International Millenium Mining Corp. v. McMahon et al

Filing 27

ORDER granting in part and denying in part 20 Motion to Dismiss for Lack of Jurisdiction. Amended complaint due within 20 days. Request for sanctions against IMMC denied. Signed by Judge Edward C. Reed, Jr on 07/15/09. (Copies have been distributed pursuant to the NEF - LG)

1 2 3 4 5 6 INTERNATIONAL MILLENIUM MINING 7 CORP., a corporation, 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ) ) ) Plaintiff, ) ) vs. ) ) PAUL MCMAHON, EXECUTOR OF THE ) ESTATE OF NADEAN YOVONNE BEDFORD, ) aka NADEAN YVONNE BEDFORD, ) aka NADEAN Y. BEDFORD; KIMI DIAZ, ) an individual; DOES 1-5; and BLACK ) CORPORATIONS 1-5, ) ) Defendants. ) ___________________________________) ) KIMI DIAZ, ) ) Cross/Counter-Plaintiff ) ) vs. ) ) INTERNATIONAL MILLENIUM MINING ) CORP., a corporation; PAUL MCMAHON,) EXECUTOR OF THE ESTATE OF NADEAN ) YOVONNE BEDFORD, aka NADEAN YVONNE ) BEDFORD, aka NADEAN Y. BEDFORD; ) DOES 1-5; and BLACK CORPORATIONS ) 1-5, ) ) Cross/Counter-Defendants. ) ___________________________________) ) ESTATE OF BEDFORD, ) ) Cross-Plaintiff, ) ) vs. ) ) KIMI DIAZ, ) ) Cross-Defendant. ) ) 3:08-CV-00030-ECR-RAM UNITED STATES DISTRICT COURT DISTRICT OF NEVADA RENO, NEVADA

Order

1

Now pending is the "Motion to Dismiss and for Sanctions" (#20) Diaz seeks dismissal of the

2 filed by Defendant Kimi Diaz ("Diaz").

3 various claims asserted against her by Plaintiff International 4 Millenium Mining Corp. ("IMMC"), as well as the cross-claim for 5 indemnity asserted by Defendant Paul McMahon, Executor of the Estate 6 of Nadean Yovonne Bedford, aka Nadean Yvonne Bedford, aka Nadean Y. 7 Bedford ("the Estate"). Diaz has withdrawn her motion for sanctions

8 pursuant to Fed. R. Civ. P. 11, conceding that she failed to comply 9 with the requirements of Rule 11(c)(2). She requests, however, that

10 sanctions be imposed "on the Court's own initiative" or based on 11 Diaz's counterclaims for abuse of process and malicious prosecution. 12 (Reply at 6-7 (#25).) 13 For the reasons stated below, Diaz's motion (#20) will be

14 granted in part and denied in part. 15 16 17 I. Background This suit was brought by IMMC to protect its interests in (Complaint

18 certain mining claims located in Mineral County, Nevada. 19 ¶ 7 (#1).)

These mining claims were owned by Nadean Bedford and are (Id. ¶ 8.) Diaz is one of the On December 15, 2004, IMMC

20 now owned by her Estate.

21 beneficiaries of the Estate.

(Id. ¶ 9.)

22 entered into a contract with Bedford that gave IMMC an exclusive 23 option to purchase the mining claims for $900,000.00, payable on a 24 schedule of $3000.00 per month. (Id. ¶ 12.) IMMC alleges that

25 Defendants -- generally without specifying which of the Defendants -- 26 have engaged in conduct that has interfered with IMMC's contractual 27 rights. 28 In particular, IMMC alleges that Defendants have attempted
2

1 to sell or otherwise transfer or encumber the mining claims to third 2 parties in violation of IMMC's contractual right to an exclusive 3 option to purchase the mining claims. (Id. ¶ 13.) Further,

4 Defendants have allegedly made false statements to third parties 5 regarding the Estate's rights in the mining claims, failing to 6 disclose the contract with IMMC to those third parties. 7 19.) 8 IMMC's complaint (#1) was filed on January 16, 2008. The (Id. ¶¶ 17-

9 complaint asserts ten claims for relief: (1) breach of contract; (2) 10 fraud; (3) negligence; (4) misrepresentation; (5) breach of the 11 covenant of good faith and fair dealing; (6) deceptive trade 12 practice; (7) racketeering; (8) interference with contracts; (9) 13 interference with prospective economic advantages; and (10) 14 conspiracy. The Estate filed its answer and crossclaim (#4) on The Estate alleges that if IMMC suffered any

15 April 7, 2008.

16 damages, it is because of actions taken by Diaz; the Estate asserts 17 a right to complete indemnity on that basis. (Answer ¶ 100 (#4).)

