Tim Bekins et al v. Dmitry Zheleznyak et al

Filing 29

MINUTES OF Motion Hearing held before Judge Christina A. Snyder: The Court GRANTS WITHOUT PREJUDICE defendants' motion to dismiss 15 , without prejudice, on the grounds that plaintiffs have failed to join a necessary party pursuant to Federal R ule of Civil Procedure 19. Plaintiffs' motion for leave to amend 19 is therefore DENIED AS MOOT. However, the Court notes that plaintiffs' proposed Second Amended Complaint also fails to name Akvinta as a party in this case. Plaintiffs shall have 30 days to file an amended complaint addressing the deficiencies identified herein. Failure to do so may result in dismissal of plaintiffs' case with prejudice. Court Reporter: Laura Elias. (gk)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-04478-CAS(ASx)

Title

TIM BEKINS, ET AL. V. DMITRY ZHELZNYAK

Present: The Honorable

Date

‘O’

January 11, 2016

CHRISTINA A. SNYDER

Catherine Jeang
Deputy Clerk

Laura Elias
Court Reporter / Recorder

N/A
Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

Tim Bekins, Pro Se
Tami Donald, Pro Se

Yuval Rogson

Proceedings:

DEFENDANTS’ MOTION TO DISMISS PLAINTIFFS’ FIRST
AMENDED COMPLAINT
PLAINTIFFS’ MOTION FOR LEAVE TO FILE AN AMENDED
COMPLAINT

I.

INTRODUCTION

On October 9, 2015, plaintiffs Tim Bekins, Tami Donald, and Reba Barber-Money
(collectively, “plaintiffs”), proceeding pro se, filed the operative First Amended
Complaint (“FAC”) in this action against defendants Dmitry Zheleznyak (“Zheleznyak”),
Jeff Becker (“Becker”), and Kristina Bucic (collectively, “defendants”). Dkt. 11.
Plaintiffs assert the following claims against defendants: (1) failure to pay earned wages
and expenses in violation of the California Labor Code § 204; (2) fraud; (3) deceit; (4)
misrepresentation; (5) negligent misrepresentation; (6) breach of fiduciary duty; (7)
breach of the covenant of good faith and fair dealing; (8) money had and received; (9)
unjust enrichment; (10) unlawful and unfair business practices; and (11) violations of the
Fair Labor Standards Act (“FLSA”). Dkt. 11.
In brief, plaintiffs allege that they were employees of a corporation known as
Akvinta USA (“Akvinta”), but that they were not paid their salaries or reimbursed for
their expenses from the end of 2013 through 2015. Plaintiffs also allege that defendants
Zheleznyak and Becker are the alter egos of Akvinta USA. Accordingly, in their
complaint, it appears that plaintiffs are attempting to hold Zheleznyak and Becker liable
for the conduct of Akvinta USA under an alter ego theory.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-04478-CAS(ASx)

Date

Title

‘O’

January 11, 2016

TIM BEKINS, ET AL. V. DMITRY ZHELZNYAK

On November 2, 2015, defendants filed a motion to dismiss the FAC on several
grounds, including for failure to state a claim pursuant to Federal Rule of Civil Procedure
12(b)(6) and for failure to join a necessary party pursuant to Federal Rule of Civil
Procedure 19. Dkt. 15. On December 22, 2015, plaintiffs filed an opposition to
defendants’ motion to dismiss, Dkt. 17, and on December 28, 2015, defendants filed a
reply, Dkt. 24. On December 22, 2015, plaintiffs filed a motion for leave to amend their
complaint. Dkt. 19. On January 4, 2016, defendants filed an opposition to plaintiffs’
motion for leave to amend their complaint. Dkt. 25. Having carefully considered the
parties’ arguments, the Court finds and concludes as follows.1
II.

