1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN JOSE DIVISION 7 WILLIAM G. SALVADOR, 8 Case No. 5:18-cv-07159-EJD Plaintiff, 9 ORDER GRANTING IN PART AND v. DENYING IN PART DEFENDANT 10 SPEARS’ MOTION TO DISMISS LIVE AT HOME CARE CONNECTION, 11 INC., et al., Re: Dkt. No. 35 12 Defendants.
13 Plaintiff William G. Salvador, a citizen of Canada, initiated this suit against Defendant 14 Mylah G. Spears (“Spears”) and her home care businesses, Defendants Live At Home Care 15 Connection, Inc. (“LAHCC”) and Defendant Care Connection Transport, Inc. (“CCT”), as well as 16 Doe Defendants, asserting a single claim entitled “alter ego liability.” Plaintiff brings this claim in 17 federal court pursuant to 28 U.S.C. § 1332(a) on the basis of diversity jurisdiction. Pending before 18 the Court is Spears’ motion to dismiss. The Court finds it appropriate to take this matter under 19 submission for decision without oral argument pursuant to Civil Local Rule 7-1(b). The March 20 19, 2020 hearing is therefore vacated. For the reasons set forth below, the Court will grant in part 21 and deny in part Spears’ motion to dismiss. 22 I. BACKGROUND1 23 Spears owns 80 shares of stock in Defendant LAHCC, which amounts to forty (40) percent 24 of the total number of shares issued and outstanding. Id. ¶ 8. Spears also owns 60 shares of stock 25 in Defendant CCT, which amounts to thirty (30) percent of the total number of shares issued and 26
27 1 The Background is a summary of the allegations in the Complaint. Case No.: 5:18-cv-07159-EJD 1 outstanding. Id. ¶ 9. The Defendant corporations are allegedly the alter egos of Spears. Id. ¶ 10. 2 Plaintiff is a creditor of LAHCC. ¶ 11. Spears represented to Plaintiff that the debt 3 incurred by LAHCC “was in fact [Spears’] obligation” to repay. Id. ¶ 12. Spears withdrew funds 4 from Defendant LAHCC, rendering the company insolvent, to avoid repaying Plaintiff. Id. ¶¶ 11, 5 17. Spears also withdrew funds from CCT, rendering the company insolvent, to avoid repaying 6 Plaintiff. Id. ¶ 18. In total, Spears withdrew $66,000 from the two companies. Id. ¶¶ 11 7 (referring to $8,000 withdrawal), 17 (referring to $50,000 withdrawal), 18 (referring to $8,000 8 withdrawal). Plaintiff seeks $200,000 in damages. Id. ¶ 25.1. 9 Spears moves to dismiss the Complaint pursuant to Rules 12(b)(1) and 12(b)(6) of the 10 Federal Rules of Civil Procedure. Spears contends that the Court lacks subject matter jurisdiction 11 because Plaintiff has failed to plausibly allege an amount in controversy over $75,000; Plaintiff 12 lacks standing to assert any claims; and Plaintiff fails to state a claim upon which relief may be 13 granted. 14 II. DISCUSSION 15 A. Subject Matter Jurisdiction 16 “The party asserting federal jurisdiction bears the burden of proving the case is properly in 17 federal court.” In re Ford Motor Co./Citibank (South Dakota), N.A., 264 F.3d 952 (9th Cir. 2001). 18 At the pleading stage, however, allegations of jurisdictional fact need not be proven unless 19 challenged.” NewGen, LLC v. Safe Cig, LLC, 840 F.3d 606, 614 (9th Cir. 2016). Under Federal 20 Rule of Civil Procedure 12(b)(1), a party may challenge the plaintiff’s jurisdictional allegations in 21 one of two ways. Leite v. Crane Co., 749 F.3d 1117, 1121 (9th Cir. 2014). “A ‘facial’ attack 22 accepts the truth of the plaintiff’s allegations but asserts that they ‘are insufficient on their face to 23 invoke federal jurisdiction.’” Id. (quoting Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 24 (9th Cir. 2004). By contrast, a “factual” attack “contests the truth of the plaintiff’s factual 25 allegations, usually by introducing evidence outside the pleadings.” Id. 26 Here, Spears raises a “factual attack” to the alleged amount in controversy. In a 27 Case No.: 5:18-cv-07159-EJD 1 declaration dated August 29, 2019, Spears denies making unlawful withdrawals, stating:
2 3. I did not cause the sum of $8,000.00 to be withdrawn from the funds of defendant, [LAHCC], and distributed to myself. 3 4. I did not cause the sum of $50,000 to be withdrawn from the funds 4 of defendant [LAHCC] and distributed to myself.
