Lewis, et al v. Russell, et al

Filing 370

MEMORANDUM and ORDER signed by Judge William B. Shubb on 1/20/12, ORDERING that Vic's 351 , 352 motions for judgment on the pleadings are GRANTED. (Kastilahn, A)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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----oo0oo---11
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CHARLES H. LEWIS and JANE W.
LEWIS,

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NO. CIV. S-03-2646 WBS CKD

Plaintiffs,
v.

MEMORANDUM AND ORDER RE: MOTIONS
FOR JUDGMENT ON THE PLEADINGS

ROBERT D. RUSSELL; IRENE
RUSSELL; BEN J. NEWITT; the
Estate of PHILLIP NEWITT,
Deceased; JUNG HANG SUH; SOO
JUNG SUH; JUNG K. SEO; THE DAVIS
CENTER, LLC; MELVIN R. STOVER,
individually and as trustee of
the Stover Family Trust; EMILY
A. STOVER, individually and as
trustee of the Stover Family
Trust; STOVER FAMILY TRUST;
RICHARD ALBERT STINCHFIELD,
individually and as successor
trustee of the Robert S.
Stinchfield Separate Property
Revocable Trust, and as trustee
of the Barbara Ellen Stinchfield
Testamentary Trust; ROBERT S.
STINCHFIELD SEPARATE PROPERTY
REVOCABLE TRUST; THE BARBARA
ELLEN STINCHFIELD TESTAMENTARY
TRUST; WORKROOM SUPPLY, INC., a
California corporation; SAFETYKLEEN CORPORATION, a California
corporation; the CITY OF DAVIS;
JENSEN MANUFACTURING COMPANY;
VIC MANUFACTURING COMPANY;
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MARTIN FRANCHISES INC., aka/dba
MARTINIZING DRY CLEANING,

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Defendants.
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AND RELATED COUNTER, CROSS,
AND THIRD PARTY CLAIMS.

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/

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----oo0oo----

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Charles H. Lewis and Jane W. Lewis (the “Lewises”)

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brought this action pursuant to the Comprehensive Environmental

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Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C.

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§§ 9601-9675, for recovery of costs incurred removing hazardous

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substances from a piece of real property located in Davis,

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California (“Property”).

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defendant Vic Manufacturing Company’s (“Vic”) motions for

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judgment on the pleadings on The Davis Center LLC’s (“Davis

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Center”) First Amended Cross-Claims and the City of Davis’ First

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Amended Cross-Claims pursuant to Federal Rule of Civil Procedure

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12(c).

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I.

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Presently before the court are

Factual and Procedural Background
This multi-party litigation concerns the contamination

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of the Property with tetrachloroethene (“PCE”), a chemical

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allegedly released through the operation of a dry cleaning

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facility on the Property.

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(Docket No. 197).)

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managers of the Property during the relevant time period, the

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operators of the dry cleaning facility, the entities that

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supplied and removed the PCE, and the manufacturers of the

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equipment used in dry cleaning operations at the Property.

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id. ¶¶ 7-25; First Am. Third Party Compl. (“FATPC”) ¶¶ 1-2

(See Second Am. Compl. (“SAC”) ¶ 40

The parties include the alleged owners and

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(See

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(Docket No. 198).)

The City of Davis is also a party to the

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litigation because of its alleged role in maintaining the

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underground sewer system that services the Property.

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Since the filing of the original complaint in 2003, the parties

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have filed numerous counterclaims, crossclaims, and third-party

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claims for contribution pursuant to 42 U.S.C. § 9613(f).

(SAC ¶ 22.)

In February 1999, the California Regional Water

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Quality Control Board, Central Valley Region (“RWQCB”), informed

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the owners and operators of the Property that it had discovered

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PCE in the soil and groundwater at the Property.

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The RWQCB then issued a Cleanup and Abatement Order on October 2,

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2002, instructing the current and past owners and operators of

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the Property to investigate the extent of the PCE contamination

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and to prepare work plans to address the contamination.

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42.)

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incurred costs in carrying out the activities ordered by the

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RWQCB.

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(SAC ¶ 40.)

(Id. ¶

Thereafter, some of the parties, including the Lewises,

(Id. ¶¶ 42, 46.)
The Lewises filed the Complaint in this action on

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December 9, 2003, seeking various forms of declaratory relief and

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asserting claims for cost recovery and contribution, 42 U.S.C. §§

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9607, 9613; contribution and/or indemnity, Cal. Health & Safety

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Code § 25363(e); equitable indemnity and contribution;

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negligence; and breach of contract.

