Derby Capital, LLC et al v. Trinity HR Services, LLC et al

Filing 42

MEMORANDUM OPINION & ORDER granting 29 Motion to Dismiss Count X of complaint for Failure to State a Claim. Signed by Senior Judge Thomas B. Russell on 5/23/2013. cc:counsel (KJA)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
LOUISVILLE DIVISION
CIVIL ACTION NO. 3:12-CV-00850
DERBY CITY CAPITAL, LLC, et al.

Plaintiffs

v.
TRINITY HR SERVICES, et al.

Defendants

MEMORANDUM OPINION AND ORDER
This matter is before the Court upon Defendant General Employment
Enterprises, Inc.’s (GEE) Motion to Dismiss. (Docket No. 29.) Plaintiffs Derby City
Capital, LLC, and Derby Capital JOB, LLC, have responded, (Docket No. 33), and
GEE has replied, (Docket No. 35). This matter is now ripe for adjudication. For the
reasons that follow, GEE’s Motion to Dismiss, (Docket No. 29), will be GRANTED.
BACKGROUND
Plaintiffs initially filed his action on December 21, 2012, (see Docket No. 1),
and thereafter filed an Amended Complaint on February 12, 2012, (see Docket No. 26).
Among the Defendants named in Plaintiffs’ Amended Complaint is GEE. Plaintiffs
state in paragraph 11 of their Amended Complaint that “GEE is included as an active
party Defendant in this action by virtue of Fed. R. Civ. P. 19(a)(1),” which provides for
joinder of a party in whose absence the Court cannot accord complete relief. (Docket
No. 26, at 13.) In Count X, Plaintiffs lay out a single cause of action against GEE:
common law negligence. GEE now moves, pursuant to Fed. R. Civ. P. 12(b)(6), to

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dismiss Plaintiffs’ negligence claim against it on the basis that “GEE never owed any
legal duty whatsoever to Plaintiffs.” (Docket No. 29, at 1.)
STANDARD
The Federal Rules of Civil Procedure require that pleadings, including
complaints, contain a “short and plain statement of the claim showing that the pleader is
entitled to relief.” Fed. R. Civ. P. 8(a)(2). A complaint may be attacked for failure “to
state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). When
considering a Rule 12(b)(6) motion to dismiss, the court will presume that all the factual
allegations in the complaint are true and will draw all reasonable inferences in favor of
the nonmoving party. Total Benefits Planning Agency v. Anthem Blue Cross & Blue
Shield, 552 F.3d 430, 434 (6th Cir. 2008) (citing Great Lakes Steel v. Deggendorf, 716
F.2d 1101, 1105 (6th Cir. 1983)). “The court need not, however, accept unwarranted
factual inferences.” Id. (citing Morgan v. Church’s Fried Chicken, 829 F.2d 10, 12 (6th
Cir. 1987)).
Even though a “complaint attacked by a Rule 12(b)(6) motion to dismiss does
not need detailed factual allegations, a plaintiff’s obligation to provide the grounds of
his entitlement to relief requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555 (2007) (citations omitted).

Instead, the plaintiff’s “[f]actual

allegations must be enough to raise a right to relief above the speculative level on the
assumption that all the allegations in the complaint are true (even if doubtful in fact).”
Id. (citations omitted). A complaint should contain enough facts “to state a claim to
relief that is plausible on its face.” Id. at 570. A claim becomes plausible “when the
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plaintiff pleads factual content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (citing Twombly, 550 U.S. at 556). If, from the well-pleaded facts, the court
cannot “infer more than the mere possibility of misconduct, the complaint has alleged—
but has not ‘show[n]’—‘that the pleader is entitled to relief.’” Id. at 679 (quoting Fed.
R. Civ. P. 8(a)(2)). “[O]nly a complaint that states a plausible claim for relief survives a
motion to dismiss.” Id.
DISCUSSION
GEE argues that because Plaintiffs’ sole claim against it is based on common
law negligence, Plaintiffs have failed to state a plausible claim for relief because GEE
never owed any legal duty to Plaintiffs. To succeed on a negligence claim, a plaintiff
must prove (1) that the defendant owed the plaintiff a duty, (2) a breach of that duty, and
(3) that the breach caused the plaintiff’s injury. Dickens v. Oxy Vinyls, LP, 631 F. Supp.
2d 859, 866 (W.D. Ky. 2009) (citing Pathways, Inc. v. Hammons, 113 S.W.3d 85, 88
(Ky. 2003)). The failure to establish any of these elements is fatal to the plaintiff’s
claim. See M & T Chems., Inc. v. Westrick, 525 S.W.2d 740, 741 (Ky. 1974). “If no
duty is owed by the defendant to the plaintiff, there can be no breach thereof, and
therefore no actionable negligence.” Ashcroft v. Peoples Liberty Bank & Trust Co., 724
S.W.2d 228, 229 (Ky. Ct. App. 1986). “Duty, the first element, presents a question of
law.” Pathways, 113 S.W.3d at 89. According to GEE, “Plaintiffs have failed to plead
(much less adequately plead) that GEE owed any duty to Plaintiffs . . . because, in fact,
GEE owes no duty to Plaintiffs.” (Docket No. 29-1, at 4-5.) The Court agrees.

