relating to the motion to dismiss establish 9 10 the following: 11 - When Marks was hired, Fujita was majority-owned by a company named South North Guam, LLC. Pl.’s Am. Complaint ¶ 15, ECF No. 20. 12 - South North Guam, LLC, consisted of several members, including a company 13 named South North Guam Management, LLC. Id. ¶ 16; Def’s Req. for Judicial 14 Notice Ex. B, ECF No. 39.

15 - South North Guam Management, LLC, itself was made up of at least one member: Defendant Lars Hellmont. Pl.’s Am. Complaint ¶ 16, ECF No. 20. 16

17 - In 2016, South North Guam, LLC, sold all its interest in Fujita to Prospector Properties. Def’s Req. for Judicial Notice Ex. C, ECF No. 39. 18 Consequently, it would be difficult for the court to say, as a matter of law, that Marks’s 19 alter ego argument would obviously fail. Furthermore, the purported distinction between 20 Fujita and Lars is not as clear as Fujita contends - Lars signed many documents 21 22 representing himself as the Co-Owner, Managing Partner, or Owner of Fujita Property 23 Guam, Inc. Decl. of Robert Jay Marks Ex. J, ECF No. 48 at 96-114. 24 The record also contains some evidence that Fujita may have been Marks’s 25 employer. The Original Agreement is addressed to Marks with “C/O FUJITA 26 PROPERTY GUAM INC.” named at the top, and Fujita Property Guam, Inc. is listed as 27 No. 20; Decl. of Robert Jay Marks Ex. A, ECF No. 48 at 4-5. In 2014, Lars was 1 2 consistently emailing Fujita’s secretary attempting to facilitate reimbursement to Marks, 3 and Fujita’s financial ledgers indicate that Fujita reimbursed Marks for traveling 4 expenses. Decl. of Robert Jay Marks Ex. I, ECF No. 48 at 91-95. 5 In sum, the record reflects that Lars and Fujita were closer in practice than they 6 were on paper. These facts alone make it possible that Lars was using Fujita as his alter 7 ego, and if he was, it would be an injustice to allow Lars to hide behind the corporate veil 8 to avoid his contractual obligations. 9 10 The affidavits and evidence provided in Marks’s supplemental motions and Fujita’s sur- 11 reply only further underscore this possibility. Lars acted in Fujita’s name in opposing the 12 renaming of a road nearby the “ITC” building, a building managed by Fujita. Decl. of Pl.’s 13 Counsel Ex. F, ECF No. 55 at 18-34. Furthermore, Lars exerted a large amount of control over 14 Fujita’s secretary who had access to Fujita’s bank accounts. Decl. of Pl.’s Counsel ¶¶ 16-36, 15 ECF No. 65 at 3-6. Lars currently appears to be the sole member of South North Guam, LLC, the 16 entity that owned most of Fujita’s shares prior to 2016. Id. ¶ 60. And despite Lars’s problems 17 18 complying with the court’s discovery orders,5 Lars provided a lengthy affidavit to Fujita wherein 19 he admits not only that he previously had an 18 percent interest in Fujita, but that he was paid 20 $9,000.00 a month by South North Guam Management, LLC, by way of Fujita Guam. Decl. of 21 Lars Hellmont ¶¶ 8-9, ECF No. 82 at 17-21. 22 Fujita’s other arguments are unavailing. For one, Fujita argues the merits of whether 23 there was a contract at all. The Ninth Circuit has been clear on this point; when the determination 24 25 requires the court to reach at the underlying merits, the issue is inappropriate for application of 26 fraudulent joinder. Fujita also takes issue with the fact that the Amended Complaint does not 27 5 The court granted two of Marks’s motions to compel discovery from Lars and warned Lars that continued specifically assert any alter ego theory of liability. However, this argument conflates the 1 2 standards of fraudulent joinder and a Rule 12(b)(6) motion. The court is not to test the 3 sufficiency of the complaint, but rather the viability of Marks’s claims. Here, Guam has 4 recognized the alter ego theory, and the present record indicates that Lars may have been using 5 Fujita as an alter ego. Even if the Amended Complaint could not withstand a Rule 12(b)(6) 6 motion, the application of fraudulent joinder is not automatically triggered, as “ [t]he district 7 court must consider [] whether a deficiency in the complaint can possibly be cured by granting 8 the plaintiff leave to amend.” Grancare, 889 F.3d at 550. If an amendment could repair the issue, 9 10 remand is appropriate. Id. Here, Marks could conceivably seek leave to amend his complaint. 11 Whether Marks’s claims will succeed down the road is irrelevant to the question of 12 fraudulent joinder. As the court cannot find it “a near certainty” that Fujita is not a party to the 13 contractual relationships described in the Amended Complaint, the court cannot find that Fujita 14 was fraudulently joined. Lewis, 83 F.R.D. at 466. 15 2. Particularity of the Amended Complaint (applicable to Counts IV – VIII) 16 Several claims in the Amended Complaint allege fraud. Fujita argues that under the local 17 18 and federal pleading rules, allegations of fraud must be pled with particularity. See Guam R. Civ. 19 P. 9(b) and Fed. R. Civ. P. 9(b). Here, the Amended Complaint fails to do so, and thus Marks has 20 no possibility of recovery against Fujita for the fraud claims. 21 As stated previously, direct attacks on the sufficiency of the Amended Complaint 22 conflate the Rule 12(b)(6) standard with the fraudulent joinder standard. “If a defendant cannot 23 withstand a Rule 12(b)(6) motion, the fraudulent inquiry does not end there. For example, the 24 25 district court must consider, as it did in this case, whether a deficiency in the complaint can 26 possibly be cured by granting the plaintiff leave to amend.” Grancare, 889 F.3d at 550. Here, 27 Marks possibly could seek leave to amend his complaint, making the issue inappropriate for the 3. Statute of Limitations (applicable to all Counts) 1

