Magnuson v. Magnuson

Filing 27

MEMORANDUM DECISION AND ORDER granting 14 Motion for Judgment on the Pleadings. Plaintiff Thomas Magnusons tortious interference claim against Defendant H. James Magnuson is DISMISSED. Signed by Judge Edward J. Lodge. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjs)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

THOMAS MAGUNSON, an individual,
Plaintiff,
Case No. 2:15-CV-000282-EJL

v.

H. JAMES MAGNUSON, an individual,
in his capacity as Successor Trustee of
the Thomas Robert Magnuson Inter
Vivos Trust,

MEMORANDUM DECISION AND
ORDER

Defendant.

INTRODUCTION
Pending before the Court in the above-entitled matter is Defendants’ Motion
for Partial Judgment on the Pleadings pursuant to Federal Rule of Civil Procedure
12(c). Plaintiffs have responded to the Motion and the matter is ripe for the
Court’s review. Having fully reviewed the record herein, the Court finds that the
facts and legal arguments are adequately presented in the briefs and record.
Accordingly, in the interest of avoiding further delay, and because the Court
conclusively finds that the decisional process would not be significantly aided by
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oral argument, this Motion shall be decided on the record before this Court without
oral argument.
FACTUAL AND PROCEDURAL BACKGROUND
On or about September 22, 2004, Defendant H. James Magnuson
(“Defendant”) assumed his role of Successor Trustee of the Thomas Robert
Magnuson Inter Vivos Trust (“Trust”). (Dkt. 1, ¶3.1.) Defendant’s brother,
Plaintiff Thomas Magnuson (“Plaintiff”), is the sole beneficiary of distributions
from the Trust. (Id. at ¶3.3.) On July 23, 2015, Plaintiff initiated the present
lawsuit alleging causes of action for: (1) breach of Trust, (2) breach of fiduciary
obligations, (3) demand for third-party trust accounting, (4) removal of Trustee and
appointment of Defendant as Successor Trustee, and (5) tortious interference with
contractual expectancy. (Dkt. 1, ¶¶4.1-4.18.) Defendant then filed the instant
Motion for Partial Judgment on the Pleadings as to Plaintiff’s tortious interference
with contractual expectancy claim. (Dkt. 14.)
The Trust requires Defendant to make distributions to Plaintiff of “all the
ordinary, net income from the trust estate in convenient installments, but at least
semiannually,” and gives Defendant discretion to “make distribution of the corpus
of the trust estate to any income beneficiary of this trust at such time as in trustee’s
judgment is necessary for the beneficiary’s health, education, support, or

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maintenance to maintain the beneficiary’s accustomed manner of living.” (See
Dkt. 1, ¶3.2.)
The parties agree the primary assets of the Trust are its significant equity
interests in numerous businesses, including but not limited to: Magnuson
Properties Corporation; Magnuson Hospitality Group, Inc.; University City, Inc.;
and Syringa Mining Corporation. (Id. at ¶3.4.) Defendant does not dispute that he
served as President and/or Director for each of these businesses. (See id. at ¶¶3.43.7, and Dkt. 4, ¶¶5-7.)1 The parties do not contest that the Trust does not hold a
majority or controlling interest in any of the businesses in which it owns an equity
interest.
Plaintiff alleges Defendant breached the Trust by using its assets in a way
that tortiously interfered with Plaintiff’s contractual expectancy. (Dkt. 1, ¶¶4.154.18.) Specifically, Plaintiff contends Defendant used his Director roles to make
decisions that were financially harmful to the trust, including: (1) causing
Magnuson Properties Corporation and Magnuson Hospitality Group to advance
over a half a million dollars in personal interest-free loans to Defendant’s mother
and father; (2) advancing approximately $420,000 in interest-free intercompany
receivables from Magnuson Properties Corporation, and $1,034,000 from Coeur