18 On May 15, 2008, Diaz answered (#8) IMMC's complaint (#1), asserting 19 a crossclaim for indemnity against the Estate and counterclaims for 20 malicious prosecution and abuse of process against IMMC. 21 Diaz's motion to dismiss (#20), filed on September 19, 2008,

22 seeks dismissal of IMMC's complaint and the Estate's crossclaim 23 pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6). 24 (#21) the motion and Diaz replied (#25). 25 // 26 // 27 // 28
3

IMMC opposed

1 2

II. Subject Matter Jurisdiction Diaz asserts that the Court does not have subject matter Though she makes several arguments, we need only

3 jurisdiction.

4 address those relating to diversity jurisdiction, and in particular 5 the amount in controversy requirement. For the reasons stated

6 below, we conclude that we have subject matter jurisdiction. 7 8 A. Standard

The plaintiff bears the burden of establishing that this Court

9 has personal and subject matter jurisdiction over the defendant. 10 See Mattel, Inc. v. Greiner & Hausser GmbH, 354 F.3d 857, 862 (9th 11 Cir. 2003). A motion to dismiss for lack of jurisdiction may attack

12 the sufficiency of the complaint, or it may be made as a "speaking 13 motion" attacking the existence of jurisdiction as a matter of fact. 14 Thornhill Publ'g. Co., Inc. v. Gen. Tel. & Elecs. Corp., 594 F.2d 15 730, 733 (9th Cir. 1979). Here, Diaz has launched a facial attack

16 on the sufficiency of the complaint because she does not present any 17 affidavits or other evidence. See Safe Air for Everyone v. Meyer,

18 373 F.3d 1035, 1039 (9th Cir. 2004); Savage v. Glendale Union High 19 School, 343 F.3d 1036, 1040 n.2 (9th Cir. 2003). 20 The non-moving party "need only make a prima facie showing of Mattel, 354 F.3d at

21 jurisdiction to survive the motion to dismiss." 22 862.

The non-moving party's version of any contested facts must be Rhoades v. Avon Prods., Inc., 504 F.3d 1151, 1160 Where the amount in controversy is at issue, "[t]o

23 taken as true. 24 (9th Cir. 2007).

25 justify dismissal, it must appear to a legal certainty that the 26 claim is really for less than the jurisdictional amount." Crum v.

27 Circus Circus Enters., 231 F.3d 1129, 1131 (9th Cir. 2000) (internal 28
4

1 quotation marks omitted).

Thus, because the burden of proof to

2 establish jurisdiction lies with the plaintiff, IMCC must show that 3 it does not appear to a legal certainty that its claims are for less 4 than the required amount. United States v. S. Pac. Transp. Co., 543

5 F.2d 676, 682 (9th Cir. 1976).1 6 7 B. Analysis

Diaz argues that IMMC has failed to show that we have diversity Under 28 U.S.C. § 1332, a district

8 jurisdiction over this action.

9 court has jurisdiction when the matter in controversy exceeds 10 $75,000 and the parties are in complete diversity. Diaz does not

11 challenge the diversity of the parties' citizenship, and it appears 12 from the face of the complaint that there is complete diversity. 13 Rather, Diaz argues that the amount in controversy is less than 14 $75,000. 15 Generally, the sum claimed by the plaintiff in the pleadings

16 controls the amount in controversy inquiry, so long as the claim is 17 made in good faith. See Crum, 231 F.3d at 1131 (citing St. Paul Here,

18 Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288 (1938)). 19 20 21 22 23 24 25 26 27 28

