THE HONORABLE JOHN C. COUGHENOUR 1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 WESTERN DISTRICT OF WASHINGTON 9 MFG UNIVERSE CORP., et al., CASE NO. C21-0742-JCC 10 Plaintiffs, ORDER 11 v. 12 NEXT GEN LED, INC., et al., 13 Defendants. 14
15 This matter comes before the Court on Defendants Andrew Myers,1 Joe Visintainer, 16 Dave Inman, and Scott Schneider’s (collectively, the “Individual Defendants”) motion to dismiss 17 Plaintiffs’ Third Amended Complaint (“TAC”) (Dkt. No. 56). Having thoroughly considered the 18 briefing and the relevant record, the Court finds oral argument unnecessary and hereby GRANTS 19 in part and DENIES in part the motion for the reasons described herein. 21 The Court previously described the allegations contained in the Second Amended 22 Complaint (“SAC”) (Dkt. No. 47), and will not repeat them here. (See Dkt. No. 54.) The TAC 23 incorporates those allegations, adds new allegations, and two new causes of action. (See 24 generally Dkt. No. 55.) The new allegations are claim-specific and separately stated against each 25 1 The spelling of Mr. Myers’ surname varies throughout the parties’ filings. “Myers” will 26 be used throughout this order. The Court means no disrespect if this is not an accurate spelling. 1 of the Individual Defendants, except for a declaration from Plaintiff Paul Koo, incorporated into 2 the TAC, describing conduct by all. (See Dkt. Nos. 55 at 7–38, 55-1.) The Individual Defendants 3 again move to dismiss, arguing that the TAC (a) fails to state the claims asserted and (b) adds 4 causes of action without the requisite authorization to do so. (See generally Dkt. No. 56.) 6 A. Additional Claims 7 As a preliminary matter, the Court agrees that Plaintiffs lack the necessary leave to add 8 claims. See Fed. R. Civ. P. 15(a)(2). When the Court granted Plaintiffs leave to amend the SAC, 9 it did so solely with respect to the “remaining claims” stated in the SAC (after dismissal of the 10 conversion claim). (Dkt. No. 54 at 5–6.) Neither a breach of implied covenant of good faith and 11 fair dealing nor an unjust enrichment claim were stated in the SAC. (See generally Dkt. No. 47). 12 Because Plaintiffs did not independently seek leave to add either claim, they are DISMISSED. 13 B. Rule 12(b)(6) Motion 14 To survive the Rule 12(b)(6) motion on the remaining claims, the TAC “must contain 15 sufficient factual matter, accepted as true, to state [] claim[s] . . . plausible on [their] face.” 16 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). Meaning, it must “plead[] factual 17 content that allows the court to draw the reasonable inference that the defendant is liable for the 18 misconduct alleged.” Id. at 678. In reviewing the Individual Defendants’ motion, the Court 19 accepts factual allegations in the complaint as true and draws all reasonable inferences in 20 Plaintiffs’ favor. Vasquez v. Los Angeles Cnty., 487 F.3d 1246, 1249 (9th Cir. 2007). This does 21 not mean, though, that the Court must accept legal conclusions as factual allegations. Id. 22 As the Court previously indicated, because default has already been entered against 23 Defendant Next Gen LED, Inc., only the Individual Defendants are contesting Plaintiffs’ claims. 24 (See Dkt. No. 54 at 1 n.1.) And unlike the SAC, which suggested a variety of mechanisms 25 ascribing personal liability to those persons, (see Dkt. No. 54 at 4), the TAC focuses on one—the 26 “Responsible Corporate Officer Doctrine.” (See Dkt. Nos. 55 at 8–10, 15–19, 23–27, 31–35; 57 1 at 3–4.) Under the Doctrine, “[i]f a corporate officer participates in [] wrongful conduct, or with 2 knowledge approves of the conduct, then the officer, as well as the corporation, is liable for the 3 penalties.” State v. Ralph Williams’ N.W. Chrysler Plymouth, Inc., 553 P.2d 423, 439 (Wash. 4 1976) (citing Johnson v. Harrigan-Peach Land Dev. Co., 489 P.2d 923, 928 (Wash. 1971) 5 (explaining that “an officer of a corporation who takes no part whatever in a tort committed by 6 the corporation is not personally liable to third persons for such tort but . . . this immunity 7 vanishes if such corporate officer knowingly participated in, cooperated in the doing of, or 8 directed that the acts be done.”)). 