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These are the only businesses that Plaintiff identifies as relevant for the instant
motion. (Dkt. 21, p. 7.) However, Plaintiff’s complaint lists many other
businesses and related leadership roles held by Defendant. (Dkt. 1,¶ ¶3.4-3.7.)
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d’Alene Land Company to University City, Inc., again interest-free, without
making any attempt to collect on these debts; and (3) removing Plaintiff from
Plaintiff’s leadership roles in Magnuson Hospitality Group, Inc., Magnuson
Properties Corporation, Syringa Mining Corporation, and H.F. Magnuson Family
Foundation, without any removal proceedings or corporate formalities. (Dkt. 21,
p. 7.) Plaintiff contends he has suffered and will continue to suffer damages as a
result of these actions. (Dkt. 1, ¶4.18.)
STANDARD OF REVIEW
Motions for a judgment on the pleadings are governed by Federal Rule of
Civil Procedure 12(c). The principal difference between motions filed pursuant to
Federal Rule of Civil Procedure 12(b) and Rule 12(c) is the time of filing.
Dworkin v. Hustler Magazine Inc., 867 F.2d 1188, 1192 (9th Cir. 1989). A party
may move for a judgment on the pleadings at any point after the pleadings close.
Fed. R. Civ. P. 12(c). “Because the motions are functionally identical, the same
standard of review applicable to a Rule 12(b) motion applies to its Rule 12(c)
analog.” Dworkin, 867 F.2d at 1192.
A motion pursuant to Rule 12(b)(6) or Rule 12(c) challenges the legal
sufficiency of the claims stated in the complaint. Conservation Force v. Salazar,
646 F.3d 1240, 1242 (9th Cir. 2011). To sufficiently state a claim to relief and
survive such motion, the pleading “does not need detailed factual allegations,”
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however, the “[f]actual allegations must be enough to raise a right to relief above
the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).
Mere “labels and conclusions” or a “formulaic recitation of the elements of a cause
of action will not do[.]” Id. (citations omitted). Rather, there must be “enough
facts to state a claim to relief that is plausible on its face.” Id. at 570. A claim has
facial plausibility when the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct
alleged. Id. at 556. The plausibility standard is not akin to a “probability
requirement,” but does require more than a sheer possibility that a defendant acted
unlawfully. Id.
In Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), the Supreme Court identified
two “working principals” that underlie Twombly. First, although a court must
accept as true all factual allegations in a complaint when ruling on a Rule 12(b)(6)
or 12(c) motion, the court need not accept legal conclusions as true. Id. “Rule 8
marks a notable and generous departure from the hyper-technical, code-pleading
regime of a prior era, but it does not unlock the doors of discovery for a plaintiff
armed with nothing more than conclusions.” Id. at 678-79. Second, only a
complaint that states a plausible claim for relief will survive a motion to dismiss.
Id. at 679. “Determining whether a complaint states a plausible claim for relief will

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. . . be a context-specific task that requires the reviewing court to draw on its
judicial experience and common sense.” Id.
In light of Twombly and Iqbal, the Ninth Circuit has summarized the
governing standard as follows: “In sum, for a complaint to survive a motion to
dismiss [or Rule 12(c) motion], the nonconclusory factual content, and reasonable
inferences from that content, must be plausibly suggestive of a claim entitling the
plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009)
(internal quotation and citation omitted). Apart from factual insufficiency, a
complaint is also subject to dismissal where it lacks a cognizable legal theory,
Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990), or where the
allegations on their face show that relief is barred for a legal reason. Jones v. Bock,
549 U.S. 199, 215 (2007).

ANALYSIS
A prima facie case of tortious interference with a contract requires a plaintiff
to prove: “(a) the existence of a contract, (b) knowledge of the contract on the part
of the defendant, (c) intentional interference causing a breach of the contract, and
(d) injury to the plaintiff resulting from the breach.” Barlow v. Int’l Harvester Co.,
522 P.2d 1102, 1114 (Idaho 1974) (citations omitted). As both parties note, the
Idaho Supreme Court has upheld the general rule that “a party cannot tortiously

