Campanile Investments LLC et al v. Westmoreland Equity Fund LLC et al

Filing 114

ORDER DISMISSING WITHOUT PREJUDICE 97 Motion to Compel; GRANTING 99 Motion for Leave to File third amended complaint; GRANTING 105 Motion to Compel; DENYING WITHOUT PREJUDICE 107 Motion to Set Aside Default Judgment. Signed by Judge Elizabeth S. Chestney. (rg)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
CAMPANILE INVESTMENTS LLC,
JOAQUIN JUAN BOSCO GARZA
MUGUERZA,
Plaintiffs,
vs.
WESTMORELAND EQUITY FUND
LLC, ED RYAN, AMERICAN ESCROW
AND SETTLEMENT SERVICES,
BERNARD FELDMAN, ELIAS CORREA
MENENDEZ, ALAN FELDMAN,
LYDECKER, LEE, BERGA & DE
ZAYAS, LLC,
Defendants.

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SA-17-CV-00337-FB

ORDER
Before the Court is the above-styled cause of action. On April 24, 2019, the Court held a
hearing, at which Plaintiffs and Defendants Ed Ryan a/k/a Sandy Hutchens and Bernard Feldman
appeared through counsel. At the hearing, the Court heard argument on the following pending
motions: Defendant Sandy Hutchens Motion to Compel Answers to Interrogatories and for
Protective Order [#97], Defendant Sandy Hutchens Motion to Compel Arbitration and Dismiss
or to Stay [#98], Plaintiffs’ Opposed Motion for Leave to File their Third Amended Complaint
[#99], Plaintiffs’ Motion to Compel Defendant Ed Ryan a/k/a Sandy Hutchens’ Answers to
Plaintiffs’ Interrogatories and Requests for Production [#105], and Defendant Westmoreland
Equity Fund LLC Motion to Set Aside Default Judgment [#107].
At the close of the hearing, the Court indicated it would take the motion to compel
arbitration under advisement and allow the parties seven days to file supplemental briefing. The
Court also issued certain oral rulings on the parties’ discovery disputes and Plaintiffs’ request for
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leave to file a Third Amended Complaint, which the Court now memorializes with this written
Order. Finally, the Court will deny Hutchens’s motion to set aside the Clerk’s entry of default
against Defendant Westmoreland Equity Fund LLC (“Westmoreland”).
The Court will grant Plaintiffs’ motion to compel Hutchens’s answers to Plaintiffs’
interrogatories and requests for production, as Hutchens acknowledged at the hearing that he has
not responded to any of Plaintiffs’ discovery requests. Hutchens will have 14 days to respond to
Plaintiffs’ interrogatories and requests for production but may have 30 days to actually produce
the relevant responsive documents. Despite the untimeliness of Hutchens’s responses, the Court
will not deem any objections waived at this time in light of Mr. Hutchens’s pro se status.
However, Mr. Hutchens is warned that failure to comply with the deadlines in this Order could
result in deeming his objections waived.
The Court will dismiss Hutchens’s motion to compel Plaintiffs’ answers to
interrogatories without prejudice to refiling a motion to compel specifically identifying a basis
for challenging the objections raised by Plaintiffs. The parties shall confer within the next 14
days on any objections at issue, and Hutchens has 21 days to file any renewed motion to compel.
The Court will grant Plaintiffs’ motion for leave to file an amended complaint under the
liberal standard for amending pleadings set forth in Rule 15(a) of the Federal Rules of Civil
Procedure because Defendants failed to establish any undue delay or bad faith on the part of
Plaintiffs or any undue prejudice the amendment would cause Defendants. See United States ex
rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 270 (5th Cir. 2010).
The Court will deny Hutchens’s motion to set aside the default judgment against
Westmoreland.