5 5. I did not cause the sum of $8,000 to be withdrawn from the funds of defendant [CCT] and distributed to myself. 6 7 Dkt. No. 36. 8 To resolve this factual attack on jurisdiction, this Court may review evidence beyond the 9 Complaint without converting the motion to dismiss into a motion for summary judgment. Savage 10 v. Glendale Union High Sch., 343 F.3d 1036, 1039 n. 2 (9th Cir. 2003) (citing White v. Lee, 227 11 F.3d, 1214, 1242 (9th Cir. 2000)). The Court need not presume the truthfulness of Plaintiff’s 12 allegations and Plaintiff must furnish affidavits or other evidence necessary to satisfy its burden of 13 establishing subject matter jurisdiction. Id. 14 In response to Spears’ motion, Plaintiff submitted his own declaration dated September 11, 15 2019, which states that Spears withdrew $14,000 from LAHCC and $47,000 from CCT, for a total 16 of $61,000. Decl. of William Salvador (Dkt. No. 38-1) ¶¶ 1-2. Spears allegedly withdrew these 17 funds and distributed them to herself “for the purpose of avoiding and preventing attachment and 18 execution by creditors, including [P]laintiff, thereby rendering [LAHCC and CCT] insolvent and 19 unable to meet [their] obligations.” Id. Plaintiff also asserts that the withdrawals were “willful 20 and fraudulent conversions justifying an award of punitive damages against [Spears] in an amount 21 in excess of the jurisdictional limit of this court.” Id. ¶ 3. 22 The parties’ competing declarations raise jurisdictional factual issues that go directly to 23 the merits of Plaintiff’s underlying claim. The Ninth Circuit has instructed that “if the 24 jurisdictional issue and substantive claims are so intertwined that resolution of the jurisdictional 25 question is dependent on factual issues going to the merits, the district court should employ the 26 standard applicable to a motion for summary judgment and grant the motion to dismiss for lack of 27 Case No.: 5:18-cv-07159-EJD 1 jurisdiction only if the material jurisdictional facts are not in dispute and the moving party is 2 entitled to prevail as a matter of law.” Rosales v. U.S., 824 F.2d 799, 803 (9th Cir. 1987). 3 “Otherwise, the intertwined jurisdictional facts must be resolved at trial by the trier of fact.” Id. 4 (citing Augustine v. U.S., 704 F.2d 1074, 1077 (9th Cir. 1983)). 5 Here, applying the summary judgment standard, the Court finds that the parties’ 6 competing declarations raise material factual disputes which must be resolved by the trier of fact. 7 Spears denies withdrawing and distributing funds to herself, and Plaintiff contends the opposite. 8 Accordingly, Spears’ motion to dismiss under Rule 12(b)(1) is denied. 9 B. Standing 10 Spears next contends that the Complaint lacks sufficient facts to establish Plaintiff’s 11 standing.
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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN JOSE DIVISION 7 WILLIAM G. SALVADOR, 8 Case No. 5:18-cv-07159-EJD Plaintiff, 9 ORDER GRANTING IN PART AND v. DENYING IN PART DEFENDANT 10 SPEARS’ MOTION TO DISMISS LIVE AT HOME CARE CONNECTION, 11 INC., et al., Re: Dkt. No. 35 12 Defendants.
13 Plaintiff William G. Salvador, a citizen of Canada, initiated this suit against Defendant 14 Mylah G. Spears (“Spears”) and her home care businesses, Defendants Live At Home Care 15 Connection, Inc. (“LAHCC”) and Defendant Care Connection Transport, Inc. (“CCT”), as well as 16 Doe Defendants, asserting a single claim entitled “alter ego liability.” Plaintiff brings this claim in 17 federal court pursuant to 28 U.S.C. § 1332(a) on the basis of diversity jurisdiction. Pending before 18 the Court is Spears’ motion to dismiss. The Court finds it appropriate to take this matter under 19 submission for decision without oral argument pursuant to Civil Local Rule 7-1(b). The March 20 19, 2020 hearing is therefore vacated. For the reasons set forth below, the Court will grant in part 21 and deny in part Spears’ motion to dismiss. 22 I. BACKGROUND1 23 Spears owns 80 shares of stock in Defendant LAHCC, which amounts to forty (40) percent 24 of the total number of shares issued and outstanding. Id. ¶ 8. Spears also owns 60 shares of stock 25 in Defendant CCT, which amounts to thirty (30) percent of the total number of shares issued and 26