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Plaintiffs summarily contest GEE’s challenge that GEE did not owe any duty to
them, stating:
The Plaintiffs’ Response Memorandum to the GEE Motion to
Dismiss is dedicated to the proposition that there are, in fact, a
series of duties owed by GEE’s management and directors to the
Plaintiffs and that the Plaintiffs’ 68-page Verified Complaint
contains multiple factual allegations supporting reasonable
inferences that an unknown (at present) set of GEE officials and
directors have breached their duties to the Plaintiffs’ [sic] as well
as the shareholders of GEE for their failure to properly manage the
affairs of GEE - in the face of a civil conspiracy to take control of
the company by a group of people who, along with their
‘godfather,’ have been involved in a nationwide white-collar
corporate pillaging spree for more than a decade.
(Docket No. 33, at 2.) But despite going on to discuss a variety of topics across their
28-page Response, Plaintiffs present little more than an expansive narrative of GEE’s
alleged internal shortcomings. The closest Plaintiffs come to establishing a duty on the
part of GEE is to argue that GEE owed them certain duties as “beneficial shareholders”
of GEE stock. 1 Yet Plaintiffs cite no statutory or common law authority to support their
contention that GEE owes them any duties as a “beneficial shareholder.” Instead,
Plaintiffs seem to imply that they were “beneficial shareholders” because they owned
part of a Limited Liability Company (LLC) that, in turn, did own GEE common stock.
But as GEE points out, members of an LLC do not enjoy ownership rights in property
owned by the LLC—rather, that property is owned by LLC as an entity unto itself. See
Ky. Rev. Stat. § 275.240(1) (“Property transferred to or otherwise acquired by a limited
liability company shall be the property of the limited liability company and not the

1

The Court notes that Plaintiffs do not plead in their Amended Complaint that they ever held the
status of “shareholder” of GEE common stock. (See Docket No. 26.)

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members individually.”). That Plaintiffs may have been part owner of an LLC that itself
owned GEE stock does not equate to Plaintiffs owning GEE stock. As such, the
Plaintiffs have failed to plead that GEE owed them any legal duty—an essential element
of their negligence claim—and, thus, have failed to state a plausible claim for relief. 2
Moreover, Plaintiffs appear to concede that GEE was named as a defendant only
for the purpose of facilitating discovery:
The Plaintiffs’ Verified Complaint alleges corporate negligence
in Count X and did not specifically plead a shareholder’s
derivative action via Fed. R. Civ. Proc. 23.1 There is a reason for
that.
. . . [B]ecause of the inability to conduct discovery prior to filing of
a Complaint, which discovery would have resulted in a precise
determination as to what happened and WHICH directors and/or
WHICH corporate officers were negligent, the Plaintiffs deemed it
appropriate to assert blame on EVERY director and EVERY
officer, because it believed (from their subsequent conduct after
October 1, 2012), that some of the directors and officials were
likely to be not at fault.
It is the Plaintiffs[’] belief that GEE has endured enough harm
. . . . It is not the intention of the Plaintiffs’ [sic] to further cause
damage to GEE. It’s [sic] intention is to ferret out the civil
conspirators and the aiders and abettors of that conspiracy, which
has permitted the purloining of the Plaintiffs’ controlling interest in
GEE’s common stock -- and who have wreaked this most recent
havoc upon an upstanding 100 year old company.

2

Plaintiffs also seem to imply in Count X of their Amended Complaint that GEE owed a duty “to
protect the credibility of the ownership and control of its common stock.” (Docket No. 26, ¶ 137.) But
again, Plaintiffs cite no authority for the proposition that GEE, as a publicly held, NYSE-MKT listed
company, has any duty to “protect the credibility of the ownership and control of its common stock.” If
anything, the case law referenced by GEE, though dated and not binding here, suggests that the purchase,
sale, transfer, or exchange of GEE common stock is something entirely out of GEE’s control. See Lowell
Wiper Supply Co. v. Helen Shop, Inc., 362 S.W.2d 787 (Tenn. 1962); Carlson v. Ringgold Cnty. Mut. Tel.
Co., 108 N.W.2d 478 (Iowa 1961).

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(Docket No. 33, at 25-26 (all emphases in original).) Plaintiffs then state that “[GEE]
should be removed once this litigation ferrets them out through discovery and
deposition testimony of those who know what happened . . . .” (Docket No. 33, at 26.)
But, much as GEE argues, where no claim will lie against a party, it is neither necessary
nor permitted to name that party as a defendant merely for purposes of discovery. See
Fed. R. Civ. P. 19(a)(1); 20. By acknowledging that they named GEE as a defendant for
this purpose and stating that GEE should be dismissed from this action after discovery,
Plaintiffs effectively concede that they have no viable cause of action against GEE.
For these reasons, the Court finds that Plaintiffs have failed to state a plausible
claim for relief against GEE and, thus, dismissal under Fed. R. Civ. P. 12(b)(6) is
appropriate.
CONCLUSION
Having considered the parties’ respective arguments, and being otherwise
sufficiently advised, for the reasons set forth above;
IT IS HEREBY ORDERED that General Employment Enterprises, Inc.’s
Motion to Dismiss, (Docket No. 29), is GRANTED, and Count X of Plaintiffs’
Amended Complaint against this Defendant is DISMISSED with prejudice.
IT IS SO ORDERED.
Date:

cc:

May 23, 2013

Counsel

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