9 The allegations contained in the TAC vary. With respect to Defendant Andrew Myers, 10 they are detailed, specific, and describe affirmative conduct generally supporting the TAC’s 11 claims. (See Dkt. Nos. 55 at 3–15, 55-1.) Those allegations include that Mr. Myers (a) personally 12 negotiated Next Gen’s contract with Plaintiffs while knowingly misrepresenting Next Gen’s 13 financial condition; (b) affirmatively decided to overextend the organization financially; and (c) 14 similarly made the decision for Next Gen to renege on its agreement with Plaintiffs, even going 15 so far as to inform Plaintiffs of his intent to do so. (Id.) Mr. Myers also acted as surety and/or 16 personal guarantor for the resulting obligation. (Dkt. No. 55 at 4.) 17 The Individual Defendants contend these allegations are not sufficient to trigger the 18 Responsible Corporate Officer Doctrine, at least for purposes of a breach of contract claim 19 against Mr. Myers, based on the lack of a “public danger” from the alleged conduct. (See Dkt. 20 No. 56 at 4 (citing State v. Arlene’s Flowers, Inc., 441 P.3d 1203, 1237 (Wash. 2019)).) While, 21 admittedly, courts more frequently apply the Doctrine in such contexts, the Individual 22 Defendants point to no controlling authority requiring this component. Indeed, the Washington 23 Court of Appeals recently applied it to tortious activity lacking a clear public impact. See R.N. v. 24 Kiwanis Intl., 496 P.3d 748, 760 (Wash. Ct. App. 2021). Therefore, it stands to reason that the 25 Doctrine would apply equally to business dealings. And it is unquestioned that it applies to 26 violations of Washington’s Consumer Protection Act (“CPA”). See State v. Arlene’s Flowers, 1 Inc., 441 P.3d 1203, 1237 (Wash. 2019). For these reasons, the Court FINDS that the TAC 2 adequately states claims against Mr. Myers for breach of contract,2 CPA violations, and 3 violations of the Voidable Transactions Act.3 4 For the remaining Defendants, the TAC alleges that each was in a position to know of 5 Next Gen’s and/or Mr. Myers’ unlawful conduct, and do something about it, but failed to act. 6 (See Dkt. No. 55 at 15–38, 55-1.) Whether this is sufficient to trigger the Doctrine is much more 7 questionable. The cases Plaintiffs cite either do not stand for this proposition, are distinguishable 8 to this case, are not controlling, or all of the above.4 (See Dkt. No. 55 at 8–9.) The Individual 9 Defendants make this very point. (See Dkt. No. 56 at 4.) Yet Plaintiffs fail to adequately address 10 it on reply. (See generally Dkt. No. 57.) Instead, their brief overstates the authority and 11 allegations contained within the TAC. (See id. at 3–5.) Therefore, the Court is left to conclude 12 that the Doctrine does not apply to the remaining Individual Defendants, as pleaded. As a result, 13 all claims against the remaining Individual Defendants are DISMISSED. 14 C. Further Amendment 15 Finally, the Court FINDS the dismissals noted above should be with prejudice. First, 16 Plaintiffs do not ask the Court for further leave to amend. (See generally Dkt. No.
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THE HONORABLE JOHN C. COUGHENOUR 1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 WESTERN DISTRICT OF WASHINGTON 9 MFG UNIVERSE CORP., et al., CASE NO. C21-0742-JCC 10 Plaintiffs, ORDER 11 v. 12 NEXT GEN LED, INC., et al., 13 Defendants. 14
15 This matter comes before the Court on Defendants Andrew Myers,1 Joe Visintainer, 16 Dave Inman, and Scott Schneider’s (collectively, the “Individual Defendants”) motion to dismiss 17 Plaintiffs’ Third Amended Complaint (“TAC”) (Dkt. No. 56). Having thoroughly considered the 18 briefing and the relevant record, the Court finds oral argument unnecessary and hereby GRANTS 19 in part and DENIES in part the motion for the reasons described herein. 21 The Court previously described the allegations contained in the Second Amended 22 Complaint (“SAC”) (Dkt. No. 47), and will not repeat them here. (See Dkt. No. 54.) The TAC 23 incorporates those allegations, adds new allegations, and two new causes of action. (See 24 generally Dkt. No. 55.) The new allegations are claim-specific and separately stated against each 25 1 The spelling of Mr. Myers’ surname varies throughout the parties’ filings. “Myers” will 26 be used throughout this order. The Court means no disrespect if this is not an accurate spelling. 