It is worth noting that Diaz's understanding of the burden of proof is apparently different, though her motion is not a model of clarity in this regard. In any case, her argument is based on cases where the action has been removed from state court, rather than filed initially in federal court. (See Motion at 4 (#20) (citing Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996).) In Sanchez and other such cases, the Ninth Circuit required the removing defendants to prove the amount in controversy by a preponderance of the evidence. See Sanchez, 102 F.3d at 404. So allocating the burden of proof would be inappropriate in this case, which was not removed, but rather filed originally in federal court. See Crum, 231 F.3d 1129, 1131 (applying legal certainty test); Gaus v. Miles, Inc., 980 F.2d 565, 566 (9th Cir. 1992) (noting that "[i]n diversity cases, where the amount in controversy is in doubt, the Supreme Court has drawn a sharp distinction between original and removal jurisdiction").
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1

1 IMMC states in its prayer for relief that it seeks "general damages 2 in a sum in excess of $1,000,000 from each Defendant." 3 at 15 (#1).) (Complaint

Diaz, however, challenges whether this sum is claimed

4 in good faith: "IMMC's assertion that the amount in controversy 5 exceeds $75,000.00, much less $1 million, is ludicrous and was made 6 in bad faith." 7 (Motion at 4 (#20).)

Diaz has presented no evidence in support of her claim of bad Nor does it appear from the face of IMMC's complaint that Diaz concedes that she would have

8 faith.

9 the claim is made in bad faith.

10 no right to do the things she is alleged to have attempted to do 11 (such as sell the mining claims to third parties). (Id.) She

12 asserts on that basis that she "could not . . . have been the cause 13 of anything but very nominal damages, if any at all." (Id.) We do

14 not see why this would necessarily be the case: the Complaint 15 alleges that the defendants, including Diaz, interfered with IMMC's 16 contractual rights by giving third parties the impression that the 17 defendants had the right and authority to sell or otherwise alienate 18 or encumber the mining claims. (Complaint ¶ 13 (#1).) On this

19 basis, the third parties could well conclude there are at least 20 questions about IMMC's rights to the mining claims and thereby 21 refrain from doing business with IMMC with regard to the mining 22 claims. 23 thereby. It is plausible that IMMC could be substantially damaged Thus, we cannot conclude from the face of the Complaint

24 that the claims are made in bad faith. 25 Further, even if we were to find that Plaintiff's claim for

26 damages does not control in this case, the Complaint alleges (and 27 Diaz has not disputed) that IMMC has been paying $3000 per month 28
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1 since December 2004 for the exclusive option to purchase the mining 2 claims, as well as the agreement of the defendants to refrain from 3 certain actions, including attempts to sell or otherwise alienate or 4 encumber the mining claims except in accordance with the agreement 5 with IMMC. (Complaint ¶¶ 12-14 (#1).) The Complaint alleges that

6 IMMC has not obtained the benefit of its bargain as a result of the 7 actions of the defendants, including Diaz. (Id. at ¶ 13, 15.) Even

8 if IMMC suffered no damages other than the fruitless payment of 9 $3,000 per month since December 2004, the total payments made as of 10 the filing of the Complaint on January 16, 2008, substantially 11 exceed the jurisdictional amount of $75,000. 12 We conclude that IMMC has met its burden of demonstrating that

13 it does not appear to a legal certainty that the amount in 14 controversy is less than the jurisdictional amount. As such, we

15 have subject matter jurisdiction over this case, and Diaz's motion 16 will be denied in that respect. 17 18 19 20 III. Failure to Plead Fraud with Particularity A. Standard Federal Rule of Civil Procedure 9(b) provides: "In alleging

21 fraud . . . a party must state with particularity the circumstances 22 constituting fraud . . . ." Rule 9(b) imposes this heightened

23 pleading requirement so that the fraud-action defendant "can prepare 24 an adequate answer from the allegations." Odom v. Microsoft Corp.,

25 486 F.3d 541, 553 (9th Cir. 2007) (internal quotation marks 26 omitted). Applying this particularity requirement, the Ninth

27 Circuit has held that a plaintiff must plead "times, dates, places" 28
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1 and other details. 2 Cir. 1985).

