Kanaka Industrial Projects, LLC v. Golden State Biofuels, LLC et al

Filing 25

ORDER DENYING PLAINTIFF'S REQUEST FOR COURT APPROVAL OF VOLUNTARY DISMISSAL AND OF FORM OF NOTICE re 13 , 16 , 21 . Signed by JUDGE ALAN C KAY on 12/14/11. (eps) -- Within thirty days of this order, Plaintiff is DIRECTED to f ile, for the Court's approval, a proposed notice of voluntary dismissal. The Figueroas' motion to dismiss is DEEMED WITHDRAWN and is TERMINATED. The hearing on that motion, currently set for February 21, 2012, is VACATED. The Figueroas are GRANTED LEAVE to refile their motion to dismiss in the event that this case is not voluntarily dismissed CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry .

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
)
KANAKA INDUSTRIAL PROJECTS, LLC,)
)
Plaintiff, )
)
)
vs.
)
)
GOLDEN STATE BIOFUELS, LLC,
)
et al.
)
Defendants. )
)

Civ. No. 11-00553 ACK-KSC

ORDER DENYING PLAINTIFF’S REQUEST FOR COURT APPROVAL OF VOLUNTARY
DISMISSAL AND OF FORM OF NOTICE
On September 13, 2011, Plaintiff Kanaka Industrial
Projects, LLC, which owns fifteen of the ninety-eight issued and
outstanding voting member ownership units of Defendant Golden
State Biofuels, LLC, filed this derivative action against Golden
State and two of its officers, Richard Figueroa and Celine
Figueroa, who hold sixty-seven of the issued and outstanding
voting member ownership units.
1.)

(Compl. ¶¶ 1, 3, 5, 8, ECF No.

The complaint generally alleges that the Figueroas have

breached their fiduciary duties to Golden State by steering
Golden State’s business opportunities toward other entities
controlled by the Figueroas.

(Id. ¶¶ 10–14.)

Among other

things, the complaint seeks damages and expulsion of the
Figueroas from ownership of member owner units in Golden State
and from their roles as officers of Golden State.
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(Id. at 7–8.)

Plaintiff now seeks to voluntarily dismiss the action,
without prejudice, under Federal Rule of Civil Procedure
41(a)(1)(A)(i).

(See ECF No. 21.)

Both Golden State and the

Figueroas have filed statements of no opposition to the
dismissal.

(ECF Nos. 22, 24.)
In an ordinary action, a plaintiff may voluntarily

dismiss a complaint without a court order by filing a notice of
dismissal “before the opposing party serves either an answer or a
motion for summary judgment.”

Fed. R. Civ. P. 41(a)(1)(A)(i).

In this case, the Figueroas have filed a motion to dismiss the
complaint. (ECF No. 13.)

But no answer or motion for summary

judgment has been filed by any party.

The case therefore

satisfies the requirements of voluntary dismissal in ordinary
cases.
Yet Rule 41(a)(1)(A) is subject to Federal Rule of
Civil Procedure 23.1(c), which provides that derivative actions
such as this one “may be settled, voluntarily dismissed, or
compromised only with the court’s approval.”
23.1(c).

Fed. R. Civ. P.

The rule further provides that “[n]otice of a proposed

settlement, voluntary dismissal, or compromise must be given to
shareholders or members in the manner that the court orders.”
Id.; see also Cramer v. Gen. Tel. & Elecs. Corp, 582 F.2d 259,
268–69 (3d Cir. 1978) (discussing the reasons for the notice

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requirement); Papilsky v. Berndt, 466 F.2d 251, 257–58 (2d Cir.
1972) (same).
The Court finds that Plaintiff’s current submission is
deficient both as to the proposed form of notice and as to the
proposed method of notice.
As to the form of notice, “[a]ny notice of settlement
or voluntary dismissal must provide sufficient information to
allow the [members] to make an informed choice regarding whether
to intervene to challenge the proposed disposition of the
litigation.”

5 Moore’s Federal Practice § 23.1.10[1][b] (Matthew

Bender 3d ed.) (citing Bell Atl. Corp. v. Bolger, 2 F.3d 1304,
1317–18 (3d Cir. 1993) (finding that a notice of a settlement was
adequate when it “summarized the . . . matter, the procedural
history, the parties’ contentions, the issues involved, the
reasons each party recommended settlement, and the terms of the
settlement agreement,” and also “advised shareholders of their
right to object, the consequences of not doing so, and how to go
about obtaining further information available on file with the
court”); Maher v. Zapata Corp, 714 F.2d 436, 450–53 (5th Cir.
1983) (same)).

The proposed notice fails to describe the pending

action or the reasons that Plaintiff has elected to voluntarily
dismiss the action, and also fails to inform the non-party
members of Golden State of their rights or their ability to
obtain further information.

The proposed notice therefore fails

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to provide sufficient information to allow the members to make an
informed choice about how and whether to proceed in this action.
As to method of notice, while the Court provisionally
approves of providing notice to the member owners of Golden State
via Priority Mail, the Court cannot, based on the current record,
determine whether all member owners are included in the proposed
certificate of service.

The document that Plaintiff filed states

that the proposed certificate of service “lists the names and
addresses of all member owners of record of Golden State
Biofuels,” but that statement is unsworn and unsupported by a
current listing of Golden State’s members.
Within thirty days of this order, Plaintiff is DIRECTED
to file, for the Court’s approval, a proposed notice of voluntary
dismissal in keeping with the requirements described above.

The

proposed notice shall be accompanied by a current listing of
Golden State’s members and a sworn statement as to that listing’s
authenticity.

The proposed notice shall provide, at minimum,

thirty days for non-party members to file motions to intervene,
objections to the proposed voluntary dismissal, or statements of
no opposition.

The Court will set a hearing date for any motions

to intervene or objections upon Plaintiff’s submission of an
adequate proposed notice.
In light of the current posture of the case, the
Figueroas’ motion to dismiss is DEEMED WITHDRAWN and is

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TERMINATED.

The hearing on that motion, currently set for

February 21, 2012, is VACATED.

The Figueroas are GRANTED LEAVE

to refile their motion to dismiss in the event that this case is
not voluntarily dismissed.
IT IS SO ORDERED.
DATED:

Honolulu, Hawai#i, December 14, 2011.

________________________________
Alan C. Kay
Sr. United States District Judge

Kanaka Indus. Projects, LLC v. Golden State Biofuels, LLC, Civ. No. 11-00553
ACK-KSC: Order Denying Plaintiff’s Request for Court Approval of Voluntary
Dismissal and of Form of Notice

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