2 Lastly, Fujita asserts that the statute of limitations has run for Marks’s claims. The Guam 3 statute of limitations for any action based in a written contract is four years, and three years for 4 an action based in fraud. 7 GUAM CODE ANN. §§ 11303, 11305. Fujita argues the clock began 5 ticking in May 2016, when Marks’s two-year term of employment allegedly ended. As the 6 Amended Complaint was not filed until June 19, 2020, the statute of limitations ran by the time 7 the lawsuit was filed. 8 An affirmative defense, such as the statute of limitations, is normally not a reason to 9 10 apply fraudulent joinder. See Ritchey, 139 F.3d at 1318. The Ninth Circuit has reasoned there “is 11 a distinction” between the questions of whether there was a valid cause of action, and whether 12 there was a defense to a valid cause of action, unless the defense concerns material elements of 13 the underlying claim. Id. 14 Here, the statute of limitations is unrelated to the merits of Marks’s claims, and thus does 15 not affect the validity of those claims. Furthermore, Marks asserts in his Amended Complaint 16 that all statutes of limitation should be equitably tolled. Equitable estoppel as applicable to a 17 18 statute of limitations is recognized in Guam. Bautista v. Torres, 2020 Guam 28, ¶ 24 (Guam Dec. 19 29, 2020) (holding that a defendant is “estopped from asserting the statute of limitations as a bar 20 to plaintiff's action if he has done anything that would tend to lull the plaintiff into inaction and 21 thereby permit the statutory limitation to run against him.”) (internal quotations omitted). Here, 22 the record reflects several instances where Lars told Marks to be patient while he attempted to 23 move funds around or that payment would be shortly forthcoming. Lars also expressly asked 24 25 Marks to see if they could “settle without lawyers” which caused Marks to delay filing suit. ECF 26 No. 20 at ¶ 33. 27 Once again, the court is not tasked today with determining whether the statute of 12 of 12

1 inquiry” to see if it is obvious the statute would prevent Marks from being successful on his 2 claims. As Guam recognizes equitable tolling, and the record reflects that Lars may have lulled 3 Marks into inaction, the court cannot conclude that Fuyjita’s statute of limitations defense is so 4 obviously applicable that Marks has no possibility of succeeding on his claims. 5 III. Conclusion 6 The court emphasizes that it does not, and need not, reach the merits of Marks’s claims. Indeed, any one of Fujita’s arguments could ultimately be correct. Nevertheless, the court

9 cannot obviously conclude that Marks has no chance of recovery against Fujita. The limited 10 record, in part a result of the limited discovery that has occurred, eschews any type of 11 “summary inquiry” or an “obvious” determination appropriate for application of the fraudulent 12 joinder rule. 1S As Fujita is a non-diverse defendant, and the court declines to apply fraudulent joinder, IT IS HEREBY ORDERED that Fujita’s Motion to Dismiss is DENIED and this matter be REMANDED to Superior Court of Guam.

7 SO ORDERED. 18 19 /s/ Frances M. Tydingco-Gatewood Chief Judge 20 a) & Dated: Mar 31, 2021 51 ae A

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