Chabrowski, et al v. Litwin et al

Filing 78

ORDER denying Defendant Litwin's 66 Motion to Dismiss. (See Order for details.) Signed by Judge Douglas L Rayes on 8/29/2017. (MMO)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Derek Jahn Chabrowski, Plaintiff, 10 11 Wlodzimierz Jan Litwin, 13 ORDER v. 12 No. CV-16-03766-PHX-DLR Defendant. 14 15 16 Before the Court is Defendant Litwin's motion to dismiss pursuant to Rule 17 12(b)(6). (Doc. 66.) The motion is fully briefed. (Docs. 72, 76.) For reasons stated 18 below, the motion is denied.1 19 I. Background 20 Chabrowski commenced this action by filing a pro se complaint on behalf of 21 ARTBE Enterprises LLC. ARTBE was formed five years ago by Chabrowski and Litwin 22 as a high-end car rental and leasing business. The articles of organization for ARTBE 23 listed Chabrowski as the sole member and Litwin as manager. Chabrowski claims to 24 have served as primary financial investor and holder of legal interest in the vehicles, most 25 of which were supplied by Litwin when ARTBE was established. Chabrowski alleges 26 that Litwin falsely claimed to be the true owner of some of the vehicles while others were 27 28 1 Litwin’s request for oral argument is denied because the issues are adequately briefed and oral argument would not aid the Court’s decision. See LRCiv 7.2(f). 1 either never located in the United States or smuggled out of the country to Europe. 2 (Doc. 1.) 3 At a status conference on December 9, 2016, Chabrowski was advised that he 4 cannot proceed in this matter representing ARTBE because only licensed attorneys may 5 represent a limited liability company in federal court. (Doc. 11.) Chabrowski thereafter 6 sought leave to file an amended complaint asserting claims of fraud and swindling, 7 embezzlement, and civil conspiracy. (Docs. 15, 16.) The Court denied leave to amend 8 because the proposed complaint impermissibly sought to bring claims on behalf ARTBE, 9 asserted claims under criminal statutes, and otherwise failed to meet the pleading 10 requirements of Rule 8. (Doc. 19.) 11 Chabrowski thereafter moved for leave to file a second amended complaint. 12 (Doc. 23.) The Court granted the motion under Rule 15(b)(2), finding in part that the 13 proposed amended pleading did not appear to be futile. (Doc. 27.) Litwin has now 14 moved to dismiss the complaint pursuant to Rule 12(b)(6) for failure to state a claim for 15 relief. (Doc. 66.) 16 II. Legal Standard 17 A successful Rule 12(b)(6) motion must show that the complaint lacks a 18 cognizable legal theory or fails to allege facts sufficient to support such a theory. See 19 Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988). A complaint that 20 sets forth a cognizable legal theory will survive a motion to dismiss where it contains 21 "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its 22 face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 23 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads 24 factual content that allows the court to draw the reasonable inference that the defendant is 25 liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556). 26 III. Discussion 27 The amended complaint asserts claims under A.R.S. § 29-858 for civil liability 28 and equitable remedies for false filings with the Arizona Corporation Commission -2- 1 (ACC). (Doc. 28 ¶¶ 79-95). Chabrowski alleges that in September and October 2015, 2 Litwin made unauthorized filings with the ACC including articles of termination falsely 3 declaring that company assets had been properly collected and distributed to members. 4 (¶¶ 23, 27.) Chabrowski claims that company assets, including the vehicles identified in 5 the complaint, were never collected and distributed as Litwin declared and he therefore 6 has violated § 29-858 by knowingly filing a materially false document with the ACC. 7 (¶¶ 80-88.) 8 Section 29-858 was enacted in 2016 as part of the "Arizona business entities 9 competitive omnibus act." 2016 Ariz. Sess. Laws, ch. 354, § 27 (S.B. 1356 at 32). 10 Section 29-858(A) creates a civil right of action, which did not previously exist, "that the 11 corporation or LLC, its creditors, and shareholders or members, may exercise against any 12 person that authorizes or signs a document delivered for filing with the [ACC] that the 13 person knows contains false or misleading information."2 Section 29-858(A) provides, 14 in pertinent part: 18 [A]ny person that authorizes or signs a report, certificate, notice or other document with respect to [an LLC] that is delivered for filing with the [ACC] pursuant to this chapter and that has knowledge at the time of delivery . . . that the information contained in that . . . document is materially false or misleading is liable to the [LLC] and its creditors and members for all damages resulting. 