Southampton Ltd et al v. Salalati et al
Filing
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ORDER granting 7 defendants' Motion to Dismiss for Failure to State a Claim, dismissing plaintiffs' Original Complaint, and granting plaintiffs leave to file an amended complaint to cure the pleading deficiency in their cause of action for unlawful stock purchase or redemption/unlawful dividend. Said amended complaint shall be filed within fourteen (14) days of the date of this Order (as more fully set out). Signed by Honorable Vicki Miles-LaGrange on 2/19/2015. (ks)
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
SOUTHAMPTON, LTD. and
SOUTHWEST REINSURANCE, INC.,
Plaintiffs,
vs.
VAHID SALALATI, GREGORY
LUSTER, and ROGER ELY,
Defendants.
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Case No. CIV-14-852-M
ORDER
Before the Court is defendants’ Motion to Dismiss for Failure to State a Claim, filed
September 17, 2014. On October 15, 2014, plaintiffs filed their response, and on October 28, 2014,
defendants filed their reply. Pursuant to Federal Rules of Civil Procedure 8 and 12(b)(6), defendants
move this Court to dismiss plaintiffs’ complaint.
I.
Introduction
According to plaintiffs,
[t]his lawsuit arises from a guarantor’s failure to repay
amounts due under a promissory note memorializing an advance loan
from Southampton, Ltd. in connection with the purchase of
automobile dealerships in Oklahoma. In connection with this loan
arrangement, the guarantor also agreed to sell vehicle service
contracts and other ancillary products offered by Southwest
Reinsurance, Inc. at its dealerships, but failed to sell the required
number of products. Instead, the dealerships sold and continue to sell
similar contracts offered by Southwest Reinsurance, Inc.’s
competitors. Defendants are all partners and promoters of the
guarantor, which they purportedly formed and then used as a vehicle
to raise capital to acquire the dealerships.
Moreover, instead of repaying the amounts owed to Plaintiffs,
the guarantor made a substantial payment to one of its former
directors at a time when the guarantor was insolvent or when such
payment would cause the guarantor to become insolvent in violation
of Oklahoma corporate law. Defendants are the guarantor’s directors
and approved of this unlawful payment.
Plaintiff’s Original Complaint [docket no. 1] at ¶¶ 1-2. The guarantor at issue in this case is Four
Horsemen Auto Group, Inc. (“Four Horsemen”). According to plaintiffs, defendants are directors
and officers of Four Horsemen. See Plaintiff’s Original Complaint at ¶ 15.
II.
Standard for Dismissal
Regarding the standard for determining whether to dismiss a claim pursuant to Federal Rule
of Civil Procedure 12(b)(6), the United States Supreme Court has held:
To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to state a claim to relief that is
plausible on its face. 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. The plausibility standard is not akin to a “probability
requirement,” but it asks for more than a sheer possibility that a
defendant has acted unlawfully. Where a complaint pleads facts that
are merely consistent with a defendant’s liability, it stops short of the
line between possibility and plausibility of entitlement to relief.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotations and citations omitted). Further,
“where the well-pleaded facts do not permit the court to infer more than the mere possibility of
misconduct, the complaint has alleged - but it has not shown - that the pleader is entitled to relief.”
Id. at 679 (internal quotations and citations omitted). Additionally, “[a] pleading that offers labels
and conclusions or a formulaic recitation of the elements of a cause of action will not do. Nor does
a complaint suffice if it tenders naked assertion[s] devoid of further factual enhancement.” Id. at
678 (internal quotations and citations omitted). A court “must determine whether the complaint
sufficiently alleges facts supporting all the elements necessary to establish an entitlement to relief
under the legal theory proposed.” Lane v. Simon, 495 F.3d 1182, 1186 (10th Cir. 2007) (internal
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quotations and citation omitted). Finally, “[a] court reviewing the sufficiency of a complaint
presumes all of plaintiff’s factual allegations are true and construes them in the light most favorable
to the plaintiff.” Hall v. Bellmon, 935 F.2d 1106, 1109 (10th Cir. 1991).
III.
Discussion
A.
Causes of action for breach of the agreements
Oklahoma law explicitly provides:
No suit or claim of any nature shall be brought against any officer,
director or shareholder for the debt or liability of a corporation of
which he or she is an officer, director or shareholder, until judgment
is obtained therefor against the corporation and execution thereon
returned unsatisfied. This provision includes, but is not limited to,
claims based on vicarious liability and alter ego. Provided, nothing
herein prohibits a suit or claim against an officer, director or
shareholder for their own conduct, act or contractual obligation
arising out of or in connection with their direct involvement in the
same or related transaction or occurrence.
