Sinclair et al v. Fox Hollow, et al
Filing
626
MEMORANDUM DECISION Regarding 478 Motion For Summary Judgment, signed by Judge Oliver W. Wanger on 6/13/2011. (Plaintiffs motion for summary judgment is GRANTED; Plaintiffs shall file a form of order consistent with this memorandum decision within five (5) days of electronic serviceof this decision.)(Gaumnitz, R)
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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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RICHARD SINCLAIR, et al.
Plaintiffs,
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FOX HOLLOW OF TURLOCK OWNERS
ASSOCIATION, et al.
Defendants.
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I. INTRODUCTION.
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MEMORANDUM DECISION REGARDING
MOTION FOR SUMMARY JUDGMENT
(Doc. 478)
v.
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1:03-cv-05439-OWW-DLB
This case is a consolidation of three actions: An action
commenced
Association
Sinclair,
by
Plaintiff
("Fox
Gregory
Fox
Hollow")
Mauchley,
Hollow
against
of
Turlock
Richard
Lairtrust,
Homeowners'
Sinclair,
LLC,
Brandon
Capstone,
LLC,
Mauctrst, LLC, and Stanley Flake as Trustee of Capstone Trust, Case
No. CV-F-03-5439 OWW/DLB ("Fox Hollow Action"); an action commenced
by
California
Equity
Management
Group,
Inc.
("CEMG")
against
Mauctrst LLC, Gregory Mauchley, Diana Mauchley, Lairtrust LLC,
Richard Sinclair, Deborah Sinclair, Sinclair Enterprises, Inc.,
Capstone, LLC, Brandon Sinclair, Stanley Flake, and Stanley Flake
as Trustee of the F. Hanse Trust and of the Julie Insurance Trust
Case No. CVF- 03-5774 OWW/DLB ("CEMG Action"); and an action
commenced by Lairtrust LLC, Mauctrst LLC, and Capstone LLC against
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Fox Hollow, Andrew Katakis, and California Equity Management Group,
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Inc. in the Stanislaus County Superior Court, Case No. 322675
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("Lairtrust Action"), removed to this Court and consolidated with
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the Fox Hollow and CEMG Actions by Order filed on October 6, 2003
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("Consolidated Federal Actions").
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On August 10, 2010, Defendants Gregory Mauchley, Richard
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Sinclair, and Brandon Sinclair ("Inidividual Defendants") filed a
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cross-complaint against Plaintiffs.
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Hollow and CEMG ("Plaintiffs") filed a motion to dismiss, or in the
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alternative, sever and stay Individual Defendants cross-complaint
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on September 3, 2010.
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court issued a memorandum decision granting in part Plaintiffs’
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motion to stay and terminating Plaintiff’s motion for a more
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definite statement without prejudice.
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denied Plaintiffs’ motion to stay claims arising out of “(i)
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Plaintiffs’ alleged breach of the 2007 settlement agreement, and
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(ii) Plaintiffs’ alleged conduct during and after trial of the
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state court action;” the court authorized Plaintiffs to file a
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separate
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Defendants’ claims arising out of the purported 2007 agreement have
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been stayed.
motion
to
(Doc. 425).
(Docs. 431, 432).
stay
regarding
Plaintiffs Fox
On January 21, 2011, the
(Doc. 473 at 6).
these
claims.
The court
Individual
(Doc. 563).
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Plaintiffs filed a motion for summary judgment on February 4,
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2011; Plaintiffs motion seeks judgment on Individual Defendants’
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claims arising out of ownership interests in Lot 1 during and after
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trial of the state court action. (Doc. 478). Individual Defendants
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filed opposition on March 14, 2011.
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a reply on March 21, 2011. (Doc. 505). The court heard Plaintiffs’
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motion on May 2, 2011.
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(Doc. 493).
Plaintiffs filed
II. FACTUAL BACKGROUND.
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This
action
out
thirty-five
of
unit
an
alleged
town
home
fraudulent
complex
in
scheme
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concerning
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California, known as Fox Hollow of Turlock (“the Property”).
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Plaintiff Fox Hollow is the home owners’ association (“HOA”) for the
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Property.
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within the Property, the successor in interest to lenders who
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extended loans secured by lots within the Property, and the assignee
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of the rights of certain tenants who entered into leases for units
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contained in the Property. Mauctrst, Lairtrust, and Capstone are
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limited liability companies (“LLC Defendants”)that were allegedly
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used to convert HOA funds, effect property transfers, obtain loans,
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prosecute dilatory lawsuits, and to carry out other parts of the
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alleged schemes that form the basis for Plaintiffs’ claims.