BACKGROUND

The FAC alleges the following facts: On March 1, 2012, plaintiffs Tim Bekins
(“Bekins”) and Tami Donald (“Donald”) were hired to work for Akvinta, a vodka
company, as sales managers in Southern California. FAC ¶ 11. Bekins and Donald were
to be paid $5,000 and $6,000 per month respectively. Id. On June 15, 2013, plaintiff
Reba Barber-Money (“Barber-Money”) was hired as a sales manager in Northern
California. Id. Barber-Money was to be paid $4,500 per month. Id. Donald was
eventually promoted to California state manager and given a raise to $7,000. Id. Bekins
was also promoted and given a raise to $5,750. Id. During the course of their work,
plaintiffs were asked to use their own personal credit cards and cash to pay for company
expenses. Id. ¶ 12. Plaintiffs were to be reimbursed for these expenses on a monthly
basis. Id.
Plaintiffs allege that as a result of their hard work, and the use of their credit cards
and cash to pay for company expenses, Akvinta was able to reap $1,500,000 in revenue
between 2013 and 2015. Id. Nonetheless, plaintiffs assert that, beginning in the end of
2013 and continuing through 2015, their salaries and expenses were not paid. Id.
Plaintiffs contend that, as of 2015, Bekins is owed $ 102,500 in unpaid salaries and
1

On January 6, 2016, plaintiffs filed a surreply to defendants’ motion to dismiss.
Plaintiffs did not obtain leave of the Court prior to filing their surreply. Dkt. 26.
Accordingly, the Court could strike plaintiffs’ improperly filed surreply. However, in
light of the fact that plaintiffs are proceeding pro se, the Court has reviewed plaintiffs’
surreply and determined that it does not materially alter the Court’s analysis in this order.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-04478-CAS(ASx)

Date

Title

‘O’

January 11, 2016

TIM BEKINS, ET AL. V. DMITRY ZHELZNYAK

$5,123 in unpaid expenses, Donald is owed $98,000 in unpaid salaries and $44,351 in
unpaid expenses, and Barber-Money is owed $81,000 in unpaid salaries and $6,923 in
unpaid expenses. Id.
Defendant Zheleznyak is a founder and chairman of Akvinta. Id. ¶ 4. Defendant
Becker is the president of Akvinta. Id. ¶ 5. Plaintiffs allege that defendants are the alter
egos of Akvinta and that Akvinta is, in reality, a sham corporation. Id. ¶ 10. Plaintiffs
allege that revenue that was received by Akvinta was transferred to a bank account in
Croatia controlled by defendant Zheleznyak. Id. Plaintiffs also allege that defendants
“flew first class to California, stayed at the most expensive hotels in California, ate at the
best restaurants and went to the most exotic clubs” all at Akvinta’s expense. Id. Plaintiffs
allege that Zheleznyak at times stated that he was going to capitalize Akvinta by selling
some of his other assets in Croatia and that he used money from other business operations
and his personal funds to cover Akvinta’s basic operating expenses. Id. Plaintiffs assert
that, unbeknownst to them, at the time of their hiring, Akvinta was severely
undercapitalized. Id. Based on these and other allegations, plaintiffs allege that there
exists a lack of “separateness” between defendants and Akvinta. Id. Accordingly,
plaintiffs state that “adherence to the fiction of the separate corporate existence of
Akvinta” would, under the circumstances of this case, promote injustice and prevent
plaintiffs from recovering for their injuries.
III.

LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(7) permits a Court to dismiss an action for
failure to join a party whose presence is needed for just adjudication under Federal Rule
of Civil Procedure 19. “Rule 19 of the Federal Rules of Civil Procedure sets forth
considerations to guide a district court’s determination whether a particular party should
be joined in a suit if possible, referred to as a ‘necessary party,’ and, if so, whether, if the
party cannot be joined, the suit should be dismissed because the absent party is
‘indispensable.’” Disabled Rights Action Comm. v. Las Vegas Events, Inc., 375 F.3d
861, 878 (9th Cir. 2004) (citations omitted).
The Ninth Circuit has held that a party may be “necessary” pursuant to Rule 19 in
either of two ways. Las Vegas Events, 375 F.3d at 879. First, under Rule 19(a) (1), a
party is necessary if complete relief cannot be granted in its absence. Id. “In conducting
the Rule 19(a)(1) analysis, the court asks whether the absence of the party would preclude
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-04478-CAS(ASx)

Date

Title

‘O’

