Rodger May et al. v. John Ketcham

• Court: District Court, W.D. Washington
• Decided: March 2, 2026
• Docket: 2:25-cv-01353
• Status: Unknown

Opinion

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3 4 5 UNITED STATES DISTRICT COURT 6 WESTERN DISTRICT OF WASHINGTON AT SEATTLE 7 RODGER MAY et al., CASE NO. 2:25-cv-01353-JNW 8 Plaintiff, ORDER GRANTING DEFENDANT’S 9 MOTION TO DISMISS v. 10 JOHN KETCHAM, 11 Defendant. 12 13 1. INTRODUCTION 14 This matter comes before the Court on Defendant John Ketcham’s motion to 15 dismiss Plaintiffs’ amended complaint. Dkt. No. 9. Plaintiffs, Rodger May and Fish 16 Tank, LLC, assert claims against Ketcham for breach of contract and declaratory 17 judgment. Dkt. No. 7. 18 The dispute arises from the sale of Peter Pan Seafood Company’s assets 19 through a state court receivership proceeding in King County Superior Court. May 20 bought those assets—including the Port Moller processing facility in Alaska—at a 21 court-supervised auction. Ketcham, who holds a junior lien on the Port Moller 22 property, has challenged the sale and continues to assert his lien rights. Plaintiffs 23 1 claim that Ketcham’s position breaches a Subordination and Intercreditor 2 Agreement (“SIA”)1 between Ketcham and Wells Fargo, to which Plaintiffs claim

3 third-party beneficiary status. Plaintiffs also seek a declaratory judgment that 4 Ketcham’s lien has been released. 5 For the reasons below, the Court GRANTS the motion. Plaintiffs’ breach of 6 contract claim is dismissed without prejudice for failure to plead facts sufficient to 7 state a claim. Plaintiffs’ declaratory judgment claim is dismissed under Brillhart 8 abstention. Plaintiffs are granted leave to file a Second Amended Complaint as to

9 the breach of contract claim. 10 2. LEGAL STANDARD 11 A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of a 12 complaint. The Court will grant the motion only if the complaint fails to allege 13 “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. 14 Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the 15 plaintiff pleads factual content that allows the court to draw the reasonable 16 inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 17 556 U.S. 662, 678 (2009) (citations omitted). The plausibility standard is less than 18 probability, “but it asks for more than a sheer possibility” that a defendant did 19 something wrong. Iqbal, 556 U.S. at 678 (citations omitted). “Where a complaint 20

21 1 The Court recognizes that the Parties refer to the underlying contract at issue using different names, the Court adopts to refer to the Agreement using the header 22 identified on the first page of the contract, the “Subordination and Intercreditor Agreement,” SIA for short. Dkt. No. 10-1. 23 1 pleads facts that are ‘merely consistent with’ a defendant's liability, it ‘stops short of 2 the line between possibility and plausibility of ‘entitlement to relief.’” Id. (quoting

3 Twombly, 550 U.S. at 557). In other words, a plaintiff must plead “more than an 4 unadorned, the-defendant-unlawfully-harmed-me accusation.” Id. 5 When considering a motion to dismiss, the Court accepts factual allegations 6 pleaded in the complaint as true and construes them in the light most favorable to 7 the plaintiff. Lund v. Cowan, 5 F.4th 964, 968 (9th Cir. 2021). But courts “do not 8 assume the truth of legal conclusions merely because they are cast in the form of

9 factual allegations.” Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir. 2011). Thus, 10 “conclusory allegations of law and unwarranted inferences are insufficient to defeat 11 a motion to dismiss.” Id. (internal quotation marks omitted). 12 3. DISCUSSION 13 3.1 Plaintiff’s breach of contract claim is dismissed without prejudice. 14 The SIA is governed by New York law.2 Dkt. No. 10 at 10 n.5 (citing Dkt. No. 15 10-1 § 16). To state a breach of contract claim under New York law, plaintiffs must 16 plausibly allege: (1) the existence of a contract, (2) performance under the contract 17 by plaintiff, (3) breach of that contract by the defendant, and (4) resulting damages. 18 19 20 2 On a motion to dismiss, the Court may consider documents attached to or 21 incorporated by reference in the complaint, as well as matters subject to judicial notice. Lee v. County of Los Angeles, 250 F.3d. 668, 688 (9th. Cir. 2001). Although 22 Plaintiffs did not attach the SIA to their amended complaint, they reference a version of the agreement filed by Ketcham and they do not dispute its authenticity. 23 Dkt. No. 14 at 4 n.5. The Court therefore considers the SIA in resolving this motion. 1 Abu Dhabi Com. Bank v. Morgan Stanley & Co. Inc., 651 F. Supp. 2d 155, 173 2 (S.D.N.Y. 2009).