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Individual
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Brandon Sinclair are individuals who where principals, directors,
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or employees of the LLC Defendants during times relevant to the
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parties’ respective claims.
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a
arises
Turlock,
Plaintiff CEMG is the record owner of lots contained
Defendants
Gregory
Mauchley,
Richard
Sinclair,
and
Individual Defendants’ cross-complaint asserts twenty-seven
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causes
of
action
against
Plaintiffs
arising
out
of
various
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transactions and conduct related to the Property.
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Defendants unsuccessfully asserted most of their cross-claims in an
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action filed on April 24, 2003 in the Stanislaus County Superior
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Court.
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state
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appealed.
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court judgment is currently pending in the California Court of
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Appeal.
Individual
Judgment was entered against Individual Defendants in the
court
action
on
August
18,
2009;
Individual
Defendants
Resolution of Individual Defendants’ appeal of the state
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On January 21, 2011, the court issued a memorandum decision
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granting Plaintiffs’ motion to stay as to all claims asserted in the
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counter-complaint except for claims arising out of “(i) Plaintiffs’
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alleged
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Plaintiffs’ alleged conduct during and after trial of the state
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court action.”
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memorandum decision granting Plaintiffs’ motion to stay claims
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arising out of the purported 2007 settlement agreement. (Doc. 563).
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Defendants’ only remaining unstayed cross-claims are those arising
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out of “conduct during and after trial of the state court action;”
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these claims are the target of Plaintiffs’ instant motion for
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summary judgment.
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The
breach
of
the
2007
(Doc. 473).
cross-complaint’s
settlement
agreement,
and
(ii)
On April 29, 2011, the court issued a
allegations
concerning
the
unstayed
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claims are unclear.
The only allegations asserted in the cross-
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complaint that appear to qualify as allegations concerning “conduct
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during and after trial of the state court action” are contained at
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pages 12 through 13 of the cross-complaint in paragraphs 33 through
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36.1
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Sinclair as a member manager of Lairtrust LLC acquired legal title
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to Lot 1 [of the Property].”
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cross-complaint, Individual Defendants allege that Andrew Katakis,
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acting on behalf of the Fox Hollow HOA: (1) violated certain
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provisions of the Conditions, Covenants, and Restrictions (“CC&R’s”)
Paragraph 34 of the cross-complaint alleges that “Richard
In paragraphs 35 through 36 of the
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Individual Defendants’ represent that “in addition to the incidents described
in [paragraphs 33-36], cross-defendants committed several other wrongful acts
during and after the trial as well.” (Doc. at ). Despite Individual Defendants’
representation that they would seek to file an amended cross-complaint to clarify
their allegations concerning Plaintiffs conduct during and after the state court
trial, they have not done so. (Doc. 443 at 6)(stating “Cross-complaints...will
file a motion requesting [leave] to amend their [cross-complaint] to include
these allegations.”).
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by failing to make repairs on Lot 1 within the Property and by
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failing to place Sinclair and/or Lairtrust on the Board of Directors
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of
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maintained by the Fox Hollow HOA; (3) “assessed extra assessments
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on Lot 1 and then proceeded to wrongfully foreclose;” and (4)
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refused to remove “a judgment lien from Richard C. Sinclair that
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Richard Sinclair had paid off years earlier despite written requests
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for Defendant to do so.”
the
HOA;
inadequately
accounted
for
reserve
accounts
(Doc. 425 at 12-13).
III. LEGAL STANDARD.
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(2)
Summary
judgment/adjudication
is
appropriate
when
"the
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pleadings, the discovery and disclosure materials on file, and any
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affidavits show that there is no genuine issue as to any material
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fact and that the movant is entitled to judgment as a matter of
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law." Fed. R. Civ. P. 56(c). The movant "always bears the initial
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responsibility of informing the district court of the basis for its
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motion,
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depositions, answers to interrogatories, and admissions on file,
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together with the affidavits, if any, which it believes demonstrate
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the absence of a genuine issue of material fact." Celotex Corp. v.
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Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986)
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(internal quotation marks omitted).
and
identifying
those
portions
of
the
pleadings,
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Where the movant will have the burden of proof on an issue at
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trial, it must "affirmatively demonstrate that no reasonable trier
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of fact could find other than for the moving party."