January 11, 2016

TIM BEKINS, ET AL. V. DMITRY ZHELZNYAK

the district court from fashioning meaningful relief as between the parties.” Id.
Alternatively, a party is necessary pursuant to Rule 19(a)(2), if the district court
determines that “the absent party’s participation is necessary to protect its legally
cognizable interests or to protect other parties from a substantial risk of incurring
multiple or inconsistent obligations because of those interests.” Id. at 880. Such a legally
cognizable interest must be more than a financial stake in the outcome of the litigation.
Makah Indian Tribe v. Verity, 910 F.2d 555, 558 (9th Cir.1990). Finally, the moving
party bears the burden of proving that joinder is necessary. Id. Once the court
determines that a party should be joined, the court must determine whether joinder is
feasible. Fed. R. Civ. P. 19(a)-(b).
If a necessary party cannot be joined, the court must consider the following factors
in deciding whether to dismiss the action because the party is indispensable: (1) the
extent to which a judgment rendered in the person’s absence might prejudice that person
or the existing parties; (2) the extent to which any prejudice could be lessened or avoided
by: (A) protective provisions in the judgment; (B) shaping the relief; or (C) other
measures; (3) whether a judgment rendered in the person’s absence would be adequate;
and (4) whether the plaintiff would have an adequate remedy if the action were dismissed
for nonjoinder. Fed. R. Civ. P. 19(b).
However, none of the aforementioned factors is dispositive. Instead, in the context
of a particular case, “the court must determine whether, in equity and good conscience,
the action should proceed among the existing parties or should be dismissed.” Fed. R.
Civ. P. 19(b); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. ENC Corp., 464 F.3d 885,
891 (9th Cir.2006).
IV.

ANALYSIS

In the FAC, plaintiffs allege that Akvinta is a sham corporation and that, in reality,
defendants are the alter egos of Akvinta. In other words, plaintiffs are attempting to set
aside the corporate form and hold defendants liable for the conduct of Akvinta.
Defendants contend, however, that in order to set aside the corporate form, Akvinta must
be joined in this action as a necessary party. Accordingly, defendants move to dismiss
the FAC for failure to join a necessary party.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-04478-CAS(ASx)

Title

TIM BEKINS, ET AL. V. DMITRY ZHELZNYAK
A.

Date

‘O’

January 11, 2016

Necessary Party

The Rule 19 inquiry begins with an assessment of whether Akvinta constitutes a
necessary party in this action. As stated, the Ninth Circuit has held that a party may be
“necessary” pursuant to Rule 19(a) in either of two ways: (1) a party is necessary if
complete relief cannot be granted in its absence; or (2) the absent party’s participation is
necessary to protect its legally cognizable interests or to protect it from a substantial risk
of incurring multiple or inconsistent obligations because of those interests.” Las Vegas
Events, 375 F.3d at 879-80. Here, Akvinta qualifies as a necessary party under either of
these theories.
First, in the FAC, plaintiffs assert numerous claims against defendants for which
they likely cannot be held liable in their individual capacities. For example, plaintiffs
assert claims against defendants for violations of California Labor Code § 204. However,
officers and directors of a corporation cannot generally be considered an “employer” for
purposes of a violation of the California Labor Code. See Martinez v. Combs, 49 Cal.
4th 35, 66 (2010). Accordingly, without joining Akvinta as a party, plaintiffs may not be
able to receive complete relief on their claims. See also Ramirez v. Manpower, Inc.,
2014 WL 116531, at *3 (N.D. Cal. Jan. 10, 2014) (“As Plaintiff’s sole employer, MI/CP
would be primarily responsible for the alleged labor code violations that implicate an
‘employer.’ Without Plaintiff’s actual employer being party to this case, the Court’s
ability to grant complete relief among the existing parties is impeded. The Court
consequently finds MI/CP to be an indispensable party pursuant to Federal Rule of Civil
Procedure 19(a)(1).”) (citing Cal. Labor Code. § 204).
Second, Akvinta’s participation in this action is “necessary” to protect its legally
cognizable interests. Here, all of plaintiffs’ claims arise out of either the conduct of
Akvinta, in failing to pay plaintiffs’ wages, or the conduct of defendants, in the course of
their positions as directors and officers of Akvinta. Thus, Akvinta has an obvious
“interest relating to the subject of the action,” Fed. R. Civ. P. 19(a)(1)(B): namely,
Akvinta may be found liable for a host of Labor Code and FLSA violations as well as the
allegedly fraudulent conduct of its employees.
Moreover, defendants cannot adequately protect Akvinta’s interests in this lawsuit.
In Wilson v. Metals USA, Inc., 2012 WL 5932990 (E.D. Cal. Nov. 27, 2012), the court
was faced with a nearly identical situation to that presented here. In that case, plaintiffs
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-04478-CAS(ASx)