3 Under New York law, a third-party beneficiary claimant must establish “(1) 4 the existence of a valid and binding contract between other parties, (2) that the 5 contract was intended for his benefit and (3) that the benefit to him is sufficiently 6 immediate, rather than incidental, to indicate the assumption by the contracting 7 parties of a duty to compensate him if the benefit is lost.” State of Cal. Pub. 8 Employees' Ret. Syst. v. Shearman & Sterling, 741 N.E.2d 101, 104 (N.Y. 2000).

9 When considering the intent of the parties, courts consider the surrounding 10 circumstances as well as the agreement. Trans–Orient Marine Corp. v. Star Trading 11 & Marine, Inc., 925 F.2d 566, 573 (2d Cir. 1991) (citing Restatement (Second) of 12 Contracts § 302(b) (1981)). 13 Dismissal of a third-party beneficiary claim is appropriate when the contract 14 rules out any intent to benefit the claimant, State of Cal. Pub. Employees’ Ret. 15 Sys., 741 N.E.2d 103–04, or when the complaint relies on language in the contract

16 or other circumstances that will not support the inference that the parties intended 17 to confer a benefit on the claimant, First Capital Asset Mgmt., Inc. v. N.A. Partners, 18 L.P., 688 N.Y.S.2d 25 (N.Y. App. Div. 1999) (dismissing third- 19 party beneficiary complaint where there was no allegation that performance was 20 owed directly to claimant “nor is there an allegation of any contractual language or 21 other circumstances from which an intent to confer a benefit on petitioner could be

22 inferred”). 23 1 Ketcham raises substantial arguments about whether Plaintiffs qualify as 2 intended third-party beneficiaries of the SIA, including a dispute about whether

3 Section 2.6 or Section 2.2 of the agreement governs the sale at issue. The parties 4 also disagree about whether a sale by a court-appointed receiver qualifies as a sale 5 by a “Company” within the meaning of Section 2.6. These are contested questions of 6 contract interpretation that the Court need not resolve at this stage. Even assuming 7 Plaintiffs could establish third-party beneficiary status, their claim independently 8 fails because the amended complaint does not adequately plead breach.

9 To survive a motion to dismiss on their contract claim, Plaintiffs must allege 10 facts showing that Ketcham breached a specific provision of the SIA. See Clemmons 11 v. Upfield US Inc., 667 F. Supp. 3d 5, 19 (S.D.N.Y. 2023). Plaintiffs’ factual 12 allegations here are conclusory. Plaintiffs allege that Ketcham “has repeatedly 13 taken the position” that he holds a lien in the Port Moller Property” and that his 14 “conduct following the Sale has impeded Fish Tank’s ability to sell the Port Moller 15 real property, causing harm to Plaintiffs.” Dkt. No. 7 ¶¶ 53, 54. Plaintiffs provide no

16 further details about what this conduct entailed or how Ketcham’s conduct 17 prevented the sale from going forward. Nor do they allege any factual details from 18 which the Court could draw a reasonable inference of breach. This falls short of the 19 pleading standard. See Iqbal, 556 U.S. at 678 (“A pleading that offers ‘labels and 20 conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not 21 do.’”).

22 Plaintiffs acknowledge this deficiency and explain that their reason for not 23 including more information for this element was due to Ketcham’s actions over the 1 course of litigation. In Plaintiffs’ original complaint, filed in state court before the 2 case was removed to federal court, Dkt. No. 1-1, they included more details about

3 Ketcham’s allegedly breaching conduct—namely, his appeals of the Sale Order in 4 King County Superior Court, in the Alaska ancillary proceeding, and in the 5 Washington Court of Appeals. Dkt. No. 14 at 13–14. In response, Ketcham filed an 6 anti-SLAPP notice under RCW 4.105.020, which prompted Plaintiffs to amend their 7 complaint and remove details of those allegations. Whatever the reason for this 8 pleading deficiency, the operative complaint must stand or fall on its own

