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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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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United States District Court
For the Northern District of California

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ORDER GRANTING
DEFENDANT’S MOTION
TO DISMISS

Plaintiff,

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No. C 12-2940 CW

ENCATTO LTD.,

v.
OBSCURA DIGITAL INCORPORATED,

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Defendants.

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________________________________/

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Defendant Obscura Digital has filed a motion to dismiss

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Plaintiff Encatto’s complaint.

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motion was decided on the papers.

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parties papers, the Court grants Defendant’s motion.

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6.

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Plaintiff opposes the motion.

The

Having considered all of the
Docket No.

BACKGROUND
Plaintiff is a Belize company that is a subsidiary of Gazprom

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Invest-Vostok, a Russian company.

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California company with its principal place of business in San

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Francisco.

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Ventures Ltd., a British company, to arrange a public relations

Complaint ¶ 3.

Complaint ¶ 2.

Defendant is a

In 2011, Gazprom engaged Apogee

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event to take place in September 2011 in Russia.

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In July 2011, Apogee contacted Defendant to inquire about

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Defendant producing a film for the September event.

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¶ 7.

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Complaint ¶ 6.

Complaint

Because the date of the event was approaching, Gazprom sought

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to have Defendant’s film crew begin filming as quickly as

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possible.

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Defendant to provide a budget for filming alone, without any pre-

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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

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shoot would cost $40,000, including all equipment costs.

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July 23, 2011, Apogee and Gazprom representatives met with

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Defendant.

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Defendant reached an agreement that upon receipt of a down

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payment, Defendant would begin filming while the parties continued

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to negotiate final terms, conditions and pricing for the

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production phase of the film project.

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Complaint ¶ 8.

Id.

On

During that meeting Apogee and

Id.

Plaintiff sent Defendant a $50,000 down payment on Gazprom’s

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behalf.

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filming immediately.

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and began filming.

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Apogee that the cost of the ten-day film shoot was $30,000, not

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$40,000 as it previously quoted.

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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-

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production of the film.

Complaint ¶ 11.

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Apogee that it would cost $1,973,400 to complete the film.

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Apogee did not agree to this amount.

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Plaintiff sent Defendant an additional $100,000 while Apogee and

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Defendant continued to negotiate.

Id.

Id.

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Defendant informed
Id.

On August 10, 2011,

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On August 16, 2011, Gazprom directed Apogee to make a

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counter-offer of $631,900 to complete post-production.

Complaint

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¶ 12.

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work on the project.

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any portion of the $150,000 it received.

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Plaintiff alleges one cause of action for unjust enrichment.

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Defendant now moves to dismiss the complaint pursuant to Federal

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Rule of Civil Procedure 12(b)(6) for failure to state a claim and

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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

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indispensable party.

Because the Court dismisses pursuant to Rule

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12(b)(7), it need not reach Defendant’s alternate argument

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pursuant to Rule 12(b)(6).

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DISCUSSION
Defendant moves to dismiss pursuant to Federal Rule of Civil

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Procedure 12(b)(7) for failure to join an indispensable party.

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Federal Rule of Civil Procedure 19 provides,

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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

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(ii) leave an existing party subject to a
substantial risk of incurring double, multiple, or
otherwise inconsistent obligations because of the
interest.

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Fed. R. Civ. P. 19(a).

Such parties are referred to as

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“necessary” or “required” parties.

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See Fed. R. Civ. P. 19(a)(1).

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If a necessary party cannot be joined, the court must determine

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whether “equity and good conscience” will permit the action in the

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party’s absence.

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considered “indispensable” and the lawsuit must be dismissed in

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the absence of that party.

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v. Patterson, 390 U.S. 102, 118 (1968).

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the burden of persuasion in arguing for dismissal under Rule 19.

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Clinton v. Babbitt, 180 F.3d 1081, 1088 (9th Cir. 1999).

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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

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satisfied in this case with respect to Gazprom because the

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payments at issue were made in relation to the agreement between

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Gazprom and Defendant.

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question of whether Defendant was entitled to keep the money it

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received will turn on the agreement between it and Gazprom and the

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work Defendant performed.

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Gazprom’s presence, “the court cannot accord complete relief among

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existing parties.”

Defendant asserts that resolution of the

Therefore, Defendant argues that absent

Fed. R. Civ. P. 19(a)(1)(A).

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In Haas v. Jefferson Nat. Bank of Miami Beach, the Fifth

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Circuit held that a third party was a necessary party because his

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“evidence [would] either support the complaint or bolster the

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defense,” making his presence “critical to the disposition of the

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important issues in the litigation.” 442 F.2d 394, 398 (5th Cir.

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1971).

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the defendant bank to issue him shares of its common stock.

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F.3d at 395.

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the third party through which they would jointly purchase shares

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of the bank’s stock.

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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

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shares.

Id.

The plaintiff alleged that the defendant was aware

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of his ownership interest.

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that he asked the third party to order the defendant to issue

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certificates in the plaintiff’s name, which the third party did.

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Id.

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third party was indebted to the bank under an agreement which

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required the third party to “assign, and transfer to the bank

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property of any kind owned by [the third party] and coming into

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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

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For the Northern District of California

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third party “withdrew the transfer request and instead pledged the

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stock certificates with a second bank as collateral for a loan

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there.”