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interfere with its own contract,” and thus, “a claim for tortious interference with
contractual relations requires proof that the defendant is a stranger to the contract
with which the defendant allegedly interfered and to the business relationship
giving rise to the contract.” BECO Const. Co., Inc. v. J-U-B Engineers, Inc., 184
P.3d 844, 849 (Idaho 2008) (citations omitted). Because Defendant is the Trustee
of the same Trust that gives rise to Plaintiff’s tortious interference claim,
Defendant contends he was not a stranger to the contract or to the business
relationship giving rise to the contract. (Dkt. 14-1, p. 5.) Plaintiff counters
Defendant was a stranger for purposes of this claim because when he committed
the allegedly tortious actions, Defendant was not acting as Trustee but rather as the
Director of the businesses in which the Trust had a beneficial interest. (Dkt. 21,
pp. 6-8.)
Plaintiff further alleges that cases dismissing a tortious interference claim
are only dismissed when the parties do not dispute that the defendant was acting
within the scope of his or her official capacity. (Dkt. 21, p. 9.) The Plaintiff
subsequently argues that because his Complaint alleges Defendant acted outside of
his duties as Trustee, his case must be treated differently from the cases Defendant
relied on. (Id. at pp.9-10.) The Court agrees an agent can be liable for tortious
interference when acting “outside its scope of duty to the corporation.” Ostrander
v. Farm Bureau Mut. Ins. Co. of Idaho, Inc., 851 P.2d 946, 950 (Idaho 1993)
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(citations omitted). The Court does not agree, however, that Plaintiff has alleged
facts sufficient to show Defendant acted as a stranger to the Trust or as a stranger
to the business relationship giving rise to the Trust.
The Court has been unable to locate, and Plaintiff fails to cite, any case
finding a trustee becomes a stranger to his or her trust by acting outside the scope
of the trustee position. In fact, Plaintiff’s Complaint clearly alleges tortious
interference with contractual expectancy against Defendant as Trustee:
As described above and as will be further established at the time of trial,
Trustee…[i]ntentionally interfered with Petitioner’s valid and existing
expectancy of receiving distributions in accordance with the contractual
terms of the Trust, by actions including but not limited to: failure to use due
care in the management of Trust assets by advancing loans in contravention
of reasonable business practices, including loans to entities in which Trustee
served as an officer and/or director, failing to collect such loans, allowing
such loan to be made on an interest-free basis, exposure to unnecessary tax
risk, and failing to follow corporate formalities.
(Dkt. 1, ¶¶4.17-4.17.1.) Plaintiff simultaneously attempts to sue Defendant for his
alleged intentional interference as Trustee, while also asserting Defendant’s actions
outside of his role as Trustee are what give rise to liability. Under Idaho law,
however, a trust is a relationship between the trustee who holds title to its assets,
and the party who holds a beneficial interest. Dennett v. Kuenzli, 936 P.2d 219,
228 (Idaho App. 1997). The Court therefore finds Defendant, as Trustee holding
title to the Trust’s assets, cannot be a stranger to the Trust as required to support a
claim for tortious interference with Plaintiff’s beneficiary interests. See, e.g.,
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Cantwell v. City of Boise, 191 P.3d 205, 216 (Idaho 2008) (“[s]ince there is no
third party to the relationship, [Plaintiff] cannot state a claim for tortious
interference.”); BECO, 184 P.3d at 850 (“since [Defendant] was an agent of a party
to the contract and was acting for the benefit of such party, it is not a stranger to
the contract and therefore cannot be liable for tortious interference with such
contract.”). Because the allegations on their face show relief is barred for a legal
reason, the Court must grant Defendant’s Motion for Partial Judgment on
Plaintiff’s tortious interference with contractual expectancy claim. Jones, 549 U.S.
at 215. The Court need not address Plaintiff’s other arguments as the failure to
establish Defendant was a stranger to the Trust is a fatal defect to the tortious
interference claim.
ORDER
IT IS HEREBY ORDERED that Defendant’s Motion for Partial Judgment
on the Pleadings (Dkt. 14) is GRANTED and Plaintiff Thomas Magnuson’s
tortious interference claim against Defendant H. James Magnuson is DISMISSED.  

July 14, 2016

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