Gramercy Group Inc. v. D.A. Builders, LLC
Filing
478
ORDER GRANTING PLAINTIFF'S MOTION TO DISMISS WITH PREJUDICE COUNT IX OF THE FIRST AMENDED COMPLAINT re: 467 . Signed by JUDGE JILL A. OTAKE on 11/26/2018. (afc) WRITTEN ORDER follows hearing held November 26, 2018; minutes of hearing: ECF 475 .
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
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Plaintiff,
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vs.
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D.A. BUILDERS, LLC aka D.A.
BUILDERS; DAVID A. ALCOS III; )
JOHN DOES 1-20; JANE DOES 1- )
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10; DOE CORPORATIONS 1-10;
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DOE PARTNERSHIPS 1-10;
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OTHER ENTITIES 1-10,
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Defendants.
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GRAMERCY GROUP, INC.,
CIVIL NO. 16-00114 JAO-KSC
ORDER GRANTING PLAINTIFF’S
MOTION TO DISMISS WITH
PREJUDICE COUNT IX OF THE FIRST
AMENDED COMPLAINT
ORDER GRANTING PLAINTIFF’S MOTION TO DISMISS
WITH PREJUDICE COUNT IX OF THE FIRST AMENDED COMPLAINT
INTRODUCTION
Plaintiff Gramercy Group, Inc. (“Plaintiff”) moves to dismiss with prejudice
Count IX (Gramercy’s Interest in the Pledged Ewa Beach Property) of the First
Amended Complaint. At the November 20, 2018 continued hearing on the parties’
motions in limine, Plaintiff offered, for the first time, to dismiss Count IX with
prejudice. For the reasons articulated below, the Court GRANTS the Motion
subject to certain conditions.
DISCUSSION
Plaintiff argues that Count IX should be dismissed with prejudice pursuant
to Federal Rule of Civil Procedure (“FRCP”) 12(b)(1) because: 1) David Alcos
stipulated to the Fourth Amended Notice of Pendency of Action (“NOPA”), but it
was never recorded, which means the NOPA is invalid and any ruling about
Plaintiff’s interest in the subject property would exceed this Court’s jurisdiction;
2) World Business Lenders, LLC, an unrelated third-party, initiated a foreclosure
action regarding the subject property and Plaintiff has not sought to intervene;
3) the subject property is so encumbered by other unrelated claims that any interest
Plaintiff would have had would be moot; and 4) although Mr. Alcos signed a
Guaranty purporting to pledge the subject property, he never validly pledged it.
Defendants argue that Plaintiff’s attempt to dismiss Count IX at this late date
evidences its bad faith in asserting the claim. Although Defendants support
dismissal, they request that a number of conditions be imposed, including an award
of attorneys’ fees and costs; permission to inform the jury that Plaintiff sought to
foreclose until 10 days before trial; permission to discuss the NOPAs and their
contents; and permission to examine witnesses without limitation about the
dismissed claim.
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A.
Federal Rule of Civil Procedure 12(b)(1)
As a preliminary matter, the Court notes that Plaintiff incorrectly relies on
Federal Rule of Civil Procedure (“FRCP”) 12(b)(1) as a basis to dismiss Count IX.
FRCP 12(b) provides:
(b) How to Present Defenses. Every defense to a claim for relief in
any pleading must be asserted in the responsive pleading if one is
required. But a party may assert the following defenses by motion:
(1) lack of subject-matter jurisdiction;
....
A motion asserting any of these defenses must be made before
pleading if a responsive pleading is allowed. If a pleading sets out a
claim for relief that does not require a responsive pleading, an
opposing party may assert at trial any defense to that claim. No
defense or objection is waived by joining it with one or more other
defenses or objections in a responsive pleading or in a motion.
Fed. R. Civ. P. 12(b). “ If a party so moves, any defense listed in Rule 12(b)(1)(7)--whether made in a pleading or by motion--and a motion under Rule 12(c) must
be heard and decided before trial unless the court orders a deferral until trial.” Fed.
R. Civ. P. 12(i).
A court must dismiss an action if at anytime it determines that it lacks
subject-matter jurisdiction. Fed. R. Civ. P. 12(h)(3). “Although Rule 12(h)(1)
permits a party to bring a Rule 12(b)(1) motion at any point and the court may
consider jurisdiction on its own motion under Rule 12(h)(3), nowhere is it
suggested that the opportunity to bring a Rule 12(b)(1) motion is extended to the
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party presenting the claim in the first place.” Feezor v. Excel Stockton, LLC, No.
CIV S 12-0156 KJM, 2013 WL 2485623, at *11 (E.D. Cal. June 10, 2013).
Thus, while a defendant may avail itself of FRCP 12(b)(1), this provision does not
provide a legal basis for Plaintiff to request dismissal. Even if it did, the purported
invalidity of the Fourth Amended NOPA does not affect the Court’s subject matter
jurisdiction with respect to Count IX.