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After more than a year of litigation, including the filing of

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numerous cross-claims, counter-claims, a third-party complaint by

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the Davis Center, and answers thereto, the court ordered a stay

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of litigation on April 13, 2005, to facilitate an agreed-upon

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settlement process.

(See Compl. (Docket No. 1).)

(See Order of Settlement Process 1:23-2:2,
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12:6-7 (Docket No. 124).)

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resolve of the litigation, the court dissolved the stay on

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September 12, 2008.

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After the settlement process failed to

(See Sept. 12, 2008 Order (Docket No. 253).

During the settlement stay, the court granted

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plaintiffs leave to file their SAC.

(Aug. 8, 2007 Order (Docket

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No. 195).)

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proceedings on August 22, 2007, when plaintiffs filed their SAC

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adding Vic as a defendant.

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that Vic manufactured at least one of the dry cleaning machines

Vic was first named as a party in the litigation

(Docket No. 197.)

(SAC ¶ 24.)1

The SAC alleges

On September 6, 2007, Davis

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used on the property.

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Center filed its First Amended Third Party Complaint (“FATPC”)

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naming Vic as a third-party defendant for the first time.

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(Docket No. 198.)

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cross-claims on February 29, 2008, when it filed its First

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Amended Cross-Claim (“FACC”).

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The City of Davis added Vic as a party to its

(Docket No. 229.)

Vic filed its Answers to the SAC, FATPC, and FACC on

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November 27, 2007, January 29, 2008, and April 3, 2008,

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respectively.

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raise incapacity as an affirmative defense in any of its

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responsive pleadings.

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dissolution only in its Answer to City of Davis’ FACC.

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Answer, Vic states that:

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(See Docket Nos. 206, 222, 237.)

Vic did not

Vic raised the subject of its corporate
In its

In response to paragraph 20, this answering defendant
admits it was a duly formed and operating corporation but
is now a dissolved corporation and it otherwise denies
the allegations in paragraph 20 to the extent that they
pertain to it and otherwise lacks sufficient information
and belief upon which to answer the allegations contained
in said paragraph, and based thereon denies each and

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Plaintiffs dismissed their claims against Vic on
November 7, 2011. (Docket No. 349.)
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every allegation therein.

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(Answer of Third-Party Def. Vic to City of Davis’ FACC (“Answer

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to FACC”) ¶ 19.)

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status as a dissolved corporation in its responsive pleadings.

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In each of its responsive pleadings, Vic did raise as affirmative

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defenses that the complaint did not state facts sufficient to

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state a cause of action against Vic, (id. at 8; Answer of Third-

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Party Def. Vic to FATPC (“Answer to FATPC”) at 7), and the

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statute of limitations, (Answer to FACC at 10; Answer to FATPC at

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There are no additional references to Vic’s

9).
Also during the settlement stay, Jung Hang Suh and Soo

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Jung Suh, who allegedly operated the dry cleaning facility from

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1996 through 2005 (SAC ¶ 36), filed for bankruptcy.

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14, 2005 Order (Docket No. 162) at 1:25.)

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automatically stayed as to them pursuant to 11 U.S.C. § 362,

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which prevents the “commencement or continuation . . . of a

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judicial, administrative, or other action or proceeding against

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the debtor that was or could have been commenced before the

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commencement” of the bankruptcy action.

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On May 7, 2009, the court stayed the entire action pursuant to 11

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U.S.C. § 362(a), reasoning that the claims by and against the

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Suhs were so integral that they could not be meaningfully excised

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from the litigation.

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KJM, 2009 WL 1260290, at *3 (E.D. Cal. May 7, 2009); (Docket No.

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301).

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proceedings, the stay was lifted on January 29, 2011.

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No. 333.)

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(See Dec.

The case was thus

11 U.S.C. § 362(a)(1).

Lewis v. Russell, No. CIV S-03-2646 WBS

Following the resolution of the Suh’s bankruptcy
(Docket

Once the bankruptcy stay was lifted, the parties filed
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an Amended Joint Status Report on April 4, 2011.

(Docket No.

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341.)

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Minnesota corporation.

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untimely as no claim was filed against Vic within 2 years after

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the date it filed its notice of intent to dissolve.”