27 1 The Background is a summary of the allegations in the Complaint. Case No.: 5:18-cv-07159-EJD 1 outstanding. Id. ¶ 9. The Defendant corporations are allegedly the alter egos of Spears. Id. ¶ 10. 2 Plaintiff is a creditor of LAHCC. ¶ 11. Spears represented to Plaintiff that the debt 3 incurred by LAHCC “was in fact [Spears’] obligation” to repay. Id. ¶ 12. Spears withdrew funds 4 from Defendant LAHCC, rendering the company insolvent, to avoid repaying Plaintiff. Id. ¶¶ 11, 5 17. Spears also withdrew funds from CCT, rendering the company insolvent, to avoid repaying 6 Plaintiff. Id. ¶ 18. In total, Spears withdrew $66,000 from the two companies. Id. ¶¶ 11 7 (referring to $8,000 withdrawal), 17 (referring to $50,000 withdrawal), 18 (referring to $8,000 8 withdrawal). Plaintiff seeks $200,000 in damages. Id. ¶ 25.1. 9 Spears moves to dismiss the Complaint pursuant to Rules 12(b)(1) and 12(b)(6) of the 10 Federal Rules of Civil Procedure. Spears contends that the Court lacks subject matter jurisdiction 11 because Plaintiff has failed to plausibly allege an amount in controversy over $75,000; Plaintiff 12 lacks standing to assert any claims; and Plaintiff fails to state a claim upon which relief may be 13 granted. 14 II. DISCUSSION 15 A. Subject Matter Jurisdiction 16 “The party asserting federal jurisdiction bears the burden of proving the case is properly in 17 federal court.” In re Ford Motor Co./Citibank (South Dakota), N.A., 264 F.3d 952 (9th Cir. 2001). 18 At the pleading stage, however, allegations of jurisdictional fact need not be proven unless 19 challenged.” NewGen, LLC v. Safe Cig, LLC, 840 F.3d 606, 614 (9th Cir. 2016). Under Federal 20 Rule of Civil Procedure 12(b)(1), a party may challenge the plaintiff’s jurisdictional allegations in 21 one of two ways. Leite v. Crane Co., 749 F.3d 1117, 1121 (9th Cir. 2014). “A ‘facial’ attack 22 accepts the truth of the plaintiff’s allegations but asserts that they ‘are insufficient on their face to 23 invoke federal jurisdiction.’” Id. (quoting Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 24 (9th Cir. 2004). By contrast, a “factual” attack “contests the truth of the plaintiff’s factual 25 allegations, usually by introducing evidence outside the pleadings.” Id. 26 Here, Spears raises a “factual attack” to the alleged amount in controversy. In a 27 Case No.: 5:18-cv-07159-EJD 1 declaration dated August 29, 2019, Spears denies making unlawful withdrawals, stating:
2 3. I did not cause the sum of $8,000.00 to be withdrawn from the funds of defendant, [LAHCC], and distributed to myself. 3 4. I did not cause the sum of $50,000 to be withdrawn from the funds 4 of defendant [LAHCC] and distributed to myself.
5 5. I did not cause the sum of $8,000 to be withdrawn from the funds of defendant [CCT] and distributed to myself. 6 7 Dkt. No. 36. 8 To resolve this factual attack on jurisdiction, this Court may review evidence beyond the 9 Complaint without converting the motion to dismiss into a motion for summary judgment. Savage 10 v. Glendale Union High Sch., 343 F.3d 1036, 1039 n. 2 (9th Cir. 2003) (citing White v. Lee, 227 11 F.3d, 1214, 1242 (9th Cir. 2000)). The Court need not presume the truthfulness of Plaintiff’s 12 allegations and Plaintiff must furnish affidavits or other evidence necessary to satisfy its burden of 13 establishing subject matter jurisdiction. Id. 14 In response to Spears’ motion, Plaintiff submitted his own declaration dated September 11, 15 2019, which states that Spears withdrew $14,000 from LAHCC and $47,000 from CCT, for a total 16 of $61,000. Decl. of William Salvador (Dkt. No. 38-1) ¶¶ 1-2. Spears allegedly withdrew these 17 funds and distributed them to herself “for the purpose of avoiding and preventing attachment and 18 execution by creditors, including [P]laintiff, thereby rendering [LAHCC and CCT] insolvent and 19 unable to meet [their] obligations.” Id. Plaintiff also asserts that the withdrawals were “willful 20 and fraudulent conversions justifying an award of punitive damages against [Spears] in an amount 21 in excess of the jurisdictional limit of this court.” Id. ¶ 3. 22 The parties’ competing declarations raise jurisdictional factual issues that go directly to 23 the merits of Plaintiff’s underlying claim. The Ninth Circuit has instructed that “if the 24 jurisdictional issue and substantive claims are so intertwined that resolution of the jurisdictional 25 question is dependent on factual issues going to the merits, the district court should employ the 26 standard applicable to a motion for summary judgment and grant the motion to dismiss for lack of 27 Case No.: 5:18-cv-07159-EJD 1 jurisdiction only if the material jurisdictional facts are not in dispute and the moving party is 2 entitled to prevail as a matter of law.” Rosales v. U.S., 824 F.2d 799, 803 (9th Cir. 1987). 3 “Otherwise, the intertwined jurisdictional facts must be resolved at trial by the trier of fact.” Id. 4 (citing Augustine v. U.S., 704 F.2d 1074, 1077 (9th Cir. 1983)). 