Date

Title

‘O’

January 11, 2016

TIM BEKINS, ET AL. V. DMITRY ZHELZNYAK

sought to hold an individual shareholder and officer of a corporation liable under an alter
ego theory, but did not join the corporation in the lawsuit. Id. at *1. The court
determined that the action could not proceed unless the corporation was joined as a party.
Id. at *5. Specifically, the Court noted that the individual shareholder could not
adequately protect the corporation’s interests, “as he may ignore questions of liability and
instead focus his defense on showing that he is not the corporation’s alter ego.” Id.
Further, the Court reasoned that failure to join the corporation would subject it to a
“significant risk of incurring double, multiple, or otherwise inconsistent obligations”
because the corporation might be found liable in the instant action, as an alter ego, but not
liable in a separate action solely against the corporation. Id. These concerns apply
equally in this case. Accordingly, under either of the rationales recognized by the Ninth
Circuit, Akvinta appears to be a “necessary party” for purposes of Rule 19.
B.

Feasibility of Joinder

Next, the Court must determine whether joinder of Akvinta is feasible. Joinder is
not feasible where it would “destroy subject matter jurisdiction.” E.E.O.C. v. Peabody
Western Coal Co., 400 F.3d 774, 779 (9th Cir. 2005). Here, subject matter jurisdiction is
based on diversity. Plaintiffs are all residents of California, where as defendants are all
residents of New York. See FAC ¶¶ 1-5, 8.
In their opposition, plaintiffs contend that joinder of Akvinta is not feasible
because Akvinta has been incorporated in California, and is therefore a citizen of
California. Accordingly, joinder of Akvinta would destroy complete diversity amongst
the parties and would deprive this court of subject matter jurisdiction. However, it is not
clear on the current record that this is, in fact, the case. While plaintiffs claim in their
opposition that Akvinta is incorporated in California, they have concurrently filed, with
their request for judicial notice, a “Business Entity Detail” from the website of the
California Secretary of State. Plaintiffs’ RJN, Ex. 6. This document indicates that
Akvinta has a designated agent in Los Angeles, California, but that the jurisdiction and
address of Akvinta are both located in New York. Id. Moreover, in the FAC, plaintiffs
state only that Akvinta “received its charter to operate in California on May 5, 2014.”
FAC ¶ 12. To the extent Akvinta is only licensed to conduct business in California, and
is not incorporated in California, the Court is not persuaded that joining Akvinta as a
party would destroy complete diversity in this case.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-04478-CAS(ASx)

Date

Title

‘O’

January 11, 2016

TIM BEKINS, ET AL. V. DMITRY ZHELZNYAK

Accordingly, to the extent Akvinta is not a citizen of California, the Court finds
that the FAC should be dismissed without prejudice so that plaintiffs may amend their
complaint to join Akvinta as a party in this action. However, to the extent that plaintiffs
are correct, and joinder is not feasible, the Court will still address whether Akvinta is an
“indispensable party.” See also Metals USA, Inc., 2012 WL 5932990, at *8 (noting that
there was presently insufficient evidence in the record to determine the feasibility of
joining corporation, but “having determined that the corporation is a required party,”
proceeding to determine whether the corporation was an “indispensable party.”).
C.