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Status Report at 15:16-19 (citing Minn. Stat. § 302A.7291 subd.

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3; Camacho v. Todd & Leiser Homes, 706 N.W.2d 49 (Minn. 2005)).)

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Vic requested that the court stay further discovery until it was

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able to file a motion for judgment on the pleadings raising its

In the status report, Vic states that: “Vic is a dissolved

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incapacity claim.

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the requested stay.

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Under Minnesota law, the present claim is

344.))

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(Id. at 19:27-20:19.)

(Am. Joint

The court did not grant

(April 13, 2011 Order at 3 n.1 (Docket No.

Vic now seeks entry of a Rule 12(c) judgment on the

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pleadings on the City of Davis’ FACC and Davis Center’s FATPC on

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the basis that it lacked the capacity to be sued in federal court

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pursuant to Rule 17(b) when the parties first asserted claims

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against Vic in this action.

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was dissolved under Minnesota law on February 25. 2002.

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for Judicial Notice Ex. A; Mot. for J. on the Pleadings on Davis

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Center’s FATPC at 4:5-7; Mot. for J. on the Pleadings on City of

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Davis’ FACC at 4:1-2.)

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II.

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In its motions, Vic states that it
(Req.

Discussion
A.

Motion for Judgment on the Pleadings
“After the pleadings are closed -- but early enough not

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to delay trial -- a party may move for judgment on the

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pleadings.”

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for judgment on the basis of plaintiff’s “[f]ailure to state a

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claim upon which relief can be granted.”

Fed. R. Civ. P. 12(c).

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A Rule 12(c) motion may ask

Id. 12(h)(2)(B).

Such

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a motion is essentially equivalent to a Rule 12(b)(6) motion to

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dismiss, so a district court may “dispos[e] of the motion by

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dismissal rather than judgment.”2

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Cnty. of San Diego, 311 F. Supp. 2d 898, 903 (S.D. Cal. 2004).

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Sprint Telephony PCS, L.P. v.

Under Federal Rule of Civil Procedure 8(a)(2), a

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pleading must contain “a short and plain statement of the claim

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showing that the pleader is entitled to relief.”

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motion to dismiss, a complaint must contain sufficient factual

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matter, accepted as true, to ‘state a claim to relief that is

“To survive a

Ashcroft v. Iqbal, 556 U.S. 662, 129 S.

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plausible on its face.’”

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Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550

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U.S. 544, 570 (2007)).

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pleading standard rests on two principles.

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that a court must accept as true all of the allegations contained

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in a complaint is inapplicable to legal conclusions.”

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showing an entitlement to relief “does not require ‘detailed

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factual allegations,’ . . . it demands more than an unadorned,

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the-defendant-unlawfully-harmed-me accusation.”

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Twombly, 550 U.S. at 555).

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a plausible claim for relief survives a motion to dismiss.”

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at 1950.

The Supreme Court has explained that the
First, “the tenet

Id.

While

Id. (quoting

Second, “only a complaint that states

If the pleadings “do not permit the court to infer more

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Id.

The motions differ in only two respects:

(1) the timing (a motion for judgment on the pleadings is
usually brought after an answer has been filed, whereas
a motion to dismiss is typically brought before an answer
is filed), and (2) the party bringing the motion (a
motion to dismiss may be brought only by the party
against whom the claim for relief is made, usually the
defendant, whereas a motion for judgment on the pleadings
may be brought by any party) (internal citation omitted).
Sprint Telephony, 311 F. Supp. 2d at 902-03.
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than the mere possibility of misconduct, the complaint has

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alleged -- but it has not ‘show[n]’ -- ‘that the pleader is

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entitled to relief.’” Id. (quoting Fed. R. Civ. P. 8(a)(2)).3

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Federal Rule of Civil Procedure 17(b)(2) provides that

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a corporation’s capacity to be sued is determined by reference to

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the law of the state in which it is incorporated.

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incorporated in the state of Minnesota and dissolved in

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accordance with Minnesota law on February 25, 2002.

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for Judicial Notice, Ex. A.)

Vic was

(Def’s Req.

Accordingly, under Rule 17(b)(2),

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Minnesota law controls on the question of Vic’s capacity to be

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sued.

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Minnesota law provides claimants with a two-year window

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to file post-dissolution claims against corporations.

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Stat. § 302A.7291 subd. 3.

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claims period, claims may no longer be raised against dissolved

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corporations.

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431, 434 (9th Cir. 1993) (holding that CERCLA claims could not be

Minn.

After the expiration of the two-year

See Louisiana-Pac. Corp. v. ASARCO, Inc., 5 F.3d

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Vic has requested that the court take judicial notice
of the Certificate of Dissolution of Vic Manufacturing Company,
Inc. In considering a motion for judgment on the pleadings, a
court may consider “documents attached to the complaint,
documents incorporated by reference in the complaint, or matters
of judicial notice -- without converting the motion . . . into a
motion for summary judgment.” United States v. Ritchie, 342 F.3d
903, 908 (9th Cir. 2003); see Heliotrope Gen., Inc. v. Ford Motor
Co., 189 F.3d 971, 981 n.18 (9th Cir. 1999). A court may take
judicial notice of facts “not subject to reasonable dispute”
because they are either “(1) generally known within the
territorial jurisdiction of the trial court or (2) capable of
accurate and ready determination by resort to sources whose
accuracy cannot reasonably be questioned.” Fed. R. Evid. 201.
The court may take judicial notice of matters of public record or
of documents whose contents are alleged in the complaint and
whose authenticity is not questioned. Lee v. City of L.A., 250
F.3d 668, 688-89 (9th Cir. 2001). The court will take judicial
notice of Vic’s exhibit, as it is a matter of public record whose
accuracy cannot be questioned. See id. at 689.
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brought against dissolved Washington corporation after expiration

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of Washington’s two-year corporate capacity term).

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dissolved on February 25, 2002, thus the two year window to file

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post-dissolution claims against Vic expired on February 25, 2004.

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The Davis Center did not file its FATPC against Vic until

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September 6, 2007, and the City of Davis did not file its FACC

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against Vic until February 29, 2008 -- six years after Vic’s

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dissolution.4

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because it lacks capacity to be sued pursuant to Rule 17(b).

Vic was

Vic thus moves for judgment on the pleadings

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The City of Davis and Davis Center argue that Vic

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waived its incapacity defense when it failed to include the

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defense in its responsive pleadings pursuant to Rule 9(a)(2).

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They also rely on Rule 12, which provides that every defense must

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be raised in the responsive pleading or by motion before

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pleading.

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Food Mach., Inc., 206 F.3d 874, 878 (9th Cir. 2000) (“Case law in

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this circuit states that the ‘specific negative averment’ must be

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made ‘in the responsive pleading or by motion before pleading.’”

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(quoting Summers v. Interstate Tractor & Equip. Co., 466 F.2d 42,

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49-50 (9th Cir. 1972))).

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pleadings are deemed to have been waived.

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at 50.

Fed. R. Civ. P. 12(b); see also De Saracho v. Custom

Defenses not raised in the responsive
See Summers, 466 F.2d

Ninth Circuit caselaw would appear at first glance to

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hold that lack of capacity is a waivable defense.

See, e.g., De

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Saracho, 206 F.3d at 880; Summers, 466 F.2d at 50; In re

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Neither City of Davis nor Davis Center argue that their
claims should relate back to the date of the Lewises’ original
complaint filed on December 9, 2003.
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1

Allustiarte, 786 F.2d 910, 914 (9th Cir. 1986); AmeriPride Servs.

2

Inc. v. Valley Indus. Serv., Inc., No. CIV S-00-113, 2008 WL

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5068672, at *4 (E.D. Cal. 2008);

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Accident & Cas. Ins. Co., 160 F.3d 925, 936 (2d Cir. 1998); Swaim

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v. Moltan Co., 73 F.3d 711, 718 (7th Cir. 1996); Wagner Furniture

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Interiors, Inc. v. Kemner's Georgetown Manor, Inc., 929 F.2d 343,

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345 (7th Cir. 1991); MTO Mar. Transp. Overseas, Inc. v. McLendon

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Forwarding Co., 837 F.2d 215, 218 (5th Cir. 1988); Trounstine v.

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Bauer, Pogue & Co., 144 F.2d 379, 383 (2d Cir. 1944).

E.R. Squibb & Sons, Inc. v.

This

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caselaw, however, is distinguishable from the present case in

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three important respects.

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First, the Ninth Circuit has never addressed whether

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state statutes controlling corporate capacity function as

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substantive statutes of repose rather than procedural

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requirements.5

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court believes that Rule 17(c)’s instruction to look to state law

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to determine whether a corporation may be sued also requires the

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court to consider whether the applicable state law designates

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lack of capacity by a corporation as an affirmative, waivable

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defense or as a non-waivable substantive statute of repose.

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court therefore looks to Minnesota law to determine the legal

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effect of the state’s corporate capacity statute.

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Baking Co. v. Lanham Mach. Co., Inc., 288 F.3d 895, 901 (6th Cir.

Without guidance from the Ninth Circuit, the

The

See Roskam

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A statute of repose limits the time within which an
action may be brought and is not related to the accrual of any
cause of action. Unlike a statute of limitations, a statute of
repose begins when a specific event occurs, such as the
dissolution of a corporation, regardless of whether a cause of
action or injury has yet accrued. See McDonald v. Sun Oil Co.,
548 F.3d 774, 779-80 (9th Cir. 2008).

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2002) (evaluating the legal effect of a statute of repose under

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state law to determine if the defense was procedural or

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substantive).

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In Camacho v. Todd & Leiser, Homes, Inc., 706 N.W.2d 49

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(Minn. 2005), the Minnesota Supreme Court found that the

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Minnesota statute that regulates when post-dissolution claims can

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be brought against corporations is a substantive statute of

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repose.

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of action is extinguished before it comes into existence and

Id. at 55.

“[W]hen the repose period expires, the cause

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prevented from accruing.”

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Nos. A10-0087, A10-0089, A10-0090, A10-0091, --- N.W.2d ----,

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2011 WL 5964496, at *7 (Minn. Nov. 30, 2011); see also Warfield

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v. Alaniz, 453 F. Supp. 2d 1118, 1130 (D. Ariz. 2006) (noting

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that “a statute of repose extinguishes the claim after the

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specified time period has expired”).

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is extinguished and prevented from accruing in the first place,

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statutes of repose deprive plaintiffs of the ability to state a

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claim against the dissolved corporation.

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F.3d at 900-01; Stuart v. Am. Cyanamid Co., 158 F.3d 622, 627 (2d

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Cir. 1998).

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In re Individual 35W Bridge Litig.,

Because the cause of action

Roskam Baking Co., 288

The extinguishment of a claim before it accrues

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distinguishes statutes of repose from traditional affirmative

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defenses, such as statutes of limitations, and means that “a

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statute of repose cannot be waived.”

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cv-2613-IEG, 2011 WL 6098025, at *5 (S.D. Cal. Dec. 6, 2011)

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(citing Warfield, 453 F. Supp. 2d at 1130); see also Klein v.

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Capital One Fin. Corp., No. 4:10-CV-00629-EJL, 2011 WL 3270438,

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at *7 n.5 (D. Idaho July 29, 2011) (“[T]he statute of repose . .
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Donell v. Keppers, No. 10-

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. cannot be waived.”).

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traditional affirmative defense and was not waived by Vic’s

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failure to include the defense in its responsive pleadings.

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Thus, Vic’s incapacity defense is not a

Second, the courts in Summers, Wagner Furniture, De

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Saracho, and MTO Maritime address the defendant’s waiver of their

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defense that the plaintiff lacks capacity to sue, not that the

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defendant lacks the capacity to be sued.

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cases is typically due to the inability of the plaintiff to sue

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in a representative capacity, (see, e.g., Summers, 466 F.2d at

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49), or the failure to comply with state corporate registration

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laws, (see, e.g., Wagner Furntiture, 929 F.2d at 345).

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technical causes of incapacity result from procedural rules and

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thus require affirmative pleading under Rule 9.

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defendant’s failure to raise a plaintiff’s incapacity to sue can

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be analogized to waiver by a defendant that the court lacks

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personal jurisdiction -- failure to affirmatively plead the

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defense suggests that the defendant waives any objection it has

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to the plaintiff’s failure to comply with the procedural rules.

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Incapacity in these

Such

Waiver due to a

Incapacity to sue due to procedural defects differs

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significantly from incapacity to be sued due to corporate

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dissolution.

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not procedural, requirement -- the statute of repose.

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corporation lacks capacity due to its previous dissolution, it

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cannot be sued because it no longer exists.

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substantive incapacity defense brought by dissolved corporations

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should be harder to waive than the procedural incapacity defense

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brought by parties contesting plaintiff’s ability to sue.

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Incapacity to be sued results from a substantive,

It follows that the

Third, the caselaw cited by plaintiffs is
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When a

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distinguishable because in most of the cases the defense was not

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raised until the eve of trial or during appeal.

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Summers, 466 F.2d 42, 49-50 (appeal); De Saracho, 206 F.3d 874

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(eve of trial); Swaim, 73 F.3d at 718 (appeal); Wagner Furniture,

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929 F.2d at 345 (two weeks before trial); In re Allustiarte, 786

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F.2d at 914 (during trial); MTO Maritime, 837 F.2d at 218 (eve of

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trial); Trounstine, 144 F.2d at 383 (trial).

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establish that capacity may not be raised on the eve of trial,

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not that capacity is waived if it is not included in the

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See, e.g.,

These cases only

responsive pleadings.
The Ninth Circuit has “liberalized the requirement that

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defendants must raise affirmative defenses in their initial

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pleadings.”

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1436, 1446 (9th Cir. 1997).

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defense for the first time in a motion for judgment on the

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pleadings where the delay does not prejudice the plaintiff.

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Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 713 (9th

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Cir. 2001); see also Camarillo v. McCarthy, 998 F.2d 638, 639

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(9th Cir. 1993) (holding that qualified immunity affirmative

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defense may be raised for the first time at summary judgment

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where there is no prejudice to the plaintiff); Rivera v. Anaya,

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726 F.2d 564, 566 (9th Cir. 1984) (holding that affirmative

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defense of statute of limitations may be raised for the first

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time at summary judgment where plaintiff was not prejudiced).

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the present case, although Vic’s incapacity to sue was not raised

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for four years after Vic was added to the case, the litigation is

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still in its infancy.

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the time after Vic was added as a party, trial is not scheduled

Magana v. Commonwealth of the N. Mar. I., 107 F.3d
A defendant may raise an affirmative

In

The case was stayed for the majority of

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until 2014, and only initial written discovery has been

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conducted.

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allowing Vic to raise incapacity at this time is therefore

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minimal.

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The prejudice to City of Davis and Davis Center in

The only cited case in which the defendant both raised

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its own incapacity as a defense and did not do so on the eve of

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trial is AmeriPride, in which the corporate defendant had been

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dissolved for several years and raised incapacity in its motion

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for summary judgment.

AmeriPride, 2008 WL 5068672, at *4.

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There, the district court found that incapacity was a waivable

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defense; however the court was not discussing whether the

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defendant had waived the defense by not including it in its

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answer (because it had).

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defendant’s active litigation strategy constituted an affirmative

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waiver of the defense and found that it did not.

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Vic’s involvement in the litigation has been minimal and could

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not be interpreted as inconsistent with or affirmatively waiving

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its incapacity defense.

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Rather, the court addressed whether the

Id.

Here,

The court is aware of no case, and the parties have

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presented none, in which a court has rejected a defendant

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corporation’s incapacity defense when it was presented well

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before trial.

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to occur only when a number of factors are simultaneously

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present.

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is not the sine qua non.

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case from those finding waiver of the incapacity defense --

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Minnesota’s classification of its corporate dissolution statute

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as a statute of repose, the substantive nature of the defense,

Waiver of the incapacity defense instead appears

Vic’s timing in raising its corporate capacity defense
The three factors distinguishing this

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and the lack of prejudice to City of Davis and Davis Center --

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suggest that a finding of waiver would be inappropriate and

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inequitable in this case.

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Vic’s motion for judgment on the pleadings.

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B.

Accordingly, the court will grant

Notice Prior to Further Amendments

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In the Joint Status Report filed April 4, 2011, the

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Lewises and Davis Center stated that there is a possibility that

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they may move for leave to amend their complaints to add Dow

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Chemical Company (“Dow”) as an additional defendant/third-party

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defendant.

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informed that the undersigned judge has a financial interest in

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Dow as defined by 28 U.S.C. § 455(b)(4).

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file a motion for leave to amend to add Dow as a party, the court

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requests that it be notified beforehand so that it may take the

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necessary steps to avoid a violation of that statute.

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(Joint Status Report at 17:8-18.)

Counsel should be

If any party intends to

IT IS THEREFORE ORDERED that Vic’s motions for judgment

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on the pleadings be, and the same hereby are, GRANTED.

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DATED:

January 20, 2012

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