1 of the Individual Defendants, except for a declaration from Plaintiff Paul Koo, incorporated into 2 the TAC, describing conduct by all. (See Dkt. Nos. 55 at 7–38, 55-1.) The Individual Defendants 3 again move to dismiss, arguing that the TAC (a) fails to state the claims asserted and (b) adds 4 causes of action without the requisite authorization to do so. (See generally Dkt. No. 56.) 6 A. Additional Claims 7 As a preliminary matter, the Court agrees that Plaintiffs lack the necessary leave to add 8 claims. See Fed. R. Civ. P. 15(a)(2). When the Court granted Plaintiffs leave to amend the SAC, 9 it did so solely with respect to the “remaining claims” stated in the SAC (after dismissal of the 10 conversion claim). (Dkt. No. 54 at 5–6.) Neither a breach of implied covenant of good faith and 11 fair dealing nor an unjust enrichment claim were stated in the SAC. (See generally Dkt. No. 47). 12 Because Plaintiffs did not independently seek leave to add either claim, they are DISMISSED. 13 B. Rule 12(b)(6) Motion 14 To survive the Rule 12(b)(6) motion on the remaining claims, the TAC “must contain 15 sufficient factual matter, accepted as true, to state [] claim[s] . . . plausible on [their] face.” 16 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). Meaning, it must “plead[] factual 17 content that allows the court to draw the reasonable inference that the defendant is liable for the 18 misconduct alleged.” Id. at 678. In reviewing the Individual Defendants’ motion, the Court 19 accepts factual allegations in the complaint as true and draws all reasonable inferences in 20 Plaintiffs’ favor. Vasquez v. Los Angeles Cnty., 487 F.3d 1246, 1249 (9th Cir. 2007). This does 21 not mean, though, that the Court must accept legal conclusions as factual allegations. Id. 22 As the Court previously indicated, because default has already been entered against 23 Defendant Next Gen LED, Inc., only the Individual Defendants are contesting Plaintiffs’ claims. 24 (See Dkt. No. 54 at 1 n.1.) And unlike the SAC, which suggested a variety of mechanisms 25 ascribing personal liability to those persons, (see Dkt. No. 54 at 4), the TAC focuses on one—the 26 “Responsible Corporate Officer Doctrine.” (See Dkt. Nos. 55 at 8–10, 15–19, 23–27, 31–35; 57 1 at 3–4.) Under the Doctrine, “[i]f a corporate officer participates in [] wrongful conduct, or with 2 knowledge approves of the conduct, then the officer, as well as the corporation, is liable for the 3 penalties.” State v. Ralph Williams’ N.W. Chrysler Plymouth, Inc., 553 P.2d 423, 439 (Wash. 4 1976) (citing Johnson v. Harrigan-Peach Land Dev. Co., 489 P.2d 923, 928 (Wash. 1971) 5 (explaining that “an officer of a corporation who takes no part whatever in a tort committed by 6 the corporation is not personally liable to third persons for such tort but . . . this immunity 7 vanishes if such corporate officer knowingly participated in, cooperated in the doing of, or 8 directed that the acts be done.”)). 9 The allegations contained in the TAC vary. With respect to Defendant Andrew Myers, 10 they are detailed, specific, and describe affirmative conduct generally supporting the TAC’s 11 claims. (See Dkt. Nos. 55 at 3–15, 55-1.) Those allegations include that Mr. Myers (a) personally 12 negotiated Next Gen’s contract with Plaintiffs while knowingly misrepresenting Next Gen’s 13 financial condition; (b) affirmatively decided to overextend the organization financially; and (c) 14 similarly made the decision for Next Gen to renege on its agreement with Plaintiffs, even going 15 so far as to inform Plaintiffs of his intent to do so. (Id.) Mr. Myers also acted as surety and/or 16 personal guarantor for the resulting obligation. (Dkt. No. 55 at 4.) 