E.g., Semegen v. Weidner, 780 F.2d 727, 731 (9th

"How much additional specificity is required depends on Arroyo v. Wheat, 591 F. Supp.

3 the nature of the individual case." 4 141, 144 (D. Nev. 1984). 5 6 B. Analysis

Diaz asserts that IMMC has failed to plead fraud with the An examination of IMMC's For the most part, IMMC

7 particularity required under Rule 9(b). 8 complaint reveals that Diaz is correct.

9 makes allegations against "Defendants," rather than any particular 10 one of the defendants. No "times, dates, places," or other details See Semegen, 780 F.2d at 731. It

11 of the alleged fraud are alleged.

12 is alleged that "Defendants knowingly and deceptively schemed and 13 planned, on at least two (2) separate occasions, and were prepared 14 to and did, in fact, make whatever representations were necessary to 15 induce third parties to make offers and enter into at least one 16 written agreement to acquire interests in the Property . . . ." 17 (Complaint ¶ 19 (#1).) No details are alleged, however, regarding

18 the content of alleged misrepresentations, who the third parties 19 might be, the time, date, or place of the "two (2) separate 20 occasions," and so on. 21 IMMC argues that the relaxed standard of pleading that applies

22 when facts relevant to the fraud claims are peculiarly within the 23 defendant's knowledge should be applied here. 24 (#21).) (P.'s Opp. at 10

It is apparent from IMMC's opposition, however, that there

25 are a number of relevant facts that were not peculiarly within 26 defendants' knowledge and yet were not pleaded. (Id. at 11-12.)

27 Thus, even if some facts in this case may be peculiarly within the 28
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1 defendants' knowledge, IMMC needs to plead with a great deal more 2 particularity than it did. 3 We conclude that insofar as the Complaint (#1) alleges fraud,

4 it does not comply with the particularity requirements of Rule 9(b). 5 There is no reason to believe, however, that IMMC could not plead 6 fraud with particularity, given leave to amend. See United States

7 ex rel. Lee v. SmithKline Beecham, Inc., 245 F.3d 1048, 1052 (9th 8 Cir. 2001) (noting that leave to amend should be granted unless the 9 pleading could not possibly be cured by the allegation of other 10 facts). 11 in fraud. Moreover, not all of IMMC's claims for relief are grounded IMMC's first claim for relief, for example, is for breach

12 of contract, which falls under the notice pleading requirements of 13 Rule 8(a). Thus, leave to amend should be granted, and even if an

14 amended complaint is not filed, the case would proceed on IMMC's 15 claims for relief that are not grounded in fraud. 16 17 18 IV. Conclusion We have diversity jurisdiction over this case because the

19 parties' citizenship is completely diverse and the amount in 20 controversy exceeds $75,000. IMMC has, however, failed to plead its

21 allegations of fraud with the degree of particularity required under 22 Rule 9(b). Thus, IMMC must either amend its complaint with regard

23 to its claims for relief that are grounded in fraud, or proceed 24 without amendment on its other claims for relief that fall under the 25 notice pleading standard of Rule 8(a). 26 27 28
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1

IT IS, THEREFORE, HEREBY ORDERED THAT Plaintiff's Motion to

2 Dismiss (#20) is GRANTED IN PART and DENIED IN PART as follows: 3 Insofar as Diaz seeks dismissal pursuant to Fed. R. Civ. P.

4 12(b)(1) for lack of subject matter jurisdiction, the motion is 5 DENIED. 6 Insofar as Diaz seeks dismissal of IMMC's complaint for failure

7 to plead claims grounded in fraud with particularity pursuant to 8 Fed. R. Civ. P. 9(b), the motion is GRANTED. Plaintiff shall have

9 twenty (20) days from the date of entry of this Order within which 10 to file an amended complaint. If no amended complaint is filed

11 within that period, IMMC's claims for relief that are grounded in 12 fraud will be dismissed, and the case will proceed on IMMC's 13 remaining claims. 14 15 16 17 DATED: July 15, 2009. 18 19 20 21 22 23 24 25 26 27 28
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Diaz's request for sanctions against IMMC is DENIED.

____________________________ UNITED STATES DISTRICT JUDGE