Hutchens asks the Court to set aside the Clerk’s entry of default against

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Westmoreland and permit him to file an answer on Westmoreland’s behalf, alleging that
Westmoreland was never informed of service of Plaintiffs’ complaint in this lawsuit.
Regardless of whether Westmoreland was properly served, Westmoreland is a singlemember limited liability corporation (“LLC”), which cannot represent itself without licensed
counsel in federal court. See Yanmar Am. Corp. v. Vina Tractor Co., No. 3:12-CV-2479-M,
2013 WL 12123943, at *1 (N.D. Tex. Mar. 20, 2013) (denying motion to set aside default
judgment because “LLCs may not represent themselves in federal court”); see also Memon v.
Allied Domecq QSR, 385 F.3d 871, 873 (5th Cir. 2004) (“Although 28 U.S.C. § 1654 authorizes
individuals to appear in federal courts pro se, the statute is silent regarding corporations. The
lack of authorization in § 1654 has been interpreted as barring corporations from appearing in
federal court without an attorney.”); Lattanzio v. COMTA, 481 F.3d 137, 140 (2d Cir. 2007)
(“Because both a partnership and a corporation must appear through licensed counsel, and
because a limited liability company is a hybrid of the partnership and corporate forms, . . . a
limited liability company also may appear in federal court only through a licensed attorney.”)
(internal citations omitted).
The Court is not persuaded by Hutchens’s argument that a single-member LLC should be
treated like a sole proprietorship with respect to federal rules on pro se representation. See
M3Girl Designs LLC v. Purple Mountain Sweaters, No. 3:09-CV-2334-G, 2010 WL 304243, at
*2 (N.D. Tex. Jan. 22, 2010) (sole proprietorship need not be represented by an attorney because
it “has a legal existence only in the identity of the sole proprietor”). Hutchens directs the Court
to an IRS informational bulletin explaining that, for income tax purposes, the IRS treats a singlemember LLC as a “disregarded entity” with no existence separate from its owner such that it can
be included as part of its owner’s tax return. (Reply [#111] at 8.) Hutchens has provided the

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Court with no authority, nor has the Court identified one, that holds this IRS designation
translates to an ability to disregard an LLC’s corporate entity for purposes of self representation
in federal court. See Nest Int’l, Inc. v. Balzamo, No. CIV.A. 12-2087 JBS, 2012 WL 1584609, at
*1 (D.N.J. May 3, 2012) (“Defendant Balzamo cannot represent Defendant Zamo; even LLCs
with a single member must be represented by counsel because they have a legal identity separate
from their members.”). This denial will be without prejudice to Westmoreland retaining licensed
counsel to represent it in this action.
IT IS THEREFORE ORDERED that Defendant Sandy Hutchens Motion to Compel
Answers to Interrogatories and for Protective Order [#97] is DISMISSED WITHOUT
PREJDUICE. The parties are ordered to confer on the issues raised in Defendant’s motion, and
Hutchens may file a renewed motion to compel identifying the specific bases for challenging
Plaintiffs’ objections on or before May 16, 2019.
IT IS FURTHER ORDERED that Plaintiffs’ Opposed Motion for Leave to File their
Third Amended Complaint [#99] is GRANTED. The Clerk is directed to file Plaintiffs’ Third
Amended Complaint [#99-1].
IT IS FURTHER ORDERED that Plaintiffs’ Motion to Compel Defendant Ed Ryan
a/k/a Sandy Hutchens’ Answers to Plaintiffs’ Interrogatories and Requests for Production [#105]
is GRANTED. Hutchens is ordered to respond to Plaintiffs’ discovery requests on or before
May 9, 2019 and produce all requested documents on or before May 27, 2019.
IT IS FURTHER ORDERED that Defendant Westmoreland Equity Fund LLC Motion
to Set Aside Default Judgment [#107] is DENIED WITHOUT PREJUDICE to Westmoreland
finding licensed counsel to represent it in this action.

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IT IS FINALLY ORDERED that the parties provide the Court with any supplemental
briefing in support of or in response to Defendant Sandy Hutchens’s Motion to Compel
Arbitration [#98] on or before May 2, 2019.
SIGNED this 25th day of April, 2019.

ELIZABETH S. ("BETSY") CHESTNEY
UNITED STATES MAGISTRATE JUDGE

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