9 allegations. It does not contain sufficient factual matter to state a plausible breach 10 of contract claim. 11 Accordingly, the Court GRANTS Ketcham’s motion to dismiss Plaintiffs’ 12 breach of contract claim without prejudice. Although Plaintiffs’ request for leave to 13 amend does not comply with LCR 15(a), the Court GRANTS their request for leave 14 to file a Second Amended Complaint. In doing so, Plaintiffs must ensure that any 15 new claims they wish to raise are not compulsory counterclaims in Ketcham v. May,

16 Case No. 2:25-cv-01291-JNW. See Seattle Totems Hockey Club, Inc. v. Nat’l Hockey 17 League, 652 F.2d 852, 854 (9th Cir. 1981) (Rule 13 “bars a party who failed to assert 18 a compulsory counterclaim in one action from instituting a second action in which 19 that counterclaim is the basis of the complaint”). 20 3.2 The Court declines to exercise jurisdiction over Plaintiffs’ declaratory judgment claim. 21 Plaintiffs seek a declaratory judgment that, “pursuant to the terms of the 22 [SIA], Ketcham has released his lien on the Port Moller Real Property and that Fish 23 1 Tank owns the Port Moller Real Property free and clear of such lien.” Dkt. No. 7 ¶ 2 70. Ketcham asks the Court to decline jurisdiction under Brillhart v. Excess Ins. Co.

3 of Am., 316 U.S. 491, 495 (1942). 4 The Declaratory Judgment Act, 28 U.S.C § 2201, provides that courts may 5 declare the rights of interested parties. This is an authorization, not a 6 commandment. Brillhart, 316 U.S. at 494. “Based on the permissive nature of the 7 Declaratory Judgment Act, in Brillhart … , the Supreme Court held that a district 8 court has discretion to dismiss a federal declaratory judgment action when ‘the

9 questions in controversy can better be settled in’ a pending state court proceeding.” 10 R.R. St. & Co. Inc. v. Transp. Ins. Co., 656 F.3d 966, 975 (9th Cir. 2011) (quoting 11 Brillhart, 316 U.S. at 495). In deciding whether to entertain such actions, district 12 courts have “unique and substantial discretion,” and no showing of “exceptional 13 circumstances” is required to justify staying or dismissing federal proceedings. 14 Wilton v. Seven Falls Co., 515 U.S. 277, 286–89 (1995); see also Maryland Cas. Co. 15 v. Knight, 96 F.3d 1284, 1288 (9th Cir. 1996).

16 District courts consider three factors when deciding whether to entertain a 17 declaratory judgment action: “[1] avoiding ‘needless determination of state law 18 issues'; [2] discouraging ‘forum shopping’; and [3] avoiding ‘duplicative 19 litigation.’” R.R. St. & Co. Inc. v. Transp. Ins. Co., 656 F.3d 966, 975 (9th Cir. 20 2011) (quoting Gov’t Emps. Ins. Co. v. Dizol, 133 F.3d 1220, 1224 (9th Cir. 1998)). 21 Brillhart, 316 U.S. at 495.

22 In assessing the first factor, courts focus on “unsettled issues of state law, not 23 fact-finding in the specific case.” Allstate Ins. Co. v. Davis, 430 F. Supp. 2d 1112, 1 1120 (D. Haw. 2006) (quoting Nat’l Chiropractic Mut. Ins. Co. v. Doe, 23 F. Supp. 2d 2 1109, 1118 (D. Alaska 1998)); Hartford Underwriters Ins. Co. v. Masters, Civ. Nos.

3 10-00629 JMS-BMK, 2011 WL 2173779, at *9 (D. Haw. June 2, 2011) (“Thus, the 4 court assesses not merely whether the action raises a state law issue (which is the 5 case for almost all diversity actions), but rather whether it presents an unsettled 6 issue of state law”). Plaintiffs’ request, though framed as a contract question, asks 7 this court to determine who owns the Port Moller Property free and clear of liens. 8 That question is the subject matter of litigation in King County Superior Court,

9 Wells Fargo Bank, Nat’l Association v. Northwest Fish Co., LLC, et al., No. 24-2- 10 08809-1 SEA. In that case, the trial court entered the Sale Order authorizing the 11 Receiver to sell and transfer Peter Pan’s assets to May, following the court-approved 12 auction. Dkt. No. 7 ¶ 47–49. Ketcham has challenged that order, appealing to the 13 Washington Court of Appeals. To issue the declaration Plaintiffs seek, this Court 14 would need to assess the validity and effect of the Sale Order—a state court order 15 entered in an ongoing state proceeding. This is the kind of “needless determination