Okla. Stat. tit. 12, § 682 (B).
Defendants assert that these causes of action are based on the actions of Four Horsemen and
appear to sound in recovery under an “alter ego” or “piercing of the corporate veil” theory of
liability. Because plaintiffs have not obtained a judgment against Four Horsemen, as required by
section 682(B), defendants contend that these causes of action should be dismissed. In response,
plaintiffs assert they are suing defendants directly for their own wrongful conduct, not vicariously
for the conduct of Four Horsemen. Plaintiffs further assert defendants are liable for partnership
debts as a result of their direct involvement as partners in the dealerships doing business under the
name Terry Dodge Chrysler Jeep and Terry Chevrolet.
Having carefully reviewed plaintiffs’ Original Complaint, the Court finds that plaintiffs are
not suing defendants directly for their own wrongful conduct but are seeking to hold defendants
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liable for Four Horsemen’s alleged breaches of the guaranty, the advance agreement, and the
producer agency agreement. Pursuant to section 682(B), because defendants are officers and
directors of Four Horsemen, plaintiffs can not bring any claims against defendants for the debt or
liability of Four Horsemen until judgment is obtained against Four Horsemen and execution thereon
is returned unsatisfied. In their Original Complaint, plaintiffs do not allege that any judgment has
been obtained against Four Horsemen or that execution thereon has been returned unsatisfied.
Accordingly, the Court finds that plaintiffs’ causes of action for breach of the agreements should be
dismissed.
B.
Cause of action for unlawful stock purchase or redemption/unlawful dividend
Having carefully reviewed plaintiffs’ Original Complaint, it is unclear whether plaintiffs are
alleging in their fourth cause of action that defendants are liable for Four Horsemen’s violation of
sections 41 and 52 of the Oklahoma General Corporations Act (“OGCA”) or that defendants are
liable, pursuant to section 53 of the OGCA, as directors for the willful or negligent violation of the
provisions of sections 41 and 52 of the OGCA. Regardless of which basis plaintiffs are alleging,
the Court finds that this cause of action should be dismissed.
Section 1124 of the OGCA provides:
No suit shall be brought against any officer, director or shareholder
for any debt of a corporation of which he is an officer, director or
shareholder, until judgment is obtained therefor against the
corporation and execution thereon returned unsatisfied.
Okla. Stat. tit. 18, § 1124(B). As set forth above, plaintiffs do not allege that any judgment has been
obtained against Four Horsemen or that execution thereon has been returned unsatisfied.
Accordingly, the Court finds that defendants can not be held liable, at this time, for Four Horsemen’s
alleged violation of sections 41 and 52 of the OGCA.
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Section 1053 of the OGCA provides, in pertinent part:
In case of any willful or negligent violation of the provisions of
Sections 41 and 52 of this act, the directors under whose
administration the same may happen shall be jointly and severally
liable, at any time within six (6) years after paying any unlawful
dividend or after any unlawful stock purchase or redemption, to the
corporation, and to its creditors in the event of its dissolution or
insolvency, to the full amount of the dividend unlawfully paid, or to
the full amount unlawfully paid for the purchase or redemption of the
corporation’s stock, with interest from the time such liability accrued.
Okla. Stat. tit. 18, § 1053(A) (emphasis added). In their Original Complaint, plaintiffs do not allege
that Four Horsemen has been dissolved or is insolvent. The Court, therefore, finds that plaintiffs
have failed to state a claim under section 1053 of the OGCA.
Accordingly, the Court finds that plaintiffs’ fourth cause of action should be dismissed.
C.
Leave to amend
In the conclusion of their response, plaintiffs request that they be given leave to amend to
cure any defects in the allegations if the Court grants defendants’ motion to dismiss. Having
reviewed the parties’ submissions, as well as plaintiffs’ Original Complaint, the Court finds that
plaintiffs should not be granted leave to amend their first three causes of action that seek to hold
defendants liable for the debt and/or liability of Four Horsemen but should be granted leave to
amend their fourth cause of action to cure the pleading deficiency set forth above.
IV.
Conclusion
Accordingly, the Court GRANTS defendants’ Motion to Dismiss for Failure to State a Claim
[docket no. 7], DISMISSES plaintiffs’ Original Complaint, and GRANTS plaintiffs leave to file an
amended complaint to cure the pleading deficiency in their cause of action for unlawful stock
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purchase or redemption/unlawful dividend. Said amended complaint shall be filed within fourteen
(14) days of the date of this Order.
IT IS SO ORDERED this 19th day of February, 2015.
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