B.
Federal Rule of Civil Procedure 41(a)(2)
The proper authority governing Plaintiff’s request is FRCP 41(a)(2), which
provides:
Except as provided in Rule 41(a)(1),1 an action may be dismissed at
the plaintiff's request only by court order, on terms that the court
considers proper. If a defendant has pleaded a counterclaim before
being served with the plaintiff’s motion to dismiss, the action may be
dismissed over the defendant’s objection only if the counterclaim can
remain pending for independent adjudication. Unless the order states
otherwise, a dismissal under this paragraph (2) is without prejudice.
Fed. R. Civ. P. 41(a)(2). Decisions regarding motions for voluntary dismissal are
left “to the district court’s sound discretion and the court’s order will not be
disturbed unless the court has abused its discretion.” Westlands Water Dist. v.
United States, 100 F.3d 94, 96 (9th Cir. 1996). A motion for voluntary dismissal
should be granted “unless a defendant can show that it will suffer some plain legal
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A plaintiff may dismiss action without a court order by filing: “(i) a notice of
dismissal before the opposing party serves either an answer or a motion for
summary judgment; or (ii) a stipulation of dismissal signed by all parties who have
appeared.” Fed. R. Civ. P. 41(a)(1).
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prejudice as a result.” Smith v. Lenches, 263 F.3d 972, 975 (9th Cir. 2001)
(citations omitted). “‘[L]egal prejudice’ means ‘prejudice to some legal interest,
some legal claim, some legal argument.’” Id. at 976. Plain legal prejudice does
not result due to uncertainty from unresolved disputes or a threat of future
litigation. Id. In addition, plain legal prejudice does not exist “merely because the
defendant will be inconvenienced by having to defend in another forum or where a
plaintiff would gain a tactical advantage by that dismissal.” Id. Finally, incurring
expenses defending against a lawsuit does not constitute legal prejudice.
Westlands, 100 F.3d at 97. This is because a defendant’s “interests can be
protected by conditioning the dismissal upon the payment of appropriate costs and
attorney fees.” Id.
Courts make three determinations in exercising their discretion to allow
dismissal: “(1) whether to allow the dismissal at all; (2) whether the dismissal
should be with or without prejudice; and (3) what terms and conditions, if any,
should be imposed.” Burnette v. Godshall, 828 F. Supp. 1439, 1443 (N.D. Cal.
1993), aff'd sub nom., Burnette v. Lockheed Missiles & Space Co., 72 F.3d 766
(9th Cir. 1995).
1. Count IX Should be Dismissed With Prejudice
In the present case, the Court, in its sound discretion, finds that dismissal
with prejudice of Count IX is appropriate pursuant to FRCP 41(a)(2). Defendants
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support dismissal and they will not suffer plain legal prejudice from a dismissal of
Count IX. Even though Plaintiff may be attempting to gain a tactical advantage
and Defendants have incurred expenses defending against the claim, neither
amount to legal prejudice, especially because they can be remedied through the
imposition of conditions. Accordingly, the Motion is GRANTED and Count IX is
DISMISSED WITH PREJUDICE.
2. Dismissal Must be Subject to Conditions
Given the record before it, the Court concludes that conditions must be
imposed in allowing dismissal. The Court cannot turn a blind eye to the timing of
Plaintiff’s request to dismiss Count IX and Plaintiff’s arguable admission that the
claim lacks a legal basis. The very bases for dismissal that Plaintiff proffers have
existed for some time. Yet it was not until the Court ruled that it would not
exclude evidence of the Guaranty and the remedies sought by Plaintiff in Count IX
that Plaintiff first expressed its willingness to dismiss the claim. Notably, this was
two years and eight months after the commencement after the case, more than a
year after the expiration of the dispositive motions deadline, and less than two
weeks before trial. This not only evidences dilatory conduct, but calls into
question the propriety of asserting and continuing to pursue the claim.
At the hearing, the Court learned that Plaintiff failed to record any of the
four NOPAs in the Bureau of Conveyances. In the April 27, 2018 Stipulation
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Regarding Notice of Pendency of Action; Order, which was signed by Plaintiff’s
former counsel, the parties stipulated that “Gramercy will immediately amend the
NOPA to expunge the NOPA insofar as it was filed and recorded on certain real
properties.” Doc. No. 68 (emphasis added). This was a blatant misrepresentation
to the Court and Defendants that the NOPAs2—or at least one iteration of the
NOPAs—had been recorded in the Bureau of Conveyances. Any suggestion that
the failure to record the Fourth Amended NOPA invalidates the NOPAs (a
predicament caused solely by Plaintiff’s failure) and divests the Court of
jurisdiction to adjudicate Count IX is wholly without merit.