19 In addition to a request for damages, the plaintiff may, pursuant to § 29-858(E), seek an 20 "award of equitable remedies, if appropriate." 15 16 17 21 The complaint alleges that on October 14, 2015, Litwin filed articles of 22 termination with the ACC falsely declaring, under penalty of perjury, that company assets 23 had been properly collected and distributed to members and all priority liens discharged. 24 (Doc. 28 ¶ 27; see Doc. 25 at 26; http://ecorp.azcc.gov/Details/Corp?corpId=L17447110; 25 2 26 27 28 ACC, New Legislation Summary – May 2016, http://www.azcc.gov/Divisions/ Corporations/Legislative-changes-update-May-2016.pdf?d=551 (last visited Aug. 29, 2017); see 6 Ariz. Prac., Corporate Practice § 12:99 (Oct. 2016) (explaining that the civil remedies provided for in § 29-858 was deemed necessary because members or managers of an LLC who were not in control were filing articles to the contrary and unlawfully taking company assets but criminal prosecutions for such fraudulent conduct rarely occurred.) -3- 1 http://corporations.images.azcc.gov/05232519.pdf (last visited Aug. 29, 2017)). 2 cause of action for false filings alleges that company assets, including the vehicles 3 identified in the complaint, were never collected and distributed as Litwin declared and 4 he therefore has violated § 29-858(A) by knowingly filing a materially false document 5 with the ACC. (Doc. 28 ¶¶ 80-88.) The second cause of action requests equitable 6 remedies under § 29-858(E). (¶¶ 90-95.) The 7 Litwin does not argue that the complaint fails to assert a cognizable legal claim 8 under § 29-858. Rather, Litwin contends that the complaint fails to show any materially 9 false or misleading statement because it does not allege that the vehicles belonged to 10 ARTBE when Litwin filed the articles of termination with the ACC. (Doc. 66 at 3-4.) 11 To the contrary, the whole basis for this action is that Litwin allegedly committed fraud 12 by swindling ARTBE and Chabrowski out of company assets. The complaint makes 13 clear that that many of the vehicles provided by Litwin as part of the joint venture were 14 "assets of the company" and/or registered with the Arizona Department of Transportation 15 in the name of ARTBE with Chabrowski as priority lien holder. (Doc. 28 ¶¶ 10-18, 16 20-21.) The complaint specifically alleges that Chabrowski, "as a Member-Creditor of 17 ARTBE Enterprises, LLC, and a priority lien holder over the aforementioned company 18 assets, as a matter of Arizona law, is entitled to recover the vehicles, or in the alternative, 19 their fair market value." (¶ 29 (emphasis added).) The complaint then identifies the 20 sixteen specific vehicles at issue (¶ 30), and goes on to explain what allegedly happened 21 to them (¶¶ 31-78). 22 Plaintiff, of course, ultimately will have to prove at the summary judgment stage 23 or trial that each vehicle belonged to ARTBE at all relevant times. But accepting the 24 complaint's allegations as true – as the Court must at the dismissal stage – the Court finds 25 that Chabrowski has adequately alleged facts showing that the vehicles were company 26 assets over which he had a priority lien when Litwin filed the articles of termination with 27 the ACC. 28 Defendant further contends that the complaint fails to state a claim for relief under -4- 1 § 29-858 because it does not allege that Litwin had knowledge of any false or misleading 2 statement. (Doc. 66 at 3.) But the first cause of action itself affirmatively alleges that 3 Litwin "knowingly submitted a falsehood to the [ACC] with regards to the company, and 4 thus is personal[ly] liable" to Chabrowski for the fair market value of the sixteen 5 vehicles. (Doc. 28 ¶ 88 (emphasis added).) Moreover, the complaint's factual section 6 alleges that Litwin, contrary to A.R.S. § 29-858(A), filed articles of termination with the 7 ACC declaring that all of the statute's requirements regarding company assets had been 8 met. (¶ 27.) These allegations are sufficient to meet the knowledge requirement of § 29- 9 858(A). 10 In summary, reading the complaint as a whole and drawing reasonable inferences 11 in Chabrowski's favor, the Court finds that it states a plausible claim for relief under § 29- 12 858. The motion to dismiss pursuant to Rule 12(b)(6) therefore is denied. 13 14 15 IT IS ORDERED that Defendant Litwin's motion to dismiss (Doc. 66) is DENIED. Dated this 29th day of August, 2017. 16 17 18 19 20 Douglas L. Rayes United States District Judge 21 22 23 24 25 26 27 28 -5-

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