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Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007).
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respect to an issue as to which the non-moving party will have the
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burden of proof, the movant "can prevail merely by pointing out that
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there is an absence of evidence to support the nonmoving party's
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Soremekun v.
With
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case." Soremekun, 509 F.3d at 984.
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When a motion for summary judgment is properly made and
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supported, the non-movant cannot defeat the motion by resting upon
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the
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"non-moving party must set forth, by affidavit or as otherwise
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provided in Rule 56, 'specific facts showing that there is a genuine
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issue for trial.'" Soremekun, 509 F.3d at 984. (quoting Anderson v.
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Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 91 L. Ed.
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2d 202 (1986)). "A non-movant's bald assertions or a mere scintilla
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of evidence in his favor are both insufficient to withstand summary
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judgment." FTC v. Stefanchik, 559 F.3d 924, 929 (9th Cir. 2009).
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"[A] non-movant must show a genuine issue of material fact by
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presenting affirmative evidence from which a jury could find in his
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favor." Id. (emphasis in original). "[S]ummary judgment will not lie
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if [a] dispute about a material fact is 'genuine,' that is, if the
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evidence is such that a reasonable jury could return a verdict for
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the nonmoving party."
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whether a genuine dispute exists, a district court does not make
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credibility determinations; rather, the "evidence of the non-movant
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is to be believed, and all justifiable inferences are to be drawn
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in his favor." Id. at 255.
allegations
denials
of
its
own
pleading,
rather
the
Anderson, 477 U.S. at 248. In determining
IV. DISCUSSION.
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or
Plaintiffs’ motion for summary judgment asserts that Individual
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Defendants
lack
standing
to
prosecute
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ownership interest in Lot 1 during or after the state court trial
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because none of the Individual Defendants owned Lot 1 during the
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operative time periods. Individual Defendants do not dispute that
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none of them owned Lot 1 during or after the state court trial.
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claims
arising
out
of
Nor
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do the Individual Defendants provide any legal authority for the
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proposition that individual members of a limited liability company
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(“LLC”) have standing to pursue claims arising out of ownership
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interests held solely by the LLC.
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In California, an LLC is a hybrid business entity formed under
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the Corporations Code consisting of at least two members who own
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membership interests.
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has a legal existence separate from its members.
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Communications Internat. v. Superior Court, 90 Cal. App. 4th 958,
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963 (Cal. Ct. App. 2001). While members actively participate in the
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management and control of the company, they have limited liability
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for the company's debts and obligations to the same extent enjoyed
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by corporate shareholders.
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1211, 1214 n.1 (Cal. Ct. App. 2004). “Like corporate shareholders,
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members of a limited liability company hold no direct ownership
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interest in the company's assets.”
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See Cal. Corp. Code § 1700 et seq.
An LLC
E.g., Paclink
Denevi v. LGCC, LLC, 121 Cal. App. 4th
Id.
Members of an LLC do not have an ownership interest in property
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to which the LLC holds title.
E.g., Kwok v. Transnation Title Ins.
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Co., 170 Cal. App. 4th 1562, 1570-71 (Cal. Ct. App. 2009).
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the gravamen of a complaint is injury to an LLC’s property, the
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right of action lies with the LLC, not individual members of the
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LLC.
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411, 426 (Cal. Ct. App. 2003) (discussing application of Paclink in
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partnership context).
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to prosecute claims for injury to the LLC’s property.
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Paclink, 90 Cal. App. 4th at 962, 965-66.
Where
See Everest Investors 8 v. McNeil Partners, 114 Cal. App. 4th
Members of an LLC lack individual standing
E.g.,
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It is undisputed that none of the Individual Defendants were
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owners of Lot 1 during the time period relevant to the remaining
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unstayed claims asserted in the cross-complaint.
As Individual
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Defendants lack standing to sue for claims arising out of any LLC’s
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ownership interest in Lot 1 during and after trial of the state
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court action, Plaintiffs are entitled to summary judgment on such
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claims.
Plaintiffs’ motion is GRANTED.
ORDER
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For the reasons stated, IT IS ORDERED:
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1) Plaintiffs motion for summary judgment is GRANTED; and
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2) Plaintiffs shall file a form of order consistent with this
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memorandum decision within five (5) days of electronic service
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of this decision.
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IT IS SO ORDERED.
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Dated:
hkh80h
June 13, 2011
/s/ Oliver W. Wanger
UNITED STATES DISTRICT JUDGE
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