17 The Individual Defendants contend these allegations are not sufficient to trigger the 18 Responsible Corporate Officer Doctrine, at least for purposes of a breach of contract claim 19 against Mr. Myers, based on the lack of a “public danger” from the alleged conduct. (See Dkt. 20 No. 56 at 4 (citing State v. Arlene’s Flowers, Inc., 441 P.3d 1203, 1237 (Wash. 2019)).) While, 21 admittedly, courts more frequently apply the Doctrine in such contexts, the Individual 22 Defendants point to no controlling authority requiring this component. Indeed, the Washington 23 Court of Appeals recently applied it to tortious activity lacking a clear public impact. See R.N. v. 24 Kiwanis Intl., 496 P.3d 748, 760 (Wash. Ct. App. 2021). Therefore, it stands to reason that the 25 Doctrine would apply equally to business dealings. And it is unquestioned that it applies to 26 violations of Washington’s Consumer Protection Act (“CPA”). See State v. Arlene’s Flowers, 1 Inc., 441 P.3d 1203, 1237 (Wash. 2019). For these reasons, the Court FINDS that the TAC 2 adequately states claims against Mr. Myers for breach of contract,2 CPA violations, and 3 violations of the Voidable Transactions Act.3 4 For the remaining Defendants, the TAC alleges that each was in a position to know of 5 Next Gen’s and/or Mr. Myers’ unlawful conduct, and do something about it, but failed to act. 6 (See Dkt. No. 55 at 15–38, 55-1.) Whether this is sufficient to trigger the Doctrine is much more 7 questionable. The cases Plaintiffs cite either do not stand for this proposition, are distinguishable 8 to this case, are not controlling, or all of the above.4 (See Dkt. No. 55 at 8–9.) The Individual 9 Defendants make this very point. (See Dkt. No. 56 at 4.) Yet Plaintiffs fail to adequately address 10 it on reply. (See generally Dkt. No. 57.) Instead, their brief overstates the authority and 11 allegations contained within the TAC. (See id. at 3–5.) Therefore, the Court is left to conclude 12 that the Doctrine does not apply to the remaining Individual Defendants, as pleaded. As a result, 13 all claims against the remaining Individual Defendants are DISMISSED. 14 C. Further Amendment 15 Finally, the Court FINDS the dismissals noted above should be with prejudice. First, 16 Plaintiffs do not ask the Court for further leave to amend. (See generally Dkt. No. 57.) Second, 17 such amendment would not be appropriate here, given the resulting undue delay, Plaintiffs’ 18
19 2 The parties debate whether the breach of contract claim, as alleged in the TAC, also encompasses Mr. Myers’ guarantor agreement. (Compare Dkt. No. 56 at 4, with Dkt. No. 57 at 20 5.) The Court FINDS that the TAC adequately states a claim for breach of this agreement as well, separate and apart from Next Gen’s agreement with Plaintiffs. 21 3 To the extent the claims are subject to Rule 9, the Court FINDS that the TAC alleges 22 with adequate specificity the conduct by Mr. Myers supporting these claims. 4 The TAC is replete with legal citation not repeated in Plaintiff’s brief opposing the 23 motion, (compare Dkt. No. 55, with Dkt. No. 57), which includes the following: Arlene’s 24 Flowers, Inc., 441 P.3d at 1237; U.S. v. Park, 421 U.S. 658, 674 (1975); U.S. v. Pollution Abatement Services of Oswego, Inc., 763 F.2d 133, 135 (2d Cir. 1985); State of N.Y. v. Shore 25 Realty Corp., 759 F.2d 1032, 1052 (2d Cir. 1985); U.S. v. Gulf Park Water Co., Inc., 972 F. Supp. 1056, 1064 (S.D. Miss. 1997); State, Dept. of Ecology v. Lundgren, 971 P.2d 948, 953 26 (Wash. Ct. App. 1999). 1 repeated failure to cure deficiencies previously identified, the likely prejudice to the Individual 2 Defendants other than Mr. Myers, and the anticipated futility of such an amendment. See Foman 3 v. Davis, 371 U.S. 178, 182 (1962). The bottom line is this: Plaintiffs filed their original 4 complaint more than 16 months ago, (see Dkt. No. 1), and it is now time for this case to move 5 forward. 7 For the foregoing reasons, Defendants’ motion to dismiss (Dkt. No. 56) is GRANTED in 8 part and DENIED in part. The Court ORDERS as follows: 9 • The Breach of the Implied Covenant of Good Faith and Fair Dealing claim is 10 DISMISSED with prejudice; 11 • The Unjust Enrichment claim is DISMISSED with prejudice; 12 • All claims against Defendants Joe Visintainer, Dave Inman, Scott Schneider and 13 their marital estates are DISMISSED with prejudice; and 14 • If not already completed, the parties must hold the Rule 26(f) conference, submit initial 15 disclosures, and file the joint status report previously ordered in Docket Number 42 16 within 14 days of this Order. 17 DATED this 14th day of October 2022. A 18 19 20 John C. Coughenour 21 UNITED STATES DISTRICT JUDGE 22 23 24 25