Indispensable Party

In assessing whether a party is “indispensable,” courts look to the following, nonexhaustive list of factors: (1) the extent to which a judgment rendered in the person’s
absence might prejudice that person or the existing parties; (2) the extent to which any
prejudice could be lessened or avoided by protective provisions in the judgment, shaping
the relief, or other measures; (3) whether a judgment rendered in the person’s absence
would be adequate; and (4) whether the plaintiff would have an adequate remedy if the
action were dismissed for nonjoinder. Fed. R. Civ. P. 19(b). Here, all of these factors
weigh in favor of finding that Akvinta is an indispensable party.
First, as already discussed, Akvinta faces a significant risk of prejudice if this
action proceeds without joining it as a party. A finding of liability in this action could
result in multiple or inconsistent obligations for Akvinta and defendants cannot
adequately protect Akvinta’s interests in this action.
Second, it is unclear what measures could be taken to lessen or avoid the potential
prejudice to Akvinta. In Metals USA, Inc., the court noted that Wright & Miller’s
Federal Practice and Procedure, § 1608 (3d. ed. 2012) sets forth several approaches
taken by other courts to minimize prejudice to an absent party. 2012 WL 5932990, at *8.
These procedures included awarding monetary damages in lieu of injunctive or
declaratory relief, entering a judgment condition on the plaintiff taking certain actions, or
requiring that sufficient funds be set aside to pay other claimants. Id. However, the court
determined that “[n]one of these approaches [was] satisfactory in the present matter”
because “the effect of a judgment herein on [the absent corporation was] completely
unforeseeable” and therefore impossible to mitigate. Id. Similarly, here, the Court
cannot anticipate the impact any judgment in this case might have on Akvinta and,
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-04478-CAS(ASx)

Date

Title

‘O’

January 11, 2016

TIM BEKINS, ET AL. V. DMITRY ZHELZNYAK

therefore, cannot fashion appropriate precautions to mitigate the potential prejudice to
Akvinta.
Third, a judgment rendered in the absence of Akvinta would not be “adequate.” In
this context, the Supreme Court has defined “adequate” as satisfying the “social interest
in the efficient administration of justice and the avoidance of multiple litigation.”
Republic of Philippines v. Pimental, 553 U.S. 851, 870 (2008). Thus, in evaluating the
third factor, courts consider “the public interest in settling the dispute as a whole.” Id. at
870-71. Here, it seems that the true party in interest to this lawsuit is likely plaintiffs’
former employer, Akvinta. All of plaintiffs’ claims, at base, arise out of their allegations
that Akvinta failed to pay their salaries and reimburse them for expenses. Moreover,
many of plaintiffs’ claims, such as their claims under the California Labor Code, are more
appropriately brought against their employer, Akvinta. Thus, in order to resolve this
dispute “as a whole,” Akvinta must be joined as a party. Failure to join Akvinta will
likely prevent plaintiffs from obtaining complete relief on their claims and could cause
this litigation to proceed in a piecemeal fashion if plaintiffs later pursued separate
litigation against Akvinta.
Finally, assuming that Akvinta is a California resident, and thus this action cannot
proceed in federal court with Akvinta as a party, plaintiffs have identified no reason why
they could not adequately pursue their claims in California state court. Therefore, there is
no reason for the Court to believe that plaintiffs would not have an adequate remedy if
this action were dismissed for non-joinder.
Accordingly, for all of these reasons, the Court finds that if Akvinta cannot be
joined as a party in this action, this action should be dismissed because Akvinta is an
“indispensable party.”
V.

CONCLUSION

In accordance with the foregoing, the Court GRANTS WITHOUT PREJUDICE
defendants’ motion to dismiss on the grounds that plaintiffs have failed to join a
necessary party pursuant to Federal Rule of Civil Procedure 19. Plaintiffs shall have

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-04478-CAS(ASx)

Date

Title

‘O’

January 11, 2016

TIM BEKINS, ET AL. V. DMITRY ZHELZNYAK

thirty (30) days to file an amended complaint addressing the deficiencies identified
herein. Failure to do so may result in dismissal of plaintiffs’ case with prejudice.1
IT IS SO ORDERED.
00
Initials of Preparer

:

01

CMJ

1

The Court grants defendants’ motion to dismiss without prejudice. Plaintiffs’ motion
for leave to amend is therefore DENIED AS MOOT. However, the Court notes that
plaintiffs’ proposed Second Amended Complaint also fails to name Akvinta as a party in
this case. Accordingly, it too would likely be subject to dismissal for the reasons stated
in this order.

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