5 Here, applying the summary judgment standard, the Court finds that the parties’ 6 competing declarations raise material factual disputes which must be resolved by the trier of fact. 7 Spears denies withdrawing and distributing funds to herself, and Plaintiff contends the opposite. 8 Accordingly, Spears’ motion to dismiss under Rule 12(b)(1) is denied. 9 B. Standing 10 Spears next contends that the Complaint lacks sufficient facts to establish Plaintiff’s 11 standing. More specifically, Spears argues that there are no facts pled to support the allegation 12 that Plaintiff is a “creditor,” nor facts to explain how or why Plaintiff is entitled to any relief based 13 on Spears’ alleged withdrawals of funds. 14 In response, Plaintiff relies on his declaration in which he attests to his standing as a 15 creditor, as well as a shareholder, director and officer of LAHCC and CCT. Decl. of William 16 Salvador ¶¶ 1-2, 4. Plaintiff requests leave of Court to amend his Complaint to add facts 17 clarifying the basis of his standing. 18 Requests to amend the pleadings are subject to the liberal standard set forth in Rule 15 of 19 the Federal Rules of Civil Procedure: “The court should freely give leave when justice so 20 requires.” Fed. R. Civ. P. 15(a)(2). Courts consider the following five factors when deciding 21 whether to grant leave to amend: bad faith; undue delay; prejudice to the opposing party; futility 22 of amendment; and prior amendments. Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 23 1052 (9th Cir. 2003). Here, all of the factors favor granting Plaintiff leave to amend. Plaintiff has 24 not sought prior amendments, and there is no evidence of bad faith, undue delay or prejudice. Nor 25 do the proposed amendments appear futile. Plaintiff’s request for leave to amend is therefore 26 granted. 27 Case No.: 5:18-cv-07159-EJD 1 C. Rule 12(b)(6) 2 Lastly, Spears contends that the Complaint must be dismissed for failure to state a claim. 3 Spears reasons that the so-called alter ego claim is not a claim at all, but rather a mechanism to 4 attach liability for a substantive claim. 5 Plaintiff does not challenge Spears’ contention that the alter ego theory is not itself a claim. 6 Instead, Plaintiff asserts that the Complaint includes sufficient facts to state a claim for conversion 7 or fraud, and requests leave to amend his Complaint to add new claims for fraud, conversion, and 8 “other related causes of action.” Pl.’s Opp’n 3. 9 Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim with sufficient 10 specificity to “give the defendant fair notice of what the . . . claim is and the grounds upon which 11 it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). 12 A complaint which falls short of the Rule 8(a) standard may therefore be dismissed if it fails to 13 state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). “Dismissal under Rule 14 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts 15 to support a cognizable legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 16 1104 (9th Cir. 2008). While a complaint need not contain detailed factual allegations, it “must 17 contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its 18 face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 19 544, 570 (2007)). 20 The Court finds that the Complaint fails to state a claim upon which relief may be granted. 21 Plaintiff does not cite to, and this Court is unaware of, any court recognizing a claim for alter ego.2 22 Accordingly, Plaintiff’s Complaint is subject to dismissal with leave to amend. 23
24 2 To the contrary, the Court’s independent research led to one published decision in which the 25 Ninth Circuit observed that “no California court has recognized a freestanding general alter ego claim that would require a shareholder to be liable for all of a company’s debts and, in fact, the 26 California Supreme Court stated that such a cause of action does not exist.” Ahcom, Ltd. v. Smeding, 623 F.3d 1248, 1252 (9th Cir. 2010). 27 Case No.: 5:18-cv-07159-EJD 1 || CONCLUSION 2 For the reasons set forth above, Spears’ motion to dismiss for lack of subject matter 3 || jurisdiction is DENIED. Spears’ motion to dismiss for lack of standing and for failure to state a 4 || claim GRANTED with leave to amend. Plaintiff shall file and serve an amended complaint no 5 later than March 6, 2020. 6 IT IS SO ORDERED. 7 Dated: February 21, 2020 8 EDWARD J. DAVILA 9 United States District Judge 10 11 a 12
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Z 18 19 20 21 22 23 24 25 26 27 Case No.: 5:18-cv-07159-EJD 28 || ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS