Encatto Ltd. v. Obscura Digital Inc.

Filing 15

ORDER by Judge Claudia Wilken GRANTING DEFENDANTS 6 MOTION TO DISMISS. (ndr, COURT STAFF) (Filed on 1/30/2013)

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1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 United States District Court For the Northern District of California 10 11 ORDER GRANTING DEFENDANT’S MOTION TO DISMISS Plaintiff, 12 13 No. C 12-2940 CW ENCATTO LTD., v. OBSCURA DIGITAL INCORPORATED, 14 Defendants. 15 16 ________________________________/ 17 Defendant Obscura Digital has filed a motion to dismiss 18 19 Plaintiff Encatto’s complaint. 20 motion was decided on the papers. 21 parties papers, the Court grants Defendant’s motion. 22 6. 23 24 Plaintiff opposes the motion. The Having considered all of the Docket No. BACKGROUND Plaintiff is a Belize company that is a subsidiary of Gazprom 25 Invest-Vostok, a Russian company. 26 California company with its principal place of business in San 27 Francisco. 28 Ventures Ltd., a British company, to arrange a public relations Complaint ¶ 3. Complaint ¶ 2. Defendant is a In 2011, Gazprom engaged Apogee 1 event to take place in September 2011 in Russia. 2 In July 2011, Apogee contacted Defendant to inquire about 3 Defendant producing a film for the September event. 4 ¶ 7. 5 Complaint ¶ 6. Complaint Because the date of the event was approaching, Gazprom sought 6 to have Defendant’s film crew begin filming as quickly as 7 possible. 8 Defendant to provide a budget for filming alone, without any pre- 9 or post-production costs. Id. Accordingly, on July 21, 2011, Gazprom asked Id. Defendant stated that the film United States District Court For the Northern District of California 10 shoot would cost $40,000, including all equipment costs. 11 July 23, 2011, Apogee and Gazprom representatives met with 12 Defendant. 13 Defendant reached an agreement that upon receipt of a down 14 payment, Defendant would begin filming while the parties continued 15 to negotiate final terms, conditions and pricing for the 16 production phase of the film project. 17 Complaint ¶ 8. Id. On During that meeting Apogee and Id. Plaintiff sent Defendant a $50,000 down payment on Gazprom’s 18 behalf. 19 filming immediately. 20 and began filming. 21 Apogee that the cost of the ten-day film shoot was $30,000, not 22 $40,000 as it previously quoted. 23 Complaint ¶ 9. Apogee requested that Defendant begin Id. Id. Defendant sent its film crew to Russia On July 27, 2011, Defendant informed Id. Apogee and Defendant continued to negotiate pricing for post- 24 production of the film. Complaint ¶ 11. 25 Apogee that it would cost $1,973,400 to complete the film. 26 Apogee did not agree to this amount. 27 Plaintiff sent Defendant an additional $100,000 while Apogee and 28 Defendant continued to negotiate. Id. Id. 2 Defendant informed Id. On August 10, 2011, 1 On August 16, 2011, Gazprom directed Apogee to make a 2 counter-offer of $631,900 to complete post-production. Complaint 3 ¶ 12. 4 work on the project. 5 any portion of the $150,000 it received. 6 Plaintiff alleges one cause of action for unjust enrichment. 7 Defendant now moves to dismiss the complaint pursuant to Federal 8 Rule of Civil Procedure 12(b)(6) for failure to state a claim and 9 Federal Rule of Civil Procedure 12(b)(7) for failure to join an Defendant rejected Apogee’s counter-offer and discontinued Complaint ¶ 13. Defendant has not returned Complaint ¶ 17. United States District Court For the Northern District of California 10 indispensable party. Because the Court dismisses pursuant to Rule 11 12(b)(7), it need not reach Defendant’s alternate argument 12 pursuant to Rule 12(b)(6). 13 14 DISCUSSION Defendant moves to dismiss pursuant to Federal Rule of Civil 15 Procedure 12(b)(7) for failure to join an indispensable party. 16 Federal Rule of Civil Procedure 19 provides, 17 18 19 20 21 22 23 A person who is subject to service of process and whose joinder will not deprive the court of subject-matter jurisdiction must be joined as a party if: (A) in that person’s absence, the court cannot accord complete relief among existing parties; or (B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person’s absence may: (i) as a practical matter impair or impede the person’s ability to protect the interest; or 24 25 26 (ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest. 27 Fed. R. Civ. P. 19(a). Such parties are referred to as 28 “necessary” or “required” parties. 3 See Fed. R. Civ. P. 19(a)(1). 1 If a necessary party cannot be joined, the court must determine 2 whether “equity and good conscience” will permit the action in the 3 party’s absence. 4 considered “indispensable” and the lawsuit must be dismissed in 5 the absence of that party. 6 v. Patterson, 390 U.S. 102, 118 (1968). 7 the burden of persuasion in arguing for dismissal under Rule 19. 8 Clinton v. Babbitt, 180 F.3d 1081, 1088 (9th Cir. 1999). 9 Fed. R. Civ. P. 19(b). If not, the party is Provident Tradesmens Bank & Trust Co. The moving party bears Defendant argues generally that both prongs of Rule 19(a) are United States District Court For the Northern District of California 10 satisfied in this case with respect to Gazprom because the 11 payments at issue were made in relation to the agreement between 12 Gazprom and Defendant. 13 question of whether Defendant was entitled to keep the money it 14 received will turn on the agreement between it and Gazprom and the 15 work Defendant performed. 16 Gazprom’s presence, “the court cannot accord complete relief among 17 existing parties.” Defendant asserts that resolution of the Therefore, Defendant argues that absent Fed. R. Civ. P. 19(a)(1)(A). 18 In Haas v. Jefferson Nat. Bank of Miami Beach, the Fifth 19 Circuit held that a third party was a necessary party because his 20 “evidence [would] either support the complaint or bolster the 21 defense,” making his presence “critical to the disposition of the 22 important issues in the litigation.” 442 F.2d 394, 398 (5th Cir. 23 1971). 24 the defendant bank to issue him shares of its common stock. 25 F.3d at 395. 26 the third party through which they would jointly purchase shares 27 of the bank’s stock. 28 name, but the plaintiff would have one-half ownership of the In that case, the plaintiff sought an injunction directing 442 The plaintiff alleged that he had an agreement with The stocks would issue in the third party’s 4 1 shares. Id. The plaintiff alleged that the defendant was aware 2 of his ownership interest. 3 that he asked the third party to order the defendant to issue 4 certificates in the plaintiff’s name, which the third party did. 5 Id. 6 third party was indebted to the bank under an agreement which 7 required the third party to “assign, and transfer to the bank 8 property of any kind owned by [the third party] and coming into 9 the possession of the Bank.” Id. The plaintiff further alleged However, the bank refused to make the assignment because the Id. According to the bank, the United States District Court For the Northern District of California 10 third party “withdrew the transfer request and instead pledged the 11 stock certificates with a second bank as collateral for a loan 12 there.” 13 Id. At a pre-trial conference, the parties stipulated that the 14 questions of fact remaining to be litigated at trial included the 15 status of the third party's obligation to the bank, and whether 16 the third party had withdrawn his transfer request. 17 Following the entry of these stipulations, the court entered an 18 order directing the plaintiff to amend the complaint to join the 19 third party as a party to the action. 20 amendment, the court granted the defendant's motion to dismiss, 21 finding that joinder of the third party destroyed complete 22 diversity. 23 Id. Id. Following the Id. Because the plaintiff's primary claim was based on the bank's 24 transfer of the stock to the second bank as collateral for the 25 third party's loan, the Fifth Circuit held that the third party 26 was “more than a key witness whose testimony would be of 27 inestimable value.” 28 active participant in the alleged conversion of [the plaintiff's] Id. “Instead,” the court held, he was “an 5 1 stock.” 2 party's absence would expose the bank to a risk of inconsistent 3 obligations if the plaintiff prevailed and the third party later 4 sued the bank asserting ownership of the shares. 5 the Fifth Circuit held that a favorable decision for the plaintiff 6 could “impair or impede” the third party's ability to protect his 7 interest in all of the shares of stock. 8 9 Id. Moreover, the Fifth Circuit held that the third Id. Finally, Id. Here, Gazprom is similarly involved in the transaction alleged in Plaintiff’s complaint. Plaintiff alleges that it sent United States District Court For the Northern District of California 10 money to Defendant on Gazprom’s behalf for work that Defendant was 11 to perform for Gazprom. 12 resolution of whether it is liable to return money to Plaintiff 13 turns on the agreement Defendant reached with Gazprom, and the 14 value of the work it performed for Gazprom. 15 agree, stating that Defendant could demonstrate that it was 16 entitled to keep the $150,000 it received “by proving that the 17 work it performed was worth $150,000 or more.” 18 Opposition at 8. 19 light of the agreement with Gazprom, the party for whom the work 20 was performed. 21 than a key witness whose testimony would be of inestimable value” 22 and “critical to the disposition of the important issues in the 23 litigation.” 24 Accordingly, as Defendant argues, the Plaintiff appears to Plaintiff’s The value of the work can only be evaluated in Like the third party in Haas, Gazprom is “more Id. at 398. Moreover, if Plaintiff simply “sent” money to Defendant “on 25 Gazprom’s behalf,” as Plaintiff alleges in the complaint, Gazprom 26 has an interest in the money at issue in this case, which it 27 cannot protect if it is not present in the case. 28 Gazprom is also a necessary party pursuant to Rule 19(a)(1)(B)(i). 6 Accordingly, 1 Finally, there is potential prejudice to Defendant if it is 2 ordered to pay money to Plaintiff in this case, and Gazprom later 3 sues Defendant seeking repayment of the amount paid to Plaintiff 4 on its behalf. 5 Defendant for “consequential damages from Obscura’s breach of 6 contract” is unavailing. 7 it could be prejudiced by being forced to relitigate these issues 8 in a case brought by Gazprom. 9 Plaintiff’s assertion that Gazprom could only sue Even if Defendant prevails in this case, The parties agree that Gazprom, a Russian entity, is not United States District Court For the Northern District of California 10 subject to the jurisdiction of this Court. 11 must determine whether Gazprom is an indispensable party, that is, 12 whether “in equity and good conscience” this case should be 13 dismissed or proceed in Gazprom’s absence. 14 The factors the Court considers in making this decision include, 15 (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 . . .; (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. 16 17 18 19 Accordingly, the Court Fed. R. Civ. P. 19(b). 20 Fed. R. Civ. P. 19(b)(1)-(4). As discussed above, the Court finds 21 that there is potential for prejudice to both Gazprom and 22 Defendant if this case proceeds in Gazprom’s absence. 23 argues that to defeat Plaintiff’s claim, Defendant need only show 24 that it is entitled to keep the money paid to it, and that “there 25 is no reason it cannot subpoena Gazprom for documents or 26 deposition testimony.” 27 Gazprom is a Russian company, not subject to the Court’s subpoena 28 power. Plaintiff’s Opposition at 8. Plaintiff However, Accordingly, there can be no assurance that Defendant 7 1 would be able to obtain the evidence necessary to defend itself 2 against Plaintiff’s claim. 3 Moreover, because resolution of Plaintiff’s claim requires an 4 inquiry into the relationship between Defendant and Gazprom, and 5 the work Defendant performed for Gazprom, there is no possibility 6 of fashioning a remedy to reduce the prejudice. 7 criteria, whether the judgment rendered in Gazprom’s absence would 8 be adequate refers to the “public stake in settling disputes by 9 wholes, whenever possible.” The third Provident Tradesmens Bank, 390 U.S. United States District Court For the Northern District of California 10 at 11. 11 dispute at issue, and there is no way that resolution of 12 Plaintiff’s claim will guarantee resolution of the whole dispute 13 at issue. 14 action against Defendant. 15 As discussed above, Gazprom is an essential player in the Nothing would prevent Gazprom from bringing another The Court finds that the first three factors tend to suggest 16 that Gazprom is an indispensable party and dismissal is 17 appropriate. 18 regarding an alternate forum where Plaintiff can bring its claim 19 against Defendant and Gazprom can be joined as a party. 20 fourth factor, whether Plaintiff will have an avenue for relief if 21 this case is dismissed, weighs in Plaintiff’s favor, the other 22 factors outweigh this factor. 23 Defendant does not provide any argument or evidence While the Accordingly, the Court dismisses Plaintiff’s complaint for 24 failure to join an indispensable party. 25 prejudice. 26 27 28 This dismissal is without CONCLUSION For the reasons stated above, the Court GRANTS Defendant’s motion to dismiss. Docket No. 6. Plaintiff’s complaint against 8 1 Defendant is dismissed with leave to amend to refile within 2 fourteen days with Gazprom as a co-plaintiff. 3 without prejudice to refiling in a jurisdiction in which Gazprom 4 can be joined. 5 financial relationship with Gazprom, presumably it will be able to 6 join Gazprom as a co-plaintiff, or sue Gazprom for Plaintiff's 7 money back, leaving Gazprom to sue Defendant for Defendant's 8 alleged breach. 9 timely, the Clerk shall enter a separate judgment. United States District Court For the Northern District of California 10 Dismissal is also Because Plaintiff apparently has a preexisting If Plaintiff does not file an amended complaint Each party shall bear its own costs of suit. 11 12 IT IS SO ORDERED. 13 14 15 Dated: CLAUDIA WILKEN United States District Judge 16 17 18 19 20 21 22 23 24 25 26 27 28 9

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