16 of state law issues” that Brillhart warns against. This factor favors abstention. 17 As for the second factor, Ketcham does not argue that Plaintiffs are engaging 18 in forum-shopping. It was Ketcham who removed this case to federal court. This 19 factor weighs in favor of retention. 20 Turning to the third factor—avoiding duplicative litigation—retaining 21 jurisdiction would require this Court to address the same issues of state law that

22 the King County Superior Court has been grappling with and that will be presented 23 to the Washington Court of Appeals once the receivership concludes. See R.R. St. & 1 Co., 656 F.3d at 976 (duplicative litigation results where retaining jurisdiction 2 would require the district court to address the same issues that the state court has

3 been addressing). A parallel state proceeding need not involve identical parties or 4 issues; overlap of factual questions suffices. Dizol, 133 F.3d at 1227; Polido v. State 5 Farm Mut. Auto. Ins. Co., 110 F.3d 1418, 1423 (9th Cir. 1997). The overlap here is 6 substantial. This factor favors abstention. As the Ninth Circuit put it, “the 7 dispositive question is not whether the pending state proceeding is parallel, but 8 rather, whether there was a procedural vehicle available to the [defendant] in state

9 court to resolve the issues raised in the action filed in federal court.” Polido, 110 10 F.3d at 1428. That vehicle exists here because the anticipated appeal of the Sale 11 Order will present the Washington Court of Appeals with the same ownership and 12 lien-priority issues that Plaintiffs have asked this Court to resolve. 13 Two of the three Brillhart factors favor abstention, and an additional 14 consideration reinforces that conclusion. Beyond the Brillhart factors, the Ninth 15 Circuit has recognized that courts may also consider whether exercising jurisdiction

16 over a declaratory action would result in “entanglement between the federal and 17 state court systems.” Dizol, 133 F.3d at 1225 n.5. That risk is present here. Issuing 18 a declaration about who owns the Port Moller Property free and clear of liens while 19 the Sale Order remains subject to state appellate review would risk conflicting 20 rulings and inject this Court into a state proceeding that is still unfolding. The 21 Court therefore declines to exercise jurisdiction over Plaintiffs’ declaratory

22 judgment claim. Wilton, 515 U.S. at 282–83 (“Brillhart did not set out an exclusive 23 list of factors governing the district court’s exercise of this discretion”). 1 3.3 The Court dismisses rather than stays the declaratory judgment claim. 2 The Court dismisses rather than stays the declaratory judgment claim. 3 Although a stay is often the preferred remedy, Wilton, 515 U.S. at 288, the breach of 4 contract claim has been dismissed with leave to amend, and the state receivership 5 proceedings remain ongoing with no final judgment in sight. Staying the 6 declaratory claim while the breach claim is repled and perhaps relitigated would 7 serve no useful purpose and would leave this Court indefinitely tethered to a claim 8 it cannot meaningfully resolve until the state proceedings have run their course. 9 Dismissal without prejudice is the more efficient path. The breach of contract claim, 10 by contrast, exists independent of the request for declaratory relief and is not 11 subject to the Declaratory Judgment Act’s discretionary jurisdictional standard. 12 Snodgrass v. Provident Life & Accident Ins. Co., 147 F.3d 1163, 1167 (9th Cir. 13 1998). 14 4. CONCLUSION 15 Accordingly, the Court ORDERS: 16 1. Ketcham’s motion to dismiss, Dkt. No. 9, is GRANTED, and Plaintiffs’ 17 declaratory judgment claim is DISMISSED pursuant to Brillhart v. Excess 18 Ins. Co. of Am., 316 U.S. 491 (1942), and its progeny. 19 2. Plaintiffs’ request for leave to file a Second Amended Complaint is 20 GRANTED. Plaintiffs may file a Second Amended Complaint within 21 THIRTY (30) days of this Order. Plaintiffs must ensure that any new 22 23 1 claims they wish to raise are not the subject of counterclaims in Ketcham 2 v. May, Case No. 2:25-cv-01291-JNW.

3 Dated this 2nd day of March, 2026. 4 a Jamal N. Whitehead 5 United States District Judge 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23