The Court also learned that World Business Lenders initiated the foreclosure
proceeding regarding the subject property in or around March 2018. Plaintiff now
argues that it has not sought to intervene in the foreclosure proceeding and that the
subject property is so encumbered by other unrelated claims that any interest it
might have would be moot. Plaintiff did not explain why, if this fact supports
dismissal now, it was not brought to the Court’s attention at the time the
foreclosure proceeding commenced.
While Plaintiff’s questionable actions cannot alone preclude dismissal of
Count IX, they provide ample support for subjecting dismissal to the following
conditions:
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The NOPAs can be found at Doc. Nos. 18, 22, 24, and 69.
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Defendants are entitled to their reasonable attorneys’ fees and costs associated
with the defense of Count IX;
Defendants may raise the belated dismissal of Count IX; and
Defendants may address the NOPAs and related Stipulation (Doc. Nos. 18, 22,
24, 68, and 69), and contents therein, notwithstanding the fact that Plaintiff
failed to record the NOPAs.
Plaintiff raises a host of meritless arguments in opposition to Defendants’
request for attorneys’ fees and costs, none of which are supported by the governing
law. The Court is authorized to condition dismissal upon the payment of
appropriate attorneys’ fees and costs. Westlands, 100 F.3d at 97. There is no
requirement that a motion or request for fees be pending,3 or that Defendants
provide an independent legal basis for fees and costs. Even if this were not the
case, the Subcontract and Guaranty Agreement are in the nature of assumpsit.
Under Hawaii law, “[o]rdinarily, attorneys’ fees cannot be awarded as
damages or costs unless so provided by statute, stipulation, or agreement.”
Stanford Carr Dev. Corp. v. Unity House, Inc., 111 Hawai‘i 286, 305, 141 P.3d
459, 478 (2006) (citation and quotation marks omitted); DFS Group, L.P. v. Paiea
Props., 110 Hawai‘i 217, 219, 131 P.3d 500, 502 (2006) (quoting TSA Int’l, Ltd. v.
Shimizu Corp., 92 Hawai‘i 243, 263, 990 P.2d 713, 733 (1999) (“Generally, under
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In fact, any such request would be premature under FRCP 54(d).
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the ‘American Rule,’ each party is responsible for paying his or her own litigation
expenses. A notable exception to the ‘American Rule,’ however, is the rule that
attorneys’ fees may be awarded to the prevailing party where such an award is
provided for by statute, stipulation, or agreement.”)). Hawai‘i Revised Statutes
(“HRS”) § 607-14 is a statutory exception to the American Rule. DFS, 110
Hawai‘i at 219, 131 P.3d at 502. It mandates the recovery of fees when a
promissory note or contract provides for the same, in writing, or when an action is
in the nature of assumpsit. “Assumpsit is a common law form of action which
allows for the recovery of damages for non-performance of a contract, either
express or implied, written or verbal, as well as quasi contractual obligations.” 808
Dev., LLC v. Murakami, 111 Hawai‘i 349, 366, 141 P.3d 996, 1013 (2006)
(citation, emphases, and quotation marks omitted); Helfand v. Gerson, 105 F.3d
530, 537 (9th Cir. 1997) (“Under Hawaii case law, an action in the nature of
assumpsit includes ‘all possible contract claims.’”).
Due to the suspect timing of the dismissal of Count IX, as discussed above,
the Court finds that disclosure of the belated dismissal is appropriate and relevant.
Moreover, while this Order dismisses the claim, the pledge of the subject property
and subsequent encumbrance remain as allegations asserted in support of
Plaintiff’s fraud/misrepresentation claim (Count V). Doc. No. 15 at ¶ 98 (“As part
of the DA Subcontract DA pledged the Pledged Ewa Beach Real Property, and
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represented that DA or David Alcos was the owner of this real estate.”); Id. at ¶ 99
(“Approximately seven (7) days after signing the DA Guaranty, David Alcos
encumbered the real estate with a mortgage of approximately $400,000.00.”).
Finally, the Court permits Defendants to discuss the NOPAs as specified
because the NOPAs and related Stipulation were filed in this action. That Plaintiff
failed to record the NOPAs does not change the fact that they are matters of public
record disclosing that Plaintiff sought to foreclose upon the subject property
throughout the course of this litigation.
CONCLUSION
In accordance with the foregoing, the Court HEREBY GRANTS Plaintiff’s
Motion to Dismiss With Prejudice Count IX of the First Amended Complaint, filed
November 23, 2018, subject to the conditions set forth above.
IT IS SO ORDERED.
DATED:
Honolulu, Hawaii, November 26, 2018.
CIVIL NO. 16-00114 JAO-KSC; GRAMERCY GROUP, INC. V. D.A. BUILDERS, LLC, ET AL.; ORDER
GRANTING PLAINTIFF’S MOTION TO DISMISS WITH PREJUDICE COUNT IX OF THE FIRST
AMENDED COMPLAINT
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