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Id.

At a pre-trial conference, the parties stipulated that the

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questions of fact remaining to be litigated at trial included the

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status of the third party's obligation to the bank, and whether

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the third party had withdrawn his transfer request.

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Following the entry of these stipulations, the court entered an

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order directing the plaintiff to amend the complaint to join the

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third party as a party to the action.

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amendment, the court granted the defendant's motion to dismiss,

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finding that joinder of the third party destroyed complete

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diversity.

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Id.

Id.

Following the

Id.

Because the plaintiff's primary claim was based on the bank's

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transfer of the stock to the second bank as collateral for the

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third party's loan, the Fifth Circuit held that the third party

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was “more than a key witness whose testimony would be of

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inestimable value.”

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active participant in the alleged conversion of [the plaintiff's]

Id.

“Instead,” the court held, he was “an

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stock.”

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party's absence would expose the bank to a risk of inconsistent

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obligations if the plaintiff prevailed and the third party later

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sued the bank asserting ownership of the shares.

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the Fifth Circuit held that a favorable decision for the plaintiff

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could “impair or impede” the third party's ability to protect his

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interest in all of the shares of stock.

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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

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For the Northern District of California

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money to Defendant on Gazprom’s behalf for work that Defendant was

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to perform for Gazprom.

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resolution of whether it is liable to return money to Plaintiff

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turns on the agreement Defendant reached with Gazprom, and the

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value of the work it performed for Gazprom.

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agree, stating that Defendant could demonstrate that it was

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entitled to keep the $150,000 it received “by proving that the

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work it performed was worth $150,000 or more.”

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Opposition at 8.

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light of the agreement with Gazprom, the party for whom the work

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was performed.

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than a key witness whose testimony would be of inestimable value”

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and “critical to the disposition of the important issues in the

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litigation.”

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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

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Gazprom’s behalf,” as Plaintiff alleges in the complaint, Gazprom

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has an interest in the money at issue in this case, which it

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cannot protect if it is not present in the case.

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Gazprom is also a necessary party pursuant to Rule 19(a)(1)(B)(i).

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Accordingly,

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Finally, there is potential prejudice to Defendant if it is

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ordered to pay money to Plaintiff in this case, and Gazprom later

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sues Defendant seeking repayment of the amount paid to Plaintiff

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on its behalf.

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Defendant for “consequential damages from Obscura’s breach of

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contract” is unavailing.

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it could be prejudiced by being forced to relitigate these issues

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in a case brought by Gazprom.

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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

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subject to the jurisdiction of this Court.

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must determine whether Gazprom is an indispensable party, that is,

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whether “in equity and good conscience” this case should be

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dismissed or proceed in Gazprom’s absence.

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The factors the Court considers in making this decision include,

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(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.

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Accordingly, the Court

Fed. R. Civ. P. 19(b).

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Fed. R. Civ. P. 19(b)(1)-(4).

As discussed above, the Court finds

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that there is potential for prejudice to both Gazprom and

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Defendant if this case proceeds in Gazprom’s absence.

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argues that to defeat Plaintiff’s claim, Defendant need only show

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that it is entitled to keep the money paid to it, and that “there

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is no reason it cannot subpoena Gazprom for documents or

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deposition testimony.”

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Gazprom is a Russian company, not subject to the Court’s subpoena

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power.

Plaintiff’s Opposition at 8.

Plaintiff

However,

Accordingly, there can be no assurance that Defendant

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would be able to obtain the evidence necessary to defend itself

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against Plaintiff’s claim.

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Moreover, because resolution of Plaintiff’s claim requires an

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inquiry into the relationship between Defendant and Gazprom, and

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the work Defendant performed for Gazprom, there is no possibility

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of fashioning a remedy to reduce the prejudice.

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criteria, whether the judgment rendered in Gazprom’s absence would

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be adequate refers to the “public stake in settling disputes by

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wholes, whenever possible.”

The third

Provident Tradesmens Bank, 390 U.S.

United States District Court
For the Northern District of California

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at 11.

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dispute at issue, and there is no way that resolution of

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Plaintiff’s claim will guarantee resolution of the whole dispute

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at issue.

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action against Defendant.

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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

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that Gazprom is an indispensable party and dismissal is

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appropriate.

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regarding an alternate forum where Plaintiff can bring its claim

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against Defendant and Gazprom can be joined as a party.

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fourth factor, whether Plaintiff will have an avenue for relief if

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this case is dismissed, weighs in Plaintiff’s favor, the other

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factors outweigh this factor.

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Defendant does not provide any argument or evidence

While the

Accordingly, the Court dismisses Plaintiff’s complaint for

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failure to join an indispensable party.

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prejudice.

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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

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Defendant is dismissed with leave to amend to refile within

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fourteen days with Gazprom as a co-plaintiff.

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without prejudice to refiling in a jurisdiction in which Gazprom

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can be joined.

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financial relationship with Gazprom, presumably it will be able to

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join Gazprom as a co-plaintiff, or sue Gazprom for Plaintiff's

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money back, leaving Gazprom to sue Defendant for Defendant's

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alleged breach.

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timely, the Clerk shall enter a separate judgment.

United States District Court
For the Northern District of California

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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.

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IT IS SO ORDERED.

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Dated:
CLAUDIA WILKEN
United States District Judge

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